10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

ý  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2018

or

o  TransitionReport Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to             

Commission File Number 001-31901

PROTECTIVE LIFE INSURANCE COMPANY

(Exact name of registrant as specified in its charter)

TENNESSEE	63-0169720
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)

2801 HIGHWAY 280 SOUTH

BIRMINGHAM, ALABAMA 35223

(Address of principal executive offices and zip code)

(205) 268-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý  No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ý  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated Filer o
Non-accelerated filer x	Smaller Reporting Company o
	Emerging Growth Company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o  No ý

Number of shares of Common Stock, $1.00 Par Value, outstanding as of October 26, 2018:  5,000,000

PROTECTIVE LIFE INSURANCE COMPANY

QUARTERLY REPORT ON FORM 10-Q

FOR QUARTERLY PERIOD ENDED SEPTEMBER 30, 2018

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Financial Statements (unaudited):
	Consolidated Condensed Statements of Income For The Three and Nine Months Ended September 30, 2018 and 2017	2
	Consolidated Condensed Statements of Comprehensive Income (Loss) For The Three and Nine Months Ended September 30, 2018 and 2017	3
	Consolidated Condensed Balance Sheets as of September 30, 2018 and December 31, 2017	4
	Consolidated Condensed Statement of Shareowner’s Equity For The Nine Months Ended September 30, 2018	6
	Consolidated Condensed Statements of Cash Flows For The Nine Months Ended September 30, 2018 and 2017	7
	Notes to Consolidated Condensed Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	59
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	109
Item 4.	Controls and Procedures	110
	PART II
Item 1.	Legal Proceedings	110
Item 1A.	Risk Factors	110
Item 6.	Exhibits	117
	Signature	118

1

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Revenues
Premiums and policy fees	$	871,892		$	849,743		$	2,691,233		$	2,568,228
Reinsurance ceded	(267,910		)	(326,572		)	(1,005,398		)	(989,835		)
Net of reinsurance ceded	603,982			523,171			1,685,835			1,578,393
Net investment income	631,955			477,011			1,699,787			1,427,442
Realized investment gains (losses):
Derivative financial instruments	(26,710		)	5,302			37,176			(119,392		)
All other investments	(20,156		)	18,150			(157,350		)	94,526
Other-than-temporary impairment losses	(14		)	(366		)	(715		)	(494		)
Portion recognized in other comprehensive income (before taxes)	—			93			(2,949		)	(7,765		)
Net impairment losses recognized in earnings	(14		)	(273		)	(3,664		)	(8,259		)
Other income	80,906			82,031			241,334			243,501
Total revenues	1,269,963			1,105,392			3,503,118			3,216,211
Benefits and expenses
Benefits and settlement expenses, net of reinsurance ceded: (three months: 2018 - $214,326; 2017 - $255,063; nine months: 2018 - $855,929; 2017 - $800,868)	950,942			742,789			2,598,151			2,203,883
Amortization of deferred policy acquisition costs and value of business acquired	33,469			4,267			144,172			48,505
Other operating expenses, net of reinsurance ceded: (three months: 2018 - $50,067; 2017 - $58,009; nine months: 2018 - $152,694; 2017 - $163,902)	190,382			192,354			582,795			577,911
Total benefits and expenses	1,174,793			939,410			3,325,118			2,830,299
Income before income tax	95,170			165,982			178,000			385,912
Income tax expense	16,646			49,016			28,933			120,975
Net income	$	78,524		$	116,966		$	149,067		$	264,937

See Notes to the Consolidated Condensed Financial Statements

2

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited) 

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Net income	$	78,524		$	116,966		$	149,067		$	264,937
Other comprehensive income (loss):
Change in net unrealized gains (losses) on investments, net of income tax: (three months: 2018 - $(53,407); 2017 - $54,143; nine months: 2018 - $(318,444); 2017 - $295,015)	(200,912		)	100,553			(1,198,669		)	547,885
Reclassification adjustment for investment amounts included in net income, net of income tax: (three months: 2018 - $427; 2017 - $(146); nine months: 2018 - $(542); 2017 - $(289))	1,605			(271		)	(2,042		)	(536		)
Change in net unrealized gains (losses) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (three months: 2018 - $0; 2017 - $452; nine months: 2018 - $6; 2017 - $3,837)	—			839			22			7,125
Change in accumulated (loss) gain - derivatives, net of income tax: (three months: 2018 - $61; 2017 - $445; nine months: 2018 - $813; 2017 - $19)	229			828			3,060			36
Reclassification adjustment for derivative amounts included in net income, net of income tax: (three months: 2018 - $101; 2017 - $14; nine months: 2018 - $168; 2017 - $139)	380			24			631			257
Total other comprehensive income (loss)	(198,698		)	101,973			(1,196,998		)	554,767
Total comprehensive income (loss)	$	(120,174	)	$	218,939		$	(1,047,931	)	$	819,704

See Notes to the Consolidated Condensed Financial Statements

3

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

	As of
	September 30, 2018		December 31, 2017
	(Dollars In Thousands)
Assets
Fixed maturities, at fair value (amortized cost: 2018 - $54,348,551; 2017 - $40,952,535)	$	52,180,974	$	40,971,486
Fixed maturities, at amortized cost (fair value: 2018 - $2,577,841; 2017 - $2,776,327)	2,653,605		2,718,904
Equity securities, at fair value (cost: 2018 - $623,882; 2017 - $701,951)	623,201		715,498
Mortgage loans (related to securitizations: 2018 - $505; 2017 - $226,409)	7,572,349		6,817,723
Investment real estate, net of accumulated depreciation (2018 - $219; 2017 - $132)	7,147		8,355
Policy loans	1,703,462		1,615,615
Other long-term investments	1,050,741		940,047
Short-term investments	366,586		527,144
Total investments	66,158,065		54,314,772
Cash	161,173		178,855
Accrued investment income	650,573		489,979
Accounts and premiums receivable	180,971		152,086
Reinsurance receivables	4,532,362		4,800,891
Deferred policy acquisition costs and value of business acquired	2,979,384		2,205,401
Goodwill	793,470		793,470
Other intangibles, net of accumulated amortization (2018 - $183,072; 2017 - $140,232)	625,828		662,916
Property and equipment, net of accumulated depreciation (2018 - $28,459; 2017 - $21,305)	105,424		109,711
Other assets	370,742		337,395
Income tax receivable	—		76,986
Assets related to separate accounts
Variable annuity	13,555,469		13,956,071
Variable universal life	1,077,842		1,035,202
Total assets	$	91,191,303	$	79,113,735

See Notes to the Consolidated Condensed Financial Statements

4

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(continued)

	As of
	September 30, 2018			December 31, 2017
	(Dollars In Thousands)
Liabilities
Future policy benefits and claims	$	42,012,551		$	30,956,792
Unearned premiums	772,139			751,130
Total policy liabilities and accruals	42,784,690			31,707,922
Stable value product account balances	5,211,668			4,698,371
Annuity account balances	13,590,482			10,921,190
Other policyholders’ funds	1,142,522			1,267,198
Other liabilities	2,150,163			1,859,254
Income tax payable	3,590			—
Deferred income taxes	970,859			1,371,989
Subordinated debt	110,000			—
Debt	1,410			1,682
Non-recourse funding obligations	2,890,435			2,952,822
Secured financing liabilities	514,413			1,017,749
Liabilities related to separate accounts
Variable annuity	13,555,469			13,956,071
Variable universal life	1,077,842			1,035,202
Total liabilities	84,003,543			70,789,450
Commitments and contingencies - Note 12
Shareowner’s equity
Preferred Stock; $1 par value, shares authorized: 2,000; Liquidation preference: $2	2			2
Common Stock, $1 par value, shares authorized and issued: 2018 and 2017 - 5,000,000	5,000			5,000
Additional paid-in-capital	7,378,496			7,378,496
Retained earnings	987,996			916,971
Accumulated other comprehensive income (loss):
Net unrealized gains (losses) on investments, net of income tax: (2018 - $(315,843); 2017 - $6,138)	(1,188,172		)	23,091
Net unrealized losses relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (2018 - $0; 2017 - $(6))	—			(22		)
Accumulated gain (loss) - derivatives, net of income tax: (2018 - $1,180; 2017 - $198)	4,438			747
Total shareowner’s equity	7,187,760			8,324,285
Total liabilities and shareowner’s equity	$	91,191,303		$	79,113,735

See Notes to the Consolidated Condensed Financial Statements

5

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED CONDENSED STATEMENTS OF SHAREOWNER’S EQUITY

(Unaudited)

	Preferred Stock		Common Stock		Additional Paid-In-Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareowner’s Equity
	(Dollars In Thousands)
Balance, December 31, 2017	$	2	$	5,000	$	7,378,496	$	916,971		$	23,816		$	8,324,285
Net income for the nine months ended September 30, 2018							149,067						149,067
Other comprehensive loss										(1,196,998		)	(1,196,998		)
Comprehensive loss for the nine months ended September 30, 2018													(1,047,931		)
Cumulative effect adjustments							(78,042		)	(10,552		)	(88,594		)
Balance, September 30, 2018	$	2	$	5,000	$	7,378,496	$	987,996		$	(1,183,734	)	$	7,187,760

See Notes to the Consolidated Condensed Financial Statements

6

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	For The Nine Months Ended September 30,
	2018			2017
	(Dollars In Thousands)
Cash flows from operating activities
Net income	$	149,067		$	264,937
Adjustments to reconcile net income to net cash provided by operating activities:
Realized investment (gains) losses	123,838			33,125
Amortization of DAC and VOBA	144,172			48,505
Capitalization of DAC	(333,222		)	(251,472		)
Depreciation and amortization expense	50,205			48,591
Deferred income tax	(52,071		)	82,835
Accrued income tax	80,576			9,350
Interest credited to universal life and investment products	630,770			507,229
Policy fees assessed on universal life and investment products	(1,146,980		)	(1,004,829		)
Change in reinsurance receivables	268,866			150,137
Change in accrued investment income and other receivables	2,059			(1,498		)
Change in policy liabilities and other policyholders’ funds of traditional life and health products	(491,751		)	(282,841		)
Trading securities:
Maturities and principal reductions of investments	140,851			131,563
Sale of investments	307,632			195,733
Cost of investments acquired	(403,355		)	(277,423		)
Other net change in trading securities	10,641			9,357
Amortization of premiums and accretion of discounts on investments and mortgage loans	232,448			232,694
Change in other liabilities	98,321			181,696
Other, net	(27,322		)	(61,295		)
Net cash (used in) provided by operating activities	$	(215,255	)	$	16,394

See Notes to the Consolidated Condensed Financial Statements

7

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(continued

	For The Nine Months Ended September 30,
	2018			2017
	(Dollars In Thousands)
Cash flows from investing activities
Maturities and principal reductions of investments, available-for-sale	$	895,175		$	541,024
Sale of investments, available-for-sale	1,932,956			1,302,130
Cost of investments acquired, available-for-sale	(3,942,180		)	(3,232,925		)
Change in investments, held-to-maturity	62,000			36,000
Mortgage loans:
New lendings	(1,185,316		)	(1,081,226		)
Repayments	797,450			644,189
Change in investment real estate, net	647			3,679
Change in policy loans, net	43,642			24,280
Change in other long-term investments, net	(293,208		)	(282,688		)
Change in short-term investments, net	160,149			(106,888		)
Net unsettled security transactions	84,036			349,544
Purchase of property, equipment, and intangibles	(9,629		)	(34,067		)
Cash received from reinsurance transaction	20,669			—
Net cash used in investing activities	$	(1,433,609	)	$	(1,836,948	)
Cash flows from financing activities
Borrowings under subordinated debt	110,000			—
Issuance (repayment) of non-recourse funding obligations	(61,981		)	(35,984		)
Secured financing liabilities	(503,336		)	(198,165		)
Dividends/Return of capital to parent company	—			(162,999		)
Investment product deposits and change in universal life deposits	4,397,886			3,901,051
Investment product withdrawals	(2,311,096		)	(1,698,062		)
Other financing activities, net	(291		)	(93		)
Net cash provided by financing activities	$	1,631,182		$	1,805,748
Change in cash	(17,682		)	(14,806		)
Cash at beginning of period	178,855			214,439
Cash at end of period	$	161,173		$	199,633

See Notes to the Consolidated Condensed Financial Statements

8

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1.BASIS OF PRESENTATION

Basis of Presentation

Protective Life Insurance Company (the “Company”), a stock life insurance company, was founded in 1907. The Company is a wholly owned subsidiary of Protective Life Corporation (“PLC”), an insurance holding company. On February 1, 2015, PLC became a wholly owned subsidiary of The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan (now known as Dai-ichi Life Holdings, Inc., “Dai-ichi Life”), when DL Investment (Delaware), Inc. a wholly owned subsidiary of Dai-ichi Life, merged with and into PLC. Prior to February 1, 2015, PLC’s stock was publicly traded on the New York Stock Exchange. Subsequent to the Merger date, PLC and the Company remain as SEC registrants within the United States. The Company markets individual life insurance, credit life and disability insurance, guaranteed investment contracts, guaranteed funding agreements, fixed and variable annuities, and extended service contracts throughout the United States. The Company also maintains a separate segment devoted to the acquisition of insurance policies from other companies. PLC is a holding company with subsidiaries that provide financial services through the production, distribution, and administration of insurance and investment products.

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for the interim periods presented herein. In the opinion of management, the accompanying financial statements reflect all adjustments (consisting only of normal recurring items) necessary for a fair statement of the results for the interim periods presented. Operating results for the three and nine months ended September 30, 2018, are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2018. The year-end consolidated condensed financial data included herein was derived from audited financial statements but does not include all disclosures required by GAAP within this report. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

The operating results of companies in the insurance industry have historically been subject to significant fluctuations due to changing competition, economic conditions, interest rates, investment performance, insurance ratings, claims, persistency, and other factors.

Entities Included

The consolidated condensed financial statements in this report include the accounts of Protective Life Insurance Company and its affiliate companies in which the Company holds a majority voting or economic interest. Intercompany balances and transactions have been eliminated.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

For a full description of significant accounting policies, see Note 2 to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. There were no significant changes to the Company’s accounting policies during the nine months ended September 30, 2018 other than those discussed below.

Property and Casualty Insurance Products

Property and casualty insurance products include service contract business, surety bonds, and guaranteed asset protection (“GAP”). Premiums and fees associated with service contracts and GAP products are recognized based on expected claim patterns. For all other products, premiums are generally recognized over the terms of the contract on a pro-rata basis. Commissions and fee income associated with other products are recognized as earned when the related services are provided to the customer. Unearned premium reserves are maintained for the portion of the premiums that is related to the unexpired period of the policy. Benefit reserves are recorded when insured events occur. Benefit reserves include case basis reserves for known but unpaid claims as of the balance sheet date as well as incurred but not reported (“IBNR”) reserves for claims where the insured event has occurred but has not been reported to the Company as of the balance sheet date. The case basis reserves and IBNR are calculated based on historical experience and on assumptions relating to claim severity and frequency, the level of used vehicle prices, and other factors. These assumptions are modified as necessary to reflect anticipated trends.

Effective January 1, 2018, the Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers. In consideration of the amendments in this Update, the Company revised its recognition pattern for administrative fees associated with certain vehicle service and GAP products. Previously, these fees were recognized based on the work effort involved in satisfying the Company’s contract obligations. The Company will recognize these fees on a claims occurrence basis in future periods. To reflect this change in accounting principle, the Company recorded a cumulative effect adjustment as of January 1, 2018 that resulted in a decrease in retained earnings of $88.6 million. The pre-tax impact to each affected line item on the Company’s financial statements is reflected in the table below:

9

	As of September 30, 2018
	As Reported		Previous Accounting Method
	(Dollars In Millions)
Financial Statement Line Item:
Balance Sheet
Deferred policy acquisition costs and value of business acquired	$	2,979.4	$	2,840.0
Other liabilities	$	2,150.2	$	1,891.4

	For the Three Months Ended September 30, 2018				For The Nine Months Ended September 30, 2018
	As Reported		Previous Accounting Method		As Reported		Previous Accounting Method
	(Dollars In Millions)				(Dollars In Millions)
Financial Statement Line Item:
Statements of Income
Other income	$	80.9	$	82.4	$	241.3	$	244.9
Amortization of deferred policy acquisition costs and value of business acquired	$	33.5	$	21.9	$	144.2	$	108.1
Other operating expenses, net of reinsurance ceded	$	190.4	$	203.2	$	582.8	$	622.3

Accounting Pronouncements Recently Adopted

ASU No. 2014-09 - Revenue from Contracts with Customers (Topic 606).This Update provides for significant revisions to the recognition of revenue from contracts with customers across various industries. Under the new guidance, entities are required to apply a prescribed 5-step process to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting for revenues associated with insurance products is not within the scope of this Update. The Update was originally effective for annual and interim periods beginning after December 15, 2016. However, in August 2015, the FASB issued ASU No. 2015-14 - Revenues from Contracts with Customers: Deferral of the Effective Date, to defer the effective date of ASU No. 2014-09 by one year to annual and interim periods beginning after December 15, 2017. The Company adopted this Update using the modified retrospective approach via a cumulative effect adjustment to retained earnings as of January 1, 2018. The amendments in the Update, along with clarifying updates issued subsequent to ASU 2014-09, impacted certain revenues associated with the Company’s Asset Protection products. The lines of business to which the revised guidance applies are not material to the Company’s financial statements. In consideration of the amendments in this Update, the Company revised its recognition pattern for administrative fees associated with certain vehicle service and GAP products. Previously, these fees were recognized based on the work effort involved in satisfying the Company’s contract obligations. The Company will recognize these fees on a claims occurrence basis in future periods. To reflect this change in accounting principle, the Company recorded a cumulative effect adjustment as of January 1, 2018 that resulted in a decrease in retained earnings of $88.6 million. See above for additional discussion.

ASU No. 2016-01 - Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most notably, the Update requires that equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) be measured at fair value with changes in fair value recognized in net income. The Update also introduces a single-step impairment model for equity investments without a readily determinable fair value. Additionally, the Update requires changes in instrument-specific credit risk for fair value option liabilities to be recorded in other comprehensive income. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2017 and were applied on a modified retrospective basis. The Company recorded a cumulative-effect adjustment at the date of adoption, January 1, 2018, transferring unrealized gains and losses on available-for-sale equity securities to retained earnings from accumulated other comprehensive income. The impact of this adjustment, net of income tax, resulted in a $10.6 million increase to retained earnings and a corresponding decrease to accumulated other comprehensive income, resulting in no net impact to consolidated shareowner’s equity. The Company has updated its disclosures in Note 5, Investment Operations and Note 6, Fair Value of Financial Instruments in accordance with the ASU.

ASU No. 2016-15 - Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. The amendments in this Update are intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Specific transactions addressed in the new guidance include:Debt prepayment/extinguishment costs, contingent consideration payments, proceeds from the settlement of corporate-owned life insurance policies, and distributions received from equity method investments. The Update does not introduce any new accounting or financial reporting requirements, and is effective for annual and interim periods beginning after December 15, 2017 using the retrospective method. There was no financial impact.

10

ASU No. 2016-18 - Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Task Force). The amendments in this update provide guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows, thereby reducing diversity in practice related to the presentation of these amounts. The amendments require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Update is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. There was no impact to the Company on adoption.

ASU No. 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business. The purpose of this update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in the Update provide a specific test by which an entity may determine whether an acquisition involves a set of assets or a business. The amendments in the Update are to be applied prospectively for periods beginning after December 15, 2017. The Company has reviewed the revised requirements, and does not anticipate that the changes will impact its policies or recent conclusions related to its acquisition activities.

ASU No. 2017-07 - Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendments in this update require entities to disaggregate the current-service-cost component from other components of net benefit cost and present it with other current compensation costs in the income statement. The other components of net benefit cost must be presented outside of income from operations if that subtotal is presented. In addition, the Update requires entities to disclose the income statement lines that contain the other components if they are not presented on appropriately described separate lines. The amendments in this update are effective for interim and annual periods beginning after December 15, 2017. As provided for in the ASU, the Company expects to apply the provisions of the statement retrospectively for components of net periodic pension costs and prospectively for capitalization of the service costs component of net periodic costs and net periodic postretirement benefits. The Update did not impact the Company’s financial position, results of operations, or current disclosures.

Accounting Pronouncements Not Yet Adopted

ASU No. 2016-02 - Leases. The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of leases. The most significant change will relate to the accounting model used by lessees. The Update will require all leases with terms greater than 12 months to be recorded on the balance sheet in the form of a lease asset and liability. The lease asset and liability will be measured at the present value of the minimum lease payments less any upfront payments or fees. The amendments in the Update are effective for annual and interim periods beginning after December 15, 2018 on a modified retrospective basis. The Company has completed an inventory of all leases in the organization. Based on our lease portfolio as of September 30, 2018, the Company expects to record a right of use asset and lease liability of approximately $21 million on its consolidated condensed balance sheet in the period of adoption. However, the ultimate impact of adopting the ASU will depend on the Company’s lease portfolio as of the adoption date.

ASU No. 2016-13 - Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments. The amendments in this Update introduce a new current expected credit loss (“CECL”) model for certain financial assets, including mortgage loans and reinsurance receivables. The new model will not apply to debt securities classified as available-for-sale. For assets within the scope of the new model, an entity will recognize as an allowance against earnings its estimate of the contractual cash flows not expected to be collected on day one of the asset’s acquisition. The allowance may be reversed through earnings if a security recovers in value. This differs from the current impairment model, which requires recognition of credit losses when they have been incurred and recognizes a security’s subsequent recovery in value in other comprehensive income. The Update also makes targeted changes to the current impairment model for available-for-sale debt securities, which comprise the majority of the Company’s invested assets. Similar to the CECL model, credit loss impairments will be recorded in an allowance against earnings that may be reversed for subsequent recoveries in value. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2019 on a modified retrospective basis. The Company is reviewing its policies and processes to ensure compliance with the requirements in this Update, upon adoption, and assessing the impact this standard will have on its operations and financial results.

ASU No. 2017-08 - Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in this Update require that premiums on callable debt securities be amortized to the first call date. This is a change from current guidance, under which premiums are amortized to the maturity date of the security. The amendments are effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. Transition will be through a modified retrospective approach in which the cumulative effect of application is recorded to retained earnings at the beginning of the annual period in which an entity adopts the revised guidance. Based on our population of callable debt securities held as of September 30, 2018, the Company estimates it would record a reduction to retained earnings of approximately $56.1 million as a result of adopting the ASU. However, the adoption impact will ultimately depend on the population of callable debt securities held as of the adoption date.

ASU No. 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in this Update are designed to permit hedge accounting to be applied to a broader range of hedging strategies as well as to more closely align hedge accounting and risk management objectives. Specific provisions include requiring changes in the fair value of a hedging instrument be recorded in the same income statement line as the hedged item when it affects earnings. In addition, after a hedge has initially qualified as an effective hedge the Update permits the use of a qualitative hedge effectiveness test in subsequent periods. The amendments in this Update are effective for annual and interim periods beginning

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after December 15, 2018 and early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on its operations or financial results.

ASU No. 2018-12 - Financial Services - Insurance (Topic 944): Targeted Improvements to Accounting for Long-Duration Contracts. The amendments in this Update are designed to make improvements to the existing recognition, measurement, presentation, and disclosure requirements for certain long-duration contracts issued by an insurance company. The new amendments require insurance entities to provide a more current measure of the liability for future policy benefits for traditional and limited-payment contracts by regularly refining the liability for actual past experience and updated future assumptions. This differs from current requirements where assumptions are locked-in at contract issuance for these contract types. In addition, the updated liability will be discounted using an upper-medium grade (low-credit-risk) fixed income instrument yield that reflects the characteristics of the liability which differs from currently used rates based on the invested assets supporting the liability. In addition, the amendments introduce new requirements to assess market-based insurance contract options and guarantees for Market Risk Benefits and measure them at fair value. This Update also requires insurance entities to amortize deferred acquisition costs on a constant-level basis over the expected life of the contract. Finally this Update requires new disclosures including liability rollforwards and information about significant inputs, judgments, assumptions, and methods used in the measurement. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2020 with early adoption permitted. The Company is currently reviewing its policies, processes, and applicable systems to determine the impact this standard will have on its operations and financial results.

3.SIGNIFICANT TRANSACTIONS

On May 1, 2018, The Lincoln National Life Insurance Company (“Lincoln Life”) completed its previously announced acquisition (the “Closing”) of Liberty Mutual Group Inc.’s (“Liberty Mutual”) Group Benefits Business and Individual Life and Annuity Business (the “Life Business”) through the acquisition of all of the issued and outstanding capital stock of Liberty Life Assurance Company of Boston (“Liberty”). In connection with the Closing and  pursuant to the Master Transaction Agreement, dated January 18, 2018 (the “Master Transaction Agreement”), previously reported in our Current Report on Form 8-K filed on January 23, 2018, the Company and Protective Life and Annuity Insurance Company (“PLAIC”), a wholly owned subsidiary of the Company, entered into reinsurance agreements (the “Reinsurance Agreements”) and related ancillary documents (including administrative services agreements and transition services agreements) providing for the reinsurance and administration of the Life Business.

Pursuant to the Reinsurance Agreements, Liberty ceded to the Company and PLAIC the insurance policies related to the Life Business on a 100% coinsurance basis. The aggregate ceding commission for the reinsurance of the Life Business was $422.4 million, which is the purchase price. Other than cash received as part of the acquired Liberty investment portfolio as reflected in “amounts received from reinsurance transaction” in the Consolidated Condensed Statements of Cash Flows and as reflected in the table below, this was a non-cash transaction.

All policies issued in states other than New York were ceded to the Company under a reinsurance agreement between Liberty and the Company, and all policies issued in New York were ceded to PLAIC under a reinsurance agreement between Liberty and PLAIC.  The aggregate statutory reserves of Liberty ceded to the Company and PLAIC as of the closing of the Transaction were approximately $13.3 billion, which amount was based on initial estimates and is subject to adjustment following the Closing. Pursuant to the terms of the Reinsurance Agreements, each of the Company and PLAIC are required to maintain assets in trust for the benefit of Liberty to secure their respective obligations to Liberty under the Reinsurance Agreements. The trust accounts were initially funded by each of the Company and PLAIC principally with the investment assets that were received from Liberty. Additionally, the Company and PLAIC have each agreed to provide, on behalf of Liberty, administration and policyholder servicing of the Life Business reinsured by it pursuant to administrative services agreements between Liberty and each of the Company and PLAIC.

The terms of the Reinsurance Agreements resulted in an acquisition of the Life Business by the Company in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations.

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The following table details the purchase consideration and preliminary allocation of assets acquired and liabilities assumed from the Life Business reinsurance transaction as of the transaction date. These estimates remain preliminary and are subject to adjustment. While they are not expected to be materially different than those shown, any material adjustments to the estimates will be reflected, retroactively, as of the date of the acquisition.  

	Fair Value as of May 1, 2018
	(Dollars In Thousands)
ASSETS
Fixed maturities	$	12,588,512
Mortgage loans	435,405
Policy loans	131,489
Total investments	13,155,406
Cash	20,669
Accrued investment income	151,610
Reinsurance receivables	337
Value of business acquired	336,437
Other assets	2,542
Total assets	13,667,001
LIABILITIES
Future policy benefits and claims	$	11,744,496
Unearned premiums	—
Total policy liabilities and accruals	11,744,496
Annuity account balances	1,823,444
Other policyholders’ funds	41,954
Other liabilities	57,107
Total liabilities	13,667,001
NET ASSETS ACQUIRED	$	—

The following unaudited pro forma condensed consolidated results of operations assumes that the aforementioned transactions of the Life Business were completed as of January 1, 2017. The unaudited pro forma condensed results of operations are presented solely for information purposes and are not necessarily indicative of the consolidated condensed results of operations that might have been achieved had the transaction been completed as of the date indicated.

	Unaudited				Unaudited
	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2018		2017		2018		2017
	(Dollars In Thousands)
Revenue	$	1,269,963	$	1,418,743	$	3,826,857	$	4,170,636
Net income	$	78,524	$	152,971	$	195,211	$	369,826

The amount of revenue and income before income tax of the Life Business since the transaction date, May 1, 2018, included in the consolidated condensed statements of income for the three and nine months ended September 30, 2018 amounted to $218.1 million and $360.9 million and $26.1 million and $33.7 million, respectively. Also, included in the income before income tax for the nine months ended September 30, 2018, is approximately $5.5 million of non-recurring transaction costs.

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Based on the balance recorded as of May 1, 2018, the expected amortization of VOBA for the next five years is as follows:

Years	Expected Amortization
	(Dollars In Thousands)
Remainder of 2018	$	5,265
2019	21,063
2020	19,950
2021	18,329
2022	16,611

4.MONY CLOSED BLOCK OF BUSINESS

In 1998, MONY Life Insurance Company (“MONY”) converted from a mutual insurance company to a stock corporation (“demutualization”). In connection with its demutualization, an accounting mechanism known as a closed block (the “Closed Block”) was established for certain individuals’ participating policies in force as of the date of demutualization. Assets, liabilities, and earnings of the Closed Block are specifically identified to support its participating policyholders. The Company acquired the Closed Block in conjunction with the acquisition of MONY in 2013.

Assets allocated to the Closed Block inure solely to the benefit of each Closed Block’s policyholders and will not revert to the benefit of MONY or the Company. No reallocation, transfer, borrowing or lending of assets can be made between the Closed Block and other portions of MONY’s general account, any of MONY’s separate accounts or any affiliate of MONY without the approval of the Superintendent of The New York State Department of Financial Services (the “Superintendent”). Closed Block assets and liabilities are carried on the same basis as similar assets and liabilities held in the general account.

The excess of Closed Block liabilities over Closed Block assets (adjusted to exclude the impact of related amounts in AOCI) at the acquisition date of October 1, 2013, represented the estimated maximum future post-tax earnings from the Closed Block that would be recognized in income from continuing operations over the period the policies and contracts in the Closed Block remain in force. In connection with the acquisition of MONY, the Company developed an actuarial calculation of the expected timing of MONY’s Closed Block’s earnings as of October 1, 2013. Pursuant to the acquisition of the Company by Dai-ichi Life, this actuarial calculation of the expected timing of MONY’s Closed Block earnings was recalculated and reset as February 1, 2015, along with the establishment of a policyholder dividend obligation as of such date.

If the actual cumulative earnings from the Closed Block are greater than the expected cumulative earnings, only the expected earnings will be recognized in the Company’s net income. Actual cumulative earnings in excess of expected cumulative earnings at any point in time are recorded as a policyholder dividend obligation because they will ultimately be paid to Closed Block policyholders as an additional policyholder dividend unless offset by future performance that is less favorable than originally expected. If a policyholder dividend obligation has been previously established and the actual Closed Block earnings in a subsequent period are less than the expected earnings for that period, the policyholder dividend obligation would be reduced (but not below zero). If, over the period the policies and contracts in the Closed Block remain in force, the actual cumulative earnings of the Closed Block are less than the expected cumulative earnings, only actual earnings would be recognized in income from continuing operations. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside the Closed Block.

Many expenses related to Closed Block operations, including amortization of VOBA, are charged to operations outside of the Closed Block; accordingly, net revenues of the Closed Block do not represent the actual profitability of the Closed Block operations. Operating costs and expenses outside of the Closed Block are, therefore, disproportionate to the business outside of the Closed Block.

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Summarized financial information for the Closed Block as of September 30, 2018 and December 31, 2017 is as follows:

	As of
	September 30, 2018			December 31, 2017
	(Dollars In Thousands)
Closed block liabilities
Future policy benefits, policyholders’ account balances and other policyholder liabilities	$	5,699,118		$	5,791,867
Policyholder dividend obligation	—			160,712
Other liabilities	42,640			30,764
Total closed block liabilities	5,741,758			5,983,343
Closed block assets
Fixed maturities, available-for-sale, at fair value	$	4,339,342		$	4,669,856
Mortgage loans on real estate	76,608			108,934
Policy loans	679,760			700,769
Cash	72,868			31,182
Other assets	144,077			122,637
Total closed block assets	5,312,655			5,633,378
Excess of reported closed block liabilities over closed block assets	429,103			349,965
Portion of above representing accumulated other comprehensive income:
Net unrealized investment gains (losses) net of policyholder dividend obligation: $(149,219) and $(13,429); and net of income tax: $57,054 and $2,820	(96,749		)	—
Future earnings to be recognized from closed block assets and closed block liabilities	$	332,354		$	349,965

Reconciliation of the policyholder dividend obligation is as follows:

	For The Nine Months Ended September 30,
	2018			2017
	(Dollars In Thousands)
Policyholder dividend obligation, beginning of period	$	160,712		$	31,932
Applicable to net revenue (losses)	(24,922		)	(38,147		)
Change in net unrealized investment gains (losses) allocated to the policyholder dividend obligation	(135,790		)	142,219
Policyholder dividend obligation, end of period	$	—		$	136,004

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Closed Block revenues and expenses were as follows:

	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2018		2017		2018		2017
	(Dollars In Thousands)
Revenues
Premiums and other income	$	39,691	$	40,962	$	121,768	$	128,697
Net investment income	50,833		50,780		152,248		153,481
Net investment gains	40		341		66		448
Total revenues	90,564		92,083		274,082		282,626
Benefits and other deductions
Benefits and settlement expenses	83,588		81,721		251,480		249,319
Other operating expenses	291		621		310		1,216
Total benefits and other deductions	83,879		82,342		251,790		250,535
Net revenues before income taxes	6,685		9,741		22,292		32,091
Income tax expense	1,404		3,409		4,681		11,232
Net revenues	$	5,281	$	6,332	$	17,611	$	20,859

5.INVESTMENT OPERATIONS

Net realized gains (losses) for all other investments are summarized as follows:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Fixed maturities	$	(2,018	)	$	1,042		$	6,248		$	10,482
Equity gains and losses(1)	(6,925		)	(352		)	(16,693		)	(1,398		)
Impairments	(14		)	(273		)	(3,664		)	(8,259		)
Modco trading portfolio	(10,901		)	19,399			(148,427		)	93,181
Other investments	(312		)	(1,939		)	1,522			(7,739		)
Total realized gains (losses) - investments	$	(20,170	)	$	17,877		$	(161,014	)	$	86,267
(1) Beginning January 1, 2018, all changes in the fair market value of equity securities are recorded as a realized gains (loss) as a result of the adoption of ASU No. 2016-01.

Gross realized gains and gross realized losses on investments available-for-sale (fixed maturities and short-term investments) are as follows:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Gross realized gains	$	3,410		$	1,933		$	21,540		$	14,968
Gross realized losses:
Impairment losses	$	(14	)	$	(273	)	$	(3,664	)	$	(8,259	)
Other realized losses	$	(5,428	)	$	(1,243	)	$	(15,292	)	$	(5,884	)

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The chart below summarizes the fair value (proceeds) and the gains (losses) realized on available-for-sale securities the Company sold that were in an unrealized gain position and an unrealized loss position.

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Securities in an unrealized gain position:
Fair value (proceeds)	$	306,600		$	121,459		$	909,846		$	566,064
Gains realized	$	3,410		$	1,933		$	21,540		$	14,967
Securities in an unrealized loss position(1):
Fair value (proceeds)	$	122,317		$	37,186		$	380,493		$	121,450
Losses realized	$	(5,428	)	$	(1,243	)	$	(15,292	)	$	(5,884	)
(1) The Company made the decision to exit these holdings in conjunction with its overall asset/liability management process.

The chart below summarizes the realized gains (losses) on equity securities sold during the period and equity securities still held at the reporting date.

	For The Three Months Ended September 30, 2018			For The Nine Months Ended September 30, 2018
	(Dollars In Thousands)
Net gains (losses) recognized during the period on equity securities	$	(6,925	)	$	(16,693	)
Less: net gains (losses) recognized on equity securities sold during the period	$	(1,476	)	$	(3,858	)
Gains (losses) recognized during the period on equity securities still held	$	(5,449	)	$	(12,835	)

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The amortized cost and fair value of the Company’s investments classified as available-for-sale are as follows:

As of September 30, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Total OTTI Recognized in OCI(1)
	(Dollars In Thousands)
Fixed maturities:
Residential mortgage-backed securities	$	3,506,384	$	5,808	$	(105,531	)	$	3,406,661	$	—
Commercial mortgage-backed securities	2,314,831		180		(80,633		)	2,234,378		—
Other asset-backed securities	1,456,768		13,749		(16,382		)	1,454,135		—
U.S. government-related securities	1,653,626		160		(72,807		)	1,580,979		—
Other government-related securities	546,356		2,925		(21,635		)	527,646		—
States, municipals, and political subdivisions	3,691,930		6,070		(139,927		)	3,558,073		—
Corporate securities	38,612,538		166,917		(1,919,248		)	36,860,207		—
Redeemable preferred stock	94,362		—		(7,223		)	87,139		—
	51,876,795		195,809		(2,363,386		)	49,709,218		—
Short-term investments	310,721		—		—			310,721		—
	$	52,187,516	$	195,809	$	(2,363,386	)	$	50,019,939	$	—
As of December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Total OTTI Recognized in OCI(1)
	(Dollars In Thousands)
Fixed maturities:
Residential mortgage-backed securities	$	2,321,811	$	19,412	$	(22,730	)	$	2,318,493	$	10
Commercial mortgage-backed securities	1,885,109		4,931		(29,552		)	1,860,488		—
Other asset-backed securities	1,234,376		20,936		(5,763		)	1,249,549		—
U.S. government-related securities	1,255,244		185		(32,177		)	1,223,252		—
Other government-related securities	280,780		9,401		(4,948		)	285,233		—
States, municipals, and political subdivisions	1,770,299		16,959		(45,613		)	1,741,645		(37		)
Corporate securities	29,446,365		618,582		(527,401		)	29,537,546		(1		)
Redeemable preferred stock	94,362		232		(3,503		)	91,091		—
	38,288,346		690,638		(671,687		)	38,307,297		(28		)
Equity securities	696,706		22,319		(8,771		)	710,254		—
Short-term investments	470,883		—		—			470,883		—
	$	39,455,935	$	712,957	$	(680,458	)	$	39,488,434	$	(28	)
(1) These amounts are included in the gross unrealized gains and gross unrealized losses columns above.

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The fair values of the Company’s investments classified as trading are as follows:

	As of September 30, 2018		As of December 31, 2017
	(Dollars In Thousands)
Fixed maturities:
Residential mortgage-backed securities	$	254,037	$	259,694
Commercial mortgage-backed securities	135,403		146,804
Other asset-backed securities	111,770		138,097
U.S. government-related securities	58,081		27,234
Other government-related securities	43,030		63,925
States, municipals, and political subdivisions	296,618		326,925
Corporate securities	1,569,652		1,698,183
Redeemable preferred stock	3,165		3,327
	2,471,756		2,664,189
Equity securities	3,801		5,244
Short-term investments	55,865		56,261
	$	2,531,422	$	2,725,694

The amortized cost and fair value of available-for-sale and held-to-maturity fixed maturities as of September 30, 2018, by expected maturity, are shown below. Expected maturities of securities without a single maturity date are allocated based on estimated rates of prepayment that may differ from actual rates of prepayment.

	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars In Thousands)
Due in one year or less	$	957,984	$	955,779	$	—	$	—
Due after one year through five years	9,252,383		9,079,479		—		—
Due after five years through ten years	9,099,912		8,847,681		—		—
Due after ten years	32,566,516		30,826,279		2,653,605		2,577,841
	$	51,876,795	$	49,709,218	$	2,653,605	$	2,577,841

The charts below summarize the Company’s other-than-temporary impairments of investments. All of the impairments were related to fixed maturities.

	For The Three Months Ended September 30, 2018			For The Nine Months Ended September 30, 2018
	Fixed Maturities			Fixed Maturities
	(Dollars In Thousands)
Other-than-temporary impairments	$	(14	)	$	(715	)
Non-credit impairment losses recorded in other comprehensive income	—			(2,949		)
Net impairment losses recognized in earnings	$	(14	)	$	(3,664	)

	For The Three Months Ended September 30, 2017			For The Nine Months Ended September 30, 2017
	Fixed Maturities			Fixed Maturities
	(Dollars In Thousands)
Other-than-temporary impairments	$	(366	)	$	(494	)
Non-credit impairment losses recorded in other comprehensive income	93			(7,765		)
Net impairment losses recognized in earnings	$	(273	)	$	(8,259	)

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There were no other-than-temporary impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell for the three and nine months ended September 30, 2018 and 2017.

The following chart is a rollforward of available-for-sale credit losses on fixed maturities held by the Company for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (loss):

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Beginning balance	$	2		$	2,783		$	3,268		$	12,685
Additions for newly impaired securities	—			266			—			266
Additions for previously impaired securities	—			6			2			2,791
Reductions for previously impaired securities due to a change in expected cash flows	—			(37		)	—			(12,724		)
Reductions for previously impaired securities that were sold in the current period	(2		)	(600		)	(3,270		)	(600		)
Ending balance	$	—		$	2,418		$	—		$	2,418

The following table includes the gross unrealized losses and fair value of the Company’s investments that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2018:

	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(Dollars In Thousands)
Residential mortgage-backed securities	$	2,831,194	$	(80,839	)	$	399,676	$	(24,692	)	$	3,230,870	$	(105,531	)
Commercial mortgage-backed securities	1,433,287		(39,701		)	740,262		(40,932		)	2,173,549		(80,633		)
Other asset-backed securities	645,956		(9,131		)	125,847		(7,251		)	771,803		(16,382		)
U.S. government-related securities	551,939		(14,066		)	1,012,450		(58,741		)	1,564,389		(72,807		)
Other government-related securities	254,968		(7,405		)	111,089		(14,230		)	366,057		(21,635		)
States, municipalities, and political subdivisions	2,268,935		(51,019		)	998,399		(88,908		)	3,267,334		(139,927		)
Corporate securities	21,709,122		(782,983		)	9,756,347		(1,136,265		)	31,465,469		(1,919,248		)
Redeemable preferred stock	43,712		(1,902		)	43,427		(5,321		)	87,139		(7,223		)
	$	29,739,113	$	(987,046	)	$	13,187,497	$	(1,376,340	)	$	42,926,610	$	(2,363,386	)

RMBS and CMBS had gross unrealized losses greater than twelve months of $24.7 million and $40.9 million, respectively, as of September 30, 2018. Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.

The other asset-backed securities had a gross unrealized loss greater than twelve months of $7.3 million as of September 30, 2018. This category predominately includes student loan backed auction rate securities whose underlying collateral is at least 97% guaranteed by the Federal Family Education Loan Program (“FFELP”). At this time, the Company has no reason to believe that the U.S. Department of Education would not honor the FFELP guarantee, if it were necessary.

The U.S. government-related securities and the other government-related securities had gross unrealized losses greater than twelve months of $58.7 million and $14.2 million as of September 30, 2018, respectively. These declines were related to changes in interest rates.

The states, municipalities, and political subdivisions category had gross unrealized losses greater than twelve months of $88.9 million as of September 30, 2018. The aggregate decline in market value of these securities was deemed temporary due to positive factors supporting the recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, and other pertinent information.

The corporate securities category had gross unrealized losses greater than twelve months of $1.1 billion as of September 30, 2018. The aggregate decline in market value of these securities was deemed temporary due to positive factors supporting the

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recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, and other pertinent information.

As of September 30, 2018, the Company had a total of 4,367 positions that were in an unrealized loss position, but the Company does not consider these unrealized loss positions to be other-than-temporary. This is based on the aggregate factors discussed previously and because the Company has the ability and intent to hold these investments until the fair values recover, and the Company does not intend to sell or expect to be required to sell the securities before recovering the Company’s amortized cost of the securities.

The following table includes the gross unrealized losses and fair value of the Company’s investments that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2017:

	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(Dollars In Thousands)
Residential mortgage-backed securities	$	765,641	$	(9,666	)	$	408,460	$	(13,064	)	$	1,174,101	$	(22,730	)
Commercial mortgage-backed securities	750,643		(8,521		)	779,086		(21,031		)	1,529,729		(29,552		)
Other asset-backed securities	86,506		(322		)	134,316		(5,441		)	220,822		(5,763		)
U.S. government-related securities	94,110		(688		)	1,072,232		(31,489		)	1,166,342		(32,177		)
Other government-related securities	24,830		(169		)	115,294		(4,779		)	140,124		(4,948		)
States, municipalities, and political subdivisions	170,268		(1,738		)	1,027,747		(43,875		)	1,198,015		(45,613		)
Corporate securities	5,026,417		(55,649		)	10,947,027		(471,752		)	15,973,444		(527,401		)
Redeemable preferred stock	22,048		(1,120		)	23,197		(2,383		)	45,245		(3,503		)
Equities	86,194		(1,400		)	91,195		(7,371		)	177,389		(8,771		)
	$	7,026,657	$	(79,273	)	$	14,598,554	$	(601,185	)	$	21,625,211	$	(680,458	)

RMBS and CMBS had gross unrealized losses greater than twelve months of $13.1 million and $21.0 million, respectively, as of December 31, 2017. Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.

The other asset-backed securities had a gross unrealized loss greater than twelve months of $5.4 million as of December 31, 2017. This category predominately includes student loan backed auction rate securities whose underlying collateral is at least 97% guaranteed by the FFELP. At this time, the Company has no reason to believe that the U.S. Department of Education would not honor the FFELP guarantee, if it were necessary.

The U.S. government-related securities and other government-related securities had gross unrealized losses greater than twelve months of $31.5 million and $4.8 million as of December 31, 2017, respectively. These declines were related to changes in interest rates.

The states, municipalities, and political subdivisions category had gross unrealized losses greater than twelve months of $43.9 million as of December 31, 2017. These declines were related to changes in interest rates.

The corporate securities category had gross unrealized losses greater than twelve months of $471.8 million as of December 31, 2017. The aggregate decline in market value of these securities was deemed temporary due to positive factors supporting the recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, and other pertinent information.

As of September 30, 2018, the Company had securities in its available-for-sale portfolio which were rated below investment grade of $1.7 billion and had an amortized cost of $1.7 billion. In addition, included in the Company’s trading portfolio, the Company held $175.6 million of securities which were rated below investment grade. Approximately $263.1 million of the available-for-sale and trading securities that were below investment grade were not publicly traded.

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The change in unrealized gains (losses), net of income tax, on fixed maturities, classified as available-for-sale is summarized as follows:

	For The Three Months Ended September 30,					For The Nine Months Ended September 30,
	2018			2017		2018			2017
	(Dollars In Thousands)
Fixed maturities	$	(229,609	)	$	167,488	$	(1,727,358	)	$	865,743

The amortized cost and fair value of the Company’s investments classified as held-to-maturity as of September 30, 2018 and December 31, 2017, are as follows:

As of September 30, 2018	Amortized Cost		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Fair Value		Total OTTI Recognized in OCI
	(Dollars In Thousands)
Fixed maturities:
Securities issued by affiliates:
Red Mountain, LLC	$	736,605	$	—	$	(77,492	)	$	659,113	$	—
Steel City, LLC	1,917,000		1,728		—			1,918,728		—
	$	2,653,605	$	1,728	$	(77,492	)	$	2,577,841	$	—
As of December 31, 2017	Amortized Cost		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Fair Value		Total OTTI Recognized in OCI
	(Dollars In Thousands)
Fixed maturities:
Securities issued by affiliates:
Red Mountain, LLC	$	704,904	$	—	$	(19,163	)	$	685,741	$	—
Steel City, LLC	2,014,000		76,586		—			2,090,586		—
	$	2,718,904	$	76,586	$	(19,163	)	$	2,776,327	$	—

During the three and nine months ended September 30, 2018 and 2017, the Company recorded no other-than-temporary impairments on held-to-maturity securities.

The Company’s held-to-maturity securities had$1.7 millionof gross unrecognized holding gains and$77.5 million of gross unrecognized holding losses by maturity as of September 30, 2018. The Company does not consider these unrecognized holding losses to be other-than-temporary based on certain positive factors associated with the securities which include credit ratings of the guarantor, financial health of the issuer and guarantor, continued access of the issuer to capital markets and other pertinent information. These held-to-maturity securities are issued by affiliates of the Company which are considered variable interest entities (“VIEs”). The Company is not the primary beneficiary of these entities and thus the securities are not eliminated in consolidation. These securities are collateralized by non-recourse funding obligations issued by captive insurance companies that are affiliates of the Company.

The Company’s held-to-maturity securities had $76.6 million of gross unrecognized holding gains and $19.2 million of gross unrecognized holding losses by maturity as of December 31, 2017. The Company does not consider these unrecognized holding losses to be other-than-temporary based on certain positive factors associated with the securities which include credit ratings of the guarantor, financial health of the issuer and guarantor, continued access of the issuer to capital markets and other pertinent information.

Variable Interest Entity

The Company holds certain investments in entities in which its ownership interests could possibly be considered variable interests under Topic 810 of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC” or “Codification”) (excluding debt and equity securities held as trading, available for sale, or held to maturity). The Company reviews the characteristics of each of these applicable entities and compares those characteristics to applicable criteria to determine whether the entity is a VIE. If the entity is determined to be a VIE, the Company then performs a detailed review to determine whether the interest would be considered a variable interest under the guidance. The Company then performs a qualitative review of all variable interests with the entity and determines whether the Company is the primary beneficiary. ASC 810 provides that an entity is the primary beneficiary of a VIE if the entity has 1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and 2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE.

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Based on this analysis, the Company had an interest in one wholly owned subsidiary, Red Mountain, LLC (“Red Mountain”) as of September 30, 2018 and December 31, 2017, that was determined to be a VIE.

The activity most significant to Red Mountain is the issuance of a note in connection with a financing transaction involving Golden Gate V Vermont Captive Insurance Company (“Golden Gate V”) and the Company in which Golden Gate V issued non-recourse funding obligations to Red Mountain and Red Mountain issued the note to Golden Gate V. Credit enhancement on the Red Mountain Note is provided by an unrelated third party. The Company had the power, via its 100% ownership through an affiliate, to direct the activities of the VIE, but did not have the obligation to absorb losses related to the primary risks or sources of variability to the VIE. The variability of loss would be borne primarily by the third party in its function as provider of credit enhancement on the Red Mountain Note. Accordingly, it was determined that the Company is not the primary beneficiary of the VIE. The Company’s risk of loss related to the VIE is limited to its investment of $10,000. Additionally, the Company has guaranteed Red Mountain’s payment obligation for the credit enhancement fee to the unrelated third party provider. As of September 30, 2018, no payments have been made or required related to this guarantee.

6.FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company determined the fair value of its financial instruments based on the fair value hierarchy established in FASB guidance referenced in the Fair Value Measurements and Disclosures Topic which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company has adopted the provisions from the FASB guidance that is referenced in the Fair Value Measurements and Disclosures Topic for non-financial assets and liabilities (such as property and equipment, goodwill, and other intangible assets) that are required to be measured at fair value on a periodic basis. The effect on the Company’s periodic fair value measurements for non-financial assets and liabilities was not material.

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 consolidated balance sheets are categorized as follows:

•Level 1: Unadjusted quoted prices for identical assets or liabilities in an active market.

• Level 2: Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly. Level 2 inputs include the following:

a. Quoted prices for similar assets or liabilities in active markets;

b. Quoted prices for identical or similar assets or liabilities in non-active markets;

c. Inputs other than quoted market prices that are observable; and

d. Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

• Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management’s own estimates about the assumptions a market participant would use in pricing the asset or liability.

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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, 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	$	—	$	3,406,661	$	—	$	3,406,661
Commercial mortgage-backed securities	4	—		2,214,911		19,467		2,234,378
Other asset-backed securities	4	—		951,874		502,261		1,454,135
U.S. government-related securities	4	946,679		634,300		—		1,580,979
State, municipalities, and political subdivisions	4	—		3,558,073		—		3,558,073
Other government-related securities	4	—		527,646		—		527,646
Corporate securities	4	—		36,231,923		628,284		36,860,207
Redeemable preferred stock	4	69,550		17,589		—		87,139
Total fixed maturity securities - available-for-sale		1,016,229		47,542,977		1,150,012		49,709,218
Fixed maturity securities - trading
Residential mortgage-backed securities	3	—		254,037		—		254,037
Commercial mortgage-backed securities	3	—		135,403		—		135,403
Other asset-backed securities	3	—		83,758		28,012		111,770
U.S. government-related securities	3	26,859		31,222		—		58,081
State, municipalities, and political subdivisions	3	—		296,618		—		296,618
Other government-related securities	3	—		43,030		—		43,030
Corporate securities	3	—		1,564,429		5,223		1,569,652
Redeemable preferred stock	3	3,165		—		—		3,165
Total fixed maturity securities - trading		30,024		2,408,497		33,235		2,471,756
Total fixed maturity securities		1,046,253		49,951,474		1,183,247		52,180,974
Equity securities	3	559,750		—		63,451		623,201
Other long-term investments(1)	3 & 4	52,728		402,312		180,578		635,618
Short-term investments	3	269,266		97,320		—		366,586
Total investments		1,927,997		50,451,106		1,427,276		53,806,379
Cash	3	161,173		—		—		161,173
Assets related to separate accounts	3
Variable annuity	3	13,555,469		—		—		13,555,469
Variable universal life	3	1,077,842		—		—		1,077,842
Total assets measured at fair value on a recurring basis		$	16,722,481	$	50,451,106	$	1,427,276	$	68,600,863
Liabilities:
Annuity account balances(2)	3	$	—	$	—	$	78,463	$	78,463
Other liabilities(1)	3 & 4	8,243		333,156		460,373		801,772
Total liabilities measured at fair value on a recurring basis		$	8,243	$	333,156	$	538,836	$	880,235
(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

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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.

Determination of fair values

The valuation methodologies used to determine the fair values of assets and liabilities reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The Company determines the fair values of certain financial assets and financial liabilities based on quoted market prices, where available. The Company also determines certain fair values based on future cash flows discounted at the appropriate current market rate. Fair values reflect adjustments for counterparty credit quality, the Company’s credit standing, liquidity, and where appropriate, risk margins on unobservable parameters. The following is a discussion of the methodologies used to determine fair values for the financial instruments as listed in the above table.

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The fair value of fixed maturity, short-term, and equity securities is determined by management after considering one of three primary sources of information: third party pricing services, non-binding independent broker quotations, or pricing matrices. Security pricing is applied using a “waterfall” approach whereby publicly available prices are first sought from third party pricing services, the remaining unpriced securities are submitted to independent brokers for non-binding prices, or lastly, securities are priced using a pricing matrix. Typical inputs used by these three pricing methods include, but are not limited to: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Third party pricing services price approximately 93.3% of the Company’s available-for-sale and trading fixed maturity securities. Based on the typical trading volumes and the lack of quoted market prices for available-for-sale and trading fixed maturities, third party pricing services derive the majority of security prices from observable market inputs such as recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information outlined above. If there are no recent reported trades, the third party pricing services and brokers may use matrix or model processes to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Certain securities are priced via independent non-binding broker quotations, which are considered to have no significant unobservable inputs. When using non-binding independent broker quotations, the Company obtains one quote per security, typically from the broker from which we purchased the security. A pricing matrix is used to price securities for which the Company is unable to obtain or effectively rely on either a price from a third party pricing service or an independent broker quotation.

The pricing matrix used by the Company begins with current spread levels to determine the market price for the security. The credit spreads, assigned by brokers, incorporate the issuer’s credit rating, liquidity discounts, weighted- average of contracted cash flows, risk premium, if warranted, due to the issuer’s industry, and the security’s time to maturity. The Company uses credit ratings provided by nationally recognized rating agencies.

For securities that are priced via non-binding independent broker quotations, the Company assesses whether prices received from independent brokers represent a reasonable estimate of fair value through an analysis using internal and external cash flow models developed based on spreads and, when available, market indices. The Company uses a market-based cash flow analysis to validate the reasonableness of prices received from independent brokers. These analytics, which are updated daily, incorporate various metrics (yield curves, credit spreads, prepayment rates, etc.) to determine the valuation of such holdings. As a result of this analysis, if the Company determines there is a more appropriate fair value based upon the analytics, the price received from the independent broker is adjusted accordingly. The Company did not adjust any quotes or prices received from brokers during the nine months ended September 30, 2018.

The Company has analyzed the third party pricing services’ valuation methodologies and related inputs and has also evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs that is in accordance with the Fair Value Measurements and Disclosures Topic of the ASC. Based on this evaluation and investment class analysis, each price was classified into Level 1, 2, or 3. Most prices provided by third party pricing services are classified into Level 2 because the significant inputs used in pricing the securities are market observable and the observable inputs are corroborated by the Company. Since the matrix pricing of certain debt securities includes significant non-observable inputs, they are classified as Level 3.

Asset-Backed Securities

This category mainly consists of residential mortgage-backed securities, commercial mortgage-backed securities, and other asset-backed securities (collectively referred to as asset-backed securities or “ABS”). As of September 30, 2018, the Company held $7.0 billion of ABS classified as Level 2. These securities are priced from information provided by a third party pricing service and independent broker quotes. The third party pricing services and brokers mainly value securities using both a market and income approach to valuation. As part of this valuation process they consider the following characteristics of the item being measured to be relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, and 7) credit ratings of the securities.

After reviewing these characteristics of the ABS, the third party pricing service and brokers use certain inputs to determine the value of the security. For ABS classified as Level 2, the valuation would consist of predominantly market observable inputs such as, but not limited to: 1) monthly principal and interest payments on the underlying assets, 2) average life of the security, 3) prepayment speeds, 4) credit spreads, 5) treasury and swap yield curves, and 6) discount margin. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.

As of September 30, 2018, the Company held $549.7 million of Level 3 ABS, which included $521.7 million of other asset-backed securities classified as available-for-sale and $28.0 million of other asset-backed securities classified as trading. These securities are predominantly ARS whose underlying collateral is at least 97% guaranteed by the FFELP. The Company prices its ARS using an income approach valuation model. As part of the valuation process the Company reviews the following characteristics of the ARS in determining the relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, 7) credit ratings of the securities, 8) liquidity premium, and 9) paydown rate. In periods where market activity increases and there are transactions at a price that is not the result of a distressed or forced sale we consider those prices as part of our valuation. If the market activity during a period is solely the result of the issuer redeeming positions we consider those transactions in our valuation, but still consider them to be level three measurements due to the nature of the transaction.

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Corporate Securities, U.S. Government-Related Securities, States, Municipals, and Political Subdivisions, and Other Government-Related Securities

As of September 30, 2018, the Company classified approximately $42.9 billion of corporate securities, U.S. government-related securities, states, municipals, and political subdivisions, and other government-related securities as Level 2. The fair value of the Level 2 securities is predominantly priced by broker quotes and a third party pricing service. The Company has reviewed the valuation techniques of the brokers and third party pricing service and has determined that such techniques used Level 2 market observable inputs. The following characteristics of the securities are considered to be the primary relevant inputs to the valuation: 1) weighted- average coupon rate, 2) weighted-average years to maturity, 3) seniority, and 4) credit ratings. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.

The brokers and third party pricing service utilize valuation models that consist of a hybrid income and market approach to valuation. The pricing models utilize the following inputs: 1) principal and interest payments, 2) treasury yield curve, 3) credit spreads from new issue and secondary trading markets, 4) dealer quotes with adjustments for issues with early redemption features, 5) liquidity premiums present on private placements, and 6) discount margins from dealers in the new issue market.

As of September 30, 2018, the Company classified approximately $633.5 million of securities as Level 3 valuations. Level 3 securities primarily represent investments in illiquid bonds for which no price is readily available. To determine a price, the Company uses a discounted cash flow model with both observable and unobservable inputs. These inputs are entered into an industry standard pricing model to determine the final price of the security. These inputs include: 1) principal and interest payments, 2) coupon rate, 3) sector and issuer level spread over treasury, 4) underlying collateral, 5) credit ratings, 6) maturity, 7) embedded options, 8) recent new issuance, 9) comparative bond analysis, and 10) an illiquidity premium.

Equities

As of September 30, 2018, the Company held approximately $63.5 million of equity securities classified as Level 2 and Level 3. Of this total, $63.4 million represents Federal Home Loan Bank (“FHLB”) stock. The Company believes that the cost of the FHLB stock approximates fair value.

Other Long-Term Investments and Other Liabilities

Other long-term investments and other liabilities consist entirely of free-standing and embedded derivative financial instruments. Refer to Note 7, Derivative Financial Instruments for additional information related to derivatives. Derivative financial instruments are valued using exchange prices, independent broker quotations, or pricing valuation models, which utilize market data inputs. Excluding embedded derivatives, as of September 30, 2018, 84.0% of derivatives based upon notional values were priced using exchange prices or independent broker quotations. The remaining derivatives were priced by pricing valuation models, which utilize observable market data inputs to the extent they are available. Inputs used to value derivatives include, but are not limited to, interest swap rates, credit spreads, interest rate and equity market volatility indices, equity index levels, and treasury rates. The Company performs monthly analysis on derivative valuations that includes both quantitative and qualitative analyses.

Derivative instruments classified as Level 1 generally include futures and options, which are traded on active exchange markets.

Derivative instruments classified as Level 2 primarily include swaps, options, and swaptions, which are traded over-the-counter. Level 2 also includes certain centrally cleared derivatives. These derivative valuations are determined using independent broker quotations, which are corroborated with observable market inputs.

Derivative instruments classified as Level 3 were embedded derivatives and include at least one significant non-observable input. A derivative instrument containing Level 1 and Level 2 inputs will be classified as a Level 3 financial instrument in its entirety if it has at least one significant Level 3 input.

The Company utilizes derivative instruments to manage the risk associated with certain assets and liabilities. However, the derivative instruments may not be classified within the same fair value hierarchy level as the associated assets and liabilities. Therefore, the changes in fair value on derivatives reported in Level 3 may not reflect the offsetting impact of the changes in fair value of the associated assets and liabilities.

The embedded derivatives are carried at fair value in “other long-term investments” and “other liabilities” on the Company’s consolidated condensed balance sheet. The changes in fair value are recorded in earnings as “Realized investment gains (losses)-Derivative financial instruments”. Refer to Note 7, Derivative Financial Instruments for more information related to each embedded derivatives gains and losses.

The fair value of the guaranteed living withdrawal benefits (“GLWB”) embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using multiple risk neutral stochastic equity scenarios and policyholder behavior assumptions. The risk neutral scenarios are generated using the current swap curve and projected equity volatilities and correlations. The projected equity volatilities are based on a blend of historical volatility and near-term equity market implied volatilities. The equity correlations are based on historical price observations. For policyholder behavior assumptions, expected lapse and utilization assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the Ruark 2015 ALB table with attained age factors varying from 91.1% - 106.6%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR plus a credit spread (to represent the Company’s non-performance risk). As a result of using significant unobservable inputs, the GLWB embedded derivative is categorized as Level 3. Policyholder assumptions are reviewed on an annual basis.

27

The balance of the FIA embedded derivative is impacted by policyholder cash flows associated with the FIA product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the FIA embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the 2015 Ruark ALB mortality table modified with company experience, with attained age factors varying from 87% - 100%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the Company’s non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the FIA embedded derivative is categorized as Level 3.

The balance of the indexed universal life (“IUL”) embedded derivative is impacted by policyholder cash flows associated with the IUL product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the IUL embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the SOA 2015 VBT Primary Tables modified with company experience, with attained age factors varying from 37% - 577%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the Company’s non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the IUL embedded derivative is categorized as Level 3.

The Company has assumed and ceded certain blocks of policies under modified coinsurance agreements in which the investment results of the underlying portfolios inure directly to the reinsurers. As a result, these agreements contain embedded derivatives that are reported at fair value. Changes in their fair value are reported in earnings. The investments supporting these agreements are designated as “trading securities”; therefore changes in their fair value are also reported in earnings. As of September 30, 2018, the fair value of the embedded derivative is based upon the relationship between the statutory policy liabilities (net of policy loans) of $2.3 billion and the statutory unrealized gain (loss) of the securities of $60.0 million. As a result, changes in the fair value of the embedded derivatives are largely offset by the changes in fair value of the related investments and each are reported in earnings. The fair value of the embedded derivative is considered a Level 3 valuation due to the unobservable nature of the policy liabilities.

The Company and certain of its subsidiaries have entered into interest support, yearly renewable term (“YRT”) premium support, and portfolio maintenance agreements with PLC. These agreements meet the definition of a derivative and are accounted for at fair value and are considered Level 3 valuations. The fair value of these derivatives as of September 30, 2018 was $90.9 million and is included in Other long-term investments. For information regarding realized gains on these derivatives please refer to Note 7, Derivative Financial Instruments.

The Interest Support Agreement provides that PLC will make payments to Golden Gate II Captive Insurance Company (“Golden Gate II”) if actual investment income on certain of Golden Gate II’s asset portfolios falls below a calculated investment income amount as defined in the Interest Support Agreement. The calculated investment income amount is a level of investment income deemed to be sufficient to support certain of Golden Gate II’s obligations under a reinsurance agreement with the Company, dated July 1, 2007. The derivative is valued using an internal valuation model that assumes a conservative projection of investment income under an adverse interest rate scenario and the probability that the expectation falls below the calculated investment income amount. This derivative had a fair value of $38.5 million as of September 30, 2018. During the three months ended September 30, 2018, Golden Gate II received no payments under this agreement, and during the nine months ended September 30, 2018, Golden Gate II received $0.6 million in payments under this agreement. As of September 30, 2018, certain interest support agreement obligations to Golden Gate II of approximately $4.9 million have been collateralized by PLC. Re-evaluation and, if necessary, adjustments of any support agreement collateralization amounts occur annually during the first quarter pursuant to the terms of the support agreement.

The YRT premium support agreements provide that PLC will make payments to Golden Gate Captive Insurance Company (“Golden Gate”) and Golden Gate II in the event that YRT premium rates increase. The derivatives are valued using an internal valuation model. The valuation model is a probability weighted discounted cash flow model. The value is primarily a function of the likelihood and severity of future YRT premium increases. The fair value of these derivatives as of September 30, 2018 was $49.8 million. As of September 30, 2018, no payments have been made under these agreements.

The portfolio maintenance agreements provide that PLC will make payments to Golden Gate, Golden Gate V, and West Coast Life Insurance Company (“WCL”) in the event of other-than-temporary impairments on investments that exceed defined thresholds. The derivatives are valued using an internal discounted cash flow model. The significant unobservable inputs are the projected probability and severity of credit losses used to project future cash flows on the investment portfolios. The fair value of the portfolio maintenance agreements as of September 30, 2018, was $2.7 million. As of September 30, 2018, no payments have been made under these agreements.

The Funds Withheld derivative results from a reinsurance agreement with Shades Creek where the economic performance of certain hedging instruments held by the Company is ceded to Shades Creek. The value of the Funds Withheld derivative is directly tied to the value of the hedging instruments held in the funds withheld account. The hedging instruments predominantly consist of derivative instruments the fair values of which are classified as a Level 2 measurement; as such, the fair value of the Funds Withheld derivative has been classified as a Level 2 measurement. The fair value of the Funds Withheld derivative as of September 30, 2018, was a liability of $60.4 million.

28

Annuity Account Balances

The Company records a certain legacy block of FIA reserves at fair value. Based on the characteristics of these reserves, the Company believes that the fund value approximates fair value. The fair value measurement of these reserves is considered a Level 3 valuation due to the unobservable nature of the fund values. The Level 3 fair value as of September 30, 2018 is $78.5 million.

Separate Accounts

Separate account assets are invested in open-ended mutual funds and are included in Level 1.

Valuation of Level 3 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, 2018		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	502,020	Liquidation	Liquidation value	$90 - $97 ($94.92)
			Discounted cash flow	Liquidity premium	0.0% - 1.40% (0.62%)
				Paydown rate	11.09% - 13.15% (12.38%)
Corporate securities	621,392		Discounted cash flow	Spread over treasury	0.90% - 4.23% (1.51%)
Embedded derivatives - GLWB(2)	$	40,048	Actuarial cash flow model	Mortality	87% to 100% of Ruark 2015 ALB Table
				Lapse	Ruark Predictive Model
				Utilization	99%. 10% of policies have a one-time over-utilization of 400%
				Nonperformance risk	0.13% - 0.88%
Liabilities:(1)
Embedded derivative - FIA	256,912		Actuarial cash flow model	Expenses	$145 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% - 0.88%
Embedded derivative - IUL	95,739		Actuarial cash flow model	Mortality	37% - 577% of 2015
					VBT Primary Tables
				Lapse	0.5% - 0.10%, depending on
					duration/distribution channel
					and smoking class
				Nonperformance risk	0.13% - 0.88%
(1) Excludes modified coinsurance arrangements.
(2) The fair value for the GLWB embedded derivative is presented as a net asset.

The chart above excludes Level 3 financial instruments that are valued using broker quotes and for which book value approximates fair value.

The Company has considered all reasonably available quantitative inputs as of September 30, 2018, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $59.9 million of financial instruments being classified as Level 3 as of September 30, 2018. Of the $59.9 million, $47.7 million are other asset-backed securities, and $12.1 million are corporate securities.

In certain cases the Company has determined that book value materially approximates fair value. As of September 30, 2018, the Company held $63.4 million of financial instruments where book value approximates fair value which were predominantly FHLB stock.

29

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.

The chart above excludes Level 3 financial instruments that are valued using broker quotes and for which book value approximates fair value.

The Company had considered all reasonably available quantitative inputs as of December 31, 2017, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $50.0 million of financial instruments being classified as Level 3 as of December 31, 2017. Of the $50.0 million, $35.4 million are other asset backed securities, and $14.6 million are corporate securities.

In certain cases the Company has determined that book value materially approximates fair value. As of December 31, 2017, the Company held $65.5 million of financial instruments where book value approximates fair value which are predominantly FHLB stock.

The asset-backed securities classified as Level 3 are predominantly ARS. A change in the paydown rate (the projected annual rate of principal reduction) of the ARS can significantly impact the fair value of these securities. A decrease in the paydown rate would increase the projected weighted average life of the ARS and increase the sensitivity of the ARS’ fair value to changes in interest rates. An increase in the liquidity premium would result in a decrease in the fair value of the securities, while a decrease in the liquidity premium would increase the fair value of these securities. The liquidation values for these securities are sensitive to the issuer’s available cash flows and ability to redeem the securities, as well as the current holders’ willingness to liquidate at the specified price.

The fair value of corporate bonds classified as Level 3 is sensitive to changes in the interest rate spread over the corresponding U.S. Treasury rate. This spread represents a risk premium that is impacted by company-specific and market factors. An increase in the spread can be caused by a perceived increase in credit risk of a specific issuer and/or an increase in the overall market risk premium associated with similar securities. The fair values of corporate bonds are sensitive to changes in spread. When holding the treasury rate constant, the fair value of corporate bonds increases when spreads decrease and decreases when spreads increase.

30

The fair value of the GLWB embedded derivative is sensitive to changes in the discount rate which includes the Company’s nonperformance risk, volatility, lapse, and mortality assumptions. The volatility assumption is an observable input as it is based on market inputs. The Company’s nonperformance risk, lapse, and mortality are unobservable. An increase in the three unobservable assumptions would result in a decrease in the fair value of the liability and conversely, if there is a decrease in the assumptions the fair value would increase. The fair value is also dependent on the assumed policyholder utilization of the GLWB where an increase in assumed utilization would result in an increase in the fair value of the liability and conversely, if there is a decrease in the assumption, the fair value would decrease.

The fair value of the FIA embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the FIA embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and nonperformance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

The fair value of the IUL embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the IUL embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and non-performance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

31

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended September 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	$	21,780	$	—	$	—	$	—		$	(538	)	$	—	$	—		$	—	$	—	$	(21,281	)	$	39		$	—	$	—
Commercial mortgage-backed securities	47,227		—		—		—			(1,212		)	—		(151		)	—		—		(26,372		)	(25		)	19,467		—
Other asset-backed securities	515,701		—		17		(62		)	(14,802		)	—		(24		)	—		—		—			1,431			502,261		—
Corporate securities	644,811		—		1,422		—			(4,044		)	15,000		(47,935		)	—		—		19,903			(873		)	628,284		—
Total fixed maturity securities - available-for-sale	1,229,519		—		1,439		(62		)	(20,596		)	15,000		(48,110		)	—		—		(27,750		)	572			1,150,012		—
Fixed maturity securities - trading
Other asset-backed securities	24,852		84		—		(76		)	—			4,128		(926		)	—		—		—			(50		)	28,012		68
Corporate securities	5,254		—		—		(6		)	—			—		—			—		—		—			(25		)	5,223		(6		)
Total fixed maturity securities - trading	30,106		84		—		(82		)	—			4,128		(926		)	—		—		—			(75		)	33,235		62
Total fixed maturity securities	1,259,625		84		1,439		(144		)	(20,596		)	19,128		(49,036		)	—		—		(27,750		)	497			1,183,247		62
Equity securities	65,553		—		—		—			—			—		(2,102		)	—		—		—			—			63,451		287
Other long-term investments(1)	170,594		11,899		—		(1,915		)	—			—		—			—		—		—			—			180,578		9,984
Total investments	1,495,772		11,983		1,439		(2,059		)	(20,596		)	19,128		(51,138		)	—		—		(27,750		)	497			1,427,276		10,333
Total assets measured at fair value on a recurring basis	$	1,495,772	$	11,983	$	1,439	$	(2,059	)	$	(20,596	)	$	19,128	$	(51,138	)	$	—	$	—	$	(27,750	)	$	497		$	1,427,276	$	10,333
Liabilities:
Annuity account balances(2)	$	80,098	$	—	$	—	$	(896	)	$	—		$	—	$	—		$	40	$	2,571	—			$	—		$	78,463	$	—
Other liabilities(1)	457,008		38,249		—		(41,614		)	—			—		—			—		—		—			—			460,373		(3,365		)
Total liabilities measured at fair value on a recurring basis	$	537,106	$	38,249	$	—	$	(42,510	)	$	—		$	—	$	—		$	40	$	2,571	$	—		$	—		$	538,836	$	(3,365	)
(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

For the three months ended September 30, 2018, there were$19.9 millionsecurities transferred into Level 3.

For the three months ended September 30, 2018, there were $47.7 million securities transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were priced internally using significant unobservable inputs where market observable inputs were not available in previous periods but were priced by independent pricing services or brokers as of September 30, 2018.

For thethree months ended September 30, 2018, there wereno transfers from Level 2 to Level 1.

For the three months ended September 30, 2018, there were no transfers from Level 1 into Level 2.

32

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the nine months ended September 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	$	—	$	—	$	—	$	—		$	(995	)	$	22,225	$	—		$	—	$	—		$	(21,281	)	$	51		$	—	$	—
Commercial mortgage-backed securities	—		—		—		—			(2,496		)	48,621		(245		)	—		—			(26,372		)	(41		)	19,467		—
Other asset-backed securities	504,365		—		11,884		(62		)	(16,449		)	—		(47		)	—		—			222			2,348			502,261		—
Corporate securities	626,901		—		8,483		—			(22,973		)	93,491		(86,388		)	—		—			12,009			(3,239		)	628,284		—
Total fixed maturity securities - available-for-sale	1,131,266		—		20,367		(62		)	(42,913		)	164,337		(86,680		)	—		—			(35,422		)	(881		)	1,150,012		—
Fixed maturity securities - trading
Other asset-backed securities	35,222		278		—		(3,674		)	—			8,728		(12,595		)	—		—			164			(111		)	28,012		(3,337		)
Corporate securities	5,442		—		—		(145		)	—			—		—			—		—			—			(74		)	5,223		(145		)
Total fixed maturity securities - trading	40,664		278		—		(3,819		)	—			8,728		(12,595		)	—		—			164			(185		)	33,235		(3,482		)
Total fixed maturity securities	1,171,930		278		20,367		(3,881		)	(42,913		)	173,065		(99,275		)	—		—			(35,258		)	(1,066		)	1,183,247		(3,482		)
Equity securities	65,518		1		—		(1		)	—			36		(2,102		)	—		—			—			(1		)	63,451		224
Other long-term investments(1)	160,466		34,303		—		(13,564		)	—			—		—			—		(627		)	—			—			180,578		20,112
Short-term investments	—		—		—		—			—			—		—			—		—			—			—			—		—
Total investments	1,397,914		34,582		20,367		(17,446		)	(42,913		)	173,101		(101,377		)	—		(627		)	(35,258		)	(1,067		)	1,427,276		16,854
Total assets measured at fair value on a recurring basis	$	1,397,914	$	34,582	$	20,367	$	(17,446	)	$	(42,913	)	$	173,101	$	(101,377	)	$	—	$	(627	)	$	(35,258	)	$	(1,067	)	$	1,427,276	$	16,854
Liabilities:
Annuity account balances(2)	$	83,472	$	—	$	—	$	(2,749	)	$	—		$	—	$	—		$	570	$	8,328		—			$	—		$	78,463	$	—
Other liabilities(1)	597,562		226,359		—		(89,170		)	—			—		—			—		—			—			—			460,373		137,189
Total liabilities measured at fair value on a recurring basis	$	681,034	$	226,359	$	—	$	(91,919	)	$	—		$	—	$	—		$	570	$	8,328		$	—		$	—		$	538,836	$	137,189
(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

For the nine months ended September 30, 2018, there were$30.9 millionsecurities transferred into Level 3.

For the nine months ended September 30, 2018, there were $66.2 million securities transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were priced internally using significant unobservable inputs where market observable inputs were not available in previous periods but were priced by independent pricing services or brokers as of September 30, 2018.

For thenine months ended September 30, 2018, there wereno transfers from Level 2 to Level 1.

For the nine months ended September 30, 2018, there were no transfers from Level 1 into Level 2.

33

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.

For the three months ended September 30, 2017, there were no securities transferred into Level 3.

For the three months ended September 30, 2017, $17.4 million of securities were transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were priced internally using significant unobservable inputs where market observable inputs were not available in previous periods but were priced by independent pricing services or brokers as of September 30, 2017.

For the three months ended September 30, 2017, there were no securities transferred into Level 1.

For the three months ended September 30, 2017, there were no securities transferred into Level 2.

34

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	)	$	—	$	—
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
Short-term investments	—		—		—		—			—			—		—			—		—		—			—			—		—
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.

For the nine months ended September 30, 2017, there was an immaterial amount of securities transferred into Level 3.

For the nine months ended September 30, 2017, $28.9 million of securities were transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were priced internally using significant unobservable inputs where market observable inputs were not available in previous periods but were priced by independent pricing services or brokers as of September 30, 2017.

For the nine months ended September 30, 2017, there were no securities transferred into Level 1.

For the nine months ended September 30, 2017, there were no securities transferred into Level 2.

Total realized and unrealized gains (losses) on Level 3 assets and liabilities are primarily reported in either realized investment gains (losses) within the consolidated condensed statements of income (loss) or other comprehensive income (loss) within shareowner’s equity based on the appropriate accounting treatment for the item.

Purchases, sales, issuances, and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period.

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Such activity primarily relates to purchases and sales of fixed maturity securities and issuances and settlements of fixed indexed annuities.

The Company reviews the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting period in which the changes occur. The asset transfers in the table(s) above primarily related to positions moved from Level 3 to Level 2 as the Company determined that certain inputs were observable.

The amount of total gains (losses) for assets and liabilities still held as of the reporting date primarily represents changes in fair value of trading securities and certain derivatives that exist as of the reporting date and the change in fair value of fixed indexed annuities.

Estimated Fair Value of 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, 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	$	7,572,349	$	7,335,547	$	6,817,723	$	6,740,177
Policy loans	3	1,703,462		1,703,462		1,615,615		1,615,615
Fixed maturities, held-to-maturity(1)	3	2,653,605		2,577,841		2,718,904		2,776,327
Liabilities:
Stable value product account balances	3	$	5,211,668	$	5,147,084	$	4,698,371	$	4,698,868
Future policy benefits and claims(2)	3	223,091		223,091		220,498		220,498
Other policyholders’ funds(3)	3	131,338		130,672		133,508		134,253
Debt:(4)
Non-recourse funding obligations(5)	3	$	2,890,435	$	2,814,355	$	2,952,822	$	2,980,495
Subordinated funding obligations	3	110,000		97,451		—		—
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 $1.4 million and $1.7 million as of September 30, 2018 and December 31, 2017, respectively.
(5) As of September 30, 2018, carrying amount of $2.6 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.

Fair Value Measurements

Mortgage loans on real estate

The Company estimates the fair value of mortgage loans using an internally developed model. This model includes inputs derived by the Company based on assumed discount rates relative to the Company’s current mortgage loan lending rate and an expected cash flow analysis based on a review of the mortgage loan terms. The model also contains the Company’s determined representative risk adjustment assumptions related to credit and liquidity risks.

Policy loans

The Company believes the fair value of policy loans approximates book value. Policy loans are funds provided to policyholders in return for a claim on the policy. The funds provided are limited to the cash surrender value of the underlying policy. The nature of policy loans is to have a negligible default risk as the loans are fully collateralized by the value of the policy. Policy loans do not have a stated maturity and the balances and accrued interest are repaid either by the policyholder or with proceeds from the policy. Due to the collateralized nature of policy loans and unpredictable timing of repayments, the Company believes the fair value of policy loans approximates carrying value.

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Fixed maturities, held-to-maturity

The Company estimates the fair value of its fixed maturity, held-to-maturity securities using internal discounted cash flow models. The discount rates used in the model are based on a current market yield for similar financial instruments.

Stable value product and other investment contract balances

The Company estimates the fair value of stable value product account balances and other investment contract balances (included in Future policy benefits and claims as well as Other policyholder funds line items on our balance sheet) using models based on discounted expected cash flows. The discount rates used in the models are based on a current market rate for similar financial instruments.

Funding obligations

The Company estimates the fair value of its subordinated and non-recourse funding obligations using internal discounted cash flow models. The discount rates used in the model are based on a current market yield for similar financial instruments.

7.DERIVATIVE FINANCIAL INSTRUMENTS

Types of Derivative Instruments and Derivative Strategies

The Company utilizes a risk management strategy that incorporates the use of derivative financial instruments to reduce exposure to certain risks, including but not limited to, interest rate risk, currency exchange risk, volatility risk, and equity market risk. These strategies are developed through the Company’s analysis of data from financial simulation models and other internal and industry sources and are then incorporated into the Company’s risk management program.

Derivative instruments expose the Company to credit and market risk and could result in material changes from period to period. The Company attempts to minimize its credit in connection with its overall asset/liability management programs and risk management strategies. In addition, all derivative programs are monitored by our risk management department.

Derivatives Related to Interest Rate Risk Management

Derivative instruments that are used as part of the Company’s interest rate risk management strategy include interest rate swaps, interest rate futures, interest rate caps, and interest rate swaptions.

Derivatives Related to Foreign Currency Exchange Risk Management

Derivative instruments that are used as part of the Company’s foreign currency exchange risk management strategy include foreign currency swaps, foreign currency futures, foreign equity futures, and foreign equity options.

Derivatives Related to Risk Mitigation of Certain Annuity Contracts

The Company may use the following types of derivative contracts to mitigate its exposure to certain guaranteed benefits related to VA contracts, fixed indexed annuities, and indexed universal life contracts:

•Foreign Currency Futures

•Variance Swaps

•Interest Rate Futures

•Equity Options

•Equity Futures

•Credit Derivatives

•Interest Rate Swaps

•Interest Rate Swaptions

•Volatility Futures

•Volatility Options

•Funds Withheld Agreement

•Total Return Swaps

Other Derivatives

The Company and certain of its subsidiaries have derivatives with PLC. These derivatives consist of an interest support agreement, YRT premium support agreements, and portfolio maintenance agreements with PLC.

The Company has a funds withheld account that consists of various derivative instruments held by us that is used to hedge the GLWB and GMDB riders. The economic performance of derivatives in the funds withheld account is ceded to Shades Creek. The funds withheld account is accounted for as a derivative financial instrument.

Accounting for Derivative Instruments

The Company records its derivative financial instruments in the consolidated balance sheet in “other long-term investments” and “other liabilities” in accordance with GAAP, which requires that all derivative instruments be recognized in the balance sheet at fair value. The change in the fair value of derivative financial instruments is reported either in the statement of income or in other comprehensive income (loss), depending upon whether it qualified for and also has been properly identified as being part of a hedging relationship, and also on the type of hedging relationship that exists.

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For a derivative financial instrument to be accounted for as an accounting hedge, it must be identified and documented as such on the date of designation. For cash flow hedges, the effective portion of their realized gain or loss is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged item impacts earnings. Any remaining gain or loss, the ineffective portion, is recognized in current earnings. For fair value hedge derivatives, their gain or loss as well as the offsetting loss or gain attributable to the hedged risk of the hedged item is recognized in current earnings. Effectiveness of the Company’s hedge relationships is assessed on a quarterly basis.

The Company reports changes in fair values of derivatives that are not part of a qualifying hedge relationship through earnings in the period of change. Changes in the fair value of derivatives that are recognized in current earnings are reported in “Realized investment gains (losses)-Derivative financial instruments.”

Derivative Instruments Designated and Qualifying as Hedging Instruments

Cash-Flow Hedges

• To hedge a fixed rate note denominated in a foreign currency, the Company entered into a fixed-to-fixed foreign currency swap in order to hedge the foreign currency exchange risk associated with the note. The cash flows received on the swap are identical to the cash flow paid on the note.

• To hedge a floating rate note, the Company entered into an interest rate swap to exchange the floating rate on the note for a fixed rate in order to hedge the interest rate risk associated with the note. The cash flows received on the swap are identical to the cash flow variability paid on the note.

Derivative Instruments Not Designated and Not Qualifying as Hedging Instruments

The Company uses various other derivative instruments for risk management purposes that do not qualify for hedge accounting treatment. Changes in the fair value of these derivatives are recognized in earnings during the period of change.

Derivatives Related to Variable Annuity Contracts

• The Company uses equity futures, equity options, total return swaps, interest rate futures, interest rate swaps, interest rate swaptions, currency futures, volatility futures, volatility options, and variance swaps to mitigate the risk related to certain guaranteed minimum benefits, including GLWB, within its VA products. In general, the cost of such benefits varies with the level of equity and interest rate markets, foreign currency levels, and overall volatility.

• The Company markets certain VA products with a GLWB rider. The GLWB component is considered an embedded derivative, not considered to be clearly and closely related to the host contract.

• The Company has a funds withheld account that consists of various derivative instruments held by the Company that are used to hedge the GLWB and GMDB riders. The economic performance of derivatives in the funds withheld account is ceded to Shades Creek. The funds withheld account is accounted for as a derivative financial instrument.

Derivatives Related to Fixed Annuity Contracts

• The Company uses equity futures and options to mitigate the risk within its fixed indexed annuity products. In general, the cost of such benefits varies with the level of equity markets and overall volatility.

• The Company markets certain fixed indexed annuity products. The FIA component is considered an embedded derivative as it is, not considered to be clearly and closely related to the host contract.

Derivatives Related to Indexed Universal Life Contracts

• The Company uses equity, futures, and options to mitigate the risk within its indexed universal life products. In general, the cost of such benefits varies with the level of equity markets.

• The Company markets certain IUL products. The IUL component is considered an embedded derivative as it is not considered to be clearly and closely related to the host contract.

Other Derivatives

• The Company and certain of its subsidiaries have an interest support agreement, two YRT premium support agreements, and three portfolio maintenance agreements with PLC. The Company entered into three separate portfolio maintenance agreements, two in October 2012 and one in January 2016.

• The Company uses various swaps and other types of derivatives to manage risk related to other exposures.

• The Company is involved in various modified coinsurance and funds withheld arrangements which contain embedded derivatives. Changes in their fair value are recorded in current period earnings. The investment portfolios that support the related modified coinsurance reserves and funds withheld arrangements had fair value changes which substantially offset the gains or losses on these embedded derivatives.

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The following table sets forth realized investments gains and losses for the periods shown:

Realized investment gains (losses) - derivative financial instruments

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Derivatives related to VA contracts:
Interest rate futures	$	2,111		$	549		$	(13,229	)	$	16,746
Equity futures	(5,733		)	(25,959		)	(23,025		)	(75,389		)
Currency futures	3,410			(6,092		)	7,890			(22,366		)
Equity options	(21,206		)	(23,307		)	(47,406		)	(76,376		)
Interest rate swaptions	—			(292		)	(14		)	(2,423		)
Interest rate swaps	(41,288		)	5,342			(131,147		)	31,331
Total return swaps	(32,343		)	(8,057		)	(35,908		)	(9,675		)
Embedded derivative - GLWB	22,931			485			55,595			(13,306		)
Funds withheld derivative	37,444			35,821			68,341			103,746
Total derivatives related to VA contracts	(34,674		)	(21,510		)	(118,903		)	(47,712		)
Derivatives related to FIA contracts:
Embedded derivative	(14,360		)	(18,606		)	(7,957		)	(40,351		)
Equity futures	(388		)	66			(716		)	161
Equity options	18,474			11,242			21,203			29,511
Total derivatives related to FIA contracts	3,726			(7,298		)	12,530			(10,679		)
Derivatives related to IUL contracts:
Embedded derivative	(9,535		)	(297		)	(877		)	(10,958		)
Equity futures	(1		)	58			135			(878		)
Equity options	4,928			1,975			5,764			6,437
Total derivatives related to IUL contracts	(4,608		)	1,736			5,022			(5,399		)
Embedded derivative - Modco reinsurance treaties	10,811			(19,746		)	138,652			(90,314		)
Derivatives with PLC(1)	(1,913		)	52,077			(66		)	34,671
Other derivatives	(52		)	43			(59		)	41
Total realized gains (losses) - derivatives	$	(26,710	)	$	5,302		$	37,176		$	(119,392	)
(1) These derivatives include the Interest, YRT premium support, and portfolio maintenance agreements between certain of the Company’s subsidiaries and PLC.

39

The following table presents the components of the gain or loss on derivatives that qualify as a cash flow hedging relationship.

Gain (Loss) on Derivatives in Cash Flow Hedging Relationship

	Amount of Gains (Losses) Deferred in Accumulated Other Comprehensive Income (Loss) on Derivatives		Amount and Location of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)			Amount and Location of (Losses) Recognized in Income (Loss) on Derivatives
	(Effective Portion)		(Effective Portion)			(Ineffective Portion)
			Benefits and settlement expenses			Realized investment gains (losses)
	(Dollars In Thousands)
For The Three Months Ended September 30, 2018
Foreign currency swaps	$	190	$	(155	)	$	—
Interest rate swaps	101		(326		)	—
Total	$	291	$	(481	)	$	—
For The Nine Months Ended September 30, 2018
Foreign currency swaps	$	3,772	$	(473	)	$	—
Interest rate swaps	101		(326		)	—
Total	$	3,873	$	(799	)	$	—
For The Three Months Ended September 30, 2017
Foreign currency swaps	$	1,273	$	(38	)	$	—
Total	$	1,273	$	(38	)	$	—
For The Nine Months Ended September 30, 2017
Foreign currency swaps	$	55	$	(396	)	$	—
Total	$	55	$	(396	)	$	—

Based on expected cash flows of the underlying hedged items, the Company expects to reclassify $0.3 million out of accumulated other comprehensive income into earnings during the next twelve months.

40

The table below presents information about the nature and accounting treatment of the Company’s primary derivative financial instruments and the location in and effect on the consolidated condensed financial statements for the periods presented below:

	As of
	September 30, 2018				December 31, 2017
	Notional Amount		Fair Value		Notional Amount		Fair Value
	(Dollars In Thousands)
Other long-term investments
Cash flow hedges:
Interest rate swaps	$	350,000	$	—	$	—	$	—
Foreign currency swaps	117,178		10,902		117,178		6,016
Derivatives not designated as hedging instruments:
Interest rate swaps	565,000		8,402		1,265,000		55,411
Total return swaps	482,523		3,676		190,938		135
Derivatives with PLC(1)	2,863,575		90,885		2,810,469		91,578
Embedded derivative - Modco reinsurance treaties	322,308		2,650		64,472		1,009
Embedded derivative - GLWB	2,692,724		87,043		2,116,935		67,879
Interest rate futures	875,566		8,329		1,071,870		3,178
Equity futures	205,872		2,387		62,266		154
Currency futures	135,112		1,096		1,117		2
Equity options	6,026,348		420,107		4,436,467		403,961
Interest rate swaptions	—		—		225,000		14
Other	157		141		157		200
	$	14,636,363	$	635,618	$	12,361,869	$	629,537
Other liabilities
Derivatives not designated as hedging instruments:
Interest rate swaps	$	1,547,500	$	26,321	$	597,500	$	2,960
Total return swaps	—		—		243,388		318
Embedded derivative - Modco reinsurance treaties	2,082,638		60,683		2,390,539		215,247
Funds withheld derivative	1,813,454		60,432		1,502,726		61,729
Embedded derivative - GLWB	1,385,123		46,995		1,939,320		83,427
Embedded derivative - FIA	2,459,246		256,912		1,951,650		218,676
Embedded derivative - IUL	219,226		95,739		168,349		80,212
Interest rate futures	348,749		7,122		230,404		917
Equity futures	77,916		1,043		318,795		2,593
Currency futures	79,861		15		255,248		2,087
Equity options	4,174,072		246,466		3,112,812		237,807
Other	341		44		—		—
	$	14,188,126	$	801,772	$	12,710,731	$	905,973
(1) These derivatives include the Interest, YRT premium support, and portfolio maintenance agreements between certain of the Company’s subsidiaries and PLC.

41

8.    OFFSETTING OF ASSETS AND LIABILITIES

Certain of the Company’s derivative instruments are subject to enforceable master netting arrangements that provide for the net settlement of all derivative contracts between the Company and a counterparty in the event of default or upon the occurrence of certain termination events. Collateral support agreements associated with each master netting arrangement provide that the Company will receive or pledge financial collateral in the event either minimum thresholds, or in certain cases ratings levels, have been reached. Additionally, certain of the Company’s repurchase agreements provide for net settlement on termination of the agreement. Refer to Note 11, Debt and Other Obligations for details of the Company’s repurchase agreement programs. 

Collateral received includes both cash and non-cash collateral. Cash collateral received by the Company is recorded on the consolidated condensed balance sheet as “cash”, with a corresponding amount recorded in “other liabilities” to represent the Company’s obligation to return the collateral. Non-cash collateral received by the Company is not recognized on the consolidated condensed balance sheet unless the company exercises its right to sell or re-pledge the underlying asset. As of September 30, 2018, the fair value of non-cash collateral received was $8.2 million. As of December 31, 2017, the Company had not received any non-cash collateral.

The tables below present the derivative instruments by assets and liabilities for the Company as of September 30, 2018.

	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
							Financial Instruments		Collateral Received		Net Amount
	(Dollars In Thousands)
Offsetting of Assets
Derivatives:
Free-Standing derivatives	$	454,899	$	—	$	454,899	$	270,878	$	68,809	$	115,212
Total derivatives, subject to a master netting arrangement or similar arrangement	454,899		—		454,899		270,878		68,809		115,212
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	2,650		—		2,650		—		—		2,650
Embedded derivative - GLWB	87,043		—		87,043		—		—		87,043
Derivatives with PLC	90,885		—		90,885		—		—		90,885
Other	141		—		141		—		—		141
Total derivatives, not subject to a master netting arrangement or similar arrangement	180,719		—		180,719		—		—		180,719
Total derivatives	635,618		—		635,618		270,878		68,809		295,931
Total Assets	$	635,618	$	—	$	635,618	$	270,878	$	68,809	$	295,931

42

	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
							Financial Instruments		Collateral Posted		Net Amount
	(Dollars In Thousands)
Offsetting of Liabilities
Derivatives:
Free-Standing derivatives	$	280,967	$	—	$	280,967	$	270,878	$	10,089	$	—
Total derivatives, subject to a master netting arrangement or similar arrangement	280,967		—		280,967		270,878		10,089		—
Derivatives, not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	60,683		—		60,683		—		—		60,683
Funds withheld derivative	60,432		—		60,432		—		—		60,432
Embedded derivative - GLWB	46,995		—		46,995		—		—		46,995
Embedded derivative - FIA	256,912		—		256,912		—		—		256,912
Embedded derivative - IUL	95,739		—		95,739		—		—		95,739
Other	44		—		44		—		—		44
Total derivatives, not subject to a master netting arrangement or similar arrangement	520,805		—		520,805		—		—		520,805
Total derivatives	801,772		—		801,772		270,878		10,089		520,805
Repurchase agreements(1)	417,094		—		417,094		—		—		417,094
Total Liabilities	$	1,218,866	$	—	$	1,218,866	$	270,878	$	10,089	$	937,899
(1) Borrowings under repurchase agreements are for a term less than 90 days.

The tables below present the derivative instruments by assets and liabilities for the Company as of December 31, 2017.

	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
							Financial Instruments		Collateral Received		Net Amount
	(Dollars In Thousands)
Offsetting of Assets
Derivatives:
Free-Standing derivatives	$	468,871	$	—	$	468,871	$	242,105	$	108,830	$	117,936
Total derivatives, subject to a master netting arrangement or similar arrangement	468,871		—		468,871		242,105		108,830		117,936
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	1,009		—		1,009		—		—		1,009
Embedded derivative - GLWB	67,879		—		67,879		—		—		67,879
Derivatives with PLC	91,578		—		91,578		—		—		91,578
Other	200		—		200		—		—		200
Total derivatives, not subject to a master netting arrangement or similar arrangement	160,666		—		160,666		—		—		160,666
Total derivatives	629,537		—		629,537		242,105		108,830		278,602
Total Assets	$	629,537	$	—	$	629,537	$	242,105	$	108,830	$	278,602

43

	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
							Financial Instruments		Collateral Posted		Net Amount
	(Dollars In Thousands)
Offsetting of Liabilities
Derivatives:
Free-Standing derivatives	$	246,682	$	—	$	246,682	$	242,105	$	4,577	$	—
Total derivatives, subject to a master netting arrangement or similar arrangement	246,682		—		246,682		242,105		4,577		—
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	215,247		—		215,247		—		—		215,247
Funds withheld derivative	61,729		—		61,729		—		—		61,729
Embedded derivative - GLWB	83,427		—		83,427		—		—		83,427
Embedded derivative - FIA	218,676		—		218,676		—		—		218,676
Embedded derivative - IUL	80,212		—		80,212		—		—		80,212
Total derivatives, not subject to a master netting arrangement or similar arrangement	659,291		—		659,291		—		—		659,291
Total derivatives	905,973		—		905,973		242,105		4,577		659,291
Repurchase agreements(1)	885,000		—		885,000		—		—		885,000
Total Liabilities	$	1,790,973	$	—	$	1,790,973	$	242,105	$	4,577	$	1,544,291
(1) Borrowings under repurchase agreements are for a term less than 90 days.

9.MORTGAGE LOANS

Mortgage Loans

The Company invests a portion of its investment portfolio in commercial mortgage loans. As of September 30, 2018, the Company’s mortgage loan holdings were approximately$7.6 billion. The Company has specialized in making loans on credit-oriented commercial properties, credit-anchored strip shopping centers, senior living facilities, and apartments. The Company’s underwriting procedures relative to its commercial loan portfolio are based, in the Company’s view, on a conservative and disciplined approach. The Company concentrates on a small number of commercial real estate asset types associated with the necessities of life (retail, multi-family, senior living, professional office buildings, and warehouses). The Company believes that these asset types tend to weather economic downturns better than other commercial asset classes in which it has chosen not to participate. The Company believes this disciplined approach has helped to maintain a relatively low delinquency and foreclosure rate throughout its history. The majority of the Company’s mortgage loans portfolio was underwritten by the Company. From time to time, the Company may acquire loans in conjunction with an acquisition.

The Company’s commercial mortgage loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, and net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan’s contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts and prepayment fees are reported in net investment income.

Certain of the mortgage loans have call options that occur within the next 11 years. However, if interest rates were to significantly increase, the Company may be unable to exercise the call options on its existing mortgage loans commensurate with the significantly increased market rates. As of September 30, 2018, assuming the loans are called at their next call dates, approximately $80.7 million of principal would become due for the remainder of 2018, $933.4 million in 2019 through 2023, $91.8 million in 2024 through 2028, and $1.9 million thereafter.

The Company offers a type of commercial mortgage loan under which the Company will permit a loan-to-value ratio of up to 85% in exchange for a participating interest in the cash flows from the underlying real estate. As of September 30, 2018 and December 31, 2017, approximately $757.0 million and $669.3 million, respectively, of the Company’s total mortgage loans principal balance have this participation feature. Cash flows received as a result of this participation feature are recorded as interest income. During the three and nine months ended September 30, 2018 and 2017, the Company recognized $9.5 million, $22.0 million, $14.2 million, and $25.7 million, respectively, of participating mortgage loan income.

44

As ofSeptember 30, 2018,$3.0 millionof the Company’s invested assets consisted of nonperforming mortgage loans, restructured mortgage loans, or mortgage loans that were foreclosed and were converted to real estate properties. For all mortgage loans, the impact of troubled debt restructurings is generally reflected in our investment balance and in the allowance for mortgage loan credit losses. During the nine months ended September 30, 2018, the Company recognized one troubled debt restructuring as a result of the Company granting a concession to a borrower which included loan terms unavailable from other lenders. This concession was the result of an agreement between the creditor and the debtor, and the Company did not identify any loans whose principal was permanently impaired.

TheCompany’s mortgage loan portfolio consists of two categories of loans: 1) those not subject to a pooling and servicing agreement and 2) those subject to a contractual pooling and servicing agreement. As of September 30, 2018, the Company held $3.0 million of mortgage loans not subject to a pooling and servicing agreement that were nonperforming mortgage loans, restructured, or mortgage loans that were foreclosed and were converted to real estate properties. The Company did not foreclose on any nonperforming loans not subject to a pooling and servicing agreement during the nine months ended September 30, 2018.

As of September 30, 2018,noneof the loans subject to a pooling and servicing agreement were nonperforming or restructured. The Company did not foreclose on any nonperforming loans subject to a pooling and servicing agreement during the nine months ended September 30, 2018.

As of September 30, 2018, the Company had an allowance for mortgage loan credit losses of $1.5 million and as of December 31, 2017, there was no allowance for mortgage loan credit losses. Due to the Company’s loss experience and nature of the loan portfolio, the Company believes that a collectively evaluated allowance would be inappropriate. The Company believes an allowance calculated through an analysis of specific loans that are believed to have a higher risk of credit impairment provides a more accurate presentation of expected losses in the portfolio and is consistent with the applicable guidance for loan impairments in ASC Subtopic 310. Since the Company uses the specific identification method for calculating the allowance, it is necessary to review the economic situation of each borrower to determine those that have higher risk of credit impairment. The Company has a team of professionals that monitors borrower conditions such as payment practices, borrower credit, operating performance, and property conditions, as well as ensuring the timely payment of property taxes and insurance. Through this monitoring process, the Company assesses the risk of each loan. When issues are identified, the severity of the issues are assessed and reviewed for possible credit impairment. If a loss is probable, an expected loss calculation is performed and an allowance is established for that loan based on the expected loss. The expected loss is calculated as the excess carrying value of a loan over either the present value of expected future cash flows discounted at the loan’s original effective interest rate, or the current estimated fair value of the loan’s underlying collateral. A loan may be subsequently charged off at such point that the Company no longer expects to receive cash payments, the present value of future expected payments of the renegotiated loan is less than the current principal balance, or at such time that the Company is party to foreclosure or bankruptcy proceedings associated with the borrower and does not expect to recover the principal balance of the loan.

A charge off is recorded by eliminating the allowance against the mortgage loan and recording the renegotiated loan or the collateral property related to the loan as investment real estate on the balance sheet, which is carried at the lower of the appraised fair value of the property or the unpaid principal balance of the loan, less estimated selling costs associated with the property.

	For The Nine Months Ended September 30, 2018
	(Dollars In Thousands)
Beginning balance, December 31, 2017	$	—
Charge offs	—
Recoveries	(24		)
Provision	1,505
Ending balance, September 30, 2018	$	1,481

45

It is the Company’s policy to cease to carry accrued interest on loans that are over 90 days delinquent. For loans less than 90 days delinquent, interest is accrued unless it is determined that the accrued interest is not collectible. If a loan becomes over 90 days delinquent, it is the Company’s general policy to initiate foreclosure proceedings unless a workout arrangement to bring the loan current is in place. For loans subject to a pooling and servicing agreement, there are certain additional restrictions and/or requirements related to workout proceedings, and as such, these loans may have different attributes and/or circumstances affecting the status of delinquency or categorization of those in nonperforming status. An analysis of the delinquent loans is shown in the following chart. 

					Greater
	30-59 Days		60-89 Days		than 90 Days		Total
As of September 30, 2018	Delinquent		Delinquent		Delinquent		Delinquent
	(Dollars In Thousands)
Commercial mortgage loans	$	1,180	$	—	$	1,243	$	2,423
Number of delinquent commercial mortgage loans	1		—		1		2
As of December 31, 2017
Commercial mortgage loans	$	1,817	$	—	$	—	$	1,817
Number of delinquent commercial mortgage loans	2		—		—		2

The Company’s commercial mortgage loan portfolio consists of mortgage loans that are collateralized by real estate. Due to the collateralized nature of the loans, any assessment of impairment and ultimate loss given a default on the loans is based upon a consideration of the estimated fair value of the real estate. The Company limits accrued interest income on impaired loans to 90 days of interest. Once accrued interest on the impaired loan is received, interest income is recognized on a cash basis.

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income
	(Dollars In Thousands)
As of September 30, 2018
Commercial mortgage loans:
With no related allowance recorded	$	—	$	—	$	—	$	—	$	—	$	—
With an allowance recorded	5,714		5,327		1,481		1,905		197		225
As of December 31, 2017
Commercial mortgage loans:
With no related allowance recorded	$	—	$	—	$	—	$	—	$	—	$	—
With an allowance recorded	—		—		—		—		—		—

Mortgage loans that were modified in a troubled debt restructuring as of September 30, 2018 and December 31, 2017 were as follows:

	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(Dollars In Thousands)
As of September 30, 2018
Troubled debt restructuring:
Commercial mortgage loans	1	$	2,694	$	1,748
As of December 31, 2017
Troubled debt restructuring:
Commercial mortgage loans	1	$	418	$	418

46

10.GOODWILL

The balance of goodwill for the Company as of September 30, 2018 was $793.5 million. There has been no change to goodwill during the nine months ended September 30, 2018.

Accounting for goodwill requires an estimate of the future profitability of the associated lines of business to assess the recoverability of the capitalized acquisition goodwill. The Company evaluates the carrying value of goodwill at the segment (or reporting unit) level at least annually and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to: 1) a significant adverse change in legal factors or in business climate, 2) unanticipated competition, or 3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, the Company first determines through qualitative analysis whether relevant events and circumstances indicate that it is more likely than not that segment goodwill balances are impaired as of the testing date. If it is determined that it is more likely than not that impairment exists, the Company compares its estimate of the fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. The Company utilizes a fair value measurement (which includes a discounted cash flows analysis) to assess the carrying value of the reporting units in consideration of the recoverability of the goodwill balance assigned to each reporting unit as of the measurement date. The Company’s material goodwill balances are attributable to certain of its operating segments (which are each considered to be reporting units). The cash flows used to determine the fair value of the Company’s reporting units are dependent on a number of significant assumptions. The Company’s estimates, which consider a market participant view of fair value, are subject to change given the inherent uncertainty in predicting future results and cash flows, which are impacted by such things as policyholder behavior, competitor pricing, capital limitations, new product introductions, and specific industry and market conditions.

The balance recognized as goodwill is not amortized, but is reviewed for impairment on an annual basis, or more frequently as events or circumstances may warrant, including those circumstances which would more likely than not reduce the fair value of the Company’s reporting units below its carrying amount. During the fourth quarter of 2017, the Company performed its annual evaluation of goodwill based on information as of October 1, 2017, and determined that no adjustment to impair goodwill was necessary. During the nine months ended September 30, 2018, the Company did not identify any events or circumstances which would indicate that the fair value of its operating segments would have declined below their book value, either individually or in the aggregate.

11.DEBT AND OTHER OBLIGATIONS

Under a revolving line of credit arrangement that was in effect until May 3, 2018 (the “2015 Credit Facility”), the Company had the ability to borrow on an unsecured basis up to an aggregate principal amount of $1.0 billion. The Company had the right in certain circumstances to request that the commitment under the 2015 Credit Facility be increased up to a maximum principal amount of $1.25 billion. Balances outstanding under the 2015 Credit Facility accrued interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of PLC’s Senior Debt, or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent’s Prime rate, (y) 0.50% above the Funds rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of PLC’s Senior Debt. The 2015 Credit Facility also provided for a facility fee at a rate that varies with the ratings of PLC’s Senior Debt and that is calculated on the aggregate amount of commitments under the 2015 Credit Facility, whether used or unused. The annual facility fee rate is 0.125% of the aggregate principal amount. The 2015 Credit Facility provides that PLC is liable for the full amount of any obligations for borrowings or letters of credit, including those of the Company, under the Credit Facility. The maturity date of the 2015 Credit Facility was February 2, 2020.

On May 3, 2018, the Company amended the 2015 Credit Facility (as amended, the “Credit Facility”). Under the Credit Facility, the Company has the ability to borrow on an unsecured basis up to an aggregate principal amount of $1.0 billion. The Company has the right in certain circumstances to request that the commitment under the Credit Facility be increased up to a maximum principal amount of $1.5 billion. Balances outstanding under the Credit Facility accrue interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of PLC’s Senior Debt, or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent’s Prime rate, (y) 0.50% above the Funds rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of PLC’s Senior Debt. The Credit Facility also provided for a facility fee at a rate that varies with the ratings of PLC’s Senior Debt and that is calculated on the aggregate amount of commitments under the Credit Facility, whether used or unused. The annual facility fee rate is 0.125% of the aggregate principal amount. The Credit Facility provides that PLC is liable for the full amount of any obligations for borrowings or letters of credit, including those of the Company, under the Credit Facility. The maturity date of the Credit Facility is May 3, 2023. The Company is not aware of any non-compliance with the financial debt covenants of the Credit Facility as of September 30, 2018. PLC had no outstanding balance as of September 30, 2018.

During 2018, the Company issued $110.0 million of Subordinated Funding Obligations at a rate of 3.55% due 2038.

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Non-RecourseFunding Obligations

Non-recourse funding obligations outstanding as of September 30, 2018, on a consolidated basis, are shown in the following table:

Issuer	Outstanding Principal		Carrying Value(1)		Maturity Year	Year-to-Date Weighted-Avg Interest Rate
	(Dollars In Thousands)
Golden Gate Captive Insurance Company(2)(3)	$	1,917,000	$	1,917,000	2039	4.75	%
Golden Gate II Captive Insurance Company	309,849		256,157		2052	4.07	%
Golden Gate V Vermont Captive Insurance Company(2)(3)	655,000		714,921		2037	5.12	%
MONY Life Insurance Company(3)	1,091		2,357		2024	6.19	%
Total	$	2,882,940	$	2,890,435
(1) Carrying values include premiums and discounts and do not represent unpaid principal balances.
(2) Obligations are issued to non-consolidated subsidiaries of PLC. These obligations collateralize certain held-to-maturity securities issued by wholly owned subsidiaries of the Company.
(3) Fixed rate obligations.

Non-recourse funding obligations outstanding as of December 31, 2017, on a consolidated basis, are shown in the following table:

Issuer	Outstanding Principal		Carrying Value(1)		Maturity Year	Year-to-Date Weighted-Avg Interest Rate
	(Dollars In Thousands)
Golden Gate Captive Insurance Company(2)(3)	$	2,014,000	$	2,014,000	2039	4.75	%
Golden Gate II Captive Insurance Company	309,849		255,132		2052	3.11	%
Golden Gate V Vermont Captive Insurance Company(2)(3)	620,000		681,285		2037	5.12	%
MONY Life Insurance Company(3)	1,091		2,405		2024	6.19	%
Total	$	2,944,940	$	2,952,822
(1) Carrying values include premiums and discounts and do not represent unpaid principal balances.
(2) Obligations are issued to non-consolidated subsidiaries of PLC. These obligations collateralize certain held-to-maturity securities issued by wholly owned subsidiaries of the Company.
(3) Fixed rate obligations.

Secured Financing Transactions

Repurchase Program Borrowings

While the Company anticipates that the cash flows of its operating subsidiaries will be sufficient to meet its investment commitments and operating cash needs in a normal credit market environment, the Company recognizes that investment commitments scheduled to be funded may, from time to time, exceed the funds then available. Therefore, the Company has established repurchase agreement programs for certain of its insurance subsidiaries to provide liquidity when needed. The Company expects that the rate received on its investments will equal or exceed its borrowing rate. Under this program, the Company may, from time to time, sell an investment security at a specific price and agree to repurchase that security at another specified price at a later date. These borrowings are typically for a term less than90 days. The market value of securities to be repurchased is monitored and collateral levels are adjusted where appropriate to protect the counterparty against credit exposure. Cash received is invested in fixed maturity securities, and the agreements provided for net settlement in the event of default or on termination of the agreements. As of September 30, 2018, the fair value of securities pledged under the repurchase program was $457.5 million, and the repurchase obligation of $417.1 million was included in the Company’s consolidated condensed balance sheets (at an average borrowing rate of 223 basis points). During the nine months ended September 30, 2018, the maximum balance outstanding at any one point in time related to these programs was $427.5 million. The average daily balance was $225.9 million (at an average borrowing rate of 208 basis points) during the nine months ended September 30, 2018.As ofDecember 31, 2017, the fair value of securities pledged under the repurchase program was $1,006.6 million, and the repurchase obligation of $885.0 million was included in the Company’s consolidated condensed balance sheets (at an average borrowing rate of142basis points). During2017, the maximum balance outstanding at any one point in time related to these programs was $988.5 million. The average daily balance was$624.7 million(at an average borrowing rate of101basis points) during the year endedDecember 31, 2017.

48

Securities Lending

The Company participates in securities lending, primarily as an investment yield enhancement, whereby securities that are held as investments are loaned out to third parties for short periods of time. The Company requires initial collateral of 102% of the market value of the loaned securities to be separately maintained. The loaned securities’ market value is monitored on a daily basis. As of September 30, 2018, securities with a market value of $92.0 million were loaned under this program. As collateral for the loaned securities, the Company receives short-term investments, which are recorded in “short-term investments” with a corresponding liability recorded in “secured financing liabilities” to account for its obligation to return the collateral. As of September 30, 2018, the fair value of the collateral related to this program was $97.3 million and the Company has an obligation to return $97.3 million of collateral to the securities borrowers.

The following table provides the amount by asset class of securities of collateral pledged for repurchase agreements and securities that have been loaned as part of securities lending transactions as of September 30, 2018 and December 31, 2017:

Repurchase Agreements, Securities Lending Transactions, and Repurchase-to-Maturity Transactions

Accounted for as Secured Borrowings

	Remaining Contractual Maturity of the Agreements
	As of September 30, 2018
	(Dollars In Thousands)
	Overnight and Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions
U.S. Treasury and agency securities	$	401,011	$	56,513	$	—	$	—	$	457,524
Mortgage loans	—		—		—		—		—
Total repurchase agreements and repurchase-to-maturity transactions	401,011		56,513		—		—		457,524
Securities lending transactions
Fixed maturities	91,040		—		—		—		91,040
Equity securities	982		—		—		—		982
Redeemable preferred stock	—		—		—		—		—
Other government related securities	—		—		—		—		—
Total securities lending transactions	92,022		—		—		—		92,022
Total securities	$	493,033	$	56,513	$	—	$	—	$	549,546

Repurchase Agreements, Securities Lending Transactions, and Repurchase-to-Maturity Transactions

Accounted for as Secured Borrowings

	Remaining Contractual Maturity of the Agreements
	As of December 31, 2017
	(Dollars In Thousands)
	Overnight and Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions
U.S. Treasury and agency securities	$	307,633	$	—	$	—	$	—	$	307,633
Mortgage loans	698,974		—		—		—		698,974
Total repurchase agreements and repurchase-to-maturity transactions	1,006,607		—		—		—		1,006,607
Securities lending transactions
Corporate securities	118,817		—		—		—		118,817
Equity securities	5,699		—		—		—		5,699
Redeemable preferred stock	755		—		—		—		755
Total securities lending transactions	125,271		—		—		—		125,271
Total securities	$	1,131,878	$	—	$	—	$	—	$	1,131,878

49

12.COMMITMENTS AND CONTINGENCIES

Under the insurance guaranty fund laws in most states, insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. From time to time, companies may be asked to contribute amounts beyond prescribed limits. It is possible that the Company could be assessed with respect to product lines not offered by the Company. In addition, legislation may be introduced in various states with respect to guaranty fund assessment laws related to insurance products, including long term care insurance and other specialty products, that increases the cost of future assessments or alters future premium tax offsets received in connection with guaranty fund assessments. The Company cannot predict the amount, nature or timing of any future assessments or legislation, any of which could have a material and adverse impact on the Company’s financial condition or results of operations.

A number of civil jury verdicts have been returned against insurers, broker-dealers, and other providers of financial services involving sales, refund or claims practices, alleged agent misconduct, failure to properly supervise representatives, relationships with agents or persons with whom the insurer does business, and other matters. Often these lawsuits have resulted in the award of substantial judgments that are disproportionate to the actual damages, including material amounts of punitive and non-economic compensatory damages. In some states, juries, judges, and arbitrators have substantial discretion in awarding punitive and non-economic compensatory damages which creates the potential for unpredictable material adverse judgments or awards in any given lawsuit or arbitration. Arbitration awards are subject to very limited appellate review. In addition, in some class action and other lawsuits, companies have made material settlement payments. The financial services and insurance industries in particular are also sometimes the target of law enforcement and regulatory investigations relating to the numerous laws and regulations that govern such companies. Some companies have been the subject of law enforcement or regulatory actions or other actions resulting from such investigations. The Company, in the ordinary course of business, is involved in such matters.

The Company establishes liabilities for litigation and regulatory actions when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. For matters where a loss is believed to be reasonably possible, but not probable, no liability is established. For such matters, the Company may provide an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. The Company reviews relevant information with respect to litigation and regulatory matters on a quarterly and annual basis and updates its established liabilities, disclosures and estimates of reasonably possible losses or range of loss based on such reviews.

The Company and certain of its insurance subsidiaries, as well as certain other insurance companies for which the Company has coinsured blocks of life insurance and annuity policies, are under audit for compliance with the unclaimed property laws of a number of states. The audits are being conducted on behalf of the treasury departments or unclaimed property administrators in such states. The focus of the audits is on whether there have been unreported deaths, maturities, or policies that have exceeded limiting age with respect to which death benefits or other payments under life insurance or annuity policies should be treated as unclaimed property that should be escheated to the state. The Company is presently unable to estimate the reasonably possible loss or range of loss that may result from the audits due to a number of factors, including uncertainty as to the legal theory or theories that may give rise to liability, the early stages of the audits being conducted, and uncertainty as to whether the Company or other companies are responsible for the liabilities, if any, arising in connection with certain co-insured policies. The Company will continue to monitor the matter for any developments that would make the loss contingency associated with the audits reasonably estimable.

The Company and certain of its insurance subsidiaries are under a targeted multi-state examination with respect to their claims paying practices and their use of the U.S. Social Security Administration’s Death Master File or similar databases (a “Death Database”) to identify unreported deaths in their life insurance policies, annuity contracts and retained asset accounts. There is no clear basis in previously existing law for requiring a life insurer to search for unreported deaths in order to determine whether a benefit is owed, and substantial legal authority exists to support the position that the prevailing industry practice was lawful. A number of life insurers, however, have entered into settlement or consent agreements with state insurance regulators under which the life insurers agreed to implement procedures for periodically comparing their life insurance and annuity contracts and retained asset accounts against a Death Database, treating confirmed deaths as giving rise to a death benefit under their policies, locating beneficiaries and paying them the benefits and interest, escheating the benefits and interest to the state if the beneficiary could not be found, and paying penalties to the state, if required. It has been publicly reported that the life insurers have paid administrative and/or examination fees to the insurance regulators in connection with the settlement or consent agreements. The Company believes that insurance regulators could demand from the Company administrative and/or examination fees relating to the targeted multi-state examination. Based on publicly reported payments by other life insurers, the Company does not believe such fees, if assessed, would have a material effect on its financial statements.

Advance Trust & Life Escrow Services, LTA, as Securities Intermediary of Life Partners Position Holder Trust v. Protective Life Insurance Company, Case No. 2:18-CV-01290, is a putative class action that was filed on August 13, 2018 in the United States District Court for the Northern District of Alabama. Plaintiff alleges that the Company required policyholders to pay unlawful and excessive cost of insurance charges. Plaintiff seeks to represent all owners of universal life and variable universal life policies issued or administered by the Company or its predecessors that provide that cost of insurance rates are to be determined based on expectations of future mortality experience. The plaintiff seeks class certification, compensatory damages, pre-judgment and post judgment interest, costs, and other unspecified relief. The Companyis vigorously defending this matter and cannot predict the outcome of or reasonably estimate the possible loss or range of loss that might result from this litigation.

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13.EMPLOYEE BENEFIT PLANS

Components of the net periodic benefit cost of PLC’s defined benefit pension plan for the three and nine months ended September 30, 2018 and 2017, are as follows: 

	For The Three Months Ended September 30,										For The Nine Months Ended September 30,
	2018					2017					2018					2017
	Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan
	(Dollars In Thousands)
Service cost — benefits earned during the period	$	3,006		$	288	$	3,348		$	334	$	9,888		$	1,062	$	10,044		$	1,002
Interest cost on projected benefit obligation	2,577			359		2,191			297		7,371			1,077		6,573			891
Expected return on plan assets	(4,743		)	—		(3,352		)	—		(12,795		)	—		(10,056		)	—
Amortization of prior service cost	—			—		—			—		—			—		—			—
Amortization of actuarial loss/(gain)	—			196		—			118		—			726		—			354
Preliminary net periodic benefit cost	840			843		2,187			749		4,464			2,865		6,561			2,247
Settlement/curtailment expense(1)	—			986		—			—		—			986		—			—
Total net periodic benefit costs	$	840		$	1,829	$	2,187		$	749	$	4,464		$	3,851	$	6,561		$	2,247
(1) The unfunded excess benefit plan triggered settlement accounting for the nine months ended September 30, 2018 since total lump sum payments exceeded the settlement threshold of service cost plus interest cost.

During the nine months ended September 30, 2018, PLC contributed $18.8 million to its defined benefit pension plan for the 2017 plan year. PLC will make contributions in future periods as necessary to at least satisfy minimum funding requirements, to maintain an adjusted funding target attainment percentage (“AFTAP”) of at least 80% and to avoid certain Pension Benefit Guaranty Corporation (“PBGC”) reporting triggers. PLC may also make additional discretionary contributions in excess of the contribution amounts established by the current funding policy.

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14.ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables summarize the changes in the accumulated balances for each component of accumulated other comprehensive income (loss) (“AOCI”) as of September 30, 2018 and December 31, 2017.

Changes in Accumulated Other Comprehensive Income (Loss) by Component

	Unrealized Gains and Losses on Investments(2)			Accumulated Gain and Loss Derivatives		Total Accumulated Other Comprehensive Income (Loss)
	(Dollars In Thousands, Net of Tax)
Beginning Balance, December 31, 2017	$	23,069		$	747	$	23,816
Other comprehensive income (loss) before reclassifications	(1,198,669		)	3,060		(1,195,609		)
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings	22			—		22
Amounts reclassified from accumulated other comprehensive income (loss)(1)	(2,042		)	631		(1,411		)
Net current-period other comprehensive income (loss)	(1,200,689		)	3,691		(1,196,998		)
Cumulative effect adjustment	(10,552		)	—		(10,552		)
Ending Balance, September 30, 2018	$	(1,188,172	)	$	4,438	$	(1,183,734	)
(1)  See Reclassification table below for details.
(2)  As of September 30, 2018, net unrealized losses reported in AOCI were offset by $524.1 million due to the impact those net unrealized losses would have had on certain of the Company’s insurance assets and liabilities if the net unrealized losses had been recognized in net income.

Changes in Accumulated Other Comprehensive Income (Loss) by Component

	Unrealized Gains and Losses on Investments(2)			Accumulated Gain and Loss Derivatives			Total Accumulated Other Comprehensive Income (Loss)
	(Dollars In Thousands, Net of Tax)
Beginning Balance, December 31, 2016	$	(655,767	)	$	727		$	(655,040	)
Other comprehensive income (loss) before reclassifications	699,097			(563		)	698,534
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings	7,153			—			7,153
Amounts reclassified from accumulated other comprehensive income (loss)(1)	(944		)	451			(493		)
Net current-period other comprehensive income (loss)	705,306			(112		)	705,194
Cumulative effect adjustments	(26,470		)	132			(26,338		)
Ending Balance, December 31, 2017	$	23,069		$	747		$	23,816
(1) See Reclassification table below for details.
(2)  As of December 31, 2016 and December 31, 2017, net unrealized losses reported in AOCI were offset by $424.1 million and $(6.3) million, respectively, due to the impact those net unrealized losses would have had on certain of the Company’s insurance assets and liabilities if the net unrealized losses had been recognized in net income.

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The following tables summarize the reclassifications amounts out of AOCI for the three and nine months ended September 30, 2018 and 2017.

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

For The Three Months Ended September 30, 2018	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Condensed Statements of Income
	(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit(1)	$	(481	)	Benefits and settlement expenses, net of reinsurance ceded
	(481		)	Total before tax
	101			Tax (expense) or benefit
	$	(380	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains (losses)	$	(2,018	)	Realized investment gains (losses): All other investments
Impairments recognized in earnings	(14		)	Net impairment losses recognized in earnings
	(2,032		)	Total before tax
	427			Tax (expense) or benefit
	$	(1,605	)	Net of tax
(1) See Note 7, Derivative Financial Instruments for additional information

For The Nine Months September 30, 2018	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Condensed Statements of Income
	(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit(1)	$	(799	)	Benefits and settlement expenses, net of reinsurance ceded
	(799		)	Total before tax
	168			Tax (expense) or benefit
	$	(631	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains (losses)	$	6,248		Realized investment gains (losses): All other investments
Impairments recognized in earnings	(3,664		)	Net impairment losses recognized in earnings
	2,584			Total before tax
	(542		)	Tax (expense) or benefit
	$	2,042		Net of tax
(1) See Note 7, Derivative Financial Instruments for additional information

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Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

For The Three Months Ended September 30, 2017	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Condensed Statements of Income
	(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit(1)	$	(38	)	Benefits and settlement expenses, net of reinsurance ceded
	(38		)	Total before tax
	14			Tax (expense) or benefit
	$	(24	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains (losses)	$	690		Realized investment gains (losses): All other investments
Impairments recognized in earnings	(273		)	Net impairment losses recognized in earnings
	417			Total before tax
	(146		)	Tax (expense) or benefit
	$	271		Net of tax

For The Nine Months Ended September 30, 2017	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Condensed Statements of Income
	(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit(1)	$	(396	)	Benefits and settlement expenses, net of reinsurance ceded
	(396		)	Total before tax
	139			Tax (expense) or benefit
	$	(257	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains (losses)	$	9,084		Realized investment gains (losses): All other investments
Impairments recognized in earnings	(8,259		)	Net impairment losses recognized in earnings
	825			Total before tax
	(289		)	Tax (expense) or benefit
	$	536		Net of tax

15.INCOME TAXES

The Company used its respective estimates for its annual 2018 and 2017 incomes in computing its effective income tax rates for the three and nine months ended September 30, 2018 and 2017. The estimate of the annual 2018 income excluded unrealized gains and losses on equity securities due to an inability to forecast future gains and losses. The Company’s effective tax rate related to continuing operations varied from the maximum federal income tax rates as follows:

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	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2018		2017		2018		2017
Statutory federal income tax rate applied to pre-tax income	21.0	%	35.0	%	21.0	%	35.0	%
State income taxes	0.5		0.4		0.5		0.5
Investment income not subject to tax	(3.4	)	(4.0	)	(3.9	)	(3.6	)
Uncertain tax positions	—		(0.1	)	—		0.2
Change in State Tax Rate	—		—		(0.8	)	—
Prior period adjustments	—		(1.7	)	—		(0.8	)
Other	(0.6	)	(0.1	)	(0.5	)	0.1
	17.5	%	29.5	%	16.3	%	31.4	%

In April 2017, a routine review by Congress’ Joint Committee on Taxation related to IRS examinations for 2003 through 2011 was finalized and the Company received an approximate $6.2 million net refund in the fourth quarter of 2017. The resulting net adjustment to the Company’s current income taxes and the collection of this refund for the years 2003 through 2011 did not materially affect the Company or its effective tax rate.

There have been no material changes to the balance of unrecognized tax benefits, where the changes impact earnings, during the quarter ending September 30, 2018. The Company believes that in the next twelve months, none of the unrecognized tax benefits will be reduced.

In general, the Company is no longer subject to income tax examinations by taxing authorities for tax years that began before 2014. Furthermore, due to the aforementioned IRS adjustments to the Company’s pre-2014 taxable income, the Company has amended certain of its 2003 through 2013 state income tax returns. Such amendments will cause such years to remain open, pending the states’ acceptances of the returns.

During the year ended December 31, 2016, the Company entered into a reinsurance transaction. This transaction generated an operating loss on the Company’s consolidated 2016 U.S. income tax return. The Company partially carried back this loss and received refunds for substantially all of the U.S. income taxes it paid in 2014 and 2015 and expects to fully utilize the remaining operating loss carryforward during the carryforward period. Based on the Company’s current assessment of future taxable income, including available tax planning opportunities, the Company anticipates that it is more likely than not that it will generate sufficient taxable income to realize all of its material deferred tax assets. The Company did not record a valuation allowance against its material deferred tax assets as of September 30, 2018 and December 31, 2017.

In the tax year ended December 31, 2017, the Company recognized provisional impacts related to the revaluation of certain deferred tax assets under the Tax Reform Act under Staff Accounting Bulletin No. 118. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional regulatory guidance that may be issued, additional analysis, and resulting changes in interpretations and assumptions the Company has made. Any adjustments to these provisional amounts will be reported as a component of income tax expense (benefit) in the reporting period in which any such adjustments are determined. There are no material adjustments for the nine months ended September 30, 2018. The accounting is expected to be complete by December 22, 2018.

16.OPERATINGSEGMENTS

The Company has several operating segments, each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. The Company periodically evaluates its operating segments and makes adjustments to its segment reporting as needed. A brief description of each segment follows.

• The Life Marketing segment markets fixed universal life (“UL”), indexed universal life (“IUL”), variable universal life (“VUL”), bank-owned life insurance (“BOLI”), and level premium term insurance (“traditional”) products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, independent marketing organizations, and affinity groups.

• The Acquisitions segment focuses on acquiring, converting, and servicing policies and contracts acquired from other companies. The segment’s primary focus is on life insurance policies and annuity products that were sold to individuals. The level of the segment’s acquisition activity is predicated upon many factors, including available capital, operating capacity, potential return on capital, and market dynamics. Policies acquired through the Acquisitions segment are typically blocks of business where no new policies are being marketed. Therefore earnings and account values are expected to decline as the result of lapses, deaths, and other terminations of coverage unless new acquisitions are made.

• The Annuities segment markets fixed and VA products. These products are primarily sold through broker-dealers, financial institutions, and independent agents and brokers.

• The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. This segment also issues funding agreements to the FHLB, and markets guaranteed investment contracts (“GICs”)

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to 401(k) and other qualified retirement savings plans. The Company also has an unregistered funding agreement-backed notes program which provides for offers of notes to both domestic and international institutional investors.

• The Asset Protection segment markets extended service contracts, GAP products, credit life and disability insurance, and other specialized ancillary products to protect consumers’ investments in automobiles and recreational vehicles. GAP products are designed to cover the difference between the scheduled loan pay-off amount and an asset’s actual cash value in the case of a total loss. Each type of specialized ancillary product protects against damage or other loss to a particular aspect of the underlying asset.

• The Corporate and Other segment primarily consists of net investment income on assets supporting our equity capital, unallocated corporate overhead and expenses not attributable to the segments above. This segment includes earnings from several non-strategic or runoff lines of business, various financing and investment-related transactions, and the operations of several small subsidiaries.

 The Company’s management and Board of Directors analyzes and assesses the operating performance of each segment using “pre-tax adjusted operating income (loss)” and “after-tax adjusted operating income (loss)”. Consistent with GAAP accounting guidance for segment reporting, pre-tax adjusted operating income (loss) is the Company’s measure of segment performance. Pre-tax adjusted operating income (loss) is calculated by adjusting “income (loss) before income tax”, by excluding the following items:

• realized gains and losses on investments and derivatives,

• changes in the GLWB embedded derivatives exclusive of the portion attributable to the economic cost of the GLWB,

• actual GLWB incurred claims, and

• the amortization of deferred policy acquisition costs (“DAC”), value of business acquired (“VOBA”), and certain policy liabilities that is impacted by the exclusion of these items.

The items excluded from adjusted operating income (loss) are important to understanding the overall results of operations. Pre-tax adjusted operating income (loss) and after-tax adjusted operating income (loss) are not substitutes for income before income taxes or net income (loss), respectively. These measures may not be comparable to similarly titled measures reported by other companies. The Company believes that pre-tax and after-tax adjusted operating income (loss) enhances management’s and the Board of Directors’ understanding of the ongoing operations, the underlying profitability of each segment, and helps facilitate the allocation of resources.

After-tax adjusted operating income (loss) is derived from pre-tax adjusted operating income (loss) with the inclusion of income tax expense or benefits associated with pre-tax adjusted operating income. Income tax expense or benefits is allocated to the items excluded from pre-tax adjusted operating income (loss) at the statutory federal income tax rate for the associated period. For periods ending on and prior to December 31, 2017, a rate of 35% was used. Beginning in 2018, a statutory federal income tax rate of 21% will be used to allocate income tax expense or benefits to items excluded from pre-tax adjusted operating income (loss). Income tax expense or benefits allocated to after-tax adjusted operating income (loss) can vary period to period based on changes in the Company’s effective income tax rate.

In determining the components of the pre-tax adjusted operating income (loss) for each segment, premiums and policy fees, other income, benefits and settlement expenses, and amortization of DAC and VOBA are attributed directly to each operating segment. Net investment income is allocated based on directly related assets required for transacting the business of that segment. Realized investment gains (losses) and other operating expenses are allocated to the segments in a manner that most appropriately reflects the operations of that segment. Investments and other assets are allocated based on statutory policy liabilities net of associated statutory policy assets, while DAC/VOBA and goodwill are shown in the segments to which they are attributable.

There were no significant intersegment transactions during the three and nine months ended September 30, 2018 and 2017.

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The following tables present a summary of results and reconciles pre-tax adjusted operating income (loss) to consolidated income before income tax and net income: 

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Revenues
Life Marketing	$	407,708		$	397,096		$	1,195,074		$	1,174,048
Acquisitions	581,054			375,819			1,469,787			1,164,650
Annuities	110,386			110,870			321,880			357,589
Stable Value Products	59,328			49,933			158,944			132,863
Asset Protection	90,926			93,799			266,747			277,433
Corporate and Other	20,561			77,875			90,686			109,628
Total revenues	$	1,269,963		$	1,105,392		$	3,503,118		$	3,216,211
Pre-tax Adjusted Operating Income (Loss)
Life Marketing	$	3,647		10,798			(18,326		)	$	55,217
Acquisitions	93,648			62,880			208,206			184,825
Annuities	36,249			51,779			112,234			130,128
Stable Value Products	27,126			27,992			76,198			74,258
Asset Protection	7,051			5,187			16,991			13,812
Corporate and Other	(41,927		)	(38,054		)	(119,474		)	(107,741		)
Pre-tax adjusted operating income	125,794			120,582			275,829			350,499
Realized (losses) gains on investments and derivatives	(30,624		)	45,400			(97,829		)	35,413
Income before income tax	95,170			165,982			178,000			385,912
Income tax expense	(16,646		)	(49,016		)	(28,933		)	(120,975		)
Net income	$	78,524		$	116,966		$	149,067		$	264,937
Pre-tax adjusted operating income	$	125,794		$	120,582		$	275,829		$	350,499
Adjusted operating income tax (expense) benefit	(23,077		)	(33,126		)	(49,477		)	(108,580		)
After-tax adjusted operating income	102,717			87,456			226,352			241,919
Realized (losses) gains on investments and derivatives	(30,624		)	45,400			(97,829		)	35,413
Income tax benefit (expense) on adjustments	6,431			(15,890		)	20,544			(12,395		)
Net income	$	78,524		$	116,966		$	149,067		$	264,937
Realized investment (losses) gains:
Derivative financial instruments	$	(26,710	)	$	5,302		$	37,176		$	(119,392	)
All other investments	(20,156		)	18,150			(157,350		)	94,526
Net impairment losses recognized in earnings	(14		)	(273		)	(3,664		)	(8,259		)
Less: related amortization(1)	(5,859		)	(12,123		)	5,060			(38,570		)
Less: VA GLWB economic cost	(10,397		)	(10,098		)	(31,069		)	(29,968		)
Realized (losses) gains on investments and derivatives	$	(30,624	)	$	45,400		$	(97,829	)	$	35,413
(1)  Includes amortization of DAC/VOBA and benefits and settlement expenses that are impacted by realized gains (losses).

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	Operating Segment Assets As of September 30, 2018
	(Dollars In Thousands)
	Life Marketing		Acquisitions		Annuities		Stable Value Products
Investments and other assets	$	14,709,504	$	32,234,422	$	21,083,522	$	5,083,328
DAC and VOBA	1,468,989		455,343		876,390		7,001
Other intangibles	267,087		32,622		160,118		7,556
Goodwill	200,274		14,524		336,677		113,813
Total assets	$	16,645,854	$	32,736,911	$	22,456,707	$	5,211,698

	Asset Protection		Corporate and Other		Total Consolidated
Investments and other assets	$	824,282	$	12,857,563	$	86,792,621
DAC and VOBA	171,661		—		2,979,384
Other intangibles	125,251		33,194		625,828
Goodwill	128,182		—		793,470
Total assets	$	1,249,376	$	12,890,757	$	91,191,303

	Operating Segment Assets As of December 31, 2017
	(Dollars In Thousands)
	Life Marketing		Acquisitions		Annuities		Stable Value Products
Investments and other assets	$	14,917,752	$	19,588,133	$	20,774,566	$	4,569,639
DAC and VOBA	1,320,776		74,862		772,634		6,864
Other intangibles	281,705		34,548		170,117		8,056
Goodwill	200,274		14,524		336,677		113,813
Total assets	$	16,720,507	$	19,712,067	$	22,053,994	$	4,698,372

	Asset Protection		Corporate and Other		Total Consolidated
Investments and other assets	$	708,605	$	14,893,253	$	75,451,948
DAC and VOBA	30,265		—		2,205,401
Other intangibles	133,234		35,256		662,916
Goodwill	128,182		—		793,470
Total assets	$	1,000,286	$	14,928,509	$	79,113,735

17.SUBSEQUENT EVENTS

The Company has evaluated the effects of events subsequent to September 30, 2018, and through the date we filed our consolidated condensed financial statements with the United States Securities and Exchange Commission. All accounting and disclosure requirements related to subsequent events are included in our consolidated condensed financial statements.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our consolidated condensed financial statements included under Part I, Item 1, Financial Statements (Unaudited), of this Quarterly Report on Form 10-Q and our audited consolidated financial statements for the year ended December 31, 2017, included in our Annual Report on Form 10-K.

For a more complete understanding of our business and current period results, please read the following MD&A in conjunction with our latest Annual Report on Form 10-K and other filings with the United States Securities and Exchange Commission (the “SEC”).

Certain reclassifications have been made in the previously reported financial statements and accompanying notes to make the prior period amounts comparable to those of the current period. Such reclassifications had no effect on previously reported net income or shareowner’s equity.

FORWARD-LOOKING STATEMENTS — CAUTIONARY LANGUAGE

This report reviews our financial condition and results of operations, including our liquidity and capital resources. Historical information is presented and discussed, and where appropriate, factors that may affect future financial performance are also identified and discussed. Certain statements made in this report include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that may predict, forecast, indicate, or imply future results, performance, or achievements instead of historical facts and may contain words like “believe,” “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “plan,” “will,” “shall,” “may,” and other words, phrases, or expressions with similar meaning. Forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially from the results contained in the forward-looking statements, and we cannot give assurances that such statements will prove to be correct. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise. For more information about the risks, uncertainties, and other factors that could affect our future results, please refer to Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Part II, Item 1A, Risk Factors, of this report, as well as Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

IMPORTANT INVESTOR INFORMATION

We file reports with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other reports as required. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer and the SEC maintains an internet site at www.sec.gov that contains these reports and other information filed electronically by us. We make available through our website, www.protective.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC. We will furnish such documents to anyone who requests such copies in writing. Requests for copies should be directed to: Financial Information, Protective Life Corporation, P. O. Box 2606, Birmingham, Alabama 35202, Telephone (205) 268-3912, Fax (205) 268-3642.

We also make available to the public current information, including financial information, regarding the Company and our affiliates on the Financial Information page of our website, www.protective.com. We encourage investors, the media and others interested in us and our affiliates to review the information we post on our website. The information found on our website is not part of this or any other report filed with or furnished to the SEC.

OVERVIEW

Our Business

We are a wholly owned subsidiary of Protective Life Corporation (“PLC”). Founded in 1907, we are the largest operating subsidiary of PLC. On February 1, 2015, PLC became a wholly owned subsidiary of The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan (now known as Dai-ichi Life Holdings, Inc., “Dai-ichi Life”), when DL Investment (Delaware), Inc., a wholly owned subsidiary of Dai-ichi Life, merged with and into PLC. Prior to February 1, 2015, PLC’s stock was publicly traded on the New York Stock Exchange. Subsequent to the Merger, PLC and the Company remain SEC registrants for financial reporting purposes in the United States. We provide financial services through the production, distribution, and administration of insurance and investment products. Unless the context otherwise requires, the “Company,” “we,” “us,” or “our” refers to the consolidated group of Protective Life Insurance Company and our subsidiaries.

We have several operating segments, each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. We periodically evaluate our operating segments and make adjustments to our segment reporting as needed.

Our operating segments are Life Marketing, Acquisitions, Annuities, Stable Value Products, Asset Protection, and Corporate and Other.

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• Life Marketing- We market fixed universal life (“UL”), indexed universal life (“IUL”), variable universal life (“VUL”), bank-owned life insurance (“BOLI”), and level premium term insurance (“traditional”) products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, independent distribution organizations, and affinity groups.

• Acquisitions - We focus on acquiring, converting, and/or servicing policies and contracts from other companies. This segment’s primary focus is on life insurance policies and annuity products that were sold to individuals. The level of the segment’s acquisition activity is predicated upon many factors, including available capital, operating capacity, potential return on capital, and market dynamics. Policies acquired through the Acquisitions segment are typically blocks of business where no new policies are being marketed. Therefore earnings and account values are expected to decline as the result of lapses, deaths, and other terminations of coverage unless new acquisitions are made.

• Annuities - We market fixed and variable annuity (“VA”) products. These products are primarily sold through broker-dealers, financial institutions, and independent agents and brokers.

• Stable Value Products - We sell fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. The segment also issues funding agreements to the Federal Home Loan Bank (“FHLB”), and markets guaranteed investment contracts (“GICs”) to 401(k) and other qualified retirement savings plans. We also have an unregistered funding agreement-backed notes program which provides for offers of notes to both domestic and international institutional investors.

• Asset Protection - We market extended service contracts, guaranteed asset protection (“GAP”) products, credit life and disability insurance, and other specialized ancillary products to protect consumers’ investments in automobiles and recreational vehicles. GAP products are designed to cover the difference between the scheduled loan pay-off amount and an asset’s actual cash value in the case of a total loss. Each type of specialized ancillary product protects against damage or other loss to a particular aspect of the underlying asset.

• Corporate and Other - This segment primarily consists of net investment income on assets supporting our equity capital, unallocated corporate overhead, and expenses not attributable to the segments above. This segment includes earnings from several non-strategic or runoff lines of business, financing and investment-related transactions, and the operations of several small subsidiaries.

RECENT DEVELOPMENTS

On May 1, 2018, The Lincoln National Life Insurance Company (“Lincoln Life”) completed its previously announced acquisition (the “Closing”) of Liberty Mutual Group Inc.’s (“Liberty Mutual”) Group Benefits Business and Individual Life and Annuity Business (the “Life Business”) through the acquisition of all of the issued and outstanding capital stock of Liberty Life Assurance Company of Boston (“Liberty”). In connection with the Closing and  pursuant to the Master Transaction Agreement, dated January 18, 2018 (the “Master Transaction Agreement”), previously reported in the Company's Current Report on Form 8-K filed on January 23, 2018, the Company, a wholly owned subsidiary of PLC, and Protective Life and Annuity Insurance Company (“PLAIC”), a wholly owned subsidiary of the Company, entered into reinsurance agreements (the “Reinsurance Agreements”) and related ancillary documents (including administrative services agreements and transition services agreements) providing for the reinsurance and administration of the Life Business. 

Pursuant to the Reinsurance Agreements, Liberty ceded to the Company and PLAIC the insurance policies related to the Life Business on a 100% coinsurance basis. The aggregate ceding commission for the reinsurance of the Life Business was $422.4 million. All policies issued in states other than New York were ceded to the Company under a reinsurance agreement between Liberty and the Company, and all policies issued in New York were ceded to PLAIC under a reinsurance agreement between Liberty and PLAIC. The aggregate statutory reserves of Liberty ceded to the Company and PLAIC as of the closing of the Transaction were approximately $13.3 billion, which amount was based on initial estimates and is subject to adjustment following the Closing.  Pursuant to the terms of the Reinsurance Agreements, each of the Company and PLAIC are required to maintain assets in trust for the benefit of Liberty to secure their respective obligations to Liberty under the Reinsurance Agreements. The trust accounts were initially funded by each of the Company and PLAIC principally with the investment assets that were received from Liberty. Additionally, the Company and PLAIC have each agreed to provide, on behalf of Liberty, administration and policyholder servicing of the Life Business reinsured by it pursuant to administrative services agreements between Liberty and each of the Company and PLAIC.

RISKS AND UNCERTAINTIES

The factors which could affect our future results include, but are not limited to, general economic conditions and the following risks and uncertainties:

General

• exposure to risks related to natural and man-made disasters, catastrophes, diseases, epidemics, pandemics, malicious acts, cyber attacks, terrorist acts and climate change could adversely affect our operations and results;

• a disruption affecting the electronic systems of the Company or those on whom the Company relies could adversely affect our business, financial condition and results of operations;

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• confidential information maintained in the systems of the Company or other parties upon which the Company relies could be compromised or misappropriated, damaging our business and reputation and adversely affecting our financial condition and results of operations;

• our results and financial condition may be negatively affected should actual experience differ from management’s assumptions and estimates;

• we may not realize our anticipated financial results from our acquisitions strategy;

• assets allocated to the MONY Closed Block benefit only the holders of certain policies; adverse performance of Closed Block assets or adverse experience of Closed Block liabilities may negatively affect us;

• we are dependent on the performance of others;

• our risk management policies, practices, and procedures could leave us exposed to unidentified or unanticipated risks, which could negatively affect our business or result in losses;

• our strategies for mitigating risks arising from our day-to-day operations may prove ineffective resulting in a material adverse effect on our results of operations and financial condition;

• events that damage our reputation could adversely impact our business, results of operations, or financial condition;

Financial Environment

• interest rate fluctuations or sustained periods of high or low interest rates could negatively affect our interest earnings and spread income, or otherwise impact our business;

• our investments are subject to market and credit risks, which could be heightened during periods of extreme volatility or disruption in financial and credit markets;

• equity market volatility could negatively impact our business;

• our use of derivative financial instruments within our risk management strategy may not be effective or sufficient;

• credit market volatility or disruption could adversely impact our financial condition or results from operations;

• our ability to grow depends in large part upon the continued availability of capital;

• we could be adversely affected by a ratings downgrade or other negative action by a rating organization;

• we could be forced to sell investments at a loss to cover policyholder withdrawals;

• disruption of the capital and credit markets could negatively affect our ability to meet our liquidity and financing needs;

• difficult general economic conditions could materially adversely affect our business and results of operations;

• we may be required to establish a valuation allowance against our deferred tax assets, which could have a material adverse effect on our results of operations, financial condition, and capital position;

• we could be adversely affected by an inability to access our credit facility;

• we could be adversely affected by an inability to access FHLB lending;

• our securities lending program may subject us to liquidity and other risks;

• our financial condition or results of operations could be adversely impacted if our assumptions regarding the fair value and future performance of our investments differ from actual experience;

• adverse actions of certain funds or their advisers could have a detrimental impact on our ability to sell our variable life and annuity products, or maintain current levels of assets in those products;

• the amount of statutory capital or risk-based capital that we have and the amount of statutory capital or risk-based capital that we must hold to maintain our financial strength and credit ratings and meet other requirements can vary significantly from time to time and such amounts are sensitive to a number of factors outside of our control;

Industry and Regulation

• the business of our company is highly regulated and is subject to routine audits, examinations and actions by regulators, law enforcement agencies, and self-regulatory organizations;

• we may be subject to regulations of, or regulations influenced by, international regulatory authorities or initiatives;

• NAIC actions, pronouncements and initiatives may affect our product profitability, reserve and capital requirements, financial condition or results of operations;

• our use of captive reinsurance companies to finance statutory reserves related to our term and universal life products and to reduce volatility affecting our variable annuity products, may be limited or adversely affected by regulatory action, pronouncements and interpretations;

• laws, regulations and initiatives related to unreported deaths and unclaimed property and death benefits may result in operational burdens, fines, unexpected payments or escheatments;

• we are subject to insurance guaranty fund laws, rules and regulations which could adversely affect our financial condition or results of operations;

• we are subject to insurable interest laws, rules and regulations which could adversely affect our financial condition or results of operations;

• the Healthcare Act and related regulations could adversely affect our results of operations or financial condition;

• laws, rules and regulations promulgated in connection with the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act may adversely affect our results of operations or financial condition;

• new and amended regulations regarding the standard of care or standard of conduct applicable to investment professionals, insurance agencies, and financial institutions that recommend or sell annuities or life insurance products may have a material adverse impact on our ability to sell annuities and other products, to retain in-force business and on our financial condition or results of operations;

• we may be subject to regulation, investigations, enforcement actions, fines and penalties imposed by the SEC, FINRA and other federal and international regulators in connection with our business operations;

• changes to tax law, such as the effect of the Tax Cuts and Jobs Act which was enacted on December 22, 2017, or interpretations of existing tax law could adversely affect our ability to compete with non-insurance products or reduce the demand for certain insurance products;

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• financial services companies are frequently the targets of legal proceedings, including class action litigation, which could result in substantial judgments;

• the financial services and insurance industries are sometimes the target of law enforcement investigations and the focus of increased regulatory scrutiny;

• new accounting rules, changes to existing accounting rules, or the grant of permitted accounting practices to competitors could negatively impact us;

• if our business does not perform well, we may be required to recognize an impairment of our goodwill and indefinite lived intangible assets which could adversely affect our results of operations or financial condition;

• use of reinsurance introduces variability in our statements of income;

• our reinsurers could fail to meet assumed obligations, increase rates, terminate agreements, or be subject to adverse developments that could affect us;

• our policy claims fluctuate from period to period resulting in earnings volatility;

• we operate in a mature, highly competitive industry, which could limit our ability to gain or maintain our position in the industry and negatively affect profitability;

• our ability to maintain competitive unit costs is dependent upon the level of new sales and persistency of existing business; and

• we may not be able to protect our intellectual property and may be subject to infringement claims.

For more information about the risks, uncertainties, and other factors that could affect our future results, please see Part II, Item 1A of this report and our Annual Report on Form 10-K.

CRITICAL ACCOUNTING POLICIES

Our accounting policies require the use of judgments relating to a variety of assumptions and estimates, including, but not limited to expectations of current and future mortality, morbidity, persistency, expenses, and interest rates, as well as expectations around the valuations of securities. Because of the inherent uncertainty when using the assumptions and estimates, the effect of certain accounting policies under different conditions or assumptions could be materially different from those reported in the consolidated condensed financial statements. For a complete listing of our critical accounting policies, refer to our Annual Report on Form 10-K for the year ended December 31, 2017.

RESULTS OF OPERATIONS

Our management and Board of Directors analyzes and assesses the operating performance of each segment using “pre-tax adjusted operating income (loss)” and “after-tax adjusted operating income (loss)”. Consistent with GAAP accounting guidance for segment reporting, pre-tax adjusted operating income (loss) is our measure of segment performance. Pre-tax adjusted operating income (loss) is calculated by adjusting “income (loss) before income tax,” by excluding the following items:

• realized gains and losses on investments and derivatives,

• changes in the guaranteed living withdrawal benefits (“GLWB”) embedded derivatives exclusive of the portion attributable to the economic cost of the GLWB,

• actual GLWB incurred claims, and

• the amortization of deferred policy acquisition costs (“DAC”), value of business acquired (“VOBA”), and certain policy liabilities that is impacted by the exclusion of these items.

After-tax adjusted operating income (loss) is derived from pre-tax adjusted operating income (loss) with the inclusion of income tax expense or benefits associated with pre-tax adjusted operating income. Income tax expense or benefits is allocated to the items excluded from pre-tax adjusted operating income (loss) at the statutory federal income tax rate for the associated period. For periods ending on and prior to December 31, 2017 a rate of 35% was used. Beginning in 2018, a statutory federal income tax rate of 21% will be used to allocate income tax expense or benefits to items excluded from pre-tax adjusted operating income (loss). Income tax expense or benefits allocated to after-tax adjusted operating income (loss) can vary period to period based on changes in our effective income tax rate.

The items excluded from adjusted operating income (loss) are important to understanding the overall results of operations. Pre-tax adjusted operating income (loss) and after-tax adjusted operating income (loss) are not substitutes for income before income taxes or net income (loss), respectively. These measures may not be comparable to similarly titled measures reported by other companies. Our belief is that pre-tax and after-tax adjusted operating income (loss) enhances management’s and the Board of Directors’ understanding of the ongoing operations, the underlying profitability of each segment, and helps facilitate the allocation of resources.

In determining the components of the pre-tax adjusted operating income (loss) for each segment, premiums and policy fees, other income, benefits and settlement expenses, and amortization of DAC and VOBA are attributed directly to each operating segment. Net investment income is allocated based on directly related assets required for transacting the business of that segment. Realized investment gains (losses) and other operating expenses are allocated to the segments in a manner that most appropriately reflects the operations of that segment. Investments and other assets are allocated based on policy liabilities net of associated policy assets, while DAC/VOBA and goodwill are shown in the segments to which they are attributable.

We periodically review and update as appropriate our key assumptions used to measure certain balances related to insurance products, including future mortality, expenses, lapses, premium persistency, benefit utilization, investment yields, interest rates, and separate account fund returns. Changes to these assumptions result in adjustments which increase or decrease DAC and

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VOBA amortization and/or benefits and expenses. The periodic review and updating of assumptions is referred to as “unlocking.” When referring to unlocking the reference is to changes in all balance sheet components associated with these assumption changes.

The following table presents a summary of results and reconciles pre-tax adjusted operating income (loss) to consolidated income before income tax and net income:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Pre-tax Adjusted Operating Income (Loss)
Life Marketing	$	3,647		$	10,798		$	(18,326	)	$	55,217
Acquisitions	93,648			62,880			208,206			184,825
Annuities	36,249			51,779			112,234			130,128
Stable Value Products	27,126			27,992			76,198			74,258
Asset Protection	7,051			5,187			16,991			13,812
Corporate and Other	(41,927		)	(38,054		)	(119,474		)	(107,741		)
Pre-tax adjusted operating income	125,794			120,582			275,829			350,499
Realized (losses) gains on investments and derivatives	(30,624		)	45,400			(97,829		)	35,413
Income before income tax	95,170			165,982			178,000			385,912
Income tax expense	(16,646		)	(49,016		)	(28,933		)	(120,975		)
Net income	$	78,524		$	116,966		$	149,067		$	264,937
Pre-tax adjusted operating income	$	125,794		$	120,582		$	275,829		$	350,499
Adjusted operating income tax (expense) benefit	(23,077		)	(33,126		)	(49,477		)	(108,580		)
After-tax adjusted operating income	102,717			87,456			226,352			241,919
Realized (losses) gains on investments and derivatives	(30,624		)	45,400			(97,829		)	35,413
Income tax benefit (expense) on adjustments	6,431			(15,890		)	20,544			(12,395		)
Net income	$	78,524		$	116,966		$	149,067		$	264,937
Realized investment (losses) gains:
Derivative financial instruments	$	(26,710	)	$	5,302		$	37,176		$	(119,392	)
All other investments	(20,156		)	18,150			(157,350		)	94,526
Net impairment losses recognized in earnings	(14		)	(273		)	(3,664		)	(8,259		)
Less: related amortization(1)	(5,859		)	(12,123		)	5,060			(38,570		)
Less: VA GLWB economic cost	(10,397		)	(10,098		)	(31,069		)	(29,968		)
Realized (losses) gains on investments and derivatives	$	(30,624	)	$	45,400		$	(97,829	)	$	35,413
(1)  Includes amortization of DAC/VOBA and benefits and settlement expenses that are impacted by realized gains (losses).

For The Three Months Ended September 30, 2018 as compared to The Three Months Ended September 30, 2017

Net income for the three months ended September 30, 2018 included a $5.2 million, or 4.3%, increase in pre-tax adjusted operating income. The increase consisted of a $30.8 million increase in the Acquisition segment and a $1.9 million increase in the Asset Protection segment. These increases were partially offset by a $7.2 million decrease in the Life Marketing segment, a $15.5 decrease in the Annuities segment, a $0.9 million decrease in the Stable Value Products segment, and a $3.9 million decrease in the Corporate and Other segment.

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Net realized losses on investments and derivatives for the three months ended September 30, 2018 was $30.6 million as compared to net realized gains of $45.4 million for the three months ended September 30, 2017.

• Life Marketing segment pre-tax adjusted operating income was $3.6 million for the three months ended September 30, 2018, representing a decrease of $7.2 million from the three months ended September 30, 2017. The decrease was primarily due to the impact of unlocking. The segment recorded an unfavorable $6.9 million of unlocking for the three months ended September 30, 2018, as compared to a favorable $1.8 million of unlocking for the three months ended September 30, 2017.

• Acquisitions segment pre-tax adjusted operating income was $93.6 million for the three months ended September 30, 2018, an increase of $30.8 million as compared to the three months ended September 30, 2017, due to the favorable impact of $26.1 million from the Liberty reinsurance transaction completed on May 1, 2018 and a decrease in benefit and settlement expenses on the other in-force blocks of business. For the three months ended September 30, 2018, the segment recorded favorable prospective unlocking of $0.7 million as compared to unfavorable $3.7 million of prospective unlocking for the three months ended September 30, 2017.

• Annuities segment pre-tax adjusted operating income was $36.2 million for the three months ended September 30, 2018, as compared to $51.8 million for the three months ended September 30, 2017, a decrease of $15.5 million, or 30.0%. This variance was primarily the result of unfavorable unlocking, partially offset by a favorable change in single premium immediate annuities (“SPIA”) mortality. Segment results were negatively impacted by $4.8 million of unfavorable unlocking for the three months ended September 30, 2018, as compared to $13.0 million of favorable unlocking for the three months ended September 30, 2017.

• Stable Value segment pre-tax adjusted operating income was $27.1 million and decreased $0.9 million, or 3.1%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. The decrease in adjusted operating earnings primarily resulted from higher interest expenses. Participating mortgage income for the three months ended September 30, 2018, was $9.0 million as compared to $12.4 million for the three months ended September 30, 2017. The adjusted operating spread, which excludes participating income, decreased by 10 basis points for the three months ended September 30, 2018, from the prior year, due primarily to an increase in credited interest.

• Asset Protection segment pre-tax adjusted operating income was $7.1 million, representing an increase of $1.9 million, or 35.9%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. Service contract earnings increased $2.0 million primarily due to favorable loss ratios and higher investment income. Credit insurance earnings decreased $0.1 million primarily due to lower volume and higher losses. Earnings from the GAP product line remained consistent with the prior year.

• The Corporate and Other segment pre-tax adjusted operating loss was $41.9 million for the three months ended September 30, 2018, as compared to a pre-tax adjusted operating loss of $38.1 million for the three months ended September 30, 2017. The increased operating loss was primarily due to a decrease in investment income due to decreased invested asset balances.

For The Nine Months Ended September 30, 2018 as compared to The Nine Months Ended September 30, 2017

Net income for the nine months ended September 30, 2018 included a $74.7 million, or 21.3%, decrease in pre-tax adjusted operating income. The decrease consisted of a $73.5 million decrease in the Life Marketing segment, a $17.9 million decrease in the Annuities segment, and a $11.7 million decrease in the Corporate and Other segment. These decreases were partially offset by a $23.4 million increase in the Acquisitions segment, a $1.9 million increase in the Stable Value Products segment, and a $3.2 million increase in the Asset Protection segment.

Net realized losses on investments and derivatives for the nine months ended September 30, 2018 was $97.8 million as compared to a gain of $35.4 million for the nine months ended September 30, 2017.

• Life Marketing segment pre-tax adjusted operating loss was $18.3 million for the nine months ended September 30, 2018, representing a decrease of $73.5 million from the nine months ended September 30, 2017. The decrease was primarily due to the impact of unlocking and higher life claims compared to the prior year. The segment recorded an unfavorable $19.8 million of unlocking for the nine months ended September 30, 2018, as compared to a favorable $3.0 million of unlocking for the nine months ended September 30, 2017. Life claims were approximately $57.3 million higher for the nine months ended September 30, 2018 when compared to the nine months ended September 30, 2017.

• Acquisitions segment pre-tax adjusted operating income was $208.2 million for the nine months ended September 30, 2018, an increase of $23.4 million as compared to the nine months ended September 30, 2017, primarily due to the favorable impact of $33.1 million from the Liberty reinsurance transaction completed on May 1, 2018 partly offset by the expected runoff of the in-force blocks of business. For the nine months ended September 30, 2018, the segment recorded favorable prospective unlocking of $0.7 million as compared to unfavorable $3.7 million of prospective unlocking for the nine months ended September 30, 2017.

• Annuities segment pre-tax adjusted operating income was $112.2 million for the nine months ended September 30, 2018, as compared to $130.1 million for the nine months ended September 30, 2017, a decrease of $17.9 million, or 13.8%. This variance was primarily the result of unfavorable unlocking and higher non-deferred expenses, partially offset by a favorable change in SPIA mortality. Segment results were negatively impacted by $11.7 million of

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unfavorable unlocking for the nine months ended September 30, 2018, as compared to $14.9 million of favorable unlocking for the nine months ended September 30, 2017.

• Stable Value segment pre-tax adjusted operating income was $76.2 million and increased $1.9 million, or 2.6%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. The increase in adjusted operating earnings primarily resulted from higher average account values. Participating mortgage income for the nine months ended September 30, 2018, was $20.9 million as compared to $23.6 million for the nine months ended September 30, 2017. The adjusted operating spread, which excludes participating income, decreased by 21 basis points for the nine months ended September 30, 2018, from the prior year, due primarily to an increase in credited interest.

• Asset Protection segment pre-tax adjusted operating income was $17.0 million, representing an increase of $3.2 million, or 23.0%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. Service contract earnings increased $3.2 million primarily due to favorable loss ratios and higher investment income. Earnings from the GAP product line increased $0.5 million due to lower expenses. Credit insurance earnings decreased $0.5 million primarily due to lower volume and higher losses.

• The Corporate and Other segment pre-tax adjusted operating loss was $119.5 million for the nine months ended September 30, 2018, as compared to a pre-tax adjusted operating loss of $107.7 million for the nine months ended September 30, 2017. The increased operating loss was primarily due to an increase in corporate overhead expenses, partly offset by an increase in investment income due to higher invested asset balances and improved yields.

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Life Marketing

Segment Results of Operations

Segment results were as follows:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
REVENUES
Gross premiums and policy fees	$	422,430		$	458,468		$	1,416,241		$	1,372,864
Reinsurance ceded	(144,607		)	(200,616		)	(630,736		)	(601,839		)
Net premiums and policy fees	277,823			257,852			785,505			771,025
Net investment income	137,204			136,405			412,013			410,659
Other income	566			768			2,418			1,805
Total operating revenues	415,593			395,025			1,199,936			1,183,489
Realized gains (losses) - investments	(3,277		)	334			(9,884		)	(4,041		)
Realized gains (losses) - derivatives	(4,608		)	1,737			5,022			(5,400		)
Total revenues	407,708			397,096			1,195,074			1,174,048
BENEFITS AND EXPENSES
Benefits and settlement expenses	383,653			345,501			1,081,769			993,424
Amortization of DAC/VOBA	16,776			26,984			82,222			86,934
Other operating expenses	11,517			11,742			54,271			47,914
Operating benefits and settlement expenses	411,946			384,227			1,218,262			1,128,272
Amortization related to benefits and settlement expenses	(5,721		)	(396		)	(2,335		)	(10,250		)
Amortization of DAC/VOBA related to realized gains (losses) - investments	819			427			1,205			938
Total benefits and expenses	407,044			384,258			1,217,132			1,118,960
INCOME (LOSS) BEFORE INCOME TAX	664			12,838			(22,058		)	55,088
Less: realized gains (losses)	(7,885		)	2,071			(4,862		)	(9,441		)
Less: amortization related to benefits and settlement expenses	5,721			396			2,335			10,250
Less: related amortization of DAC/VOBA	(819		)	(427		)	(1,205		)	(938		)
PRE-TAX ADJUSTED OPERATING INCOME (LOSS)	$	3,647		$	10,798		$	(18,326	)	$	55,217

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The following table summarizes key data for the Life Marketing segment:

	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2018		2017		2018		2017
	(Dollars In Thousands)
Sales By Product(1)
Traditional life	$	13,034	$	721	$	39,184	$	1,325
Universal life	30,712		41,244		92,348		127,743
	$	43,746	$	41,965	$	131,532	$	129,068
Sales By Distribution Channel
Traditional brokerage	$	38,282	$	35,320	$	113,962	$	110,066
Institutional	3,412		4,459		11,027		12,262
Direct	2,052		2,186		6,543		6,740
	$	43,746	$	41,965	$	131,532	$	129,068
Average Life Insurance In-force(2)
Traditional	$	352,442,802	$	342,522,847	$	348,875,590	$	347,481,484
Universal life	280,352,234		260,101,843		276,612,519		248,933,690
	$	632,795,036	$	602,624,690	$	625,488,109	$	596,415,174
Average Account Values
Universal life	$	7,765,543	$	7,644,822	$	7,741,229	$	7,607,208
Variable universal life	786,953		729,171		777,037		705,045
	$	8,552,496	$	8,373,993	$	8,518,266	$	8,312,253
(1)  Sales data for traditional life insurance is based on annualized premiums. Universal life sales are based on annualized planned premiums, or “target” premiums if lesser, plus 6% of amounts received in excess of target premiums and 10% of single premiums. “Target” premiums for universal life are those premiums upon which full first year commissions are paid.
(2)  Amounts are not adjusted for reinsurance ceded.

Operating expenses detail

Other operating expenses for the segment were as follows:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
First year commissions	$	48,673		$	48,654		$	148,275		$	147,618
Renewal commissions	9,455			9,503			29,971			28,932
First year ceding allowances	(273		)	(729		)	(499		)	(1,766		)
Renewal ceding allowances	(47,509		)	(48,218		)	(126,167		)	(134,492		)
General & administrative	54,178			55,533			166,629			170,928
Taxes, licenses, and fees	9,173			9,592			29,023			26,268
Other operating expenses incurred	73,697			74,335			247,232			237,488
Less: commissions, allowances & expenses capitalized	(62,180		)	(62,593		)	(192,961		)	(189,574		)
Other operating expenses	$	11,517		$	11,742		$	54,271		$	47,914

For The Three Months Ended September 30, 2018, as compared to The Three Months Ended September 30, 2017

Pre-tax adjusted operating income (loss)

Pre-tax adjusted operating income was $3.6 million for the three months ended September 30, 2018, representing a decrease of $7.2 million from the three months ended September 30, 2017. The decrease was primarily due to the impact of

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unlocking during the current quarter compared to the prior year. The segment recorded an unfavorable $6.9 million of unlocking for the three months ended September 30, 2018, as compared to a favorable $1.8 million of unlocking for the three months ended September 30, 2017.

Operating revenues

Total operating revenues for the three months ended September 30, 2018, increased $20.6 million, or 5.2%, as compared to the three months ended September 30, 2017. This increase was driven by higher traditional life premiums during the current quarter compared to the prior year.

Net premiums and policy fees

Net premiums and policy fees increased by $20.0 million, or 7.7%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, due to an increase in traditional life premiums.

Net investment income

Net investment income in the segment increased $0.8 million, or 0.6%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, driven by higher universal life investment income of $1.9 million, offset by lower traditional life investment income of $0.8 million.

Other income

Other income remained consistent for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017.

Benefits and settlement expenses

Benefits and settlement expenses increased by $38.2 million, or 11.0%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, due to unlocking and an increase in traditional life reserves. For the three months ended September 30, 2018, universal life unlocking increased policy benefits and settlement expenses $12.2 million, as compared to an increase of $1.8 million for the three months ended September 30, 2017.

Amortization of DAC/VOBA

DAC/VOBA amortization decreased $10.2 million, or 37.8%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, primarily due to lower VOBA amortization in the traditional life block. For the three months ended September 30, 2018, universal life unlocking decreased amortization $5.3 million, as compared to a decrease of $3.6 million for the three months ended September 30, 2017.

Other operating expenses

Other operating expenses remained consistent for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017.

Sales

Sales for the segment increased $1.8 million for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, primarily due to higher traditional life sales, offset by lower sales in the universal life block. The change between products was due to a shift in sales focus from a product within the universal life block to a new term life product.

For The Nine Months Ended September 30, 2018, as compared to The Nine Months Ended September 30, 2017

Pre-tax adjusted operating income (loss)

Pre-tax adjusted operating loss was $18.3 million for the nine months ended September 30, 2018, representing a decrease of $73.5 million from the nine months ended September 30, 2017. The decrease was primarily due to the impact of unlocking and higher life claims compared to the prior year. The segment recorded an unfavorable $19.8 million of unlocking for the nine months ended September 30, 2018, as compared to a favorable $3.0 million of unlocking for the nine months ended September 30, 2017. Life claims were approximately $57.3 million higher for the nine months ended September 30, 2018 when compared to the nine months ended September 30, 2017.

Operating revenues

Total operating revenues for the nine months ended September 30, 2018, increased $16.4 million, or 1.4%, as compared to the nine months ended September 30, 2017. This increase was driven by higher premiums and policy fees.

Net premiums and policy fees

Net premiums and policy fees increased by $14.5 million, or 1.9%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, due to an increase in premiums and policy fees associated with continued growth in universal life and traditional life business.

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Net investment income

Net investment income in the segment increased $1.4 million, or 0.3%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, due to higher universal life investment income of $6.1 million, offset by lower traditional life investment income of $4.4 million.

Other income

Other income remained consistent for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017.

Benefits and settlement expenses

Benefits and settlement expenses increased by $88.3 million, or 8.9%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, driven by unlocking and an increase in claims. For the nine months ended September 30, 2018, universal life unlocking increased policy benefits and settlement expenses $20.1 million, as compared to an increase of $1.3 million for the nine months ended September 30, 2017.

Amortization of DAC/VOBA

DAC/VOBA amortization decreased $4.7 million, or 5.4%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, due to lower VOBA amortization in the traditional life blocks, offset by higher VOBA amortization in the universal life block. For the nine months ended September 30, 2018, universal life unlocking decreased amortization $0.3 million, as compared to a decrease of $4.4 million for the nine months ended September 30, 2017.

Other operating expenses

Other operating expenses increased $6.4 million for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. This increase was driven by lower ceding allowances.

Sales

Sales for the segment increased $2.5 million for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, primarily due to higher traditional life sales, offset by lower sales in the universal life block. The change between products was due to a shift in sales focus from a product within the universal life block to a new term life product.

Reinsurance

Currently, the Life Marketing segment reinsures significant amounts of its life insurance in-force. Pursuant to the underlying reinsurance contracts, reinsurers pay allowances to the segment as a percentage of both first year and renewal premiums. Reinsurance allowances represent the amount the reinsurer is willing to pay for reimbursement of acquisition costs incurred by the direct writer of the business. A portion of reinsurance allowances received is deferred as part of DAC and a portion is recognized immediately as a reduction of other operating expenses. As the non-deferred portion of allowances reduces operating expenses in the period received, these amounts represent a net increase to adjusted operating income during that period.

Reinsurance allowances do not affect the methodology used to amortize DAC or the period over which such DAC is amortized. However, they do affect the amounts recognized as DAC amortization. DAC on universal life-type, limited-payment long duration, and investment contracts business is amortized based on the estimated gross profits of the policies in-force. Reinsurance allowances are considered in the determination of estimated gross profits, and therefore, impact DAC amortization on these lines of business. Deferred reinsurance allowances on level term business are recorded as ceded DAC, which is amortized over estimated ceded premiums of the policies in-force. Thus, deferred reinsurance allowances may impact DAC amortization. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. 

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Impact of reinsurance

Reinsurance impacted the Life Marketing segment line items as shown in the following table:

Life Marketing Segment

Line Item Impact of Reinsurance

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
REVENUES
Reinsurance ceded	$	(144,607	)	$	(200,616	)	$	(630,736	)	$	(601,839	)
BENEFITS AND EXPENSES
Benefits and settlement expenses	(131,528		)	(170,468		)	(579,246		)	(504,652		)
Amortization of DAC/VOBA	(1,409		)	(1,418		)	(4,120		)	(4,270		)
Other operating expenses(1)	(45,570		)	(46,756		)	(121,420		)	(130,426		)
Total benefits and expenses	(178,507		)	(218,642		)	(704,786		)	(639,348		)
NET IMPACT OF REINSURANCE	$	33,900		$	18,026		$	74,050		$	37,509
Allowances received	$	(47,782	)	$	(48,948	)	$	(126,666	)	$	(136,258	)
Less: Amount deferred	2,212			2,192			5,246			5,832
Allowances recognized (ceded other operating expenses)(1)	$	(45,570	)	$	(46,756	)	$	(121,420	)	$	(130,426	)
(1)  Other operating expenses ceded per the income statement are equal to reinsurance allowances recognized after capitalization.

The table above does not reflect the impact of reinsurance on our net investment income. By ceding business to the assuming companies, we forgo investment income on the reserves ceded. Conversely, the assuming companies will receive investment income on the reserves assumed, which will increase the assuming companies’ profitability on the business that we cede. The net investment income impact to us and the assuming companies has not been quantified. The impact of including foregone investment income would be to substantially reduce the favorable net impact of reinsurance reflected above. We estimate that the impact of foregone investment income would be to reduce the net impact of reinsurance presented in the table above by 275% to 480%. The Life Marketing segment’s reinsurance programs do not materially impact the “other income” line of our income statement.

As shown above, reinsurance generally has a favorable impact on the Life Marketing segment’s operating income results. The impact of reinsurance is largely due to our quota share coinsurance program in place prior to mid-2005. Under that program, generally 90% of the segment’s traditional new business was ceded to reinsurers. Since mid-2005, a much smaller percentage of overall term business has been ceded due to a change in reinsurance strategy on traditional business. In addition, since 2012, a much smaller percentage of the segment’s new universal life business has been ceded. As a result of that change, the relative impact of reinsurance on the Life Marketing segment’s overall results is expected to decrease over time. While the significance of reinsurance is expected to decline over time, the overall impact of reinsurance for a given period may fluctuate due to variations in mortality and the unlocking of balances.

For The Three Months Ended September 30, 2018, as compared to The Three Months Ended September 30, 2017

The lower ceded premium and policy fees for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, was caused primarily by lower ceded traditional life premiums of $76.9 million, partially offset by higher universal life policy fees of $20.9 million.

Ceded benefits and settlement expenses were lower for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, due to lower ceded traditional life reserves and claims, partly offset by higher ceded universal life reserves and claims. Traditional life ceded reserves decreased $82.3 million and universal life ceded reserves increased $48.2 million as compared to the three months ended September 30, 2017. Ceded traditional life claims were $13.7 million lower and ceded universal life claims were $8.2 million higher for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017.

Ceded amortization of DAC and VOBA decreased slightly for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017.

Ceded other operating expenses reflect the impact of reinsurance allowances net of amounts deferred.

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For The Nine Months Ended September 30, 2018, as compared to The Nine Months Ended September 30, 2017

The higher ceded premium and policy fees for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, was caused primarily by higher universal life policy fees of $51.5 million, offset by lower ceded traditional life premiums of $23.2 million.

Ceded benefits and settlement expenses were higher for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, due to higher ceded claims, partly offset by lower ceded traditional life reserves. Universal life and traditional life ceded claims were $82.3 million and $20.3 million higher, respectively, as compared to the nine months ended September 30, 2017. Traditional life ceded reserves decreased $31.0 million as compared to the nine months ended September 30, 2017.

Ceded amortization of DAC and VOBA decreased slightly for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017.

Ceded other operating expenses reflect the impact of reinsurance allowances net of amounts deferred.

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Acquisitions

Segment Results of Operations

Segment results were as follows:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
REVENUES
Gross premiums and policy fees	$	332,863		$	270,303		$	922,260		$	828,252
Reinsurance ceded	(75,743		)	(78,647		)	(231,988		)	(239,785		)
Net premiums and policy fees	257,120			191,656			690,272			588,467
Net investment income	323,117			181,714			785,579			561,632
Other income	3,225			2,515			10,143			8,350
Total operating revenues	583,462			375,885			1,485,994			1,158,449
Realized gains (losses) - investments	(13,200		)	19,675			(156,191		)	95,135
Realized gains (losses) - derivatives	10,792			(19,741		)	139,984			(88,934		)
Total revenues	581,054			375,819			1,469,787			1,164,650
BENEFITS AND EXPENSES
Benefits and settlement expenses	452,324			286,035			1,174,632			894,509
Amortization of VOBA	(2,627		)	(453		)	(1,309		)	(3,362		)
Other operating expenses	40,117			27,423			104,465			82,477
Operating benefits and expenses	489,814			313,005			1,277,788			973,624
Amortization related to benefits and settlement expenses	2,015			2,603			7,545			7,109
Amortization of VOBA related to realized gains (losses) - investments	(93		)	(27		)	312			(183		)
Total benefits and expenses	491,736			315,581			1,285,645			980,550
INCOME BEFORE INCOME TAX	89,318			60,238			184,142			184,100
Less: realized gains (losses)	(2,408		)	(66		)	(16,207		)	6,201
Less: amortization related to benefits and settlement expenses	(2,015		)	(2,603		)	(7,545		)	(7,109		)
Less: related amortization of VOBA	93			27			(312		)	183
PRE-TAX ADJUSTED OPERATING INCOME	$	93,648		$	62,880		$	208,206		$	184,825

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The following table summarizes key data for the Acquisitions segment:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Average Life Insurance In-Force(1)
Traditional	$	233,481,851		$	225,506,328		$	225,828,144		$	229,375,136
Universal life	32,702,123			27,216,155			29,450,423			27,725,925
	$	266,183,974		$	252,722,483		$	255,278,567		$	257,101,061
Average Account Values
Universal life	$	8,173,378		$	4,194,821		$	6,164,475		$	4,203,635
Fixed annuity(2)	11,884,932			3,545,906			7,716,996			3,523,691
Variable annuity	1,197,979			1,194,958			1,197,039			1,181,037
	$	21,256,289		$	8,935,685		$	15,078,510		$	8,908,363
Interest Spread - Fixed Annuities
Net investment income yield	4.23		%	3.97		%	4.15		%	3.99		%
Interest credited to policyholders	3.53		%	3.29		%	3.47		%	3.27		%
Interest spread(3)	0.70		%	0.68		%	0.68		%	0.72		%
(1)  Amounts are not adjusted for reinsurance ceded.
(2)  Includes general account balances held within variable annuity products and is net of coinsurance ceded.
(3)  Earned rates exclude portfolios supporting modified coinsurance and crediting rates exclude 100% cessions.

For The Three Months Ended September 30, 2018, as compared to The Three Months Ended September 30, 2017

Pre-tax adjusted operating income

Pre-tax adjusted operating income was $93.6 million for the three months ended September 30, 2018, an increase of $30.8 million as compared to the three months ended September 30, 2017, due to the favorable impact of $26.1 million from the Liberty reinsurance transaction completed on May 1, 2018 and a decrease in benefit and settlement expenses on the other in force blocks of business. For the three months ended September 30, 2018, the segment recorded favorable prospective unlocking of $0.7 million as compared to unfavorable $3.7 million of prospective unlocking for the three months ended September 30, 2017.

Operating revenues

Net premiums and policy fees increased $65.5 million, or 34.2%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, primarily due to the premiums associated with the Liberty reinsurance transaction more than offsetting the expected runoff of the in-force blocks of business. Net investment income increased $141.4 million, or 77.8%, for the three months ended September 30, 2018, primarily due to the $140.0 million impact of the Liberty reinsurance transaction.

Total benefits and expenses

Total benefits and expenses increased $176.2 million, or 55.8%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. The increase was primarily due to the Liberty reinsurance transaction, which increased benefits and expenses $192.0 million. This was partly offset by the expected runoff of the in-force blocks of business.

For The Nine Months Ended September 30, 2018, as compared to The Nine Months Ended September 30, 2017

Pre-tax adjusted operating income

Pre-tax adjusted operating income was $208.2 million for the nine months ended September 30, 2018, an increase of $23.4 million as compared to the nine months ended September 30, 2017, primarily due to the favorable impact of $33.1 million from the Liberty reinsurance transaction completed on May 1, 2018, partly offset by the expected runoff of the in-force blocks of business. For the nine months ended September 30, 2018, the segment recorded favorable prospective unlocking of $0.7 million as compared to unfavorable $3.7 million of prospective unlocking for the nine months ended September 30, 2017.

Operating revenues

Net premiums and policy fees increased $101.8 million, or 17.3%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, primarily due to the premiums associated with the Liberty reinsurance

73

transaction more than offsetting the expected runoff of the in-force blocks of business. Net investment income increased $223.9 million, or 39.9%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017,due to the $232.9 million impact of the Liberty reinsurance transaction, partly offset by the expected runoff of the in-force blocks of business.

Total benefits and expenses

Total benefits and expenses increased $305.1 million, or 31.1%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. The increase was primarily due to the Liberty reinsurance transaction, which increased benefits and expenses $327.2 million.

Reinsurance

The Acquisitions segment currently reinsures portions of both its life and annuity in-force. The cost of reinsurance to the segment is reflected in the chart shown below. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Impact of reinsurance

Reinsurance impacted the Acquisitions segment line items as shown in the following table:

Acquisitions Segment

Line Item Impact of Reinsurance

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
REVENUES
Reinsurance ceded	$	(75,743	)	$	(78,647	)	$	(231,988	)	$	(239,785	)
BENEFITS AND EXPENSES
Benefits and settlement expenses	(52,497		)	(53,233		)	(192,117		)	(207,339		)
Amortization of VOBA	(138		)	(183		)	(513		)	(440		)
Other operating expenses	(8,994		)	(9,710		)	(26,488		)	(29,272		)
Total benefits and expenses	(61,629		)	(63,126		)	(219,118		)	(237,051		)
NET IMPACT OF REINSURANCE(1)	$	(14,114	)	$	(15,521	)	$	(12,870	)	$	(2,734	)
(1)  Assumes no investment income on reinsurance. Foregone investment income would substantially reduce the favorable impact of reinsurance.

The segment’s reinsurance programs do not materially impact the other income line of the income statement. In addition, net investment income generally has no direct impact on reinsurance cost. However, by ceding business to the assuming companies, we forgo investment income on the reserves ceded to the assuming companies. Conversely, the assuming companies will receive investment income on the reserves assumed which will increase the assuming companies’ profitability on business assumed from the Company. For business ceded under modified coinsurance arrangements, the amount of investment income attributable to the assuming company is included as part of the overall change in policy reserves and, as such, is reflected in benefit and settlement expenses. The net investment income impact to us and the assuming companies has not been quantified as it is not fully reflected in our consolidated financial statements.

The net impact of reinsurance was more favorable by $1.4 million for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, primarily due to lower ceded revenue partly offset by lower ceded benefits and expenses. For the three months ended September 30, 2018, ceded revenues decreased by $2.9 million, while ceded benefits and expenses decreased by $1.5 million.

The net impact of reinsurance was less favorable by $10.1 million for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, primarily due to lower ceded benefits and expenses, partly offset by lower ceded revenue. For the nine months ended September 30, 2018, ceded revenues decreased by $7.8 million, while ceded benefits and expenses decreased by $17.9 million.

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Annuities

Segment Results of Operations

Segment results were as follows:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
REVENUES
Gross premiums and policy fees	$	35,462		$	38,259		$	112,210		$	114,294
Reinsurance ceded	(18,799		)	(19,569		)	(57,471		)	(59,446		)
Net premiums and policy fees	16,663			18,690			54,739			54,848
Net investment income	84,623			78,903			248,086			235,468
Realized gains (losses) - derivatives	(10,397		)	(10,098		)	(31,069		)	(29,968		)
Other income	41,658			41,950			125,104			125,920
Total operating revenues	132,547			129,445			396,860			386,268
Realized gains (losses) - investments	(1,610		)	135			324			(256		)
Realized gains (losses) - derivatives, net of economic cost	(20,551		)	(18,710		)	(75,304		)	(28,423		)
Total revenues	110,386			110,870			321,880			357,589
BENEFITS AND EXPENSES
Benefits and settlement expenses	54,229			52,889			158,014			159,346
Amortization of DAC/VOBA	6,004			(11,741		)	14,936			(11,647		)
Other operating expenses	36,065			36,518			111,676			108,441
Operating benefits and expenses	96,298			77,666			284,626			256,140
Amortization related to benefits and settlement expenses	778			1,157			1,306			3,569
Amortization of DAC/VOBA related to realized gains (losses) - investments	(3,657		)	(15,887		)	(2,973		)	(39,753		)
Total benefits and expenses	93,419			62,936			282,959			219,956
INCOME BEFORE INCOME TAX	16,967			47,934			38,921			137,633
Less: realized gains (losses) - investments	(1,610		)	135			324			(256		)
Less: realized gains (losses) - derivatives, net of economic cost	(20,551		)	(18,710		)	(75,304		)	(28,423		)
Less: amortization related to benefits and settlement expenses	(778		)	(1,157		)	(1,306		)	(3,569		)
Less: related amortization of DAC/VOBA	3,657			15,887			2,973			39,753
PRE-TAX ADJUSTED OPERATING INCOME	$	36,249		$	51,779		$	112,234		$	130,128

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The following tables summarize key data for the Annuities segment:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Sales(1)
Fixed annuity	$	513,990		$	246,914		$	1,597,767		$	806,432
Variable annuity	69,125			87,045			230,144			323,650
	$	583,115		$	333,959		$	1,827,911		$	1,130,082
Average Account Values
Fixed annuity(2)	$	9,198,082		$	8,297,792		$	8,882,096		$	8,188,092
Variable annuity	12,891,627			13,082,417			12,977,629			12,977,656
	$	22,089,709		$	21,380,209		$	21,859,725		$	21,165,748
Interest Spread - Fixed Annuities(3)
Net investment income yield	3.59		%	3.73		%	3.63		%	3.68		%
Interest credited to policyholders	2.44			2.53			2.49			2.52
Interest spread	1.15		%	1.20		%	1.14		%	1.16		%
(1)  Sales are measured based on the amount of purchase payments received less surrenders occurring within twelve months of the purchase payments.
(2)  Includes general account balances held within VA products.
(3)  Interest spread on average general account values.

76

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Derivatives related to VA contracts:
Interest rate futures	$	2,111		$	549		$	(13,229	)	$	16,746
Equity futures	(5,733		)	(25,959		)	(23,025		)	(75,389		)
Currency futures	3,410			(6,092		)	7,890			(22,366		)
Equity options	(21,206		)	(23,307		)	(47,406		)	(76,376		)
Interest rate swaptions	—			(292		)	(14		)	(2,423		)
Interest rate swaps	(41,288		)	5,342			(131,147		)	31,331
Total return swaps	(32,343		)	(8,057		)	(35,908		)	(9,675		)
Embedded derivative - GLWB(1)	22,931			485			55,595			(13,306		)
Funds withheld derivative	37,444			35,821			68,341			103,746
Total derivatives related to VA contracts	(34,674		)	(21,510		)	(118,903		)	(47,712		)
Derivatives related to FIA contracts:
Embedded derivative	(14,360		)	(18,606		)	(7,957		)	(40,351		)
Equity futures	(388		)	66			(716		)	161
Equity options	18,474			11,242			21,203			29,511
Total derivatives related to FIA contracts	3,726			(7,298		)	12,530			(10,679		)
VA GLWB economic cost(2)	10,397			10,098			31,069			29,968
Realized gains (losses) - derivatives, net of economic cost	$	(20,551	)	$	(18,710	)	$	(75,304	)	$	(28,423	)
(1) Includes impact of nonperformance risk of $3.0 million and $(4.2) million for the three and nine months ended September 30, 2018 and $0.3 million and $(11.6) million for the three and nine months ended September 30, 2017.
(2) Economic cost is the long-term expected average cost of providing the product benefit over the life of the policy based on product pricing assumptions. These include assumptions about the economic/market environment, and elective and non-elective policy owner behavior (e.g. lapses, withdrawal timing, mortality, etc.).

	As of
	September 30, 2018			December 31, 2017
	(Dollars In Thousands)
GMDB - Net amount at risk(1)	$	68,968		$	68,536
GMDB Reserves	25,576			23,795
GLWB and GMAB Reserves	(40,048		)	15,548
Account value subject to GLWB rider	9,232,492			9,718,263
GLWB Benefit Base	10,371,802			10,560,893
GMAB Benefit Base	1,924			3,298
S&P 500® Index	2,914			2,674
(1) Guaranteed benefits in excess of contract holder account balance.

For The Three Months Ended September 30, 2018, as compared to The Three Months Ended September 30, 2017

Pre-tax adjusted operating income

Pre-tax adjusted operating income was $36.2 million for the three months ended September 30, 2018, as compared to $51.8 million for the three months ended September 30, 2017, a decrease of $15.5 million, or 30.0%. This variance was primarily the result of unfavorable unlocking, partially offset by a favorable change in SPIA mortality. Segment results were negatively impacted by $4.8 million of unfavorable unlocking for the three months ended September 30, 2018, as compared to $13.0 million of favorable unlocking for the three months ended September 30, 2017.

77

Operating revenues

Segment operating revenues increased $3.1 million, or 2.4%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, primarily due to higher investment income. The higher investment income is related to growth in fixed annuity account values. Average fixed account balances increased 10.8% and average variable account balances decreased 1.5% for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017.

Benefits and settlement expenses

Benefits and settlement expenses increased $1.3 million, or 2.5%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. This increase was primarily the result of higher credited interest and unfavorable unlocking, partially offset by a favorable change in SPIA mortality. Included in benefits and settlement expenses was $2.4 million of unfavorable unlocking for the three months ended September 30, 2018, as compared to $0.1 million of favorable unlocking for the three months ended September 30, 2017.

Amortization of DAC and VOBA

DAC and VOBA amortization unfavorably changed by $17.7 million for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. The unfavorable change was primarily due to unfavorable unlocking. DAC and VOBA unlocking for the three months ended September 30, 2018, was $2.4 million unfavorable as compared to $12.9 million favorable for the three months ended September 30, 2017.

Other operating expenses

Other operating expenses decreased $0.5 million, or 1.2%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. Lower non-deferred maintenance and overhead expense and commission expenses were partially offset by higher non-deferred acquisition expense.

Sales

Total sales increased $249.2 million, or 74.6%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. Sales of variable annuities decreased $17.9 million, or 20.6% for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, primarily due to the relative competitiveness of our product within the market. Sales of fixed annuities increased by $267.1 million, or 108.2%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, primarily due to an increase in single premium deferred annuities (“SPDA”) sales.

For The Nine Months Ended September 30, 2018, as compared to The Nine Months Ended September 30, 2017

Pre-tax adjusted operating income

Pre-tax adjusted operating income was $112.2 million for the nine months ended September 30, 2018, as compared to $130.1 million for the nine months ended September 30, 2017, a decrease of $17.9 million, or 13.8%. This variance was primarily the result of unfavorable unlocking and higher non-deferred expenses, partially offset by a favorable change in SPIA mortality. Segment results were negatively impacted by $11.7 million of unfavorable unlocking for the nine months ended September 30, 2018, as compared to $14.9 million of favorable unlocking for the nine months ended September 30, 2017.

Operating revenues

Segment operating revenues increased $10.6 million, or 2.7%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, primarily due to higher investment income. The higher investment income related to growth in fixed annuity account value. Average fixed account balances increased 8.5% and average variable account balances were relatively unchanged for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017.

Benefits and settlement expenses

Benefits and settlement expenses decreased $1.3 million, or 0.8%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. This decrease was primarily the result of a favorable change in SPIA mortality, partially offset by higher credited interest and unfavorable unlocking. Included in benefits and settlement expenses was $3.5 million of unfavorable unlocking for the nine months ended September 30, 2018, as compared to $0.2 million of favorable unlocking for the nine months ended September 30, 2017.

Amortization of DAC and VOBA

DAC and VOBA amortization unfavorably changed by $26.6 million for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. The unfavorable change was primarily due to unfavorable unlocking. DAC and VOBA unlocking for the nine months ended September 30, 2018, was $8.2 million unfavorable as compared to $14.7 million favorable for the nine months ended September 30, 2017.

78

Other operating expenses

Other operating expenses increased $3.2 million, or 3.0%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. Increases in non-deferred acquisition expense and maintenance and overhead expense were partially offset by lower non-deferred commission expense.

Sales

Total sales increased $697.8 million, or 61.8%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. Sales of variable annuities decreased $93.5 million, or 28.9% for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, primarily due to the relative competitiveness of our product within the market. Sales of fixed annuities increased by $791.3 million, or 98.1%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, primarily due to an increase in SPDA sales.

Reinsurance

During the year ended December 31, 2012, the Annuity segment began reinsuring certain risks associated with the GLWB and GMDB riders to Shades Creek Captive Insurance Company (“Shades Creek”), a direct wholly owned subsidiary of PLC. The cost of reinsurance to the segment is reflected in the chart shown below. The impact of the Shades Creek reinsurance arrangement for the three month period ending March 31, 2013, was eliminated in consolidation. Prior to April 1, 2013, we paid as a dividend all of Shades Creek’s outstanding common stock to its parent, PLC. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Impact of reinsurance

Reinsurance impacted the Annuities segment line items as shown in the following table:

Annuities Segment

Line Item Impact of Reinsurance

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
REVENUES
Reinsurance ceded	$	(18,799	)	$	(19,569	)	$	(57,471	)	$	(59,446	)
Realized gains (losses) - derivatives	10,837			11,161			32,764			33,560
Total operating revenues	(7,962		)	(8,408		)	(24,707		)	(25,886		)
Realized gains (losses) - derivatives, net of economic cost	(8,169		)	24,406			(58,381		)	72,784
Total revenues	(16,131		)	15,998			(83,088		)	46,898
BENEFITS AND EXPENSES
Benefits and settlement expenses	(831		)	(217		)	(1,178		)	(191		)
Amortization of DAC/VOBA	—			—			—			—
Other operating expenses	(420		)	(453		)	(1,284		)	(1,379		)
Operating benefits and expenses	(1,251		)	(670		)	(2,462		)	(1,570		)
Amortization of deferred policy acquisition costs related to realized gain (loss) investments	—			—			—			—
Total benefit and expenses	(1,251		)	(670		)	(2,462		)	(1,570		)
NET IMPACT OF REINSURANCE	$	(14,880	)	$	16,668		$	(80,626	)	$	48,468

The table above does not reflect the impact of reinsurance on our net investment income. The net investment income impact to us and the assuming company has been quantified and is immaterial. The Annuities segment’s reinsurance programs do not materially impact the “other income” line of our income statement.

The net impact of reinsurance was unfavorable by $14.9 million for the three months ended September 30, 2018, as compared to the favorable net impact of $16.7 million for the three months ended September 30, 2017.

The net impact of reinsurance was unfavorable by $80.6 million for the nine months ended September 30, 2018, as compared to the favorable net impact of $48.5 million for the nine months ended September 30, 2017.

79

Stable Value Products

Segment Results of Operations

Segment results were as follows:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
REVENUES
Net investment income	$	59,420		$	49,962		$	159,391		$	130,816
Other income	37			—			215			—
Total operating revenues	59,457			49,962			159,606			130,816
Realized gains (losses)	(129		)	(29		)	(662		)	2,047
Total revenues	59,328			49,933			158,944			132,863
BENEFITS AND EXPENSES
Benefits and settlement expenses	30,698			19,121			78,917			51,074
Amortization of DAC	869			607			2,321			1,613
Other operating expenses	764			2,242			2,170			3,871
Total benefits and expenses	32,331			21,970			83,408			56,558
INCOME BEFORE INCOME TAX	26,997			27,963			75,536			76,305
Less: realized gains (losses)	(129		)	(29		)	(662		)	2,047
PRE-TAX ADJUSTED OPERATING INCOME	$	27,126		$	27,992		$	76,198		$	74,258

The following table summarizes key data for the Stable Value Products segment: 

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Sales(1)
GIC	$	27,000		$	50,000		$	37,000		$	107,000
GFA	350,000			900,000			1,150,000			1,650,000
	$	377,000		$	950,000		$	1,187,000		$	1,757,000
Average Account Values	$	5,219,360		$	4,184,418		$	4,873,790		$	3,947,056
Ending Account Values	$	5,211,668		$	4,793,890		$	5,211,668		$	4,793,890
Operating Spread
Net investment income yield	4.57		%	4.79		%	4.37		%	4.43		%
Other income yield	—			—			0.01			—
Interest credited	2.36			1.83			2.16			1.73
Operating expenses	0.13			0.28			0.13			0.18
Operating spread	2.08		%	2.68		%	2.09		%	2.52		%
Adjusted operating spread(2)	1.39		%	1.49		%	1.52		%	1.73		%
(1)  Sales are measured at the time the purchase payments are received.
(2)  Excludes participating mortgage loan income.

80

For The Three Months Ended September 30, 2018, as compared to The Three Months Ended September 30, 2017

Pre-tax adjusted operating income

Pre-tax adjusted operating income was $27.1 million and decreased $0.9 million, or 3.1%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. The decrease in adjusted operating earnings primarily resulted from higher interest expenses. Participating mortgage income for the three months ended September 30, 2018, was $9.0 million as compared to $12.4 million for the three months ended September 30, 2017. The adjusted operating spread, which excludes participating income, decreased by 10 basis points for the three months ended September 30, 2018, from the prior year, due primarily to an increase in credited interest.

For The Nine Months Ended September 30, 2018, as compared to The Nine Months Ended September 30, 2017

Pre-tax adjusted operating income

Pre-tax adjusted operating income was $76.2 million and increased $1.9 million, or 2.6%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. The increase in adjusted operating earnings primarily resulted from higher average account values. Participating mortgage income for the nine months ended September 30, 2018, was $20.9 million as compared to $23.6 million for the nine months ended September 30, 2017. The adjusted operating spread, which excludes participating income, decreased by 21 basis points for the nine months ended September 30, 2018, from the prior year, due primarily to an increase in credited interest.

81

Asset Protection

Segment Results of Operations

Segment results were as follows: 

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
REVENUES
Gross premiums and policy fees	$	78,123		$	79,595		$	231,351		$	243,160
Reinsurance ceded	(28,759		)	(27,751		)	(85,172		)	(88,695		)
Net premiums and policy fees	49,364			51,844			146,179			154,465
Net investment income	6,548			5,642			18,215			16,352
Other income	35,014			36,319			102,353			106,622
Realized gains (losses)	—			(6		)	—			(6		)
Total operating revenues	90,926			93,799			266,747			277,433
BENEFITS AND EXPENSES
Benefits and settlement expenses	28,514			31,608			85,668			94,017
Amortization of DAC/VOBA	15,378			4,357			47,458			13,965
Other operating expenses	39,983			52,653			116,630			155,645
Total benefits and expenses	83,875			88,618			249,756			263,627
INCOME BEFORE INCOME TAX	7,051			5,181			16,991			13,806
Less: realized gains (losses)	—			(6		)	—			(6		)
PRE-TAX ADJUSTED OPERATING INCOME	$	7,051		$	5,187		$	16,991		$	13,812

The following table summarizes key data for the Asset Protection segment:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Sales(1)
Credit insurance	$	2,978		$	3,880		$	9,387		$	11,759
Service contracts	97,883			102,180			284,771			291,991
GAP	17,632			26,965			50,874			86,565
	$	118,493		$	133,025		$	345,032		$	390,315
Loss Ratios(2)
Credit insurance	30.1		%	9.8		%	26.8		%	19.2		%
Service contracts	37.2			39.3			35.8			38.8
GAP	138.6			123.1			137.1			122.5
(1) Sales are based on the amount of single premiums and fees received
(2) Incurred claims as a percentage of earned premiums

For The Three Months Ended September 30, 2018, as compared to The Three Months Ended September 30, 2017

Pre-tax adjusted operating income

Pre-tax adjusted operating income was $7.1 million, representing an increase of $1.9 million, or 35.9%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. Service contract earnings increased $2.0 million primarily due to favorable loss ratios and higher investment income. Credit insurance earnings decreased $0.1 million primarily due to lower volume and higher losses. Earnings from the GAP product line remained consistent with the prior year.

82

Net premiums and policy fees

Net premiums and policy fees decreased $2.5 million, or 4.8%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. GAP and credit insurance premiums decreased $4.1 million and $0.4 million, respectively, as a result of lower sales. This was partly offset by an increase in service contract premiums of $2.1 million.

Other income

Other income decreased $1.3 million, or 3.6% for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017 due to lower volume and the impact of an accounting change implemented in conjunction with the adoption of ASU No. 2014-09.

Benefits and settlement expenses

Benefits and settlement expenses decreased $3.1 million, or 9.8%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. GAP claims decreased $3.5 million primarily due to lower volume. Credit insurance claims increased $0.4 million due to higher loss ratios.

Amortization of DAC and VOBA and Other operating expenses

Amortization of DAC and VOBA increased $11.0 million and other operating expenses decreased $12.7 million for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. The changes were due to the impact of an accounting change implemented in conjunction with the adoption of ASU No. 2014-09.

Sales

Total segment sales decreased $14.5 million, or 10.9%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. GAP sales decreased $9.3 million due to discontinuing the relationship with a significant distribution partner. Service contract sales decreased $4.0 million due to lower volume resulting from the impact of previous price increases. Credit insurance sales decreased $0.9 million due to decreasing demand for the product.

For The Nine Months Ended September 30, 2018, as compared to The Nine Months Ended September 30, 2017

Pre-tax adjusted operating income

Pre-tax adjusted operating income was $17.0 million, representing an increase of $3.2 million, or 23.0%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. Service contract earnings increased $3.2 million primarily due to favorable loss ratios and higher investment income. Earnings from the GAP product line increased $0.5 million due to lower expenses. Credit insurance earnings decreased $0.5 million primarily due to lower volume and higher losses.

Net premiums and policy fees

Net premiums and policy fees decreased $8.3 million, or 5.4%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. GAP and credit insurance premiums decreased $9.1 million and $2.0 million, respectively, as a result of lower sales. Service contract premiums increased $2.8 million.

Other income

Other income decreased $4.3 million, or 4.0%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017 due to lower volume and the impact of an accounting change implemented in conjunction with the adoption of ASU No. 2014-09.

Benefits and settlement expenses

Benefits and settlement expenses decreased $8.3 million, or 8.9%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. GAP claims decreased $6.3 million due to lower volume. Service contract claims decreased $2.2 million due to lower loss ratios. Credit insurance claims increased $0.1 million due to higher loss ratios.

Amortization of DAC and VOBA and Other operating expenses

Amortization of DAC and VOBA increased $33.5 million and other operating expenses decreased $39.0 million for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. The changes were due to the impact of an accounting change implemented in conjunction with the adoption of ASU No. 2014-09.

Sales

Total segment sales decreased $45.3 million, or 11.6%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. GAP sales decreased $35.7 million due to discontinuing the relationship with a significant distribution partner. Service contract sales decreased $7.2 million due to lower volume resulting from the impact of previous price increases. Credit insurance sales decreased $2.4 million due to decreasing demand for the product.

83

Reinsurance

The majority of the Asset Protection segment’s reinsurance activity relates to the cession of single premium credit life and credit accident and health insurance, vehicle service contracts, and guaranteed asset protection insurance to producer affiliated reinsurance companies (“PARCs”). These arrangements are coinsurance contracts ceding the business on a first dollar quota share basis at 100% to limit our exposure and allow the PARCs to share in the underwriting income of the product. Reinsurance contracts do not relieve us from our obligations to our policyholders. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies, to our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Impact of Reinsurance

Reinsurance impacted the Asset Protection segment line items as shown in the following table:

Asset Protection Segment

Line Item Impact of Reinsurance

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
REVENUES
Reinsurance ceded	$	(28,759	)	$	(27,751	)	$	(85,172	)	$	(88,695	)
BENEFITS AND EXPENSES
Benefits and settlement expenses	(18,939		)	(22,428		)	(56,336		)	(57,176		)
Amortization of DAC/VOBA	(755		)	(566		)	(2,188		)	(1,545		)
Other operating expenses	(1,077		)	(1,064		)	(3,449		)	(3,990		)
Total benefits and expenses	(20,771		)	(24,058		)	(61,973		)	(62,711		)
NET IMPACT OF REINSURANCE(1)	$	(7,988	)	$	(3,693	)	$	(23,199	)	$	(25,984	)
(1)  Assumes no investment income on reinsurance. Foregone investment income would substantially change the impact of reinsurance.

For The Three Months Ended September 30, 2018, as compared to The Three Months Ended September 30, 2017

Reinsurance premiums ceded increased $1.0 million, or 3.6%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. The increase was primarily due to an increase in ceded service contract premiums, partially offset by a decrease in ceded credit insurance premiums.

Benefits and settlement expenses ceded decreased $3.5 million, or 15.6%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. The decrease was primarily due to lower ceded losses in the GAP product line, as a result of Hurricane Harvey claims incurred in 2017, somewhat offset by higher ceded losses in the service contract line.

Amortization of DAC and VOBA ceded increased $0.2 million for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, as the result of ceded activity in all product lines. Other operating expenses ceded were consistent for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017.

Net investment income has no direct impact on reinsurance cost. However, by ceding business to the assuming companies, we forgo investment income on the reserves ceded. Conversely, the assuming companies will receive investment income on the reserves assumed which generally will increase the assuming companies’ profitability on business we cede. The net investment income impact to us and the assuming companies has not been quantified as it is not reflected in our consolidated financial statements.

For The Nine Months Ended September 30, 2018, as compared to The Nine Months Ended September 30, 2017

Reinsurance premiums ceded decreased $3.5 million, or 4.0%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. The decrease was due to decreases in ceded premiums in all product lines.

Benefits and settlement expenses ceded decreased $0.8 million, or 1.5%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. The decrease was primarily due to lower ceded losses in the GAP product line as a result of Hurricane Harvey claims incurred in 2017, offset by higher ceded losses in the service contract product line.

84

Amortization of DAC and VOBA ceded increased $0.6 million for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, as the result of ceded activity in all product lines. Other operating expenses ceded decreased $0.5 million for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017 mainly due to ceded activity in the credit insurance product line.

Net investment income has no direct impact on reinsurance cost. However, by ceding business to the assuming companies, we forgo investment income on the reserves ceded. Conversely, the assuming companies will receive investment income on the reserves assumed which generally will increase the assuming companies’ profitability on business we cede. The net investment income impact to us and the assuming companies has not been quantified as it is not reflected in our consolidated financial statements.

85

Corporate and Other

Segment Results of Operations

Segment results were as follows:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
REVENUES
Gross premiums and policy fees	$	3,014		$	3,118		$	9,171		$	9,658
Reinsurance ceded	(2		)	11			(31		)	(70		)
Net premiums and policy fees	3,012			3,129			9,140			9,588
Net investment income	21,043			24,385			76,503			72,515
Other income	406			479			1,101			804
Total operating revenues	24,461			27,993			86,744			82,907
Realized gains (losses) - investments	(1,954		)	(2,232		)	5,399			(6,612		)
Realized gains (losses) - derivatives	(1,946		)	52,114			(1,457		)	33,333
Total revenues	20,561			77,875			90,686			109,628
BENEFITS AND EXPENSES
Benefits and settlement expenses	4,452			4,271			12,635			11,085
Amortization of DAC/VOBA	—			—			—			—
Other operating expenses	61,936			61,776			193,583			179,563
Total benefits and expenses	66,388			66,047			206,218			190,648
INCOME (LOSS) BEFORE INCOME TAX	(45,827		)	11,828			(115,532		)	(81,020		)
Less: realized gains (losses) - investments	(1,954		)	(2,232		)	5,399			(6,612		)
Less: realized gains (losses) - derivatives	(1,946		)	52,114			(1,457		)	33,333
PRE-TAX ADJUSTED OPERATING INCOME (LOSS)	$	(41,927	)	$	(38,054	)	$	(119,474	)	$	(107,741	)

For The Three Months Ended September 30, 2018, as compared to The Three Months Ended September 30, 2017

Pre-tax adjusted operating income (loss)

Pre-tax adjusted operating loss was $41.9 million for the three months ended September 30, 2018, as compared to a pre-tax adjusted operating loss of $38.1 million for the three months ended September 30, 2017. The increased operating loss was primarily due to a decrease in investment income due to decreased invested asset balances.

Operating revenues

Net investment income for the segment decreased $3.3 million or 13.7% for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. The decrease was primarily due to a decrease in invested asset balances.

Total benefits and expenses

Total benefits and expenses increased $0.3 million, or 0.5%, for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, primarily due to increases in interest expense and corporate overhead expenses.

For The Nine Months Ended September 30, 2018, as compared to The Nine Months Ended September 30, 2017

Pre-tax adjusted operating income (loss)

Pre-tax adjusted operating loss was $119.5 million for the nine months ended September 30, 2018, as compared to a pre-tax adjusted operating loss of $107.7 million for the nine months ended September 30, 2017. The increased operating loss was primarily due to an increase in corporate overhead expenses, partly offset by an increase in investment income due to higher invested asset balances and improved yields.

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Operating revenues

Net investment income for the segment increased $4.0 million or 5.5% for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. The increase was primarily due to an increase in invested asset balances and yields.

Total benefits and expenses

Total benefits and expenses increased $15.6 million, or 8.2%, for the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, primarily due to increases in interest expense and corporate overhead expenses.

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CONSOLIDATED INVESTMENTS

As of September 30, 2018, our investment portfolio was approximately $66.2 billion. The types of assets in which we may invest are influenced by various state insurance laws which prescribe qualified investment assets. Within the parameters of these laws, we invest in assets giving consideration to such factors as liquidity and capital needs, investment quality, investment return, matching of assets and liabilities, and the overall composition of the investment portfolio by asset type and credit exposure.

Within our fixed maturity investments, we maintain portfolios classified as “available-for-sale”, “trading”, and “held-to-maturity”. We purchase our available-for-sale investments with the intent to hold to maturity by purchasing investments that match future cash flow needs. However, we may sell any of our available-for-sale and trading investments to maintain proper matching of assets and liabilities. Accordingly, we classified $49.7 billion, or 90.7%, of our fixed maturities as “available-for-sale” as of September 30, 2018. These securities are carried at fair value on our consolidated condensed balance sheets. Changes in fair value for our available-for-sale portfolio, net of tax and the related impact on certain insurance assets and liabilities are recorded directly to shareowner’s equity. Declines in fair value that are other-than-temporary are recorded as realized losses in the consolidated condensed statements of income, net of any applicable non-credit component of the loss, which is recorded as an adjustment to other comprehensive income (loss).

Trading securities are carried at fair value and changes in fair value are recorded on the income statement as they occur. Our trading portfolio accounted for $2.5 billion, or 4.5%, of our fixed maturities and $55.9 million of short-term investments as of September 30, 2018. Changes in fair value on the Modco trading portfolios, including gains and losses from sales, are passed to third party reinsurers through the contractual terms of the related reinsurance arrangements. Partially offsetting these amounts are corresponding changes in the fair value of the embedded derivative associated with the underlying reinsurance arrangement.

Fixed maturities with respect to which we have both the positive intent and ability to hold to maturity are classified as “held-to-maturity”. We classified $2.7 billion, or 4.8%, of our fixed maturities as “held-to-maturity” as of September 30, 2018. These securities are carried at amortized cost on our consolidated condensed balance sheets.

Fair values for private, non-traded securities are determined as follows: 1) we obtain estimates from independent pricing services and 2) we estimate fair value based upon a comparison to quoted issues of the same issuer or issues of other issuers with similar terms and risk characteristics. We analyze the independent pricing services valuation methodologies and related inputs, including an assessment of the observability of market inputs. Upon obtaining this information related to fair value, management makes a determination as to the appropriate valuation amount. For more information about the fair values of our investments please refer to Note 6, Fair Value of Financial Instruments, to the financial statements.

The following table presents the reported values of our invested assets:

	As of
	September 30, 2018				December 31, 2017
	(Dollars In Thousands)
Publicly issued bonds (amortized cost: 2018 - $40,715,638 2017 - $30,735,009)	$	38,960,941	58.9	%	$	30,712,511	56.6	%
Privately issued bonds (amortized cost: 2018 - $16,188,991; 2017 - $12,838,740)	15,783,334		23.9		12,883,461		23.7
Preferred stock (amortized cost: 2018 - $97,527; 2017 - $97,690)	90,304		0.1		94,418		0.2
Fixed maturities	54,834,579		82.9	%	43,690,390		80.5	%
Equity securities (cost: 2018 - $623,882; 2017 - $701,951)	623,201		0.9		715,498		1.3
Mortgage loans	7,572,349		11.4		6,817,723		12.5
Investment real estate	7,147		—		8,355		—
Policy loans	1,703,462		2.6		1,615,615		3.0
Other long-term investments	1,050,741		1.6		940,047		1.7
Short-term investments	366,586		0.6		527,144		1.0
Total investments	$	66,158,065	100.0	%	$	54,314,772	100.0	%

Included in the preceding table are $2.5 billion and $2.7 billion of fixed maturities and $55.9 million and $56.3 million of short-term investments classified as trading securities as of September 30, 2018 and December 31, 2017, respectively. All of the fixed maturities in the trading portfolio are invested assets that are held pursuant to Modco arrangements under which the economic risks and benefits of the investments are passed to third party reinsurers. Also included above are $2.7 billion and $2.7 billion of securities classified as held-to-maturity as of September 30, 2018 and December 31, 2017, respectively.

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Fixed Maturity Investments

As of September 30, 2018, our fixed maturity investment holdings were approximately $54.8 billion. The approximate percentage distribution of our fixed maturity investments by quality rating is as follows:

	As of
Rating	September 30, 2018				December 31, 2017
	(Dollars In Thousands)
AAA	$	6,655,690	12.1	%	$	5,729,332	13.1	%
AA	6,197,049		11.3		3,553,140		8.1
A	17,879,641		32.6		13,871,438		31.7
BBB	19,605,860		35.8		15,688,958		35.9
Below investment grade	1,842,734		3.4		2,128,618		5.0
Not rated(1)	2,653,605		4.8		2,718,904		6.2
	$	54,834,579	100.0	%	$	43,690,390	100.0	%
(1) Our “not rated” securities are $2.7 billion or 4.8% of our fixed maturity investments, of held-to-maturity securities issued by affiliates of the Company which are considered variable interest entities (“VIEs”) and are discussed in Note 5, Investment Operations, to the consolidated condensed financial statements. We are not the primary beneficiary of these entities and thus these securities are not eliminated in consolidation. These securities are collateralized by non-recourse funding obligations issued by captive insurance companies that are wholly owned subsidiaries of the Company.

We use various Nationally Recognized Statistical Rating Organizations’ (“NRSRO”) ratings when classifying securities by quality ratings. When the various NRSRO ratings are not consistent for a security, we use the second-highest convention in assigning the rating. When there are no such published ratings, we assign a rating based on the statutory accounting rating system if such ratings are available.

The distribution of our fixed maturity investments by type is as follows: 

	As of
Type	September 30, 2018		December 31, 2017
	(Dollars In Thousands)
Corporate securities	$	38,429,859	$	31,235,729
Residential mortgage-backed securities	3,660,698		2,578,187
Commercial mortgage-backed securities	2,369,781		2,007,292
Other asset-backed securities	1,565,905		1,387,646
U.S. government-related securities	1,639,060		1,250,486
Other government-related securities	570,676		349,158
States, municipals, and political subdivisions	3,854,691		2,068,570
Redeemable preferred stock	90,304		94,418
Securities issued by affiliates	2,653,605		2,718,904
Total fixed income portfolio	$	54,834,579	$	43,690,390

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The industry segment composition of our fixed maturity securities is presented in the following table:

	As of September 30, 2018		% Fair Value		As of December 31, 2017		% Fair Value
	(Dollars In Thousands)
Banking	$	5,233,308	9.5	%	$	4,245,896	9.7	%
Other finance	249,601		0.5		60,697		0.1
Electric utility	4,592,024		8.4		3,971,653		9.1
Energy	4,301,553		7.8		4,001,011		9.2
Natural gas	793,423		1.4		736,626		1.7
Insurance	3,985,002		7.3		3,675,251		8.4
Communications	2,169,177		4.0		1,688,865		3.9
Basic industrial	1,871,199		3.4		1,624,327		3.7
Consumer noncyclical	5,281,928		9.6		3,795,507		8.7
Consumer cyclical	1,818,842		3.3		1,224,401		2.8
Finance companies	204,096		0.4		161,683		0.4
Capital goods	2,742,060		5.0		1,904,768		4.4
Transportation	1,674,633		3.1		1,202,481		2.8
Other industrial	380,915		0.7		239,368		0.5
Brokerage	995,481		1.8		911,917		2.1
Technology	1,955,810		3.6		1,737,807		4.0
Real estate	218,351		0.4		82,125		0.2
Other utility	52,760		0.2		65,764		—
Commercial mortgage-backed securities	2,369,781		4.3		2,007,292		4.6
Other asset-backed securities	1,565,905		2.9		1,387,646		3.2
Residential mortgage-backed non-agency securities	2,822,506		5.1		1,853,164		4.2
Residential mortgage-backed agency securities	838,192		1.5		725,023		1.7
U.S. government-related securities	1,639,060		3.0		1,250,486		2.9
Other government-related securities	570,676		1.0		349,158		0.8
State, municipals, and political divisions	3,854,691		7.0		2,068,570		4.7
Securities issued by affiliates	2,653,605		4.8		2,718,904		6.2
Total	$	54,834,579	100.0	%	$	43,690,390	100.0	%

The total Modco trading portfolio fixed maturities by rating is as follows:

	As of
Rating	September 30, 2018				December 31, 2017
	(Dollars In Thousands)
AAA	$	291,123	11.8	%	$	355,719	13.4	%
AA	300,647		12.2		277,984		10.4
A	873,677		35.3		911,490		34.2
BBB	830,729		33.6		890,101		33.4
Below investment grade	175,580		7.1		228,895		8.6
	$	2,471,756	100.0	%	$	2,664,189	100.0	%

A portion of our bond portfolio is invested in residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”), and other asset-backed securities (collectively referred to as asset-backed securities or “ABS”). ABS are securities that are backed by a pool of assets. These holdings as of September 30, 2018, were approximately $7.6 billion. Mortgage-backed securities (“MBS”) are constructed from pools of mortgages and may have cash flow volatility as a result of changes in the rate at which prepayments of principal occur with respect to the underlying loans. Excluding limitations on access

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to lending and other extraordinary economic conditions, prepayments of principal on the underlying loans can be expected to accelerate with decreases in market interest rates and diminish with increases in interest rates.

The following tables include the percentage of our collateral grouped by rating category and categorizes the estimated fair value by year of security origination for our Prime, Non-Prime, Commercial, and Other asset-backed securities as of September 30, 2018 and December 31, 2017.

	As of September 30, 2018
	Prime(1)						Non-Prime(1)						Commercial						Other asset-backed						Total
	Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized
	Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost
	(Dollars In Millions)
Rating $
AAA	$	2,690.9		$	2,766.3		$	—		$	—		$	1,361.6		$	1,405.3		$	611.6		$	610.8		$	4,664.1		$	4,782.4
AA	1.9			1.9			—			—			521.3			546.5			197.3			196.3			720.5			744.7
A	840.4			864.6			14.9			14.9			484.3			495.7			649.8			653.8			1,989.4			2,029.0
BBB	3.2			3.2			1.2			1.2			2.6			2.6			63.9			64.4			70.9			71.4
Below	25.2			25.2			83.1			83.1			—			—			43.3			43.2			151.6			151.5
	$	3,561.6		$	3,661.2		$	99.2		$	99.2		$	2,369.8		$	2,450.1		$	1,565.9		$	1,568.5		$	7,596.5		$	7,779.0
Rating %
AAA	75.5		%	75.5		%	—		%	—		%	57.5		%	57.4		%	39.0		%	38.9		%	61.4		%	61.5		%
AA	0.1			0.1			—			—			22.0			22.3			12.6			12.5			9.5			9.6
A	23.6			23.6			15.0			15.0			20.4			20.2			41.5			41.7			26.2			26.1
BBB	0.1			0.1			1.2			1.2			0.1			0.1			4.1			4.1			0.9			0.9
Below	0.7			0.7			83.8			83.8			—			—			2.8			2.8			2.0			1.9
	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%
Estimated Fair Value of Security by Year of Security Origination
2014 and prior	$	1,121.7		$	1,146.3		$	99.2		$	99.2		$	1,501.3		$	1,546.2		$	815.7		$	813.7		$	3,537.9		$	3,605.4
2015	576.9			591.4			—			—			282.2			290.0			61.3			61.4			920.4			942.8
2016	281.8			295.6			—			—			415.9			438.6			229.1			230.5			926.8			964.7
2017	659.8			691.4			—			—			97.7			102.3			387.9			390.7			1,145.4			1,184.4
2018	921.4			936.5			—			—			72.7			73.0			71.9			72.2			1,066.0			1,081.7
Total	$	3,561.6		$	3,661.2		$	99.2		$	99.2		$	2,369.8		$	2,450.1		$	1,565.9		$	1,568.5		$	7,596.5		$	7,779.0
(1) Included in Residential Mortgage-Backed securities.

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	As of December 31, 2017
	Prime(1)						Non-Prime(1)						Commercial						Other asset-backed						Total
	Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized
	Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost
	(Dollars In Millions)
Rating $
AAA	$	2,255.5		$	2,259.1		$	—		$	—		$	1,256.1		$	1,269.0		$	591.5		$	590.5		$	4,103.1		$	4,118.6
AA	1.5			1.4			—			—			506.4			516.6			158.5			150.1			666.4			668.1
A	1.1			1.1			15.9			15.9			241.5			243.0			512.9			508.6			771.4			768.6
BBB	1.5			1.5			1.5			1.5			3.3			3.3			50.2			49.6			56.5			55.9
Below	92.4			92.0			208.8			209.0			—			—			74.5			73.7			375.7			374.7
	$	2,352.0		$	2,355.1		$	226.2		$	226.4		$	2,007.3		$	2,031.9		$	1,387.6		$	1,372.5		$	5,973.1		$	5,985.9
Rating %
AAA	95.9		%	95.9		%	—		%	—		%	62.6		%	62.4		%	42.6		%	43.0		%	68.7		%	68.8		%
AA	0.1			0.1			—			—			25.2			25.4			11.4			10.9			11.2			11.2
A	—			—			7.0			7.0			12.0			12.0			37.0			37.1			12.9			12.8
BBB	0.1			0.1			0.6			0.6			0.2			0.2			3.6			3.6			0.9			0.9
Below	3.9			3.9			92.4			92.4			—			—			5.4			5.4			6.3			6.3
	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%
Estimated Fair Value of Security by Year of Security Origination
2013 and prior	$	897.4		$	898.7		$	226.2		$	226.4		$	1,020.5		$	1,034.6		$	761.2		$	752.4		$	2,905.3		$	2,912.1
2014	202.8			201.9			—			—			234.9			239.7			31.2			31.6			468.9			473.2
2015	456.4			458.4			—			—			212.6			210.8			29.4			28.7			698.4			697.9
2016	229.2			232.0			—			—			436.8			443.9			232.9			230.3			898.9			906.2
2017	566.2			564.1			—			—			102.5			102.9			332.9			329.5			1,001.6			996.5
Total	$	2,352.0		$	2,355.1		$	226.2		$	226.4		$	2,007.3		$	2,031.9		$	1,387.6		$	1,372.5		$	5,973.1		$	5,985.9
(1) Included in Residential Mortgage-Backed securities

The majority of our RMBS holdings as of September 30, 2018, were super senior or senior bonds in the capital structure. Our total non-agency portfolio has a weighted-average life of 13.77 years. The following table categorizes the weighted-average life for our non-agency portfolio, by category of material holdings, as of September 30, 2018:

	Weighted-Average
Non-agency portfolio	Life
Prime	13.82
Alt-A	4.31
Sub-prime	3.17

Mortgage Loans

We invest a portion of our investment portfolio in commercial mortgage loans. As of September 30, 2018, our mortgage loan holdings were approximately $7.6 billion. We have specialized in making loans on either credit-oriented commercial properties or credit-anchored strip shopping centers and apartments. Our underwriting procedures relative to our commercial loan portfolio are based, in our view, on a conservative and disciplined approach. We concentrate on a small number of commercial real estate asset types associated with the necessities of life (retail, multi-family, senior living, professional office buildings, and warehouses). We believe that these asset types tend to weather economic downturns better than other commercial asset classes in which we have chosen not to participate. We believe this disciplined approach has helped to maintain a relatively low delinquency and foreclosure rate throughout our history. The majority of our mortgage loans portfolio was underwritten and funded by us. From time to time, we may acquire loans in conjunction with an acquisition.

Our commercial mortgage loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, and net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan’s contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts, and prepayment fees are reported in net investment income.

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Certain of the mortgage loans have call options that occur within the next 11 years. However, if interest rates were to significantly increase, we may be unable to exercise the call options on our existing mortgage loans commensurate with the significantly increased market rates. As of September 30, 2018, assuming the loans are called at their next call dates, approximately $80.7 million of principal would become due for the remainder of 2018, $933.4 million in 2019 through 2023, $91.8 million in 2024 through 2028, and $1.9 million thereafter.

We offer a type of commercial mortgage loan under which we will permit a loan-to-value ratio of up to 85% in exchange for a participating interest in the cash flows from the underlying real estate. As of September 30, 2018 and December 31, 2017, approximately $757.0 million and $669.3 million, respectively, of our total mortgage loans principal balance have this participation feature. Cash flows received as a result of this participation feature are recorded as interest income. During the three and nine months ended September 30, 2018 and 2017, we recognized $9.5 million, $22.0 million, $14.2 million, and $25.7 million, respectively, of participating mortgage loan income.

We record mortgage loans net of an allowance for credit losses. This allowance is calculated through analysis of specific loans that have indicators of potential impairment based on current information and events. As of September 30, 2018, there was an allowance for mortgage loan credit loss of $1.5 million and as of December 31, 2017, there was no allowance for mortgage loan credit losses. While our mortgage loans do not have quoted market values, as of September 30, 2018, we estimated the fair value of our mortgage loans to be $7.3 billion (using an internal fair value model which calculates the value of most loans by using the loan’s discounted cash flows to the loan’s call or maturity date), which was approximately 3.13% less than the amortized cost, less any related loan loss reserve.

At the time of origination, our mortgage lending criteria targets that the loan-to-value ratio on each mortgage is 75% or less. We target projected rental payments from credit anchors (i.e., excluding rental payments from smaller local tenants) of 70% of the property’s projected operating expenses and debt service.

As of September 30, 2018, $3.0 million of the Company’s invested assets consisted of nonperforming mortgage loans, restructured mortgage loans, or mortgage loans that were foreclosed and were converted to real estate properties. For all mortgage loans, the impact of troubled debt restructurings is reflected in our investment balance and in the allowance for mortgage loan credit losses. During the nine months ended September 30, 2018, we recognized one troubled debt restructuring as a result of granting a concession to a borrower which included loan terms unavailable from other lenders. This concession was the result of an agreement between the creditor and the debtor, and we did not identify any loans whose principal was permanently impaired.

Our mortgage loan portfolio consists of two categories of loans: 1) those not subject to a pooling and servicing agreement and 2) those subject to a contractual pooling and servicing agreement. As of September 30, 2018, the Company held $3.0 million of mortgage loans not subject to a pooling and servicing agreement that were nonperforming mortgage loans, restructured, or mortgage loans that were foreclosed and were converted to real estate properties. We did not foreclose on any nonperforming loans not subject to a pooling and servicing agreement during the nine months ended September 30, 2018.

As of September 30, 2018, none of the loans subject to a pooling and servicing agreement were nonperforming or restructured. We did not foreclose on any nonperforming loans subject to a pooling and servicing agreement during the nine months ended September 30, 2018.

We do not expect these investments to adversely affect our liquidity or ability to maintain proper matching of assets and liabilities.

It is our policy to cease to carry accrued interest on loans that are over 90 days delinquent. For loans less than 90 days delinquent, interest is accrued unless it is determined that the accrued interest is not collectible. If a loan becomes over 90 days delinquent, it is our general policy to initiate foreclosure proceedings unless a workout arrangement to bring the loan current is in place. For loans subject to a pooling and servicing agreement, there are certain additional restrictions and/or requirements related to workout proceedings, and as such, these loans may have different attributes and/or circumstances affecting the status of delinquency or categorization of those in nonperforming status.

Unrealized Gains and Losses — Available-for-Sale Securities

The information presented below relates to investments at a certain point in time and is not necessarily indicative of the status of the portfolio at any time after September 30, 2018, the balance sheet date. Information about unrealized gains and losses is subject to rapidly changing conditions, including volatility of financial markets and changes in interest rates. Management considers a number of factors in determining if an unrealized loss is other-than-temporary, including the expected cash to be collected and the intent, likelihood, and/or ability to hold the security until recovery. Consistent with our long-standing practice, we do not utilize a “bright line test” to determine other-than-temporary impairments. On a quarterly basis, we perform an analysis on every security with an unrealized loss to determine if an other-than-temporary impairment has occurred. This analysis includes reviewing several metrics including collateral, expected cash flows, ratings, and liquidity. Furthermore, since the timing of recognizing realized gains and losses is largely based on management’s decisions as to the timing and selection of investments to be sold, the tables and information provided below should be considered within the context of the overall unrealized gain/(loss) position of the portfolio. We had an overall net unrealized loss of $2.2 billion, prior to tax and the related impact of certain insurance assets and liabilities offsets, as of September 30, 2018, and an overall net unrealized gain of $32.5 million as of December 31, 2017.

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For fixed maturity securities held that are in an unrealized loss position as of September 30, 2018, the fair value, amortized cost, unrealized loss, and total time period that the security has been in an unrealized loss position are presented in the table below: 

	Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		Unrealized Loss			% Unrealized Loss
	(Dollars In Thousands)
<= 90 days	$	12,262,987	28.6	%	$	12,467,409	27.6	%	$	(204,422	)	8.5	%
>90 days but <= 180 days	4,416,137		10.3		4,562,038		10.1		(145,901		)	6.2
>180 days but <= 270 days	8,168,678		19.0		8,603,152		19.0		(434,474		)	18.4
>270 days but <= 1 year	4,891,310		11.4		5,093,562		11.2		(202,252		)	8.6
>1 year but <= 2 years	5,776,424		13.5		6,215,018		13.7		(438,594		)	18.6
>2 years but <= 3 years	654,097		1.5		727,311		1.6		(73,214		)	3.1
>3 years but <= 4 years	6,756,977		15.7		7,621,506		16.8		(864,529		)	36.6
>4 years but <= 5 years	—		—		—		—		—			—
>5 years	—		—		—		—		—			—
Total	$	42,926,610	100.0	%	$	45,289,996	100.0	%	$	(2,363,386	)	100.0	%

The range of maturity dates for securities in an unrealized loss position as ofSeptember 30, 2018, varies, with 20.6% maturing in less than 5 years, 18.2% maturing between 5 and 10 years, and 61.2% maturing after 10 years. The following table shows the credit rating of securities in an unrealized loss position as of September 30, 2018:

S&P or Equivalent	Fair		% Fair		Amortized		% Amortized		Unrealized			% Unrealized
Designation	Value		Value		Cost		Cost		Loss			Loss
	(Dollars In Thousands)
AAA/AA/A	$	26,265,206	61.2	%	$	27,517,568	60.8	%	$	(1,252,362	)	53.0	%
BBB	15,741,051		36.7		16,755,807		37.0		(1,014,756		)	42.9
Investment grade	42,006,257		97.9	%	44,273,375		97.8	%	(2,267,118		)	95.9	%
BB	602,696		1.4		653,711		1.4		(51,015		)	2.1
B	192,470		0.4		222,174		0.5		(29,704		)	1.3
CCC or lower	125,187		0.3		140,736		0.3		(15,549		)	0.7
Below investment grade	920,353		2.1	%	1,016,621		2.2	%	(96,268		)	4.1	%
Total	$	42,926,610	100.0	%	$	45,289,996	100.0	%	$	(2,363,386	)	100.0	%

As of September 30, 2018, the Barclays Investment Grade Index was priced at 101.8 bps versus a 10 year average of 164.9 bps. Similarly, the Barclays High Yield Index was priced at 333.5 bps versus a 10 year average of 620.7 bps. As of September 30, 2018, the five, ten, and thirty-year U.S. Treasury obligations were trading at levels of 3.0%, 3.1%, and 3.2%, as compared to 10 year averages of 1.6%, 2.5%, and 3.3%, respectively.

As of September 30, 2018, 95.9% of the unrealized loss was associated with securities that were rated investment grade. We have examined the performance of the underlying collateral and cash flows and expect that our investments will continue to perform in accordance with their contractual terms. Factors such as credit enhancements within the deal structures and the underlying collateral performance/characteristics support the recoverability of the investments. Based on the factors discussed, we do not consider these unrealized loss positions to be other-than-temporary. However, from time to time, we may sell securities in the ordinary course of managing our portfolio to meet diversification, credit quality, yield enhancement, asset/liability management, and liquidity requirements.

Expectations that investments in mortgage-backed and asset-backed securities will continue to perform in accordance with their contractual terms are based on assumptions that a market participant would use in determining the current fair value. It is reasonably possible that the underlying collateral of these investments will perform worse than current market expectations and that such an event may lead to adverse changes in the cash flows on our holdings of these types of securities. This could lead to potential future write-downs within our portfolio of mortgage-backed and asset-backed securities. Expectations that our investments in corporate securities and/or debt obligations will continue to perform in accordance with their contractual terms are based on evidence gathered through our normal credit surveillance process. Although we do not anticipate such events, it is reasonably possible that issuers of our investments in corporate securities will perform worse than current expectations. Such events may lead us to recognize potential future write-downs within our portfolio of corporate securities. It is also possible that such unanticipated events would lead us to dispose of those certain holdings and recognize the effects of any such market movements in our financial statements.

As of September 30, 2018, there were estimated gross unrealized losses of $0.3 million related to our mortgage-backed securities collateralized by Alt-A mortgage loans. Gross unrealized losses in our securities collateralized by Alt-A residential mortgage loans as of September 30, 2018, were primarily the result of continued widening spreads, representing marketplace

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uncertainty arising from higher defaults in Alt-A residential mortgage loans and rating agency downgrades of securities collateralized by Alt-A residential mortgage loans.

As of September 30, 2018, we held a total of 4,367 positions that were in an unrealized loss position. Included in that amount were 160 positions of below investment grade securities with a fair value of $920.4 million that were in an unrealized loss position. Total unrealized losses related to below investment grade securities were $96.3 million, $74.5 million of which had been in an unrealized loss position for more than twelve months. Below investment grade securities in an unrealized loss position were 1.4% of invested assets.

As of September 30, 2018, securities in an unrealized loss position that were rated as below investment grade represented 2.1% of the total fair value and 4.1% of the total unrealized loss. We have the ability and intent to hold these securities to maturity. After a review of each security and its expected cash flows, we believe the decline in market value to be temporary.

The following table includes the fair value, amortized cost, unrealized loss, and total time period that the security has been in an unrealized loss position for all below investment grade securities as of September 30, 2018:

	Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		Unrealized Loss			% Unrealized Loss
	(Dollars In Thousands)
<= 90 days	$	78,160	8.6	%	$	79,782	7.9	%	$	(1,622	)	1.7	%
>90 days but <= 180 days	159,432		17.3		163,588		16.1		(4,156		)	4.3
>180 days but <= 270 days	108,841		11.8		113,244		11.1		(4,403		)	4.6
>270 days but <= 1 year	144,924		15.7		156,557		15.4		(11,633		)	12.1
>1 year but <= 2 years	44,293		4.8		51,639		5.1		(7,346		)	7.6
>2 years but <= 3 years	22,560		2.5		25,626		2.5		(3,066		)	3.2
>3 years but <= 4 years	362,143		39.3		426,185		41.9		(64,042		)	66.5
>4 years but <= 5 years	—		—		—		—		—			—
>5 years	—		—		—		—		—			—
Total	$	920,353	100.0	%	$	1,016,621	100.0	%	$	(96,268	)	100.0	%

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We have no material concentrations of issuers or guarantors of fixed maturity securities. The industry segment composition of all securities in an unrealized loss position held as of September 30, 2018, is presented in the following table:

	Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		Unrealized Loss			% Unrealized Loss
	(Dollars In Thousands)
Banking	$	4,241,349	9.9	%	$	4,392,603	9.7	%	$	(151,254	)	6.4	%
Other finance	188,468		0.4		194,528		0.4		(6,060		)	0.3
Electric utility	4,230,785		9.9		4,588,511		10.1		(357,726		)	15.1
Energy	2,939,272		6.8		3,095,934		6.8		(156,662		)	6.6
Natural gas	752,141		1.8		815,649		1.8		(63,508		)	2.7
Insurance	3,391,637		7.9		3,626,978		8.0		(235,341		)	10.0
Communications	1,816,588		4.2		1,974,194		4.4		(157,606		)	6.7
Basic industrial	1,406,757		3.3		1,490,572		3.3		(83,815		)	3.5
Consumer noncyclical	4,450,944		10.4		4,743,831		10.5		(292,887		)	12.4
Consumer cyclical	1,465,578		3.4		1,547,701		3.4		(82,123		)	3.5
Finance companies	108,782		0.3		114,181		0.3		(5,399		)	0.2
Capital goods	2,460,341		5.7		2,587,926		5.7		(127,585		)	5.4
Transportation	1,533,872		3.6		1,616,383		3.6		(82,511		)	3.5
Other industrial	335,588		0.8		353,691		0.8		(18,103		)	0.8
Brokerage	760,107		1.8		797,146		1.8		(37,039		)	1.6
Technology	1,286,159		3.0		1,350,940		3.0		(64,781		)	2.7
Real estate	131,481		0.3		133,696		0.3		(2,215		)	0.1
Other utility	52,758		—		54,614		—		(1,856		)	—
Commercial mortgage-backed securities	2,173,549		5.1		2,254,182		5.0		(80,633		)	3.4
Other asset-backed securities	771,803		1.8		788,185		1.7		(16,382		)	0.7
Residential mortgage-backed non-agency securities	2,496,397		5.8		2,576,534		5.7		(80,137		)	3.4
Residential mortgage-backed agency securities	734,473		1.7		759,867		1.7		(25,394		)	1.1
U.S. government-related securities	1,564,389		3.6		1,637,196		3.6		(72,807		)	3.1
Other government-related securities	366,057		0.9		387,692		0.9		(21,635		)	0.9
States, municipals, and political divisions	3,267,335		7.6		3,407,262		7.5		(139,927		)	5.9
Total	$	42,926,610	100.0	%	$	45,289,996	100.0	%	$	(2,363,386	)	100.0	%

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We have no material concentrations of issuers or guarantors of fixed maturity securities. The industry segment composition of all securities in an unrealized loss position held as of December 31, 2017, is presented in the following table:

	Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		Unrealized Loss			% Unrealized Loss
	(Dollars In Thousands)
Banking	$	1,719,714	8.0	%	$	1,744,888	7.8	%	$	(25,174	)	3.7	%
Other finance	54,454		0.3		58,198		0.3		(3,744		)	0.6
Electric utility	3,110,720		14.4		3,241,952		14.5		(131,232		)	19.3
Energy	1,397,312		6.5		1,458,690		6.5		(61,378		)	9.0
Natural gas	604,431		2.8		624,203		2.8		(19,772		)	2.9
Insurance	1,690,250		7.8		1,736,099		7.8		(45,849		)	6.7
Communications	1,236,092		5.7		1,301,272		5.8		(65,180		)	9.6
Basic industrial	581,249		2.7		603,248		2.7		(21,999		)	3.2
Consumer noncyclical	2,009,655		9.3		2,070,956		9.3		(61,301		)	9.0
Consumer cyclical	625,082		2.9		645,122		2.9		(20,040		)	2.9
Finance companies	38,721		0.2		39,585		0.2		(864		)	0.1
Capital goods	1,120,906		5.2		1,145,532		5.1		(24,626		)	3.6
Transportation	786,922		3.6		807,468		3.6		(20,546		)	3.0
Other industrial	174,797		0.8		185,701		0.8		(10,904		)	1.6
Brokerage	380,331		1.8		384,860		1.7		(4,529		)	0.7
Technology	575,617		2.7		596,855		2.7		(21,238		)	3.1
Real estate	43,096		0.2		43,610		0.2		(514		)	0.1
Other utility	46,729		—		47,514		0.3		(785		)	0.4
Commercial mortgage-backed securities	1,529,729		7.1		1,559,281		7.0		(29,552		)	4.3
Other asset-backed securities	220,822		1.0		226,586		1.0		(5,764		)	0.8
Residential mortgage-backed non-agency securities	814,076		3.8		829,825		3.7		(15,749		)	2.3
Residential mortgage-backed agency securities	360,025		1.7		367,006		1.6		(6,981		)	1.0
U.S. government-related securities	1,166,342		5.4		1,198,519		5.4		(32,177		)	4.7
Other government-related securities	140,124		0.6		145,071		0.7		(4,947		)	0.7
States, municipals, and political divisions	1,198,015		5.5		1,243,628		5.6		(45,613		)	6.7
Total	$	21,625,211	100.0	%	$	22,305,669	100.0	%	$	(680,458	)	100.0	%

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Risk Management and Impairment Review

We monitor the overall credit quality of our portfolio within established guidelines. The following table includes our available-for-sale fixed maturities by credit rating as of September 30, 2018: 

			Percent of
Rating	Fair Value		Fair Value
	(Dollars In Thousands)
AAA	$	6,364,568	12.8	%
AA	5,896,402		11.9
A	17,005,964		34.2
BBB	18,775,132		37.8
Investment grade	48,042,066		96.7
BB	1,197,848		2.4
B	283,471		0.6
CCC or lower	185,833		0.3
Below investment grade	1,667,152		3.3
Total	$	49,709,218	100.0	%

Not included in the table above are $2.3 billion of investment grade and $175.6 million of below investment grade fixed maturities classified as trading securities and $2.7 billion of fixed maturities classified as held-to-maturity.

Limiting bond exposure to any creditor group is another way we manage credit risk. We held no credit default swaps on the positions listed below as of September 30, 2018. The following table summarizes our ten largest fixed maturity exposures to an individual creditor group as of September 30, 2018: 

	Fair Value of
	Funded		Unfunded		Total
Creditor	Securities		Exposures		Fair Value
	(Dollars In Millions)
AT&T Inc.	$	325.5	$	—	$	325.5
Federal Home Loan Bank	320.2		—		320.2
Wells Fargo & Co.	258.3		0.7		259.0
Berkshire Hathaway	254.4		—		254.4
Duke Energy Corp.	245.4		—		245.4
Morgan Stanley	235.4		—		235.4
Bank of America Corp.	223.6		1.7		225.3
JP Morgan Chase & Co.	217.2		7.7		224.9
Goldman Sachs Group Inc.	224.8		—		224.8
Exelon Corp.	223.0		—		223.0
Total	$	2,527.8	$	10.1	$	2,537.9

Determining whether a decline in the current fair value of invested assets is an other-than-temporary decline in value is both objective and subjective, and can involve a variety of assumptions and estimates, particularly for investments that are not actively traded in established markets. We review our positions on a monthly basis for possible credit concerns and review our current exposure, credit enhancement, and delinquency experience.

Management considers a number of factors when determining the impairment status of individual securities. These include the economic condition of various industry segments and geographic locations and other areas of identified risks. Since it is possible for the impairment of one investment to affect other investments, we engage in ongoing risk management to safeguard against and limit any further risk to our investment portfolio. Special attention is given to correlative risks within specific industries, related parties, and business markets.

For certain securitized financial assets with contractual cash flows, including RMBS, CMBS, and other asset-backed securities (collectively referred to as asset-backed securities or “ABS”), GAAP requires us to periodically update our best estimate of cash flows over the life of the security. If the fair value of a securitized financial asset is less than its cost or amortized cost and there has been a decrease in the present value of the expected cash flows since the last revised estimate, considering both timing and amount, an other-than-temporary impairment charge is recognized. Estimating future cash flows is a quantitative and qualitative process that incorporates information received from third party sources along with certain internal assumptions and judgments regarding the future performance of the underlying collateral. Projections of expected future cash flows may change based upon

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new information regarding the performance of the underlying collateral. In addition, we consider our intent and ability to retain a temporarily depressed security until recovery.

Securities in an unrealized loss position are reviewed at least quarterly to determine if an other-than-temporary impairment is present based on certain quantitative and qualitative factors. We consider a number of factors in determining whether the impairment is other-than-temporary. These include, but are not limited to: 1) actions taken by rating agencies, 2) default by the issuer, 3) the significance of the decline, 4) an assessment of our intent to sell the security (including a more likely than not assessment of whether we will be required to sell the security) before recovering the security’s amortized cost, 5) the time period during which the decline has occurred, 6) an economic analysis of the issuer’s industry, and 7) the financial strength, liquidity, and recoverability of the issuer. Management performs a security-by-security review each quarter in evaluating the need for any other-than-temporary impairments. Although no set formula is used in this process, the investment performance, collateral position, and continued viability of the issuer are significant measures considered, along with an analysis regarding our expectations for recovery of the security’s entire amortized cost basis through the receipt of future cash flows. Based on our analysis, for the nine months ended September 30, 2018, we recognized approximately $3.7 million of credit related impairments on investment securities in an unrealized loss position that were other-than-temporarily impaired resulting in a charge to earnings.

There are certain risks and uncertainties associated with determining whether declines in fair values are other-than-temporary. These include significant changes in general economic conditions and business markets, trends in certain industry segments, interest rate fluctuations, rating agency actions, changes in significant accounting estimates and assumptions, commission of fraud, and legislative actions. We continuously monitor these factors as they relate to the investment portfolio in determining the status of each investment.

We have deposits with certain financial institutions which exceed federally insured limits. We have reviewed the creditworthiness of these financial institutions and believe that there is minimal risk of a material loss.

Certain European countries have experienced varying degrees of financial stress, which could have a detrimental impact on regional or global economic conditions and on sovereign and non-sovereign obligations. The chart shown below includes our non-sovereign fair value exposures in these countries as of September 30, 2018. As of September 30, 2018, we had no material unfunded exposure and had no material direct sovereign exposure. 

					Total Gross
	Non-sovereign Debt				Funded
Financial Instrument and Country	Financial		Non-financial		Exposure
	(Dollars In Millions)
Securities:
United Kingdom	$	759.6	$	931.3	$	1,690.9
France	301.1		391.0		692.1
Netherlands	298.0		271.5		569.5
Germany	111.8		386.6		498.4
Switzerland	295.7		199.2		494.9
Spain	50.6		262.9		313.5
Belgium	—		182.6		182.6
Norway	4.0		135.6		139.6
Ireland	39.3		85.9		125.2
Italy	9.9		113.9		123.8
Finland	110.6		—		110.6
Luxembourg	—		69.1		69.1
Sweden	40.9		15.3		56.2
Denmark	29.6		—		29.6
Portugal	—		22.8		22.8
Austria	—		11.9		11.9
Total securities	2,051.1		3,079.6		5,130.7
Derivatives:
Germany	19.1		—		19.1
United Kingdom	18.3		—		18.3
Switzerland	3.0		—		3.0
France	2.7		—		2.7
Total derivatives	43.1		—		43.1
Total securities	$	2,094.2	$	3,079.6	$	5,173.8

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Realized Gains and Losses

The following table sets forth realized investment gains and losses for the periods shown:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Fixed maturity gains - sales	$	3,410		$	1,933		$	21,540		$	14,968
Fixed maturity losses - sales	(5,428		)	(891		)	(15,292		)	(4,486		)
Equity gains and losses	(6,925		)	(352		)	(16,693		)	(1,398		)
Impairments on fixed maturity securities	(14		)	(273		)	(3,664		)	(8,259		)
Modco trading portfolio	(10,901		)	19,399			(148,427		)	93,181
Other	(312		)	(1,939		)	1,522			(7,739		)
Total realized gains (losses) - investments	$	(20,170	)	$	17,877		$	(161,014	)	$	86,267
Derivatives related to VA contracts:
Interest rate futures	$	2,111		$	549		$	(13,229	)	$	16,746
Equity futures	(5,733		)	(25,959		)	(23,025		)	(75,389		)
Currency futures	3,410			(6,092		)	7,890			(22,366		)
Equity options	(21,206		)	(23,307		)	(47,406		)	(76,376		)
Interest rate swaptions	—			(292		)	(14		)	(2,423		)
Interest rate swaps	(41,288		)	5,342			(131,147		)	31,331
Total return swaps	(32,343		)	(8,057		)	(35,908		)	(9,675		)
Embedded derivative - GLWB	22,931			485			55,595			(13,306		)
Funds withheld derivative	37,444			35,821			68,341			103,746
Total derivatives related to VA contracts	(34,674		)	(21,510		)	(118,903		)	(47,712		)
Derivatives related to FIA contracts:
Embedded derivative	(14,360		)	(18,606		)	(7,957		)	(40,351		)
Equity futures	(388		)	66			(716		)	161
Equity options	18,474			11,242			21,203			29,511
Total derivatives related to FIA contracts	3,726			(7,298		)	12,530			(10,679		)
Derivatives related to IUL contracts:
Embedded derivative	(9,535		)	(297		)	(877		)	(10,958		)
Equity futures	(1		)	58			135			(878		)
Equity options	4,928			1,975			5,764			6,437
Total derivatives related to IUL contracts	(4,608		)	1,736			5,022			(5,399		)
Embedded derivative - Modco reinsurance treaties	10,811			(19,746		)	138,652			(90,314		)
Derivatives with PLC(1)	(1,913		)	52,077			(66		)	34,671
Other derivatives	(52		)	43			(59		)	41
Total realized gains (losses) - derivatives	$	(26,710	)	$	5,302		$	37,176		$	(119,392	)
(1) These derivatives include the interest support agreement, two early renewable term (“YRT”) premium support agreements, and three portfolio maintenance agreements between certain of our subsidiaries and PLC.

Realized gains and losses on investments reflect portfolio management activities designed to maintain proper matching of assets and liabilities and to enhance long-term investment portfolio performance. The change in net realized investment gains (losses), excluding impairments and Modco trading portfolio activity during the three and nine months ended September 30, 2018, primarily reflects the normal operation of our asset/liability program within the context of the changing interest rate and spread environment.

Realized losses are comprised of other-than-temporary impairments and actual sales of investments. These other-than-temporary impairments resulted from our analysis of circumstances and our belief that credit events, loss severity, changes in

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credit enhancement, and/or other adverse conditions of the respective issuers have caused, or will lead to, a deficiency in the contractual cash flows related to these investments. These other-than-temporary impairments are presented in the chart below: 

	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2018		2017		2018		2017
	(Dollars In Thousands)
Alt-A MBS	$	—	$	—	$	—	$	—
Other MBS	14		6		50		44
Corporate securities	—		—		3,614		7,948
Other	—		267		—		267
Total	$	14	$	273	$	3,664	$	8,259

As previously discussed, management considers several factors when determining other-than-temporary impairments. Although we purchase securities with the intent to hold them until maturity, we may change our position as a result of a change in circumstances. Any such decision is consistent with our classification of all but a specific portion of our investment portfolio as available-for-sale. For the nine months ended September 30, 2018, we sold securities in an unrealized loss position with a fair value of $380.5 million. For such securities, the proceeds, realized loss, and total time period that the security had been in an unrealized loss position are presented in the table below:

	Proceeds		% Proceeds		Realized Loss			% Realized Loss
	(Dollars In Thousands)
<= 90 days	$	286,478	75.3	%	$	(6,509	)	42.5	%
>90 days but <= 180 days	67,310		17.7		(6,812		)	44.5
>180 days but <= 270 days	1,582		0.4		(102		)	0.7
>270 days but <= 1 year	1,843		0.5		(73		)	0.5
>1 year	23,280		6.1		(1,796		)	11.8
Total	$	380,493	100.0	%	$	(15,292	)	100.0	%

For the three and nine months ended September 30, 2018, we sold securities in an unrealized loss position with a fair value (proceeds) of $122.3 million and $380.5 million. The losses realized on the sale of these securities were $5.4 million and $15.3 million. We made the decision to exit these holdings in conjunction with our overall asset/liability management process.

For the three and nine months ended September 30, 2018, we sold securities in an unrealized gain position with a fair value of $306.6 million and $909.8 million. The gains realized on the sale of these securities were $3.4 million and $21.5 million.

The $0.3 million of other realized losses recognized for the three months ended September 30, 2018, included $0.5 million of realized losses associated with our mortgage loan portfolio and partnership gains of $0.2 million, respectively.

The $1.6 million of other realized gains recognized for the nine months ended September 30, 2018, included $1.9 million of realized gains associated with our mortgage loan portfolio, partnership gains of $0.4 million, fixed asset losses of $0.1 million, and real estate losses of $0.6 million, respectively.

The Modco embedded derivative associated with the trading portfolios had realized pre-tax gains of $10.8 million and $138.7 million, during the three and nine months ended September 30, 2018. The gains during the three months ended September 30, 2018 were due to credit spreads tightening which were more than offset by treasury yields increasing. The gains for the nine months ended September 30, 2018, were due to the credit spreads widening and treasury yields increasing.

For the three and nine months ended September 30, 2018, net losses of $10.9 million and $148.4 million, primarily related to changes in fair value on our Modco trading portfolios, were included in realized gains and losses. Of the $148.4 million for the nine months ended September 30, 2018, approximately $8.3 million of losses were realized through the sale of certain securities, which will be returned to us from our reinsurance partners over time through the reinsurance settlement process for this block of business.

Realized investment gains and losses related to derivatives represent changes in their fair value during the period and termination gains/(losses) on those derivatives that were closed during the period.

We use various derivative instruments to manage risks related to certain life insurance and annuity products. We can use these derivatives as economic hedges against risks inherent in the products. These risks have a direct impact on the cost of these products and are correlated with the equity markets, interest rates, foreign currency levels, and overall volatility. The hedged risks are recorded through the recognition of embedded derivatives associated with the products. These products include the GLWB rider associated with the variable annuity, fixed indexed annuity products as well as indexed universal life products. During the three and nine months ended September 30, 2018, we experienced net realized losses of $34.7 million and $118.9 million on

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derivatives related to VA contracts. These net losses on derivatives related to VA contracts were affected by capital market impacts, changes in our non-performance risk, unlocking of assumptions, and variations in actual sub-account fund performance from the indices included in our hedging program during the three and nine months ended September 30, 2018.

The Funds Withheld derivative associated with Shades Creek had pre-tax realized gains of $37.4 million and $68.3 million for the three and nine months ended September 30, 2018.

Certain of our subsidiaries have derivatives with PLC. These derivatives consist of an interest support agreement, two YRT premium support agreements, and three portfolio maintenance agreements with PLC. We recognized a loss of $1.9 million and a gain of $0.6 million related to the interest support agreement for the three and nine months ended September 30, 2018. We recognized immaterial gains and $1.1 million of gains related to the YRT premium support agreements for the three and nine months ended September 30, 2018.

We entered into two separate portfolio maintenance agreements in October 2012 and one portfolio maintenance agreement in January 2016. We recognized immaterial losses and $1.8 million of losses for the three and nine months ended September 30, 2018.

We also use various swaps and other types of derivatives to mitigate risk related to other exposures. For the three and nine months ended September 30, 2018, these contracts generated losses of $0.1 million.

LIQUIDITY AND CAPITAL RESOURCES

The Holding Company

Overview

Our primary sources of funding are from our insurance operations and revenues from investments. These sources of cash support our operations and are used to pay dividends to PLC.

The states in which we and our insurance subsidiaries are domiciled impose certain restrictions on the ability to pay dividends. These restrictions are based in part on the prior year’s statutory income and/or surplus.

Debt and other capital resources

Our primary sources of capital are from retained income from our insurance operations and capital infusions from our parent, PLC. Additionally, we have access to the Credit Facility discussed below.

On May 3, 2018, we amended the Credit Facility (as amended the “Credit Facility”). We have the ability to borrow under a Credit Facility arrangement on an unsecured basis up to an aggregate principal amount of $1.0 billion. We have the right in certain circumstances to request that the commitment under the Credit Facility be increased up to a maximum principal amount of $1.5 billion. We are not aware of any non-compliance with the financial debt covenants of the Credit Facility as of September 30, 2018. PLC had no outstanding balance as of September 30, 2018.

Liquidity

Liquidity refers to a company’s ability to generate adequate amounts of cash to meet its needs. We meet our liquidity requirements primarily through positive cash flows from our operating subsidiaries. Primary sources of cash from the operating subsidiaries are premiums, deposits for policyholder accounts, investment sales and maturities, and investment income. Primary uses of cash include benefit payments, withdrawals from policyholder accounts, investment purchases, policy acquisition costs, interest payments, and other operating expenses. We believe that we have sufficient liquidity to fund our cash needs under normal operating scenarios.

In the event of significant unanticipated cash requirements beyond our normal liquidity needs, we have additional sources of liquidity available depending on market conditions and the amount and timing of the liquidity need. These additional sources of liquidity include cash flows from operations, the sale of liquid assets, accessing our credit facility, and other sources described herein. Our decision to sell investment assets could be impacted by accounting rules, including rules relating to the likelihood of a requirement to sell securities before recovery of our cost basis. Under stressful market and economic conditions, liquidity may broadly deteriorate, which could negatively impact our ability to sell investment assets. If we require on short notice significant amounts of cash in excess of normal requirements, we may have difficulty selling investment assets in a timely manner, be forced to sell them for less than we otherwise would have been able to realize, or both.

Our liquidity requirements primarily relate to the liabilities associated with our various insurance and investment products, operating expenses, and income taxes. Liabilities arising from insurance and investment products include the payment of policyholder benefits, as well as cash payments in connection with policy surrenders and withdrawals, policy loans, and obligations to redeem funding agreements.

We maintain investment strategies intended to provide adequate funds to pay benefits and expected surrenders, withdrawals, loans, and redemption obligations without forced sales of investments. In addition, our insurance subsidiaries hold highly liquid, high-quality short-term investment securities and other liquid investment grade fixed maturity securities to fund our expected operating expenses, surrenders, and withdrawals. We were committed as of September 30, 2018 to fund mortgage loans in the amount of $825.6 million.

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Our positive cash flows are used to fund an investment portfolio that provides for future benefit payments. We employ a formal asset/liability program to manage the cash flows of our investment portfolio relative to our long-term benefit obligations. As of September 30, 2018, we held cash and short-term investments of approximately $527.8 million.

The following chart includes the cash flows provided by or used in operating, investing, and financing activities for the following periods:

	For The Nine Months Ended September 30,
	2018			2017
	(Dollars In Thousands)
Net cash (used in) provided by operating activities	$	(215,255	)	$	16,394
Net cash used in investing activities	(1,433,609		)	(1,836,948		)
Net cash provided by financing activities	1,631,182			1,805,748
Total	$	(17,682	)	$	(14,806	)

For The Nine Months Ended September 30, 2018 as compared to the Nine Months Ended September 30, 2017

Net cash (used in) provided by operating activities - Cash flows from operating activities are affected by the timing of premiums received, investment income, and benefits and expenses paid. Principal sources of cash inflows from operating activities include sales of our products and services as well as income from investments. Due to the nature of our business and the fact that many of the products we sell produce financing and investing cash flows it is important to consider cash flows generated by investing and financing activities in conjunction with those generated by operating activities.

Net cash used in investing activities - Changes in cash from investing activities primarily related to our investment portfolio.

Net cash provided by financing activities - Changes in cash from financing activities included $503.3 million of outflows from secured financing liabilities for the nine months ended September 30, 2018, as compared to the $198.2 million of outflows for the nine months ended September 30, 2017 and $2.1 billion of inflows of investment product and universal life net activity as compared to $2.2 billion in the prior year. Net repayment of non-recourse funding obligations equaled $62.0 million during the nine months ended September 30, 2018 as compared to net repayments of $36.0 million during the nine months ended September 30, 2017. We also had $110.0 million of subordinated funding obligations for the nine months ended September 30, 2018.

Through our subsidiaries, we are members of the FHLB of Cincinnati and the FHLB of New York. FHLB advances provide an attractive funding source for short-term borrowing and for the sale of funding agreements. Membership in the FHLB requires that we purchase FHLB capital stock based on a minimum requirement and a percentage of the dollar amount of advances outstanding. Our borrowing capacity is determined by criteria established by each respective bank. In addition, our obligations under the advances must be collateralized. We maintain control over any such pledged assets, including the right of substitution. As of September 30, 2018, we had $550.9 million of funding agreement-related advances and accrued interest outstanding under the FHLB program.

While we anticipate that the cash flows of our operating subsidiaries will be sufficient to meet our investment commitments and operating cash needs in a normal credit market environment, we recognize that investment commitments scheduled to be funded may, from time to time, exceed the funds then available. Therefore, we have established repurchase agreement programs for certain of our insurance subsidiaries to provide liquidity when needed. We expect that the rate received on its investments will equal or exceed its borrowing rate. Under this program, we may, from time to time, sell an investment security at a specific price and agree to repurchase that security at another specified price at a later date. These borrowings are typically for a term less than 90 days. The market value of securities to be repurchased is monitored and collateral levels are adjusted where appropriate to protect the counterparty against credit exposure. Cash received is invested in fixed maturity securities, and the agreements provided for net settlement in the event of default or on termination of the agreements. As of September 30, 2018, the fair value of securities pledged under the repurchase program was $457.5 million and the repurchase obligation of $417.1 million was included in our consolidated condensed balance sheets (at an average borrowing rate of 223 basis points). During the nine months ended September 30, 2018, the maximum balance outstanding at any one point in time related to these programs was $427.5 million. The average daily balance was $225.9 million (at an average borrowing rate of 208 basis points) during the nine months ended September 30, 2018. As of December 31, 2017, the fair value of securities pledged under the repurchase program was $1,006.6 million and the repurchase obligation of $885.0 million was included in our consolidated condensed balance sheets (at an average borrowing rate of 142 basis points). During 2017, the maximum balance outstanding at any one point in time related to these programs was $988.5 million. The average daily balance was $624.7 million (at an average borrowing rate of 101 basis points) during the year ended December 31, 2017.

We participate in securities lending, primarily as an investment yield enhancement, whereby securities that are held as investments are loaned out to third parties for short periods of time. We require initial collateral of 102% of the market value of the loaned securities to be separately maintained. The loaned securities’ market value is monitored on a daily basis. As of September 30, 2018, securities with a market value of $92.0 million were loaned under this program. As collateral for the loaned securities, we receive short-term investments, which are recorded in “short-term investments” with a corresponding liability recorded in “other liabilities” to account for its obligation to return the collateral. As of September 30, 2018, the fair value of the

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collateral related to this program was $97.3 million and we have an obligation to return $97.3 million of collateral to the securities borrowers.

Statutory Capital

A life insurance company’s statutory capital is computed according to rules prescribed by the NAIC, as modified by state law. Generally speaking, other states in which a company does business defer to the interpretation of the domiciliary state with respect to NAIC rules, unless inconsistent with the other state’s regulations. Statutory accounting rules are different from GAAP and are intended to reflect a more conservative view, for example, requiring immediate expensing of policy acquisition costs. The NAIC’s risk-based capital requirements require insurance companies to calculate and report information under a risk-based capital formula. The achievement of long-term growth will require growth in the statutory capital of our insurance subsidiaries. The subsidiaries may secure additional statutory capital through various sources, such as retained statutory earnings or our equity contributions. In general, dividends up to specified levels are considered ordinary and may be paid without prior approval of the insurance commissioner of the state of domicile. Dividends in larger amounts are considered extraordinary and are subject to affirmative prior approval by such commissioner. The maximum amount that would qualify as an ordinary dividend from our insurance subsidiaries in 2018 is approximately $175.1million.

State insurance regulators and the NAIC have adopted risk-based capital (“RBC”) requirements for life insurance companies to evaluate the adequacy of statutory capital and surplus in relation to investment and insurance risks. The requirements provide a means of measuring the minimum amount of statutory surplus appropriate for an insurance company to support its overall business operations based on its size and risk profile. A company’s risk-based statutory surplus is calculated by applying factors and performing calculations relating to various asset, premium, claim, expense, and reserve items. Regulators can then measure the adequacy of a company’s statutory surplus by comparing it to RBC. We manage our capital consumption by using the ratio of our total adjusted capital, as defined by the insurance regulators, to our company action level RBC (known as the RBC ratio), also as defined by insurance regulators.

Statutory reserves established for VA contracts are sensitive to changes in the equity markets and are affected by the level of account values relative to the level of any guarantees and product design. As a result, the relationship between reserve changes and equity market performance may be non-linear during any given reporting period. Market conditions greatly influence the capital required due to their impact on the valuation of reserves and derivative investments mitigating the risk in these reserves. Risk mitigation activities may result in material and sometimes counterintuitive impacts on statutory surplus and RBC ratio. Notably, as changes in these market and non-market factors occur, both our potential obligation and the related statutory reserves and/or required capital can vary at a non-linear rate.

Our statutory surplus is impacted by credit spreads as a result of accounting for the assets and liabilities on our fixed MVA annuities. Statutory separate account assets supporting the fixed MVA annuities are recorded at fair value. In determining the statutory reserve for the fixed MVA annuities, we are required to use current crediting rates based on U.S. Treasuries. In many capital market scenarios, current crediting rates based on U.S. Treasuries are highly correlated with market rates implicit in the fair value of statutory separate account assets. As a result, the change in the statutory reserve from period to period will likely substantially offset the change in the fair value of the statutory separate account assets. However, in periods of volatile credit markets, actual credit spreads on investment assets may increase or decrease sharply for certain sub-sectors of the overall credit market, resulting in statutory separate account asset market value gains or losses. As actual credit spreads are not fully reflected in current crediting rates based on U.S. Treasuries, the calculation of statutory reserves will not substantially offset the change in fair value of the statutory separate account assets resulting in a change in statutory surplus.

We cede material amounts of insurance and transfer related assets to other insurance companies through reinsurance. However, notwithstanding the transfer of related assets, we remain liable with respect to ceded insurance should any reinsurer fail to meet the obligations that it assumed. We evaluate the financial condition of our reinsurers and monitor the associated concentration of credit risk. For the three and nine months ended September 30, 2018, we ceded premiums to third party reinsurers amounting to $268.0 million and $1.0 billion, respectively. In addition, we had receivables from reinsurers amounting to $4.5 billion as of September 30, 2018. We review reinsurance receivable amounts for collectability and establish bad debt reserves if deemed appropriate.

Captive Reinsurance Companies

The Company and our life insurance subsidiaries are subject to a regulation entitled “Valuation of Life Insurance Policies Model Regulation,” commonly known as “Regulation XXX,” and a supporting guideline entitled “The Application of the Valuation of Life Insurance Policies Model Regulation,” commonly known as “Guideline AXXX.” The regulation and supporting guideline require insurers to establish statutory reserves for term and universal life insurance policies with long-term premium guarantees that are consistent with the statutory reserves required for other individual life insurance policies with similar guarantees. Many market participants believe that these levels of reserves are non-economic. We use captive reinsurance companies to implement reinsurance and capital management actions to satisfy these reserve requirements by financing the non-economic reserves either through the issuance of non-recourse funding obligations by the captives or obtaining Letters of Credit from third-party financial institutions.

Our captive reinsurance companies assume business from affiliates only. Our captives are capitalized to a level we believe is sufficient to support the contractual risks and other general obligations of the respective captive entity. All of our captive reinsurance companies are wholly owned subsidiaries and are located domestically. The captive insurance companies are subject to regulations in the state of domicile.

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The National Association of Insurance Commissioners (“NAIC”), through various committees, subgroups and dedicated task forces, is reviewing the use of captives and special purpose vehicles used to transfer insurance risk in relation to existing state laws and regulations, and several committees have adopted or exposed for comment white papers and reports that, if or when implemented, could impose additional requirements on the use of captives and other reinsurers. The Financial Condition (E) Committee of the NAIC established a Variable Annuity Issues Working Group to examine company use of variable annuity captives. The Committee has proposed changes in the regulation of variable annuities and variable annuity captives, which could adversely affect our future financial condition and results of operations if adopted.

The NAIC has adopted Actuarial Guideline XLVIII (“AG48”) and the substantially similar “Term and Universal Life Insurance Reserve Financing Model Regulation” (the “Reserve Model”) which establish national standards for new reserve financing arrangements for term life insurance and universal life insurance with secondary guarantees. AG48 and the Reserve Model govern collateral requirements for captive reinsurance arrangements. In order to obtain reserve credit, AG48 and the Reserve Model require a minimum level of funds, consisting of primary and other securities, to be held by or on behalf of ceding insurers as security under each captive life reinsurance treaty. As a result of AG48 and the Reserve Model, the implementation of new captive structures in the future may be less capital efficient, lead to lower product returns and/or increased product pricing or result in reduced sales of certain products. In some circumstances, AG48 and the Reserve Model could impact the Company’s ability to engage in certain reinsurance transactions with non-affiliates.

We also use a captive reinsurance company to reinsure risks associated with GLWB and GMDB riders which helps us to manage those risks on an economic basis. In an effort to mitigate the equity market risks relative to our RBC ratio, we reinsure these risks to Shades Creek Captive Insurance Company (“Shades Creek”). The purpose of Shades Creek is to reduce the volatility in RBC due to non-economic variables included within the RBC calculation.

During 2012, PLC entered into an intercompany capital support agreement with Shades Creek. The agreement provides through a guarantee that PLC will contribute assets or purchase surplus notes (or cause an affiliate or third party to contribute assets or purchase surplus notes) in amounts necessary for Shades Creek’s regulatory capital levels to equal or exceed minimum thresholds as defined by the agreement. As of September 30, 2018, Shades Creek maintained capital levels in excess of the required minimum thresholds. The maximum potential future payment amount which could be required under the capital support agreement will be dependent on numerous factors, including the performance of equity markets, the level of interest rates, performance of associated hedges, and related policyholder behavior.

Ratings

Various Nationally Recognized Statistical Rating Organizations (“rating organizations”) review the financial performance and condition of insurers, including us and our insurance subsidiaries, and publish their financial strength ratings as indicators of an insurer’s ability to meet policyholder and contract holder obligations. These ratings are important to maintaining public confidence in an insurer’s products, its ability to market its products and its competitive position. The following table summarizes the current financial strength ratings of our significant member companies from the major independent rating organizations:

			Standard &
Ratings	A.M. Best	Fitch	Poor’s	Moody’s
Insurance company financial strength rating:
Protective Life Insurance Company	A+	A+	AA-	A1
West Coast Life Insurance Company	A+	A+	AA-	A1
Protective Life and Annuity Insurance Company	A+	A+	AA-	—
Protective Property & Casualty Insurance Company	A	—	—	—
MONY Life Insurance Company	A+	A+	A+	A1

 Our ratings are subject to review and change by the rating organizations at any time and without notice. A downgrade or other negative action by a rating organization with respect to the financial strength ratings of us and our insurance subsidiaries could adversely affect sales, relationships with distributors, the level of policy surrenders and withdrawals, competitive position in the marketplace, and the cost or availability of reinsurance. The rating agencies may take various actions, positive or negative, with respect to the debt and financial strength ratings of PLC and its subsidiaries, including as a result of PLC’s status as a subsidiary of Dai-ichi Life.

LIABILITIES

Many of our products contain surrender charges and other features that are designed to reward persistency and penalize the early withdrawal of funds. Certain stable value and annuity contracts have market-value adjustments that protect us against investment losses if interest rates are higher at the time of surrender than at the time of issue.

As of September 30, 2018, we had policy liabilities and accruals of approximately $42.8 billion. Our interest-sensitive life insurance policies have a weighted average minimum credited interest rate of approximately 3.47%.

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Contractual Obligations

We enter into various obligations to third parties in the ordinary course of our operations. However, we do not believe that our cash flow requirements can be assessed solely based upon an analysis of these obligations. The most significant factors affecting our future cash flows are our ability to earn and collect cash from our customers, and the cash flows arising from our investment program. Future cash outflows, whether they are contractual obligations or not, will also vary based upon our future needs. Although some outflows are fixed, others depend on future events. Examples of fixed obligations include our obligations to pay principal and interest on fixed-rate borrowings. Examples of obligations that will vary include obligations to pay interest on variable-rate borrowings and insurance liabilities that depend on future interest rates, market performance, or surrender provisions. Many of our obligations are linked to cash-generating contracts. In addition, our operations involve significant expenditures that are not based upon contractual obligations. These include expenditures for income taxes and payroll.

As of September 30, 2018, we carried a $6.4 million liability for uncertain tax positions. These amounts are not included in the long-term contractual obligations table because of the difficulty in making reasonably reliable estimates of the occurrence or timing of cash settlements with the respective taxing authorities.

The table below sets forth future maturities of our contractual obligations:

			Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(Dollars In Thousands)
Non-recourse funding obligations(1)	$	4,979,428	$	290,260	$	665,265	$	645,984	$	3,377,919
Subordinated debt (2)	186,473		3,905		7,810		7,810		166,948
Stable value products(3)	5,500,754		1,453,493		3,210,755		697,764		138,742
Operating leases(4)	25,445		5,739		7,354		6,180		6,172
Home office lease(5)	75,915		75,915		—		—		—
Mortgage loan and investment commitments	959,446		854,676		104,770		—		—
Secured financing liabilities(6)	514,495		514,495		—		—		—
Policyholder obligations(7)	56,375,172		11,950,698		5,144,791		5,446,140		33,833,543
Total	$	68,617,128	$	15,149,181	$	9,140,745	$	6,803,878	$	37,523,324
(1) Non-recourse funding obligations include all undiscounted principal amounts owed and expected future interest payments due over the term of the notes. Of the total undiscounted cash flows, $1.7 billion relates to the Golden Gate V transaction. These cash outflows are matched and predominantly offset by the cash inflows Golden Gate V receives from notes issued by a nonconsolidated variable interest entity. Additionally, $2.6 billion relates to the Golden Gate transaction. These cash outflows are matched and predominantly offset by the cash inflows Golden Gate receives from notes issued by a nonconsolidated entity and third parties. The remaining amounts are associated with the Golden Gate II notes held by third parties as well as certain obligations assumed with the acquisition of MONY Life Insurance Company.
(2) Subordinated debt includes all principal amounts and interest payments due over the term of the obligations.
(3) Anticipated stable value products cash flows including interest.
(4) Includes all lease payments required under operating lease agreements.
(5) The lease payments shown assume we exercise our option to purchase the building at the end of the lease term.
(6) Represents secured borrowings and accrued interest as part of our repurchase program as well as liabilities associated with securities lending transactions.
(7) Estimated contractual policyholder obligations are based on mortality, morbidity, and lapse assumptions comparable to our historical experience, modified for recent observed trends. These obligations are based on current balance sheet values and include expected interest crediting, but do not incorporate an expectation of future market growth, or future deposits. Due to the significance of the assumptions used, the amounts presented could materially differ from actual results. As variable separate account obligations are legally insulated from general account obligations, the variable separate account obligations will be fully funded by cash flows from variable separate account assets. We expect to fully fund the general account obligations from cash flows from general account investments.

OFF-BALANCE SHEET ARRANGEMENTS

We have entered into operating leases that do not result in an obligation being recorded on the balance sheet. Refer to Note 12, Commitments and Contingencies, of the consolidated condensed financial statements for more information.

MARKET RISK EXPOSURES

Our financial position and earnings are subject to various market risks including changes in interest rates, the yield curve, spreads between risk-adjusted and risk-free interest rates, foreign currency rates, used vehicle prices, and equity price risks and issuer defaults. We analyze and manage the risks arising from market exposures of financial instruments, as well as other risks, through an integrated asset/liability management process. Our asset/liability management programs and procedures involve the monitoring of asset and liability durations for various product lines; cash flow testing under various interest rate scenarios; and the continuous rebalancing of assets and liabilities with respect to yield, credit and market risk, and cash flow characteristics.

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These programs also incorporate the use of derivative financial instruments primarily to reduce our exposure to interest rate risk, inflation risk, currency exchange risk, volatility risk, and equity market risk. See Note 7, Derivative Financial Instruments, to the consolidated financial statements included in this report for additional information on our financial instruments.

The primary focus of our asset/liability program is the management of interest rate risk within the insurance operations. This includes monitoring the duration of both investments and insurance liabilities to maintain an appropriate balance between risk and profitability for each product category, and for us as a whole. It is our policy to maintain asset and liability durations within one year of one another, although, from time to time, a broader interval may be allowed.

We are exposed to credit risk within our investment portfolio and through derivative counterparties. Credit risk relates to the uncertainty of an obligor’s continued ability to make timely payments in accordance with the contractual terms of the instrument or contract. We manage credit risk through established investment policies which attempt to address quality of obligors and counterparties, credit concentration limits, diversification requirements, and acceptable risk levels under expected and stressed scenarios. Derivative counterparty credit risk is measured as the amount owed to us, net of collateral held, based upon current market conditions. In addition, we periodically assess exposure related to potential payment obligations between us and our counterparties. We minimize the credit risk in derivative financial instruments by entering into transactions with high quality counterparties, (A-rated or higher at the time we enter into the contract), and we maintain credit support annexes with certain of those counterparties.

We utilize a risk management strategy that incorporates the use of derivative financial instruments to reduce exposure to certain risks, including but not limited to, interest rate risk, currency exchange risk, volatility risk, and equity market risk. These strategies are developed through our analysis of data from financial simulation models and other internal and industry sources, and are then incorporated into our risk management program.

Derivative instruments expose us to credit and market risk and could result in material changes from period to period. We attempt to minimize our credit risk by entering into transactions with highly rated counterparties. We manage the market risk by establishing and monitoring limits as to the types and degrees of risk that may be undertaken. We monitor our use of derivatives in connection with our overall asset/liability management programs and risk management strategies. In addition, all derivative programs are monitored by our risk management department.

Derivative instruments that are used as part of our interest rate risk management strategy include interest rate swaps, interest rate futures, interest rate caps, and interest rate swaptions.

Derivative instruments that are used as part of the Company’s foreign currency exchange risk management strategy include foreign currency swaps, foreign currency futures, foreign equity futures, and foreign equity options.

We may use the following types of derivative contracts to mitigate our exposure to certain guaranteed benefits related to variable annuity, fixed indexed annuity, and indexed universal life contracts:

•Foreign Currency Futures

•Variance Swaps

•Interest Rate Futures

•Equity Options

•Equity Futures

•Credit Derivatives

•Interest Rate Swaps

•Interest Rate Swaptions

•Volatility Futures

•Volatility Options

•Funds Withheld Agreement

•Total Return Swaps

Other Derivatives

The Company and certain of our subsidiaries have derivatives with PLC. These derivatives consist of an interest support agreement, YRT premium support arrangements, and portfolio maintenance agreements with PLC.

We have a funds withheld account that consists of various derivative instruments held by us that is used to hedge the GLWB and GMDB riders. The economic performance of derivatives in the funds withheld account is ceded to Shades Creek. The funds withheld account is accounted for as a derivative financial instrument.

We believe that our asset/liability management programs and procedures and certain product features provide protection against the effects of changes in interest rates under various scenarios. Additionally, we believe our asset/liability management programs and procedures provide sufficient liquidity to enable us to fulfill our obligation to pay benefits under our various insurance and deposit contracts. However, our asset/liability management programs and procedures incorporate assumptions about the relationship between short-term and long-term interest rates (i.e., the slope of the yield curve), relationships between risk-adjusted and risk-free interest rates, market liquidity, spread movements, implied volatility, policyholder behavior, and other factors, and the effectiveness of our asset/liability management programs and procedures may be negatively affected whenever actual results differ from those assumptions.

In the ordinary course of our commercial mortgage lending operations, we may commit to provide a mortgage loan before the property to be mortgaged has been built or acquired. The mortgage loan commitment is a contractual obligation to fund a

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mortgage loan when called upon by the borrower. The commitment is not recognized in our financial statements until the commitment is actually funded. The mortgage loan commitment contains terms, including the rate of interest, which may be different than prevailing interest rates. As of September 30, 2018, we had outstanding mortgage loan commitments of $825.6 million at an average rate of 4.4%.

Impact of Continued Low Interest Rate Environment

Significant changes in interest rates expose us to the risk of not realizing anticipated spreads between the interest rate earned on investments and the interest rate credited to in-force policies and contracts. In addition, certain of our insurance and investment products guarantee a minimum guaranteed interest rate (“MGIR”). In periods of prolonged low interest rates, the interest spread earned may be negatively impacted to the extent our ability to reduce policyholder crediting rates is limited by the guaranteed minimum credited interest rates. Additionally, those policies without account values may exhibit lower profitability in periods of prolonged low interest rates due to reduced investment income.

The tables below present account values by range of current minimum guaranteed interest rates and current crediting rates for our universal life and deferred fixed annuity products as of September 30, 2018 and December 31, 2017:

Credited Rate Summary

As of September 30, 2018

				1-50 bps			More than
Minimum Guaranteed Interest Rate	At			above			50 bps
Account Value	MGIR			MGIR			above MGIR			Total
	(Dollars In Millions)
Universal Life Insurance
>2% - 3%	$	2,394		$	1,316		$	2,027		$	5,737
>3% - 4%	4,537			928			506			5,971
>4% - 5%	2,463			433			1			2,897
>5% - 6%	190			—			—			190
Subtotal	9,584			2,677			2,534			14,795
Fixed Annuities
1%	$	425		$	561		$	2,339		$	3,325
>1% - 2%	397			184			783			1,364
>2% - 3%	1,760			81			3			1,844
>3% - 4%	266			4			—			270
>4% - 5%	262			—			—			262
>5% - 6%	2			—			—			2
Subtotal	3,112			830			3,125			7,067
Total	$	12,696		$	3,507		$	5,659		$	21,862
Percentage of Total	58		%	16		%	26		%	100		%

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Credited Rate Summary

As of December 31, 2017

				1-50 bps			More than
Minimum Guaranteed Interest Rate	At			above			50 bps
Account Value	MGIR			MGIR			above MGIR			Total
	(Dollars In Millions)
Universal Life Insurance
>2% - 3%	$	206		$	1,252		$	2,006		$	3,464
>3% - 4%	4,146			993			8			5,147
>4% - 5%	1,987			13			1			2,001
>5% - 6%	199			—			—			199
Subtotal	6,538			2,258			2,015			10,811
Fixed Annuities
1%	$	571		$	239		$	540		$	1,350
>1% - 2%	473			331			70			874
>2% - 3%	1,897			63			4			1,964
>3% - 4%	254			—			—			254
>4% - 5%	271			—			—			271
>5% - 6%	2			—			—			2
Subtotal	3,468			633			614			4,715
Total	$	10,006		$	2,891		$	2,629		$	15,526
Percentage of Total	64		%	19		%	17		%	100		%

We are active in mitigating the impact of a continued low interest rate environment through product design, as well as adjusting crediting rates on current in-force policies and contracts. We also manage interest rate and reinvestment risks through our asset/liability management process. Our asset/liability management programs and procedures involve the monitoring of asset and liability durations; cash flow testing under various interest rate scenarios; and the regular rebalancing of assets and liabilities with respect to yield, credit and market risk, and cash flow characteristics. These programs also incorporate the use of derivative financial instruments primarily to reduce our exposure to interest rate risk, inflation risk, currency exchange risk, volatility risk, and equity market risk.

IMPACT OF INFLATION

Inflation increases the need for life insurance. Many policyholders who once had adequate insurance programs may increase their life insurance coverage to provide the same relative financial benefit and protection. Higher interest rates may result in higher sales of certain of our investment products.

The higher interest rates that have traditionally accompanied inflation could also affect our operations. Policy loans increase as policy loan interest rates become relatively more attractive. As interest rates increase, disintermediation of stable value and annuity account balances and individual life policy cash values may increase. The market value of our fixed-rate, long-term investments may decrease, we may be unable to implement fully the interest rate reset and call provisions of our mortgage loans, and our ability to make attractive mortgage loans, including participating mortgage loans, may decrease. In addition, participating mortgage loan income may decrease. The difference between the interest rate earned on investments and the interest rate credited to life insurance and investment products may also be adversely affected by rising interest rates. During the periods covered by this report, we believe inflation has not had a material impact on our business.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 2, Summary of Significant Accounting Policies, to the consolidated condensed financial statements for information regarding recently issued accounting standards.

Item 3.Quantitative and Qualitative Disclosures about Market Risk

See Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Liquidity and Capital Resources” and Part II, Item 1A, Risk Factors, of this report for market risk disclosures.

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Item 4.Controls and Procedures

(a)    Disclosure controls and procedures

In order to ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized, and reported on a timely basis, the Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), except as otherwise noted below. Based on their evaluation as of the end of the period covered by this Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective. It should be noted that any system of controls, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of any control system is based in part upon certain judgments, including the costs and benefits of controls and the likelihood of future events. Because of these and other inherent limitations of control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected.

In conducting our evaluation of the effectiveness of internal control over financial reporting as of September 30, 2018, the Company has excluded the internal controls relating to the administrative systems and processes being provided by third parties for the Liberty Life Assurance Company of Boston (Liberty) block of business reinsured from Liberty. As of September 30, 2018, the Company is in the process of, but has not completed its own evaluation of the design and operation of the internal controls relating to the administrative systems and processes, including those currently being provided by third parties, for the Liberty business. For the nine months ended September 30, 2018, Liberty Business represented revenues and income before income tax of $360.9 million and $33.7 million, of the Company’s consolidated income before income tax.

(b)Changes in internal control over financial reporting

During the second quarter of 2018, the Company began the conversion and integration of administrative processing into its internal controls over financial reporting for the Liberty block of business. The conversion to the Company’s operating environment was in process as of September 30, 2018.

There were no changes in the Company’s internal control over financial reporting during the three months ended September 30, 2018, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company’s internal controls exist within a dynamic environment and the Company continually strives to improve its internal controls and procedures to enhance the quality of its financial reporting.

PART II

Item 1.  Legal Proceedings

See Note 12, Commitments and Contingencies, to the Notes to Consolidated Condensed Financial Statements included in this report.

Item 1A.  Risk Factors

The operating results of companies in the insurance industry have historically been subject to significant fluctuations. The factors which could affect the Company’s future results include, but are not limited to, general economic conditions and known trends and uncertainties. In addition to other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A, Risk Factors, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, which could materially affect the Company’s business, financial condition, or future results of operations which are discussed more fully below.

The Company’s use of derivative financial instruments within its risk management strategy may not be effective or sufficient.

The Company uses derivative financial instruments within its risk management strategy to mitigate risks to which it is exposed, including risks related to credit and equity markets, interest rate levels, foreign exchange, and volatility on its fixed indexed annuity and variable annuity products and associated guaranteed benefit features. The Company may also use derivative financial instruments within its risk management strategy to mitigate risks arising from its exposure to investments in individual issuers or sectors of issuers and to mitigate the adverse effects of interest rate levels or volatility on its overall financial condition or results of operations.

These derivative financial instruments may not effectively offset the changes in the carrying value of the exposures due to, among other things, the time lag between changes in the value of such exposures and the changes in the value of the derivative financial instruments purchased by the Company, extreme credit and/or equity market and/or interest rate levels or volatility, contract holder behavior that differs from the Company’s expectations, and basis risk.

The use of derivative financial instruments by the Company generally to hedge various risks that impact GAAP earnings may have an adverse impact on the level of statutory capital and risk-based capital ratios because earnings are recognized differently under GAAP and statutory accounting methods.

The Company may also choose not to hedge, in whole or in part, these or other risks that it has identified, due to, for example, the availability and/or cost of a suitable derivative financial instrument. In addition, the Company may fail to identify

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risks, or the magnitude thereof, to which it is exposed. The derivative financial instruments used by the Company in its risk management strategy may not be properly designed, may not be properly implemented as designed and/or may be insufficient to hedge the risks in relation to the Company’s obligations.

The Company is subject to the risk that its derivative counterparties or clearinghouse may fail or refuse to meet their obligations to the Company, which may result in associated derivative financial instruments becoming ineffective or inefficient.

The above factors, either alone or in combination, may have a material adverse effect on the Company’s financial condition and results of operations.

The Company may be required to establish a valuation allowance against its deferred tax assets, which could have a material adverse effect on the Company’s results of operations, financial condition, and capital position.

Deferred tax assets are attributable to certain differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets represent future savings of taxes that would otherwise be paid in cash. In general, the realization of the deferred tax assets is dependent upon the generation of sufficient future ordinary and capital taxable income. If it is determined that a certain deferred tax asset cannot be realized, then a deferred tax valuation allowance must be established, with a corresponding charge to either adjusted operating income or other comprehensive income (depending on the nature of the deferred tax asset).

Based on the Company’s current assessment of future taxable income, including available tax planning opportunities, the Company anticipates that it is more likely than not that it will generate sufficient taxable income to realize its material deferred tax assets net of any existing valuation allowance. The Company has recognized valuation allowances of $4.5 million and $5.0 million as of September 30, 2018 and December 31, 2017, respectively, related to state operating loss carryforwards which are more likely than not to expire unutilized. If future events differ from the Company’s current forecasts, an additional valuation allowance may need to be established, which could have a material adverse effect on the Company’s results of operations, financial condition, or capital position.

The Company could be adversely affected by an inability to access FHLB lending.

The Company and certain of its subsidiaries are members of the Federal Home Loan Bank (the “FHLB”) of Cincinnati and the FHLB of New York. Membership provides the Company and these certain subsidiaries with access to FHLB financial services, including advances that provide an attractive funding source for short-term borrowing and for the sale of funding agreements. The extent to which these services are available could be impacted by legislative or regulatory action at the state or federal level. It is unclear at this time whether or to what extent additional or new legislation or regulatory action regarding continued access to FHLB financial services will be enacted or adopted. Any developments that limit access to FHLB financial services could have a material adverse effect on the Company.

The amount of statutory capital or risk-based capital that the Company has and the amount of statutory capital or risk-based capital that it must hold to maintain its financial strength and credit ratings and meet other requirements can vary significantly from time to time and such amounts are sensitive to a number of factors outside of the Company’s control.

In addition to its direct business, the Company also conducts business through licensed insurance company subsidiaries. Insurance regulators have established regulations that provide minimum capitalization requirements based on risk-based capital formulas for life and property and casualty companies. The risk-based capital formula for life insurance companies establishes capital requirements relating to insurance, business, asset, interest rate, and certain other risks. The risk-based capital formula for property and casualty companies establishes capital requirements relating to asset, credit, underwriting, and certain other risks.

In any particular year, statutory surplus amounts and risk-based capital ratios may increase or decrease depending on a variety of factors, including, but not limited to, the amount of statutory income or losses generated by the Company and its insurance subsidiaries (which itself is sensitive to equity market and credit market conditions), the amount of additional capital which it and its insurance subsidiaries must hold to support business growth, changes in the Company’s statutory reserve requirements, the Company’s ability to secure capital market solutions to provide statutory reserve relief, changes in equity market levels, the value of certain fixed-income and equity securities in its investment portfolio, the credit ratings of investments held in its portfolio, including those issued by, or explicitly or implicitly guaranteed by, a government, the value of certain derivative instruments, changes in interest rates, foreign currency exchange rates or tax rates, credit market volatility, changes in consumer behavior, and changes to the National Association of Insurance Commissioners’ (the “NAIC”) risk-based capital formulas. Most of these factors are outside of the Company’s control.

At its June 2018 meeting, the NAIC’s Capital Adequacy Task Force adopted a change to the formulas used to calculate risk-based capital to reflect the lower federal corporate income tax rate. The NAIC’s risk-based capital formulas now employ a tax factor of 21%, instead of 35%. This change will have a one-time lowering effect on the risk-based capital ratios of the Company and its subsidiaries when it becomes effective at the end of 2018.

Another proposed change to the NAIC’s risk-based capital formula that is currently under consideration would update the factors used to calculate required capital for bonds. While the extent and timing of this change is unknown, if adopted, the revision would likely increase the Company’s required capital and decrease the statutory risk-based capital ratios of the Company and its subsidiaries.

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The Company’s financial strength and credit ratings are significantly influenced by the statutory surplus amounts and risk-based capital ratios of its insurance company subsidiaries. Rating agencies may implement changes to their internal models that have the effect of increasing or decreasing the amount of statutory capital the Company must hold in order to maintain its current ratings. In addition, rating agencies may downgrade the investments held in the Company’s portfolio, which could result in a reduction of the Company’s capital and surplus and/or its risk-based capital ratio.

In scenarios of equity market declines, the amount of additional statutory reserves or risk-based capital the Company is required to hold for its variable product guarantees may increase at a rate greater than the rate of change of the markets. Increases in reserves or risk-based capital could result in a reduction to the Company’s capital, surplus, and/or risk-based capital ratio. Also, in environments where there is not a correlative relationship between interest rates and spreads, the Company’s market value adjusted annuity product can have a material adverse effect on the Company’s statutory surplus position.

The Company may be subject to regulations of, or regulations influenced by, international regulatory authorities or initiatives.

The NAIC and the Company’s state regulators may be influenced by the initiatives of international regulatory bodies, and those initiatives may not translate readily into the legal system under which U.S. insurers must operate. There is increasing pressure to conform to international standards due to the globalization of the business of insurance and the most recent financial crisis. In addition to developments at the NAIC and in the United States, the Financial Stability Board (“FSB”), consisting of representatives of national financial authorities of the G20 nations, and the G20 have issued a series of proposals intended to produce significant changes in how financial companies, particularly companies that are members of large and complex financial groups, should be regulated.

The International Association of Insurance Supervisors (“IAIS”), at the direction of the FSB, has published an evolving methodology for identifying “global systemically important insurers” (“G-SIIs”) and high-level policy measures that will apply to G-SIIs. The FSB, working with national authorities and the IAIS, has designated nine insurance groups as G-SIIs. The IAIS is working on the policy measures which include higher capital requirements and enhanced supervision. Although neither the Company nor Dai-ichi Life has been designated as a G-SII, the list of designated insurers will be updated periodically by the FSB. It is possible that the greater size and reach of the combined group as a result of the Company becoming a subsidiary of Dai-ichi Life, or a change in the methodologies or their application, could lead to the combined group’s designation as a G-SII.

The IAIS is also in the process of developing a common framework for the supervision of internationally active insurance groups (“IAIGs”). The framework, which is currently under discussion, may include a global capital measurement standard for insurance groups deemed to be IAIGs that could exceed the sum of state or other local capital requirements. In addition, the IAIS is developing a model framework for the supervision of IAIGs that contemplates “group wide supervision” across national boundaries and legal entities, which could require each IAIG to conduct its own risk and solvency assessment to monitor and manage its overall solvency. It is likely that, as a result of the Merger, the combined group will be deemed an IAIG, in which case it may be subject to supervision requirements and capital measurement standards beyond those applicable to any competitors who are not designated as an IAIG.

PLC’s sole stockholder, Dai-ichi Life, is also subject to regulation by the Japanese Financial Services Authority (“JFSA”). Under applicable laws and regulations, Dai-ichi Life is required to provide notice to or obtain the consent of the JFSA prior to taking certain actions or engaging in certain transactions, either directly or indirectly through its subsidiaries, including the Company and its consolidated subsidiaries, which could limit the ability of the Company to engage in certain transactions or business initiatives.

While it is not yet known how or the extent to which the Company will be impacted by these regulations, the Company may experience increased costs of compliance, increased disclosure, less flexibility in capital management, and more burdensome regulation and capital requirements for specific lines of business. In addition, such regulations could impact the business of the Company and its reserve and capital requirements, financial condition or results of operations.

NAIC actions, pronouncements and initiatives may affect the Company’s product profitability, reserve and capital requirements, financial condition or results of operations.

Although some NAIC pronouncements, particularly as they affect accounting, reserving and risk-based capital issues, may take effect automatically without affirmative action taken by the states, the NAIC is not a governmental entity and its processes and procedures do not comport with those to which governmental entities typically adhere. Therefore, it is possible that actions could be taken by the NAIC that become effective without the procedural safeguards that would be present if governmental action was required. In addition, with respect to some financial regulations and guidelines, states sometimes defer to the interpretation of the insurance department of a non-domiciliary state. Neither the action of the non-domiciliary state nor the action of the NAIC is binding on a domiciliary state. Accordingly, a state could choose to follow a different interpretation. The Company is also subject to the risk that compliance with any particular regulator’s interpretation of a legal, accounting or actuarial issue may result in non-compliance with another regulator’s interpretation of the same issue, particularly when compliance is judged in hindsight. There is an additional risk that any particular regulator’s interpretation of a legal, accounting or actuarial issue may change over time to the Company’s detriment, or that changes to the overall legal or market environment may cause the Company to change its practices in ways that may, in some cases, limit its growth or profitability. Statutes, regulations, interpretations, and instructions may be applied with retroactive impact, particularly in areas such as accounting, reserve and risk-based capital requirements. Also, regulatory actions with prospective impact can potentially have a significant impact on currently sold products.

The NAIC has announced more focused inquiries on certain matters that could have an impact on the Company’s financial condition and results of operations. Such inquiries concern, for example, insurer use of captive reinsurance companies, variable

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annuity reserves and capital treatment, certain aspects of insurance holding company reporting and disclosure, reinsurance, cybersecurity practices, liquidity assessment, and risk-based capital calculations. In addition, the NAIC continues to consider various initiatives to change and modernize its financial and solvency requirements and regulations. It has adopted principles-based reserving methodologies for life insurance and annuity reserves, but additional formulas and/or guidance relevant to the new standard are being developed. The NAIC is also considering changes to accounting and risk-based capital regulations, risk-based capital calculations, governance practices of insurers, and other items. Additionally, the NAIC is studying a group capital calculation that would aggregate required capital across U.S.-based insurance groups. The Company cannot currently estimate what impact these more focused inquiries or proposed changes, if they occur, will have on its product mix, product profitability, reserve and capital requirements, financial condition or results of operations.

The Company’s use of captive reinsurance companies to finance statutory reserves related to its term and universal life products and to reduce volatility affecting its variable annuity products may be limited or adversely affected by regulatory action, pronouncements and interpretations.

The Company currently uses affiliated captive reinsurance companies in various structures to finance certain statutory reserves based on a regulation entitled “Valuation of Life Insurance Policies Model Regulation,” commonly known as “Regulation XXX,” and a supporting guideline entitled “The Application of the Valuation of Life Insurance Policies Model Regulation,” commonly known as “Guideline AXXX,” which are associated with term life insurance and universal life insurance with secondary guarantees, respectively, as well as to reduce the volatility in statutory risk-based capital associated with certain guaranteed minimum withdrawal and death benefit riders associated with certain of the Company’s variable annuity products.

The NAIC has adopted Actuarial Guideline XLVIII (“AG48”) and the substantially similar “Term and Universal Life Insurance Reserve Financing Model Regulation” (the “Reserve Model”) which establish national standards for new reserve financing arrangements for term life insurance and universal life insurance with secondary guarantees. AG48 and the Reserve Model govern collateral requirements for captive reinsurance arrangements. In order to obtain reserve credit, AG48 and the Reserve Model require a minimum level of funds, consisting of primary and other securities, to be held by or on behalf of ceding insurers as security under each captive life reinsurance treaty. As a result of AG48 and the Reserve Model, the implementation of new captive structures in the future may be less capital efficient, lead to lower product returns and/or increased product pricing, or result in reduced sales of certain products. In some circumstances, AG48 and the Reserve Model could impact the Company’s ability to engage in certain reinsurance transactions with non-affiliates.

The Financial Condition (E) Committee of the NAIC has adopted a framework for changes to current rules and regulations applicable to the determination of variable annuity reserves and risk-based capital. The changes are intended to decrease incentives for insurers to establish variable annuities captives and will apply to both in-force and new business. The new rules and regulations will likely have a 2020 effective date and an optional 3- to 7-year transition period from current rules and regulations, beginning on the effective date. The changes could adversely affect our future financial condition and results of operations.

The NAIC adopted revisions to the Part A Laws and Regulations Preamble (the “Preamble”) of the NAIC Financial Regulation Standards and Accreditation Program that includes within the definition of “multi-state insurer” certain insurer-owned captives and special purpose vehicles that are single-state licensed but assume reinsurance from cedants operating in multiple states. The revised definition subjects certain captives, including XXX/AXXX captives, variable annuity and long-term care captives, to all of the accreditation standards applicable to other traditional multi-state insurers, including standards related to capital and surplus requirements, risk-based capital requirements, investment laws and credit for reinsurance laws. Although we do not expect the revised definition to affect our existing life insurance captives (or our ability to engage in life insurance captive transactions in the future), such application will likely prevent us from engaging in variable annuity captive transactions on the same or a similar basis as in the past and, if applied retroactively, would likely cause us to recapture business from and unwind our existing variable annuity captive (“VA Captive”).

While the recapture of business from our existing VA Captive, caused either by actions of the VAIWG or the effect of the Preamble, would not have a material adverse effect on the Company given current market conditions, in the future the Company could experience fluctuations in its risk-based capital ratio due to market volatility if it were prohibited from engaging in similar transactions or required to unwind its existing VA Captive, which could adversely affect our future financial condition and results of operations.

Any regulatory action or change in interpretation that materially adversely affects the Company’s use or materially increases the Company’s cost of using captives or reinsurers for the affected business, either retroactively or prospectively, could have a material adverse impact on the Company’s financial condition or results of operations. If the Company were required to discontinue its use of captives for intercompany reinsurance transactions on a retroactive basis, adverse impacts would include early termination fees payable to third party finance providers with respect to certain structures, diminished capital position and higher cost of capital. Additionally, finding alternative means to support policy liabilities efficiently is an unknown factor that would be dependent, in part, on future market conditions and the Company’s ability to obtain required regulatory approvals. On a prospective basis, discontinuation of the use of captives could impact the types, amounts and pricing of products offered by the Company and its insurance subsidiaries.

Laws, regulations and initiatives related to unreported deaths and unclaimed property and death benefits may result in operational burdens, fines, unexpected payments or escheatments.

Since 2012, various states have enacted laws that require life insurers to search for unreported deaths. The National Conference of Insurance Legislators (“NCOIL”) has adopted the Model Unclaimed Life Insurance Benefits Act (the “Unclaimed Benefits Act”) and legislation or regulations have been enacted in numerous states that are similar to the Unclaimed Benefits Act,

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although each state’s version differs in some respects. The Unclaimed Benefits Act, if adopted by any state, imposes new requirements on insurers to periodically compare their life insurance and annuity contracts and retained asset accounts against the U.S. Social Security Administration’s Death Master File or similar databases (a “Death Database”), investigate any potential matches to confirm the death and determine whether benefits are due, and to attempt to locate the beneficiaries of any benefits that are due or, if no beneficiary can be located, escheat the benefit to the state as unclaimed property. Other states in which the Company does business may also consider adopting legislation similar to the Unclaimed Benefits Act. The Company cannot predict whether such legislation will be proposed or enacted in additional states.

The Uniform Laws Commission has adopted revisions to the Uniform Unclaimed Property Act in a manner likely to impact state unclaimed property laws and requirements, though it is not clear at this time to what extent or whether requirements will conflict with otherwise imposed search requirements. Other life insurance industry associations and regulatory associations are also considering these matters. Certain states have amended or may amend their unclaimed property laws to require insurers to compare in-force and certain terminated life insurance policies, annuity contracts, and retained asset accounts against a Death Database, to investigate potential matches to determine whether the named insured is deceased, to attempt to locate and pay beneficiaries any unclaimed benefits required to be paid, and, if no beneficiary can be located, to escheat policy benefits to the appropriate state as unclaimed property. The enactment of such unclaimed property laws may require the Company to incur significant expenses, including benefits with respect to terminated policies for which no reserves are currently held and unanticipated operational expenses. Any of the foregoing could have a material adverse effect on the Company’s financial condition and results of operations.

A number of state treasury departments and administrators of unclaimed property have audited life insurance companies for compliance with unclaimed property laws. The focus of the audits has been to determine whether there have been maturities of policies or contracts, or policies that have exceeded limiting age with respect to which death benefits or other payments under the policies should be treated as unclaimed property that should be escheated to the state. In addition, the audits have sought to identify unreported deaths of insureds. There is no clear basis in previously existing law for treating an unreported death as giving rise to a policy benefit that would be subject to unclaimed property procedures. A number of life insurers, however, have entered into resolution agreements with state treasury departments and administrators of unclaimed property under which the life insurers agreed to procedures for comparing their previously issued life insurance and annuity contracts and retained asset accounts against a Death Database, treating confirmed deaths as giving rise to a death benefit under their policies, locating beneficiaries and paying them the benefits and interest, escheating the benefits and interest, in some cases at a negotiated rate, to the state if the beneficiary could not be found, and paying penalties to the state, if required. The amounts publicly reported to have been paid to beneficiaries and/or escheated to the states have been substantial.

State insurance regulators have initiated targeted multi-state examinations of life insurance companies with respect to the companies’ claims paying practices and use of a Death Database to identify unreported deaths in their life insurance policies, annuity contracts and retained asset accounts, despite having no clear basis in previously existing law for requiring a life insurer to search for unreported deaths in order to determine whether a benefit is owed. A number of life insurers, however, have entered into settlement or consent agreements with state insurance regulators under which the life insurers agreed to implement systems and procedures for periodically comparing their life insurance and annuity contracts and retained asset accounts against a Death Database, treating confirmed deaths as giving rise to a death benefit under their policies, locating beneficiaries and paying them the benefits and interest, escheating the benefits and interest to the state if the beneficiary could not be found, and paying penalties to the state, if required. It has been publicly reported that the life insurers have paid substantial administrative and/or examination fees to the insurance regulators in connection with the settlement or consent agreements.

The Company and certain of its subsidiaries as well as certain other insurance companies from whom the Company has coinsured blocks of life insurance and annuity policies are subject to unclaimed property audits and/or targeted multi-state examinations by insurance regulators similar to those described above. It is possible that the audits, examinations and/or the enactment of state laws similar to the Unclaimed Benefits Act could result in additional payments to beneficiaries, additional escheatment of funds deemed abandoned under state laws, payment of administrative penalties and/or examination fees to state authorities, and changes to the Company’s procedures for identifying unreported deaths and escheatment of abandoned property. It is possible any such additional payments and any costs related to changes in Company procedures could materially impact the Company’s financial condition and/or results of operations. It is also possible that life insurers, including the Company, may be subject to claims, regulatory actions, law enforcement actions, and civil litigation arising from their prior business practices, unclaimed property practices or related audits and examinations. Any resulting liabilities, payments or costs, including initial and ongoing costs of changes to the Company’s procedures or systems, could be significant and could have a material adverse effect on the Company’s financial condition and/or results of operations.

During December 2012, the West Virginia Treasurer filed actions against the Company and its subsidiary West Coast Life Insurance Company in West Virginia state court (State of West Virginia ex rel. John D. Perdue v. Protective Life Insurance Company; State of West Virginia ex rel. John D. Perdue v. West Coast Life Insurance Company; Defendants’ Motions to Dismiss granted on December 27, 2013; Notice of Appeal filed on January 27, 2014; dismissal reversed by the West Virginia Supreme Court of Appeals on June 16, 2015; Petition for Rehearing filed by Defendant insurance companies denied on September 21, 2015). The actions, which also name numerous other life insurance companies, allege that the companies violated the West Virginia Uniform Unclaimed Property Act, seek to compel compliance with the Act, and seek payment of unclaimed property, interest, and penalties. While the legal theory or theories that may give rise to liability in the West Virginia Treasurer litigation are uncertain, it is possible that other jurisdictions may pursue similar actions. The Company does not currently believe that losses, if any, arising from the West Virginia Treasurer litigation will be material. The Company cannot, however, predict whether other jurisdictions will pursue similar actions or if they do, whether such actions will have a material impact on the Company’s financial condition and/or results of operations.

114

New and amended regulations regarding the standard of care or standard of conduct applicable to investment professionals, insurance agencies, and financial institutions that recommend or sell annuities or life insurance products may have a material adverse impact on our ability to sell annuities and other products, to retain in-force business and on our financial condition or results of operations.

Sales of life insurance policies, contracts, and annuities offered by the Company are subject to regulations relating to sales practices adopted by a variety of federal and state regulatory authorities. Certain annuities and life insurance policies such as variable annuities and variable universal life insurance are regulated under the federal securities laws administered by the U.S. Securities and Exchange Commission (the “SEC”). On April 18, 2018, the SEC voted to propose rulemakings and interpretations relating to the standard of conduct applicable to broker-dealers, investment advisers, and their representatives when making certain recommendations to retail customers. Specifically, under the proposed regulations, a broker-dealer would be required to act in the best interest of a retail customer when recommending any securities transaction or investment strategy involving securities to a retail customer. The SEC also proposed an interpretation reaffirming and, in some cases, clarifying its views of the fiduciary duty that investment advisers owe to their clients. Another SEC proposal would require broker-dealers and investment advisers to provide each customer with a summary of the nature of the customer’s relationship with the investment professional, as well as a restriction on the use of the terms “adviser” and “advisor” by broker-dealers.

In addition, broker-dealers, insurance agencies and other financial institutions sell the Company’s annuities to employee benefit plans governed by provisions of the Employee Retirement Income Security Act (“ERISA”) and Individual Retirement Accounts (“IRAs”) that are governed by similar provisions under the Internal Revenue Code (the “Code”). Consequently, our activities and those of the firms that sell the Company’s products are subject to restrictions that require ERISA fiduciaries to perform their duties solely in the interests of ERISA plan participants and beneficiaries, and that prohibit ERISA fiduciaries from causing a covered plan or retirement account to engage in certain prohibited transactions absent an exemption.

The NAIC is considering revisions to the Suitability in Annuity Transactions Model Regulation which, if adopted by regulators, could impose a stricter standard of care upon insurers who sell annuities. Likewise, several states are considering or have adopted legislation or regulatory measures that would implement new requirements and standards applicable to the sale of annuities and, in some cases, life insurance products. These standards vary widely in scope, applicability and timing of implementation. The adoption and enactment of these or any revised standards as law or regulation could have a material adverse effect upon the manner in which the Company’s products are sold.

There remains significant uncertainty surrounding the final form that these regulations may take. Our current distributors may continue to move forward with their plans to limit the number of products they offer, including the types of products offered by the Company. The Company may find it necessary to change sales representative and/or broker compensation, to limit the assistance or advice it can provide to owners of the Company’s annuities, to replace or engage additional distributors, or otherwise change the manner in which it designs and supports sales of its annuities. In addition, the Company continues to incur expenses in connection with initial and ongoing compliance obligations with respect to such rules, and in the aggregate these expenses may be significant. Any of the foregoing regulatory, legislative or judicial measures or the reaction to such activity by consumers or other members of the insurance industry could have a material adverse impact on our ability to sell annuities and other products, to retain in-force business, and on our financial condition or results of operations.

The Company may be subject to regulation, investigations, enforcement actions, fines and penalties imposed by the SEC, FINRA and other federal and international regulators in connection with its business operations.

Certain life insurance policies, contracts, and annuities offered by the Company are subject to regulation under the federal securities laws administered by the SEC. The federal securities laws contain regulatory restrictions and criminal, administrative, and private remedial provisions. From time to time, the SEC and the Financial Industry Regulatory Authority (“FINRA”) examine or investigate the activities of broker-dealers and investment advisors, including the Company’s affiliated broker-dealers and investment advisers. These examinations or investigations often focus on the activities of the registered representatives and registered investment advisers doing business through such entities and the entities’ supervision of those persons. It is possible that any examination or investigation could lead to enforcement action by the regulator and/or may result in payments of fines and penalties, payments to customers, or both, as well as changes in systems or procedures of such entities, any of which could have a material adverse effect on the Company’s financial condition or results of operations.

The Company may also be subject to regulation by governments of the countries in which it currently does, or may in the future, do, business, as well as regulation by the U.S. Government with respect to its operations in foreign countries, such as the Foreign Corrupt Practices Act. Penalties for violating the various laws governing the Company’s business in other countries may include restrictions upon business operations, fines and imprisonment, both within the U.S. and abroad. U.S. enforcement of anti-corruption laws continues to increase in magnitude, and penalties may be substantial.

The Company is subject to conditions and requirements set forth in the Telephone Consumer Protection Act (“TCPA”), which places restrictions on the use of automated telephone and facsimile machines. Class action lawsuits alleging violations of the act have been filed against a number of companies, including life insurance carriers. These class action lawsuits contain allegations that defendant carriers were vicariously liable for the alleged wrongful conduct of agents who violated the TCPA. Some of the class actions have resulted in substantial settlements against other insurers. Any such actions against the Company could result in a material adverse effect upon our financial condition or results of operations.

Other types of regulation that could affect the Company and its subsidiaries include, but are not limited to, insurance company investment laws and regulations, state statutory accounting and reserving practices, antitrust laws, minimum solvency requirements, enterprise risk requirements, state securities laws, federal privacy laws, cybersecurity regulation, technology and

115

data regulations, insurable interest laws, federal anti-money laundering and anti-terrorism laws, employment and immigration laws (including laws in Alabama where over half of the Company’s employees are located), and because the Company owns and operates real property, state, federal, and local environmental laws. Under some circumstances, severe penalties may be imposed for breach of these laws.

The Company cannot predict what form any future changes to laws and/or regulations affecting participants in the financial services sector and/or insurance industry, including the Company and its competitors or those entities with which it does business, may take, or what effect, if any, such changes may have.

The Company’s ability to enter into certain transactions is influenced by how such a transaction might affect Dai-ichi Life’s taxation in Japan.

Changes to tax law, such as the effect of the Tax Cuts and Jobs Act (the “Tax Reform Act”) which was enacted on December 22, 2017, or interpretations of existing tax law could adversely affect the Company and its ability to compete with non-insurance products or reduce the demand for certain insurance products.

In general, existing law exempts policyholders from current taxation on the increase in value of most insurance and annuity products during these products’ accumulation phase. This favorable tax treatment provides some of the Company’s products with a competitive advantage over products offered by non-insurance companies. To the extent that the law is revised to either reduce the tax-deferred status of life insurance and annuity products, or to establish the tax-deferred status of competing products, then all life insurance companies, including the Company and its subsidiaries, would be adversely affected with respect to their ability to sell their products. Furthermore, such changes would generally cause increased surrenders of existing life insurance and annuity products. For example, a change in law that further restricts the deductibility of interest expense when a business owns a life insurance product would result in increased surrenders of these products.

The Company is subject to corporate income, excise, franchise, and premium taxes. Federal tax law provides certain benefits to the Company, such as the dividends-received deduction, the deferral of current taxation on derivatives’ and securities’ economic income and the current deduction for future policy benefits and claims. The Tax Reform Act will require the Company to report higher amounts of taxable income both currently and in the future. However, the legislation also significantly reduced the corporate income tax rate. Overall, the Company expects to pay less income tax in the future.

The Company’s mid-2005 transition from relying on reinsurance for newly-written traditional life products to reinsuring some of these products’ reserves into its captive insurance companies resulted in a net reduction in its current taxes, offset by an increase in its deferred taxes. The resulting benefit of reduced current taxes is attributed to the applicable life products and is an important component of the profitability of these products. The Tax Reform Act, with its overall lower tax rate, has decreased the economic tax benefit associated with these products. Ultimately, the profitability and competitive position of these products is dependent on the Company’s ability to continue deducting its provision for future policy benefits and claims and the Company’s ability to generate taxable income.

116

Item 6.Exhibits

Exhibit
Number	Document
3(a)*	2011 Amended and Restated Charter of Protective Life Insurance Company dated as of June 27, 2011, incorporated by reference to Exhibit 3(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed March 29, 2012 (No. 001-31901).
3(b)*	2011 Amended and Restated By-Laws of Protective Life Insurance Company dated as of June 27, 2011, incorporated by reference to Exhibit 3(b) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed March 29, 2012 (No. 001-31901).
31(a)	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32(a)	Certification Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32(b)	Certification Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Financial statements from the quarterly report on Form 10-Q of Protective Life Insurance Company for the quarter ended September 30, 2018, filed on November 14, 2018 formatted in XBRL: (i) the Consolidated Condensed Statements of Income, (ii) the Consolidated Condensed Statements of Comprehensive Income (Loss), (iii) the Consolidated Condensed Balance Sheets, (iv) the Consolidated Condensed Statements of Shareowner’s Equity, (v) the Consolidated Condensed Statements of Cash Flows, and (iv) the Notes to Consolidated Condensed Financial Statements.

*Incorporated by Reference.

117

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PROTECTIVE LIFE INSURANCE COMPANY
Date: November 14, 2018		By:	/s/ PAUL R. WELLS
			Paul R. Wells
			Senior Vice President, Chief Accounting Officer,
			and Controller

118

EX-31.A

Exhibit 31(a)

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Richard J. Bielen, certify that:

1. I have reviewed the Quarterly Report on Form 10-Q for the period ended September 30, 2018, of Protective Life Insurance Company;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2018

/s/ Richard J. Bielen

President

and Chief Executive Officer

EX-31.B

Exhibit 31(b)

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Steven G. Walker, certify that:

1. I have reviewed the Quarterly Report on Form 10-Q for the period ended September 30, 2018, of Protective Life Insurance Company;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2018

/s/ Steven G. Walker

Executive Vice President and

Chief Financial Officer

EX-32.A

Exhibit 32(a)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Protective Life Insurance Company (the “Company”) on Form 10-Q for the period ended September 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard J. Bielen, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Richard J. Bielen

President

and Chief Executive Officer

November 14, 2018

This certification accompanies the Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

EX-32.B

Exhibit 32(b)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Protective Life Insurance Company (the “Company”) on Form 10-Q for the period ended September 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven G. Walker, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Steven G. Walker

Executive Vice President and

Chief Financial Officer

November 14, 2018

This certification accompanies the Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Oct. 26, 2018
Document and Entity Information
Entity Registrant Name	PROTECTIVE LIFE INSURANCE CO
Entity Central Index Key	0000310826
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Entity Current Reporting Status	Yes
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		5,000,000
Entity Emerging Growth Company	false
Entity Small Business	false

XML

CONSOLIDATED CONDENSED STATEMENTS OF INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenues
Premiums and policy fees	$ 871,892	$ 849,743	$ 2,691,233	$ 2,568,228
Reinsurance ceded	(267,910)	(326,572)	(1,005,398)	(989,835)
Net of reinsurance ceded	603,982	523,171	1,685,835	1,578,393
Net investment income	631,955	477,011	1,699,787	1,427,442
Realized investment gains (losses):
Derivative financial instruments	(26,710)	5,302	37,176	(119,392)
All other investments	(20,156)	18,150	(157,350)	94,526
Other-than-temporary impairment losses	(14)	(366)	(715)	(494)
Portion recognized in other comprehensive income (before taxes)	0	93	(2,949)	(7,765)
Net impairment losses recognized in earnings	(14)	(273)	(3,664)	(8,259)
Other income	80,906	82,031	241,334	243,501
Total revenues	1,269,963	1,105,392	3,503,118	3,216,211
Benefits and expenses
Benefits and settlement expenses, net of reinsurance ceded: (three months: 2018 - $214,326; 2017 - $255,063; nine months: 2018 - $855,929; 2017 - $800,868)	950,942	742,789	2,598,151	2,203,883
Amortization of deferred policy acquisition costs and value of business acquired	33,469	4,267	144,172	48,505
Other operating expenses, net of reinsurance ceded: (three months: 2018 - $50,067; 2017 - $58,009; nine months: 2018 - $152,694; 2017 - $163,902)	190,382	192,354	582,795	577,911
Total benefits and expenses	1,174,793	939,410	3,325,118	2,830,299
Income before income tax	95,170	165,982	178,000	385,912
Income tax expense	16,646	49,016	28,933	120,975
Net income	$ 78,524	$ 116,966	$ 149,067	$ 264,937

XML

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement [Abstract]
Benefits and settlement expenses, reinsurance ceded	$ 214,326	$ 255,063	$ 855,929	$ 800,868
Other operating expenses, reinsurance ceded	$ 50,067	$ 58,009	$ 152,694	$ 163,902

XML

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement of Comprehensive Income [Abstract]
Net income	$ 78,524	$ 116,966	$ 149,067	$ 264,937
Other comprehensive income (loss):
Change in net unrealized gains (losses) on investments, net of income tax: (three months: 2018 - $(53,407); 2017 - $54,143; nine months: 2018 - $(318,444); 2017 - $295,015)	(200,912)	100,553	(1,198,669)	547,885
Reclassification adjustment for investment amounts included in net income, net of income tax: (three months: 2018 - $427; 2017 - $(146); nine months: 2018 - $(542); 2017 - $(289))	1,605	(271)	(2,042)	(536)
Change in net unrealized gains (losses) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (three months: 2018 - $0; 2017 - $452; nine months: 2018 - $6; 2017 - $3,837)	0	839	22	7,125
Change in accumulated (loss) gain - derivatives, net of income tax: (three months: 2018 - $61; 2017 - $445; nine months: 2018 - $813; 2017 - $19)	229	828	3,060	36
Reclassification adjustment for derivative amounts included in net income, net of income tax: (three months: 2018 - $101; 2017 - $14; nine months: 2018 - $168; 2017 - $139)	380	24	631	257
Total other comprehensive income (loss)	(198,698)	101,973	(1,196,998)	554,767
Total comprehensive income (loss)	$ (120,174)	$ 218,939	$ (1,047,931)	$ 819,704

XML

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement of Comprehensive Income [Abstract]
Change in net unrealized gains (losses) on investments, income tax	$ (53,407)	$ 54,143	$ (318,444)	$ 295,015
Reclassification adjustment for investment amounts included in net income, income tax	427	(146)	(542)	(289)
Change in net unrealized gains (losses) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, income tax	0	452	6	3,837
Change in accumulated (loss) gain - derivatives, income tax	61	445	813	19
Reclassification adjustment for derivative amounts included in net income, income tax	$ 101	$ 14	$ 168	$ 139

XML

CONSOLIDATED CONDENSED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Assets
Fixed maturities, at fair value (amortized cost: 2018 - $54,348,551; 2017 - $40,952,535)	$ 52,180,974	$ 40,971,486
Fixed maturities, at amortized cost (fair value: 2018 - $2,577,841; 2017 - $2,776,327)	2,653,605	2,718,904
Equity securities, at fair value (cost: 2018 - $623,882; 2017 - $701,951)	623,201	715,498
Mortgage loans (related to securitizations: 2018 - $505; 2017 - $226,409)	7,572,349	6,817,723
Investment real estate, net of accumulated depreciation (2018 - $219; 2017 - $132)	7,147	8,355
Policy loans	1,703,462	1,615,615
Other long-term investments	1,050,741	940,047
Short-term investments	366,586	527,144
Total investments	66,158,065	54,314,772
Cash	161,173	178,855
Accrued investment income	650,573	489,979
Accounts and premiums receivable	180,971	152,086
Reinsurance receivables	4,532,362	4,800,891
Deferred policy acquisition costs and value of business acquired	2,979,384	2,205,401
Goodwill	793,470	793,470
Other intangibles, net of accumulated amortization (2018 - $183,072; 2017 - $140,232)	625,828	662,916
Property and equipment, net of accumulated depreciation (2018 - $28,459; 2017 - $21,305)	105,424	109,711
Other assets	370,742	337,395
Income tax receivable	0	76,986
Assets related to separate accounts
Variable annuity	13,555,469	13,956,071
Variable universal life	1,077,842	1,035,202
Total assets	91,191,303	79,113,735
Liabilities
Future policy benefits and claims	42,012,551	30,956,792
Unearned premiums	772,139	751,130
Total policy liabilities and accruals	42,784,690	31,707,922
Stable value product account balances	5,211,668	4,698,371
Annuity account balances	13,590,482	10,921,190
Other policyholders’ funds	1,142,522	1,267,198
Other liabilities	2,150,163	1,859,254
Income tax payable	3,590	0
Deferred income taxes	970,859	1,371,989
Subordinated debt	110,000	0
Debt	1,410	1,682
Non-recourse funding obligations	2,890,435	2,952,822
Secured financing liabilities	514,413	1,017,749
Liabilities related to separate accounts
Variable annuity	13,555,469	13,956,071
Variable universal life	1,077,842	1,035,202
Total liabilities	84,003,543	70,789,450
Commitments and contingencies - Note 12
Shareowner’s equity
Preferred Stock; $1 par value, shares authorized: 2,000; Liquidation preference: $2	2	2
Common Stock, $1 par value, shares authorized and issued: 2018 and 2017 - 5,000,000	5,000	5,000
Additional paid-in-capital	7,378,496	7,378,496
Retained earnings	987,996	916,971
Accumulated other comprehensive income (loss):
Net unrealized gains (losses) on investments, net of income tax: (2018 - $(315,843); 2017 - $6,138)	(1,188,172)	23,091
Net unrealized losses relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (2018 - $0; 2017 - $(6))	0	(22)
Accumulated gain (loss) - derivatives, net of income tax: (2018 - $1,180; 2017 - $198)	4,438	747
Total shareowner’s equity	7,187,760	8,324,285
Total liabilities and shareowner’s equity	$ 91,191,303	$ 79,113,735

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CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Fixed maturities, amortized cost	$ 54,348,551,000	$ 40,952,535,000
Fixed maturities, fair value	2,577,841,000	2,776,327,000
Equity securities, cost	623,882,000	701,951,000
Mortgage loans, securitizations	505,000	226,409,000
Investment real estate, accumulated depreciation	219,000	132,000
Other intangibles, accumulated amortization	183,072,000	140,232,000
Property and equipment, accumulated depreciation	$ 28,459,000	$ 21,305,000
Preferred Stock, par value (in dollars per share)	$ 1	$ 1
Preferred Stock, shares authorized (in shares)	2,000	2,000
Preferred Stock, Liquidation preference	$ 2,000	$ 2,000
Common Stock, par value (in dollars per share)	$ 1	$ 1
Common Stock, shares authorized (in shares)	5,000,000	5,000,000
Common Stock, shares issued (in shares)	5,000,000	5,000,000
Net unrealized gains on investments, income tax	$ (315,843,000)	$ 6,138,000
Net unrealized (losses) gains relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, income tax	0	(6,000)
Accumulated loss - derivatives, income tax	$ 1,180,000	$ 198,000

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CONSOLIDATED CONDENSED STATEMENTS OF SHAREOWNER'S EQUITY - USD ($) $ in Thousands	Total	Preferred Stock	Common Stock	Additional Paid-In-Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Beginning Balance at Dec. 31, 2016						$ (655,040)
Increase (decrease) in shareowner's equity
Other comprehensive loss						705,194
Ending Balance at Dec. 31, 2017	$ 8,324,285	$ 2	$ 5,000	$ 7,378,496	$ 916,971	23,816
Increase (decrease) in shareowner's equity
Cumulative effect adjustments	(88,594)				(78,042)	(10,552)
Net income for the six months ended June 30, 2018	149,067				149,067
Other comprehensive loss	(1,196,998)					(1,196,998)
Total comprehensive income (loss)	(1,047,931)
Ending Balance at Sep. 30, 2018	$ 7,187,760	$ 2	$ 5,000	$ 7,378,496	$ 987,996	$ (1,183,734)

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash flows from operating activities
Net income	$ 149,067	$ 264,937
Adjustments to reconcile net income to net cash provided by operating activities:
Realized investment (gains) losses	123,838	33,125
Amortization of DAC and VOBA	144,172	48,505
Capitalization of DAC	(333,222)	(251,472)
Depreciation and amortization expense	50,205	48,591
Deferred income tax	(52,071)	82,835
Accrued income tax	80,576	9,350
Interest credited to universal life and investment products	630,770	507,229
Policy fees assessed on universal life and investment products	(1,146,980)	(1,004,829)
Change in reinsurance receivables	268,866	150,137
Change in accrued investment income and other receivables	2,059	(1,498)
Change in policy liabilities and other policyholders’ funds of traditional life and health products	(491,751)	(282,841)
Trading securities:
Maturities and principal reductions of investments	140,851	131,563
Sale of investments	307,632	195,733
Cost of investments acquired	(403,355)	(277,423)
Other net change in trading securities	10,641	9,357
Amortization of premiums and accretion of discounts on investments and mortgage loans	232,448	232,694
Change in other liabilities	98,321	181,696
Other, net	(27,322)	(61,295)
Net cash (used in) provided by operating activities	(215,255)	16,394
Cash flows from investing activities
Maturities and principal reductions of investments, available-for-sale	895,175	541,024
Sale of investments, available-for-sale	1,932,956	1,302,130
Cost of investments acquired, available-for-sale	(3,942,180)	(3,232,925)
Change in investments, held-to-maturity	62,000	36,000
Mortgage loans:
New lendings	(1,185,316)	(1,081,226)
Repayments	797,450	644,189
Change in investment real estate, net	647	3,679
Change in policy loans, net	43,642	24,280
Change in other long-term investments, net	(293,208)	(282,688)
Change in short-term investments, net	160,149	(106,888)
Net unsettled security transactions	84,036	349,544
Purchase of property, equipment, and intangibles	(9,629)	(34,067)
Cash received from reinsurance transaction	20,669	0
Net cash used in investing activities	(1,433,609)	(1,836,948)
Cash flows from financing activities
Borrowings under subordinated debt	110,000	0
Issuance (repayment) of non-recourse funding obligations	(61,981)	(35,984)
Secured financing liabilities	(503,336)	(198,165)
Dividends/Return of capital to parent company	0	(162,999)
Investment product deposits and change in universal life deposits	4,397,886	3,901,051
Investment product withdrawals	(2,311,096)	(1,698,062)
Other financing activities, net	(291)	(93)
Net cash provided by financing activities	1,631,182	1,805,748
Change in cash	(17,682)	(14,806)
Cash at beginning of period	178,855	214,439
Cash at end of period	$ 161,173	$ 199,633

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BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

BASIS OF PRESENTATION

Basis of Presentation

Protective Life Insurance Company (the “Company”), a stock life insurance company, was founded in 1907. The Company is a wholly owned subsidiary of Protective Life Corporation (“PLC”), an insurance holding company. On February 1, 2015, PLC became a wholly owned subsidiary of The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan (now known as Dai-ichi Life Holdings, Inc., “Dai-ichi Life”), when DL Investment (Delaware), Inc. a wholly owned subsidiary of Dai-ichi Life, merged with and into PLC. Prior to February 1, 2015, PLC’s stock was publicly traded on the New York Stock Exchange. Subsequent to the Merger date, PLC and the Company remain as SEC registrants within the United States. The Company markets individual life insurance, credit life and disability insurance, guaranteed investment contracts, guaranteed funding agreements, fixed and variable annuities, and extended service contracts throughout the United States. The Company also maintains a separate segment devoted to the acquisition of insurance policies from other companies. PLC is a holding company with subsidiaries that provide financial services through the production, distribution, and administration of insurance and investment products.

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for the interim periods presented herein. In the opinion of management, the accompanying financial statements reflect all adjustments (consisting only of normal recurring items) necessary for a fair statement of the results for the interim periods presented. Operating results for the three and nine months ended September 30, 2018, are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2018. The year-end consolidated condensed financial data included herein was derived from audited financial statements but does not include all disclosures required by GAAP within this report. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

The operating results of companies in the insurance industry have historically been subject to significant fluctuations due to changing competition, economic conditions, interest rates, investment performance, insurance ratings, claims, persistency, and other factors.

Entities Included

The consolidated condensed financial statements in this report include the accounts of Protective Life Insurance Company and its affiliate companies in which the Company holds a majority voting or economic interest. Intercompany balances and transactions have been eliminated.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

For a full description of significant accounting policies, see Note 2 to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. There were no significant changes to the Company’s accounting policies during the nine months ended September 30, 2018 other than those discussed below.

Property and Casualty Insurance Products

Property and casualty insurance products include service contract business, surety bonds, and guaranteed asset protection (“GAP”). Premiums and fees associated with service contracts and GAP products are recognized based on expected claim patterns. For all other products, premiums are generally recognized over the terms of the contract on a pro-rata basis. Commissions and fee income associated with other products are recognized as earned when the related services are provided to the customer. Unearned premium reserves are maintained for the portion of the premiums that is related to the unexpired period of the policy. Benefit reserves are recorded when insured events occur. Benefit reserves include case basis reserves for known but unpaid claims as of the balance sheet date as well as incurred but not reported (“IBNR”) reserves for claims where the insured event has occurred but has not been reported to the Company as of the balance sheet date. The case basis reserves and IBNR are calculated based on historical experience and on assumptions relating to claim severity and frequency, the level of used vehicle prices, and other factors. These assumptions are modified as necessary to reflect anticipated trends.

Effective January 1, 2018, the Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers. In consideration of the amendments in this Update, the Company revised its recognition pattern for administrative fees associated with certain vehicle service and GAP products. Previously, these fees were recognized based on the work effort involved in satisfying the Company’s contract obligations. The Company will recognize these fees on a claims occurrence basis in future periods. To reflect this change in accounting principle, the Company recorded a cumulative effect adjustment as of January 1, 2018 that resulted in a decrease in retained earnings of $88.6 million. The pre-tax impact to each affected line item on the Company’s financial statements is reflected in the table below:

	As of September 30, 2018
	As Reported		Previous Accounting Method
	(Dollars In Millions)
Financial Statement Line Item:
Balance Sheet
Deferred policy acquisition costs and value of business acquired	$	2,979.4	$	2,840.0
Other liabilities	$	2,150.2	$	1,891.4

	For the Three Months Ended September 30, 2018				For The Nine Months Ended September 30, 2018
	As Reported		Previous Accounting Method		As Reported		Previous Accounting Method
	(Dollars In Millions)				(Dollars In Millions)
Financial Statement Line Item:
Statements of Income
Other income	$	80.9	$	82.4	$	241.3	$	244.9
Amortization of deferred policy acquisition costs and value of business acquired	$	33.5	$	21.9	$	144.2	$	108.1
Other operating expenses, net of reinsurance ceded	$	190.4	$	203.2	$	582.8	$	622.3

Accounting Pronouncements Recently Adopted

ASU No. 2014-09 - Revenue from Contracts with Customers (Topic 606).This Update provides for significant revisions to the recognition of revenue from contracts with customers across various industries. Under the new guidance, entities are required to apply a prescribed 5-step process to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting for revenues associated with insurance products is not within the scope of this Update. The Update was originally effective for annual and interim periods beginning after December 15, 2016. However, in August 2015, the FASB issued ASU No. 2015-14 - Revenues from Contracts with Customers: Deferral of the Effective Date, to defer the effective date of ASU No. 2014-09 by one year to annual and interim periods beginning after December 15, 2017. The Company adopted this Update using the modified retrospective approach via a cumulative effect adjustment to retained earnings as of January 1, 2018. The amendments in the Update, along with clarifying updates issued subsequent to ASU 2014-09, impacted certain revenues associated with the Company’s Asset Protection products. The lines of business to which the revised guidance applies are not material to the Company’s financial statements. In consideration of the amendments in this Update, the Company revised its recognition pattern for administrative fees associated with certain vehicle service and GAP products. Previously, these fees were recognized based on the work effort involved in satisfying the Company’s contract obligations. The Company will recognize these fees on a claims occurrence basis in future periods. To reflect this change in accounting principle, the Company recorded a cumulative effect adjustment as of January 1, 2018 that resulted in a decrease in retained earnings of $88.6 million. See above for additional discussion.

ASU No. 2016-01 - Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most notably, the Update requires that equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) be measured at fair value with changes in fair value recognized in net income. The Update also introduces a single-step impairment model for equity investments without a readily determinable fair value. Additionally, the Update requires changes in instrument-specific credit risk for fair value option liabilities to be recorded in other comprehensive income. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2017 and were applied on a modified retrospective basis. The Company recorded a cumulative-effect adjustment at the date of adoption, January 1, 2018, transferring unrealized gains and losses on available-for-sale equity securities to retained earnings from accumulated other comprehensive income. The impact of this adjustment, net of income tax, resulted in a $10.6 million increase to retained earnings and a corresponding decrease to accumulated other comprehensive income, resulting in no net impact to consolidated shareowner’s equity. The Company has updated its disclosures in Note 5, Investment Operations and Note 6, Fair Value of Financial Instruments in accordance with the ASU.

ASU No. 2016-15 - Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. The amendments in this Update are intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Specific transactions addressed in the new guidance include:Debt prepayment/extinguishment costs, contingent consideration payments, proceeds from the settlement of corporate-owned life insurance policies, and distributions received from equity method investments. The Update does not introduce any new accounting or financial reporting requirements, and is effective for annual and interim periods beginning after December 15, 2017 using the retrospective method. There was no financial impact.

ASU No. 2016-18 - Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Task Force). The amendments in this update provide guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows, thereby reducing diversity in practice related to the presentation of these amounts. The amendments require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Update is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. There was no impact to the Company on adoption.

ASU No. 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business. The purpose of this update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in the Update provide a specific test by which an entity may determine whether an acquisition involves a set of assets or a business. The amendments in the Update are to be applied prospectively for periods beginning after December 15, 2017. The Company has reviewed the revised requirements, and does not anticipate that the changes will impact its policies or recent conclusions related to its acquisition activities.

ASU No. 2017-07 - Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendments in this update require entities to disaggregate the current-service-cost component from other components of net benefit cost and present it with other current compensation costs in the income statement. The other components of net benefit cost must be presented outside of income from operations if that subtotal is presented. In addition, the Update requires entities to disclose the income statement lines that contain the other components if they are not presented on appropriately described separate lines. The amendments in this update are effective for interim and annual periods beginning after December 15, 2017. As provided for in the ASU, the Company expects to apply the provisions of the statement retrospectively for components of net periodic pension costs and prospectively for capitalization of the service costs component of net periodic costs and net periodic postretirement benefits. The Update did not impact the Company’s financial position, results of operations, or current disclosures.

Accounting Pronouncements Not Yet Adopted

ASU No. 2016-02 - Leases. The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of leases. The most significant change will relate to the accounting model used by lessees. The Update will require all leases with terms greater than 12 months to be recorded on the balance sheet in the form of a lease asset and liability. The lease asset and liability will be measured at the present value of the minimum lease payments less any upfront payments or fees. The amendments in the Update are effective for annual and interim periods beginning after December 15, 2018 on a modified retrospective basis. The Company has completed an inventory of all leases in the organization. Based on our lease portfolio as of September 30, 2018, the Company expects to record a right of use asset and lease liability of approximately $21 million on its consolidated condensed balance sheet in the period of adoption. However, the ultimate impact of adopting the ASU will depend on the Company’s lease portfolio as of the adoption date.

ASU No. 2016-13 - Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments. The amendments in this Update introduce a new current expected credit loss (“CECL”) model for certain financial assets, including mortgage loans and reinsurance receivables. The new model will not apply to debt securities classified as available-for-sale. For assets within the scope of the new model, an entity will recognize as an allowance against earnings its estimate of the contractual cash flows not expected to be collected on day one of the asset’s acquisition. The allowance may be reversed through earnings if a security recovers in value. This differs from the current impairment model, which requires recognition of credit losses when they have been incurred and recognizes a security’s subsequent recovery in value in other comprehensive income. The Update also makes targeted changes to the current impairment model for available-for-sale debt securities, which comprise the majority of the Company’s invested assets. Similar to the CECL model, credit loss impairments will be recorded in an allowance against earnings that may be reversed for subsequent recoveries in value. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2019 on a modified retrospective basis. The Company is reviewing its policies and processes to ensure compliance with the requirements in this Update, upon adoption, and assessing the impact this standard will have on its operations and financial results.

ASU No. 2017-08 - Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in this Update require that premiums on callable debt securities be amortized to the first call date. This is a change from current guidance, under which premiums are amortized to the maturity date of the security. The amendments are effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. Transition will be through a modified retrospective approach in which the cumulative effect of application is recorded to retained earnings at the beginning of the annual period in which an entity adopts the revised guidance. Based on our population of callable debt securities held as of September 30, 2018, the Company estimates it would record a reduction to retained earnings of approximately $56.1 million as a result of adopting the ASU. However, the adoption impact will ultimately depend on the population of callable debt securities held as of the adoption date.

ASU No. 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in this Update are designed to permit hedge accounting to be applied to a broader range of hedging strategies as well as to more closely align hedge accounting and risk management objectives. Specific provisions include requiring changes in the fair value of a hedging instrument be recorded in the same income statement line as the hedged item when it affects earnings. In addition, after a hedge has initially qualified as an effective hedge the Update permits the use of a qualitative hedge effectiveness test in subsequent periods. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on its operations or financial results.

ASU No. 2018-12 - Financial Services - Insurance (Topic 944): Targeted Improvements to Accounting for Long-Duration Contracts. The amendments in this Update are designed to make improvements to the existing recognition, measurement, presentation, and disclosure requirements for certain long-duration contracts issued by an insurance company. The new amendments require insurance entities to provide a more current measure of the liability for future policy benefits for traditional and limited-payment contracts by regularly refining the liability for actual past experience and updated future assumptions. This differs from current requirements where assumptions are locked-in at contract issuance for these contract types. In addition, the updated liability will be discounted using an upper-medium grade (low-credit-risk) fixed income instrument yield that reflects the characteristics of the liability which differs from currently used rates based on the invested assets supporting the liability. In addition, the amendments introduce new requirements to assess market-based insurance contract options and guarantees for Market Risk Benefits and measure them at fair value. This Update also requires insurance entities to amortize deferred acquisition costs on a constant-level basis over the expected life of the contract. Finally this Update requires new disclosures including liability rollforwards and information about significant inputs, judgments, assumptions, and methods used in the measurement. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2020 with early adoption permitted. The Company is currently reviewing its policies, processes, and applicable systems to determine the impact this standard will have on its operations and financial results.

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SIGNIFICANT TRANSACTIONS

9 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

SIGNIFICANT TRANSACTIONS

SIGNIFICANT TRANSACTIONS

On May 1, 2018, The Lincoln National Life Insurance Company (“Lincoln Life”) completed its previously announced acquisition (the “Closing”) of Liberty Mutual Group Inc.’s (“Liberty Mutual”) Group Benefits Business and Individual Life and Annuity Business (the “Life Business”) through the acquisition of all of the issued and outstanding capital stock of Liberty Life Assurance Company of Boston (“Liberty”). In connection with the Closing and  pursuant to the Master Transaction Agreement, dated January 18, 2018 (the “Master Transaction Agreement”), previously reported in our Current Report on Form 8-K filed on January 23, 2018, the Company and Protective Life and Annuity Insurance Company (“PLAIC”), a wholly owned subsidiary of the Company, entered into reinsurance agreements (the “Reinsurance Agreements”) and related ancillary documents (including administrative services agreements and transition services agreements) providing for the reinsurance and administration of the Life Business.

Pursuant to the Reinsurance Agreements, Liberty ceded to the Company and PLAIC the insurance policies related to the Life Business on a 100% coinsurance basis. The aggregate ceding commission for the reinsurance of the Life Business was $422.4 million, which is the purchase price. Other than cash received as part of the acquired Liberty investment portfolio as reflected in “amounts received from reinsurance transaction” in the Consolidated Condensed Statements of Cash Flows and as reflected in the table below, this was a non-cash transaction.

All policies issued in states other than New York were ceded to the Company under a reinsurance agreement between Liberty and the Company, and all policies issued in New York were ceded to PLAIC under a reinsurance agreement between Liberty and PLAIC.  The aggregate statutory reserves of Liberty ceded to the Company and PLAIC as of the closing of the Transaction were approximately $13.3 billion, which amount was based on initial estimates and is subject to adjustment following the Closing. Pursuant to the terms of the Reinsurance Agreements, each of the Company and PLAIC are required to maintain assets in trust for the benefit of Liberty to secure their respective obligations to Liberty under the Reinsurance Agreements. The trust accounts were initially funded by each of the Company and PLAIC principally with the investment assets that were received from Liberty. Additionally, the Company and PLAIC have each agreed to provide, on behalf of Liberty, administration and policyholder servicing of the Life Business reinsured by it pursuant to administrative services agreements between Liberty and each of the Company and PLAIC.

The terms of the Reinsurance Agreements resulted in an acquisition of the Life Business by the Company in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations.

The following table details the purchase consideration and preliminary allocation of assets acquired and liabilities assumed from the Life Business reinsurance transaction as of the transaction date. These estimates remain preliminary and are subject to adjustment. While they are not expected to be materially different than those shown, any material adjustments to the estimates will be reflected, retroactively, as of the date of the acquisition.  

	Fair Value as of May 1, 2018
	(Dollars In Thousands)
ASSETS
Fixed maturities	$	12,588,512
Mortgage loans	435,405
Policy loans	131,489
Total investments	13,155,406
Cash	20,669
Accrued investment income	151,610
Reinsurance receivables	337
Value of business acquired	336,437
Other assets	2,542
Total assets	13,667,001
LIABILITIES
Future policy benefits and claims	$	11,744,496
Unearned premiums	—
Total policy liabilities and accruals	11,744,496
Annuity account balances	1,823,444
Other policyholders’ funds	41,954
Other liabilities	57,107
Total liabilities	13,667,001
NET ASSETS ACQUIRED	$	—

The following unaudited pro forma condensed consolidated results of operations assumes that the aforementioned transactions of the Life Business were completed as of January 1, 2017. The unaudited pro forma condensed results of operations are presented solely for information purposes and are not necessarily indicative of the consolidated condensed results of operations that might have been achieved had the transaction been completed as of the date indicated.

	Unaudited				Unaudited
	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2018		2017		2018		2017
	(Dollars In Thousands)
Revenue	$	1,269,963	$	1,418,743	$	3,826,857	$	4,170,636
Net income	$	78,524	$	152,971	$	195,211	$	369,826

The amount of revenue and income before income tax of the Life Business since the transaction date, May 1, 2018, included in the consolidated condensed statements of income for the three and nine months ended September 30, 2018 amounted to $218.1 million and $360.9 million and $26.1 million and $33.7 million, respectively. Also, included in the income before income tax for the nine months ended September 30, 2018, is approximately $5.5 million of non-recurring transaction costs.

Based on the balance recorded as of May 1, 2018, the expected amortization of VOBA for the next five years is as follows:

Years	Expected Amortization
	(Dollars In Thousands)
Remainder of 2018	$	5,265
2019	21,063
2020	19,950
2021	18,329
2022	16,611

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MONY CLOSED BLOCK OF BUSINESS

9 Months Ended

Sep. 30, 2018

Closed Block Disclosure [Abstract]

MONY CLOSED BLOCK OF BUSINESS

MONY CLOSED BLOCK OF BUSINESS

In 1998, MONY Life Insurance Company (“MONY”) converted from a mutual insurance company to a stock corporation (“demutualization”). In connection with its demutualization, an accounting mechanism known as a closed block (the “Closed Block”) was established for certain individuals’ participating policies in force as of the date of demutualization. Assets, liabilities, and earnings of the Closed Block are specifically identified to support its participating policyholders. The Company acquired the Closed Block in conjunction with the acquisition of MONY in 2013.

Assets allocated to the Closed Block inure solely to the benefit of each Closed Block’s policyholders and will not revert to the benefit of MONY or the Company. No reallocation, transfer, borrowing or lending of assets can be made between the Closed Block and other portions of MONY’s general account, any of MONY’s separate accounts or any affiliate of MONY without the approval of the Superintendent of The New York State Department of Financial Services (the “Superintendent”). Closed Block assets and liabilities are carried on the same basis as similar assets and liabilities held in the general account.

The excess of Closed Block liabilities over Closed Block assets (adjusted to exclude the impact of related amounts in AOCI) at the acquisition date of October 1, 2013, represented the estimated maximum future post-tax earnings from the Closed Block that would be recognized in income from continuing operations over the period the policies and contracts in the Closed Block remain in force. In connection with the acquisition of MONY, the Company developed an actuarial calculation of the expected timing of MONY’s Closed Block’s earnings as of October 1, 2013. Pursuant to the acquisition of the Company by Dai-ichi Life, this actuarial calculation of the expected timing of MONY’s Closed Block earnings was recalculated and reset as February 1, 2015, along with the establishment of a policyholder dividend obligation as of such date.

If the actual cumulative earnings from the Closed Block are greater than the expected cumulative earnings, only the expected earnings will be recognized in the Company’s net income. Actual cumulative earnings in excess of expected cumulative earnings at any point in time are recorded as a policyholder dividend obligation because they will ultimately be paid to Closed Block policyholders as an additional policyholder dividend unless offset by future performance that is less favorable than originally expected. If a policyholder dividend obligation has been previously established and the actual Closed Block earnings in a subsequent period are less than the expected earnings for that period, the policyholder dividend obligation would be reduced (but not below zero). If, over the period the policies and contracts in the Closed Block remain in force, the actual cumulative earnings of the Closed Block are less than the expected cumulative earnings, only actual earnings would be recognized in income from continuing operations. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside the Closed Block.

Many expenses related to Closed Block operations, including amortization of VOBA, are charged to operations outside of the Closed Block; accordingly, net revenues of the Closed Block do not represent the actual profitability of the Closed Block operations. Operating costs and expenses outside of the Closed Block are, therefore, disproportionate to the business outside of the Closed Block.

Summarized financial information for the Closed Block as of September 30, 2018 and December 31, 2017 is as follows:

	As of
	September 30, 2018			December 31, 2017
	(Dollars In Thousands)
Closed block liabilities
Future policy benefits, policyholders’ account balances and other policyholder liabilities	$	5,699,118		$	5,791,867
Policyholder dividend obligation	—			160,712
Other liabilities	42,640			30,764
Total closed block liabilities	5,741,758			5,983,343
Closed block assets
Fixed maturities, available-for-sale, at fair value	$	4,339,342		$	4,669,856
Mortgage loans on real estate	76,608			108,934
Policy loans	679,760			700,769
Cash	72,868			31,182
Other assets	144,077			122,637
Total closed block assets	5,312,655			5,633,378
Excess of reported closed block liabilities over closed block assets	429,103			349,965
Portion of above representing accumulated other comprehensive income:
Net unrealized investment gains (losses) net of policyholder dividend obligation: $(149,219) and $(13,429); and net of income tax: $57,054 and $2,820	(96,749		)	—
Future earnings to be recognized from closed block assets and closed block liabilities	$	332,354		$	349,965

Reconciliation of the policyholder dividend obligation is as follows:

	For The Nine Months Ended September 30,
	2018			2017
	(Dollars In Thousands)
Policyholder dividend obligation, beginning of period	$	160,712		$	31,932
Applicable to net revenue (losses)	(24,922		)	(38,147		)
Change in net unrealized investment gains (losses) allocated to the policyholder dividend obligation	(135,790		)	142,219
Policyholder dividend obligation, end of period	$	—		$	136,004

Closed Block revenues and expenses were as follows:

	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2018		2017		2018		2017
	(Dollars In Thousands)
Revenues
Premiums and other income	$	39,691	$	40,962	$	121,768	$	128,697
Net investment income	50,833		50,780		152,248		153,481
Net investment gains	40		341		66		448
Total revenues	90,564		92,083		274,082		282,626
Benefits and other deductions
Benefits and settlement expenses	83,588		81,721		251,480		249,319
Other operating expenses	291		621		310		1,216
Total benefits and other deductions	83,879		82,342		251,790		250,535
Net revenues before income taxes	6,685		9,741		22,292		32,091
Income tax expense	1,404		3,409		4,681		11,232
Net revenues	$	5,281	$	6,332	$	17,611	$	20,859

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INVESTMENT OPERATIONS

9 Months Ended

Sep. 30, 2018

Investments, Debt and Equity Securities [Abstract]

INVESTMENT OPERATIONS

INVESTMENT OPERATIONS

Net realized gains (losses) for all other investments are summarized as follows:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Fixed maturities	$	(2,018	)	$	1,042		$	6,248		$	10,482
Equity gains and losses(1)	(6,925		)	(352		)	(16,693		)	(1,398		)
Impairments	(14		)	(273		)	(3,664		)	(8,259		)
Modco trading portfolio	(10,901		)	19,399			(148,427		)	93,181
Other investments	(312		)	(1,939		)	1,522			(7,739		)
Total realized gains (losses) - investments	$	(20,170	)	$	17,877		$	(161,014	)	$	86,267
(1) Beginning January 1, 2018, all changes in the fair market value of equity securities are recorded as a realized gains (loss) as a result of the adoption of ASU No. 2016-01.

Gross realized gains and gross realized losses on investments available-for-sale (fixed maturities and short-term investments) are as follows:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Gross realized gains	$	3,410		$	1,933		$	21,540		$	14,968
Gross realized losses:
Impairment losses	$	(14	)	$	(273	)	$	(3,664	)	$	(8,259	)
Other realized losses	$	(5,428	)	$	(1,243	)	$	(15,292	)	$	(5,884	)

The chart below summarizes the fair value (proceeds) and the gains (losses) realized on available-for-sale securities the Company sold that were in an unrealized gain position and an unrealized loss position.

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Securities in an unrealized gain position:
Fair value (proceeds)	$	306,600		$	121,459		$	909,846		$	566,064
Gains realized	$	3,410		$	1,933		$	21,540		$	14,967
Securities in an unrealized loss position(1):
Fair value (proceeds)	$	122,317		$	37,186		$	380,493		$	121,450
Losses realized	$	(5,428	)	$	(1,243	)	$	(15,292	)	$	(5,884	)
(1) The Company made the decision to exit these holdings in conjunction with its overall asset/liability management process.

The chart below summarizes the realized gains (losses) on equity securities sold during the period and equity securities still held at the reporting date.

	For The Three Months Ended September 30, 2018			For The Nine Months Ended September 30, 2018
	(Dollars In Thousands)
Net gains (losses) recognized during the period on equity securities	$	(6,925	)	$	(16,693	)
Less: net gains (losses) recognized on equity securities sold during the period	$	(1,476	)	$	(3,858	)
Gains (losses) recognized during the period on equity securities still held	$	(5,449	)	$	(12,835	)

The amortized cost and fair value of the Company’s investments classified as available-for-sale are as follows:

As of September 30, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Total OTTI Recognized in OCI(1)
	(Dollars In Thousands)
Fixed maturities:
Residential mortgage-backed securities	$	3,506,384	$	5,808	$	(105,531	)	$	3,406,661	$	—
Commercial mortgage-backed securities	2,314,831		180		(80,633		)	2,234,378		—
Other asset-backed securities	1,456,768		13,749		(16,382		)	1,454,135		—
U.S. government-related securities	1,653,626		160		(72,807		)	1,580,979		—
Other government-related securities	546,356		2,925		(21,635		)	527,646		—
States, municipals, and political subdivisions	3,691,930		6,070		(139,927		)	3,558,073		—
Corporate securities	38,612,538		166,917		(1,919,248		)	36,860,207		—
Redeemable preferred stock	94,362		—		(7,223		)	87,139		—
	51,876,795		195,809		(2,363,386		)	49,709,218		—
Short-term investments	310,721		—		—			310,721		—
	$	52,187,516	$	195,809	$	(2,363,386	)	$	50,019,939	$	—
As of December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Total OTTI Recognized in OCI(1)
	(Dollars In Thousands)
Fixed maturities:
Residential mortgage-backed securities	$	2,321,811	$	19,412	$	(22,730	)	$	2,318,493	$	10
Commercial mortgage-backed securities	1,885,109		4,931		(29,552		)	1,860,488		—
Other asset-backed securities	1,234,376		20,936		(5,763		)	1,249,549		—
U.S. government-related securities	1,255,244		185		(32,177		)	1,223,252		—
Other government-related securities	280,780		9,401		(4,948		)	285,233		—
States, municipals, and political subdivisions	1,770,299		16,959		(45,613		)	1,741,645		(37		)
Corporate securities	29,446,365		618,582		(527,401		)	29,537,546		(1		)
Redeemable preferred stock	94,362		232		(3,503		)	91,091		—
	38,288,346		690,638		(671,687		)	38,307,297		(28		)
Equity securities	696,706		22,319		(8,771		)	710,254		—
Short-term investments	470,883		—		—			470,883		—
	$	39,455,935	$	712,957	$	(680,458	)	$	39,488,434	$	(28	)
(1) These amounts are included in the gross unrealized gains and gross unrealized losses columns above.

The fair values of the Company’s investments classified as trading are as follows:

	As of September 30, 2018		As of December 31, 2017
	(Dollars In Thousands)
Fixed maturities:
Residential mortgage-backed securities	$	254,037	$	259,694
Commercial mortgage-backed securities	135,403		146,804
Other asset-backed securities	111,770		138,097
U.S. government-related securities	58,081		27,234
Other government-related securities	43,030		63,925
States, municipals, and political subdivisions	296,618		326,925
Corporate securities	1,569,652		1,698,183
Redeemable preferred stock	3,165		3,327
	2,471,756		2,664,189
Equity securities	3,801		5,244
Short-term investments	55,865		56,261
	$	2,531,422	$	2,725,694

The amortized cost and fair value of available-for-sale and held-to-maturity fixed maturities as of September 30, 2018, by expected maturity, are shown below. Expected maturities of securities without a single maturity date are allocated based on estimated rates of prepayment that may differ from actual rates of prepayment.

	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars In Thousands)
Due in one year or less	$	957,984	$	955,779	$	—	$	—
Due after one year through five years	9,252,383		9,079,479		—		—
Due after five years through ten years	9,099,912		8,847,681		—		—
Due after ten years	32,566,516		30,826,279		2,653,605		2,577,841
	$	51,876,795	$	49,709,218	$	2,653,605	$	2,577,841

The charts below summarize the Company’s other-than-temporary impairments of investments. All of the impairments were related to fixed maturities.

	For The Three Months Ended September 30, 2018			For The Nine Months Ended September 30, 2018
	Fixed Maturities			Fixed Maturities
	(Dollars In Thousands)
Other-than-temporary impairments	$	(14	)	$	(715	)
Non-credit impairment losses recorded in other comprehensive income	—			(2,949		)
Net impairment losses recognized in earnings	$	(14	)	$	(3,664	)

	For The Three Months Ended September 30, 2017			For The Nine Months Ended September 30, 2017
	Fixed Maturities			Fixed Maturities
	(Dollars In Thousands)
Other-than-temporary impairments	$	(366	)	$	(494	)
Non-credit impairment losses recorded in other comprehensive income	93			(7,765		)
Net impairment losses recognized in earnings	$	(273	)	$	(8,259	)

There were no other-than-temporary impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell for the three and nine months ended September 30, 2018 and 2017.

The following chart is a rollforward of available-for-sale credit losses on fixed maturities held by the Company for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (loss):

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Beginning balance	$	2		$	2,783		$	3,268		$	12,685
Additions for newly impaired securities	—			266			—			266
Additions for previously impaired securities	—			6			2			2,791
Reductions for previously impaired securities due to a change in expected cash flows	—			(37		)	—			(12,724		)
Reductions for previously impaired securities that were sold in the current period	(2		)	(600		)	(3,270		)	(600		)
Ending balance	$	—		$	2,418		$	—		$	2,418

The following table includes the gross unrealized losses and fair value of the Company’s investments that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2018:

	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(Dollars In Thousands)
Residential mortgage-backed securities	$	2,831,194	$	(80,839	)	$	399,676	$	(24,692	)	$	3,230,870	$	(105,531	)
Commercial mortgage-backed securities	1,433,287		(39,701		)	740,262		(40,932		)	2,173,549		(80,633		)
Other asset-backed securities	645,956		(9,131		)	125,847		(7,251		)	771,803		(16,382		)
U.S. government-related securities	551,939		(14,066		)	1,012,450		(58,741		)	1,564,389		(72,807		)
Other government-related securities	254,968		(7,405		)	111,089		(14,230		)	366,057		(21,635		)
States, municipalities, and political subdivisions	2,268,935		(51,019		)	998,399		(88,908		)	3,267,334		(139,927		)
Corporate securities	21,709,122		(782,983		)	9,756,347		(1,136,265		)	31,465,469		(1,919,248		)
Redeemable preferred stock	43,712		(1,902		)	43,427		(5,321		)	87,139		(7,223		)
	$	29,739,113	$	(987,046	)	$	13,187,497	$	(1,376,340	)	$	42,926,610	$	(2,363,386	)

RMBS and CMBS had gross unrealized losses greater than twelve months of $24.7 million and $40.9 million, respectively, as of September 30, 2018. Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.

The other asset-backed securities had a gross unrealized loss greater than twelve months of $7.3 million as of September 30, 2018. This category predominately includes student loan backed auction rate securities whose underlying collateral is at least 97% guaranteed by the Federal Family Education Loan Program (“FFELP”). At this time, the Company has no reason to believe that the U.S. Department of Education would not honor the FFELP guarantee, if it were necessary.

The U.S. government-related securities and the other government-related securities had gross unrealized losses greater than twelve months of $58.7 million and $14.2 million as of September 30, 2018, respectively. These declines were related to changes in interest rates.

The states, municipalities, and political subdivisions category had gross unrealized losses greater than twelve months of $88.9 million as of September 30, 2018. The aggregate decline in market value of these securities was deemed temporary due to positive factors supporting the recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, and other pertinent information.

The corporate securities category had gross unrealized losses greater than twelve months of $1.1 billion as of September 30, 2018. The aggregate decline in market value of these securities was deemed temporary due to positive factors supporting the recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, and other pertinent information.

As of September 30, 2018, the Company had a total of 4,367 positions that were in an unrealized loss position, but the Company does not consider these unrealized loss positions to be other-than-temporary. This is based on the aggregate factors discussed previously and because the Company has the ability and intent to hold these investments until the fair values recover, and the Company does not intend to sell or expect to be required to sell the securities before recovering the Company’s amortized cost of the securities.

The following table includes the gross unrealized losses and fair value of the Company’s investments that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2017:

	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(Dollars In Thousands)
Residential mortgage-backed securities	$	765,641	$	(9,666	)	$	408,460	$	(13,064	)	$	1,174,101	$	(22,730	)
Commercial mortgage-backed securities	750,643		(8,521		)	779,086		(21,031		)	1,529,729		(29,552		)
Other asset-backed securities	86,506		(322		)	134,316		(5,441		)	220,822		(5,763		)
U.S. government-related securities	94,110		(688		)	1,072,232		(31,489		)	1,166,342		(32,177		)
Other government-related securities	24,830		(169		)	115,294		(4,779		)	140,124		(4,948		)
States, municipalities, and political subdivisions	170,268		(1,738		)	1,027,747		(43,875		)	1,198,015		(45,613		)
Corporate securities	5,026,417		(55,649		)	10,947,027		(471,752		)	15,973,444		(527,401		)
Redeemable preferred stock	22,048		(1,120		)	23,197		(2,383		)	45,245		(3,503		)
Equities	86,194		(1,400		)	91,195		(7,371		)	177,389		(8,771		)
	$	7,026,657	$	(79,273	)	$	14,598,554	$	(601,185	)	$	21,625,211	$	(680,458	)

RMBS and CMBS had gross unrealized losses greater than twelve months of $13.1 million and $21.0 million, respectively, as of December 31, 2017. Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.

The other asset-backed securities had a gross unrealized loss greater than twelve months of $5.4 million as of December 31, 2017. This category predominately includes student loan backed auction rate securities whose underlying collateral is at least 97% guaranteed by the FFELP. At this time, the Company has no reason to believe that the U.S. Department of Education would not honor the FFELP guarantee, if it were necessary.

The U.S. government-related securities and other government-related securities had gross unrealized losses greater than twelve months of $31.5 million and $4.8 million as of December 31, 2017, respectively. These declines were related to changes in interest rates.

The states, municipalities, and political subdivisions category had gross unrealized losses greater than twelve months of $43.9 million as of December 31, 2017. These declines were related to changes in interest rates.

The corporate securities category had gross unrealized losses greater than twelve months of $471.8 million as of December 31, 2017. The aggregate decline in market value of these securities was deemed temporary due to positive factors supporting the recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, and other pertinent information.

As of September 30, 2018, the Company had securities in its available-for-sale portfolio which were rated below investment grade of $1.7 billion and had an amortized cost of $1.7 billion. In addition, included in the Company’s trading portfolio, the Company held $175.6 million of securities which were rated below investment grade. Approximately $263.1 million of the available-for-sale and trading securities that were below investment grade were not publicly traded.

The change in unrealized gains (losses), net of income tax, on fixed maturities, classified as available-for-sale is summarized as follows:

	For The Three Months Ended September 30,					For The Nine Months Ended September 30,
	2018			2017		2018			2017
	(Dollars In Thousands)
Fixed maturities	$	(229,609	)	$	167,488	$	(1,727,358	)	$	865,743

The amortized cost and fair value of the Company’s investments classified as held-to-maturity as of September 30, 2018 and December 31, 2017, are as follows:

As of September 30, 2018	Amortized Cost		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Fair Value		Total OTTI Recognized in OCI
	(Dollars In Thousands)
Fixed maturities:
Securities issued by affiliates:
Red Mountain, LLC	$	736,605	$	—	$	(77,492	)	$	659,113	$	—
Steel City, LLC	1,917,000		1,728		—			1,918,728		—
	$	2,653,605	$	1,728	$	(77,492	)	$	2,577,841	$	—
As of December 31, 2017	Amortized Cost		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Fair Value		Total OTTI Recognized in OCI
	(Dollars In Thousands)
Fixed maturities:
Securities issued by affiliates:
Red Mountain, LLC	$	704,904	$	—	$	(19,163	)	$	685,741	$	—
Steel City, LLC	2,014,000		76,586		—			2,090,586		—
	$	2,718,904	$	76,586	$	(19,163	)	$	2,776,327	$	—

During the three and nine months ended September 30, 2018 and 2017, the Company recorded no other-than-temporary impairments on held-to-maturity securities.

The Company’s held-to-maturity securities had$1.7 millionof gross unrecognized holding gains and$77.5 million of gross unrecognized holding losses by maturity as of September 30, 2018. The Company does not consider these unrecognized holding losses to be other-than-temporary based on certain positive factors associated with the securities which include credit ratings of the guarantor, financial health of the issuer and guarantor, continued access of the issuer to capital markets and other pertinent information. These held-to-maturity securities are issued by affiliates of the Company which are considered variable interest entities (“VIEs”). The Company is not the primary beneficiary of these entities and thus the securities are not eliminated in consolidation. These securities are collateralized by non-recourse funding obligations issued by captive insurance companies that are affiliates of the Company.

The Company’s held-to-maturity securities had $76.6 million of gross unrecognized holding gains and $19.2 million of gross unrecognized holding losses by maturity as of December 31, 2017. The Company does not consider these unrecognized holding losses to be other-than-temporary based on certain positive factors associated with the securities which include credit ratings of the guarantor, financial health of the issuer and guarantor, continued access of the issuer to capital markets and other pertinent information.

Variable Interest Entity

The Company holds certain investments in entities in which its ownership interests could possibly be considered variable interests under Topic 810 of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC” or “Codification”) (excluding debt and equity securities held as trading, available for sale, or held to maturity). The Company reviews the characteristics of each of these applicable entities and compares those characteristics to applicable criteria to determine whether the entity is a VIE. If the entity is determined to be a VIE, the Company then performs a detailed review to determine whether the interest would be considered a variable interest under the guidance. The Company then performs a qualitative review of all variable interests with the entity and determines whether the Company is the primary beneficiary. ASC 810 provides that an entity is the primary beneficiary of a VIE if the entity has 1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and 2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE.

Based on this analysis, the Company had an interest in one wholly owned subsidiary, Red Mountain, LLC (“Red Mountain”) as of September 30, 2018 and December 31, 2017, that was determined to be a VIE.

The activity most significant to Red Mountain is the issuance of a note in connection with a financing transaction involving Golden Gate V Vermont Captive Insurance Company (“Golden Gate V”) and the Company in which Golden Gate V issued non-recourse funding obligations to Red Mountain and Red Mountain issued the note to Golden Gate V. Credit enhancement on the Red Mountain Note is provided by an unrelated third party. The Company had the power, via its 100% ownership through an affiliate, to direct the activities of the VIE, but did not have the obligation to absorb losses related to the primary risks or sources of variability to the VIE. The variability of loss would be borne primarily by the third party in its function as provider of credit enhancement on the Red Mountain Note. Accordingly, it was determined that the Company is not the primary beneficiary of the VIE. The Company’s risk of loss related to the VIE is limited to its investment of $10,000. Additionally, the Company has guaranteed Red Mountain’s payment obligation for the credit enhancement fee to the unrelated third party provider. As of September 30, 2018, no payments have been made or required related to this guarantee.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company determined the fair value of its financial instruments based on the fair value hierarchy established in FASB guidance referenced in the Fair Value Measurements and Disclosures Topic which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company has adopted the provisions from the FASB guidance that is referenced in the Fair Value Measurements and Disclosures Topic for non-financial assets and liabilities (such as property and equipment, goodwill, and other intangible assets) that are required to be measured at fair value on a periodic basis. The effect on the Company’s periodic fair value measurements for non-financial assets and liabilities was not material.

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 consolidated balance sheets are categorized as follows:

•Level 1: Unadjusted quoted prices for identical assets or liabilities in an active market.

• Level 2: Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly. Level 2 inputs include the following:

a. Quoted prices for similar assets or liabilities in active markets;

b. Quoted prices for identical or similar assets or liabilities in non-active markets;

c. Inputs other than quoted market prices that are observable; and

d. Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

• Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management’s own estimates about the assumptions a market participant would use in pricing the asset or liability.

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, 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	$	—	$	3,406,661	$	—	$	3,406,661
Commercial mortgage-backed securities	4	—		2,214,911		19,467		2,234,378
Other asset-backed securities	4	—		951,874		502,261		1,454,135
U.S. government-related securities	4	946,679		634,300		—		1,580,979
State, municipalities, and political subdivisions	4	—		3,558,073		—		3,558,073
Other government-related securities	4	—		527,646		—		527,646
Corporate securities	4	—		36,231,923		628,284		36,860,207
Redeemable preferred stock	4	69,550		17,589		—		87,139
Total fixed maturity securities - available-for-sale		1,016,229		47,542,977		1,150,012		49,709,218
Fixed maturity securities - trading
Residential mortgage-backed securities	3	—		254,037		—		254,037
Commercial mortgage-backed securities	3	—		135,403		—		135,403
Other asset-backed securities	3	—		83,758		28,012		111,770
U.S. government-related securities	3	26,859		31,222		—		58,081
State, municipalities, and political subdivisions	3	—		296,618		—		296,618
Other government-related securities	3	—		43,030		—		43,030
Corporate securities	3	—		1,564,429		5,223		1,569,652
Redeemable preferred stock	3	3,165		—		—		3,165
Total fixed maturity securities - trading		30,024		2,408,497		33,235		2,471,756
Total fixed maturity securities		1,046,253		49,951,474		1,183,247		52,180,974
Equity securities	3	559,750		—		63,451		623,201
Other long-term investments(1)	3 & 4	52,728		402,312		180,578		635,618
Short-term investments	3	269,266		97,320		—		366,586
Total investments		1,927,997		50,451,106		1,427,276		53,806,379
Cash	3	161,173		—		—		161,173
Assets related to separate accounts	3
Variable annuity	3	13,555,469		—		—		13,555,469
Variable universal life	3	1,077,842		—		—		1,077,842
Total assets measured at fair value on a recurring basis		$	16,722,481	$	50,451,106	$	1,427,276	$	68,600,863
Liabilities:
Annuity account balances(2)	3	$	—	$	—	$	78,463	$	78,463
Other liabilities(1)	3 & 4	8,243		333,156		460,373		801,772
Total liabilities measured at fair value on a recurring basis		$	8,243	$	333,156	$	538,836	$	880,235
(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.

Determination of fair values

The valuation methodologies used to determine the fair values of assets and liabilities reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The Company determines the fair values of certain financial assets and financial liabilities based on quoted market prices, where available. The Company also determines certain fair values based on future cash flows discounted at the appropriate current market rate. Fair values reflect adjustments for counterparty credit quality, the Company’s credit standing, liquidity, and where appropriate, risk margins on unobservable parameters. The following is a discussion of the methodologies used to determine fair values for the financial instruments as listed in the above table.

The fair value of fixed maturity, short-term, and equity securities is determined by management after considering one of three primary sources of information: third party pricing services, non-binding independent broker quotations, or pricing matrices. Security pricing is applied using a “waterfall” approach whereby publicly available prices are first sought from third party pricing services, the remaining unpriced securities are submitted to independent brokers for non-binding prices, or lastly, securities are priced using a pricing matrix. Typical inputs used by these three pricing methods include, but are not limited to: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Third party pricing services price approximately 93.3% of the Company’s available-for-sale and trading fixed maturity securities. Based on the typical trading volumes and the lack of quoted market prices for available-for-sale and trading fixed maturities, third party pricing services derive the majority of security prices from observable market inputs such as recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information outlined above. If there are no recent reported trades, the third party pricing services and brokers may use matrix or model processes to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Certain securities are priced via independent non-binding broker quotations, which are considered to have no significant unobservable inputs. When using non-binding independent broker quotations, the Company obtains one quote per security, typically from the broker from which we purchased the security. A pricing matrix is used to price securities for which the Company is unable to obtain or effectively rely on either a price from a third party pricing service or an independent broker quotation.

The pricing matrix used by the Company begins with current spread levels to determine the market price for the security. The credit spreads, assigned by brokers, incorporate the issuer’s credit rating, liquidity discounts, weighted- average of contracted cash flows, risk premium, if warranted, due to the issuer’s industry, and the security’s time to maturity. The Company uses credit ratings provided by nationally recognized rating agencies.

For securities that are priced via non-binding independent broker quotations, the Company assesses whether prices received from independent brokers represent a reasonable estimate of fair value through an analysis using internal and external cash flow models developed based on spreads and, when available, market indices. The Company uses a market-based cash flow analysis to validate the reasonableness of prices received from independent brokers. These analytics, which are updated daily, incorporate various metrics (yield curves, credit spreads, prepayment rates, etc.) to determine the valuation of such holdings. As a result of this analysis, if the Company determines there is a more appropriate fair value based upon the analytics, the price received from the independent broker is adjusted accordingly. The Company did not adjust any quotes or prices received from brokers during the nine months ended September 30, 2018.

The Company has analyzed the third party pricing services’ valuation methodologies and related inputs and has also evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs that is in accordance with the Fair Value Measurements and Disclosures Topic of the ASC. Based on this evaluation and investment class analysis, each price was classified into Level 1, 2, or 3. Most prices provided by third party pricing services are classified into Level 2 because the significant inputs used in pricing the securities are market observable and the observable inputs are corroborated by the Company. Since the matrix pricing of certain debt securities includes significant non-observable inputs, they are classified as Level 3.

Asset-Backed Securities

This category mainly consists of residential mortgage-backed securities, commercial mortgage-backed securities, and other asset-backed securities (collectively referred to as asset-backed securities or “ABS”). As of September 30, 2018, the Company held $7.0 billion of ABS classified as Level 2. These securities are priced from information provided by a third party pricing service and independent broker quotes. The third party pricing services and brokers mainly value securities using both a market and income approach to valuation. As part of this valuation process they consider the following characteristics of the item being measured to be relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, and 7) credit ratings of the securities.

After reviewing these characteristics of the ABS, the third party pricing service and brokers use certain inputs to determine the value of the security. For ABS classified as Level 2, the valuation would consist of predominantly market observable inputs such as, but not limited to: 1) monthly principal and interest payments on the underlying assets, 2) average life of the security, 3) prepayment speeds, 4) credit spreads, 5) treasury and swap yield curves, and 6) discount margin. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.

As of September 30, 2018, the Company held $549.7 million of Level 3 ABS, which included $521.7 million of other asset-backed securities classified as available-for-sale and $28.0 million of other asset-backed securities classified as trading. These securities are predominantly ARS whose underlying collateral is at least 97% guaranteed by the FFELP. The Company prices its ARS using an income approach valuation model. As part of the valuation process the Company reviews the following characteristics of the ARS in determining the relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, 7) credit ratings of the securities, 8) liquidity premium, and 9) paydown rate. In periods where market activity increases and there are transactions at a price that is not the result of a distressed or forced sale we consider those prices as part of our valuation. If the market activity during a period is solely the result of the issuer redeeming positions we consider those transactions in our valuation, but still consider them to be level three measurements due to the nature of the transaction.

Corporate Securities, U.S. Government-Related Securities, States, Municipals, and Political Subdivisions, and Other Government-Related Securities

As of September 30, 2018, the Company classified approximately $42.9 billion of corporate securities, U.S. government-related securities, states, municipals, and political subdivisions, and other government-related securities as Level 2. The fair value of the Level 2 securities is predominantly priced by broker quotes and a third party pricing service. The Company has reviewed the valuation techniques of the brokers and third party pricing service and has determined that such techniques used Level 2 market observable inputs. The following characteristics of the securities are considered to be the primary relevant inputs to the valuation: 1) weighted- average coupon rate, 2) weighted-average years to maturity, 3) seniority, and 4) credit ratings. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.

The brokers and third party pricing service utilize valuation models that consist of a hybrid income and market approach to valuation. The pricing models utilize the following inputs: 1) principal and interest payments, 2) treasury yield curve, 3) credit spreads from new issue and secondary trading markets, 4) dealer quotes with adjustments for issues with early redemption features, 5) liquidity premiums present on private placements, and 6) discount margins from dealers in the new issue market.

As of September 30, 2018, the Company classified approximately $633.5 million of securities as Level 3 valuations. Level 3 securities primarily represent investments in illiquid bonds for which no price is readily available. To determine a price, the Company uses a discounted cash flow model with both observable and unobservable inputs. These inputs are entered into an industry standard pricing model to determine the final price of the security. These inputs include: 1) principal and interest payments, 2) coupon rate, 3) sector and issuer level spread over treasury, 4) underlying collateral, 5) credit ratings, 6) maturity, 7) embedded options, 8) recent new issuance, 9) comparative bond analysis, and 10) an illiquidity premium.

Equities

As of September 30, 2018, the Company held approximately $63.5 million of equity securities classified as Level 2 and Level 3. Of this total, $63.4 million represents Federal Home Loan Bank (“FHLB”) stock. The Company believes that the cost of the FHLB stock approximates fair value.

Other Long-Term Investments and Other Liabilities

Other long-term investments and other liabilities consist entirely of free-standing and embedded derivative financial instruments. Refer to Note 7, Derivative Financial Instruments for additional information related to derivatives. Derivative financial instruments are valued using exchange prices, independent broker quotations, or pricing valuation models, which utilize market data inputs. Excluding embedded derivatives, as of September 30, 2018, 84.0% of derivatives based upon notional values were priced using exchange prices or independent broker quotations. The remaining derivatives were priced by pricing valuation models, which utilize observable market data inputs to the extent they are available. Inputs used to value derivatives include, but are not limited to, interest swap rates, credit spreads, interest rate and equity market volatility indices, equity index levels, and treasury rates. The Company performs monthly analysis on derivative valuations that includes both quantitative and qualitative analyses.

Derivative instruments classified as Level 1 generally include futures and options, which are traded on active exchange markets.

Derivative instruments classified as Level 2 primarily include swaps, options, and swaptions, which are traded over-the-counter. Level 2 also includes certain centrally cleared derivatives. These derivative valuations are determined using independent broker quotations, which are corroborated with observable market inputs.

Derivative instruments classified as Level 3 were embedded derivatives and include at least one significant non-observable input. A derivative instrument containing Level 1 and Level 2 inputs will be classified as a Level 3 financial instrument in its entirety if it has at least one significant Level 3 input.

The Company utilizes derivative instruments to manage the risk associated with certain assets and liabilities. However, the derivative instruments may not be classified within the same fair value hierarchy level as the associated assets and liabilities. Therefore, the changes in fair value on derivatives reported in Level 3 may not reflect the offsetting impact of the changes in fair value of the associated assets and liabilities.

The embedded derivatives are carried at fair value in “other long-term investments” and “other liabilities” on the Company’s consolidated condensed balance sheet. The changes in fair value are recorded in earnings as “Realized investment gains (losses)-Derivative financial instruments”. Refer to Note 7, Derivative Financial Instruments for more information related to each embedded derivatives gains and losses.

The fair value of the guaranteed living withdrawal benefits (“GLWB”) embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using multiple risk neutral stochastic equity scenarios and policyholder behavior assumptions. The risk neutral scenarios are generated using the current swap curve and projected equity volatilities and correlations. The projected equity volatilities are based on a blend of historical volatility and near-term equity market implied volatilities. The equity correlations are based on historical price observations. For policyholder behavior assumptions, expected lapse and utilization assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the Ruark 2015 ALB table with attained age factors varying from 91.1% - 106.6%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR plus a credit spread (to represent the Company’s non-performance risk). As a result of using significant unobservable inputs, the GLWB embedded derivative is categorized as Level 3. Policyholder assumptions are reviewed on an annual basis.

The balance of the FIA embedded derivative is impacted by policyholder cash flows associated with the FIA product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the FIA embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the 2015 Ruark ALB mortality table modified with company experience, with attained age factors varying from 87% - 100%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the Company’s non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the FIA embedded derivative is categorized as Level 3.

The balance of the indexed universal life (“IUL”) embedded derivative is impacted by policyholder cash flows associated with the IUL product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the IUL embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the SOA 2015 VBT Primary Tables modified with company experience, with attained age factors varying from 37% - 577%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the Company’s non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the IUL embedded derivative is categorized as Level 3.

The Company has assumed and ceded certain blocks of policies under modified coinsurance agreements in which the investment results of the underlying portfolios inure directly to the reinsurers. As a result, these agreements contain embedded derivatives that are reported at fair value. Changes in their fair value are reported in earnings. The investments supporting these agreements are designated as “trading securities”; therefore changes in their fair value are also reported in earnings. As of September 30, 2018, the fair value of the embedded derivative is based upon the relationship between the statutory policy liabilities (net of policy loans) of $2.3 billion and the statutory unrealized gain (loss) of the securities of $60.0 million. As a result, changes in the fair value of the embedded derivatives are largely offset by the changes in fair value of the related investments and each are reported in earnings. The fair value of the embedded derivative is considered a Level 3 valuation due to the unobservable nature of the policy liabilities.

The Company and certain of its subsidiaries have entered into interest support, yearly renewable term (“YRT”) premium support, and portfolio maintenance agreements with PLC. These agreements meet the definition of a derivative and are accounted for at fair value and are considered Level 3 valuations. The fair value of these derivatives as of September 30, 2018 was $90.9 million and is included in Other long-term investments. For information regarding realized gains on these derivatives please refer to Note 7, Derivative Financial Instruments.

The Interest Support Agreement provides that PLC will make payments to Golden Gate II Captive Insurance Company (“Golden Gate II”) if actual investment income on certain of Golden Gate II’s asset portfolios falls below a calculated investment income amount as defined in the Interest Support Agreement. The calculated investment income amount is a level of investment income deemed to be sufficient to support certain of Golden Gate II’s obligations under a reinsurance agreement with the Company, dated July 1, 2007. The derivative is valued using an internal valuation model that assumes a conservative projection of investment income under an adverse interest rate scenario and the probability that the expectation falls below the calculated investment income amount. This derivative had a fair value of $38.5 million as of September 30, 2018. During the three months ended September 30, 2018, Golden Gate II received no payments under this agreement, and during the nine months ended September 30, 2018, Golden Gate II received $0.6 million in payments under this agreement. As of September 30, 2018, certain interest support agreement obligations to Golden Gate II of approximately $4.9 million have been collateralized by PLC. Re-evaluation and, if necessary, adjustments of any support agreement collateralization amounts occur annually during the first quarter pursuant to the terms of the support agreement.

The YRT premium support agreements provide that PLC will make payments to Golden Gate Captive Insurance Company (“Golden Gate”) and Golden Gate II in the event that YRT premium rates increase. The derivatives are valued using an internal valuation model. The valuation model is a probability weighted discounted cash flow model. The value is primarily a function of the likelihood and severity of future YRT premium increases. The fair value of these derivatives as of September 30, 2018 was $49.8 million. As of September 30, 2018, no payments have been made under these agreements.

The portfolio maintenance agreements provide that PLC will make payments to Golden Gate, Golden Gate V, and West Coast Life Insurance Company (“WCL”) in the event of other-than-temporary impairments on investments that exceed defined thresholds. The derivatives are valued using an internal discounted cash flow model. The significant unobservable inputs are the projected probability and severity of credit losses used to project future cash flows on the investment portfolios. The fair value of the portfolio maintenance agreements as of September 30, 2018, was $2.7 million. As of September 30, 2018, no payments have been made under these agreements.

The Funds Withheld derivative results from a reinsurance agreement with Shades Creek where the economic performance of certain hedging instruments held by the Company is ceded to Shades Creek. The value of the Funds Withheld derivative is directly tied to the value of the hedging instruments held in the funds withheld account. The hedging instruments predominantly consist of derivative instruments the fair values of which are classified as a Level 2 measurement; as such, the fair value of the Funds Withheld derivative has been classified as a Level 2 measurement. The fair value of the Funds Withheld derivative as of September 30, 2018, was a liability of $60.4 million.

Annuity Account Balances

The Company records a certain legacy block of FIA reserves at fair value. Based on the characteristics of these reserves, the Company believes that the fund value approximates fair value. The fair value measurement of these reserves is considered a Level 3 valuation due to the unobservable nature of the fund values. The Level 3 fair value as of September 30, 2018 is $78.5 million.

Separate Accounts

Separate account assets are invested in open-ended mutual funds and are included in Level 1.

Valuation of Level 3 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, 2018		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	502,020	Liquidation	Liquidation value	$90 - $97 ($94.92)
			Discounted cash flow	Liquidity premium	0.0% - 1.40% (0.62%)
				Paydown rate	11.09% - 13.15% (12.38%)
Corporate securities	621,392		Discounted cash flow	Spread over treasury	0.90% - 4.23% (1.51%)
Embedded derivatives - GLWB(2)	$	40,048	Actuarial cash flow model	Mortality	87% to 100% of Ruark 2015 ALB Table
				Lapse	Ruark Predictive Model
				Utilization	99%. 10% of policies have a one-time over-utilization of 400%
				Nonperformance risk	0.13% - 0.88%
Liabilities:(1)
Embedded derivative - FIA	256,912		Actuarial cash flow model	Expenses	$145 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% - 0.88%
Embedded derivative - IUL	95,739		Actuarial cash flow model	Mortality	37% - 577% of 2015
					VBT Primary Tables
				Lapse	0.5% - 0.10%, depending on
					duration/distribution channel
					and smoking class
				Nonperformance risk	0.13% - 0.88%
(1) Excludes modified coinsurance arrangements.
(2) The fair value for the GLWB embedded derivative is presented as a net asset.

The chart above excludes Level 3 financial instruments that are valued using broker quotes and for which book value approximates fair value.

The Company has considered all reasonably available quantitative inputs as of September 30, 2018, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $59.9 million of financial instruments being classified as Level 3 as of September 30, 2018. Of the $59.9 million, $47.7 million are other asset-backed securities, and $12.1 million are corporate securities.

In certain cases the Company has determined that book value materially approximates fair value. As of September 30, 2018, the Company held $63.4 million of financial instruments where book value approximates fair value which were predominantly FHLB stock.

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.

The chart above excludes Level 3 financial instruments that are valued using broker quotes and for which book value approximates fair value.

The Company had considered all reasonably available quantitative inputs as of December 31, 2017, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $50.0 million of financial instruments being classified as Level 3 as of December 31, 2017. Of the $50.0 million, $35.4 million are other asset backed securities, and $14.6 million are corporate securities.

In certain cases the Company has determined that book value materially approximates fair value. As of December 31, 2017, the Company held $65.5 million of financial instruments where book value approximates fair value which are predominantly FHLB stock.

The asset-backed securities classified as Level 3 are predominantly ARS. A change in the paydown rate (the projected annual rate of principal reduction) of the ARS can significantly impact the fair value of these securities. A decrease in the paydown rate would increase the projected weighted average life of the ARS and increase the sensitivity of the ARS’ fair value to changes in interest rates. An increase in the liquidity premium would result in a decrease in the fair value of the securities, while a decrease in the liquidity premium would increase the fair value of these securities. The liquidation values for these securities are sensitive to the issuer’s available cash flows and ability to redeem the securities, as well as the current holders’ willingness to liquidate at the specified price.

The fair value of corporate bonds classified as Level 3 is sensitive to changes in the interest rate spread over the corresponding U.S. Treasury rate. This spread represents a risk premium that is impacted by company-specific and market factors. An increase in the spread can be caused by a perceived increase in credit risk of a specific issuer and/or an increase in the overall market risk premium associated with similar securities. The fair values of corporate bonds are sensitive to changes in spread. When holding the treasury rate constant, the fair value of corporate bonds increases when spreads decrease and decreases when spreads increase.

The fair value of the GLWB embedded derivative is sensitive to changes in the discount rate which includes the Company’s nonperformance risk, volatility, lapse, and mortality assumptions. The volatility assumption is an observable input as it is based on market inputs. The Company’s nonperformance risk, lapse, and mortality are unobservable. An increase in the three unobservable assumptions would result in a decrease in the fair value of the liability and conversely, if there is a decrease in the assumptions the fair value would increase. The fair value is also dependent on the assumed policyholder utilization of the GLWB where an increase in assumed utilization would result in an increase in the fair value of the liability and conversely, if there is a decrease in the assumption, the fair value would decrease.

The fair value of the FIA embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the FIA embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and nonperformance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

The fair value of the IUL embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the IUL embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and non-performance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended September 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	$	21,780	$	—	$	—	$	—		$	(538	)	$	—	$	—		$	—	$	—	$	(21,281	)	$	39		$	—	$	—
Commercial mortgage-backed securities	47,227		—		—		—			(1,212		)	—		(151		)	—		—		(26,372		)	(25		)	19,467		—
Other asset-backed securities	515,701		—		17		(62		)	(14,802		)	—		(24		)	—		—		—			1,431			502,261		—
Corporate securities	644,811		—		1,422		—			(4,044		)	15,000		(47,935		)	—		—		19,903			(873		)	628,284		—
Total fixed maturity securities - available-for-sale	1,229,519		—		1,439		(62		)	(20,596		)	15,000		(48,110		)	—		—		(27,750		)	572			1,150,012		—
Fixed maturity securities - trading
Other asset-backed securities	24,852		84		—		(76		)	—			4,128		(926		)	—		—		—			(50		)	28,012		68
Corporate securities	5,254		—		—		(6		)	—			—		—			—		—		—			(25		)	5,223		(6		)
Total fixed maturity securities - trading	30,106		84		—		(82		)	—			4,128		(926		)	—		—		—			(75		)	33,235		62
Total fixed maturity securities	1,259,625		84		1,439		(144		)	(20,596		)	19,128		(49,036		)	—		—		(27,750		)	497			1,183,247		62
Equity securities	65,553		—		—		—			—			—		(2,102		)	—		—		—			—			63,451		287
Other long-term investments(1)	170,594		11,899		—		(1,915		)	—			—		—			—		—		—			—			180,578		9,984
Total investments	1,495,772		11,983		1,439		(2,059		)	(20,596		)	19,128		(51,138		)	—		—		(27,750		)	497			1,427,276		10,333
Total assets measured at fair value on a recurring basis	$	1,495,772	$	11,983	$	1,439	$	(2,059	)	$	(20,596	)	$	19,128	$	(51,138	)	$	—	$	—	$	(27,750	)	$	497		$	1,427,276	$	10,333
Liabilities:
Annuity account balances(2)	$	80,098	$	—	$	—	$	(896	)	$	—		$	—	$	—		$	40	$	2,571	—			$	—		$	78,463	$	—
Other liabilities(1)	457,008		38,249		—		(41,614		)	—			—		—			—		—		—			—			460,373		(3,365		)
Total liabilities measured at fair value on a recurring basis	$	537,106	$	38,249	$	—	$	(42,510	)	$	—		$	—	$	—		$	40	$	2,571	$	—		$	—		$	538,836	$	(3,365	)
(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

For the three months ended September 30, 2018, there were$19.9 millionsecurities transferred into Level 3.

For the three months ended September 30, 2018, there were $47.7 million securities transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were priced internally using significant unobservable inputs where market observable inputs were not available in previous periods but were priced by independent pricing services or brokers as of September 30, 2018.

For thethree months ended September 30, 2018, there wereno transfers from Level 2 to Level 1.

For the three months ended September 30, 2018, there were no transfers from Level 1 into Level 2.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the nine months ended September 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	$	—	$	—	$	—	$	—		$	(995	)	$	22,225	$	—		$	—	$	—		$	(21,281	)	$	51		$	—	$	—
Commercial mortgage-backed securities	—		—		—		—			(2,496		)	48,621		(245		)	—		—			(26,372		)	(41		)	19,467		—
Other asset-backed securities	504,365		—		11,884		(62		)	(16,449		)	—		(47		)	—		—			222			2,348			502,261		—
Corporate securities	626,901		—		8,483		—			(22,973		)	93,491		(86,388		)	—		—			12,009			(3,239		)	628,284		—
Total fixed maturity securities - available-for-sale	1,131,266		—		20,367		(62		)	(42,913		)	164,337		(86,680		)	—		—			(35,422		)	(881		)	1,150,012		—
Fixed maturity securities - trading
Other asset-backed securities	35,222		278		—		(3,674		)	—			8,728		(12,595		)	—		—			164			(111		)	28,012		(3,337		)
Corporate securities	5,442		—		—		(145		)	—			—		—			—		—			—			(74		)	5,223		(145		)
Total fixed maturity securities - trading	40,664		278		—		(3,819		)	—			8,728		(12,595		)	—		—			164			(185		)	33,235		(3,482		)
Total fixed maturity securities	1,171,930		278		20,367		(3,881		)	(42,913		)	173,065		(99,275		)	—		—			(35,258		)	(1,066		)	1,183,247		(3,482		)
Equity securities	65,518		1		—		(1		)	—			36		(2,102		)	—		—			—			(1		)	63,451		224
Other long-term investments(1)	160,466		34,303		—		(13,564		)	—			—		—			—		(627		)	—			—			180,578		20,112
Short-term investments	—		—		—		—			—			—		—			—		—			—			—			—		—
Total investments	1,397,914		34,582		20,367		(17,446		)	(42,913		)	173,101		(101,377		)	—		(627		)	(35,258		)	(1,067		)	1,427,276		16,854
Total assets measured at fair value on a recurring basis	$	1,397,914	$	34,582	$	20,367	$	(17,446	)	$	(42,913	)	$	173,101	$	(101,377	)	$	—	$	(627	)	$	(35,258	)	$	(1,067	)	$	1,427,276	$	16,854
Liabilities:
Annuity account balances(2)	$	83,472	$	—	$	—	$	(2,749	)	$	—		$	—	$	—		$	570	$	8,328		—			$	—		$	78,463	$	—
Other liabilities(1)	597,562		226,359		—		(89,170		)	—			—		—			—		—			—			—			460,373		137,189
Total liabilities measured at fair value on a recurring basis	$	681,034	$	226,359	$	—	$	(91,919	)	$	—		$	—	$	—		$	570	$	8,328		$	—		$	—		$	538,836	$	137,189
(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

For the nine months ended September 30, 2018, there were$30.9 millionsecurities transferred into Level 3.

For the nine months ended September 30, 2018, there were $66.2 million securities transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were priced internally using significant unobservable inputs where market observable inputs were not available in previous periods but were priced by independent pricing services or brokers as of September 30, 2018.

For thenine months ended September 30, 2018, there wereno transfers from Level 2 to Level 1.

For the nine months ended September 30, 2018, there were no transfers from Level 1 into Level 2.

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.

For the three months ended September 30, 2017, there were no securities transferred into Level 3.

For the three months ended September 30, 2017, $17.4 million of securities were transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were priced internally using significant unobservable inputs where market observable inputs were not available in previous periods but were priced by independent pricing services or brokers as of September 30, 2017.

For the three months ended September 30, 2017, there were no securities transferred into Level 1.

For the three months ended September 30, 2017, there were no securities transferred into Level 2.

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	)	$	—	$	—
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
Short-term investments	—		—		—		—			—			—		—			—		—		—			—			—		—
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.

For the nine months ended September 30, 2017, there was an immaterial amount of securities transferred into Level 3.

For the nine months ended September 30, 2017, $28.9 million of securities were transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were priced internally using significant unobservable inputs where market observable inputs were not available in previous periods but were priced by independent pricing services or brokers as of September 30, 2017.

For the nine months ended September 30, 2017, there were no securities transferred into Level 1.

For the nine months ended September 30, 2017, there were no securities transferred into Level 2.

Total realized and unrealized gains (losses) on Level 3 assets and liabilities are primarily reported in either realized investment gains (losses) within the consolidated condensed statements of income (loss) or other comprehensive income (loss) within shareowner’s equity based on the appropriate accounting treatment for the item.

Purchases, sales, issuances, and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily relates to purchases and sales of fixed maturity securities and issuances and settlements of fixed indexed annuities.

The Company reviews the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting period in which the changes occur. The asset transfers in the table(s) above primarily related to positions moved from Level 3 to Level 2 as the Company determined that certain inputs were observable.

The amount of total gains (losses) for assets and liabilities still held as of the reporting date primarily represents changes in fair value of trading securities and certain derivatives that exist as of the reporting date and the change in fair value of fixed indexed annuities.

Estimated Fair Value of 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, 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	$	7,572,349	$	7,335,547	$	6,817,723	$	6,740,177
Policy loans	3	1,703,462		1,703,462		1,615,615		1,615,615
Fixed maturities, held-to-maturity(1)	3	2,653,605		2,577,841		2,718,904		2,776,327
Liabilities:
Stable value product account balances	3	$	5,211,668	$	5,147,084	$	4,698,371	$	4,698,868
Future policy benefits and claims(2)	3	223,091		223,091		220,498		220,498
Other policyholders’ funds(3)	3	131,338		130,672		133,508		134,253
Debt:(4)
Non-recourse funding obligations(5)	3	$	2,890,435	$	2,814,355	$	2,952,822	$	2,980,495
Subordinated funding obligations	3	110,000		97,451		—		—
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 $1.4 million and $1.7 million as of September 30, 2018 and December 31, 2017, respectively.
(5) As of September 30, 2018, carrying amount of $2.6 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.

Fair Value Measurements

Mortgage loans on real estate

The Company estimates the fair value of mortgage loans using an internally developed model. This model includes inputs derived by the Company based on assumed discount rates relative to the Company’s current mortgage loan lending rate and an expected cash flow analysis based on a review of the mortgage loan terms. The model also contains the Company’s determined representative risk adjustment assumptions related to credit and liquidity risks.

Policy loans

The Company believes the fair value of policy loans approximates book value. Policy loans are funds provided to policyholders in return for a claim on the policy. The funds provided are limited to the cash surrender value of the underlying policy. The nature of policy loans is to have a negligible default risk as the loans are fully collateralized by the value of the policy. Policy loans do not have a stated maturity and the balances and accrued interest are repaid either by the policyholder or with proceeds from the policy. Due to the collateralized nature of policy loans and unpredictable timing of repayments, the Company believes the fair value of policy loans approximates carrying value.

Fixed maturities, held-to-maturity

The Company estimates the fair value of its fixed maturity, held-to-maturity securities using internal discounted cash flow models. The discount rates used in the model are based on a current market yield for similar financial instruments.

Stable value product and other investment contract balances

The Company estimates the fair value of stable value product account balances and other investment contract balances (included in Future policy benefits and claims as well as Other policyholder funds line items on our balance sheet) using models based on discounted expected cash flows. The discount rates used in the models are based on a current market rate for similar financial instruments.

Funding obligations

The Company estimates the fair value of its subordinated and non-recourse funding obligations using internal discounted cash flow models. The discount rates used in the model are based on a current market yield for similar financial instruments.

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DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

Types of Derivative Instruments and Derivative Strategies

The Company utilizes a risk management strategy that incorporates the use of derivative financial instruments to reduce exposure to certain risks, including but not limited to, interest rate risk, currency exchange risk, volatility risk, and equity market risk. These strategies are developed through the Company’s analysis of data from financial simulation models and other internal and industry sources and are then incorporated into the Company’s risk management program.

Derivative instruments expose the Company to credit and market risk and could result in material changes from period to period. The Company attempts to minimize its credit in connection with its overall asset/liability management programs and risk management strategies. In addition, all derivative programs are monitored by our risk management department.

Derivatives Related to Interest Rate Risk Management

Derivative instruments that are used as part of the Company’s interest rate risk management strategy include interest rate swaps, interest rate futures, interest rate caps, and interest rate swaptions.

Derivatives Related to Foreign Currency Exchange Risk Management

Derivative instruments that are used as part of the Company’s foreign currency exchange risk management strategy include foreign currency swaps, foreign currency futures, foreign equity futures, and foreign equity options.

Derivatives Related to Risk Mitigation of Certain Annuity Contracts

The Company may use the following types of derivative contracts to mitigate its exposure to certain guaranteed benefits related to VA contracts, fixed indexed annuities, and indexed universal life contracts:

•Foreign Currency Futures

•Variance Swaps

•Interest Rate Futures

•Equity Options

•Equity Futures

•Credit Derivatives

•Interest Rate Swaps

•Interest Rate Swaptions

•Volatility Futures

•Volatility Options

•Funds Withheld Agreement

•Total Return Swaps

Other Derivatives

The Company and certain of its subsidiaries have derivatives with PLC. These derivatives consist of an interest support agreement, YRT premium support agreements, and portfolio maintenance agreements with PLC.

The Company has a funds withheld account that consists of various derivative instruments held by us that is used to hedge the GLWB and GMDB riders. The economic performance of derivatives in the funds withheld account is ceded to Shades Creek. The funds withheld account is accounted for as a derivative financial instrument.

Accounting for Derivative Instruments

The Company records its derivative financial instruments in the consolidated balance sheet in “other long-term investments” and “other liabilities” in accordance with GAAP, which requires that all derivative instruments be recognized in the balance sheet at fair value. The change in the fair value of derivative financial instruments is reported either in the statement of income or in other comprehensive income (loss), depending upon whether it qualified for and also has been properly identified as being part of a hedging relationship, and also on the type of hedging relationship that exists.

For a derivative financial instrument to be accounted for as an accounting hedge, it must be identified and documented as such on the date of designation. For cash flow hedges, the effective portion of their realized gain or loss is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged item impacts earnings. Any remaining gain or loss, the ineffective portion, is recognized in current earnings. For fair value hedge derivatives, their gain or loss as well as the offsetting loss or gain attributable to the hedged risk of the hedged item is recognized in current earnings. Effectiveness of the Company’s hedge relationships is assessed on a quarterly basis.

The Company reports changes in fair values of derivatives that are not part of a qualifying hedge relationship through earnings in the period of change. Changes in the fair value of derivatives that are recognized in current earnings are reported in “Realized investment gains (losses)-Derivative financial instruments.”

Derivative Instruments Designated and Qualifying as Hedging Instruments

Cash-Flow Hedges

• To hedge a fixed rate note denominated in a foreign currency, the Company entered into a fixed-to-fixed foreign currency swap in order to hedge the foreign currency exchange risk associated with the note. The cash flows received on the swap are identical to the cash flow paid on the note.

• To hedge a floating rate note, the Company entered into an interest rate swap to exchange the floating rate on the note for a fixed rate in order to hedge the interest rate risk associated with the note. The cash flows received on the swap are identical to the cash flow variability paid on the note.

Derivative Instruments Not Designated and Not Qualifying as Hedging Instruments

The Company uses various other derivative instruments for risk management purposes that do not qualify for hedge accounting treatment. Changes in the fair value of these derivatives are recognized in earnings during the period of change.

Derivatives Related to Variable Annuity Contracts

• The Company uses equity futures, equity options, total return swaps, interest rate futures, interest rate swaps, interest rate swaptions, currency futures, volatility futures, volatility options, and variance swaps to mitigate the risk related to certain guaranteed minimum benefits, including GLWB, within its VA products. In general, the cost of such benefits varies with the level of equity and interest rate markets, foreign currency levels, and overall volatility.

• The Company markets certain VA products with a GLWB rider. The GLWB component is considered an embedded derivative, not considered to be clearly and closely related to the host contract.

• The Company has a funds withheld account that consists of various derivative instruments held by the Company that are used to hedge the GLWB and GMDB riders. The economic performance of derivatives in the funds withheld account is ceded to Shades Creek. The funds withheld account is accounted for as a derivative financial instrument.

Derivatives Related to Fixed Annuity Contracts

• The Company uses equity futures and options to mitigate the risk within its fixed indexed annuity products. In general, the cost of such benefits varies with the level of equity markets and overall volatility.

• The Company markets certain fixed indexed annuity products. The FIA component is considered an embedded derivative as it is, not considered to be clearly and closely related to the host contract.

Derivatives Related to Indexed Universal Life Contracts

• The Company uses equity, futures, and options to mitigate the risk within its indexed universal life products. In general, the cost of such benefits varies with the level of equity markets.

• The Company markets certain IUL products. The IUL component is considered an embedded derivative as it is not considered to be clearly and closely related to the host contract.

Other Derivatives

• The Company and certain of its subsidiaries have an interest support agreement, two YRT premium support agreements, and three portfolio maintenance agreements with PLC. The Company entered into three separate portfolio maintenance agreements, two in October 2012 and one in January 2016.

• The Company uses various swaps and other types of derivatives to manage risk related to other exposures.

• The Company is involved in various modified coinsurance and funds withheld arrangements which contain embedded derivatives. Changes in their fair value are recorded in current period earnings. The investment portfolios that support the related modified coinsurance reserves and funds withheld arrangements had fair value changes which substantially offset the gains or losses on these embedded derivatives.

The following table sets forth realized investments gains and losses for the periods shown:

Realized investment gains (losses) - derivative financial instruments

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Derivatives related to VA contracts:
Interest rate futures	$	2,111		$	549		$	(13,229	)	$	16,746
Equity futures	(5,733		)	(25,959		)	(23,025		)	(75,389		)
Currency futures	3,410			(6,092		)	7,890			(22,366		)
Equity options	(21,206		)	(23,307		)	(47,406		)	(76,376		)
Interest rate swaptions	—			(292		)	(14		)	(2,423		)
Interest rate swaps	(41,288		)	5,342			(131,147		)	31,331
Total return swaps	(32,343		)	(8,057		)	(35,908		)	(9,675		)
Embedded derivative - GLWB	22,931			485			55,595			(13,306		)
Funds withheld derivative	37,444			35,821			68,341			103,746
Total derivatives related to VA contracts	(34,674		)	(21,510		)	(118,903		)	(47,712		)
Derivatives related to FIA contracts:
Embedded derivative	(14,360		)	(18,606		)	(7,957		)	(40,351		)
Equity futures	(388		)	66			(716		)	161
Equity options	18,474			11,242			21,203			29,511
Total derivatives related to FIA contracts	3,726			(7,298		)	12,530			(10,679		)
Derivatives related to IUL contracts:
Embedded derivative	(9,535		)	(297		)	(877		)	(10,958		)
Equity futures	(1		)	58			135			(878		)
Equity options	4,928			1,975			5,764			6,437
Total derivatives related to IUL contracts	(4,608		)	1,736			5,022			(5,399		)
Embedded derivative - Modco reinsurance treaties	10,811			(19,746		)	138,652			(90,314		)
Derivatives with PLC(1)	(1,913		)	52,077			(66		)	34,671
Other derivatives	(52		)	43			(59		)	41
Total realized gains (losses) - derivatives	$	(26,710	)	$	5,302		$	37,176		$	(119,392	)
(1) These derivatives include the Interest, YRT premium support, and portfolio maintenance agreements between certain of the Company’s subsidiaries and PLC.

The following table presents the components of the gain or loss on derivatives that qualify as a cash flow hedging relationship.

Gain (Loss) on Derivatives in Cash Flow Hedging Relationship

	Amount of Gains (Losses) Deferred in Accumulated Other Comprehensive Income (Loss) on Derivatives		Amount and Location of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)			Amount and Location of (Losses) Recognized in Income (Loss) on Derivatives
	(Effective Portion)		(Effective Portion)			(Ineffective Portion)
			Benefits and settlement expenses			Realized investment gains (losses)
	(Dollars In Thousands)
For The Three Months Ended September 30, 2018
Foreign currency swaps	$	190	$	(155	)	$	—
Interest rate swaps	101		(326		)	—
Total	$	291	$	(481	)	$	—
For The Nine Months Ended September 30, 2018
Foreign currency swaps	$	3,772	$	(473	)	$	—
Interest rate swaps	101		(326		)	—
Total	$	3,873	$	(799	)	$	—
For The Three Months Ended September 30, 2017
Foreign currency swaps	$	1,273	$	(38	)	$	—
Total	$	1,273	$	(38	)	$	—
For The Nine Months Ended September 30, 2017
Foreign currency swaps	$	55	$	(396	)	$	—
Total	$	55	$	(396	)	$	—

Based on expected cash flows of the underlying hedged items, the Company expects to reclassify $0.3 million out of accumulated other comprehensive income into earnings during the next twelve months.

The table below presents information about the nature and accounting treatment of the Company’s primary derivative financial instruments and the location in and effect on the consolidated condensed financial statements for the periods presented below:

	As of
	September 30, 2018				December 31, 2017
	Notional Amount		Fair Value		Notional Amount		Fair Value
	(Dollars In Thousands)
Other long-term investments
Cash flow hedges:
Interest rate swaps	$	350,000	$	—	$	—	$	—
Foreign currency swaps	117,178		10,902		117,178		6,016
Derivatives not designated as hedging instruments:
Interest rate swaps	565,000		8,402		1,265,000		55,411
Total return swaps	482,523		3,676		190,938		135
Derivatives with PLC(1)	2,863,575		90,885		2,810,469		91,578
Embedded derivative - Modco reinsurance treaties	322,308		2,650		64,472		1,009
Embedded derivative - GLWB	2,692,724		87,043		2,116,935		67,879
Interest rate futures	875,566		8,329		1,071,870		3,178
Equity futures	205,872		2,387		62,266		154
Currency futures	135,112		1,096		1,117		2
Equity options	6,026,348		420,107		4,436,467		403,961
Interest rate swaptions	—		—		225,000		14
Other	157		141		157		200
	$	14,636,363	$	635,618	$	12,361,869	$	629,537
Other liabilities
Derivatives not designated as hedging instruments:
Interest rate swaps	$	1,547,500	$	26,321	$	597,500	$	2,960
Total return swaps	—		—		243,388		318
Embedded derivative - Modco reinsurance treaties	2,082,638		60,683		2,390,539		215,247
Funds withheld derivative	1,813,454		60,432		1,502,726		61,729
Embedded derivative - GLWB	1,385,123		46,995		1,939,320		83,427
Embedded derivative - FIA	2,459,246		256,912		1,951,650		218,676
Embedded derivative - IUL	219,226		95,739		168,349		80,212
Interest rate futures	348,749		7,122		230,404		917
Equity futures	77,916		1,043		318,795		2,593
Currency futures	79,861		15		255,248		2,087
Equity options	4,174,072		246,466		3,112,812		237,807
Other	341		44		—		—
	$	14,188,126	$	801,772	$	12,710,731	$	905,973
(1) These derivatives include the Interest, YRT premium support, and portfolio maintenance agreements between certain of the Company’s subsidiaries and PLC.

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OFFSETTING OF ASSETS AND LIABILITIES

9 Months Ended

Sep. 30, 2018

Offsetting [Abstract]

OFFSETTING OF ASSETS AND LIABILITIES

OFFSETTING OF ASSETS AND LIABILITIES

Certain of the Company’s derivative instruments are subject to enforceable master netting arrangements that provide for the net settlement of all derivative contracts between the Company and a counterparty in the event of default or upon the occurrence of certain termination events. Collateral support agreements associated with each master netting arrangement provide that the Company will receive or pledge financial collateral in the event either minimum thresholds, or in certain cases ratings levels, have been reached. Additionally, certain of the Company’s repurchase agreements provide for net settlement on termination of the agreement. Refer to Note 11, Debt and Other Obligations for details of the Company’s repurchase agreement programs. 

Collateral received includes both cash and non-cash collateral. Cash collateral received by the Company is recorded on the consolidated condensed balance sheet as “cash”, with a corresponding amount recorded in “other liabilities” to represent the Company’s obligation to return the collateral. Non-cash collateral received by the Company is not recognized on the consolidated condensed balance sheet unless the company exercises its right to sell or re-pledge the underlying asset. As of September 30, 2018, the fair value of non-cash collateral received was $8.2 million. As of December 31, 2017, the Company had not received any non-cash collateral.

The tables below present the derivative instruments by assets and liabilities for the Company as of September 30, 2018.

	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
							Financial Instruments		Collateral Received		Net Amount
	(Dollars In Thousands)
Offsetting of Assets
Derivatives:
Free-Standing derivatives	$	454,899	$	—	$	454,899	$	270,878	$	68,809	$	115,212
Total derivatives, subject to a master netting arrangement or similar arrangement	454,899		—		454,899		270,878		68,809		115,212
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	2,650		—		2,650		—		—		2,650
Embedded derivative - GLWB	87,043		—		87,043		—		—		87,043
Derivatives with PLC	90,885		—		90,885		—		—		90,885
Other	141		—		141		—		—		141
Total derivatives, not subject to a master netting arrangement or similar arrangement	180,719		—		180,719		—		—		180,719
Total derivatives	635,618		—		635,618		270,878		68,809		295,931
Total Assets	$	635,618	$	—	$	635,618	$	270,878	$	68,809	$	295,931

	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
							Financial Instruments		Collateral Posted		Net Amount
	(Dollars In Thousands)
Offsetting of Liabilities
Derivatives:
Free-Standing derivatives	$	280,967	$	—	$	280,967	$	270,878	$	10,089	$	—
Total derivatives, subject to a master netting arrangement or similar arrangement	280,967		—		280,967		270,878		10,089		—
Derivatives, not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	60,683		—		60,683		—		—		60,683
Funds withheld derivative	60,432		—		60,432		—		—		60,432
Embedded derivative - GLWB	46,995		—		46,995		—		—		46,995
Embedded derivative - FIA	256,912		—		256,912		—		—		256,912
Embedded derivative - IUL	95,739		—		95,739		—		—		95,739
Other	44		—		44		—		—		44
Total derivatives, not subject to a master netting arrangement or similar arrangement	520,805		—		520,805		—		—		520,805
Total derivatives	801,772		—		801,772		270,878		10,089		520,805
Repurchase agreements(1)	417,094		—		417,094		—		—		417,094
Total Liabilities	$	1,218,866	$	—	$	1,218,866	$	270,878	$	10,089	$	937,899
(1) Borrowings under repurchase agreements are for a term less than 90 days.

The tables below present the derivative instruments by assets and liabilities for the Company as of December 31, 2017.

	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
							Financial Instruments		Collateral Received		Net Amount
	(Dollars In Thousands)
Offsetting of Assets
Derivatives:
Free-Standing derivatives	$	468,871	$	—	$	468,871	$	242,105	$	108,830	$	117,936
Total derivatives, subject to a master netting arrangement or similar arrangement	468,871		—		468,871		242,105		108,830		117,936
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	1,009		—		1,009		—		—		1,009
Embedded derivative - GLWB	67,879		—		67,879		—		—		67,879
Derivatives with PLC	91,578		—		91,578		—		—		91,578
Other	200		—		200		—		—		200
Total derivatives, not subject to a master netting arrangement or similar arrangement	160,666		—		160,666		—		—		160,666
Total derivatives	629,537		—		629,537		242,105		108,830		278,602
Total Assets	$	629,537	$	—	$	629,537	$	242,105	$	108,830	$	278,602

	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
							Financial Instruments		Collateral Posted		Net Amount
	(Dollars In Thousands)
Offsetting of Liabilities
Derivatives:
Free-Standing derivatives	$	246,682	$	—	$	246,682	$	242,105	$	4,577	$	—
Total derivatives, subject to a master netting arrangement or similar arrangement	246,682		—		246,682		242,105		4,577		—
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	215,247		—		215,247		—		—		215,247
Funds withheld derivative	61,729		—		61,729		—		—		61,729
Embedded derivative - GLWB	83,427		—		83,427		—		—		83,427
Embedded derivative - FIA	218,676		—		218,676		—		—		218,676
Embedded derivative - IUL	80,212		—		80,212		—		—		80,212
Total derivatives, not subject to a master netting arrangement or similar arrangement	659,291		—		659,291		—		—		659,291
Total derivatives	905,973		—		905,973		242,105		4,577		659,291
Repurchase agreements(1)	885,000		—		885,000		—		—		885,000
Total Liabilities	$	1,790,973	$	—	$	1,790,973	$	242,105	$	4,577	$	1,544,291
(1) Borrowings under repurchase agreements are for a term less than 90 days.

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MORTGAGE LOANS

9 Months Ended

Sep. 30, 2018

MORTGAGE LOANS

MORTGAGE LOANS

MORTGAGE LOANS

Mortgage Loans

The Company invests a portion of its investment portfolio in commercial mortgage loans. As of September 30, 2018, the Company’s mortgage loan holdings were approximately$7.6 billion. The Company has specialized in making loans on credit-oriented commercial properties, credit-anchored strip shopping centers, senior living facilities, and apartments. The Company’s underwriting procedures relative to its commercial loan portfolio are based, in the Company’s view, on a conservative and disciplined approach. The Company concentrates on a small number of commercial real estate asset types associated with the necessities of life (retail, multi-family, senior living, professional office buildings, and warehouses). The Company believes that these asset types tend to weather economic downturns better than other commercial asset classes in which it has chosen not to participate. The Company believes this disciplined approach has helped to maintain a relatively low delinquency and foreclosure rate throughout its history. The majority of the Company’s mortgage loans portfolio was underwritten by the Company. From time to time, the Company may acquire loans in conjunction with an acquisition.

The Company’s commercial mortgage loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, and net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan’s contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts and prepayment fees are reported in net investment income.

Certain of the mortgage loans have call options that occur within the next 11 years. However, if interest rates were to significantly increase, the Company may be unable to exercise the call options on its existing mortgage loans commensurate with the significantly increased market rates. As of September 30, 2018, assuming the loans are called at their next call dates, approximately $80.7 million of principal would become due for the remainder of 2018, $933.4 million in 2019 through 2023, $91.8 million in 2024 through 2028, and $1.9 million thereafter.

The Company offers a type of commercial mortgage loan under which the Company will permit a loan-to-value ratio of up to 85% in exchange for a participating interest in the cash flows from the underlying real estate. As of September 30, 2018 and December 31, 2017, approximately $757.0 million and $669.3 million, respectively, of the Company’s total mortgage loans principal balance have this participation feature. Cash flows received as a result of this participation feature are recorded as interest income. During the three and nine months ended September 30, 2018 and 2017, the Company recognized $9.5 million, $22.0 million, $14.2 million, and $25.7 million, respectively, of participating mortgage loan income.

As ofSeptember 30, 2018,$3.0 millionof the Company’s invested assets consisted of nonperforming mortgage loans, restructured mortgage loans, or mortgage loans that were foreclosed and were converted to real estate properties. For all mortgage loans, the impact of troubled debt restructurings is generally reflected in our investment balance and in the allowance for mortgage loan credit losses. During the nine months ended September 30, 2018, the Company recognized one troubled debt restructuring as a result of the Company granting a concession to a borrower which included loan terms unavailable from other lenders. This concession was the result of an agreement between the creditor and the debtor, and the Company did not identify any loans whose principal was permanently impaired.

TheCompany’s mortgage loan portfolio consists of two categories of loans: 1) those not subject to a pooling and servicing agreement and 2) those subject to a contractual pooling and servicing agreement. As of September 30, 2018, the Company held $3.0 million of mortgage loans not subject to a pooling and servicing agreement that were nonperforming mortgage loans, restructured, or mortgage loans that were foreclosed and were converted to real estate properties. The Company did not foreclose on any nonperforming loans not subject to a pooling and servicing agreement during the nine months ended September 30, 2018.

As of September 30, 2018,noneof the loans subject to a pooling and servicing agreement were nonperforming or restructured. The Company did not foreclose on any nonperforming loans subject to a pooling and servicing agreement during the nine months ended September 30, 2018.

As of September 30, 2018, the Company had an allowance for mortgage loan credit losses of $1.5 million and as of December 31, 2017, there was no allowance for mortgage loan credit losses. Due to the Company’s loss experience and nature of the loan portfolio, the Company believes that a collectively evaluated allowance would be inappropriate. The Company believes an allowance calculated through an analysis of specific loans that are believed to have a higher risk of credit impairment provides a more accurate presentation of expected losses in the portfolio and is consistent with the applicable guidance for loan impairments in ASC Subtopic 310. Since the Company uses the specific identification method for calculating the allowance, it is necessary to review the economic situation of each borrower to determine those that have higher risk of credit impairment. The Company has a team of professionals that monitors borrower conditions such as payment practices, borrower credit, operating performance, and property conditions, as well as ensuring the timely payment of property taxes and insurance. Through this monitoring process, the Company assesses the risk of each loan. When issues are identified, the severity of the issues are assessed and reviewed for possible credit impairment. If a loss is probable, an expected loss calculation is performed and an allowance is established for that loan based on the expected loss. The expected loss is calculated as the excess carrying value of a loan over either the present value of expected future cash flows discounted at the loan’s original effective interest rate, or the current estimated fair value of the loan’s underlying collateral. A loan may be subsequently charged off at such point that the Company no longer expects to receive cash payments, the present value of future expected payments of the renegotiated loan is less than the current principal balance, or at such time that the Company is party to foreclosure or bankruptcy proceedings associated with the borrower and does not expect to recover the principal balance of the loan.

A charge off is recorded by eliminating the allowance against the mortgage loan and recording the renegotiated loan or the collateral property related to the loan as investment real estate on the balance sheet, which is carried at the lower of the appraised fair value of the property or the unpaid principal balance of the loan, less estimated selling costs associated with the property.

	For The Nine Months Ended September 30, 2018
	(Dollars In Thousands)
Beginning balance, December 31, 2017	$	—
Charge offs	—
Recoveries	(24		)
Provision	1,505
Ending balance, September 30, 2018	$	1,481

It is the Company’s policy to cease to carry accrued interest on loans that are over 90 days delinquent. For loans less than 90 days delinquent, interest is accrued unless it is determined that the accrued interest is not collectible. If a loan becomes over 90 days delinquent, it is the Company’s general policy to initiate foreclosure proceedings unless a workout arrangement to bring the loan current is in place. For loans subject to a pooling and servicing agreement, there are certain additional restrictions and/or requirements related to workout proceedings, and as such, these loans may have different attributes and/or circumstances affecting the status of delinquency or categorization of those in nonperforming status. An analysis of the delinquent loans is shown in the following chart. 

					Greater
	30-59 Days		60-89 Days		than 90 Days		Total
As of September 30, 2018	Delinquent		Delinquent		Delinquent		Delinquent
	(Dollars In Thousands)
Commercial mortgage loans	$	1,180	$	—	$	1,243	$	2,423
Number of delinquent commercial mortgage loans	1		—		1		2
As of December 31, 2017
Commercial mortgage loans	$	1,817	$	—	$	—	$	1,817
Number of delinquent commercial mortgage loans	2		—		—		2

The Company’s commercial mortgage loan portfolio consists of mortgage loans that are collateralized by real estate. Due to the collateralized nature of the loans, any assessment of impairment and ultimate loss given a default on the loans is based upon a consideration of the estimated fair value of the real estate. The Company limits accrued interest income on impaired loans to 90 days of interest. Once accrued interest on the impaired loan is received, interest income is recognized on a cash basis.

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income
	(Dollars In Thousands)
As of September 30, 2018
Commercial mortgage loans:
With no related allowance recorded	$	—	$	—	$	—	$	—	$	—	$	—
With an allowance recorded	5,714		5,327		1,481		1,905		197		225
As of December 31, 2017
Commercial mortgage loans:
With no related allowance recorded	$	—	$	—	$	—	$	—	$	—	$	—
With an allowance recorded	—		—		—		—		—		—

Mortgage loans that were modified in a troubled debt restructuring as of September 30, 2018 and December 31, 2017 were as follows:

	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(Dollars In Thousands)
As of September 30, 2018
Troubled debt restructuring:
Commercial mortgage loans	1	$	2,694	$	1,748
As of December 31, 2017
Troubled debt restructuring:
Commercial mortgage loans	1	$	418	$	418

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GOODWILL

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL

GOODWILL

The balance of goodwill for the Company as of September 30, 2018 was $793.5 million. There has been no change to goodwill during the nine months ended September 30, 2018.

Accounting for goodwill requires an estimate of the future profitability of the associated lines of business to assess the recoverability of the capitalized acquisition goodwill. The Company evaluates the carrying value of goodwill at the segment (or reporting unit) level at least annually and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to: 1) a significant adverse change in legal factors or in business climate, 2) unanticipated competition, or 3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, the Company first determines through qualitative analysis whether relevant events and circumstances indicate that it is more likely than not that segment goodwill balances are impaired as of the testing date. If it is determined that it is more likely than not that impairment exists, the Company compares its estimate of the fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. The Company utilizes a fair value measurement (which includes a discounted cash flows analysis) to assess the carrying value of the reporting units in consideration of the recoverability of the goodwill balance assigned to each reporting unit as of the measurement date. The Company’s material goodwill balances are attributable to certain of its operating segments (which are each considered to be reporting units). The cash flows used to determine the fair value of the Company’s reporting units are dependent on a number of significant assumptions. The Company’s estimates, which consider a market participant view of fair value, are subject to change given the inherent uncertainty in predicting future results and cash flows, which are impacted by such things as policyholder behavior, competitor pricing, capital limitations, new product introductions, and specific industry and market conditions.

The balance recognized as goodwill is not amortized, but is reviewed for impairment on an annual basis, or more frequently as events or circumstances may warrant, including those circumstances which would more likely than not reduce the fair value of the Company’s reporting units below its carrying amount. During the fourth quarter of 2017, the Company performed its annual evaluation of goodwill based on information as of October 1, 2017, and determined that no adjustment to impair goodwill was necessary. During the nine months ended September 30, 2018, the Company did not identify any events or circumstances which would indicate that the fair value of its operating segments would have declined below their book value, either individually or in the aggregate.

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DEBT AND OTHER OBLIGATIONS

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

DEBT AND OTHER OBLIGATIONS

DEBT AND OTHER OBLIGATIONS

Under a revolving line of credit arrangement that was in effect until May 3, 2018 (the “2015 Credit Facility”), the Company had the ability to borrow on an unsecured basis up to an aggregate principal amount of $1.0 billion. The Company had the right in certain circumstances to request that the commitment under the 2015 Credit Facility be increased up to a maximum principal amount of $1.25 billion. Balances outstanding under the 2015 Credit Facility accrued interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of PLC’s Senior Debt, or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent’s Prime rate, (y) 0.50% above the Funds rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of PLC’s Senior Debt. The 2015 Credit Facility also provided for a facility fee at a rate that varies with the ratings of PLC’s Senior Debt and that is calculated on the aggregate amount of commitments under the 2015 Credit Facility, whether used or unused. The annual facility fee rate is 0.125% of the aggregate principal amount. The 2015 Credit Facility provides that PLC is liable for the full amount of any obligations for borrowings or letters of credit, including those of the Company, under the Credit Facility. The maturity date of the 2015 Credit Facility was February 2, 2020.

On May 3, 2018, the Company amended the 2015 Credit Facility (as amended, the “Credit Facility”). Under the Credit Facility, the Company has the ability to borrow on an unsecured basis up to an aggregate principal amount of $1.0 billion. The Company has the right in certain circumstances to request that the commitment under the Credit Facility be increased up to a maximum principal amount of $1.5 billion. Balances outstanding under the Credit Facility accrue interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of PLC’s Senior Debt, or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent’s Prime rate, (y) 0.50% above the Funds rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of PLC’s Senior Debt. The Credit Facility also provided for a facility fee at a rate that varies with the ratings of PLC’s Senior Debt and that is calculated on the aggregate amount of commitments under the Credit Facility, whether used or unused. The annual facility fee rate is 0.125% of the aggregate principal amount. The Credit Facility provides that PLC is liable for the full amount of any obligations for borrowings or letters of credit, including those of the Company, under the Credit Facility. The maturity date of the Credit Facility is May 3, 2023. The Company is not aware of any non-compliance with the financial debt covenants of the Credit Facility as of September 30, 2018. PLC had no outstanding balance as of September 30, 2018.

During 2018, the Company issued $110.0 million of Subordinated Funding Obligations at a rate of 3.55% due 2038.

Non-RecourseFunding Obligations

Non-recourse funding obligations outstanding as of September 30, 2018, on a consolidated basis, are shown in the following table:

Issuer	Outstanding Principal		Carrying Value(1)		Maturity Year	Year-to-Date Weighted-Avg Interest Rate
	(Dollars In Thousands)
Golden Gate Captive Insurance Company(2)(3)	$	1,917,000	$	1,917,000	2039	4.75	%
Golden Gate II Captive Insurance Company	309,849		256,157		2052	4.07	%
Golden Gate V Vermont Captive Insurance Company(2)(3)	655,000		714,921		2037	5.12	%
MONY Life Insurance Company(3)	1,091		2,357		2024	6.19	%
Total	$	2,882,940	$	2,890,435
(1) Carrying values include premiums and discounts and do not represent unpaid principal balances.
(2) Obligations are issued to non-consolidated subsidiaries of PLC. These obligations collateralize certain held-to-maturity securities issued by wholly owned subsidiaries of the Company.
(3) Fixed rate obligations.

Non-recourse funding obligations outstanding as of December 31, 2017, on a consolidated basis, are shown in the following table:

Issuer	Outstanding Principal		Carrying Value(1)		Maturity Year	Year-to-Date Weighted-Avg Interest Rate
	(Dollars In Thousands)
Golden Gate Captive Insurance Company(2)(3)	$	2,014,000	$	2,014,000	2039	4.75	%
Golden Gate II Captive Insurance Company	309,849		255,132		2052	3.11	%
Golden Gate V Vermont Captive Insurance Company(2)(3)	620,000		681,285		2037	5.12	%
MONY Life Insurance Company(3)	1,091		2,405		2024	6.19	%
Total	$	2,944,940	$	2,952,822
(1) Carrying values include premiums and discounts and do not represent unpaid principal balances.
(2) Obligations are issued to non-consolidated subsidiaries of PLC. These obligations collateralize certain held-to-maturity securities issued by wholly owned subsidiaries of the Company.
(3) Fixed rate obligations.

Secured Financing Transactions

Repurchase Program Borrowings

While the Company anticipates that the cash flows of its operating subsidiaries will be sufficient to meet its investment commitments and operating cash needs in a normal credit market environment, the Company recognizes that investment commitments scheduled to be funded may, from time to time, exceed the funds then available. Therefore, the Company has established repurchase agreement programs for certain of its insurance subsidiaries to provide liquidity when needed. The Company expects that the rate received on its investments will equal or exceed its borrowing rate. Under this program, the Company may, from time to time, sell an investment security at a specific price and agree to repurchase that security at another specified price at a later date. These borrowings are typically for a term less than90 days. The market value of securities to be repurchased is monitored and collateral levels are adjusted where appropriate to protect the counterparty against credit exposure. Cash received is invested in fixed maturity securities, and the agreements provided for net settlement in the event of default or on termination of the agreements. As of September 30, 2018, the fair value of securities pledged under the repurchase program was $457.5 million, and the repurchase obligation of $417.1 million was included in the Company’s consolidated condensed balance sheets (at an average borrowing rate of 223 basis points). During the nine months ended September 30, 2018, the maximum balance outstanding at any one point in time related to these programs was $427.5 million. The average daily balance was $225.9 million (at an average borrowing rate of 208 basis points) during the nine months ended September 30, 2018.As ofDecember 31, 2017, the fair value of securities pledged under the repurchase program was $1,006.6 million, and the repurchase obligation of $885.0 million was included in the Company’s consolidated condensed balance sheets (at an average borrowing rate of142basis points). During2017, the maximum balance outstanding at any one point in time related to these programs was $988.5 million. The average daily balance was$624.7 million(at an average borrowing rate of101basis points) during the year endedDecember 31, 2017.

Securities Lending

The Company participates in securities lending, primarily as an investment yield enhancement, whereby securities that are held as investments are loaned out to third parties for short periods of time. The Company requires initial collateral of 102% of the market value of the loaned securities to be separately maintained. The loaned securities’ market value is monitored on a daily basis. As of September 30, 2018, securities with a market value of $92.0 million were loaned under this program. As collateral for the loaned securities, the Company receives short-term investments, which are recorded in “short-term investments” with a corresponding liability recorded in “secured financing liabilities” to account for its obligation to return the collateral. As of September 30, 2018, the fair value of the collateral related to this program was $97.3 million and the Company has an obligation to return $97.3 million of collateral to the securities borrowers.

The following table provides the amount by asset class of securities of collateral pledged for repurchase agreements and securities that have been loaned as part of securities lending transactions as of September 30, 2018 and December 31, 2017:

Repurchase Agreements, Securities Lending Transactions, and Repurchase-to-Maturity Transactions

Accounted for as Secured Borrowings

	Remaining Contractual Maturity of the Agreements
	As of September 30, 2018
	(Dollars In Thousands)
	Overnight and Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions
U.S. Treasury and agency securities	$	401,011	$	56,513	$	—	$	—	$	457,524
Mortgage loans	—		—		—		—		—
Total repurchase agreements and repurchase-to-maturity transactions	401,011		56,513		—		—		457,524
Securities lending transactions
Fixed maturities	91,040		—		—		—		91,040
Equity securities	982		—		—		—		982
Redeemable preferred stock	—		—		—		—		—
Other government related securities	—		—		—		—		—
Total securities lending transactions	92,022		—		—		—		92,022
Total securities	$	493,033	$	56,513	$	—	$	—	$	549,546

Repurchase Agreements, Securities Lending Transactions, and Repurchase-to-Maturity Transactions

Accounted for as Secured Borrowings

	Remaining Contractual Maturity of the Agreements
	As of December 31, 2017
	(Dollars In Thousands)
	Overnight and Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions
U.S. Treasury and agency securities	$	307,633	$	—	$	—	$	—	$	307,633
Mortgage loans	698,974		—		—		—		698,974
Total repurchase agreements and repurchase-to-maturity transactions	1,006,607		—		—		—		1,006,607
Securities lending transactions
Corporate securities	118,817		—		—		—		118,817
Equity securities	5,699		—		—		—		5,699
Redeemable preferred stock	755		—		—		—		755
Total securities lending transactions	125,271		—		—		—		125,271
Total securities	$	1,131,878	$	—	$	—	$	—	$	1,131,878

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Under the insurance guaranty fund laws in most states, insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. From time to time, companies may be asked to contribute amounts beyond prescribed limits. It is possible that the Company could be assessed with respect to product lines not offered by the Company. In addition, legislation may be introduced in various states with respect to guaranty fund assessment laws related to insurance products, including long term care insurance and other specialty products, that increases the cost of future assessments or alters future premium tax offsets received in connection with guaranty fund assessments. The Company cannot predict the amount, nature or timing of any future assessments or legislation, any of which could have a material and adverse impact on the Company’s financial condition or results of operations.

A number of civil jury verdicts have been returned against insurers, broker-dealers, and other providers of financial services involving sales, refund or claims practices, alleged agent misconduct, failure to properly supervise representatives, relationships with agents or persons with whom the insurer does business, and other matters. Often these lawsuits have resulted in the award of substantial judgments that are disproportionate to the actual damages, including material amounts of punitive and non-economic compensatory damages. In some states, juries, judges, and arbitrators have substantial discretion in awarding punitive and non-economic compensatory damages which creates the potential for unpredictable material adverse judgments or awards in any given lawsuit or arbitration. Arbitration awards are subject to very limited appellate review. In addition, in some class action and other lawsuits, companies have made material settlement payments. The financial services and insurance industries in particular are also sometimes the target of law enforcement and regulatory investigations relating to the numerous laws and regulations that govern such companies. Some companies have been the subject of law enforcement or regulatory actions or other actions resulting from such investigations. The Company, in the ordinary course of business, is involved in such matters.

The Company establishes liabilities for litigation and regulatory actions when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. For matters where a loss is believed to be reasonably possible, but not probable, no liability is established. For such matters, the Company may provide an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. The Company reviews relevant information with respect to litigation and regulatory matters on a quarterly and annual basis and updates its established liabilities, disclosures and estimates of reasonably possible losses or range of loss based on such reviews.

The Company and certain of its insurance subsidiaries, as well as certain other insurance companies for which the Company has coinsured blocks of life insurance and annuity policies, are under audit for compliance with the unclaimed property laws of a number of states. The audits are being conducted on behalf of the treasury departments or unclaimed property administrators in such states. The focus of the audits is on whether there have been unreported deaths, maturities, or policies that have exceeded limiting age with respect to which death benefits or other payments under life insurance or annuity policies should be treated as unclaimed property that should be escheated to the state. The Company is presently unable to estimate the reasonably possible loss or range of loss that may result from the audits due to a number of factors, including uncertainty as to the legal theory or theories that may give rise to liability, the early stages of the audits being conducted, and uncertainty as to whether the Company or other companies are responsible for the liabilities, if any, arising in connection with certain co-insured policies. The Company will continue to monitor the matter for any developments that would make the loss contingency associated with the audits reasonably estimable.

The Company and certain of its insurance subsidiaries are under a targeted multi-state examination with respect to their claims paying practices and their use of the U.S. Social Security Administration’s Death Master File or similar databases (a “Death Database”) to identify unreported deaths in their life insurance policies, annuity contracts and retained asset accounts. There is no clear basis in previously existing law for requiring a life insurer to search for unreported deaths in order to determine whether a benefit is owed, and substantial legal authority exists to support the position that the prevailing industry practice was lawful. A number of life insurers, however, have entered into settlement or consent agreements with state insurance regulators under which the life insurers agreed to implement procedures for periodically comparing their life insurance and annuity contracts and retained asset accounts against a Death Database, treating confirmed deaths as giving rise to a death benefit under their policies, locating beneficiaries and paying them the benefits and interest, escheating the benefits and interest to the state if the beneficiary could not be found, and paying penalties to the state, if required. It has been publicly reported that the life insurers have paid administrative and/or examination fees to the insurance regulators in connection with the settlement or consent agreements. The Company believes that insurance regulators could demand from the Company administrative and/or examination fees relating to the targeted multi-state examination. Based on publicly reported payments by other life insurers, the Company does not believe such fees, if assessed, would have a material effect on its financial statements.

Advance Trust & Life Escrow Services, LTA, as Securities Intermediary of Life Partners Position Holder Trust v. Protective Life Insurance Company, Case No. 2:18-CV-01290, is a putative class action that was filed on August 13, 2018 in the United States District Court for the Northern District of Alabama. Plaintiff alleges that the Company required policyholders to pay unlawful and excessive cost of insurance charges. Plaintiff seeks to represent all owners of universal life and variable universal life policies issued or administered by the Company or its predecessors that provide that cost of insurance rates are to be determined based on expectations of future mortality experience. The plaintiff seeks class certification, compensatory damages, pre-judgment and post judgment interest, costs, and other unspecified relief. The Companyis vigorously defending this matter and cannot predict the outcome of or reasonably estimate the possible loss or range of loss that might result from this litigation.

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EMPLOYEE BENEFIT PLANS

9 Months Ended

Sep. 30, 2018

Pension and Other Postretirement Benefits Cost (Reversal of Cost) [Abstract]

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS

Components of the net periodic benefit cost of PLC’s defined benefit pension plan for the three and nine months ended September 30, 2018 and 2017, are as follows: 

	For The Three Months Ended September 30,										For The Nine Months Ended September 30,
	2018					2017					2018					2017
	Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan
	(Dollars In Thousands)
Service cost — benefits earned during the period	$	3,006		$	288	$	3,348		$	334	$	9,888		$	1,062	$	10,044		$	1,002
Interest cost on projected benefit obligation	2,577			359		2,191			297		7,371			1,077		6,573			891
Expected return on plan assets	(4,743		)	—		(3,352		)	—		(12,795		)	—		(10,056		)	—
Amortization of prior service cost	—			—		—			—		—			—		—			—
Amortization of actuarial loss/(gain)	—			196		—			118		—			726		—			354
Preliminary net periodic benefit cost	840			843		2,187			749		4,464			2,865		6,561			2,247
Settlement/curtailment expense(1)	—			986		—			—		—			986		—			—
Total net periodic benefit costs	$	840		$	1,829	$	2,187		$	749	$	4,464		$	3,851	$	6,561		$	2,247
(1) The unfunded excess benefit plan triggered settlement accounting for the nine months ended September 30, 2018 since total lump sum payments exceeded the settlement threshold of service cost plus interest cost.

During the nine months ended September 30, 2018, PLC contributed $18.8 million to its defined benefit pension plan for the 2017 plan year. PLC will make contributions in future periods as necessary to at least satisfy minimum funding requirements, to maintain an adjusted funding target attainment percentage (“AFTAP”) of at least 80% and to avoid certain Pension Benefit Guaranty Corporation (“PBGC”) reporting triggers. PLC may also make additional discretionary contributions in excess of the contribution amounts established by the current funding policy.

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables summarize the changes in the accumulated balances for each component of accumulated other comprehensive income (loss) (“AOCI”) as of September 30, 2018 and December 31, 2017.

Changes in Accumulated Other Comprehensive Income (Loss) by Component

	Unrealized Gains and Losses on Investments(2)			Accumulated Gain and Loss Derivatives		Total Accumulated Other Comprehensive Income (Loss)
	(Dollars In Thousands, Net of Tax)
Beginning Balance, December 31, 2017	$	23,069		$	747	$	23,816
Other comprehensive income (loss) before reclassifications	(1,198,669		)	3,060		(1,195,609		)
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings	22			—		22
Amounts reclassified from accumulated other comprehensive income (loss)(1)	(2,042		)	631		(1,411		)
Net current-period other comprehensive income (loss)	(1,200,689		)	3,691		(1,196,998		)
Cumulative effect adjustment	(10,552		)	—		(10,552		)
Ending Balance, September 30, 2018	$	(1,188,172	)	$	4,438	$	(1,183,734	)
(1)  See Reclassification table below for details.
(2)  As of September 30, 2018, net unrealized losses reported in AOCI were offset by $524.1 million due to the impact those net unrealized losses would have had on certain of the Company’s insurance assets and liabilities if the net unrealized losses had been recognized in net income.

Changes in Accumulated Other Comprehensive Income (Loss) by Component

	Unrealized Gains and Losses on Investments(2)			Accumulated Gain and Loss Derivatives			Total Accumulated Other Comprehensive Income (Loss)
	(Dollars In Thousands, Net of Tax)
Beginning Balance, December 31, 2016	$	(655,767	)	$	727		$	(655,040	)
Other comprehensive income (loss) before reclassifications	699,097			(563		)	698,534
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings	7,153			—			7,153
Amounts reclassified from accumulated other comprehensive income (loss)(1)	(944		)	451			(493		)
Net current-period other comprehensive income (loss)	705,306			(112		)	705,194
Cumulative effect adjustments	(26,470		)	132			(26,338		)
Ending Balance, December 31, 2017	$	23,069		$	747		$	23,816
(1) See Reclassification table below for details.
(2)  As of December 31, 2016 and December 31, 2017, net unrealized losses reported in AOCI were offset by $424.1 million and $(6.3) million, respectively, due to the impact those net unrealized losses would have had on certain of the Company’s insurance assets and liabilities if the net unrealized losses had been recognized in net income.

The following tables summarize the reclassifications amounts out of AOCI for the three and nine months ended September 30, 2018 and 2017.

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

For The Three Months Ended September 30, 2018	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Condensed Statements of Income
	(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit(1)	$	(481	)	Benefits and settlement expenses, net of reinsurance ceded
	(481		)	Total before tax
	101			Tax (expense) or benefit
	$	(380	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains (losses)	$	(2,018	)	Realized investment gains (losses): All other investments
Impairments recognized in earnings	(14		)	Net impairment losses recognized in earnings
	(2,032		)	Total before tax
	427			Tax (expense) or benefit
	$	(1,605	)	Net of tax
(1) See Note 7, Derivative Financial Instruments for additional information

For The Nine Months September 30, 2018	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Condensed Statements of Income
	(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit(1)	$	(799	)	Benefits and settlement expenses, net of reinsurance ceded
	(799		)	Total before tax
	168			Tax (expense) or benefit
	$	(631	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains (losses)	$	6,248		Realized investment gains (losses): All other investments
Impairments recognized in earnings	(3,664		)	Net impairment losses recognized in earnings
	2,584			Total before tax
	(542		)	Tax (expense) or benefit
	$	2,042		Net of tax
(1) See Note 7, Derivative Financial Instruments for additional information

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

For The Three Months Ended September 30, 2017	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Condensed Statements of Income
	(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit(1)	$	(38	)	Benefits and settlement expenses, net of reinsurance ceded
	(38		)	Total before tax
	14			Tax (expense) or benefit
	$	(24	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains (losses)	$	690		Realized investment gains (losses): All other investments
Impairments recognized in earnings	(273		)	Net impairment losses recognized in earnings
	417			Total before tax
	(146		)	Tax (expense) or benefit
	$	271		Net of tax

For The Nine Months Ended September 30, 2017	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Condensed Statements of Income
	(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit(1)	$	(396	)	Benefits and settlement expenses, net of reinsurance ceded
	(396		)	Total before tax
	139			Tax (expense) or benefit
	$	(257	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains (losses)	$	9,084		Realized investment gains (losses): All other investments
Impairments recognized in earnings	(8,259		)	Net impairment losses recognized in earnings
	825			Total before tax
	(289		)	Tax (expense) or benefit
	$	536		Net of tax

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INCOME TAXES

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company used its respective estimates for its annual 2018 and 2017 incomes in computing its effective income tax rates for the three and nine months ended September 30, 2018 and 2017. The estimate of the annual 2018 income excluded unrealized gains and losses on equity securities due to an inability to forecast future gains and losses. The Company’s effective tax rate related to continuing operations varied from the maximum federal income tax rates as follows:

	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2018		2017		2018		2017
Statutory federal income tax rate applied to pre-tax income	21.0	%	35.0	%	21.0	%	35.0	%
State income taxes	0.5		0.4		0.5		0.5
Investment income not subject to tax	(3.4	)	(4.0	)	(3.9	)	(3.6	)
Uncertain tax positions	—		(0.1	)	—		0.2
Change in State Tax Rate	—		—		(0.8	)	—
Prior period adjustments	—		(1.7	)	—		(0.8	)
Other	(0.6	)	(0.1	)	(0.5	)	0.1
	17.5	%	29.5	%	16.3	%	31.4	%

In April 2017, a routine review by Congress’ Joint Committee on Taxation related to IRS examinations for 2003 through 2011 was finalized and the Company received an approximate $6.2 million net refund in the fourth quarter of 2017. The resulting net adjustment to the Company’s current income taxes and the collection of this refund for the years 2003 through 2011 did not materially affect the Company or its effective tax rate.

There have been no material changes to the balance of unrecognized tax benefits, where the changes impact earnings, during the quarter ending September 30, 2018. The Company believes that in the next twelve months, none of the unrecognized tax benefits will be reduced.

In general, the Company is no longer subject to income tax examinations by taxing authorities for tax years that began before 2014. Furthermore, due to the aforementioned IRS adjustments to the Company’s pre-2014 taxable income, the Company has amended certain of its 2003 through 2013 state income tax returns. Such amendments will cause such years to remain open, pending the states’ acceptances of the returns.

During the year ended December 31, 2016, the Company entered into a reinsurance transaction. This transaction generated an operating loss on the Company’s consolidated 2016 U.S. income tax return. The Company partially carried back this loss and received refunds for substantially all of the U.S. income taxes it paid in 2014 and 2015 and expects to fully utilize the remaining operating loss carryforward during the carryforward period. Based on the Company’s current assessment of future taxable income, including available tax planning opportunities, the Company anticipates that it is more likely than not that it will generate sufficient taxable income to realize all of its material deferred tax assets. The Company did not record a valuation allowance against its material deferred tax assets as of September 30, 2018 and December 31, 2017.

In the tax year ended December 31, 2017, the Company recognized provisional impacts related to the revaluation of certain deferred tax assets under the Tax Reform Act under Staff Accounting Bulletin No. 118. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional regulatory guidance that may be issued, additional analysis, and resulting changes in interpretations and assumptions the Company has made. Any adjustments to these provisional amounts will be reported as a component of income tax expense (benefit) in the reporting period in which any such adjustments are determined. There are no material adjustments for the nine months ended September 30, 2018. The accounting is expected to be complete by December 22, 2018.

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OPERATING SEGMENTS

9 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

OPERATING SEGMENTS

OPERATINGSEGMENTS

The Company has several operating segments, each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. The Company periodically evaluates its operating segments and makes adjustments to its segment reporting as needed. A brief description of each segment follows.

• The Life Marketing segment markets fixed universal life (“UL”), indexed universal life (“IUL”), variable universal life (“VUL”), bank-owned life insurance (“BOLI”), and level premium term insurance (“traditional”) products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, independent marketing organizations, and affinity groups.

• The Acquisitions segment focuses on acquiring, converting, and servicing policies and contracts acquired from other companies. The segment’s primary focus is on life insurance policies and annuity products that were sold to individuals. The level of the segment’s acquisition activity is predicated upon many factors, including available capital, operating capacity, potential return on capital, and market dynamics. Policies acquired through the Acquisitions segment are typically blocks of business where no new policies are being marketed. Therefore earnings and account values are expected to decline as the result of lapses, deaths, and other terminations of coverage unless new acquisitions are made.

• The Annuities segment markets fixed and VA products. These products are primarily sold through broker-dealers, financial institutions, and independent agents and brokers.

• The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. This segment also issues funding agreements to the FHLB, and markets guaranteed investment contracts (“GICs”) to 401(k) and other qualified retirement savings plans. The Company also has an unregistered funding agreement-backed notes program which provides for offers of notes to both domestic and international institutional investors.

• The Asset Protection segment markets extended service contracts, GAP products, credit life and disability insurance, and other specialized ancillary products to protect consumers’ investments in automobiles and recreational vehicles. GAP products are designed to cover the difference between the scheduled loan pay-off amount and an asset’s actual cash value in the case of a total loss. Each type of specialized ancillary product protects against damage or other loss to a particular aspect of the underlying asset.

• The Corporate and Other segment primarily consists of net investment income on assets supporting our equity capital, unallocated corporate overhead and expenses not attributable to the segments above. This segment includes earnings from several non-strategic or runoff lines of business, various financing and investment-related transactions, and the operations of several small subsidiaries.

 The Company’s management and Board of Directors analyzes and assesses the operating performance of each segment using “pre-tax adjusted operating income (loss)” and “after-tax adjusted operating income (loss)”. Consistent with GAAP accounting guidance for segment reporting, pre-tax adjusted operating income (loss) is the Company’s measure of segment performance. Pre-tax adjusted operating income (loss) is calculated by adjusting “income (loss) before income tax”, by excluding the following items:

• realized gains and losses on investments and derivatives,

• changes in the GLWB embedded derivatives exclusive of the portion attributable to the economic cost of the GLWB,

• actual GLWB incurred claims, and

• the amortization of deferred policy acquisition costs (“DAC”), value of business acquired (“VOBA”), and certain policy liabilities that is impacted by the exclusion of these items.

The items excluded from adjusted operating income (loss) are important to understanding the overall results of operations. Pre-tax adjusted operating income (loss) and after-tax adjusted operating income (loss) are not substitutes for income before income taxes or net income (loss), respectively. These measures may not be comparable to similarly titled measures reported by other companies. The Company believes that pre-tax and after-tax adjusted operating income (loss) enhances management’s and the Board of Directors’ understanding of the ongoing operations, the underlying profitability of each segment, and helps facilitate the allocation of resources.

After-tax adjusted operating income (loss) is derived from pre-tax adjusted operating income (loss) with the inclusion of income tax expense or benefits associated with pre-tax adjusted operating income. Income tax expense or benefits is allocated to the items excluded from pre-tax adjusted operating income (loss) at the statutory federal income tax rate for the associated period. For periods ending on and prior to December 31, 2017, a rate of 35% was used. Beginning in 2018, a statutory federal income tax rate of 21% will be used to allocate income tax expense or benefits to items excluded from pre-tax adjusted operating income (loss). Income tax expense or benefits allocated to after-tax adjusted operating income (loss) can vary period to period based on changes in the Company’s effective income tax rate.

In determining the components of the pre-tax adjusted operating income (loss) for each segment, premiums and policy fees, other income, benefits and settlement expenses, and amortization of DAC and VOBA are attributed directly to each operating segment. Net investment income is allocated based on directly related assets required for transacting the business of that segment. Realized investment gains (losses) and other operating expenses are allocated to the segments in a manner that most appropriately reflects the operations of that segment. Investments and other assets are allocated based on statutory policy liabilities net of associated statutory policy assets, while DAC/VOBA and goodwill are shown in the segments to which they are attributable.

There were no significant intersegment transactions during the three and nine months ended September 30, 2018 and 2017.

The following tables present a summary of results and reconciles pre-tax adjusted operating income (loss) to consolidated income before income tax and net income: 

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Revenues
Life Marketing	$	407,708		$	397,096		$	1,195,074		$	1,174,048
Acquisitions	581,054			375,819			1,469,787			1,164,650
Annuities	110,386			110,870			321,880			357,589
Stable Value Products	59,328			49,933			158,944			132,863
Asset Protection	90,926			93,799			266,747			277,433
Corporate and Other	20,561			77,875			90,686			109,628
Total revenues	$	1,269,963		$	1,105,392		$	3,503,118		$	3,216,211
Pre-tax Adjusted Operating Income (Loss)
Life Marketing	$	3,647		10,798			(18,326		)	$	55,217
Acquisitions	93,648			62,880			208,206			184,825
Annuities	36,249			51,779			112,234			130,128
Stable Value Products	27,126			27,992			76,198			74,258
Asset Protection	7,051			5,187			16,991			13,812
Corporate and Other	(41,927		)	(38,054		)	(119,474		)	(107,741		)
Pre-tax adjusted operating income	125,794			120,582			275,829			350,499
Realized (losses) gains on investments and derivatives	(30,624		)	45,400			(97,829		)	35,413
Income before income tax	95,170			165,982			178,000			385,912
Income tax expense	(16,646		)	(49,016		)	(28,933		)	(120,975		)
Net income	$	78,524		$	116,966		$	149,067		$	264,937
Pre-tax adjusted operating income	$	125,794		$	120,582		$	275,829		$	350,499
Adjusted operating income tax (expense) benefit	(23,077		)	(33,126		)	(49,477		)	(108,580		)
After-tax adjusted operating income	102,717			87,456			226,352			241,919
Realized (losses) gains on investments and derivatives	(30,624		)	45,400			(97,829		)	35,413
Income tax benefit (expense) on adjustments	6,431			(15,890		)	20,544			(12,395		)
Net income	$	78,524		$	116,966		$	149,067		$	264,937
Realized investment (losses) gains:
Derivative financial instruments	$	(26,710	)	$	5,302		$	37,176		$	(119,392	)
All other investments	(20,156		)	18,150			(157,350		)	94,526
Net impairment losses recognized in earnings	(14		)	(273		)	(3,664		)	(8,259		)
Less: related amortization(1)	(5,859		)	(12,123		)	5,060			(38,570		)
Less: VA GLWB economic cost	(10,397		)	(10,098		)	(31,069		)	(29,968		)
Realized (losses) gains on investments and derivatives	$	(30,624	)	$	45,400		$	(97,829	)	$	35,413
(1)  Includes amortization of DAC/VOBA and benefits and settlement expenses that are impacted by realized gains (losses).

	Operating Segment Assets As of September 30, 2018
	(Dollars In Thousands)
	Life Marketing		Acquisitions		Annuities		Stable Value Products
Investments and other assets	$	14,709,504	$	32,234,422	$	21,083,522	$	5,083,328
DAC and VOBA	1,468,989		455,343		876,390		7,001
Other intangibles	267,087		32,622		160,118		7,556
Goodwill	200,274		14,524		336,677		113,813
Total assets	$	16,645,854	$	32,736,911	$	22,456,707	$	5,211,698

	Asset Protection		Corporate and Other		Total Consolidated
Investments and other assets	$	824,282	$	12,857,563	$	86,792,621
DAC and VOBA	171,661		—		2,979,384
Other intangibles	125,251		33,194		625,828
Goodwill	128,182		—		793,470
Total assets	$	1,249,376	$	12,890,757	$	91,191,303

	Operating Segment Assets As of December 31, 2017
	(Dollars In Thousands)
	Life Marketing		Acquisitions		Annuities		Stable Value Products
Investments and other assets	$	14,917,752	$	19,588,133	$	20,774,566	$	4,569,639
DAC and VOBA	1,320,776		74,862		772,634		6,864
Other intangibles	281,705		34,548		170,117		8,056
Goodwill	200,274		14,524		336,677		113,813
Total assets	$	16,720,507	$	19,712,067	$	22,053,994	$	4,698,372

	Asset Protection		Corporate and Other		Total Consolidated
Investments and other assets	$	708,605	$	14,893,253	$	75,451,948
DAC and VOBA	30,265		—		2,205,401
Other intangibles	133,234		35,256		662,916
Goodwill	128,182		—		793,470
Total assets	$	1,000,286	$	14,928,509	$	79,113,735

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

The Company has evaluated the effects of events subsequent to September 30, 2018, and through the date we filed our consolidated condensed financial statements with the United States Securities and Exchange Commission. All accounting and disclosure requirements related to subsequent events are included in our consolidated condensed financial statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

Protective Life Insurance Company (the “Company”), a stock life insurance company, was founded in 1907. The Company is a wholly owned subsidiary of Protective Life Corporation (“PLC”), an insurance holding company. On February 1, 2015, PLC became a wholly owned subsidiary of The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan (now known as Dai-ichi Life Holdings, Inc., “Dai-ichi Life”), when DL Investment (Delaware), Inc. a wholly owned subsidiary of Dai-ichi Life, merged with and into PLC. Prior to February 1, 2015, PLC’s stock was publicly traded on the New York Stock Exchange. Subsequent to the Merger date, PLC and the Company remain as SEC registrants within the United States. The Company markets individual life insurance, credit life and disability insurance, guaranteed investment contracts, guaranteed funding agreements, fixed and variable annuities, and extended service contracts throughout the United States. The Company also maintains a separate segment devoted to the acquisition of insurance policies from other companies. PLC is a holding company with subsidiaries that provide financial services through the production, distribution, and administration of insurance and investment products.

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for the interim periods presented herein. In the opinion of management, the accompanying financial statements reflect all adjustments (consisting only of normal recurring items) necessary for a fair statement of the results for the interim periods presented. Operating results for the three and nine months ended September 30, 2018, are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2018. The year-end consolidated condensed financial data included herein was derived from audited financial statements but does not include all disclosures required by GAAP within this report. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

The operating results of companies in the insurance industry have historically been subject to significant fluctuations due to changing competition, economic conditions, interest rates, investment performance, insurance ratings, claims, persistency, and other factors.

Entities Included

Entities Included

The consolidated condensed financial statements in this report include the accounts of Protective Life Insurance Company and its affiliate companies in which the Company holds a majority voting or economic interest. Intercompany balances and transactions have been eliminated.

Insurance Revenue

Property and casualty insurance products include service contract business, surety bonds, and guaranteed asset protection (“GAP”). Premiums and fees associated with service contracts and GAP products are recognized based on expected claim patterns. For all other products, premiums are generally recognized over the terms of the contract on a pro-rata basis. Commissions and fee income associated with other products are recognized as earned when the related services are provided to the customer. Unearned premium reserves are maintained for the portion of the premiums that is related to the unexpired period of the policy. Benefit reserves are recorded when insured events occur.

Reserves

Benefit reserves include case basis reserves for known but unpaid claims as of the balance sheet date as well as incurred but not reported (“IBNR”) reserves for claims where the insured event has occurred but has not been reported to the Company as of the balance sheet date. The case basis reserves and IBNR are calculated based on historical experience and on assumptions relating to claim severity and frequency, the level of used vehicle prices, and other factors. These assumptions are modified as necessary to reflect anticipated trends.

Accounting Pronouncements Recently Adopted and Not Yet Adopted

Effective January 1, 2018, the Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers. In consideration of the amendments in this Update, the Company revised its recognition pattern for administrative fees associated with certain vehicle service and GAP products. Previously, these fees were recognized based on the work effort involved in satisfying the Company’s contract obligations. The Company will recognize these fees on a claims occurrence basis in future periods. To reflect this change in accounting principle, the Company recorded a cumulative effect adjustment as of January 1, 2018 that resulted in a decrease in retained earnings of $88.6 million. The pre-tax impact to each affected line item on the Company’s financial statements is reflected in the table below:

	As of September 30, 2018
	As Reported		Previous Accounting Method
	(Dollars In Millions)
Financial Statement Line Item:
Balance Sheet
Deferred policy acquisition costs and value of business acquired	$	2,979.4	$	2,840.0
Other liabilities	$	2,150.2	$	1,891.4

	For the Three Months Ended September 30, 2018				For The Nine Months Ended September 30, 2018
	As Reported		Previous Accounting Method		As Reported		Previous Accounting Method
	(Dollars In Millions)				(Dollars In Millions)
Financial Statement Line Item:
Statements of Income
Other income	$	80.9	$	82.4	$	241.3	$	244.9
Amortization of deferred policy acquisition costs and value of business acquired	$	33.5	$	21.9	$	144.2	$	108.1
Other operating expenses, net of reinsurance ceded	$	190.4	$	203.2	$	582.8	$	622.3

Accounting Pronouncements Recently Adopted

ASU No. 2014-09 - Revenue from Contracts with Customers (Topic 606).This Update provides for significant revisions to the recognition of revenue from contracts with customers across various industries. Under the new guidance, entities are required to apply a prescribed 5-step process to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting for revenues associated with insurance products is not within the scope of this Update. The Update was originally effective for annual and interim periods beginning after December 15, 2016. However, in August 2015, the FASB issued ASU No. 2015-14 - Revenues from Contracts with Customers: Deferral of the Effective Date, to defer the effective date of ASU No. 2014-09 by one year to annual and interim periods beginning after December 15, 2017. The Company adopted this Update using the modified retrospective approach via a cumulative effect adjustment to retained earnings as of January 1, 2018. The amendments in the Update, along with clarifying updates issued subsequent to ASU 2014-09, impacted certain revenues associated with the Company’s Asset Protection products. The lines of business to which the revised guidance applies are not material to the Company’s financial statements. In consideration of the amendments in this Update, the Company revised its recognition pattern for administrative fees associated with certain vehicle service and GAP products. Previously, these fees were recognized based on the work effort involved in satisfying the Company’s contract obligations. The Company will recognize these fees on a claims occurrence basis in future periods. To reflect this change in accounting principle, the Company recorded a cumulative effect adjustment as of January 1, 2018 that resulted in a decrease in retained earnings of $88.6 million. See above for additional discussion.

ASU No. 2016-01 - Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most notably, the Update requires that equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) be measured at fair value with changes in fair value recognized in net income. The Update also introduces a single-step impairment model for equity investments without a readily determinable fair value. Additionally, the Update requires changes in instrument-specific credit risk for fair value option liabilities to be recorded in other comprehensive income. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2017 and were applied on a modified retrospective basis. The Company recorded a cumulative-effect adjustment at the date of adoption, January 1, 2018, transferring unrealized gains and losses on available-for-sale equity securities to retained earnings from accumulated other comprehensive income. The impact of this adjustment, net of income tax, resulted in a $10.6 million increase to retained earnings and a corresponding decrease to accumulated other comprehensive income, resulting in no net impact to consolidated shareowner’s equity. The Company has updated its disclosures in Note 5, Investment Operations and Note 6, Fair Value of Financial Instruments in accordance with the ASU.

ASU No. 2016-15 - Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. The amendments in this Update are intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Specific transactions addressed in the new guidance include:Debt prepayment/extinguishment costs, contingent consideration payments, proceeds from the settlement of corporate-owned life insurance policies, and distributions received from equity method investments. The Update does not introduce any new accounting or financial reporting requirements, and is effective for annual and interim periods beginning after December 15, 2017 using the retrospective method. There was no financial impact.

ASU No. 2016-18 - Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Task Force). The amendments in this update provide guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows, thereby reducing diversity in practice related to the presentation of these amounts. The amendments require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Update is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. There was no impact to the Company on adoption.

ASU No. 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business. The purpose of this update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in the Update provide a specific test by which an entity may determine whether an acquisition involves a set of assets or a business. The amendments in the Update are to be applied prospectively for periods beginning after December 15, 2017. The Company has reviewed the revised requirements, and does not anticipate that the changes will impact its policies or recent conclusions related to its acquisition activities.

ASU No. 2017-07 - Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendments in this update require entities to disaggregate the current-service-cost component from other components of net benefit cost and present it with other current compensation costs in the income statement. The other components of net benefit cost must be presented outside of income from operations if that subtotal is presented. In addition, the Update requires entities to disclose the income statement lines that contain the other components if they are not presented on appropriately described separate lines. The amendments in this update are effective for interim and annual periods beginning after December 15, 2017. As provided for in the ASU, the Company expects to apply the provisions of the statement retrospectively for components of net periodic pension costs and prospectively for capitalization of the service costs component of net periodic costs and net periodic postretirement benefits. The Update did not impact the Company’s financial position, results of operations, or current disclosures.

Accounting Pronouncements Not Yet Adopted

ASU No. 2016-02 - Leases. The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of leases. The most significant change will relate to the accounting model used by lessees. The Update will require all leases with terms greater than 12 months to be recorded on the balance sheet in the form of a lease asset and liability. The lease asset and liability will be measured at the present value of the minimum lease payments less any upfront payments or fees. The amendments in the Update are effective for annual and interim periods beginning after December 15, 2018 on a modified retrospective basis. The Company has completed an inventory of all leases in the organization. Based on our lease portfolio as of September 30, 2018, the Company expects to record a right of use asset and lease liability of approximately $21 million on its consolidated condensed balance sheet in the period of adoption. However, the ultimate impact of adopting the ASU will depend on the Company’s lease portfolio as of the adoption date.

ASU No. 2016-13 - Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments. The amendments in this Update introduce a new current expected credit loss (“CECL”) model for certain financial assets, including mortgage loans and reinsurance receivables. The new model will not apply to debt securities classified as available-for-sale. For assets within the scope of the new model, an entity will recognize as an allowance against earnings its estimate of the contractual cash flows not expected to be collected on day one of the asset’s acquisition. The allowance may be reversed through earnings if a security recovers in value. This differs from the current impairment model, which requires recognition of credit losses when they have been incurred and recognizes a security’s subsequent recovery in value in other comprehensive income. The Update also makes targeted changes to the current impairment model for available-for-sale debt securities, which comprise the majority of the Company’s invested assets. Similar to the CECL model, credit loss impairments will be recorded in an allowance against earnings that may be reversed for subsequent recoveries in value. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2019 on a modified retrospective basis. The Company is reviewing its policies and processes to ensure compliance with the requirements in this Update, upon adoption, and assessing the impact this standard will have on its operations and financial results.

ASU No. 2017-08 - Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in this Update require that premiums on callable debt securities be amortized to the first call date. This is a change from current guidance, under which premiums are amortized to the maturity date of the security. The amendments are effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. Transition will be through a modified retrospective approach in which the cumulative effect of application is recorded to retained earnings at the beginning of the annual period in which an entity adopts the revised guidance. Based on our population of callable debt securities held as of September 30, 2018, the Company estimates it would record a reduction to retained earnings of approximately $56.1 million as a result of adopting the ASU. However, the adoption impact will ultimately depend on the population of callable debt securities held as of the adoption date.

ASU No. 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in this Update are designed to permit hedge accounting to be applied to a broader range of hedging strategies as well as to more closely align hedge accounting and risk management objectives. Specific provisions include requiring changes in the fair value of a hedging instrument be recorded in the same income statement line as the hedged item when it affects earnings. In addition, after a hedge has initially qualified as an effective hedge the Update permits the use of a qualitative hedge effectiveness test in subsequent periods. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on its operations or financial results.

ASU No. 2018-12 - Financial Services - Insurance (Topic 944): Targeted Improvements to Accounting for Long-Duration Contracts. The amendments in this Update are designed to make improvements to the existing recognition, measurement, presentation, and disclosure requirements for certain long-duration contracts issued by an insurance company. The new amendments require insurance entities to provide a more current measure of the liability for future policy benefits for traditional and limited-payment contracts by regularly refining the liability for actual past experience and updated future assumptions. This differs from current requirements where assumptions are locked-in at contract issuance for these contract types. In addition, the updated liability will be discounted using an upper-medium grade (low-credit-risk) fixed income instrument yield that reflects the characteristics of the liability which differs from currently used rates based on the invested assets supporting the liability. In addition, the amendments introduce new requirements to assess market-based insurance contract options and guarantees for Market Risk Benefits and measure them at fair value. This Update also requires insurance entities to amortize deferred acquisition costs on a constant-level basis over the expected life of the contract. Finally this Update requires new disclosures including liability rollforwards and information about significant inputs, judgments, assumptions, and methods used in the measurement. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2020 with early adoption permitted. The Company is currently reviewing its policies, processes, and applicable systems to determine the impact this standard will have on its operations and financial results.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Schedule of New Accounting Pronouncements and Changes in Accounting Principles

The pre-tax impact to each affected line item on the Company’s financial statements is reflected in the table below:

	As of September 30, 2018
	As Reported		Previous Accounting Method
	(Dollars In Millions)
Financial Statement Line Item:
Balance Sheet
Deferred policy acquisition costs and value of business acquired	$	2,979.4	$	2,840.0
Other liabilities	$	2,150.2	$	1,891.4

	For the Three Months Ended September 30, 2018				For The Nine Months Ended September 30, 2018
	As Reported		Previous Accounting Method		As Reported		Previous Accounting Method
	(Dollars In Millions)				(Dollars In Millions)
Financial Statement Line Item:
Statements of Income
Other income	$	80.9	$	82.4	$	241.3	$	244.9
Amortization of deferred policy acquisition costs and value of business acquired	$	33.5	$	21.9	$	144.2	$	108.1
Other operating expenses, net of reinsurance ceded	$	190.4	$	203.2	$	582.8	$	622.3

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SIGNIFICANT TRANSACTIONS (Tables)

9 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table details the purchase consideration and preliminary allocation of assets acquired and liabilities assumed from the Life Business reinsurance transaction as of the transaction date. These estimates remain preliminary and are subject to adjustment. While they are not expected to be materially different than those shown, any material adjustments to the estimates will be reflected, retroactively, as of the date of the acquisition.  

	Fair Value as of May 1, 2018
	(Dollars In Thousands)
ASSETS
Fixed maturities	$	12,588,512
Mortgage loans	435,405
Policy loans	131,489
Total investments	13,155,406
Cash	20,669
Accrued investment income	151,610
Reinsurance receivables	337
Value of business acquired	336,437
Other assets	2,542
Total assets	13,667,001
LIABILITIES
Future policy benefits and claims	$	11,744,496
Unearned premiums	—
Total policy liabilities and accruals	11,744,496
Annuity account balances	1,823,444
Other policyholders’ funds	41,954
Other liabilities	57,107
Total liabilities	13,667,001
NET ASSETS ACQUIRED	$	—

Business Acquisition, Pro Forma Information

The following unaudited pro forma condensed consolidated results of operations assumes that the aforementioned transactions of the Life Business were completed as of January 1, 2017. The unaudited pro forma condensed results of operations are presented solely for information purposes and are not necessarily indicative of the consolidated condensed results of operations that might have been achieved had the transaction been completed as of the date indicated.

	Unaudited				Unaudited
	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2018		2017		2018		2017
	(Dollars In Thousands)
Revenue	$	1,269,963	$	1,418,743	$	3,826,857	$	4,170,636
Net income	$	78,524	$	152,971	$	195,211	$	369,826

Schedule of Amortization Of Valuation Of Business Acquired

Based on the balance recorded as of May 1, 2018, the expected amortization of VOBA for the next five years is as follows:

Years	Expected Amortization
	(Dollars In Thousands)
Remainder of 2018	$	5,265
2019	21,063
2020	19,950
2021	18,329
2022	16,611

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MONY CLOSED BLOCK OF BUSINESS (Tables)

9 Months Ended

Sep. 30, 2018

Closed Block Disclosure [Abstract]

Summary of Financial Information of the Policyholder Dividend Obligation

Summarized financial information for the Closed Block as of September 30, 2018 and December 31, 2017 is as follows:

	As of
	September 30, 2018			December 31, 2017
	(Dollars In Thousands)
Closed block liabilities
Future policy benefits, policyholders’ account balances and other policyholder liabilities	$	5,699,118		$	5,791,867
Policyholder dividend obligation	—			160,712
Other liabilities	42,640			30,764
Total closed block liabilities	5,741,758			5,983,343
Closed block assets
Fixed maturities, available-for-sale, at fair value	$	4,339,342		$	4,669,856
Mortgage loans on real estate	76,608			108,934
Policy loans	679,760			700,769
Cash	72,868			31,182
Other assets	144,077			122,637
Total closed block assets	5,312,655			5,633,378
Excess of reported closed block liabilities over closed block assets	429,103			349,965
Portion of above representing accumulated other comprehensive income:
Net unrealized investment gains (losses) net of policyholder dividend obligation: $(149,219) and $(13,429); and net of income tax: $57,054 and $2,820	(96,749		)	—
Future earnings to be recognized from closed block assets and closed block liabilities	$	332,354		$	349,965

Schedule of Reconciliation of the Policyholder Dividend Obligation

Reconciliation of the policyholder dividend obligation is as follows:

	For The Nine Months Ended September 30,
	2018			2017
	(Dollars In Thousands)
Policyholder dividend obligation, beginning of period	$	160,712		$	31,932
Applicable to net revenue (losses)	(24,922		)	(38,147		)
Change in net unrealized investment gains (losses) allocated to the policyholder dividend obligation	(135,790		)	142,219
Policyholder dividend obligation, end of period	$	—		$	136,004

Schedule of Closed Block Revenues and Expenses

Closed Block revenues and expenses were as follows:

	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2018		2017		2018		2017
	(Dollars In Thousands)
Revenues
Premiums and other income	$	39,691	$	40,962	$	121,768	$	128,697
Net investment income	50,833		50,780		152,248		153,481
Net investment gains	40		341		66		448
Total revenues	90,564		92,083		274,082		282,626
Benefits and other deductions
Benefits and settlement expenses	83,588		81,721		251,480		249,319
Other operating expenses	291		621		310		1,216
Total benefits and other deductions	83,879		82,342		251,790		250,535
Net revenues before income taxes	6,685		9,741		22,292		32,091
Income tax expense	1,404		3,409		4,681		11,232
Net revenues	$	5,281	$	6,332	$	17,611	$	20,859

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INVESTMENT OPERATIONS (Tables)

9 Months Ended

Sep. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Realized Gain (Loss) on Investments

Net realized gains (losses) for all other investments are summarized as follows:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Fixed maturities	$	(2,018	)	$	1,042		$	6,248		$	10,482
Equity gains and losses(1)	(6,925		)	(352		)	(16,693		)	(1,398		)
Impairments	(14		)	(273		)	(3,664		)	(8,259		)
Modco trading portfolio	(10,901		)	19,399			(148,427		)	93,181
Other investments	(312		)	(1,939		)	1,522			(7,739		)
Total realized gains (losses) - investments	$	(20,170	)	$	17,877		$	(161,014	)	$	86,267
(1) Beginning January 1, 2018, all changes in the fair market value of equity securities are recorded as a realized gains (loss) as a result of the adoption of ASU No. 2016-01.

Gross realized gains and gross realized losses on investments available-for-sale (fixed maturities and short-term investments) are as follows:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Gross realized gains	$	3,410		$	1,933		$	21,540		$	14,968
Gross realized losses:
Impairment losses	$	(14	)	$	(273	)	$	(3,664	)	$	(8,259	)
Other realized losses	$	(5,428	)	$	(1,243	)	$	(15,292	)	$	(5,884	)

Schedule of Investments' Gross Unrealized Losses and Fair Value of the Company's Investments that are Not Deemed to be Other-than-Temporarily Impaired

The following table includes the gross unrealized losses and fair value of the Company’s investments that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2017:

	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(Dollars In Thousands)
Residential mortgage-backed securities	$	765,641	$	(9,666	)	$	408,460	$	(13,064	)	$	1,174,101	$	(22,730	)
Commercial mortgage-backed securities	750,643		(8,521		)	779,086		(21,031		)	1,529,729		(29,552		)
Other asset-backed securities	86,506		(322		)	134,316		(5,441		)	220,822		(5,763		)
U.S. government-related securities	94,110		(688		)	1,072,232		(31,489		)	1,166,342		(32,177		)
Other government-related securities	24,830		(169		)	115,294		(4,779		)	140,124		(4,948		)
States, municipalities, and political subdivisions	170,268		(1,738		)	1,027,747		(43,875		)	1,198,015		(45,613		)
Corporate securities	5,026,417		(55,649		)	10,947,027		(471,752		)	15,973,444		(527,401		)
Redeemable preferred stock	22,048		(1,120		)	23,197		(2,383		)	45,245		(3,503		)
Equities	86,194		(1,400		)	91,195		(7,371		)	177,389		(8,771		)
	$	7,026,657	$	(79,273	)	$	14,598,554	$	(601,185	)	$	21,625,211	$	(680,458	)

The chart below summarizes the fair value (proceeds) and the gains (losses) realized on available-for-sale securities the Company sold that were in an unrealized gain position and an unrealized loss position.

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Securities in an unrealized gain position:
Fair value (proceeds)	$	306,600		$	121,459		$	909,846		$	566,064
Gains realized	$	3,410		$	1,933		$	21,540		$	14,967
Securities in an unrealized loss position(1):
Fair value (proceeds)	$	122,317		$	37,186		$	380,493		$	121,450
Losses realized	$	(5,428	)	$	(1,243	)	$	(15,292	)	$	(5,884	)
(1) The Company made the decision to exit these holdings in conjunction with its overall asset/liability management process.

The following table includes the gross unrealized losses and fair value of the Company’s investments that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2018:

	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(Dollars In Thousands)
Residential mortgage-backed securities	$	2,831,194	$	(80,839	)	$	399,676	$	(24,692	)	$	3,230,870	$	(105,531	)
Commercial mortgage-backed securities	1,433,287		(39,701		)	740,262		(40,932		)	2,173,549		(80,633		)
Other asset-backed securities	645,956		(9,131		)	125,847		(7,251		)	771,803		(16,382		)
U.S. government-related securities	551,939		(14,066		)	1,012,450		(58,741		)	1,564,389		(72,807		)
Other government-related securities	254,968		(7,405		)	111,089		(14,230		)	366,057		(21,635		)
States, municipalities, and political subdivisions	2,268,935		(51,019		)	998,399		(88,908		)	3,267,334		(139,927		)
Corporate securities	21,709,122		(782,983		)	9,756,347		(1,136,265		)	31,465,469		(1,919,248		)
Redeemable preferred stock	43,712		(1,902		)	43,427		(5,321		)	87,139		(7,223		)
	$	29,739,113	$	(987,046	)	$	13,187,497	$	(1,376,340	)	$	42,926,610	$	(2,363,386	)

Debt Securities, Trading, and Equity Securities

The chart below summarizes the realized gains (losses) on equity securities sold during the period and equity securities still held at the reporting date.

	For The Three Months Ended September 30, 2018			For The Nine Months Ended September 30, 2018
	(Dollars In Thousands)
Net gains (losses) recognized during the period on equity securities	$	(6,925	)	$	(16,693	)
Less: net gains (losses) recognized on equity securities sold during the period	$	(1,476	)	$	(3,858	)
Gains (losses) recognized during the period on equity securities still held	$	(5,449	)	$	(12,835	)

Schedule of Amortized Cost and Fair Value of the Company's Investments Classified as Available-for-Sale

The amortized cost and fair value of the Company’s investments classified as available-for-sale are as follows:

As of September 30, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Total OTTI Recognized in OCI(1)
	(Dollars In Thousands)
Fixed maturities:
Residential mortgage-backed securities	$	3,506,384	$	5,808	$	(105,531	)	$	3,406,661	$	—
Commercial mortgage-backed securities	2,314,831		180		(80,633		)	2,234,378		—
Other asset-backed securities	1,456,768		13,749		(16,382		)	1,454,135		—
U.S. government-related securities	1,653,626		160		(72,807		)	1,580,979		—
Other government-related securities	546,356		2,925		(21,635		)	527,646		—
States, municipals, and political subdivisions	3,691,930		6,070		(139,927		)	3,558,073		—
Corporate securities	38,612,538		166,917		(1,919,248		)	36,860,207		—
Redeemable preferred stock	94,362		—		(7,223		)	87,139		—
	51,876,795		195,809		(2,363,386		)	49,709,218		—
Short-term investments	310,721		—		—			310,721		—
	$	52,187,516	$	195,809	$	(2,363,386	)	$	50,019,939	$	—
As of December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Total OTTI Recognized in OCI(1)
	(Dollars In Thousands)
Fixed maturities:
Residential mortgage-backed securities	$	2,321,811	$	19,412	$	(22,730	)	$	2,318,493	$	10
Commercial mortgage-backed securities	1,885,109		4,931		(29,552		)	1,860,488		—
Other asset-backed securities	1,234,376		20,936		(5,763		)	1,249,549		—
U.S. government-related securities	1,255,244		185		(32,177		)	1,223,252		—
Other government-related securities	280,780		9,401		(4,948		)	285,233		—
States, municipals, and political subdivisions	1,770,299		16,959		(45,613		)	1,741,645		(37		)
Corporate securities	29,446,365		618,582		(527,401		)	29,537,546		(1		)
Redeemable preferred stock	94,362		232		(3,503		)	91,091		—
	38,288,346		690,638		(671,687		)	38,307,297		(28		)
Equity securities	696,706		22,319		(8,771		)	710,254		—
Short-term investments	470,883		—		—			470,883		—
	$	39,455,935	$	712,957	$	(680,458	)	$	39,488,434	$	(28	)
(1) These amounts are included in the gross unrealized gains and gross unrealized losses columns above.

Schedule of Fair Value of Trading Securities

The fair values of the Company’s investments classified as trading are as follows:

	As of September 30, 2018		As of December 31, 2017
	(Dollars In Thousands)
Fixed maturities:
Residential mortgage-backed securities	$	254,037	$	259,694
Commercial mortgage-backed securities	135,403		146,804
Other asset-backed securities	111,770		138,097
U.S. government-related securities	58,081		27,234
Other government-related securities	43,030		63,925
States, municipals, and political subdivisions	296,618		326,925
Corporate securities	1,569,652		1,698,183
Redeemable preferred stock	3,165		3,327
	2,471,756		2,664,189
Equity securities	3,801		5,244
Short-term investments	55,865		56,261
	$	2,531,422	$	2,725,694

Schedule of Amortized Cost and Fair Value of Available-for-Sale and Held-to-Maturity Fixed Maturities, by Expected Maturity

The amortized cost and fair value of available-for-sale and held-to-maturity fixed maturities as of September 30, 2018, by expected maturity, are shown below. Expected maturities of securities without a single maturity date are allocated based on estimated rates of prepayment that may differ from actual rates of prepayment.

	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars In Thousands)
Due in one year or less	$	957,984	$	955,779	$	—	$	—
Due after one year through five years	9,252,383		9,079,479		—		—
Due after five years through ten years	9,099,912		8,847,681		—		—
Due after ten years	32,566,516		30,826,279		2,653,605		2,577,841
	$	51,876,795	$	49,709,218	$	2,653,605	$	2,577,841

Gain (Loss) on Investments

The charts below summarize the Company’s other-than-temporary impairments of investments. All of the impairments were related to fixed maturities.

	For The Three Months Ended September 30, 2018			For The Nine Months Ended September 30, 2018
	Fixed Maturities			Fixed Maturities
	(Dollars In Thousands)
Other-than-temporary impairments	$	(14	)	$	(715	)
Non-credit impairment losses recorded in other comprehensive income	—			(2,949		)
Net impairment losses recognized in earnings	$	(14	)	$	(3,664	)

	For The Three Months Ended September 30, 2017			For The Nine Months Ended September 30, 2017
	Fixed Maturities			Fixed Maturities
	(Dollars In Thousands)
Other-than-temporary impairments	$	(366	)	$	(494	)
Non-credit impairment losses recorded in other comprehensive income	93			(7,765		)
Net impairment losses recognized in earnings	$	(273	)	$	(8,259	)

Schedule of Available-for-Sale Credit Losses on Fixed Maturities Held by the Company for Which a Portion of Other-than-Temporary Impairments were Recognized in Other Comprehensive Income (Loss)

The following chart is a rollforward of available-for-sale credit losses on fixed maturities held by the Company for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (loss):

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Beginning balance	$	2		$	2,783		$	3,268		$	12,685
Additions for newly impaired securities	—			266			—			266
Additions for previously impaired securities	—			6			2			2,791
Reductions for previously impaired securities due to a change in expected cash flows	—			(37		)	—			(12,724		)
Reductions for previously impaired securities that were sold in the current period	(2		)	(600		)	(3,270		)	(600		)
Ending balance	$	—		$	2,418		$	—		$	2,418

Summary of Change in Unrealized Gains (Losses), Net of Income Tax, on Fixed Maturity and Equity Securities, Classified as Available-for-Sale

The change in unrealized gains (losses), net of income tax, on fixed maturities, classified as available-for-sale is summarized as follows:

	For The Three Months Ended September 30,					For The Nine Months Ended September 30,
	2018			2017		2018			2017
	(Dollars In Thousands)
Fixed maturities	$	(229,609	)	$	167,488	$	(1,727,358	)	$	865,743

Schedule of Amortized Cost and Fair Value of the Company's Investments Classified as Held-to-Maturity

The amortized cost and fair value of the Company’s investments classified as held-to-maturity as of September 30, 2018 and December 31, 2017, are as follows:

As of September 30, 2018	Amortized Cost		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Fair Value		Total OTTI Recognized in OCI
	(Dollars In Thousands)
Fixed maturities:
Securities issued by affiliates:
Red Mountain, LLC	$	736,605	$	—	$	(77,492	)	$	659,113	$	—
Steel City, LLC	1,917,000		1,728		—			1,918,728		—
	$	2,653,605	$	1,728	$	(77,492	)	$	2,577,841	$	—
As of December 31, 2017	Amortized Cost		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Fair Value		Total OTTI Recognized in OCI
	(Dollars In Thousands)
Fixed maturities:
Securities issued by affiliates:
Red Mountain, LLC	$	704,904	$	—	$	(19,163	)	$	685,741	$	—
Steel City, LLC	2,014,000		76,586		—			2,090,586		—
	$	2,718,904	$	76,586	$	(19,163	)	$	2,776,327	$	—

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

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, 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	$	—	$	3,406,661	$	—	$	3,406,661
Commercial mortgage-backed securities	4	—		2,214,911		19,467		2,234,378
Other asset-backed securities	4	—		951,874		502,261		1,454,135
U.S. government-related securities	4	946,679		634,300		—		1,580,979
State, municipalities, and political subdivisions	4	—		3,558,073		—		3,558,073
Other government-related securities	4	—		527,646		—		527,646
Corporate securities	4	—		36,231,923		628,284		36,860,207
Redeemable preferred stock	4	69,550		17,589		—		87,139
Total fixed maturity securities - available-for-sale		1,016,229		47,542,977		1,150,012		49,709,218
Fixed maturity securities - trading
Residential mortgage-backed securities	3	—		254,037		—		254,037
Commercial mortgage-backed securities	3	—		135,403		—		135,403
Other asset-backed securities	3	—		83,758		28,012		111,770
U.S. government-related securities	3	26,859		31,222		—		58,081
State, municipalities, and political subdivisions	3	—		296,618		—		296,618
Other government-related securities	3	—		43,030		—		43,030
Corporate securities	3	—		1,564,429		5,223		1,569,652
Redeemable preferred stock	3	3,165		—		—		3,165
Total fixed maturity securities - trading		30,024		2,408,497		33,235		2,471,756
Total fixed maturity securities		1,046,253		49,951,474		1,183,247		52,180,974
Equity securities	3	559,750		—		63,451		623,201
Other long-term investments(1)	3 & 4	52,728		402,312		180,578		635,618
Short-term investments	3	269,266		97,320		—		366,586
Total investments		1,927,997		50,451,106		1,427,276		53,806,379
Cash	3	161,173		—		—		161,173
Assets related to separate accounts	3
Variable annuity	3	13,555,469		—		—		13,555,469
Variable universal life	3	1,077,842		—		—		1,077,842
Total assets measured at fair value on a recurring basis		$	16,722,481	$	50,451,106	$	1,427,276	$	68,600,863
Liabilities:
Annuity account balances(2)	3	$	—	$	—	$	78,463	$	78,463
Other liabilities(1)	3 & 4	8,243		333,156		460,373		801,772
Total liabilities measured at fair value on a recurring basis		$	8,243	$	333,156	$	538,836	$	880,235
(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 September 30, 2018		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	502,020	Liquidation	Liquidation value	$90 - $97 ($94.92)
			Discounted cash flow	Liquidity premium	0.0% - 1.40% (0.62%)
				Paydown rate	11.09% - 13.15% (12.38%)
Corporate securities	621,392		Discounted cash flow	Spread over treasury	0.90% - 4.23% (1.51%)
Embedded derivatives - GLWB(2)	$	40,048	Actuarial cash flow model	Mortality	87% to 100% of Ruark 2015 ALB Table
				Lapse	Ruark Predictive Model
				Utilization	99%. 10% of policies have a one-time over-utilization of 400%
				Nonperformance risk	0.13% - 0.88%
Liabilities:(1)
Embedded derivative - FIA	256,912		Actuarial cash flow model	Expenses	$145 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% - 0.88%
Embedded derivative - IUL	95,739		Actuarial cash flow model	Mortality	37% - 577% of 2015
					VBT Primary Tables
				Lapse	0.5% - 0.10%, depending on
					duration/distribution channel
					and smoking class
				Nonperformance risk	0.13% - 0.88%
(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 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	)	$	—	$	—
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
Short-term investments	—		—		—		—			—			—		—			—		—		—			—			—		—
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, 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 three months ended September 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	$	21,780	$	—	$	—	$	—		$	(538	)	$	—	$	—		$	—	$	—	$	(21,281	)	$	39		$	—	$	—
Commercial mortgage-backed securities	47,227		—		—		—			(1,212		)	—		(151		)	—		—		(26,372		)	(25		)	19,467		—
Other asset-backed securities	515,701		—		17		(62		)	(14,802		)	—		(24		)	—		—		—			1,431			502,261		—
Corporate securities	644,811		—		1,422		—			(4,044		)	15,000		(47,935		)	—		—		19,903			(873		)	628,284		—
Total fixed maturity securities - available-for-sale	1,229,519		—		1,439		(62		)	(20,596		)	15,000		(48,110		)	—		—		(27,750		)	572			1,150,012		—
Fixed maturity securities - trading
Other asset-backed securities	24,852		84		—		(76		)	—			4,128		(926		)	—		—		—			(50		)	28,012		68
Corporate securities	5,254		—		—		(6		)	—			—		—			—		—		—			(25		)	5,223		(6		)
Total fixed maturity securities - trading	30,106		84		—		(82		)	—			4,128		(926		)	—		—		—			(75		)	33,235		62
Total fixed maturity securities	1,259,625		84		1,439		(144		)	(20,596		)	19,128		(49,036		)	—		—		(27,750		)	497			1,183,247		62
Equity securities	65,553		—		—		—			—			—		(2,102		)	—		—		—			—			63,451		287
Other long-term investments(1)	170,594		11,899		—		(1,915		)	—			—		—			—		—		—			—			180,578		9,984
Total investments	1,495,772		11,983		1,439		(2,059		)	(20,596		)	19,128		(51,138		)	—		—		(27,750		)	497			1,427,276		10,333
Total assets measured at fair value on a recurring basis	$	1,495,772	$	11,983	$	1,439	$	(2,059	)	$	(20,596	)	$	19,128	$	(51,138	)	$	—	$	—	$	(27,750	)	$	497		$	1,427,276	$	10,333
Liabilities:
Annuity account balances(2)	$	80,098	$	—	$	—	$	(896	)	$	—		$	—	$	—		$	40	$	2,571	—			$	—		$	78,463	$	—
Other liabilities(1)	457,008		38,249		—		(41,614		)	—			—		—			—		—		—			—			460,373		(3,365		)
Total liabilities measured at fair value on a recurring basis	$	537,106	$	38,249	$	—	$	(42,510	)	$	—		$	—	$	—		$	40	$	2,571	$	—		$	—		$	538,836	$	(3,365	)
(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, 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	$	—	$	—	$	—	$	—		$	(995	)	$	22,225	$	—		$	—	$	—		$	(21,281	)	$	51		$	—	$	—
Commercial mortgage-backed securities	—		—		—		—			(2,496		)	48,621		(245		)	—		—			(26,372		)	(41		)	19,467		—
Other asset-backed securities	504,365		—		11,884		(62		)	(16,449		)	—		(47		)	—		—			222			2,348			502,261		—
Corporate securities	626,901		—		8,483		—			(22,973		)	93,491		(86,388		)	—		—			12,009			(3,239		)	628,284		—
Total fixed maturity securities - available-for-sale	1,131,266		—		20,367		(62		)	(42,913		)	164,337		(86,680		)	—		—			(35,422		)	(881		)	1,150,012		—
Fixed maturity securities - trading
Other asset-backed securities	35,222		278		—		(3,674		)	—			8,728		(12,595		)	—		—			164			(111		)	28,012		(3,337		)
Corporate securities	5,442		—		—		(145		)	—			—		—			—		—			—			(74		)	5,223		(145		)
Total fixed maturity securities - trading	40,664		278		—		(3,819		)	—			8,728		(12,595		)	—		—			164			(185		)	33,235		(3,482		)
Total fixed maturity securities	1,171,930		278		20,367		(3,881		)	(42,913		)	173,065		(99,275		)	—		—			(35,258		)	(1,066		)	1,183,247		(3,482		)
Equity securities	65,518		1		—		(1		)	—			36		(2,102		)	—		—			—			(1		)	63,451		224
Other long-term investments(1)	160,466		34,303		—		(13,564		)	—			—		—			—		(627		)	—			—			180,578		20,112
Short-term investments	—		—		—		—			—			—		—			—		—			—			—			—		—
Total investments	1,397,914		34,582		20,367		(17,446		)	(42,913		)	173,101		(101,377		)	—		(627		)	(35,258		)	(1,067		)	1,427,276		16,854
Total assets measured at fair value on a recurring basis	$	1,397,914	$	34,582	$	20,367	$	(17,446	)	$	(42,913	)	$	173,101	$	(101,377	)	$	—	$	(627	)	$	(35,258	)	$	(1,067	)	$	1,427,276	$	16,854
Liabilities:
Annuity account balances(2)	$	83,472	$	—	$	—	$	(2,749	)	$	—		$	—	$	—		$	570	$	8,328		—			$	—		$	78,463	$	—
Other liabilities(1)	597,562		226,359		—		(89,170		)	—			—		—			—		—			—			—			460,373		137,189
Total liabilities measured at fair value on a recurring basis	$	681,034	$	226,359	$	—	$	(91,919	)	$	—		$	—	$	—		$	570	$	8,328		$	—		$	—		$	538,836	$	137,189
(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, 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	$	7,572,349	$	7,335,547	$	6,817,723	$	6,740,177
Policy loans	3	1,703,462		1,703,462		1,615,615		1,615,615
Fixed maturities, held-to-maturity(1)	3	2,653,605		2,577,841		2,718,904		2,776,327
Liabilities:
Stable value product account balances	3	$	5,211,668	$	5,147,084	$	4,698,371	$	4,698,868
Future policy benefits and claims(2)	3	223,091		223,091		220,498		220,498
Other policyholders’ funds(3)	3	131,338		130,672		133,508		134,253
Debt:(4)
Non-recourse funding obligations(5)	3	$	2,890,435	$	2,814,355	$	2,952,822	$	2,980,495
Subordinated funding obligations	3	110,000		97,451		—		—
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 $1.4 million and $1.7 million as of September 30, 2018 and December 31, 2017, respectively.
(5) As of September 30, 2018, carrying amount of $2.6 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.

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DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Realized Investments Gains and Losses

The following table sets forth realized investments gains and losses for the periods shown:

Realized investment gains (losses) - derivative financial instruments

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Derivatives related to VA contracts:
Interest rate futures	$	2,111		$	549		$	(13,229	)	$	16,746
Equity futures	(5,733		)	(25,959		)	(23,025		)	(75,389		)
Currency futures	3,410			(6,092		)	7,890			(22,366		)
Equity options	(21,206		)	(23,307		)	(47,406		)	(76,376		)
Interest rate swaptions	—			(292		)	(14		)	(2,423		)
Interest rate swaps	(41,288		)	5,342			(131,147		)	31,331
Total return swaps	(32,343		)	(8,057		)	(35,908		)	(9,675		)
Embedded derivative - GLWB	22,931			485			55,595			(13,306		)
Funds withheld derivative	37,444			35,821			68,341			103,746
Total derivatives related to VA contracts	(34,674		)	(21,510		)	(118,903		)	(47,712		)
Derivatives related to FIA contracts:
Embedded derivative	(14,360		)	(18,606		)	(7,957		)	(40,351		)
Equity futures	(388		)	66			(716		)	161
Equity options	18,474			11,242			21,203			29,511
Total derivatives related to FIA contracts	3,726			(7,298		)	12,530			(10,679		)
Derivatives related to IUL contracts:
Embedded derivative	(9,535		)	(297		)	(877		)	(10,958		)
Equity futures	(1		)	58			135			(878		)
Equity options	4,928			1,975			5,764			6,437
Total derivatives related to IUL contracts	(4,608		)	1,736			5,022			(5,399		)
Embedded derivative - Modco reinsurance treaties	10,811			(19,746		)	138,652			(90,314		)
Derivatives with PLC(1)	(1,913		)	52,077			(66		)	34,671
Other derivatives	(52		)	43			(59		)	41
Total realized gains (losses) - derivatives	$	(26,710	)	$	5,302		$	37,176		$	(119,392	)
(1) These derivatives include the Interest, YRT premium support, and portfolio maintenance agreements between certain of the Company’s subsidiaries and PLC.

Components of the Gain or Loss on Derivatives that Quality as a Cash Flow Hedging Relationship

The following table presents the components of the gain or loss on derivatives that qualify as a cash flow hedging relationship.

Gain (Loss) on Derivatives in Cash Flow Hedging Relationship

	Amount of Gains (Losses) Deferred in Accumulated Other Comprehensive Income (Loss) on Derivatives		Amount and Location of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)			Amount and Location of (Losses) Recognized in Income (Loss) on Derivatives
	(Effective Portion)		(Effective Portion)			(Ineffective Portion)
			Benefits and settlement expenses			Realized investment gains (losses)
	(Dollars In Thousands)
For The Three Months Ended September 30, 2018
Foreign currency swaps	$	190	$	(155	)	$	—
Interest rate swaps	101		(326		)	—
Total	$	291	$	(481	)	$	—
For The Nine Months Ended September 30, 2018
Foreign currency swaps	$	3,772	$	(473	)	$	—
Interest rate swaps	101		(326		)	—
Total	$	3,873	$	(799	)	$	—
For The Three Months Ended September 30, 2017
Foreign currency swaps	$	1,273	$	(38	)	$	—
Total	$	1,273	$	(38	)	$	—
For The Nine Months Ended September 30, 2017
Foreign currency swaps	$	55	$	(396	)	$	—
Total	$	55	$	(396	)	$	—

Schedule of Information About the Nature and Accounting Treatment of the Company's Primary Derivative Financial Instruments and the Location in and Effect on the Consolidated Financial Statements

The table below presents information about the nature and accounting treatment of the Company’s primary derivative financial instruments and the location in and effect on the consolidated condensed financial statements for the periods presented below:

	As of
	September 30, 2018				December 31, 2017
	Notional Amount		Fair Value		Notional Amount		Fair Value
	(Dollars In Thousands)
Other long-term investments
Cash flow hedges:
Interest rate swaps	$	350,000	$	—	$	—	$	—
Foreign currency swaps	117,178		10,902		117,178		6,016
Derivatives not designated as hedging instruments:
Interest rate swaps	565,000		8,402		1,265,000		55,411
Total return swaps	482,523		3,676		190,938		135
Derivatives with PLC(1)	2,863,575		90,885		2,810,469		91,578
Embedded derivative - Modco reinsurance treaties	322,308		2,650		64,472		1,009
Embedded derivative - GLWB	2,692,724		87,043		2,116,935		67,879
Interest rate futures	875,566		8,329		1,071,870		3,178
Equity futures	205,872		2,387		62,266		154
Currency futures	135,112		1,096		1,117		2
Equity options	6,026,348		420,107		4,436,467		403,961
Interest rate swaptions	—		—		225,000		14
Other	157		141		157		200
	$	14,636,363	$	635,618	$	12,361,869	$	629,537
Other liabilities
Derivatives not designated as hedging instruments:
Interest rate swaps	$	1,547,500	$	26,321	$	597,500	$	2,960
Total return swaps	—		—		243,388		318
Embedded derivative - Modco reinsurance treaties	2,082,638		60,683		2,390,539		215,247
Funds withheld derivative	1,813,454		60,432		1,502,726		61,729
Embedded derivative - GLWB	1,385,123		46,995		1,939,320		83,427
Embedded derivative - FIA	2,459,246		256,912		1,951,650		218,676
Embedded derivative - IUL	219,226		95,739		168,349		80,212
Interest rate futures	348,749		7,122		230,404		917
Equity futures	77,916		1,043		318,795		2,593
Currency futures	79,861		15		255,248		2,087
Equity options	4,174,072		246,466		3,112,812		237,807
Other	341		44		—		—
	$	14,188,126	$	801,772	$	12,710,731	$	905,973
(1) These derivatives include the Interest, YRT premium support, and portfolio maintenance agreements between certain of the Company’s subsidiaries and PLC.

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OFFSETTING OF ASSETS AND LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2018

Offsetting [Abstract]

Schedule of Derivative Instruments by Assets

	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
							Financial Instruments		Collateral Received		Net Amount
	(Dollars In Thousands)
Offsetting of Assets
Derivatives:
Free-Standing derivatives	$	454,899	$	—	$	454,899	$	270,878	$	68,809	$	115,212
Total derivatives, subject to a master netting arrangement or similar arrangement	454,899		—		454,899		270,878		68,809		115,212
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	2,650		—		2,650		—		—		2,650
Embedded derivative - GLWB	87,043		—		87,043		—		—		87,043
Derivatives with PLC	90,885		—		90,885		—		—		90,885
Other	141		—		141		—		—		141
Total derivatives, not subject to a master netting arrangement or similar arrangement	180,719		—		180,719		—		—		180,719
Total derivatives	635,618		—		635,618		270,878		68,809		295,931
Total Assets	$	635,618	$	—	$	635,618	$	270,878	$	68,809	$	295,931

	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
							Financial Instruments		Collateral Received		Net Amount
	(Dollars In Thousands)
Offsetting of Assets
Derivatives:
Free-Standing derivatives	$	468,871	$	—	$	468,871	$	242,105	$	108,830	$	117,936
Total derivatives, subject to a master netting arrangement or similar arrangement	468,871		—		468,871		242,105		108,830		117,936
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	1,009		—		1,009		—		—		1,009
Embedded derivative - GLWB	67,879		—		67,879		—		—		67,879
Derivatives with PLC	91,578		—		91,578		—		—		91,578
Other	200		—		200		—		—		200
Total derivatives, not subject to a master netting arrangement or similar arrangement	160,666		—		160,666		—		—		160,666
Total derivatives	629,537		—		629,537		242,105		108,830		278,602
Total Assets	$	629,537	$	—	$	629,537	$	242,105	$	108,830	$	278,602

Schedule of Derivative Instruments by Liabilities

	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
							Financial Instruments		Collateral Posted		Net Amount
	(Dollars In Thousands)
Offsetting of Liabilities
Derivatives:
Free-Standing derivatives	$	280,967	$	—	$	280,967	$	270,878	$	10,089	$	—
Total derivatives, subject to a master netting arrangement or similar arrangement	280,967		—		280,967		270,878		10,089		—
Derivatives, not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	60,683		—		60,683		—		—		60,683
Funds withheld derivative	60,432		—		60,432		—		—		60,432
Embedded derivative - GLWB	46,995		—		46,995		—		—		46,995
Embedded derivative - FIA	256,912		—		256,912		—		—		256,912
Embedded derivative - IUL	95,739		—		95,739		—		—		95,739
Other	44		—		44		—		—		44
Total derivatives, not subject to a master netting arrangement or similar arrangement	520,805		—		520,805		—		—		520,805
Total derivatives	801,772		—		801,772		270,878		10,089		520,805
Repurchase agreements(1)	417,094		—		417,094		—		—		417,094
Total Liabilities	$	1,218,866	$	—	$	1,218,866	$	270,878	$	10,089	$	937,899
(1) Borrowings under repurchase agreements are for a term less than 90 days.

	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
							Financial Instruments		Collateral Posted		Net Amount
	(Dollars In Thousands)
Offsetting of Liabilities
Derivatives:
Free-Standing derivatives	$	246,682	$	—	$	246,682	$	242,105	$	4,577	$	—
Total derivatives, subject to a master netting arrangement or similar arrangement	246,682		—		246,682		242,105		4,577		—
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	215,247		—		215,247		—		—		215,247
Funds withheld derivative	61,729		—		61,729		—		—		61,729
Embedded derivative - GLWB	83,427		—		83,427		—		—		83,427
Embedded derivative - FIA	218,676		—		218,676		—		—		218,676
Embedded derivative - IUL	80,212		—		80,212		—		—		80,212
Total derivatives, not subject to a master netting arrangement or similar arrangement	659,291		—		659,291		—		—		659,291
Total derivatives	905,973		—		905,973		242,105		4,577		659,291
Repurchase agreements(1)	885,000		—		885,000		—		—		885,000
Total Liabilities	$	1,790,973	$	—	$	1,790,973	$	242,105	$	4,577	$	1,544,291
(1) Borrowings under repurchase agreements are for a term less than 90 days.

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MORTGAGE LOANS (Tables)

9 Months Ended

Sep. 30, 2018

MORTGAGE LOANS

Allowance for Credit Losses on Financing Receivables

A charge off is recorded by eliminating the allowance against the mortgage loan and recording the renegotiated loan or the collateral property related to the loan as investment real estate on the balance sheet, which is carried at the lower of the appraised fair value of the property or the unpaid principal balance of the loan, less estimated selling costs associated with the property.

	For The Nine Months Ended September 30, 2018
	(Dollars In Thousands)
Beginning balance, December 31, 2017	$	—
Charge offs	—
Recoveries	(24		)
Provision	1,505
Ending balance, September 30, 2018	$	1,481

Schedule of an Analysis of the Delinquent Loans

An analysis of the delinquent loans is shown in the following chart. 

					Greater
	30-59 Days		60-89 Days		than 90 Days		Total
As of September 30, 2018	Delinquent		Delinquent		Delinquent		Delinquent
	(Dollars In Thousands)
Commercial mortgage loans	$	1,180	$	—	$	1,243	$	2,423
Number of delinquent commercial mortgage loans	1		—		1		2
As of December 31, 2017
Commercial mortgage loans	$	1,817	$	—	$	—	$	1,817
Number of delinquent commercial mortgage loans	2		—		—		2

Impaired Financing Receivables

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income
	(Dollars In Thousands)
As of September 30, 2018
Commercial mortgage loans:
With no related allowance recorded	$	—	$	—	$	—	$	—	$	—	$	—
With an allowance recorded	5,714		5,327		1,481		1,905		197		225
As of December 31, 2017
Commercial mortgage loans:
With no related allowance recorded	$	—	$	—	$	—	$	—	$	—	$	—
With an allowance recorded	—		—		—		—		—		—

Schedule of Mortgage Loans Modified in Troubled Debt Restructuring

Mortgage loans that were modified in a troubled debt restructuring as of September 30, 2018 and December 31, 2017 were as follows:

	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(Dollars In Thousands)
As of September 30, 2018
Troubled debt restructuring:
Commercial mortgage loans	1	$	2,694	$	1,748
As of December 31, 2017
Troubled debt restructuring:
Commercial mortgage loans	1	$	418	$	418

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DEBT AND OTHER OBLIGATIONS (Tables)

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Non-Recourse Funding Obligations Outstanding

Non-recourse funding obligations outstanding as of September 30, 2018, on a consolidated basis, are shown in the following table:

Issuer	Outstanding Principal		Carrying Value(1)		Maturity Year	Year-to-Date Weighted-Avg Interest Rate
	(Dollars In Thousands)
Golden Gate Captive Insurance Company(2)(3)	$	1,917,000	$	1,917,000	2039	4.75	%
Golden Gate II Captive Insurance Company	309,849		256,157		2052	4.07	%
Golden Gate V Vermont Captive Insurance Company(2)(3)	655,000		714,921		2037	5.12	%
MONY Life Insurance Company(3)	1,091		2,357		2024	6.19	%
Total	$	2,882,940	$	2,890,435
(1) Carrying values include premiums and discounts and do not represent unpaid principal balances.
(2) Obligations are issued to non-consolidated subsidiaries of PLC. These obligations collateralize certain held-to-maturity securities issued by wholly owned subsidiaries of the Company.
(3) Fixed rate obligations.

Non-recourse funding obligations outstanding as of December 31, 2017, on a consolidated basis, are shown in the following table:

Issuer	Outstanding Principal		Carrying Value(1)		Maturity Year	Year-to-Date Weighted-Avg Interest Rate
	(Dollars In Thousands)
Golden Gate Captive Insurance Company(2)(3)	$	2,014,000	$	2,014,000	2039	4.75	%
Golden Gate II Captive Insurance Company	309,849		255,132		2052	3.11	%
Golden Gate V Vermont Captive Insurance Company(2)(3)	620,000		681,285		2037	5.12	%
MONY Life Insurance Company(3)	1,091		2,405		2024	6.19	%
Total	$	2,944,940	$	2,952,822
(1) Carrying values include premiums and discounts and do not represent unpaid principal balances.
(2) Obligations are issued to non-consolidated subsidiaries of PLC. These obligations collateralize certain held-to-maturity securities issued by wholly owned subsidiaries of the Company.
(3) Fixed rate obligations.

Schedule of Collateral Pledged for Repurchase Agreements

The following table provides the amount by asset class of securities of collateral pledged for repurchase agreements and securities that have been loaned as part of securities lending transactions as of September 30, 2018 and December 31, 2017:

Repurchase Agreements, Securities Lending Transactions, and Repurchase-to-Maturity Transactions

Accounted for as Secured Borrowings

	Remaining Contractual Maturity of the Agreements
	As of September 30, 2018
	(Dollars In Thousands)
	Overnight and Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions
U.S. Treasury and agency securities	$	401,011	$	56,513	$	—	$	—	$	457,524
Mortgage loans	—		—		—		—		—
Total repurchase agreements and repurchase-to-maturity transactions	401,011		56,513		—		—		457,524
Securities lending transactions
Fixed maturities	91,040		—		—		—		91,040
Equity securities	982		—		—		—		982
Redeemable preferred stock	—		—		—		—		—
Other government related securities	—		—		—		—		—
Total securities lending transactions	92,022		—		—		—		92,022
Total securities	$	493,033	$	56,513	$	—	$	—	$	549,546

Repurchase Agreements, Securities Lending Transactions, and Repurchase-to-Maturity Transactions

Accounted for as Secured Borrowings

	Remaining Contractual Maturity of the Agreements
	As of December 31, 2017
	(Dollars In Thousands)
	Overnight and Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions
U.S. Treasury and agency securities	$	307,633	$	—	$	—	$	—	$	307,633
Mortgage loans	698,974		—		—		—		698,974
Total repurchase agreements and repurchase-to-maturity transactions	1,006,607		—		—		—		1,006,607
Securities lending transactions
Corporate securities	118,817		—		—		—		118,817
Equity securities	5,699		—		—		—		5,699
Redeemable preferred stock	755		—		—		—		755
Total securities lending transactions	125,271		—		—		—		125,271
Total securities	$	1,131,878	$	—	$	—	$	—	$	1,131,878

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EMPLOYEE BENEFIT PLANS (Tables)

9 Months Ended

Sep. 30, 2018

Pension and Other Postretirement Benefits Cost (Reversal of Cost) [Abstract]

Components of the Net Periodic Benefit Cost

Components of the net periodic benefit cost of PLC’s defined benefit pension plan for the three and nine months ended September 30, 2018 and 2017, are as follows: 

	For The Three Months Ended September 30,										For The Nine Months Ended September 30,
	2018					2017					2018					2017
	Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan
	(Dollars In Thousands)
Service cost — benefits earned during the period	$	3,006		$	288	$	3,348		$	334	$	9,888		$	1,062	$	10,044		$	1,002
Interest cost on projected benefit obligation	2,577			359		2,191			297		7,371			1,077		6,573			891
Expected return on plan assets	(4,743		)	—		(3,352		)	—		(12,795		)	—		(10,056		)	—
Amortization of prior service cost	—			—		—			—		—			—		—			—
Amortization of actuarial loss/(gain)	—			196		—			118		—			726		—			354
Preliminary net periodic benefit cost	840			843		2,187			749		4,464			2,865		6,561			2,247
Settlement/curtailment expense(1)	—			986		—			—		—			986		—			—
Total net periodic benefit costs	$	840		$	1,829	$	2,187		$	749	$	4,464		$	3,851	$	6,561		$	2,247
(1) The unfunded excess benefit plan triggered settlement accounting for the nine months ended September 30, 2018 since total lump sum payments exceeded the settlement threshold of service cost plus interest cost.

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

Summary of Changes in the Accumulated Balances for Each Component of AOCI

The following tables summarize the changes in the accumulated balances for each component of accumulated other comprehensive income (loss) (“AOCI”) as of September 30, 2018 and December 31, 2017.

Changes in Accumulated Other Comprehensive Income (Loss) by Component

	Unrealized Gains and Losses on Investments(2)			Accumulated Gain and Loss Derivatives		Total Accumulated Other Comprehensive Income (Loss)
	(Dollars In Thousands, Net of Tax)
Beginning Balance, December 31, 2017	$	23,069		$	747	$	23,816
Other comprehensive income (loss) before reclassifications	(1,198,669		)	3,060		(1,195,609		)
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings	22			—		22
Amounts reclassified from accumulated other comprehensive income (loss)(1)	(2,042		)	631		(1,411		)
Net current-period other comprehensive income (loss)	(1,200,689		)	3,691		(1,196,998		)
Cumulative effect adjustment	(10,552		)	—		(10,552		)
Ending Balance, September 30, 2018	$	(1,188,172	)	$	4,438	$	(1,183,734	)
(1)  See Reclassification table below for details.
(2)  As of September 30, 2018, net unrealized losses reported in AOCI were offset by $524.1 million due to the impact those net unrealized losses would have had on certain of the Company’s insurance assets and liabilities if the net unrealized losses had been recognized in net income.

Changes in Accumulated Other Comprehensive Income (Loss) by Component

	Unrealized Gains and Losses on Investments(2)			Accumulated Gain and Loss Derivatives			Total Accumulated Other Comprehensive Income (Loss)
	(Dollars In Thousands, Net of Tax)
Beginning Balance, December 31, 2016	$	(655,767	)	$	727		$	(655,040	)
Other comprehensive income (loss) before reclassifications	699,097			(563		)	698,534
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings	7,153			—			7,153
Amounts reclassified from accumulated other comprehensive income (loss)(1)	(944		)	451			(493		)
Net current-period other comprehensive income (loss)	705,306			(112		)	705,194
Cumulative effect adjustments	(26,470		)	132			(26,338		)
Ending Balance, December 31, 2017	$	23,069		$	747		$	23,816
(1) See Reclassification table below for details.
(2)  As of December 31, 2016 and December 31, 2017, net unrealized losses reported in AOCI were offset by $424.1 million and $(6.3) million, respectively, due to the impact those net unrealized losses would have had on certain of the Company’s insurance assets and liabilities if the net unrealized losses had been recognized in net income.

Schedule of Reclassifications Amounts Out of AOCI

The following tables summarize the reclassifications amounts out of AOCI for the three and nine months ended September 30, 2018 and 2017.

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

For The Three Months Ended September 30, 2018	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Condensed Statements of Income
	(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit(1)	$	(481	)	Benefits and settlement expenses, net of reinsurance ceded
	(481		)	Total before tax
	101			Tax (expense) or benefit
	$	(380	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains (losses)	$	(2,018	)	Realized investment gains (losses): All other investments
Impairments recognized in earnings	(14		)	Net impairment losses recognized in earnings
	(2,032		)	Total before tax
	427			Tax (expense) or benefit
	$	(1,605	)	Net of tax
(1) See Note 7, Derivative Financial Instruments for additional information

For The Nine Months September 30, 2018	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Condensed Statements of Income
	(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit(1)	$	(799	)	Benefits and settlement expenses, net of reinsurance ceded
	(799		)	Total before tax
	168			Tax (expense) or benefit
	$	(631	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains (losses)	$	6,248		Realized investment gains (losses): All other investments
Impairments recognized in earnings	(3,664		)	Net impairment losses recognized in earnings
	2,584			Total before tax
	(542		)	Tax (expense) or benefit
	$	2,042		Net of tax
(1) See Note 7, Derivative Financial Instruments for additional information

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

For The Three Months Ended September 30, 2017	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Condensed Statements of Income
	(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit(1)	$	(38	)	Benefits and settlement expenses, net of reinsurance ceded
	(38		)	Total before tax
	14			Tax (expense) or benefit
	$	(24	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains (losses)	$	690		Realized investment gains (losses): All other investments
Impairments recognized in earnings	(273		)	Net impairment losses recognized in earnings
	417			Total before tax
	(146		)	Tax (expense) or benefit
	$	271		Net of tax

For The Nine Months Ended September 30, 2017	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Condensed Statements of Income
	(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit(1)	$	(396	)	Benefits and settlement expenses, net of reinsurance ceded
	(396		)	Total before tax
	139			Tax (expense) or benefit
	$	(257	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains (losses)	$	9,084		Realized investment gains (losses): All other investments
Impairments recognized in earnings	(8,259		)	Net impairment losses recognized in earnings
	825			Total before tax
	(289		)	Tax (expense) or benefit
	$	536		Net of tax

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INCOME TAXES (Tables)

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Schedule of Effective Income Tax Rate Reconciliation

The Company’s effective tax rate related to continuing operations varied from the maximum federal income tax rates as follows:

	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2018		2017		2018		2017
Statutory federal income tax rate applied to pre-tax income	21.0	%	35.0	%	21.0	%	35.0	%
State income taxes	0.5		0.4		0.5		0.5
Investment income not subject to tax	(3.4	)	(4.0	)	(3.9	)	(3.6	)
Uncertain tax positions	—		(0.1	)	—		0.2
Change in State Tax Rate	—		—		(0.8	)	—
Prior period adjustments	—		(1.7	)	—		(0.8	)
Other	(0.6	)	(0.1	)	(0.5	)	0.1
	17.5	%	29.5	%	16.3	%	31.4	%

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OPERATING SEGMENTS (Tables)

9 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Summary of Financial Information for the Company's Segments

The following tables present a summary of results and reconciles pre-tax adjusted operating income (loss) to consolidated income before income tax and net income: 

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars In Thousands)
Revenues
Life Marketing	$	407,708		$	397,096		$	1,195,074		$	1,174,048
Acquisitions	581,054			375,819			1,469,787			1,164,650
Annuities	110,386			110,870			321,880			357,589
Stable Value Products	59,328			49,933			158,944			132,863
Asset Protection	90,926			93,799			266,747			277,433
Corporate and Other	20,561			77,875			90,686			109,628
Total revenues	$	1,269,963		$	1,105,392		$	3,503,118		$	3,216,211
Pre-tax Adjusted Operating Income (Loss)
Life Marketing	$	3,647		10,798			(18,326		)	$	55,217
Acquisitions	93,648			62,880			208,206			184,825
Annuities	36,249			51,779			112,234			130,128
Stable Value Products	27,126			27,992			76,198			74,258
Asset Protection	7,051			5,187			16,991			13,812
Corporate and Other	(41,927		)	(38,054		)	(119,474		)	(107,741		)
Pre-tax adjusted operating income	125,794			120,582			275,829			350,499
Realized (losses) gains on investments and derivatives	(30,624		)	45,400			(97,829		)	35,413
Income before income tax	95,170			165,982			178,000			385,912
Income tax expense	(16,646		)	(49,016		)	(28,933		)	(120,975		)
Net income	$	78,524		$	116,966		$	149,067		$	264,937
Pre-tax adjusted operating income	$	125,794		$	120,582		$	275,829		$	350,499
Adjusted operating income tax (expense) benefit	(23,077		)	(33,126		)	(49,477		)	(108,580		)
After-tax adjusted operating income	102,717			87,456			226,352			241,919
Realized (losses) gains on investments and derivatives	(30,624		)	45,400			(97,829		)	35,413
Income tax benefit (expense) on adjustments	6,431			(15,890		)	20,544			(12,395		)
Net income	$	78,524		$	116,966		$	149,067		$	264,937
Realized investment (losses) gains:
Derivative financial instruments	$	(26,710	)	$	5,302		$	37,176		$	(119,392	)
All other investments	(20,156		)	18,150			(157,350		)	94,526
Net impairment losses recognized in earnings	(14		)	(273		)	(3,664		)	(8,259		)
Less: related amortization(1)	(5,859		)	(12,123		)	5,060			(38,570		)
Less: VA GLWB economic cost	(10,397		)	(10,098		)	(31,069		)	(29,968		)
Realized (losses) gains on investments and derivatives	$	(30,624	)	$	45,400		$	(97,829	)	$	35,413
(1)  Includes amortization of DAC/VOBA and benefits and settlement expenses that are impacted by realized gains (losses).

	Operating Segment Assets As of September 30, 2018
	(Dollars In Thousands)
	Life Marketing		Acquisitions		Annuities		Stable Value Products
Investments and other assets	$	14,709,504	$	32,234,422	$	21,083,522	$	5,083,328
DAC and VOBA	1,468,989		455,343		876,390		7,001
Other intangibles	267,087		32,622		160,118		7,556
Goodwill	200,274		14,524		336,677		113,813
Total assets	$	16,645,854	$	32,736,911	$	22,456,707	$	5,211,698

	Asset Protection		Corporate and Other		Total Consolidated
Investments and other assets	$	824,282	$	12,857,563	$	86,792,621
DAC and VOBA	171,661		—		2,979,384
Other intangibles	125,251		33,194		625,828
Goodwill	128,182		—		793,470
Total assets	$	1,249,376	$	12,890,757	$	91,191,303

	Operating Segment Assets As of December 31, 2017
	(Dollars In Thousands)
	Life Marketing		Acquisitions		Annuities		Stable Value Products
Investments and other assets	$	14,917,752	$	19,588,133	$	20,774,566	$	4,569,639
DAC and VOBA	1,320,776		74,862		772,634		6,864
Other intangibles	281,705		34,548		170,117		8,056
Goodwill	200,274		14,524		336,677		113,813
Total assets	$	16,720,507	$	19,712,067	$	22,053,994	$	4,698,372

	Asset Protection		Corporate and Other		Total Consolidated
Investments and other assets	$	708,605	$	14,893,253	$	75,451,948
DAC and VOBA	30,265		—		2,205,401
Other intangibles	133,234		35,256		662,916
Goodwill	128,182		—		793,470
Total assets	$	1,000,286	$	14,928,509	$	79,113,735

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) - USD ($) $ in Thousands	Jan. 01, 2019	Sep. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Decrease in retained earnings		$ (987,996)		$ (916,971)
Cumulative effect adjustments				(88,594)
Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustments				(78,042)
Accumulated Other Comprehensive Income (Loss)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustments				$ (10,552)
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Right-of-use asset and lease liability		$ 21,000
ASU No. 2016-01 - Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities | Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustments			$ 10,600
ASU No. 2016-01 - Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities | Accumulated Other Comprehensive Income (Loss)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustments			(10,600)
Difference between Revenue Guidance in Effect before and after Topic 606 | ASU No. 2014-09 - Revenue from Contracts with Customers
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Decrease in retained earnings			$ 88,600
Scenario, Forecast | ASU No. 2017-08 - Receivables | Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustments	$ (56,100)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Effect of New Accounting Pronouncements (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Balance Sheet
Deferred policy acquisition costs and value of business acquired	$ 2,979,384		$ 2,979,384		$ 2,205,401
Other liabilities	2,150,163		2,150,163		$ 1,859,254
Statements of Income
Other income	80,906	$ 82,031	241,334	$ 243,501
Amortization of deferred policy acquisition costs and value of business acquired	33,469	4,267	144,172	48,505
Other operating expenses, net of reinsurance ceded	190,382	$ 192,354	582,795	$ 577,911
Before ASC 606
Balance Sheet
Deferred policy acquisition costs and value of business acquired	2,840,000		2,840,000
Other liabilities	1,891,400		1,891,400
Statements of Income
Other income	82,400		244,900
Amortization of deferred policy acquisition costs and value of business acquired	21,900		108,100
Other operating expenses, net of reinsurance ceded	$ 203,200		$ 622,300

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SIGNIFICANT TRANSACTIONS - Narrative (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018	May 01, 2018
Business Combination Segment Allocation [Line Items]
Coinsurance basis percentage			100.00%
Ceding commissions for reinsurance			$ 422.4
Statutory reserves resulting from reinsurance business acquired			$ 13,300.0
Life Business
Business Combination Segment Allocation [Line Items]
Revenue	$ 218.1	$ 360.9
Net income	26.1	33.7
Acquisition related costs	$ 5.5	$ 5.5

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SIGNIFICANT TRANSACTIONS - Purchase Consideration (Details) - Life Business - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	May 01, 2018
ASSETS
Fixed maturities					$ 12,588,512
Mortgage loans					435,405
Policy loans					131,489
Total investments					13,155,406
Cash					20,669
Accrued investment income					151,610
Reinsurance receivables					337
Value of business acquired					336,437
Other assets					2,542
Total assets					13,667,001
LIABILITIES
Future policy benefits and claims					11,744,496
Unearned premiums					0
Total policy liabilities and accruals					11,744,496
Annuity account balances					1,823,444
Other policyholders’ funds					41,954
Other liabilities					57,107
Total liabilities					13,667,001
NET ASSETS ACQUIRED					0
Pro Forma [Abstract]
Revenue	$ 1,269,963	$ 1,418,743	$ 3,826,857	$ 4,170,636
Net income	$ 78,524	$ 152,971	$ 195,211	$ 369,826
Expected Amortization
Remainder of 2018					5,265
2019					21,063
2020					19,950
2021					18,329
2022					$ 16,611

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MONY CLOSED BLOCK OF BUSINESS - Summary of Financial Information of the Policyholder Dividend Obligation (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
Closed block liabilities
Future policy benefits, policyholders’ account balances and other policyholder liabilities	$ 5,699,118	$ 5,791,867
Policyholder dividend obligation	0	160,712	$ 136,004	$ 31,932
Other liabilities	42,640	30,764
Total closed block liabilities	5,741,758	5,983,343
Closed block assets
Fixed maturities, available-for-sale, at fair value	4,339,342	4,669,856
Mortgage loans on real estate	76,608	108,934
Policy loans	679,760	700,769
Cash	72,868	31,182
Other assets	144,077	122,637
Total closed block assets	5,312,655	5,633,378
Excess of reported closed block liabilities over closed block assets	429,103	349,965
Portion of above representing accumulated other comprehensive income:
Net unrealized investment gains (losses) net of policyholder dividend obligation: $(149,219) and $(13,429); and net of income tax: $57,054 and $2,820	(96,749)	0
Future earnings to be recognized from closed block assets and closed block liabilities	332,354	349,965
Net unrealized investment gains (losses) allocated to policyholder dividend obligation, net of deferred tax benefits	(149,219)	(13,429)
Net unrealized investment gains (losses), income tax	$ 57,054	$ 2,820

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MONY CLOSED BLOCK OF BUSINESS - Schedule of Reconciliation of the Policyholder Dividend Obligation (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Movement in Closed Block Dividend Obligation [Roll Forward]
Policyholder dividend obligation, beginning of period	$ 160,712	$ 31,932
Applicable to net revenue (losses)	(24,922)	(38,147)
Change in net unrealized investment gains (losses) allocated to the policyholder dividend obligation	(135,790)	142,219
Policyholder dividend obligation, end of period	$ 0	$ 136,004

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MONY CLOSED BLOCK OF BUSINESS - Schedule of Closed Block Revenues and Expenses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenues
Premiums and other income	$ 39,691	$ 40,962	$ 121,768	$ 128,697
Net investment income	50,833	50,780	152,248	153,481
Net investment gains	40	341	66	448
Total revenues	90,564	92,083	274,082	282,626
Benefits and other deductions
Benefits and settlement expenses	83,588	81,721	251,480	249,319
Other operating expenses	291	621	310	1,216
Total benefits and other deductions	83,879	82,342	251,790	250,535
Net revenues before income taxes	6,685	9,741	22,292	32,091
Income tax expense	1,404	3,409	4,681	11,232
Net revenues	$ 5,281	$ 6,332	$ 17,611	$ 20,859

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INVESTMENT OPERATIONS - Summary of Net Realized Investment Gains (Losses) for All Other Investments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Investments, Debt and Equity Securities [Abstract]
Fixed maturities	$ (2,018)	$ 1,042	$ 6,248	$ 10,482
Equity gains and losses	(6,925)	(352)	(16,693)	(1,398)
Impairments	(14)	(273)	(3,664)	(8,259)
Modco trading portfolio	(10,901)	19,399	(148,427)	93,181
Other investments	(312)	(1,939)	1,522	(7,739)
Total realized gains (losses) - investments	$ (20,170)	$ 17,877	$ (161,014)	$ 86,267

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INVESTMENT OPERATIONS - Schedule of Gross Realized Gains (Losses) on Investments Available-for-Sale (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Investments, Debt and Equity Securities [Abstract]
Gross realized gains	$ 3,410	$ 1,933	$ 21,540	$ 14,968
Gross realized losses:
Impairment losses	(14)	(273)	(3,664)	(8,259)
Other realized losses	$ (5,428)	$ (1,243)	$ (15,292)	$ (5,884)

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INVESTMENT OPERATIONS - Schedule of Fair Value (Proceeds) and Gains/Losses Realized on Securities Sold in an Unrealized Gain/Loss Position (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Securities in an unrealized gain position:
Fair value (proceeds)	$ 306,600	$ 121,459	$ 909,846	$ 566,064
Gains realized	3,410	1,933	21,540	14,967
Securities in an unrealized loss position:
Fair value (proceeds)	122,317	37,186	380,493	121,450
Losses realized	$ (5,428)	$ (1,243)	$ (15,292)	$ (5,884)

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INVESTMENT OPERATIONS - Schedule of Realized Gain (Losses) on Equity Securities Sold (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Investments, Debt and Equity Securities [Abstract]
Net gains (losses) recognized during the period on equity securities	$ (6,925)	$ (352)	$ (16,693)	$ (1,398)
Less: net gains (losses) recognized on equity securities sold during the period	(1,476)		(3,858)
Gains (losses) recognized during the period on equity securities still held	$ (5,449)		$ (12,835)

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INVESTMENT OPERATIONS - Schedule of Amortized Cost and Fair Value of the Company's Investments Classified as Available-for-Sale (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Investment [Line Items]
Total	$ 52,187,516	$ 39,455,935
Gross Unrealized Gains	195,809	712,957
Gross Unrealized Losses	(2,363,386)	(680,458)
Fair Value	50,019,939	39,488,434
Total OTTI Recognized in OCI	0	(28)
Residential mortgage-backed securities
Investment [Line Items]
Total	3,506,384	2,321,811
Gross Unrealized Gains	5,808	19,412
Gross Unrealized Losses	(105,531)	(22,730)
Fair Value	3,406,661	2,318,493
Total OTTI Recognized in OCI	0	10
Commercial mortgage-backed securities
Investment [Line Items]
Total	2,314,831	1,885,109
Gross Unrealized Gains	180	4,931
Gross Unrealized Losses	(80,633)	(29,552)
Fair Value	2,234,378	1,860,488
Total OTTI Recognized in OCI	0	0
Other asset-backed securities
Investment [Line Items]
Total	1,456,768	1,234,376
Gross Unrealized Gains	13,749	20,936
Gross Unrealized Losses	(16,382)	(5,763)
Fair Value	1,454,135	1,249,549
Total OTTI Recognized in OCI	0	0
U.S. government-related securities
Investment [Line Items]
Total	1,653,626	1,255,244
Gross Unrealized Gains	160	185
Gross Unrealized Losses	(72,807)	(32,177)
Fair Value	1,580,979	1,223,252
Total OTTI Recognized in OCI	0	0
Other government-related securities
Investment [Line Items]
Total	546,356	280,780
Gross Unrealized Gains	2,925	9,401
Gross Unrealized Losses	(21,635)	(4,948)
Fair Value	527,646	285,233
Total OTTI Recognized in OCI	0	0
States, municipals, and political subdivisions
Investment [Line Items]
Total	3,691,930	1,770,299
Gross Unrealized Gains	6,070	16,959
Gross Unrealized Losses	(139,927)	(45,613)
Fair Value	3,558,073	1,741,645
Total OTTI Recognized in OCI	0	(37)
Corporate securities
Investment [Line Items]
Total	38,612,538	29,446,365
Gross Unrealized Gains	166,917	618,582
Gross Unrealized Losses	(1,919,248)	(527,401)
Fair Value	36,860,207	29,537,546
Total OTTI Recognized in OCI	0	(1)
Redeemable preferred stock
Investment [Line Items]
Total	94,362	94,362
Gross Unrealized Gains	0	232
Gross Unrealized Losses	(7,223)	(3,503)
Fair Value	87,139	91,091
Total OTTI Recognized in OCI	0	0
Fixed maturities
Investment [Line Items]
Total	51,876,795	38,288,346
Gross Unrealized Gains	195,809	690,638
Gross Unrealized Losses	(2,363,386)	(671,687)
Fair Value	49,709,218	38,307,297
Total OTTI Recognized in OCI	0	(28)
Equity securities
Investment [Line Items]
Total		696,706
Gross Unrealized Gains		22,319
Gross Unrealized Losses		(8,771)
Fair Value		710,254
Total OTTI Recognized in OCI		0
Short-term investments
Investment [Line Items]
Total	310,721	470,883
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	310,721	470,883
Total OTTI Recognized in OCI	$ 0	$ 0

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INVESTMENT OPERATIONS - Schedule of Fair Value of Trading Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	$ 2,531,422	$ 2,725,694
Residential mortgage-backed securities
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	254,037	259,694
Commercial mortgage-backed securities
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	135,403	146,804
Other asset-backed securities
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	111,770	138,097
U.S. government-related securities
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	58,081	27,234
Other government-related securities
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	43,030	63,925
States, municipals, and political subdivisions
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	296,618	326,925
Corporate securities
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	1,569,652	1,698,183
Redeemable preferred stock
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	3,165	3,327
Fixed maturities
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	2,471,756	2,664,189
Equity securities
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	3,801	5,244
Short-term investments
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	$ 55,865	$ 56,261

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INVESTMENT OPERATIONS - Schedule of Amortized Cost and Fair Value of Available-for-Sale and Held-to-Maturity Fixed Maturities, by Expected Maturity (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Available-for-sale, Amortized Cost
Total	$ 52,187,516	$ 39,455,935
Available-for-sale, Fair Value
Total	50,019,939	39,488,434
Held-to-maturity, Fair Value
Fair Value	2,577,841	2,776,327
Fixed maturities
Available-for-sale, Amortized Cost
Due in one year or less	957,984
Due after one year through five years	9,252,383
Due after five years through ten years	9,099,912
Due after ten years	32,566,516
Total	51,876,795	38,288,346
Available-for-sale, Fair Value
Due in one year or less	955,779
Due after one year through five years	9,079,479
Due after five years through ten years	8,847,681
Due after ten years	30,826,279
Total	49,709,218	38,307,297
Held-to-maturity, Amortized Cost
Due in one year or less	0
Due after one year through five years	0
Due after five years through ten years	0
Due after ten years	2,653,605
Amortized Cost	2,653,605	2,718,904
Held-to-maturity, Fair Value
Due in one year or less	0
Due after one year through five years	0
Due after five years through ten years	0
Due after ten years	2,577,841
Fair Value	$ 2,577,841	$ 2,776,327

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INVESTMENT OPERATIONS - Schedule of Other-than-Temporary Impairments of Investments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Investment [Line Items]
Other-than-temporary impairments	$ (14)	$ (366)	$ (715)	$ (494)
Non-credit impairment losses recorded in other comprehensive income	0	93	(2,949)	(7,765)
Net impairment losses recognized in earnings	(14)	(273)	(3,664)	(8,259)
Fixed maturities
Investment [Line Items]
Other-than-temporary impairments	(14)	(366)	(715)	(494)
Non-credit impairment losses recorded in other comprehensive income	0	93	(2,949)	(7,765)
Net impairment losses recognized in earnings	$ (14)	$ (273)	$ (3,664)	$ (8,259)

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INVESTMENT OPERATIONS - Schedule of Available-for-Sale Credit Losses on Fixed Maturities Held by the Company for Which a Portion of Other-than-Temporary Impairments were Recognized in Other Comprehensive Income (Loss) (Details) - Fixed maturities - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]
Beginning balance	$ 2	$ 2,783	$ 3,268	$ 12,685
Additions for newly impaired securities	0	266	0	266
Additions for previously impaired securities	0	6	2	2,791
Reductions for previously impaired securities due to a change in expected cash flows	0	(37)	0	(12,724)
Reductions for previously impaired securities that were sold in the current period	(2)	(600)	(3,270)	(600)
Ending balance	$ 0	$ 2,418	$ 0	$ 2,418

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INVESTMENT OPERATIONS - Schedule of Investments' Gross Unrealized Losses and Fair Value of the Company's Investments that are Not Deemed to be Other-than-Temporarily Impaired (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Fair Value
Less Than 12 Months	$ 29,739,113	$ 7,026,657
12 Months or More	13,187,497	14,598,554
Total	42,926,610	21,625,211
Unrealized Loss
Less Than 12 Months	(987,046)	(79,273)
12 Months or More	(1,376,340)	(601,185)
Total	(2,363,386)	(680,458)
Residential mortgage-backed securities
Fair Value
Less Than 12 Months	2,831,194	765,641
12 Months or More	399,676	408,460
Total	3,230,870	1,174,101
Unrealized Loss
Less Than 12 Months	(80,839)	(9,666)
12 Months or More	(24,692)	(13,064)
Total	(105,531)	(22,730)
Commercial mortgage-backed securities
Fair Value
Less Than 12 Months	1,433,287	750,643
12 Months or More	740,262	779,086
Total	2,173,549	1,529,729
Unrealized Loss
Less Than 12 Months	(39,701)	(8,521)
12 Months or More	(40,932)	(21,031)
Total	(80,633)	(29,552)
Other asset-backed securities
Fair Value
Less Than 12 Months	645,956	86,506
12 Months or More	125,847	134,316
Total	771,803	220,822
Unrealized Loss
Less Than 12 Months	(9,131)	(322)
12 Months or More	(7,251)	(5,441)
Total	(16,382)	(5,763)
U.S. government-related securities
Fair Value
Less Than 12 Months	551,939	94,110
12 Months or More	1,012,450	1,072,232
Total	1,564,389	1,166,342
Unrealized Loss
Less Than 12 Months	(14,066)	(688)
12 Months or More	(58,741)	(31,489)
Total	(72,807)	(32,177)
Other government-related securities
Fair Value
Less Than 12 Months	254,968	24,830
12 Months or More	111,089	115,294
Total	366,057	140,124
Unrealized Loss
Less Than 12 Months	(7,405)	(169)
12 Months or More	(14,230)	(4,779)
Total	(21,635)	(4,948)
States, municipals, and political subdivisions
Fair Value
Less Than 12 Months	2,268,935	170,268
12 Months or More	998,399	1,027,747
Total	3,267,334	1,198,015
Unrealized Loss
Less Than 12 Months	(51,019)	(1,738)
12 Months or More	(88,908)	(43,875)
Total	(139,927)	(45,613)
Corporate securities
Fair Value
Less Than 12 Months	21,709,122	5,026,417
12 Months or More	9,756,347	10,947,027
Total	31,465,469	15,973,444
Unrealized Loss
Less Than 12 Months	(782,983)	(55,649)
12 Months or More	(1,136,265)	(471,752)
Total	(1,919,248)	(527,401)
Redeemable preferred stock
Fair Value
Less Than 12 Months	43,712	22,048
12 Months or More	43,427	23,197
Total	87,139	45,245
Unrealized Loss
Less Than 12 Months	(1,902)	(1,120)
12 Months or More	(5,321)	(2,383)
Total	$ (7,223)	(3,503)
Equities
Fair Value
Less Than 12 Months		86,194
12 Months or More		91,195
Total		177,389
Unrealized Loss
Less Than 12 Months		(1,400)
12 Months or More		(7,371)
Total		$ (8,771)

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INVESTMENT OPERATIONS - Additional Information (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2018 USD ($) position subsidiary	Dec. 31, 2017 USD ($) subsidiary
Investment [Line Items]
Unrealized loss, greater than 12 months	$ 1,376,340,000	$ 601,185,000
Underlying collateral, percentage guaranteed by the Federal Family Education Loan Program		97.00%
Total positions that were in an unrealized loss position | position	4,367
Fixed maturity securities - available-for-sale	$ 50,019,939,000	$ 39,488,434,000
Available-for-sale, amortized cost	52,187,516,000	39,455,935,000
Fixed maturity securities - trading	2,531,422,000	$ 2,725,694,000
Payments made	$ 0
Red Mountain, LLC
Investment [Line Items]
Number of wholly owned subsidiaries that were determined to be VIEs | subsidiary	1	1
Ownership interest through an affiliate (as a percent)	100.00%
Investment to which risk of loss related to the VIE is limited	$ 10,000
Below investment grade
Investment [Line Items]
Fixed maturity securities - available-for-sale	1,700,000,000
Available-for-sale, amortized cost	1,700,000,000
Fixed maturity securities - trading	175,600,000
Securities not publicly traded	263,100,000
Residential mortgage-backed securities
Investment [Line Items]
Unrealized loss, greater than 12 months	24,692,000	$ 13,064,000
Fixed maturity securities - available-for-sale	3,406,661,000	2,318,493,000
Available-for-sale, amortized cost	3,506,384,000	2,321,811,000
Fixed maturity securities - trading	254,037,000	259,694,000
Commercial mortgage-backed securities
Investment [Line Items]
Unrealized loss, greater than 12 months	40,932,000	21,031,000
Fixed maturity securities - available-for-sale	2,234,378,000	1,860,488,000
Available-for-sale, amortized cost	2,314,831,000	1,885,109,000
Fixed maturity securities - trading	135,403,000	146,804,000
Other asset-backed securities
Investment [Line Items]
Unrealized loss, greater than 12 months	$ 7,251,000	5,441,000
Underlying collateral, percentage guaranteed by the Federal Family Education Loan Program	97.00%
Fixed maturity securities - available-for-sale	$ 1,454,135,000	1,249,549,000
Available-for-sale, amortized cost	1,456,768,000	1,234,376,000
Fixed maturity securities - trading	111,770,000	138,097,000
U.S. government-related securities
Investment [Line Items]
Unrealized loss, greater than 12 months	58,741,000	31,489,000
Fixed maturity securities - available-for-sale	1,580,979,000	1,223,252,000
Available-for-sale, amortized cost	1,653,626,000	1,255,244,000
Fixed maturity securities - trading	58,081,000	27,234,000
Other government-related securities
Investment [Line Items]
Unrealized loss, greater than 12 months	14,230,000	4,779,000
Fixed maturity securities - available-for-sale	527,646,000	285,233,000
Available-for-sale, amortized cost	546,356,000	280,780,000
Fixed maturity securities - trading	43,030,000	63,925,000
States, municipals, and political subdivisions
Investment [Line Items]
Unrealized loss, greater than 12 months	88,908,000	43,875,000
Fixed maturity securities - available-for-sale	3,558,073,000	1,741,645,000
Available-for-sale, amortized cost	3,691,930,000	1,770,299,000
Fixed maturity securities - trading	296,618,000	326,925,000
Corporate securities
Investment [Line Items]
Unrealized loss, greater than 12 months	1,136,265,000	471,752,000
Fixed maturity securities - available-for-sale	36,860,207,000	29,537,546,000
Available-for-sale, amortized cost	38,612,538,000	29,446,365,000
Fixed maturity securities - trading	1,569,652,000	1,698,183,000
Fixed maturities
Investment [Line Items]
Fixed maturity securities - available-for-sale	49,709,218,000	38,307,297,000
Available-for-sale, amortized cost	51,876,795,000	38,288,346,000
Fixed maturity securities - trading	2,471,756,000	2,664,189,000
Gross unrecognized holding gains	1,728,000	76,586,000
Gross unrecognized holding losses	$ 77,492,000	$ 19,163,000

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INVESTMENT OPERATIONS - Summary of Change in Unrealized Gains (Losses), Net of Income Tax, on Fixed Maturity and Equity Securities, Classified as Available-for-Sale (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Fixed maturities
Investment Holdings [Line Items]
Change in unrealized gains (losses), net of income tax	$ (229,609)	$ 167,488	$ (1,727,358)	$ 865,743

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INVESTMENT OPERATIONS - Schedule of Amortized Cost and Fair Value of the Company's Investments Classified as Held-to-Maturity (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Investment [Line Items]
Fair Value	$ 2,577,841	$ 2,776,327
Fixed maturities
Investment [Line Items]
Amortized Cost	2,653,605	2,718,904
Gross Unrecognized Holding Gains	1,728	76,586
Gross Unrecognized Holding Losses	(77,492)	(19,163)
Fair Value	2,577,841	2,776,327
Total OTTI Recognized in OCI	0	0
Fixed maturities | Red Mountain, LLC
Investment [Line Items]
Amortized Cost	736,605	704,904
Gross Unrecognized Holding Gains	0	0
Gross Unrecognized Holding Losses	(77,492)	(19,163)
Fair Value	659,113	685,741
Total OTTI Recognized in OCI	0	0
Fixed maturities | Steel City, LLC
Investment [Line Items]
Amortized Cost	1,917,000	2,014,000
Gross Unrecognized Holding Gains	1,728	76,586
Gross Unrecognized Holding Losses	0	0
Fair Value	1,918,728	2,090,586
Total OTTI Recognized in OCI	$ 0	$ 0

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FAIR VALUE OF FINANCIAL INSTRUMENTS - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Assets:
Fixed maturity securities - available-for-sale	$ 50,019,939	$ 39,488,434
Fixed maturity securities - trading	52,180,974	40,971,486
Equity securities	623,201	715,498
Other long-term investments	635,618	629,537
Short-term investments	366,586	527,144
Assets related to separate accounts
Variable annuity	13,555,469	13,956,071
Variable universal life	1,077,842	1,035,202
Fixed maturities
Assets:
Fixed maturity securities - available-for-sale	49,709,218	38,307,297
Residential mortgage-backed securities
Assets:
Fixed maturity securities - available-for-sale	3,406,661	2,318,493
Commercial mortgage-backed securities
Assets:
Fixed maturity securities - available-for-sale	2,234,378	1,860,488
Other asset-backed securities
Assets:
Fixed maturity securities - available-for-sale	1,454,135	1,249,549
States, municipals, and political subdivisions
Assets:
Fixed maturity securities - available-for-sale	3,558,073	1,741,645
Other government-related securities
Assets:
Fixed maturity securities - available-for-sale	527,646	285,233
Corporate securities
Assets:
Fixed maturity securities - available-for-sale	36,860,207	29,537,546
Level 3 | Other asset-backed securities
Assets:
Total investments	502,020	504,228
Level 3 | Corporate securities
Assets:
Total investments	621,392	617,770
Measured at fair value on a recurring basis
Assets:
Total fixed maturity securities	52,180,974	40,971,486
Equity securities	623,201	715,498
Other long-term investments	635,618	629,537
Short-term investments	366,586	527,144
Total investments	53,806,379	42,843,665
Cash	161,173	178,855
Assets related to separate accounts
Variable annuity	13,555,469	13,956,071
Variable universal life	1,077,842	1,035,202
Total assets measured at fair value on a recurring basis	68,600,863	58,013,793
Liabilities:
Annuity account balances	78,463	83,472
Other liabilities	801,772	905,973
Total liabilities measured at fair value on a recurring basis	880,235	989,445
Measured at fair value on a recurring basis | Fixed maturities
Assets:
Fixed maturity securities - available-for-sale	49,709,218	38,307,297
Fixed maturity securities - trading	2,471,756	2,664,189
Measured at fair value on a recurring basis | Residential mortgage-backed securities
Assets:
Fixed maturity securities - available-for-sale	3,406,661	2,318,493
Fixed maturity securities - trading	254,037	259,694
Measured at fair value on a recurring basis | Commercial mortgage-backed securities
Assets:
Fixed maturity securities - available-for-sale	2,234,378	1,860,488
Fixed maturity securities - trading	135,403	146,804
Measured at fair value on a recurring basis | Other asset-backed securities
Assets:
Fixed maturity securities - available-for-sale	1,454,135	1,249,549
Fixed maturity securities - trading	111,770	138,097
Measured at fair value on a recurring basis | U.S. government-related securities
Assets:
Fixed maturity securities - available-for-sale	1,580,979	1,223,252
Fixed maturity securities - trading	58,081	27,234
Measured at fair value on a recurring basis | States, municipals, and political subdivisions
Assets:
Fixed maturity securities - available-for-sale	3,558,073	1,741,645
Fixed maturity securities - trading	296,618	326,925
Measured at fair value on a recurring basis | Other government-related securities
Assets:
Fixed maturity securities - available-for-sale	527,646	285,233
Fixed maturity securities - trading	43,030	63,925
Measured at fair value on a recurring basis | Corporate securities
Assets:
Fixed maturity securities - available-for-sale	36,860,207	29,537,546
Fixed maturity securities - trading	1,569,652	1,698,183
Measured at fair value on a recurring basis | Redeemable preferred stock
Assets:
Fixed maturity securities - available-for-sale	87,139	91,091
Fixed maturity securities - trading	3,165	3,327
Measured at fair value on a recurring basis | Level 1
Assets:
Total fixed maturity securities	1,046,253	1,055,756
Equity securities	559,750	649,981
Other long-term investments	52,728	51,102
Short-term investments	269,266	394,394
Total investments	1,927,997	2,151,233
Cash	161,173	178,855
Assets related to separate accounts
Variable annuity	13,555,469	13,956,071
Variable universal life	1,077,842	1,035,202
Total assets measured at fair value on a recurring basis	16,722,481	17,321,361
Liabilities:
Annuity account balances	0	0
Other liabilities	8,243	5,755
Total liabilities measured at fair value on a recurring basis	8,243	5,755
Measured at fair value on a recurring basis | Level 1 | Fixed maturities
Assets:
Fixed maturity securities - available-for-sale	1,016,229	1,031,246
Fixed maturity securities - trading	30,024	24,510
Measured at fair value on a recurring basis | Level 1 | Residential mortgage-backed securities
Assets:
Fixed maturity securities - available-for-sale	0	0
Fixed maturity securities - trading	0	0
Measured at fair value on a recurring basis | Level 1 | Commercial mortgage-backed securities
Assets:
Fixed maturity securities - available-for-sale	0	0
Fixed maturity securities - trading	0	0
Measured at fair value on a recurring basis | Level 1 | Other asset-backed securities
Assets:
Fixed maturity securities - available-for-sale	0	0
Fixed maturity securities - trading	0	0
Measured at fair value on a recurring basis | Level 1 | U.S. government-related securities
Assets:
Fixed maturity securities - available-for-sale	946,679	958,775
Fixed maturity securities - trading	26,859	21,183
Measured at fair value on a recurring basis | Level 1 | States, municipals, and political subdivisions
Assets:
Fixed maturity securities - available-for-sale	0	0
Fixed maturity securities - trading	0	0
Measured at fair value on a recurring basis | Level 1 | Other government-related securities
Assets:
Fixed maturity securities - available-for-sale	0	0
Fixed maturity securities - trading	0	0
Measured at fair value on a recurring basis | Level 1 | Corporate securities
Assets:
Fixed maturity securities - available-for-sale	0	0
Fixed maturity securities - trading	0	0
Measured at fair value on a recurring basis | Level 1 | Redeemable preferred stock
Assets:
Fixed maturity securities - available-for-sale	69,550	72,471
Fixed maturity securities - trading	3,165	3,327
Measured at fair value on a recurring basis | Level 2
Assets:
Total fixed maturity securities	49,951,474	38,743,800
Equity securities	0	0
Other long-term investments	402,312	417,969
Short-term investments	97,320	132,750
Total investments	50,451,106	39,294,519
Cash	0	0
Assets related to separate accounts
Variable annuity	0	0
Variable universal life	0	0
Total assets measured at fair value on a recurring basis	50,451,106	39,294,519
Liabilities:
Annuity account balances	0	0
Other liabilities	333,156	302,656
Total liabilities measured at fair value on a recurring basis	333,156	302,656
Measured at fair value on a recurring basis | Level 2 | Fixed maturities
Assets:
Fixed maturity securities - available-for-sale	47,542,977	36,144,785
Fixed maturity securities - trading	2,408,497	2,599,015
Measured at fair value on a recurring basis | Level 2 | Residential mortgage-backed securities
Assets:
Fixed maturity securities - available-for-sale	3,406,661	2,318,493
Fixed maturity securities - trading	254,037	259,694
Measured at fair value on a recurring basis | Level 2 | Commercial mortgage-backed securities
Assets:
Fixed maturity securities - available-for-sale	2,214,911	1,860,488
Fixed maturity securities - trading	135,403	146,804
Measured at fair value on a recurring basis | Level 2 | Other asset-backed securities
Assets:
Fixed maturity securities - available-for-sale	951,874	745,184
Fixed maturity securities - trading	83,758	102,875
Measured at fair value on a recurring basis | Level 2 | U.S. government-related securities
Assets:
Fixed maturity securities - available-for-sale	634,300	264,477
Fixed maturity securities - trading	31,222	6,051
Measured at fair value on a recurring basis | Level 2 | States, municipals, and political subdivisions
Assets:
Fixed maturity securities - available-for-sale	3,558,073	1,741,645
Fixed maturity securities - trading	296,618	326,925
Measured at fair value on a recurring basis | Level 2 | Other government-related securities
Assets:
Fixed maturity securities - available-for-sale	527,646	285,233
Fixed maturity securities - trading	43,030	63,925
Measured at fair value on a recurring basis | Level 2 | Corporate securities
Assets:
Fixed maturity securities - available-for-sale	36,231,923	28,910,645
Fixed maturity securities - trading	1,564,429	1,692,741
Measured at fair value on a recurring basis | Level 2 | Redeemable preferred stock
Assets:
Fixed maturity securities - available-for-sale	17,589	18,620
Fixed maturity securities - trading	0	0
Measured at fair value on a recurring basis | Level 3
Assets:
Total fixed maturity securities	1,183,247	1,171,930
Equity securities	63,451	65,517
Other long-term investments	180,578	160,466
Short-term investments	0	0
Total investments	1,427,276	1,397,913
Cash	0	0
Assets related to separate accounts
Variable annuity	0	0
Variable universal life	0	0
Total assets measured at fair value on a recurring basis	1,427,276	1,397,913
Liabilities:
Annuity account balances	78,463	83,472
Other liabilities	460,373	597,562
Total liabilities measured at fair value on a recurring basis	538,836	681,034
Measured at fair value on a recurring basis | Level 3 | Fixed maturities
Assets:
Fixed maturity securities - available-for-sale	1,150,012	1,131,266
Fixed maturity securities - trading	33,235	40,664
Measured at fair value on a recurring basis | Level 3 | Residential mortgage-backed securities
Assets:
Fixed maturity securities - available-for-sale	0	0
Fixed maturity securities - trading	0	0
Measured at fair value on a recurring basis | Level 3 | Commercial mortgage-backed securities
Assets:
Fixed maturity securities - available-for-sale	19,467	0
Fixed maturity securities - trading	0	0
Measured at fair value on a recurring basis | Level 3 | Other asset-backed securities
Assets:
Fixed maturity securities - available-for-sale	502,261	504,365
Fixed maturity securities - trading	28,012	35,222
Measured at fair value on a recurring basis | Level 3 | U.S. government-related securities
Assets:
Fixed maturity securities - available-for-sale	0	0
Fixed maturity securities - trading	0	0
Measured at fair value on a recurring basis | Level 3 | States, municipals, and political subdivisions
Assets:
Fixed maturity securities - available-for-sale	0	0
Fixed maturity securities - trading	0	0
Measured at fair value on a recurring basis | Level 3 | Other government-related securities
Assets:
Fixed maturity securities - available-for-sale	0	0
Fixed maturity securities - trading	0	0
Measured at fair value on a recurring basis | Level 3 | Corporate securities
Assets:
Fixed maturity securities - available-for-sale	628,284	626,901
Fixed maturity securities - trading	5,223	5,442
Measured at fair value on a recurring basis | Level 3 | Redeemable preferred stock
Assets:
Fixed maturity securities - available-for-sale	0	0
Fixed maturity securities - trading	$ 0	$ 0

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS - Additional Information (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) quote primary_source input_method	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Dec. 31, 2016 USD ($)
Determination of fair values
Number of sources of information considered | primary_source			1
Number of sources of information | input_method			3
Percentage of the Company's fixed maturity securities priced by third party pricing services			93.30%
Number of broker quotes obtained per security | quote			1
Underlying collateral, percentage guaranteed by the Federal Family Education Loan Program					97.00%
Percentage of derivatives excluding embedded derivatives that were priced using exchange prices or independent broker quotations			84.00%
Other long-term investments	$ 635,618,000		$ 635,618,000		$ 629,537,000
Financial instruments owned, other	63,400,000		63,400,000		65,500,000
Securities transferred into Level 3	19,900,000	$ 0	30,900,000	$ 0
Securities transferred into Level 2 from Level 3	47,700,000	17,400,000	66,200,000	28,900,000
Transfer from level 2 to level 1	0	0	0	0
Transfers from level 1 into level 2	0	0	0	0
Interest support, YRT premium support and portfolio maintenance agreement
Determination of fair values
Other long-term investments	90,900,000		90,900,000
Golden Gate II | Interest Support Agreement
Determination of fair values
Other long-term investments	38,500,000		38,500,000
Payments made under agreement	0		600,000.0
Amount of collateralized support agreement obligations by PLC	4,900,000		4,900,000
Golden Gate II | YRT premium support agreement
Determination of fair values
Other long-term investments	49,800,000		49,800,000
Payments made under agreement			0
Golden Gate V and West Coast Life | Portfolio maintenance agreements
Determination of fair values
Other long-term investments	2,700,000		2,700,000
Payments made under agreement			0
Level 3
Determination of fair values
Level 3 fair value	538,836,000	$ 646,324,000	538,836,000	$ 646,324,000	681,034,000	$ 537,106,000	$ 618,857,000	$ 493,419,000
Financial instruments valued in broker quotes	59,900,000		59,900,000		50,000,000
Level 3 | Annuity account
Determination of fair values
Level 3 fair value	78,500,000		78,500,000
Asset-backed securities | Level 2
Determination of fair values
Fair value	7,000,000,000		7,000,000,000
Asset-backed securities | Level 3
Determination of fair values
Fair value	549,700,000		$ 549,700,000
Other asset-backed securities
Determination of fair values
Underlying collateral, percentage guaranteed by the Federal Family Education Loan Program			97.00%
Other asset-backed securities | Level 3
Determination of fair values
Fair value	502,020,000		$ 502,020,000		504,228,000
Underlying collateral, percentage guaranteed by the Federal Family Education Loan Program			97.00%
Financial instruments valued in broker quotes	47,700,000		$ 47,700,000		35,400,000
Other asset-backed securities | Level 3 | Available-for-sale securities
Determination of fair values
Fair value	521,700,000		521,700,000
Other asset-backed securities | Level 3 | Trading securities
Determination of fair values
Fair value	28,000,000		28,000,000
Corporate Bonds and Securities | Level 2
Determination of fair values
Fair value	42,900,000,000		42,900,000,000
Corporate Bonds and Securities | Level 3
Determination of fair values
Fair value	633,500,000		633,500,000
Equity securities
Determination of fair values
Fair value	63,500,000		63,500,000
Federal Home Loan Bank stock	63,400,000		63,400,000
Embedded derivative - GLWB | Level 3
Determination of fair values
Fair value	40,048,000		$ 40,048,000
Embedded derivative - GLWB | Level 3 | Minimum
Determination of fair values
Mortality rate			91.10%
Embedded derivative - GLWB | Level 3 | Maximum
Determination of fair values
Mortality rate			106.60%
Embedded derivative - FIA | Level 3 | Minimum
Determination of fair values
Mortality rate			87.00%
Embedded derivative - FIA | Level 3 | Maximum
Determination of fair values
Mortality rate			100.00%
Embedded derivative - IUL | Level 3 | Minimum
Determination of fair values
Mortality rate			37.00%
Embedded derivative - IUL | Level 3 | Maximum
Determination of fair values
Mortality rate			577.00%
Embedded derivative - Modified coinsurance agreements
Determination of fair values
Statutory policy liabilities (net of policy loans)	2,300,000,000		$ 2,300,000,000
Embedded derivative - Modified coinsurance agreements | Trading securities
Determination of fair values
Fair value	60,000,000		60,000,000
Funds withheld derivative | Level 2
Determination of fair values
Other liabilities	60,400,000		60,400,000
Corporate securities | Level 3
Determination of fair values
Fair value	621,392,000		621,392,000		617,770,000
Financial instruments valued in broker quotes	$ 12,100,000		$ 12,100,000		$ 14,600,000

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS - Valuation of Level 3 Financial Instruments (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2018 USD ($) usd_per_policy	Dec. 31, 2017 USD ($) usd_per_policy
Liabilities
Fair Value	$ 801,772,000	$ 905,973,000
Level 3 | Other asset-backed securities
Assets:
Fair value	502,020,000	504,228,000
Level 3 | Corporate securities
Assets:
Fair value	621,392,000	617,770,000
Level 3 | Embedded derivative - GLWB
Assets:
Fair value	40,048,000
Liabilities
Fair Value		15,554,000
Level 3 | Embedded derivative - FIA
Liabilities
Fair Value	256,912,000	218,676,000
Level 3 | Embedded derivative - IUL
Liabilities
Fair Value	$ 95,739,000	$ 80,212,000
Level 3 | Discounted cash flow | Corporate securities | Minimum
Liabilities
Debt securities,measurement input	0.0090	0.0031
Level 3 | Discounted cash flow | Corporate securities | Maximum
Liabilities
Debt securities,measurement input	0.0423	0.0450
Level 3 | Discounted cash flow | Corporate securities | Weighted Average
Liabilities
Debt securities,measurement input	0.0151	0.0106
Level 3 | Actuarial cash flow model | Embedded derivative - FIA
Liabilities
Embedded derivative, measurement input | usd_per_policy	145	146
Liquidation value | Level 3 | Liquidation | Other asset-backed securities | Minimum
Liabilities
Debt securities, measurement input, value	$ 90	$ 90
Liquidation value | Level 3 | Liquidation | Other asset-backed securities | Maximum
Liabilities
Debt securities, measurement input, value	97	97
Liquidation value | Level 3 | Liquidation | Other asset-backed securities | Weighted Average
Liabilities
Debt securities, measurement input, value	$ 94.92	$ 94.91
Liquidity premium | Level 3 | Discounted cash flow | Other asset-backed securities | Minimum
Liabilities
Debt securities,measurement input	0.0000	0.0006
Liquidity premium | Level 3 | Discounted cash flow | Other asset-backed securities | Maximum
Liabilities
Debt securities,measurement input	0.0140	0.0117
Liquidity premium | Level 3 | Discounted cash flow | Other asset-backed securities | Weighted Average
Liabilities
Debt securities,measurement input	0.0062	0.0075
Paydown rate | Level 3 | Discounted cash flow | Other asset-backed securities | Minimum
Liabilities
Debt securities,measurement input	0.1109	0.1131
Paydown rate | Level 3 | Discounted cash flow | Other asset-backed securities | Maximum
Liabilities
Debt securities,measurement input	0.1315	0.1197
Paydown rate | Level 3 | Discounted cash flow | Other asset-backed securities | Weighted Average
Liabilities
Debt securities,measurement input	0.1238	0.1154
Mortality | Level 3 | Actuarial cash flow model | Embedded derivative - GLWB | Minimum
Liabilities
Embedded derivative, measurement input	0.87	0.911
Mortality | Level 3 | Actuarial cash flow model | Embedded derivative - GLWB | Maximum
Liabilities
Embedded derivative, measurement input	1.00	1.066
Mortality | Level 3 | Actuarial cash flow model | Embedded derivative - IUL | Minimum
Liabilities
Embedded derivative, measurement input	0.37	0.34
Mortality | Level 3 | Actuarial cash flow model | Embedded derivative - IUL | Maximum
Liabilities
Embedded derivative, measurement input	5.77	1.52
Utilization | Level 3 | Actuarial cash flow model | Embedded derivative - GLWB
Liabilities
Embedded derivative, measurement input	0.99	0.99
Policies that have a one-time over-utilization rate of a specified amount (as a percent)	10.00%	10.00%
Specified level of one-time over-utilization (as a percent)	400.00%	400.00%
Nonperformance risk | Level 3 | Actuarial cash flow model | Embedded derivative - GLWB | Minimum
Liabilities
Embedded derivative, measurement input	0.0013	0.0011
Nonperformance risk | Level 3 | Actuarial cash flow model | Embedded derivative - GLWB | Maximum
Liabilities
Embedded derivative, measurement input	0.0088	0.0079
Nonperformance risk | Level 3 | Actuarial cash flow model | Embedded derivative - FIA | Minimum
Liabilities
Embedded derivative, measurement input	0.0013	0.0011
Nonperformance risk | Level 3 | Actuarial cash flow model | Embedded derivative - FIA | Maximum
Liabilities
Embedded derivative, measurement input	0.0088	0.0079
Nonperformance risk | Level 3 | Actuarial cash flow model | Embedded derivative - IUL | Minimum
Liabilities
Embedded derivative, measurement input	0.0013	0.0011
Nonperformance risk | Level 3 | Actuarial cash flow model | Embedded derivative - IUL | Maximum
Liabilities
Embedded derivative, measurement input	0.0088	0.0079
Withdrawal rate prior to age 70 | Level 3 | Actuarial cash flow model | Embedded derivative - FIA
Liabilities
Embedded derivative, measurement input	0.015	0.015
Withdrawal rate | Level 3 | Actuarial cash flow model | Embedded derivative - FIA
Liabilities
Embedded derivative, measurement input	1.000	1.00
Lapse | Minimum
Liabilities
Embedded derivative, measurement input		0.010
Lapse | Maximum
Liabilities
Embedded derivative, measurement input		0.300
Lapse | Level 3 | Actuarial cash flow model | Embedded derivative - FIA | Minimum
Liabilities
Embedded derivative, measurement input	0.010	0.010
Lapse | Level 3 | Actuarial cash flow model | Embedded derivative - FIA | Maximum
Liabilities
Embedded derivative, measurement input	0.300	0.300
Lapse | Level 3 | Actuarial cash flow model | Embedded derivative - IUL | Minimum
Liabilities
Embedded derivative, measurement input	0.005	0.005
Lapse | Level 3 | Actuarial cash flow model | Embedded derivative - IUL | Maximum
Liabilities
Embedded derivative, measurement input	0.001	0.100

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS - Reconciliation of Beginning and Ending Balances for Fair Value Measurements (Details) - Level 3 - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Assets:
Beginning Balance	$ 1,495,772	$ 1,446,853	$ 1,397,914	$ 1,498,010
Total Realized and Unrealized Gains, Included in Earnings, Assets	11,983	56,518	34,582	66,248
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Assets	1,439	10,066	20,367	31,394
Total Realized and Unrealized Losses, Included in Earnings, Assets	(2,059)	(355)	(17,446)	(29,403)
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Assets	(20,596)	(4,507)	(42,913)	(10,138)
Purchases	19,128	5,171	173,101	97,784
Sales	(51,138)	(61,709)	(101,377)	(190,120)
Issuances	0	0	0	0
Settlements	0	0	(627)	0
Transfers in/out of Level 3	(27,750)	(17,430)	(35,258)	(28,937)
Other	497	(641)	(1,067)	(872)
Ending Balance	1,427,276	1,433,966	1,427,276	1,433,966
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	10,333	56,307	16,854	37,718
Liabilities:
Beginning Balance	537,106	618,857	681,034	493,419
Total Realized and Unrealized Gains Included in Earnings	38,249	6,702	226,359	21,982
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Liabilities	0	0	0	0
Total Realized and Unrealized Losses, Included in Earnings, Liabilities	(42,510)	(36,212)	(91,919)	(180,448)
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Liabilities	0	0	0	0
Purchases	0	0	0	0
Sales	0	0	0	0
Issuances	40	9	570	402
Settlements	2,571	2,052	8,328	5,963
Transfers in/out of Level 3	0	0	0	0
Other	0	0	0	0
Ending Balance	538,836	646,324	538,836	646,324
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	(3,365)	(28,533)	137,189	(155,493)
Annuity account balances
Liabilities:
Beginning Balance	80,098	86,094	83,472	87,616
Total Realized and Unrealized Gains Included in Earnings	0	0	0	0
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Liabilities	0	0	0	0
Total Realized and Unrealized Losses, Included in Earnings, Liabilities	(896)	(977)	(2,749)	(2,973)
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Liabilities	0	0	0	0
Purchases	0	0	0	0
Sales	0	0	0	0
Issuances	40	9	570	402
Settlements	2,571	2,052	8,328	5,963
Transfers in/out of Level 3	0	0	0	0
Other	0	0	0	0
Ending Balance	78,463	85,028	78,463	85,028
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	0	0	0	0
Other liabilities
Liabilities:
Beginning Balance	457,008	532,763	597,562	405,803
Total Realized and Unrealized Gains Included in Earnings	38,249	6,702	226,359	21,982
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Liabilities	0	0	0	0
Total Realized and Unrealized Losses, Included in Earnings, Liabilities	(41,614)	(35,235)	(89,170)	(177,475)
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Liabilities	0	0	0	0
Purchases	0	0	0	0
Sales	0	0	0	0
Issuances	0	0	0	0
Settlements	0	0	0	0
Transfers in/out of Level 3	0	0	0	0
Other	0	0	0	0
Ending Balance	460,373	561,296	460,373	561,296
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	(3,365)	(28,533)	137,189	(155,493)
Total investments
Assets:
Beginning Balance	1,495,772	1,446,853	1,397,914	1,498,010
Total Realized and Unrealized Gains, Included in Earnings, Assets	11,983	56,518	34,582	66,248
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Assets	1,439	10,066	20,367	31,394
Total Realized and Unrealized Losses, Included in Earnings, Assets	(2,059)	(355)	(17,446)	(29,403)
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Assets	(20,596)	(4,507)	(42,913)	(10,138)
Purchases	19,128	5,171	173,101	97,784
Sales	(51,138)	(61,709)	(101,377)	(190,120)
Issuances	0	0	0	0
Settlements	0	0	(627)	0
Transfers in/out of Level 3	(27,750)	(17,430)	(35,258)	(28,937)
Other	497	(641)	(1,067)	(872)
Ending Balance	1,427,276	1,433,966	1,427,276	1,433,966
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	10,333	56,307	16,854	37,718
Fixed maturities
Assets:
Beginning Balance	1,259,625	1,287,922	1,171,930	1,316,708
Total Realized and Unrealized Gains, Included in Earnings, Assets	84	27	278	3,780
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Assets	1,439	10,066	20,367	31,394
Total Realized and Unrealized Losses, Included in Earnings, Assets	(144)	(353)	(3,881)	(1,154)
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Assets	(20,596)	(4,507)	(42,913)	(10,138)
Purchases	19,128	5,171	173,065	97,784
Sales	(49,036)	(61,539)	(99,275)	(189,846)
Issuances	0	0	0	0
Settlements	0	0	0	0
Transfers in/out of Level 3	(27,750)	(17,430)	(35,258)	(28,940)
Other	497	(641)	(1,066)	(872)
Ending Balance	1,183,247	1,218,716	1,183,247	1,218,716
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	62	(182)	(3,482)	3,498
Fixed maturities | Available-for-sale securities
Assets:
Beginning Balance	1,229,519	1,227,479	1,131,266	1,226,653
Total Realized and Unrealized Gains, Included in Earnings, Assets	0	0	0	0
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Assets	1,439	10,066	20,367	31,394
Total Realized and Unrealized Losses, Included in Earnings, Assets	(62)	0	(62)	0
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Assets	(20,596)	(4,507)	(42,913)	(10,138)
Purchases	15,000	5,171	164,337	97,784
Sales	(48,110)	(42,351)	(86,680)	(137,330)
Issuances	0	0	0	0
Settlements	0	0	0	0
Transfers in/out of Level 3	(27,750)	(17,430)	(35,422)	(28,940)
Other	572	(726)	(881)	(1,721)
Ending Balance	1,150,012	1,177,702	1,150,012	1,177,702
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	0	0	0	0
Fixed maturities | Trading securities
Assets:
Beginning Balance	30,106	60,443	40,664	90,055
Total Realized and Unrealized Gains, Included in Earnings, Assets	84	27	278	3,780
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Assets	0	0	0	0
Total Realized and Unrealized Losses, Included in Earnings, Assets	(82)	(353)	(3,819)	(1,154)
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Assets	0	0	0	0
Purchases	4,128	0	8,728	0
Sales	(926)	(19,188)	(12,595)	(52,516)
Issuances	0	0	0	0
Settlements	0	0	0	0
Transfers in/out of Level 3	0	0	164	0
Other	(75)	85	(185)	849
Ending Balance	33,235	41,014	33,235	41,014
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	62	(182)	(3,482)	3,498
Residential mortgage-backed securities | Available-for-sale securities
Assets:
Beginning Balance	21,780	11,862	0	3
Total Realized and Unrealized Gains, Included in Earnings, Assets	0	0	0	0
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Assets	0	83	0	83
Total Realized and Unrealized Losses, Included in Earnings, Assets	0	0	0	0
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Assets	(538)	0	(995)	0
Purchases	0	0	22,225	11,862
Sales	0	0	0	(3)
Issuances	0	0	0	0
Settlements	0	0	0	0
Transfers in/out of Level 3	(21,281)	(11,944)	(21,281)	(11,944)
Other	39	(1)	51	(1)
Ending Balance	0	0	0	0
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	0	0	0	0
Commercial mortgage-backed securities | Available-for-sale securities
Assets:
Beginning Balance	47,227	0	0
Total Realized and Unrealized Gains, Included in Earnings, Assets	0	0	0
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Assets	0	0	0
Total Realized and Unrealized Losses, Included in Earnings, Assets	0	0	0
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Assets	(1,212)	0	(2,496)
Purchases	0	0	48,621
Sales	(151)	0	(245)
Issuances	0	0	0
Settlements	0	0	0
Transfers in/out of Level 3	(26,372)	0	(26,372)
Other	(25)	0	(41)
Ending Balance	19,467	0	19,467	0
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	0	0	0
Other asset-backed securities | Available-for-sale securities
Assets:
Beginning Balance	515,701	552,963	504,365	562,604
Total Realized and Unrealized Gains, Included in Earnings, Assets	0	0	0	0
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Assets	17	1,682	11,884	5,212
Total Realized and Unrealized Losses, Included in Earnings, Assets	(62)	0	(62)	0
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Assets	(14,802)	(2,285)	(16,449)	(7,374)
Purchases	0	100	0	100
Sales	(24)	(109)	(47)	(2,135)
Issuances	0	0	0	0
Settlements	0	0	0	0
Transfers in/out of Level 3	0	0	222	(6,643)
Other	1,431	798	2,348	1,385
Ending Balance	502,261	553,149	502,261	553,149
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	0	0	0	0
Other asset-backed securities | Trading securities
Assets:
Beginning Balance	24,852	54,923	35,222	84,563
Total Realized and Unrealized Gains, Included in Earnings, Assets	84	0	278	3,679
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Assets	0	0	0	0
Total Realized and Unrealized Losses, Included in Earnings, Assets	(76)	(353)	(3,674)	(1,154)
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Assets	0	0	0	0
Purchases	4,128	0	8,728	0
Sales	(926)	(19,188)	(12,595)	(52,516)
Issuances	0	0	0	0
Settlements	0	0	0	0
Transfers in/out of Level 3	0	0	164	0
Other	(50)	108	(111)	918
Ending Balance	28,012	35,490	28,012	35,490
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	68	(209)	(3,337)	3,397
Corporate securities | Available-for-sale securities
Assets:
Beginning Balance	644,811	662,654	626,901	664,046
Total Realized and Unrealized Gains, Included in Earnings, Assets	0	0	0	0
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Assets	1,422	8,301	8,483	26,099
Total Realized and Unrealized Losses, Included in Earnings, Assets	0	0	0	0
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Assets	(4,044)	(2,222)	(22,973)	(2,764)
Purchases	15,000	5,071	93,491	85,822
Sales	(47,935)	(42,242)	(86,388)	(135,192)
Issuances	0	0	0	0
Settlements	0	0	0	0
Transfers in/out of Level 3	19,903	(5,486)	12,009	(10,353)
Other	(873)	(1,523)	(3,239)	(3,105)
Ending Balance	628,284	624,553	628,284	624,553
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	0	0	0	0
Corporate securities | Trading securities
Assets:
Beginning Balance	5,254	5,520	5,442	5,492
Total Realized and Unrealized Gains, Included in Earnings, Assets	0	27	0	101
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Assets	0	0	0	0
Total Realized and Unrealized Losses, Included in Earnings, Assets	(6)	0	(145)	0
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Assets	0	0	0	0
Purchases	0	0	0	0
Sales	0	0	0	0
Issuances	0	0	0	0
Settlements	0	0	0	0
Transfers in/out of Level 3	0	0	0	0
Other	(25)	(23)	(74)	(69)
Ending Balance	5,223	5,524	5,223	5,524
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	(6)	27	(145)	101
Equity securities
Assets:
Beginning Balance	65,553	65,686	65,518	65,786
Total Realized and Unrealized Gains, Included in Earnings, Assets	0	0	1	1
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Assets	0	0	0	0
Total Realized and Unrealized Losses, Included in Earnings, Assets	0	0	(1)	0
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Assets	0	0	0	0
Purchases	0	0	36	0
Sales	(2,102)	(170)	(2,102)	(274)
Issuances	0	0	0	0
Settlements	0	0	0	0
Transfers in/out of Level 3	0	0	0	3
Other	0	0	(1)	0
Ending Balance	63,451	65,516	63,451	65,516
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	287	0	224	2
Other long-term investments
Assets:
Beginning Balance	170,594	93,245	160,466	115,516
Total Realized and Unrealized Gains, Included in Earnings, Assets	11,899	56,491	34,303	62,467
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Assets	0	0	0	0
Total Realized and Unrealized Losses, Included in Earnings, Assets	(1,915)	(2)	(13,564)	(28,249)
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Assets	0	0	0	0
Purchases	0	0	0	0
Sales	0	0	0	0
Issuances	0	0	0	0
Settlements	0	0	(627)	0
Transfers in/out of Level 3	0	0	0	0
Other	0	0	0	0
Ending Balance	180,578	149,734	180,578	149,734
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date	9,984	56,489	20,112	34,218
Short-term investments
Assets:
Beginning Balance			0	0
Total Realized and Unrealized Gains, Included in Earnings, Assets			0	0
Total Realized and Unrealized Gains, Included in Other Comprehensive Income, Assets			0	0
Total Realized and Unrealized Losses, Included in Earnings, Assets			0	0
Total Realized and Unrealized Losses, Included in Other Comprehensive Income, Assets			0	0
Purchases			0	0
Sales			0	0
Issuances			0	0
Settlements			0	0
Transfers in/out of Level 3			0	0
Other			0	0
Ending Balance	$ 0	$ 0	0	0
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date			$ 0	$ 0

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS - Estimated Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Assets:
Mortgage loans on real estate	$ 7,572,349	$ 6,817,723
Policy loans	1,703,462	1,615,615
Fixed maturities, held-to-maturity	2,653,605	2,718,904
Liabilities:
Stable value product account balances	5,211,668	4,698,371
Future policy benefits and claims	13,590,482	10,921,190
Other policyholders’ funds	1,142,522	1,267,198
Debt
Non-recourse funding obligations	2,890,435	2,952,822
Capital lease obligations	1,400	1,700
Golden Gate V
Debt
Non-recourse funding obligations	714,921	681,285
Level 3 | Carrying Amounts
Assets:
Mortgage loans on real estate	7,572,349	6,817,723
Policy loans	1,703,462	1,615,615
Liabilities:
Stable value product account balances	5,211,668	4,698,371
Future policy benefits and claims	223,091	220,498
Other policyholders’ funds	131,338	133,508
Debt
Non-recourse funding obligations	2,890,435	2,952,822
Subordinated funding obligations	110,000	0
Level 3 | Carrying Amounts | Golden Gate V
Debt
Non-recourse funding obligations	2,600,000	2,700,000
Level 3 | Carrying Amounts | Fixed maturities
Assets:
Fixed maturities, held-to-maturity	2,653,605	2,718,904
Level 3 | Fair Values
Assets:
Mortgage loans on real estate	7,335,547	6,740,177
Policy loans	1,703,462	1,615,615
Liabilities:
Stable value product account balances	5,147,084	4,698,868
Future policy benefits and claims	223,091	220,498
Other policyholders’ funds	130,672	134,253
Debt
Non-recourse funding obligations	2,814,355	2,980,495
Subordinated funding obligations	97,451	0
Level 3 | Fair Values | Golden Gate V
Debt
Non-recourse funding obligations	2,600,000	2,800,000
Level 3 | Fair Values | Fixed maturities
Assets:
Fixed maturities, held-to-maturity	$ 2,577,841	$ 2,776,327

XML

DERIVATIVE FINANCIAL INSTRUMENTS - Additional Information (Details)	Sep. 30, 2018 portfolio_maintenance_agreement support_agreement	Jan. 31, 2016 portfolio_maintenance_agreement	Oct. 31, 2012 portfolio_maintenance_agreement
Derivative [Line Items]
Number of premium support agreements | support_agreement	2
PLC
Derivative [Line Items]
Number of portfolio maintenance agreements | portfolio_maintenance_agreement	3	1	2

XML

DERIVATIVE FINANCIAL INSTRUMENTS - Realized Investments Gains and Losses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	$ (26,710)	$ 5,302	$ 37,176	$ (119,392)
Derivatives not designated as hedging instruments
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	(26,710)	5,302	37,176	(119,392)
Derivatives not designated as hedging instruments | Embedded derivative - Modco reinsurance treaties
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	10,811	(19,746)	138,652	(90,314)
Derivatives not designated as hedging instruments | Derivatives with PLC
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	(1,913)	52,077	(66)	34,671
Derivatives not designated as hedging instruments | Other derivatives
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	(52)	43	(59)	41
Derivatives not designated as hedging instruments | VA
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	(34,674)	(21,510)	(118,903)	(47,712)
Derivatives not designated as hedging instruments | VA | Interest rate futures
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	2,111	549	(13,229)	16,746
Derivatives not designated as hedging instruments | VA | Equity futures
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	(5,733)	(25,959)	(23,025)	(75,389)
Derivatives not designated as hedging instruments | VA | Currency futures
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	3,410	(6,092)	7,890	(22,366)
Derivatives not designated as hedging instruments | VA | Equity options
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	(21,206)	(23,307)	(47,406)	(76,376)
Derivatives not designated as hedging instruments | VA | Interest rate swaptions
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	0	(292)	(14)	(2,423)
Derivatives not designated as hedging instruments | VA | Interest rate swaps
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	(41,288)	5,342	(131,147)	31,331
Derivatives not designated as hedging instruments | VA | Total return swaps
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	(32,343)	(8,057)	(35,908)	(9,675)
Derivatives not designated as hedging instruments | VA | Embedded derivative - GLWB
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	22,931	485	55,595	(13,306)
Derivatives not designated as hedging instruments | VA | Funds withheld derivative
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	37,444	35,821	68,341	103,746
Derivatives not designated as hedging instruments | FIA
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	3,726	(7,298)	12,530	(10,679)
Derivatives not designated as hedging instruments | FIA | Equity futures
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	(388)	66	(716)	161
Derivatives not designated as hedging instruments | FIA | Equity options
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	18,474	11,242	21,203	29,511
Derivatives not designated as hedging instruments | FIA | Embedded derivative - FIA
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	(14,360)	(18,606)	(7,957)	(40,351)
Derivatives not designated as hedging instruments | IUL
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	(4,608)	1,736	5,022	(5,399)
Derivatives not designated as hedging instruments | IUL | Equity futures
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	(1)	58	135	(878)
Derivatives not designated as hedging instruments | IUL | Equity options
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	4,928	1,975	5,764	6,437
Derivatives not designated as hedging instruments | IUL | Embedded derivative - IUL
Notional amount and fair value of the entity's derivative financial instruments
Total realized gains (losses) - derivatives	$ (9,535)	$ (297)	$ (877)	$ (10,958)

XML

DERIVATIVE FINANCIAL INSTRUMENTS - Components of the Gain or Loss on Derivatives that Quality as a Cash Flow Hedging Relationship (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Gain (Loss) on Derivatives in Cash Flow Hedging Relationship
Amount of gains (losses) reclassified from accumulated other comprehensive income (loss) in the next twelve months			$ 300
Cash flow hedges
Gain (Loss) on Derivatives in Cash Flow Hedging Relationship
Amount of Gains (Losses) Deferred in Accumulated Other Comprehensive Income (Loss) on Derivatives	$ 291	$ 1,273	3,873	$ 55
Amount and Location of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)	(481)	(38)	(799)	(396)
Amount and Location of (Losses) Recognized in Income (Loss) on Derivatives	0	0	0	0
Cash flow hedges | Foreign currency swaps
Gain (Loss) on Derivatives in Cash Flow Hedging Relationship
Amount of Gains (Losses) Deferred in Accumulated Other Comprehensive Income (Loss) on Derivatives	190	1,273	3,772	55
Amount and Location of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)	(155)	(38)	(473)	(396)
Amount and Location of (Losses) Recognized in Income (Loss) on Derivatives	0	$ 0	0	$ 0
Cash flow hedges | Interest rate swaps
Gain (Loss) on Derivatives in Cash Flow Hedging Relationship
Amount of Gains (Losses) Deferred in Accumulated Other Comprehensive Income (Loss) on Derivatives	101		101
Amount and Location of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)	(326)		(326)
Amount and Location of (Losses) Recognized in Income (Loss) on Derivatives	$ 0		$ 0

XML

DERIVATIVE FINANCIAL INSTRUMENTS - Nature and Accounting Treatment of Derivative Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Derivative [Line Items]
Other long-term investments, Fair Value	$ 635,618	$ 629,537
Derivatives with PLC
Derivative [Line Items]
Other long-term investments, Fair Value	90,885	91,578
Embedded derivative - Modco reinsurance treaties
Derivative [Line Items]
Other long-term investments, Fair Value	2,650	1,009
Embedded derivative - GLWB
Derivative [Line Items]
Other long-term investments, Fair Value	87,043	67,879
Derivatives designated as hedging instrument | Cash flow hedges | Interest rate swaps
Derivative [Line Items]
Other long-term investments, Notional Amounts	350,000	0
Other long-term investments, Fair Value	0	0
Derivatives designated as hedging instrument | Cash flow hedges | Foreign currency swaps
Derivative [Line Items]
Other long-term investments, Notional Amounts	117,178	117,178
Other long-term investments, Fair Value	10,902	6,016
Derivatives not designated as hedging instruments
Derivative [Line Items]
Other long-term investments, Notional Amounts	14,636,363	12,361,869
Other long-term investments, Fair Value	635,618	629,537
Other liabilities. Notional Amount	14,188,126	12,710,731
Other liabilities, Fair Value	801,772	905,973
Derivatives not designated as hedging instruments | Interest rate swaps
Derivative [Line Items]
Other long-term investments, Notional Amounts	565,000	1,265,000
Other long-term investments, Fair Value	8,402	55,411
Other liabilities. Notional Amount	1,547,500	597,500
Other liabilities, Fair Value	26,321	2,960
Derivatives not designated as hedging instruments | Total return swaps
Derivative [Line Items]
Other long-term investments, Notional Amounts	482,523	190,938
Other long-term investments, Fair Value	3,676	135
Other liabilities. Notional Amount	0	243,388
Other liabilities, Fair Value	0	318
Derivatives not designated as hedging instruments | Derivatives with PLC
Derivative [Line Items]
Other long-term investments, Notional Amounts	2,863,575	2,810,469
Other long-term investments, Fair Value	90,885	91,578
Derivatives not designated as hedging instruments | Embedded derivative - Modco reinsurance treaties
Derivative [Line Items]
Other long-term investments, Notional Amounts	322,308	64,472
Other long-term investments, Fair Value	2,650	1,009
Other liabilities. Notional Amount	2,082,638	2,390,539
Other liabilities, Fair Value	60,683	215,247
Derivatives not designated as hedging instruments | Funds withheld derivative
Derivative [Line Items]
Other liabilities. Notional Amount	1,813,454	1,502,726
Other liabilities, Fair Value	60,432	61,729
Derivatives not designated as hedging instruments | Embedded derivative - GLWB
Derivative [Line Items]
Other long-term investments, Notional Amounts	2,692,724	2,116,935
Other long-term investments, Fair Value	87,043	67,879
Other liabilities. Notional Amount	1,385,123	1,939,320
Other liabilities, Fair Value	46,995	83,427
Derivatives not designated as hedging instruments | Embedded derivative - FIA
Derivative [Line Items]
Other liabilities. Notional Amount	2,459,246	1,951,650
Other liabilities, Fair Value	256,912	218,676
Derivatives not designated as hedging instruments | Embedded derivative - IUL
Derivative [Line Items]
Other liabilities. Notional Amount	219,226	168,349
Other liabilities, Fair Value	95,739	80,212
Derivatives not designated as hedging instruments | Interest rate futures
Derivative [Line Items]
Other long-term investments, Notional Amounts	875,566	1,071,870
Other long-term investments, Fair Value	8,329	3,178
Other liabilities. Notional Amount	348,749	230,404
Other liabilities, Fair Value	7,122	917
Derivatives not designated as hedging instruments | Equity futures
Derivative [Line Items]
Other long-term investments, Notional Amounts	205,872	62,266
Other long-term investments, Fair Value	2,387	154
Other liabilities. Notional Amount	77,916	318,795
Other liabilities, Fair Value	1,043	2,593
Derivatives not designated as hedging instruments | Currency futures
Derivative [Line Items]
Other long-term investments, Notional Amounts	135,112	1,117
Other long-term investments, Fair Value	1,096	2
Other liabilities. Notional Amount	79,861	255,248
Other liabilities, Fair Value	15	2,087
Derivatives not designated as hedging instruments | Equity options
Derivative [Line Items]
Other long-term investments, Notional Amounts	6,026,348	4,436,467
Other long-term investments, Fair Value	420,107	403,961
Other liabilities. Notional Amount	4,174,072	3,112,812
Other liabilities, Fair Value	246,466	237,807
Derivatives not designated as hedging instruments | Interest rate swaptions
Derivative [Line Items]
Other long-term investments, Notional Amounts	0	225,000
Other long-term investments, Fair Value	0	14
Derivatives not designated as hedging instruments | Other derivatives
Derivative [Line Items]
Other long-term investments, Notional Amounts	157	157
Other long-term investments, Fair Value	141	200
Other liabilities. Notional Amount	341	0
Other liabilities, Fair Value	$ 44	$ 0

XML

OFFSETTING OF ASSETS AND LIABILITIES - Schedule of Derivative Instruments by Assets (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Derivative instruments by assets
Fair value of non-cash collateral	$ 8,200,000	$ 0
Offsetting of Assets
Gross Amounts of Recognized Assets, Derivatives Not Subject to a master netting arrangement	635,618,000	629,537,000
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Assets Presented in the Statement of Financial Position	635,618,000	629,537,000
Derivative Asset, Not Offset, Policy Election Deduction	270,878,000	242,105,000
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Received	68,809,000	108,830,000
Net Amount	295,931,000	278,602,000
Free-Standing derivatives
Offsetting of Assets
Gross Amounts of Recognized Assets, Derivatives	454,899,000	468,871,000
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Assets Presented in the Statement of Financial Position	454,899,000	468,871,000
Derivative Asset, Not Subject to Master Netting Arrangement Deduction	270,878,000	242,105,000
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Received	68,809,000	108,830,000
Net Amount	115,212,000	117,936,000
Total derivatives, subject to a master netting arrangement or similar arrangement
Offsetting of Assets
Gross Amounts of Recognized Assets, Derivatives	454,899,000	468,871,000
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Assets Presented in the Statement of Financial Position	454,899,000	468,871,000
Derivative Asset, Not Subject to Master Netting Arrangement Deduction	270,878,000	242,105,000
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Received	68,809,000	108,830,000
Net Amount	115,212,000	117,936,000
Embedded derivative - Modco reinsurance treaties
Offsetting of Assets
Gross Amounts of Recognized Assets, Derivatives Not Subject to a master netting arrangement	2,650,000	1,009,000
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Assets Presented in the Statement of Financial Position	2,650,000	1,009,000
Derivative Asset, Not Offset, Policy Election Deduction	0	0
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Received	0	0
Net Amount	2,650,000	1,009,000
Embedded derivative - GLWB
Offsetting of Assets
Gross Amounts of Recognized Assets, Derivatives Not Subject to a master netting arrangement	87,043,000	67,879,000
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Assets Presented in the Statement of Financial Position	87,043,000	67,879,000
Derivative Asset, Not Offset, Policy Election Deduction	0	0
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Received	0	0
Net Amount	87,043,000	67,879,000
Derivatives with PLC
Offsetting of Assets
Gross Amounts of Recognized Assets, Derivatives Not Subject to a master netting arrangement	90,885,000	91,578,000
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Assets Presented in the Statement of Financial Position	90,885,000	91,578,000
Derivative Asset, Not Offset, Policy Election Deduction	0	0
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Received	0	0
Net Amount	90,885,000	91,578,000
Other
Offsetting of Assets
Gross Amounts of Recognized Assets, Derivatives Not Subject to a master netting arrangement	141,000	200,000
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Assets Presented in the Statement of Financial Position	141,000	200,000
Derivative Asset, Not Offset, Policy Election Deduction	0	0
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Received	0	0
Net Amount	141,000	200,000
Total derivatives, not subject to a master netting arrangement or similar arrangement
Offsetting of Assets
Gross Amounts of Recognized Assets, Derivatives Not Subject to a master netting arrangement	180,719,000	160,666,000
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Assets Presented in the Statement of Financial Position	180,719,000	160,666,000
Derivative Asset, Not Offset, Policy Election Deduction	0	0
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Received	0	0
Net Amount	$ 180,719,000	$ 160,666,000

XML

OFFSETTING OF ASSETS AND LIABILITIES - Schedule of Derivative Instruments by Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Offsetting of Liabilities
Gross Amounts of Recognized Liabilities, Not subject to a master netting arrangement or similar arrangement	$ 801,772	$ 905,973
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Liabilities Presented in the Statement of Financial Position	801,772	905,973
Derivative Liability, Not Subject to Master Netting Arrangement Deduction	270,878	242,105
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid	10,089	4,577
Net Amount	520,805	659,291
Repurchase agreements
Gross Amounts of Recognized Liabilities	417,094	885,000
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Liabilities Presented in the Statement of Financial Position	417,094	885,000
Gross Amounts Not Offset in the Statement of Financial Position, Financial Instruments	0	0
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid	0	0
Net Amount	417,094	885,000
Total Liabilities
Gross Amounts of Recognized Liabilities	1,218,866	1,790,973
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Liabilities Presented in the Statement of Financial Position	1,218,866	1,790,973
Gross Amounts Not Offset in the Statement of Financial Position, Financial Instruments	270,878	242,105
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid	10,089	4,577
Net Amount	937,899	1,544,291
Free-Standing derivatives
Offsetting of Liabilities
Gross Amounts of Recognized Liabilities, Subject to master netting arrangement or similar arrangement	280,967	246,682
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Liabilities Presented in the Statement of Financial Position	280,967	246,682
Derivative Liability, Not Offset, Policy Election Deduction	270,878	242,105
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid	10,089	4,577
Net Amount	0	0
Total derivatives, subject to a master netting arrangement or similar arrangement
Offsetting of Liabilities
Gross Amounts of Recognized Liabilities, Subject to master netting arrangement or similar arrangement	280,967	246,682
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Liabilities Presented in the Statement of Financial Position	280,967	246,682
Derivative Liability, Not Offset, Policy Election Deduction	270,878	242,105
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid	10,089	4,577
Net Amount	0	0
Embedded derivative - Modco reinsurance treaties
Offsetting of Liabilities
Gross Amounts of Recognized Liabilities, Not subject to a master netting arrangement or similar arrangement	60,683	215,247
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Liabilities Presented in the Statement of Financial Position	60,683	215,247
Derivative Liability, Not Subject to Master Netting Arrangement Deduction	0	0
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid	0	0
Net Amount	60,683	215,247
Funds withheld derivative
Offsetting of Liabilities
Gross Amounts of Recognized Liabilities, Not subject to a master netting arrangement or similar arrangement	60,432	61,729
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Liabilities Presented in the Statement of Financial Position	60,432	61,729
Derivative Liability, Not Subject to Master Netting Arrangement Deduction	0	0
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid	0	0
Net Amount	60,432	61,729
Embedded derivative - GLWB
Offsetting of Liabilities
Gross Amounts of Recognized Liabilities, Not subject to a master netting arrangement or similar arrangement	46,995	83,427
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Liabilities Presented in the Statement of Financial Position	46,995	83,427
Derivative Liability, Not Subject to Master Netting Arrangement Deduction	0	0
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid	0	0
Net Amount	46,995	83,427
Embedded derivative - FIA
Offsetting of Liabilities
Gross Amounts of Recognized Liabilities, Not subject to a master netting arrangement or similar arrangement	256,912	218,676
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Liabilities Presented in the Statement of Financial Position	256,912	218,676
Derivative Liability, Not Subject to Master Netting Arrangement Deduction	0	0
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid	0	0
Net Amount	256,912	218,676
Embedded derivative - IUL
Offsetting of Liabilities
Gross Amounts of Recognized Liabilities, Not subject to a master netting arrangement or similar arrangement	95,739	80,212
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Liabilities Presented in the Statement of Financial Position	95,739	80,212
Derivative Liability, Not Subject to Master Netting Arrangement Deduction	0	0
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid	0	0
Net Amount	95,739	80,212
Other
Offsetting of Liabilities
Gross Amounts of Recognized Liabilities, Not subject to a master netting arrangement or similar arrangement	44
Gross Amounts Offset in the Statement of Financial Position	0
Net Amounts of Liabilities Presented in the Statement of Financial Position	44
Derivative Liability, Not Subject to Master Netting Arrangement Deduction	0
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid	0
Net Amount	44
Total derivatives, not subject to a master netting arrangement or similar arrangement
Offsetting of Liabilities
Gross Amounts of Recognized Liabilities, Not subject to a master netting arrangement or similar arrangement	520,805	659,291
Gross Amounts Offset in the Statement of Financial Position	0	0
Net Amounts of Liabilities Presented in the Statement of Financial Position	520,805	659,291
Derivative Liability, Not Subject to Master Netting Arrangement Deduction	0	0
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid	0	0
Net Amount	$ 520,805	$ 659,291

XML

MORTGAGE LOANS - Additional Information (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($) loan	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) restructuring loan category	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)
Mortgage loans
Mortgage loans on real estate	$ 7,572,349,000		$ 7,572,349,000		$ 6,817,723,000
Period for exercise of call options or interest rate reset options			11 years
Amount that would become due in remainder of 2018, if loans are called at their next call dates	80,700,000		$ 80,700,000
Amount that would become due in 2019 through 2023, if loans are called at their next call dates	933,400,000		933,400,000
Amount that would become due in 2024 through 2028, if loans are called at their next call dates	91,800,000		91,800,000
Amount that would become due after 2028, if loans are called at their next call dates	1,900,000		$ 1,900,000
Number of troubled debt restructurings | restructuring			1
Financing receivable not subject to pooling and servicing agreement, non performing or restructured amount	$ 0		$ 0
Loans subject to a pooling and servicing agreement which are either nonperforming or restructured | loan	0		0
Number of nonperforming financing receivable subject to pooling and servicing agreement which have been restructured | loan			0
Commercial mortgage loans
Mortgage loans
Mortgage loans having participation feature	$ 757,000,000		$ 757,000,000		669,300,000
Income recognized on participating mortgage loans	9,500,000	$ 14,200,000	22,000,000	$ 25,700,000
Nonperforming mortgage loans, foreclosed properties and restructured loans to invested assets	3,000,000		$ 3,000,000
Number of loan categories | category			2
Financing receivable not subject to pooling and servicing agreement, non performing or restructured amount	3,000,000		$ 3,000,000
Allowance for mortgage loan credit losses	$ 1,481,000		$ 1,481,000		$ 0
Minimum number of days for ceasing accrued interest			90 days
Minimum number of days past due to initiate foreclosure proceedings			90 days
Maximum number of days accrued interest on impaired loans			90 days
Maximum | Commercial mortgage loans
Mortgage loans
Loan-to-value ratio with participating interest (as a percent)	85.00%		85.00%

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MORTGAGE LOANS - Change in Allowance for Credit Losses (Details) - Commercial mortgage loans	9 Months Ended
	Sep. 30, 2018 USD ($)
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning Balance	$ 0
Charge offs	0
Recoveries	(24,000)
Provision	1,505,000
Ending Balance	$ 1,481,000

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MORTGAGE LOANS - Delinquent Loans (Details) - Commercial mortgage loans $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018 USD ($) loan	Dec. 31, 2017 USD ($) loan
Delinquent loans
Commercial mortgage loans | $	$ 2,423	$ 1,817
Number of delinquent commercial mortgage loans | loan	2	2
30-59 Days Delinquent
Delinquent loans
Commercial mortgage loans | $	$ 1,180	$ 1,817
Number of delinquent commercial mortgage loans | loan	1	2
60-89 Days Delinquent
Delinquent loans
Commercial mortgage loans | $	$ 0	$ 0
Number of delinquent commercial mortgage loans | loan	0	0
Greater than 90 Days Delinquent
Delinquent loans
Commercial mortgage loans | $	$ 1,243	$ 0
Number of delinquent commercial mortgage loans | loan	1	0

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MORTGAGE LOANS - Impaired Loans (Details) - Commercial mortgage loans - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Recorded Investment
With no related allowance recorded	$ 0	$ 0
With an allowance recorded	5,714	0
Unpaid Principal Balance
With no related allowance recorded	0	0
With an allowance recorded	5,327	0
Related Allowance
With an allowance recorded	1,481	0
Average Recorded Investment
With no related allowance recorded	0	0
With an allowance recorded	1,905	0
Interest Income Recognized
With no related allowance recorded	0	0
With an allowance recorded	197	0
Cash Basis Interest Income
With no related allowance recorded	0	0
With an allowance recorded	$ 225	$ 0

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MORTGAGE LOANS - Troubled Debt Restructuring (Details) - Commercial mortgage loans $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018 USD ($) contract	Dec. 31, 2017 USD ($) contract
Financing Receivable, Modifications [Line Items]
Number of Contracts | contract	1	1
Pre-Modification Outstanding Recorded Investment	$ 2,694	$ 418
Post-Modification Outstanding Recorded Investment	$ 1,748	$ 418

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GOODWILL (Details) - USD ($)	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Changes in the carrying amount of goodwill
Goodwill	$ 793,470,000	$ 793,470,000
Increase (decrease) to goodwill	$ 0

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DEBT AND OTHER OBLIGATIONS - Debt and Subordinated Debt Securities (Details) - USD ($)	May 03, 2018	Sep. 30, 2018
2015 Credit Facility
Debt Instrument [Line Items]
Line of credit, maximum borrowing capacity	$ 1,000,000,000.0
Line of credit, maximum borrowing capacity to be granted upon entity's request	$ 1,250,000,000.00
Facility fee percentage	0.125%
2015 Credit Facility | Federal Funds rate
Debt Instrument [Line Items]
Interest rate added to the base rate (as a percent)	0.50%
2015 Credit Facility | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Interest rate added to the base rate (as a percent)	1.00%
Credit Facility
Debt Instrument [Line Items]
Line of credit, maximum borrowing capacity	$ 1,000,000,000.0
Line of credit, maximum borrowing capacity to be granted upon entity's request	$ 1,500,000,000.0
Credit Facility | PLC
Debt Instrument [Line Items]
Facility fee percentage	0.125%
Line of credit, amount outstanding		$ 0
Credit Facility | Federal Funds rate | PLC
Debt Instrument [Line Items]
Interest rate added to the base rate (as a percent)	0.50%
Credit Facility | London Interbank Offered Rate (LIBOR) | PLC
Debt Instrument [Line Items]
Interest rate added to the base rate (as a percent)	1.00%
3.55% Due 2038
Debt Instrument [Line Items]
Stated interest rate		3.55%
3.55% Due 2038 | Subordinated Debt
Debt Instrument [Line Items]
Outstanding principal		$ 110,000,000

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DEBT AND OTHER OBLIGATIONS - Non-Recourse Funding Obligations (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Outstanding Principal	$ 2,882,940	$ 2,944,940
Carrying Value	2,890,435	2,952,822
Golden Gate Captive Insurance Company
Debt Instrument [Line Items]
Outstanding Principal	1,917,000	2,014,000
Carrying Value	$ 1,917,000	$ 2,014,000
Year-to-Date Weighted-Avg Interest Rate	4.75%	4.75%
Golden Gate II Captive Insurance Company
Debt Instrument [Line Items]
Outstanding Principal	$ 309,849	$ 309,849
Carrying Value	$ 256,157	$ 255,132
Year-to-Date Weighted-Avg Interest Rate	4.07%	3.11%
Golden Gate V Vermont Captive Insurance Company
Debt Instrument [Line Items]
Outstanding Principal	$ 655,000	$ 620,000
Carrying Value	$ 714,921	$ 681,285
Year-to-Date Weighted-Avg Interest Rate	5.12%	5.12%
MONY Life Insurance Company
Debt Instrument [Line Items]
Outstanding Principal	$ 1,091	$ 1,091
Carrying Value	$ 2,357	$ 2,405
Year-to-Date Weighted-Avg Interest Rate	6.19%	6.19%

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DEBT AND OTHER OBLIGATIONS - Secured Financing Transactions (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Initial collateral required (as a percent)	102.00%
Securities lending transactions	$ 92,022	$ 125,271
Fair value of collateral	97,300
Obligation to return collateral	97,300
Repurchase Program Borrowings
Debt Instrument [Line Items]
Fair value of securities pledged under the repurchase program	457,500	1,006,600
Secured financing liabilities	$ 417,100	$ 885,000
Average interest rate	2.23%	1.42%
Maximum outstanding balance	$ 427,500	$ 988,500
Average daily balance	$ 225,900	$ 624,700
Average borrowing rate (as a percent)	2.08%	1.01%
Repurchase Program Borrowings | Maximum
Debt Instrument [Line Items]
Term of financing agreement	90 days

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DEBT AND OTHER OBLIGATIONS - Amount of Collateral Pledged for Repurchase Agreements, Grouped by Asset Class (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	$ 457,524	$ 1,006,607
Securities lending transactions	92,022	125,271
Total securities	549,546	1,131,878
U.S. Treasury and agency securities
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	457,524	307,633
Mortgage loans
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	0	698,974
Corporate securities
Debt Instrument [Line Items]
Securities lending transactions	91,040	118,817
Equity securities
Debt Instrument [Line Items]
Securities lending transactions	982	5,699
Redeemable preferred stock
Debt Instrument [Line Items]
Securities lending transactions	0	755
Other government related securities
Debt Instrument [Line Items]
Securities lending transactions	0
Overnight and Continuous
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	401,011	1,006,607
Securities lending transactions	92,022	125,271
Total securities	493,033	1,131,878
Overnight and Continuous | U.S. Treasury and agency securities
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	401,011	307,633
Overnight and Continuous | Mortgage loans
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	0	698,974
Overnight and Continuous | Corporate securities
Debt Instrument [Line Items]
Securities lending transactions	91,040	118,817
Overnight and Continuous | Equity securities
Debt Instrument [Line Items]
Securities lending transactions	982	5,699
Overnight and Continuous | Redeemable preferred stock
Debt Instrument [Line Items]
Securities lending transactions	0	755
Overnight and Continuous | Other government related securities
Debt Instrument [Line Items]
Securities lending transactions	0
Up to 30 days
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	56,513	0
Securities lending transactions	0	0
Total securities	56,513	0
Up to 30 days | U.S. Treasury and agency securities
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	56,513	0
Up to 30 days | Mortgage loans
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	0	0
Up to 30 days | Corporate securities
Debt Instrument [Line Items]
Securities lending transactions	0	0
Up to 30 days | Equity securities
Debt Instrument [Line Items]
Securities lending transactions	0	0
Up to 30 days | Redeemable preferred stock
Debt Instrument [Line Items]
Securities lending transactions	0	0
Up to 30 days | Other government related securities
Debt Instrument [Line Items]
Securities lending transactions	0
30-90 days
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	0	0
Securities lending transactions	0	0
Total securities	0	0
30-90 days | U.S. Treasury and agency securities
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	0	0
30-90 days | Mortgage loans
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	0	0
30-90 days | Corporate securities
Debt Instrument [Line Items]
Securities lending transactions	0	0
30-90 days | Equity securities
Debt Instrument [Line Items]
Securities lending transactions	0	0
30-90 days | Redeemable preferred stock
Debt Instrument [Line Items]
Securities lending transactions	0	0
30-90 days | Other government related securities
Debt Instrument [Line Items]
Securities lending transactions	0
Greater Than 90 days
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	0	0
Securities lending transactions	0	0
Total securities	0	0
Greater Than 90 days | U.S. Treasury and agency securities
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	0	0
Greater Than 90 days | Mortgage loans
Debt Instrument [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	0	0
Greater Than 90 days | Corporate securities
Debt Instrument [Line Items]
Securities lending transactions	0	0
Greater Than 90 days | Equity securities
Debt Instrument [Line Items]
Securities lending transactions	0	0
Greater Than 90 days | Redeemable preferred stock
Debt Instrument [Line Items]
Securities lending transactions	0	$ 0
Greater Than 90 days | Other government related securities
Debt Instrument [Line Items]
Securities lending transactions	$ 0

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EMPLOYEE BENEFIT PLANS (Details) - Pension Plan - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
EMPLOYEE BENEFIT PLANS
Contributions by employer			$ 18,800
Minimum
EMPLOYEE BENEFIT PLANS
Adjusted funding target percentage to be maintained			80.00%
Qualified Pension Plan
EMPLOYEE BENEFIT PLANS
Service cost — benefits earned during the period	$ 3,006	$ 3,348	$ 9,888	$ 10,044
Interest cost on projected benefit obligation	2,577	2,191	7,371	6,573
Expected return on plan assets	(4,743)	(3,352)	(12,795)	(10,056)
Amortization of prior service cost	0	0	0	0
Amortization of actuarial loss/(gain)	0	0	0	0
Preliminary net periodic benefit cost	840	2,187	4,464	6,561
Settlement/curtailment expense(1)	0	0	0	0
Total net periodic benefit costs	840	2,187	4,464	6,561
Nonqualified Excess Pension Plan
EMPLOYEE BENEFIT PLANS
Service cost — benefits earned during the period	288	334	1,062	1,002
Interest cost on projected benefit obligation	359	297	1,077	891
Expected return on plan assets	0	0	0	0
Amortization of prior service cost	0	0	0	0
Amortization of actuarial loss/(gain)	196	118	726	354
Preliminary net periodic benefit cost	843	749	2,865	2,247
Settlement/curtailment expense(1)	986	0	986	0
Total net periodic benefit costs	$ 1,829	$ 749	$ 3,851	$ 2,247

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Changes in AOCI by Component (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance			$ 8,324,285
Total other comprehensive income (loss)	$ (198,698)	$ 101,973	(1,196,998)	$ 554,767
Ending Balance	7,187,760		7,187,760		$ 8,324,285
Offset of net unrealized losses in AOCI due to impact those net unrealized losses would have on certain of the Company's insurance assets and liabilities had the net unrealized losses been recognized in net income			524,100		(6,300)	$ 424,100
Unrealized Gains and Losses on Investments
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance			23,069	(655,767)	(655,767)
Other comprehensive income (loss) before reclassifications			(1,198,669)		699,097
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings			22		7,153
Amounts reclassified from accumulated other comprehensive income (loss)			(2,042)		(944)
Total other comprehensive income (loss)			(1,200,689)		705,306
Cumulative effect adjustment			(10,552)		(26,470)
Ending Balance	(1,188,172)		(1,188,172)		23,069	(655,767)
Accumulated Gain and Loss Derivatives
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance			747	727	727
Other comprehensive income (loss) before reclassifications			3,060		(563)
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings			0		0
Amounts reclassified from accumulated other comprehensive income (loss)			631		451
Total other comprehensive income (loss)			3,691		(112)
Cumulative effect adjustment			0		132
Ending Balance	4,438		4,438		747	727
Total Accumulated Other Comprehensive Income (Loss)
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance			23,816	$ (655,040)	(655,040)
Other comprehensive income (loss) before reclassifications			(1,195,609)		698,534
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings			22		7,153
Amounts reclassified from accumulated other comprehensive income (loss)			(1,411)		(493)
Total other comprehensive income (loss)			(1,196,998)		705,194
Cumulative effect adjustment			(10,552)		(26,338)
Ending Balance	$ (1,183,734)		$ (1,183,734)		$ 23,816	$ (655,040)

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Reclassifications (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Reclassifications Out of Accumulated Other Comprehensive Income (Loss)
Benefits and settlement expenses, net of reinsurance ceded	$ (950,942)	$ (742,789)	$ (2,598,151)	$ (2,203,883)
Realized investment gains (losses): All other investments	(20,156)	18,150	(157,350)	94,526
Net impairment losses recognized in earnings	(14)	(273)	(3,664)	(8,259)
Income before income tax	95,170	165,982	178,000	385,912
Tax (expense) or benefit	(16,646)	(49,016)	(28,933)	(120,975)
Net income	78,524	116,966	149,067	264,937
Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | Gains and losses on derivative instruments
Reclassifications Out of Accumulated Other Comprehensive Income (Loss)
Benefits and settlement expenses, net of reinsurance ceded	(481)	(38)	(799)	(396)
Income before income tax	(481)	(38)	(799)	(396)
Tax (expense) or benefit	101	14	168	139
Net income	(380)	(24)	(631)	(257)
Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | Unrealized gains and losses on available-for-sale securities
Reclassifications Out of Accumulated Other Comprehensive Income (Loss)
Realized investment gains (losses): All other investments	(2,018)	690	6,248	9,084
Net impairment losses recognized in earnings	(14)	(273)	(3,664)	(8,259)
Income before income tax	(2,032)	417	2,584	825
Tax (expense) or benefit	427	(146)	(542)	(289)
Net income	$ (1,605)	$ 271	$ 2,042	$ 536

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INCOME TAXES - Effective Tax Rate Reconciliation (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Tax Disclosure [Abstract]
Statutory federal income tax rate applied to pre-tax income	21.00%	35.00%	21.00%	35.00%
State income taxes	0.50%	0.40%	0.50%	0.50%
Investment income not subject to tax	(3.40%)	(4.00%)	(3.90%)	(3.60%)
Uncertain tax positions	0.00%	(0.10%)	0.00%	0.20%
Change in State Tax Rate	0.00%	0.00%	(0.80%)	0.00%
Prior period adjustments	0.00%	(1.70%)	0.00%	(0.80%)
Other	(0.60%)	(0.10%)	(0.50%)	0.10%
Effective income tax rate (as a percent)	17.50%	29.50%	16.30%	31.40%

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INCOME TAXES - Narrative (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Approximate net refund in future period		$ 6,200,000
Unrecognized tax benefits significant reduction in the next 12 months	$ 0

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OPERATING SEGMENTS (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Summarized financial information for the company's segments
Revenues	$ 1,269,963	$ 1,105,392	$ 3,503,118	$ 3,216,211
Pre-tax Adjusted Operating Income (Loss)	125,794	120,582	275,829	350,499
Realized (losses) gains on investments and derivatives	(30,624)	45,400	(97,829)	35,413
Income before income tax	95,170	165,982	178,000	385,912
Income tax expense	(16,646)	(49,016)	(28,933)	(120,975)
Net income	78,524	116,966	149,067	264,937
Adjusted operating income tax (expense) benefit	(23,077)	(33,126)	(49,477)	(108,580)
After-tax adjusted operating income	102,717	87,456	226,352	241,919
Income tax benefit (expense) on adjustments	6,431	(15,890)	20,544	(12,395)
Realized investment (losses) gains:
Derivative financial instruments	(26,710)	5,302	37,176	(119,392)
All other investments	(20,156)	18,150	(157,350)	94,526
Net impairment losses recognized in earnings	(14)	(273)	(3,664)	(8,259)
Less: related amortization	(5,859)	(12,123)	5,060	(38,570)
Less: VA GLWB economic cost	(10,397)	(10,098)	(31,069)	(29,968)
Operating Segment Assets
Investments and other assets	86,792,621		86,792,621		$ 75,451,948
DAC and VOBA	2,979,384		2,979,384		2,205,401
Other intangibles	625,828		625,828		662,916
Goodwill	793,470		793,470		793,470
Total assets	91,191,303		91,191,303		79,113,735
Life Marketing
Summarized financial information for the company's segments
Revenues	407,708	397,096	1,195,074	1,174,048
Pre-tax Adjusted Operating Income (Loss)	3,647	10,798	(18,326)	55,217
Operating Segment Assets
Investments and other assets	14,709,504		14,709,504		14,917,752
DAC and VOBA	1,468,989		1,468,989		1,320,776
Other intangibles	267,087		267,087		281,705
Goodwill	200,274		200,274		200,274
Total assets	16,645,854		16,645,854		16,720,507
Acquisitions
Summarized financial information for the company's segments
Revenues	581,054	375,819	1,469,787	1,164,650
Pre-tax Adjusted Operating Income (Loss)	93,648	62,880	208,206	184,825
Operating Segment Assets
Investments and other assets	32,234,422		32,234,422		19,588,133
DAC and VOBA	455,343		455,343		74,862
Other intangibles	32,622		32,622		34,548
Goodwill	14,524		14,524		14,524
Total assets	32,736,911		32,736,911		19,712,067
Annuities
Summarized financial information for the company's segments
Revenues	110,386	110,870	321,880	357,589
Pre-tax Adjusted Operating Income (Loss)	36,249	51,779	112,234	130,128
Operating Segment Assets
Investments and other assets	21,083,522		21,083,522		20,774,566
DAC and VOBA	876,390		876,390		772,634
Other intangibles	160,118		160,118		170,117
Goodwill	336,677		336,677		336,677
Total assets	22,456,707		22,456,707		22,053,994
Stable Value Products
Summarized financial information for the company's segments
Revenues	59,328	49,933	158,944	132,863
Pre-tax Adjusted Operating Income (Loss)	27,126	27,992	76,198	74,258
Operating Segment Assets
Investments and other assets	5,083,328		5,083,328		4,569,639
DAC and VOBA	7,001		7,001		6,864
Other intangibles	7,556		7,556		8,056
Goodwill	113,813		113,813		113,813
Total assets	5,211,698		5,211,698		4,698,372
Asset Protection
Summarized financial information for the company's segments
Revenues	90,926	93,799	266,747	277,433
Pre-tax Adjusted Operating Income (Loss)	7,051	5,187	16,991	13,812
Operating Segment Assets
Investments and other assets	824,282		824,282		708,605
DAC and VOBA	171,661		171,661		30,265
Other intangibles	125,251		125,251		133,234
Goodwill	128,182		128,182		128,182
Total assets	1,249,376		1,249,376		1,000,286
Corporate and Other
Summarized financial information for the company's segments
Revenues	20,561	77,875	90,686	109,628
Pre-tax Adjusted Operating Income (Loss)	(41,927)	$ (38,054)	(119,474)	$ (107,741)
Operating Segment Assets
Investments and other assets	12,857,563		12,857,563		14,893,253
DAC and VOBA	0		0		0
Other intangibles	33,194		33,194		35,256
Goodwill	0		0		0
Total assets	$ 12,890,757		$ 12,890,757		$ 14,928,509