FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2019

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

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of June 30, 2019:



	Measurement Category	Level 1		Level 2		Level 3		Total
		(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	4	$	—	$	4,597,444	$	—	$	4,597,444
Commercial mortgage-backed securities	4	—		2,656,488		9,366		2,665,854
Other asset-backed securities	4	—		1,443,288		418,310		1,861,598
U.S. government-related securities	4	884,053		416,504		—		1,300,557
State, municipals, and political subdivisions	4	—		4,830,966		—		4,830,966
Other government-related securities	4	—		581,036		—		581,036
Corporate securities	4	—		44,746,661		1,328,491		46,075,152
Redeemable preferred stocks	4	67,732		17,180		—		84,912
Total fixed maturity securities - available-for-sale		951,785		59,289,567		1,756,167		61,997,519
Fixed maturity securities - trading
Residential mortgage-backed securities	3	—		203,455		—		203,455
Commercial mortgage-backed securities	3	—		204,445		—		204,445
Other asset-backed securities	3	—		85,817		62,180		147,997
U.S. government-related securities	3	25,929		25,151		—		51,080
State, municipals, and political subdivisions	3	—		293,560		—		293,560
Other government-related securities	3	—		24,342		—		24,342
Corporate securities	3	—		1,560,267		5,294		1,565,561
Redeemable preferred stocks	3	11,808		—		—		11,808
Total fixed maturity securities - trading		37,737		2,397,037		67,474		2,502,248
Total fixed maturity securities		989,522		61,686,604		1,823,641		64,499,767
Equity securities	3	524,597		—		68,486		593,083
Other long-term investments⁽¹⁾	3 & 4	65,231		467,642		143,583		676,456
Short-term investments	3	990,991		66,862		—		1,057,853
Total investments		2,570,341		62,221,108		2,035,710		66,827,159
Cash	3	175,752		—		—		175,752
Assets related to separate accounts
Variable annuity	3	12,790,474		—		—		12,790,474
Variable universal life	3	1,073,020		—		—		1,073,020
Total assets measured at fair value on a recurring basis		$	16,609,587	$	62,221,108	$	2,035,710	$	80,866,405
Liabilities:
Annuity account balances⁽²⁾	3	$	—	$	—	$	72,585	$	72,585
Other liabilities⁽¹⁾	3 & 4	23,552		289,682		842,035		1,155,269
Total liabilities measured at fair value on a recurring basis		$	23,552	$	289,682	$	914,620	$	1,227,854

(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 (Loss)

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, 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	$	—	$	3,602,991	$	—	$	3,602,991
Commercial mortgage-backed securities	4	—		2,266,387		—		2,266,387
Other asset-backed securities	4	—		970,251		421,642		1,391,893
U.S. government-related securities	4	985,485		629,020		—		1,614,505
State, municipals, and political subdivisions	4	—		3,588,841		—		3,588,841
Other government-related securities	4	—		514,036		—		514,036
Corporate securities	4	—		35,563,302		638,276		36,201,578
Redeemable preferred stocks	4	65,536		17,266		—		82,802
Total fixed maturity securities - available-for-sale		1,051,021		47,152,094		1,059,918		49,263,033
Fixed maturity securities - trading
Residential mortgage-backed securities	3	—		241,836		—		241,836
Commercial mortgage-backed securities	3	—		188,925		—		188,925
Other asset-backed securities	3	—		133,851		26,056		159,907
U.S. government-related securities	3	27,453		32,341		—		59,794
State, municipals, and political subdivisions	3	—		286,413		—		286,413
Other government-related securities	3	—		44,207		—		44,207
Corporate securities	3	—		1,417,591		6,242		1,423,833
Redeemable preferred stocks	3	11,277		—		—		11,277
Total fixed maturity securities - trading		38,730		2,345,164		32,298		2,416,192
Total fixed maturity securities		1,089,751		49,497,258		1,092,216		51,679,225
Equity securities	3	494,287		—		63,421		557,708
Other long-term investments⁽¹⁾	3 & 4	83,047		180,438		151,342		414,827
Short-term investments	3	589,084		77,217		—		666,301
Total investments		2,256,169		49,754,913		1,306,979		53,318,061
Cash	3	151,400		—		—		151,400
Assets related to separate accounts
Variable annuity	3	12,288,919		—		—		12,288,919
Variable universal life	3	937,732		—		—		937,732
Total assets measured at fair value on a recurring basis		$	15,634,220	$	49,754,913	$	1,306,979	$	66,696,112
Liabilities:
Annuity account balances⁽²⁾	3	$	—	$	—	$	76,119	$	76,119
Other liabilities⁽¹⁾	3 & 4	56,018		164,643		438,127		658,788
Total liabilities measured at fair value on a recurring basis		$	56,018	$	164,643	$	514,246	$	734,907

(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 (Loss)

Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Noncurrent Assets

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



	Fair Value As of June 30, 2019		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	418,178	Liquidation	Liquidation value	$95.39 - $97.00 ($96.48)
			Discounted cash flow	Liquidity premium	0.11% - 1.50% (0.73%)
				Paydown rate	10.84% - 12.88% (11.98%)
Corporate securities	1,328,490		Discounted cash flow	Spread over treasury	0.87% - 4.10% (1.75%)
Liabilities:⁽¹⁾
Embedded derivatives - GLWB⁽²⁾	146,556		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	0.17% - 0.88%
Embedded derivative - FIA	300,364		Actuarial cash flow model	Expenses	$145 per policy
				Withdrawal rate	1.5% prior to age 70, 100% of the RMD for ages 70+
				Mortality	87% to 100% of Ruark 2015 ALB table
				Lapse	1.0% - 30.0%, depending on duration/surrender charge period
				Nonperformance risk	0.17% - 0.88%
Embedded derivative - IUL	136,660		Actuarial cash flow model	Mortality	37% - 577% of 2015
					VBT Primary Tables
				Lapse	0.5% - 10.0%, depending on
					duration/distribution channel
					and smoking class
				Nonperformance risk	0.17% - 0.88%

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

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



	Fair Value As of December 31, 2018		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	421,458	Liquidation	Liquidation value	$85.75 - $99.99 ($95.36)
			Discounted cash flow	Liquidity premium	0.02% - 1.25% (0.64%)
				Paydown Rate	10.96% - 13.11% (12.03%)
Corporate securities	631,068		Discounted cash flow	Spread over treasury	0.84% - 3.00% (1.84%)
Liabilities:⁽¹⁾
Embedded derivatives - GLWB⁽²⁾	$	43,307	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	0.21% - 1.16%
Embedded derivative - FIA	217,288		Actuarial cash flow model	Expenses	$145 per policy
				Withdrawal rate	1.5% prior to age 70, 100% of the RMD for ages 70+
				Mortality	87% to 100% or Ruark 2015 ALB table
				Lapse	1.0% - 30.0%, depending on duration/surrender charge period
				Nonperformance risk	0.21% - 1.16%
Embedded derivative - IUL	90,231		Actuarial cash flow model	Mortality	37% - 577% of 2015 VBT Primary Tables
				Lapse	0.5% - 10.0%, depending on duration/distribution channel and smoking class
				Nonperformance risk	0.21% - 1.16%

(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 six months ended June 30, 2019, 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	$	—	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—		$	—	$	—		$	—	$	—
Commercial mortgage-backed securities	—		—		16		—			—			9,359		(7		)	—		—			—		(2		)	9,366		—
Other asset-backed securities	421,642		446		10,660		(57		)	(4,799		)	—		(10,015		)	—		—			—		433			418,310		—
Corporate securities	638,276		82		43,956		—			(3,509		)	695,627		(84,956		)	—		—			39,255		(240		)	1,328,491		—
Total fixed maturity securities - available-for-sale	1,059,918		528		54,632		(57		)	(8,308		)	704,986		(94,978		)	—		—			39,255		191			1,756,167		—
Fixed maturity securities - trading
Other asset-backed securities	26,056		4,006		—		(3,584		)	—			15,463		(5,892		)	—		—			26,267		(136		)	62,180		1,068
Corporate securities	6,242		169		—		(31		)	—			—		(1,035		)	—		—			—		(51		)	5,294		134
Total fixed maturity securities - trading	32,298		4,175		—		(3,615		)	—			15,463		(6,927		)	—		—			26,267		(187		)	67,474		1,202
Total fixed maturity securities	1,092,216		4,703		54,632		(3,672		)	(8,308		)	720,449		(101,905		)	—		—			65,522		4			1,823,641		1,202
Equity securities	63,421		1		—		(16		)	—			5,080		—			—		—			—		—			68,486		222
Other long-term investments⁽¹⁾	151,342		23,789		—		(31,419		)	—			1,579		—			—		(1,708		)	—		—			143,583		(9,338		)
Total investments	1,306,979		28,493		54,632		(35,107		)	(8,308		)	727,108		(101,905		)	—		(1,708		)	65,522		4			2,035,710		(7,914		)
Total assets measured at fair value on a recurring basis	$	1,306,979	$	28,493	$	54,632	$	(35,107	)	$	(8,308	)	$	727,108	$	(101,905	)	$	—	$	(1,708	)	$	65,522	$	4		$	2,035,710	$	(7,914	)
Liabilities:
Annuity account balances⁽²⁾	$	76,119	$	—	$	—	$	(1,152	)	$	—		$	—	$	—		$	67	$	4,753		$	—	$	—		$	72,585	$	—
Other liabilities⁽¹⁾	438,127		830		—		(367,534		)	—			37,204		—			—		—			—		—			842,035		(366,704		)
Total liabilities measured at fair value on a recurring basis	$	514,246	$	830	$	—	$	(368,686	)	$	—		$	37,204	$	—		$	67	$	4,753		$	—	$	—		$	914,620	$	(366,704	)

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

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended June 30, 2019, 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	$	—	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—		$	—		$	—		$	—	$	—
Commercial mortgage-backed securities	—		—		16		—			—			9,359		(7		)	—		—			—			(2		)	9,366		—
Other asset-backed securities	420,091		—		2,513		(37		)	(4,468		)	—		(7		)	—		—			—			218			418,310		—
Corporate securities	648,608		82		25,371		—			(497		)	661,627		(56,183		)	—		—			49,350			133			1,328,491		—
Total fixed maturity securities - available-for-sale	1,068,699		82		27,900		(37		)	(4,965		)	670,986		(56,197		)	—		—			49,350			349			1,756,167		—
Fixed maturity securities - trading
Other asset-backed securities	66,484		810		—		(3,468		)	—			—		(781		)	—		—			(797		)	(68		)	62,180		(2,717		)
Corporate securities	5,251		68		—		—			—			—		1			—		—			—			(26		)	5,294		68
Total fixed maturity securities - trading	71,735		878		—		(3,468		)	—			—		(780		)	—		—			(797		)	(94		)	67,474		(2,649		)
Total fixed maturity securities	1,140,434		960		27,900		(3,505		)	(4,965		)	670,986		(56,977		)	—		—			48,553			255			1,823,641		(2,649		)
Equity securities	63,409		—		—		(3		)	—			5,080		—			—		—			—			—			68,486		153
Other long-term investments⁽¹⁾	133,694		22,762		—		(12,744		)	—			1,579		—			—		(1,708		)	—			—			143,583		8,310
Total investments	1,337,537		23,722		27,900		(16,252		)	(4,965		)	677,645		(56,977		)	—		(1,708		)	48,553			255			2,035,710		5,814
Total assets measured at fair value on a recurring basis	$	1,337,537	$	23,722	$	27,900	$	(16,252	)	$	(4,965	)	$	677,645	$	(56,977	)	$	—	$	(1,708	)	$	48,553		$	255		$	2,035,710	$	5,814
Liabilities:
Annuity account balances⁽²⁾	$	74,613	$	—	$	—	$	(825	)	$	—		$	—	$	—		$	56	$	2,909		$	—		$	—		$	72,585	$	—
Other liabilities⁽¹⁾	606,655		364				(198,540		)	—			37,204		—			—		—			—			—			842,035		(198,176		)
Total liabilities measured at fair value on a recurring basis	$	681,268	$	364	$	—	$	(199,365	)	$	—		$	37,204	$	—		$	56	$	2,909		$	—		$	—		$	914,620	$	(198,176	)

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

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the six months ended June 30, 2018, for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																								Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements			Transfers in/out of Level 3			Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	—	$	—	$	—	$	—		$	(457	)	$	22,225	$	—		$	—	$	—		$	—		$	12		$	21,780	$	—
Commercial mortgage-backed securities	—		—		—		—			(1,284		)	48,621		(94		)	—		—			—			(16		)	47,227		—
Other asset-backed securities	504,365		—		11,867		—			(1,647		)	—		(23		)	—		—			222			917			515,701		—
Corporate securities	626,901		—		7,061		—			(18,929		)	78,491		(38,452		)	—		—			(7,895		)	(2,366		)	644,811		—
Total fixed maturity securities - available-for-sale	1,131,266		—		18,928		—			(22,317		)	149,337		(38,569		)	—		—			(7,673		)	(1,453		)	1,229,519		—
Fixed maturity securities - trading
Other asset-backed securities	35,222		194		—		(3,598		)	—			4,600		(11,669		)	—		—			164			(61		)	24,852		(3,405		)
Corporate securities	5,442		—		—		(139		)	—			—		—			—		—			—			(49		)	5,254		(139		)
Total fixed maturity securities - trading	40,664		194		—		(3,737		)	—			4,600		(11,669		)	—		—			164			(110		)	30,106		(3,544		)
Total fixed maturity securities	1,171,930		194		18,928		(3,737		)	(22,317		)	153,937		(50,238		)	—		—			(7,509		)	(1,563		)	1,259,625		(3,544		)
Equity securities	65,518		1		—		(1		)	—			36		—			—		—			—			(1		)	65,553		(63		)
Other long-term investments⁽¹⁾	160,466		22,404		—		(11,649		)	—			—		—			—		(627		)	—			—			170,594		10,128
Total investments	1,397,914		22,599		18,928		(15,387		)	(22,317		)	153,973		(50,238		)	—		(627		)	(7,509		)	(1,564		)	1,495,772		6,521
Total assets measured at fair value on a recurring basis	$	1,397,914	$	22,599	$	18,928	$	(15,387	)	$	(22,317	)	$	153,973	$	(50,238	)	$	—	$	(627	)	$	(7,509	)	$	(1,564	)	$	1,495,772	$	6,521
Liabilities:
Annuity account balances⁽²⁾	$	83,472	$	—	$	—	$	(1,853	)	$	—		$	—	$	—		$	530	$	5,757		$	—		$	—		$	80,098	$	—
Other liabilities⁽¹⁾	597,562		188,110		—		(47,556		)	—			—		—			—		—			—			—			457,008		140,554
Total liabilities measured at fair value on a recurring basis	$	681,034	$	188,110	$	—	$	(49,409	)	$	—		$	—	$	—		$	530	$	5,757		$	—		$	—		$	537,106	$	140,554

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

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended June 30, 2018, for which the Company has used significant unobservable inputs (Level 3):



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

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

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

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



		As of
		June 30, 2019				December 31, 2018
	Fair Value Level	Carrying Amounts		Fair Values		Carrying Amounts		Fair Values
		(Dollars In Thousands)
Assets:
Mortgage loans on real estate	3	$	9,053,400	$	9,123,182	$	7,724,733	$	7,447,702
Policy loans	3	1,709,110		1,709,110		1,695,886		1,695,886
Fixed maturities, held-to-maturity⁽¹⁾	3	2,576,216		2,640,827		2,633,474		2,547,210
Liabilities:
Stable value product account balances	3	$	5,816,503	$	5,885,528	$	5,234,731	$	5,200,723
Future policy benefits and claims⁽²⁾	3	1,725,194		1,729,081		1,671,414		1,671,434
Other policyholders’ funds⁽³⁾	3	105,136		107,702		131,150		131,782
Debt:⁽⁴⁾
Non-recourse funding obligations⁽⁵⁾	3	$	2,833,145	$	2,944,157	$	2,888,329	$	2,801,399
Subordinated funding obligations	3	110,000		108,455		110,000		95,476

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 $2.6 million and $1.3 million as of June 30, 2019 and December 31, 2018, respectively.
(5) As of June 30, 2019, carrying amount of $2.6 billion and a fair value of $2.7 billion related to non-recourse funding obligations issued by Golden Gate and Golden Gate V. As of December 31, 2018, carrying amount of $2.6 billion and a fair value of $2.5 billion related to non-recourse funding obligations issued by Golden Gate and Golden Gate V.