FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 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 December 31, 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	$	—	$	5,931,341	$	—	$	5,931,341
Commercial mortgage-backed securities	4	—		2,629,639		10,029		2,639,668
Other asset-backed securities	4	—		1,360,016		421,219		1,781,235
U.S. government-related securities	4	662,581		369,815		—		1,032,396
State, municipalities, and political subdivisions	4	—		4,638,850		—		4,638,850
Other government-related securities	4	—		597,169		—		597,169
Corporate securities	4	—		45,435,387		1,373,714		46,809,101
Redeemable preferred stocks	4	69,976		16,689		—		86,665
Total fixed maturity securities - available-for-sale		732,557		60,978,906		1,804,962		63,516,425
Fixed maturity securities - trading
Residential mortgage-backed securities	3	—		209,521		—		209,521
Commercial mortgage-backed securities	3	—		201,284		—		201,284
Other asset-backed securities	3	—		77,954		65,407		143,361
U.S. government-related securities	3	24,810		22,257		—		47,067
State, municipalities, and political subdivisions	3	—		293,791		—		293,791
Other government-related securities	3	—		28,775		—		28,775
Corporate securities	3	—		1,579,565		11,371		1,590,936
Redeemable preferred stocks	3	12,832		—		—		12,832
Total fixed maturity securities - trading		37,642		2,413,147		76,778		2,527,567
Total fixed maturity securities		770,199		63,392,053		1,881,740		66,043,992
Equity securities	3	480,750		—		72,970		553,720
Other long-term investments ⁽¹⁾	3&4	52,225		733,425		209,843		995,493
Short-term investments	3	1,255,384		65,480		—		1,320,864
Total investments		2,558,558		64,190,958		2,164,553		68,914,069
Cash	3	171,752		—		—		171,752
Assets related to separate accounts
Variable annuity	3	12,730,090		—		—		12,730,090
Variable universal life	3	1,135,666		—		—		1,135,666
Total assets measured at fair value on a recurring basis		$	16,596,066	$	64,190,958	$	2,164,553	$	82,951,577

Liabilities:
Annuity account balances⁽²⁾	3	$	—	$	—	$	69,728	$	69,728
Other liabilities⁽¹⁾	3&4	19,561		509,645		1,017,972		1,547,178
Total liabilities measured at fair value on a recurring basis		$	19,561	$	509,645	$	1,087,700	$	1,616,906

(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, 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, municipalities, 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, municipalities, 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.

Schedule of the valuation method for material financial instruments included in level 3

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, 2019

Valuation
Technique

Unobservable
Input

Range
(Weighted Average)

(Dollars In Thousands)

Assets:

Commercial mortgage-backed securities

10,029

Discounted cash flow

Spread over treasury

2.5%

Other asset-backed securities

421,219

Liquidation

Liquidation value

$95.39 -$99.99 ($97.95)

Discounted cash flow

Liquidity premium

0.34% - 2.28% (1.44%)

Paydown Rate

8.99% - 12.45% (11.28%)

Corporate securities

1,373,714

Discounted cash flow

Spread over treasury

0.00% - 4.03% (1.60%)

Liabilities:⁽¹⁾

Embedded derivatives—GLWB⁽²⁾

186,038

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

0.12% - 0.82%

Embedded derivative—FIA

336,826

Actuarial cash flow model

Expenses

$195 per policy

Withdrawal rate

0.4%-1.2% prior to age 70 RMD for ages 70+

or WB withdrawal rate

Assume underutilized RMD

for nonWB policies age 70-81

Mortality

87% to 100% of Ruark 2015 ALB table

Lapse

0.5% - 50.0%, depending on duration/surrender charge period.

Dynamically adjusted for WB

moneyness and projected market

rates vs credited rates.

Nonperformance risk

0.12% - 0.82%

Embedded derivative—IUL

151,765

Actuarial cash flow model

Mortality

37% - 156% of 2015

VBT Primary Tables

94% - 248% of duration

8 point in scale 2015

VBT Primary Tables,

depending on type

of business

Lapse

0.5% - 10%, depending on duration/distribution channel and smoking class

Nonperformance risk

0.21% - 0.82%

(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% of 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 year ended December 31, 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	—		—		730		—		(91)		9,359		(46)		—		—		95		(18)		10,029		—
Other asset-backed securities	421,642		904		26,034		(71)		(8,075)		—		(20,031)		—		—		—		816		421,219		—



Corporate securities	638,276		82		72,881		—		(14,827)		752,929		(179,604)		—		—		106,368		(2,391)		1,373,714		—
Total fixed maturity securities - available-for-sale	1,059,918		986		99,645		(71)		(22,993)		762,288		(199,681)		—		—		106,463		(1,593)		1,804,962		—
Fixed maturity securities - trading


Other asset-backed securities	26,056		9,295		—		(3,695)		—		32,182		(24,496)		—		—		26,267		(202)		65,407		1,829



Corporate securities	6,242		239		—		(35)		—		1,700		(1,035)		—		—		4,363		(103)		11,371		35
Total fixed maturity securities - trading	32,298		9,534		—		(3,730)		—		33,882		(25,531)		—		—		30,630		(305)		76,778		1,864
Total fixed maturity securities	1,092,216		10,520		99,645		(3,801)		(22,993)		796,170		(225,212)		—		—		137,093		(1,898)		1,881,740		1,864
Equity securities	63,421		(1,829)		(244)		(18)		—		9,567		2,073		—		—		—		—		72,970		426
Other long-term investments⁽¹⁾	151,342		90,078		—		(31,448)		—		1,579		—		—		(1,708)		—		—		209,843		56,922
Short-term investments	—		—		—		—		—		—		—		—		—		—		—		—		—
Total investments	1,306,979		98,769		99,401		(35,267)		(22,993)		807,316		(223,139)		—		(1,708)		137,093		(1,898)		2,164,553		59,212
Total assets measured at fair value on a recurring basis	$	1,306,979	$	98,769	$	99,401	$	(35,267)	$	(22,993)	$	807,316	$	(223,139)	$	—	$	(1,708)	$	137,093	$	(1,898)	$	2,164,553	$	59,212

Liabilities:
Annuity account balances⁽²⁾	$	76,119	$	—	$	—	$	(2,550)	$	—	$	—	$	—	$	—	$	365	$	9,306	$	—	$	69,728	$	—
Other liabilities⁽¹⁾	438,127		108,438		—		(617,395)		—		70,888		—		—		—		—		—		1,017,972		(508,957)
Total liabilities measured at fair value on a recurring basis	$	514,246	$	108,438	$	—	$	(619,945)	$	—	$	70,888	$	—	$	—	$	365	$	9,306	$	—	$	1,087,700	$	(508,957)

(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 year ended December 31, 2018, for which the Company has used significant unobservable inputs (Level 3):


																									Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
			Total Realized and Unrealized Gains						Total Realized and Unrealized Losses
	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	—		—		50		—		(2,497)		48,621		(292)		—		—		(45,832)		(50)		—		—
Other asset-backed securities	504,365		3,716		16,503		(159)		(25,578)		—		(80,050)		—		—		222		2,623		421,642		—



Corporate securities	626,901		—		12,537		—		(29,017)		108,491		(97,676)		—		—		20,721		(3,681)		638,276		—
Total fixed maturity securities— available-for-sale	1,131,266		3,716		29,090		(159)		(58,087)		179,337		(178,018)		—		—		(46,170)		(1,057)		1,059,918		—
Fixed maturity securities—trading


Other asset-backed securities	35,222		464		—		(3,798)		—		8,728		(14,511)		—		—		164		(213)		26,056		(3,179)



Corporate securities	5,442		45		—		(145)		—		999		—		—		—		—		(99)		6,242		(101)
Total fixed maturity securities—trading	40,664		509		—		(3,943)		—		9,727		(14,511)		—		—		164		(312)		32,298		(3,280)
Total fixed maturity securities	1,171,930		4,225		29,090		(4,102)		(58,087)		189,064		(192,529)		—		—		(46,006)		(1,369)		1,092,216		(3,280)
Equity securities	65,518		1		—		(30)		—		36		(2,103)		—		—		—		(1)		63,421		282
Other long-term investments⁽¹⁾	160,466		39,118		—		(47,615)		—		—		—		—		(627)		—		—		151,342		(9,124)
Short-term investments	—		—		—		—		—		—		—		—		—		—		—		—		—
Total investments	1,397,914		43,344		29,090		(51,747)		(58,087)		189,100		(194,632)		—		(627)		(46,006)		(1,370)		1,306,979		(12,122)
Total assets measured at fair value on a recurring basis	$	1,397,914	$	43,344	$	29,090	$	(51,747)	$	(58,087)	$	189,100	$	(194,632)	$	—	$	(627)	$	(46,006)	$	(1,370)	$	1,306,979	$	(12,122)

Liabilities:
Annuity account balances⁽²⁾	$	83,472	$	—	$	—	$	(3,505)	$	—	$	—	$	—	$	623	$	11,481	$	—	$	—	$	76,119	$	—
Other liabilities⁽¹⁾	597,562		299,366		—		(139,931)		—		—		—		—		—		—		—		438,127		159,435
Total liabilities measured at fair value on a recurring basis	$	681,034	$	299,366	$	—	$	(143,436)	$	—	$	—	$	—	$	623	$	11,481	$	—	$	—	$	514,246	$	159,435

(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 December 31,
		2019						2018
	Fair Value Level	Carrying Amounts		Fair Values		Carrying Amounts		Fair Values
		(Dollars In Thousands)
Assets:
Mortgage loans on real estate	3	$	9,379,401	$	9,584,487	$	7,724,733	$	7,447,702
Policy loans	3	1,675,121		1,675,121		1,695,886		1,695,886
Fixed maturities, held-to-maturity⁽¹⁾	3	2,823,881		3,025,790		2,633,474		2,547,210
Other long-term investments⁽²⁾	3	1,216,996		1,246,889		—		—

Liabilities:
Stable value product account balances	3	$	5,443,752	$	5,551,195	$	5,234,731	$	5,200,723
Future policy benefits and claims⁽³⁾	3	1,701,324		1,705,235		1,671,414		1,671,434
Other policyholders’ funds⁽⁴⁾	3	127,084		130,259		131,150		131,782

Debt:⁽⁵⁾
Non-recourse funding obligations⁽⁶⁾	3	$	3,082,753	$	3,298,580	$	2,888,329	$	2,801,399
Subordinated funding obligations	3	110,000		113,286		110,000		95,476

Except as noted below, fair values were estimated using quoted market prices.

(1)Securities purchased from unconsolidated subsidiaries, Red Mountain LLC and Steel City LLC.

(2)Other long-term investments represents a modco receivable, which is related to invested assets such as fixed income and structured securities, which are legally owned by the ceding company. The fair value is determined in a manner consistent with other similar invested assets held by the Company.

(3)Single premium immediate annuity without life contingencies.

(4)Supplementary contracts without life contingencies.

(5)Excludes capital lease obligations of $1.0 million and $1.3 million as of December 31, 2019 and 2018, respectively.

(6)As of December 31, 2019, carrying amount $2.8 billion and a fair value of $3.0 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 fair value of $2.5 billion related to non-recourse funding obligations issued by Golden Gate and Golden Gate V.