FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2020

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, 2020:


	Measurement Category	Level 1		Level 2		Level 3		Total
		(Dollars In Thousands)
Assets:
Fixed maturity securities - AFS
Residential mortgage-backed securities	4	$	—	$	6,658,591	$	—	$	6,658,591
Commercial mortgage-backed securities	4	—		2,474,359		32,425		2,506,784
Other asset-backed securities	4	—		1,143,780		434,676		1,578,456
U.S. government-related securities	4	865,586		500,422		—		1,366,008
State, municipalities, and political subdivisions	4	—		4,418,995		—		4,418,995
Other government-related securities	4	—		715,993		—		715,993
Corporate securities	4	—		50,506,935		1,431,818		51,938,753
Redeemable preferred stocks	4	124,788		69,191		—		193,979
Total fixed maturity securities - AFS		990,374		66,488,266		1,898,919		69,377,559
Fixed maturity securities - trading
Residential mortgage-backed securities	3	—		209,240		—		209,240
Commercial mortgage-backed securities	3	—		214,107		—		214,107
Other asset-backed securities	3	—		91,241		71,400		162,641
U.S. government-related securities	3	79,196		12,092		—		91,288
State, municipalities, and political subdivisions	3	—		281,803		—		281,803
Other government-related securities	3	—		30,060		—		30,060
Corporate securities	3	—		1,842,513		17,760		1,860,273
Redeemable preferred stocks	3	12,956		—		—		12,956
Total fixed maturity securities - trading		92,152		2,681,056		89,160		2,862,368
Total fixed maturity securities		1,082,526		69,169,322		1,988,079		72,239,927
Equity securities	3	565,750		—		101,227		666,977
Other long-term investments (1)	3&4	51,736		1,285,674		221,995		1,559,405
Short-term investments	3	403,745		58,670		—		462,415
Total investments		2,103,757		70,513,666		2,311,301		74,928,724
Cash	3	581,390		—		—		581,390
Assets related to separate accounts
Variable annuity	3	12,377,571		—		—		12,377,571
Variable universal life	3	1,286,570		—		—		1,286,570
Total assets measured at fair value on a recurring basis		$	16,349,288	$	70,513,666	$	2,311,301	$	89,174,255

Liabilities:
Annuity account balances(2)	3	$	—	$	—	$	66,973	$	66,973
Other liabilities(1)	3&4	13,819		923,805		1,743,827		2,681,451
Total liabilities measured at fair value on a recurring basis		$	13,819	$	923,805	$	1,810,800	$	2,748,424

(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, 2019:


	Measurement Category	Level 1		Level 2		Level 3		Total
		(Dollars In Thousands)
Assets:
Fixed maturity securities - AFS
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 - AFS		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.

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 of December 31, 2020, as well as the unobservable inputs used in the valuation of those financial instruments:

Fair Value
As of
December 31, 2020

Valuation
Technique

Unobservable
Input

Range
(Weighted Average)

(Dollars In Thousands)

Assets:

Commercial mortgage-backed securities

32,425

Discounted cash flow

Spread over treasury

2.78% - 2.92% (2.87%)

Other asset-backed securities

434,676

Liquidation

Liquidation value

$95.00 -$97.00 ($96.19)

Discounted cash flow

Liquidity premium

0.54% - 2.30% (1.63%)

Paydown Rate

8.79% - 12.49% (11.39%)

Corporate securities

1,431,818

Discounted cash flow

Spread over treasury

0.00% - 4.75% (1.89%)

Liabilities:(1)(2)

Embedded derivatives—GLWB

403,656

Actuarial cash flow model

Mortality

88% to 100% of

Ruark 2015 ALB Table

Lapse

PL-RBA Predictive Model

Utilization

PL-RBA Predictive Model

Nonperformance risk

0.19% - 0.81%

Embedded derivative—FIA

573,216

Actuarial cash flow model

Expenses

$207 per policy

Withdrawal rate

0.4%-2.4% prior to age 70 RMD for ages 70+

or WB withdrawal rate

Assume underutilized RMD

for nonWB policies ages 72-88

Mortality

88% to 100% of Ruark 2015 ALB table

Lapse

0.2% - 50.0%, depending on duration/surrender charge period.

Dynamically adjusted for WB

moneyness and projected market

rates vs credited rates.

Nonperformance risk

0.19% - 0.81%

Embedded derivative—IUL

201,331

Actuarial cash flow model

Mortality

36% - 161% of 2015

VBT Primary Tables

94% - 248% of duration

8 point in scale 2015

VBT Primary Tables,

depending on type

of business

Lapse

0.375% - 10%, depending on duration/distribution channel and smoking class

Nonperformance risk

0.19% - 0.81%

(1)Excludes modified coinsurance arrangements.

(2)Fair value is presented as a net liability.

The following table presents the valuation method for material financial instruments included in Level 3, as of December 31, 2019, 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

Internal Predictive Model

Utilization

Internal Predictive Model

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 non WB 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% - 10.0%, depending on duration/distribution channel and smoking class

Nonperformance risk

0.12% - 0.82%

(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, 2020, 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 Net Income related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Net Income		Included In Other Comprehensive Income		Included in Net Income		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 AFS

Commercial mortgage-backed securities	$	10,029	$	—	$	1,520	$	—	$	(797)	$	—	$	(83)	$	—	$	—	$	21,780	$	(24)	$	32,425	$	—
Other asset-backed securities	421,219		—		7,559		(38)		(13,213)		—		(1,630)		—		—		22,187		(1,408)		434,676		—



Corporate securities	1,373,714		—		135,519		—		(83,388)		436,539		(562,049)		—		—		134,808		(3,325)		1,431,818		—
Total fixed maturity securities - available-for-sale	1,804,962		—		144,598		(38)		(97,398)		436,539		(563,762)		—		—		178,775		(4,757)		1,898,919		—
Fixed maturity securities - trading


Other asset-backed securities	65,407		5,979		—		(8,970)		—		12,267		(2,646)		—		—		(766)		129		71,400		1,537



Corporate securities	11,371		881		—		(441)		—		8,798		(2,324)		—		—		(408)		(117)		17,760		92
Total fixed maturity securities - trading	76,778		6,860		—		(9,411)		—		21,065		(4,970)		—		—		(1,174)		12		89,160		1,629
Total fixed maturity securities	1,881,740		6,860		144,598		(9,449)		(97,398)		457,604		(568,732)		—		—		177,601		(4,745)		1,988,079		1,629
Equity securities	72,970		1,096		—		(3)		—		26,944		(5,000)		—		—		5,220		—		101,227		314
Other long-term investments(1)	209,843		338,541		—		(228,391)		—		40,831		(134,757)		—		(4,072)		—		—		221,995		86,700
Short-term investments	—		—		—		—		—		—		—		—		—		—		—		—		—
Total investments	2,164,553		346,497		144,598		(237,843)		(97,398)		525,379		(708,489)		—		(4,072)		182,821		(4,745)		2,311,301		88,643
Total assets measured at fair value on a recurring basis	$	2,164,553	$	346,497	$	144,598	$	(237,843)	$	(97,398)	$	525,379	$	(708,489)	$	—	$	(4,072)	$	182,821	$	(4,745)	$	2,311,301	$	88,643

Liabilities:
Annuity account balances(2)	$	69,728	$	—	$	—	$	2,675	$	—	$	—	$	—	$	433	$	5,863	$	—	$	—	$	66,973	$	—
Other liabilities(1)	1,017,972		502,098		—		(1,227,953)		—		—		—		—		—		—		—		1,743,827		(725,855)
Total liabilities measured at fair value on a recurring basis	$	1,087,700	$	502,098	$	—	$	(1,225,278)	$	—	$	—	$	—	$	433	$	5,863	$	—	$	—	$	1,810,800	$	(725,855)

(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, 2019, for which the Company has used significant unobservable inputs (Level 3):


																									Total Gains (losses) included in Net Income related to Instruments still held at the Reporting Date
			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses
	Beginning Balance		Included in Net Income		Included in Other Comprehensive Income		Included in Net Income		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 AFS

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.

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 that are not reported at fair value as of the periods shown below are as follows:


		As of December 31,
		2020				2019
	Fair Value Level	Carrying Amounts		Fair Values		Carrying Amounts		Fair Values
		(Dollars In Thousands)
Assets:
Commercial mortgage loans(1)	3	$	10,005,562	$	10,787,782	$	9,379,401	$	9,584,487
Policy loans	3	1,593,394		1,593,394		1,675,121		1,675,121
Fixed maturities, held-to-maturity(2)	3	—		—		2,823,881		3,025,790
Other long-term investments(3)	3	1,186,063		1,282,999		1,216,996		1,246,889

Liabilities:
Stable value product account balances	3	$	6,056,181	$	6,230,663	$	5,443,752	$	5,551,195
Future policy benefits and claims(4)	3	1,580,221		1,602,813		1,701,324		1,705,235
Other policyholders’ funds(5)	3	102,091		107,864		127,084		130,259

Debt:(6)
Non-recourse funding obligations(7)	3	$	2,197	$	2,486	$	3,082,753	$	3,298,580
Subordinated funding obligations	3	110,000		120,835		110,000		113,286

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

(1)The carrying amount is net of allowance for credit losses.

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

(3)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.

(4)Single premium immediate annuity without life contingencies.

(5)Supplementary contracts without life contingencies.

(6)Excludes capital lease obligations of $0.6 million and $1.0 million as of December 31, 2020 and 2019, respectively.

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