XML 25 R13.htm IDEA: XBRL DOCUMENT v3.5.0.2
Investments
 9 Months Ended
Sep. 30, 2016
Investments, Debt and Equity Securities [Abstract]  
Investments
Investments
Portfolio Composition:
A summary of fixed maturities available for sale by cost or amortized cost and estimated fair value at September 30, 2016 is as follows:
Portfolio Composition as of September 30, 2016
 
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value(1)
 
% of Total
Fixed
Maturities(2)
Bonds:
 
 
 
 
 
 
 
 
 
U.S. Government direct, guaranteed, and government-sponsored enterprises
$
382,603


$
33,946


$
(431
)

$
416,118


3
States, municipalities, and political subdivisions
1,272,731


178,622


(188
)

1,451,165


9
Foreign governments
22,732


2,835


—


25,567


—
Corporates, by sector:













Financial
2,871,873


415,796


(24,624
)

3,263,045


21
Utilities
1,952,885


395,477


(3,816
)

2,344,546


15
Energy
1,565,677


148,044


(57,686
)

1,656,035


10
Other corporate sectors
5,357,717


762,583


(16,352
)

6,103,948


39
Total corporates
11,748,152


1,721,900


(102,478
)

13,367,574


85
Collateralized debt obligations
60,857


14,062


(11,637
)

63,282


—
Other asset-backed securities
56,751


2,390


—


59,141


—
Redeemable preferred stocks, by sector:













Financial
372,030


58,148


(5,625
)

424,553


3
Utilities
28,611


1,689


—


30,300


—
Total redeemable preferred stocks
400,641


59,837


(5,625
)

454,853


3
Total fixed maturities
$
13,944,467


$
2,013,592


$
(120,359
)

$
15,837,700


100
(1) Amounts reported on the balance sheet.
(2) At fair value.

A schedule of fixed maturities available for sale by contractual maturity date at September 30, 2016 is shown below on an amortized cost basis and on a fair value basis. Actual maturity dates could differ from contractual maturities due to call or prepayment provisions.
 
Amortized
Cost
 
Fair Value
Fixed maturities available for sale:
 
 
 
Due in one year or less
$
14,764

 
$
14,920

Due from one to five years
625,222

 
680,902

Due from five to ten years
1,149,329

 
1,299,091

Due from ten to twenty years
4,071,596

 
4,751,987

Due after twenty years
7,964,507

 
8,966,796

Mortgage-backed and asset-backed securities
119,049

 
124,004

 
$
13,944,467

 
$
15,837,700


Selected information about sales of fixed maturities available for sale is as follows.
Nine Months Ended September 30,
 
2016
 
2015
Proceeds from sales
$
75,299

 
$
26,330

Gross realized gains
6,133

 
260

Gross realized losses
(214
)
 
(354
)

Fair Value Measurements:
The following table represents the fair value of fixed maturities available for sale measured on a recurring basis.
Fair Value Measurements at September 30, 2016 Using:
Description
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs (Level 3)
 
Total Fair
Value
Bonds:
 
 
 
 
 
 
 
 
U.S. Government direct, guaranteed, and government-sponsored enterprises
 
$
17


$
416,101


$
—


$
416,118

States, municipalities, and political subdivisions
 
—


1,451,165


—


1,451,165

Foreign governments
 
—


25,567


—


25,567

Corporates, by sector:
 











Financial
 
—


3,199,394


63,651


3,263,045

Utilities
 
—


2,182,029


162,517


2,344,546

Energy
 
—


1,627,142


28,893


1,656,035

Other corporate sectors
 
—


5,771,256


332,692


6,103,948

Total corporates
 
—


12,779,821


587,753


13,367,574

Collateralized debt obligations
 
—


—


63,282


63,282

Other asset-backed securities
 
—


59,141


—


59,141

Redeemable preferred stocks, by sector:
 











Financial
 
—


424,553


—


424,553

Utilities
 
—


30,300


—


30,300

Total redeemable preferred stocks
 
—


454,853


—


454,853

Total fixed maturities
 
$
17


$
15,186,648


$
651,035


$
15,837,700

Percent of total
 
—
%
 
95.9
%
 
4.1
%
 
100
%

The following table represents an analysis of changes in fair value measurements using significant unobservable inputs (Level 3).
Analysis of Changes in Fair Value Measurements Using
Significant Unobservable Inputs (Level 3)
 
 
Nine Months Ended September 30, 2016
 
Collateralized
Debt
Obligations
 
Corporates(1)
 
Total
Balance at January 1, 2016
$
70,382

 
$
530,806

 
$
601,188

Total gains or losses:
 
 
 
 
 
Included in realized gains/losses
—

 
788

 
788

Included in other comprehensive income
(3,879
)
 
33,365

 
29,486

Acquisitions
—

 
33,662

 
33,662

Sales
—

 
—

 
—

Amortization
3,511

 
14

 
3,525

Other(2)
(6,732
)
 
(10,882
)
 
(17,614
)
Transfers in and/or out of Level 3(3)
—

 
—

 
—

Balance at September 30, 2016
$
63,282

 
$
587,753

 
$
651,035

Percent of total fixed maturities
0.4
%
 
3.7
%
 
4.1
%
 
 
 
 
 
 
 
Nine Months Ended September 30, 2015
 
Collateralized
Debt
Obligations
 
Corporates(1)
 
Total
Balance at January 1, 2015
$
63,232

 
$
512,714

 
$
575,946

Total gains or losses:
 
 
 
 
 
Included in realized gains/losses
—

 
1,182

 
1,182

Included in other comprehensive income
12,797

 
(3,121
)
 
9,676

Acquisitions
—

 
38,600

 
38,600

Sales
—

 
—

 
—

Amortization
4,183

 
14

 
4,197

Other(2)
(8,100
)
 
(9,719
)
 
(17,819
)
Transfers in and/or out of Level 3(3)
—

 
—

 
—

Balance at September 30, 2015
$
72,112

 
$
539,670

 
$
611,782

Percent of total fixed maturities
0.5
%
 
3.8
%
 
4.3
%
(1) Includes redeemable preferred stocks.
(2) Includes capitalized interest, foreign exchange adjustments, and principal repayments.
(3) Considered to be transferred at the end of the period. Transfers into Level 3 occur when observable inputs are no longer available. Transfers out of Level 3 occur when observable inputs become available.

Other-Than-Temporary Impairments:

Based on the Company's evaluation of its fixed maturities available for sale in an unrealized loss position in accordance with the other-than-temporary impairment (OTTI) policy, the Company concluded that there were no other-than-temporary impairments during the three or nine month periods ended September 30, 2016 and 2015.

As of quarter end, previously written down securities remaining in the portfolio were carried at a fair value of $55 million, or less than 1% of the fair value of the fixed maturity available for sale portfolio. Torchmark is continuously monitoring the market conditions impacting its portfolio. Additionally, Torchmark has the ability and intent to hold these investments to recovery, and does not expect to be required to sell any of its securities.

Unrealized Loss Analysis:

The following table discloses information about fixed maturities available for sale in an unrealized loss position.
 
 
Less than
Twelve
Months
 
Twelve
Months
or Longer
 
Total
Number of issues (CUSIP numbers) held:
 
 
 
 
 
 
As of September 30, 2016
 
50

 
105

 
155

As of December 31, 2015
 
480

 
75

 
555



Torchmark’s entire fixed maturity portfolio consisted of 1,555 issues at September 30, 2016 and 1,565 issues at December 31, 2015. The weighted average quality rating of all unrealized loss positions as of September 30, 2016 was BB+.
The following table discloses unrealized investment losses by class and major sector of fixed maturities available for sale at September 30, 2016 for the period of time in a loss position. Torchmark considers these investments to be only temporarily impaired.
Analysis of Gross Unrealized Investment Losses
At September 30, 2016
 
 
 
Less than
Twelve Months
 
Twelve Months
or Longer
 
Total
Description of Securities
 
Fair Value
 
Unrealized
Loss
 
Fair Value
 
Unrealized
Loss
 
Fair Value
 
Unrealized
Loss
Investment grade securities:
 
 
 
 
 
 
 
 
 
 
 
 
Bonds:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government direct, guaranteed, and government-sponsored enterprises
 
$
23


$
—


$
1,547


$
(431
)

$
1,570

 
$
(431
)
States, municipalities and political subdivisions
 
—


—


677


(29
)

677

 
(29
)
Corporates, by sector:
 












 
 
 
Financial
 
130,367


(1,879
)

48,458


(3,623
)

178,825

 
(5,502
)
Utilities
 
41,266


(551
)

42,015


(3,265
)

83,281

 
(3,816
)
Energy
 
18,602


(165
)

258,173


(23,929
)

276,775

 
(24,094
)
Other corporate sectors
 
120,291


(1,635
)

103,826


(2,575
)

224,117

 
(4,210
)
Total corporates
 
310,526

 
(4,230
)
 
452,472

 
(33,392
)
 
762,998

 
(37,622
)
Redeemable preferred stocks, by sector:
 












 
 
 
Financial
 
—


—


—


—


—

 
—

Total redeemable preferred stocks
 
—

 
—

 
—

 
—

 
—

 
—

Total investment grade securities
 
310,549

 
(4,230
)
 
454,696

 
(33,852
)
 
765,245

 
(38,082
)
Below investment grade securities:
 












 
 
 
Bonds:
 












 
 
 
States, municipalities and political subdivisions
 
—


—


393


(159
)

393

 
(159
)
Corporates, by sector:
 












 
 
 
Financial
 
—


—


86,650


(19,122
)

86,650

 
(19,122
)
Energy
 
4,673


(23
)

116,978


(33,569
)

121,651

 
(33,592
)
Other corporate sectors
 
24,881


(244
)

173,593


(11,898
)

198,474

 
(12,142
)
Total corporates
 
29,554

 
(267
)
 
377,221

 
(64,589
)
 
406,775

 
(64,856
)
Collateralized debt obligations
 
—


—


8,363


(11,637
)

8,363

 
(11,637
)
Redeemable preferred stocks, by sector:
 












 
 
 
Financial
 
—


—


21,511


(5,625
)

21,511

 
(5,625
)
Total redeemable preferred stocks
 
—

 
—

 
21,511

 
(5,625
)
 
21,511

 
(5,625
)
Total below investment grade securities
 
29,554

 
(267
)
 
407,488

 
(82,010
)
 
437,042

 
(82,277
)
Total fixed maturities
 
$
340,103

 
$
(4,497
)
 
$
862,184

 
$
(115,862
)
 
$
1,202,287

 
$
(120,359
)