| Investments |
Investments Portfolio Composition: A summary of fixed maturities available for sale by cost or amortized cost and estimated fair value at June 30, 2017 is as follows: Portfolio Composition as of June 30, 2017 | | | | | | | | | | | | | | | | | | | | Cost or Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value(1) | | % of Total Fixed Maturities(2) | Fixed maturities available for sale: | | | | | | | | | | U.S. Government direct, guaranteed, and government-sponsored enterprises | $ | 387,331 |
| | $ | 8,552 |
| | $ | (1,696 | ) | | $ | 394,187 |
| | 2 | States, municipalities, and political subdivisions | 1,182,708 |
| | 128,175 |
| | (185 | ) | | 1,310,698 |
| | 8 | Foreign governments | 20,720 |
| | 1,592 |
| | — |
| | 22,312 |
| | — | Corporates, by sector: | | | | | | | | | | Financial | 3,152,297 |
| | 413,004 |
| | (25,309 | ) | | 3,539,992 |
| | 22 | Utilities | 1,909,247 |
| | 314,825 |
| | (3,351 | ) | | 2,220,721 |
| | 14 | Energy | 1,589,769 |
| | 170,566 |
| | (35,952 | ) | | 1,724,383 |
| | 11 | Other corporate sectors | 5,847,507 |
| | 651,703 |
| | (20,017 | ) | | 6,479,193 |
| | 40 | Total corporates | 12,498,820 |
| | 1,550,098 |
| | (84,629 | ) | | 13,964,289 |
| | 87 | Collateralized debt obligations | 59,871 |
| | 16,677 |
| | (10,303 | ) | | 66,245 |
| | — | Other asset-backed securities | 126,019 |
| | 3,607 |
| | (15 | ) | | 129,611 |
| | 1 | Redeemable preferred stocks, by sector: | | | | | | | | | | Financial | 347,505 |
| | 59,206 |
| | (5,849 | ) | | 400,862 |
| | 2 | Utilities | 28,577 |
| | 1,725 |
| | (220 | ) | | 30,082 |
| | — | Total redeemable preferred stocks | 376,082 |
| | 60,931 |
| | (6,069 | ) | | 430,944 |
| | 2 | Total fixed maturities | $ | 14,651,551 |
| | $ | 1,769,632 |
| | $ | (102,897 | ) | | $ | 16,318,286 |
| | 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 June 30, 2017 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. | | | | | | | | | | June 30, 2017 | | Amortized
Cost | | Fair Value | Fixed maturities available for sale: | | | | Due in one year or less | $ | 143,830 |
| | $ | 148,150 |
| Due after one year through five years | 578,037 |
| | 622,103 |
| Due after five years through ten years | 1,434,971 |
| | 1,597,721 |
| Due after ten years through twenty years | 4,363,391 |
| | 5,019,819 |
| Due after twenty years | 7,944,279 |
| | 8,733,397 |
| Mortgage-backed and asset-backed securities | 187,043 |
| | 197,096 |
| | $ | 14,651,551 |
| | $ | 16,318,286 |
|
Selected information about sales of fixed maturities available for sale is as follows. | | | | | | | | | | | | | | | | | | Three Months Ended
June 30, | | Six Months Ended
June 30, | | 2017 | | 2016 | | 2017 | | 2016 | Proceeds from sales | $ | — |
| | $ | 36,968 |
| | $ | — |
| | $ | 51,299 |
| Gross realized gains | — |
| | 3,061 |
| | — |
| | 3,556 |
| Gross realized losses | — |
| | — |
| | — |
| | (214 | ) |
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 June 30, 2017 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 | | $ | — |
| | $ | 394,187 |
| | $ | — |
| | $ | 394,187 |
| States, municipalities, and political subdivisions | | — |
| | 1,310,698 |
| | — |
| | 1,310,698 |
| Foreign governments | | — |
| | 22,312 |
| | — |
| | 22,312 |
| Corporates, by sector: | |
|
| |
|
| |
|
| |
|
| Financial | | — |
| | 3,477,619 |
| | 62,373 |
| | 3,539,992 |
| Utilities | | — |
| | 2,065,431 |
| | 155,290 |
| | 2,220,721 |
| Energy | | — |
| | 1,683,064 |
| | 41,319 |
| | 1,724,383 |
| Other corporate sectors | | — |
| | 6,151,889 |
| | 327,304 |
| | 6,479,193 |
| Total corporates | | — |
| | 13,378,003 |
| | 586,286 |
| | 13,964,289 |
| Collateralized debt obligations | | — |
| | — |
| | 66,245 |
| | 66,245 |
| Other asset-backed securities | | — |
| | 115,458 |
| | 14,153 |
| | 129,611 |
| Redeemable preferred stocks, by sector: | |
|
| |
|
| |
|
| |
|
| Financial | | — |
| | 400,862 |
| | — |
| | 400,862 |
| Utilities | | — |
| | 30,082 |
| | — |
| | 30,082 |
| Total redeemable preferred stocks | | — |
| | 430,944 |
| | — |
| | 430,944 |
| Total fixed maturities | | $ | — |
| | $ | 15,651,602 |
| | $ | 666,684 |
| | $ | 16,318,286 |
| Percent of total | | — | % | | 95.9 | % | | 4.1 | % | | 100.0 | % |
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) | | | | | | | | | | | | | | | | | | Six Months Ended June 30, 2017 | | Asset-
Backed
Securities | | Collateralized
Debt
Obligations | | Corporates(1) | | Total | Balance at January 1, 2017 | $ | — |
| | $ | 63,503 |
| | $ | 559,600 |
| | $ | 623,103 |
| Total gains or losses: | | | | | | | | Included in realized gains/losses | — |
| | — |
| | — |
| | — |
| Included in other comprehensive income | 261 |
| | 3,597 |
| | 11,637 |
| | 15,495 |
| Acquisitions | 14,000 |
| | — |
| | 21,666 |
| | 35,666 |
| Sales | — |
| | — |
| | — |
| | — |
| Amortization | — |
| | 2,481 |
| | 8 |
| | 2,489 |
| Other(2) | (108 | ) | | (3,336 | ) | | (6,625 | ) | | (10,069 | ) | Transfers in and/or out of Level 3(3) | — |
| | — |
| | — |
| | — |
| Balance at June 30, 2017 | $ | 14,153 |
| | $ | 66,245 |
| | $ | 586,286 |
| | $ | 666,684 |
| Percent of total fixed maturities | 0.1 | % | | 0.4 | % | | 3.6 | % | | 4.1 | % | | | | | | | | | | Six Months Ended June 30, 2016 | | Asset-
Backed
Securities | | 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 | — |
| | — |
| | — |
| | — |
| Included in other comprehensive income | — |
| | (4,831 | ) | | 24,291 |
| | 19,460 |
| Acquisitions | — |
| | — |
| | 15,800 |
| | 15,800 |
| Sales | — |
| | — |
| | — |
| | — |
| Amortization | — |
| | 2,639 |
| | 8 |
| | 2,647 |
| Other(2) | — |
| | (4,127 | ) | | (1,740 | ) | | (5,867 | ) | Transfers in and/or out of Level 3(3) | — |
| | — |
| | — |
| | — |
| Balance at June 30, 2016 | $ | — |
| | $ | 64,063 |
| | $ | 569,165 |
| | $ | 633,228 |
| Percent of total fixed maturities | — | % | | 0.4 | % | | 3.7 | % | | 4.1 | % |
(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:
In accordance with the other-than-temporary impairment (OTTI) policy, the Company evaluated its fixed maturities available for sale in an unrealized loss position to determine if there was any impairment for the quarter. Gross unrealized losses may fluctuate quarter over quarter due to adverse factors in the market that affect our holdings, such as changes in the interest rates or credit spreads. While the Company holds securities that may be in an unrealized loss position from time to time, 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 due to the strong cash flows generated by its insurance operations.
For the six months ended June 30, 2017, the Company recorded $245 thousand ($159 thousand, net of tax) in OTTI. For the comparable period in 2016, the Company concluded that there were no other-than-temporary impairments.
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 June 30, 2017 | | 164 |
| | 76 |
| | 240 |
| As of December 31, 2016 | | 407 |
| | 94 |
| | 501 |
|
Torchmark’s entire fixed maturity portfolio consisted of 1,516 issues at June 30, 2017 and 1,565 issues at December 31, 2016. The weighted average quality rating of all unrealized loss positions as of June 30, 2017 was BBB. The following table discloses unrealized investment losses by class and major sector of fixed maturities available for sale at June 30, 2017 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 June 30, 2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 | | $ | 114,030 |
| | $ | (1,194 | ) | | $ | 1,501 |
| | $ | (502 | ) | | $ | 115,531 |
| | $ | (1,696 | ) | States, municipalities and political subdivisions | | 13,502 |
| | (155 | ) | | 666 |
| | (30 | ) | | 14,168 |
| | (185 | ) | Foreign governments | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | | Corporates, by sector: | | | | | | | | | | | | | Financial | | 123,632 |
| | (3,735 | ) | | 47,847 |
| | (1,157 | ) | | 171,479 |
| | (4,892 | ) | Utilities | | 120,890 |
| | (2,481 | ) | | 17,710 |
| | (870 | ) | | 138,600 |
| | (3,351 | ) | Energy | | 36,740 |
| | (486 | ) | | 137,991 |
| | (9,595 | ) | | 174,731 |
| | (10,081 | ) | Other corporate sectors | | 437,568 |
| | (11,357 | ) | | 69,796 |
| | (2,624 | ) | | 507,364 |
| | (13,981 | ) | Total corporates | | 718,830 |
| | (18,059 | ) | | 273,344 |
| | (14,246 | ) | | 992,174 |
| | (32,305 | ) | Other asset-backed securities | | 9,927 |
| | (15 | ) | | — |
| | — |
| | 9,927 |
| | (15 | ) | Redeemable preferred stocks, by sector: | | | | | | | | | | | | | Financial | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Utilities | | 5,855 |
| | (220 | ) | | — |
| | — |
| | 5,855 |
| | (220 | ) | Total redeemable preferred stocks | | 5,855 |
| | (220 | ) | | — |
| | — |
| | 5,855 |
| | (220 | ) | Total investment grade securities | | 862,144 |
| | (19,643 | ) | | 275,511 |
| | (14,778 | ) | | 1,137,655 |
| | (34,421 | ) | Below investment grade securities: | | | | | | | | | | | | | Bonds: | | | | | | | | | | | | | States, municipalities and political subdivisions | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Corporates, by sector: | |
|
| |
|
| |
|
| |
|
| | | | | Financial | | — |
| | — |
| | 85,338 |
| | (20,417 | ) | | 85,338 |
| | (20,417 | ) | Energy | | 20,173 |
| | (185 | ) | | 81,387 |
| | (25,686 | ) | | 101,560 |
| | (25,871 | ) | Other corporate sectors | | — |
| | — |
| | 56,134 |
| | (6,036 | ) | | 56,134 |
| | (6,036 | ) | Total corporates | | 20,173 |
| | (185 | ) | | 222,859 |
| | (52,139 | ) | | 243,032 |
| | (52,324 | ) | Collateralized debt obligations | | — |
| | — |
| | 9,697 |
| | (10,303 | ) | | 9,697 |
| | (10,303 | ) | Redeemable preferred stocks, by sector: | | | | | | | | | | | | | Financial | | — |
| | — |
| | 21,269 |
| | (5,849 | ) | | 21,269 |
| | (5,849 | ) | Total redeemable preferred stocks | | — |
| | — |
| | 21,269 |
| | (5,849 | ) | | 21,269 |
| | (5,849 | ) | Total below investment grade securities | | 20,173 |
| | (185 | ) | | 253,825 |
| | (68,291 | ) | | 273,998 |
| | (68,476 | ) | Total fixed maturities | | $ | 882,317 |
| | $ | (19,828 | ) | | $ | 529,336 |
| | $ | (83,069 | ) | | $ | 1,411,653 |
| | $ | (102,897 | ) |
|