Investments (Tables)

12 Months Ended

Dec. 31, 2017

Schedule for Fixed Income Securities at Amortized Cost, Gross Unrealized Gains and Losses and Fair Value

The amortized cost, gross unrealized gains and losses and fair value for fixed income securities are as follows:

($ in thousands)	Amortized cost		Gross unrealized					Fair value
			Gains		Losses
December 31, 2017
U.S. government and agencies	$	115,747	$	12,310	$	(5	)	$	128,052
Municipal		615,231		114,177		(75	)		729,333
Corporate		3,570,015		236,659		(10,943	)		3,795,731
Foreign government		166,043		13,722		—			179,765
ABS		41,725		210		(127	)		41,808
RMBS		20,666		1,303		(14	)		21,955
CMBS		11,855		25		(472	)		11,408
Redeemable preferred stock		8,726		947		—			9,673
Total fixed income securities	$	4,550,008	$	379,353	$	(11,636	)	$	4,917,725
December 31, 2016
U.S. government and agencies	$	123,994	$	17,570	$	—		$	141,564
Municipal		612,222		100,532		(611	)		712,143
Corporate		3,517,638		223,491		(22,906	)		3,718,223
Foreign government		173,343		19,511		—			192,854
ABS		48,274		7		(201	)		48,080
RMBS		33,888		1,733		(10	)		35,611
CMBS		15,988		5		(2,197	)		13,796
Redeemable preferred stock		8,810		1,093		—			9,903
Total fixed income securities	$	4,534,157	$	363,942	$	(25,925	)	$	4,872,174

Schedule of Net Investment Income

Net investment income

Net investment income for the years ended December 31 is as follows:

($ in thousands)	2017			2016			2015
Fixed income securities	$	228,507		$	226,894		$	248,585
Mortgage loans		28,263			28,577			27,582
Equity securities		5,465			5,868			4,905
Limited partnership interests		53,917			38,485			34,177
Short-term investments		1,200			826			393
Policy loans		2,443			2,456			2,498
Investment income, before expense		319,795			303,106			318,140
Investment expense		(9,100	)		(7,261	)		(6,896	)
Net investment income	$	310,695		$	295,845		$	311,244

Schedule of Realized Capital Gains and Losses by Asset Type

Realized capital gains and losses by asset type for the years ended December 31 are as follows:

($ in thousands)	2017		2016			2015
Fixed income securities	$	5,436	$	(17,145	)	$	42,361
Mortgage loans		1,128		—			25
Equity securities		799		(5,570	)		(3,260	)
Limited partnership interests		6,451		590			(6,948	)
Derivatives		52,506		23,781			(4,923	)
Short-term investments		12		(17	)		(137	)
Realized capital gains and losses	$	66,332	$	1,639		$	27,118

Schedule of Realized Capital Gains and Losses by Transaction Type

Realized capital gains and losses by transaction type for the years ended December 31 are as follows:

($ in thousands)	2017			2016			2015
Impairment write-downs	$	(5,370	)	$	(15,303	)	$	(7,709	)
Change in intent write-downs		—			(654	)		(80	)
Net other-than-temporary impairment losses recognized in earnings		(5,370	)		(15,957	)		(7,789	)
Sales and other		19,196			(6,185	)		39,830
Valuation and settlements of derivative instruments		52,506			23,781			(4,923	)
Realized capital gains and losses	$	66,332		$	1,639		$	27,118

Schedule of Other-Than-Temporary Impairment Losses by Asset Type

Other-than-temporary impairment losses by asset type for the years ended December 31 are as follows:

($ in thousands)	2017								2016									2015
	Gross			Included in OCI		Net			Gross			Included in OCI			Net			Gross			Included in OCI		Net
Fixed income securities:
Municipal	$	—		$	—	$	—		$	—		$	—		$	—		$	(9	)	$	—	$	(9	)
Corporate		(1,481	)		—		(1,481	)		(8,306	)		4,205			(4,101	)		(1,317	)		342		(975	)
RMBS		—			—		—			1			(1	)		—			84			—		84
CMBS		(2,338	)		893		(1,445	)		(785	)		452			(333	)		(380	)		—		(380	)
Total fixed income securities		(3,819	)		893		(2,926	)		(9,090	)		4,656			(4,434	)		(1,622	)		342		(1,280	)
Equity securities		(2,422	)		—		(2,422	)		(11,103	)		—			(11,103	)		(3,430	)		—		(3,430	)
Limited partnership interests		(22	)		—		(22	)		(420	)		—			(420	)		(3,079	)		—		(3,079	)
Other-than-temporary impairment losses	$	(6,263	)	$	893	$	(5,370	)	$	(20,613	)	$	4,656		$	(15,957	)	$	(8,131	)	$	342	$	(7,789	)

Schedule of other-than-temporary impairment losses on fixed income securities included in Accumulated Other Comprehensive Income

The total amount of other-than-temporary impairment losses included in AOCI at the time of impairment for fixed income securities, which were not included in earnings, are presented in the following table. The amount excludes $1.3 million and $9.0 million as of December 31, 2017 and 2016, respectively, of net unrealized gains related to changes in valuation of the fixed income securities subsequent to the impairment measurement date.

($ in thousands)	December 31, 2017			December 31, 2016
Corporate	$	—		$	(4,050	)
RMBS		—			(40	)
CMBS		(975	)		(384	)
Total	$	(975	)	$	(4,474	)

Schedule of Rollforwards of Cumulative Credit Losses Recognized in Earnings for Fixed Income Securities Held

Rollforwards of the cumulative credit losses recognized in earnings for fixed income securities held as of December 31 are as follows:

($ in thousands)	2017			2016			2015
Beginning balance	$	(4,594	)	$	(1,173	)	$	(568	)
Additional credit loss for securities previously other-than-temporarily impaired		(128	)		(357	)		84
Additional credit loss for securities not previously other-than-temporarily impaired		(2,798	)		(4,077	)		(1,283	)
Reduction in credit loss for securities disposed or collected		4,328			1,013			593
Change in credit loss due to accretion of increase in cash flows		—			—			1
Ending balance	$	(3,192	)	$	(4,594	)	$	(1,173	)

Schedule of Unrealized Net Capital Gains and Losses Included in Accumulated Other Comprehensive Income

Unrealized net capital gains and losses included in AOCI are as follows:

($ in thousands)	Fair value		Gross unrealized					Unrealized net gains (losses)
			Gains		Losses
December 31, 2017
Fixed income securities	$	4,917,725	$	379,353	$	(11,636	)	$	367,717
Equity securities(1)		194,533		42,758		(388	)		42,370
Short-term investments		88,786		—		(13	)		(13	)
EMA limited partnerships(2)									(10	)
Unrealized net capital gains and losses, pre-tax									410,064
Amounts recognized for:
Insurance reserves(3)									(222,342	)
DAC and DSI(4)									(9,057	)
Amounts recognized									(231,399	)
Deferred income taxes(5)									(37,520	)
Unrealized net capital gains and losses, after-tax								$	141,145

⁽¹⁾  Beginning January 1, 2018, due to the adoption of the new accounting standard for the recognition and measurement of financial assets and liabilities, equity securities will be measured at fair value with changes in fair value recognized in net income. The existing unrealized net capital gains and losses, after-tax, will be reclassified to retained income through a cumulative effect adjustment. See Note 2 for additional details on the new accounting standard.

⁽²⁾  Unrealized net capital gains and losses for limited partnership interests represent the Company’s share of EMA limited partnerships’ other comprehensive income. Fair value and gross unrealized gains and losses are not applicable.

⁽³⁾  The insurance reserves adjustment represents the amount by which the reserve balance would increase if the net unrealized gains in the applicable product portfolios were realized and reinvested at current lower interest rates, resulting in a premium deficiency. This adjustment primarily relates to structured settlement annuities with life contingencies (a type of immediate annuities with life contingencies).

⁽⁴⁾  The DAC and DSI adjustment balance represents the amount by which the amortization of DAC and DSI would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized.

⁽⁵⁾  Unrealized net capital gains and losses were reduced by deferred income taxes at the newly enacted 21% U.S. corporate tax rate.

($ in thousands)	Fair value		Gross unrealized					Unrealized net gains (losses)
			Gains		Losses
December 31, 2016
Fixed income securities	$	4,872,174	$	363,942	$	(25,925	)	$	338,017
Equity securities		218,078		17,214		(7,771	)		9,443
Short-term investments		92,698		1		(2	)		(1	)
EMA limited partnerships									(61	)
Unrealized net capital gains and losses, pre-tax									347,398
Amounts recognized for:
Insurance reserves									(56,350	)
DAC and DSI									(10,522	)
Amounts recognized									(66,872	)
Deferred income taxes									(98,184	)
Unrealized net capital gains and losses, after-tax								$	182,342

Schedule of Change in Unrealized net Capital Gains and Losses

The change in unrealized net capital gains and losses for the years ended December 31 is as follows:

($ in thousands)	2017			2016			2015
Fixed income securities	$	29,700		$	41,965		$	(235,454	)
Equity securities		32,927			12,743			(3,873	)
Short-term investments		(12	)		(3	)		1
EMA limited partnerships		51			(3	)		(58	)
Total		62,666			54,702			(239,384	)
Amounts recognized for:
Insurance reserves		(165,992	)		(11,943	)		212,845
DAC and DSI		1,465			(4,984	)		7,315
Amounts recognized		(164,527	)		(16,927	)		220,160
Deferred income taxes		60,664			(13,221	)		6,728
(Decrease) increase in unrealized net capital gains and losses, after-tax	$	(41,197	)	$	24,554		$	(12,496	)

Summary of Gross Unrealized Losses and Fair Value of Fixed Income and Equity Securities by Length of Time

The following table summarizes the gross unrealized losses and fair value of fixed income and equity securities by the length of time that individual securities have been in a continuous unrealized loss position.

($ in thousands)	Less than 12 months							12 months or more							Total unrealized losses
	Number of issues		Fair value		Unrealized losses			Number of issues		Fair value		Unrealized losses
December 31, 2017
Fixed income securities
U.S. government and agencies		2	$	39,867	$	(5	)		—	$	—	$	—		$	(5	)
Municipal		1		4,925		(75	)		—		—		—		$	(75	)
Corporate		147		527,594		(4,216	)		47		191,534		(6,727	)		(10,943	)
ABS		4		24,836		(127	)		—		—		—			(127	)
RMBS		47		1,720		(10	)		24		216		(4	)		(14	)
CMBS		—		—		—			2		8,325		(472	)		(472	)
Redeemable preferred stock		1		1		—			—		—		—			—
Total fixed income securities		202		598,943		(4,433	)		73		200,075		(7,203	)		(11,636	)
Equity securities		63		7,294		(330	)		3		759		(58	)		(388	)
Total fixed income and equity securities		265	$	606,237	$	(4,763	)		76	$	200,834	$	(7,261	)	$	(12,024	)
Investment grade fixed income securities		137	$	532,387	$	(3,093	)		64	$	185,093	$	(6,447	)	$	(9,540	)
Below investment grade fixed income securities		65		66,556		(1,340	)		9		14,982		(756	)		(2,096	)
Total fixed income securities		202	$	598,943	$	(4,433	)		73	$	200,075	$	(7,203	)	$	(11,636	)
December 31, 2016
Fixed income securities
Municipal		3	$	16,781	$	(611	)		—	$	—	$	—		$	(611	)
Corporate		215		776,730		(21,291	)		15		45,247		(1,615	)		(22,906	)
ABS		3		23,288		(201	)		—		—		—			(201	)
RMBS		35		519		(3	)		17		980		(7	)		(10	)
CMBS		4		5,297		(158	)		1		7,944		(2,039	)		(2,197	)
Redeemable preferred stock		1		—		—			—		—		—			—
Total fixed income securities		261		822,615		(22,264	)		33		54,171		(3,661	)		(25,925	)
Equity securities		156		35,306		(2,694	)		92		22,695		(5,077	)		(7,771	)
Total fixed income and equity securities		417	$	857,921	$	(24,958	)		125	$	76,866	$	(8,738	)	$	(33,696	)
Investment grade fixed income securities		176	$	744,124	$	(18,858	)		22	$	30,364	$	(868	)	$	(19,726	)
Below investment grade fixed income securities		85		78,491		(3,406	)		11		23,807		(2,793	)		(6,199	)
Total fixed income securities		261	$	822,615	$	(22,264	)		33	$	54,171	$	(3,661	)	$	(25,925	)

Schedule of Commercial Mortgage Loans by Geographic Distribution

The following table shows the principal geographic distribution of commercial real estate represented in the Company’s mortgage loan portfolio. No other state represented more than 5% of the portfolio as of December 31.

(% of mortgage loan portfolio carrying value)	2017			2016
California		19.4	%		20.9	%
Texas		14.5			11.0
New Jersey		8.5			9.3
Illinois		5.7			3.6

Schedule of Types of Properties Collateralizing Commercial Mortgage Loans

The types of properties collateralizing the mortgage loans as of December 31 are as follows:

(% of mortgage loan portfolio carrying value)	2017			2016
Office buildings		28.2	%		26.1	%
Apartment complex		26.3			25.6
Retail		19.3			19.3
Warehouse		16.5			18.9
Other		9.7			10.1
Total		100.0	%		100.0	%

Summary of Carrying Value of Non-Impaired Fixed and Variable Rate Mortgage Loans by Debt Service Coverage Ration Distribution

The following table reflects the carrying value of non-impaired fixed rate mortgage loans summarized by debt service coverage ratio distribution as of December 31. There were no variable rate mortgage loans as of December 31, 2017 or 2016.

($ in thousands)	2017		2016
Below 1.0	$	—	$	5,600
1.0 - 1.25		50,411		44,289
1.26 - 1.50		172,800		179,503
Above 1.50		405,931		384,988
Total non-impaired mortgage loans	$	629,142	$	614,380

Schedule of Municipal Bonds Held For Investment by Geographic Distribution

The Company maintains a diversified portfolio of municipal bonds. The following table shows the principal geographic distribution of municipal bond issuers represented in the Company’s portfolio as of December 31. No other state represents more than 5% of the portfolio.

(% of municipal bond portfolio carrying value)	2017			2016
California		27.7	%		27.5	%
Texas		11.9			12.3
Oregon		7.2			6.7
Illinois		5.8			5.5

Fixed income securities

Schedule of Securities Based on Contractual Maturities

Scheduled maturities

The scheduled maturities for fixed income securities are as follows as of December 31, 2017:

($ in thousands)	Amortized cost		Fair value
Due in one year or less	$	317,002	$	320,811
Due after one year through five years		1,595,959		1,670,587
Due after five years through ten years		1,468,968		1,524,178
Due after ten years		1,093,833		1,326,978
		4,475,762		4,842,554
ABS, RMBS and CMBS		74,246		75,171
Total	$	4,550,008	$	4,917,725

Mortgage loans

Schedule of Securities Based on Contractual Maturities

The contractual maturities of the mortgage loan portfolio as of December 31, 2017 are as follows:

($ in thousands)	Number of loans		Carrying value		Percent
2018		5	$	21,589		3.4	%
2019		1		10,000		1.6
2020		6		28,310		4.5
2021		11		71,052		11.3
Thereafter		77		498,191		79.2
Total		100	$	629,142		100.0	%