Derivative Financial Instruments and Off-balance sheet Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2017

Summary of Volume and Fair Value Positions of Derivative Instruments and Reporting Location in Statement of Financial Position

The following table provides a summary of the volume and fair value positions of derivative instruments as well as their reporting location in the Statement of Financial Position as of December 31, 2017. None of these derivatives are designated as accounting hedging instruments.

($ in thousands, except number of contracts)	Balance sheet location	Volume(1)
		Notional amount		Number of contracts		Fair value, net			Gross asset		Gross liability
Asset derivatives
Interest rate contracts
Interest rate cap agreements	Other investments	$	13,500		n/a	$	318		$	318	$	—
Equity and index contracts
Options	Other investments		—		105		2,800			2,800		—
Foreign currency contracts
Foreign currency forwards	Other investments		140		n/a		(12	)		—		(12	)
Other contracts
Structured settlement annuity reinsurance agreement	Other assets		—		n/a		166,290			166,290		—
Total asset derivatives		$	13,640		105	$	169,396		$	169,408	$	(12	)
Liability derivatives
Interest rate contracts
Interest rate cap agreements	Other liabilities & accrued expenses	$	2,300		n/a	$	18		$	18	$	—
Equity and index contracts
Options and futures	Other liabilities & accrued expenses		—		106		(1,149	)		—		(1,149	)
Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses		24,622				(355	)		85		(440	)
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds		32,447		n/a		(2,754	)		—		(2,754	)
Guaranteed withdrawal benefits	Contractholder funds		17,774		n/a		(321	)		—		(321	)
Equity-indexed options in life product contracts	Contractholder funds		28,833		n/a		(1,721	)		—		(1,721	)
Total liability derivatives			105,976		106		(6,282	)	$	103	$	(6,385	)
Total derivatives		$	119,616		211	$	163,114

⁽¹⁾  Volume for OTC derivative contracts is represented by their notional amounts. Volume for exchange traded derivatives is represented by the number of contracts, which is the basis on which they are traded. (n/a = not applicable)

The following table provides a summary of the volume and fair value positions of derivative instruments as well as their reporting location in the Statement of Financial Position as of December 31, 2016. None of these derivatives are designated as accounting hedging instruments.

($ in thousands, except number of contracts)	Balance sheet location		Volume(1)
			Notional amount		Number of contracts		Fair value, net			Gross asset		Gross liability
Asset derivatives
Interest rate contracts
Interest rate cap agreements		Other investments	$	18,800		n/a	$	311		$	311	$	—
Equity and index contracts
Options		Other investments		—		92		1,846			1,846		—
Foreign currency contracts
Foreign currency forwards		Other investments		15,504		n/a		423			568		(145	)
Other contracts
Structured settlement annuity reinsurance agreement		Other assets		—		n/a		109,578			109,578		—
Total asset derivatives			$	34,304		92	$	112,158		$	112,303	$	(145	)
Liability derivatives
Equity and index contracts
Options and futures		Other liabilities & accrued expenses	$	—		94	$	(760	)	$	—	$	(760	)
Embedded derivative financial instruments
Guaranteed accumulation benefits		Contractholder funds		66,584		n/a		(5,710	)		—		(5,710	)
Guaranteed withdrawal benefits		Contractholder funds		19,083		n/a		(302	)		—		(302	)
Equity-indexed options in life product contracts		Contractholder funds		21,995		n/a		(1,165	)		—		(1,165	)
Total liability derivatives				107,662		94		(7,937	)	$	—	$	(7,937	)
Total derivatives			$	141,966		186	$	104,221

⁽¹⁾  Volume for OTC derivative contracts is represented by their notional amounts. Volume for exchange traded derivatives is represented by the number of contracts, which is the basis on which they are traded. (n/a = not applicable)

Schedule of gross and net amount for the Company's OTC derivatives subject to enforceable master netting arrangements

The following table provides gross and net amounts for the Company’s OTC derivatives, all of which are subject to enforceable master netting agreements.

($ in thousands)				Offsets
	Gross amount			Counter- party netting			Cash collateral (received) pledged		Net amount on balance sheet			Securities collateral (received) pledged		Net amount
December 31, 2017
Asset derivatives	$	421		$	(115	)	$	—	$	306		$	—	$	306
Liability derivatives		(452	)		115			230		(107	)		—		(107	)
December 31, 2016
Asset derivatives	$	879		$	(145	)	$	—	$	734		$	—	$	734
Liability derivatives		(145	)		145			—		—			—		—

Summary of Gains and Losses from Valuation and Settlements For Derivatives Not Designated As Hedges

The following tables present gains and losses from valuation and settlements reported on derivatives not designated as accounting hedging instruments in the Statements of Operations and Comprehensive Income.

($ in thousands)	Realized capital gains and losses			Contract benefits			Interest credited to contractholder funds			Total gain (loss) recognized in net income on derivatives
2017
Interest rate contracts	$	(54	)	$	—		$	—		$	(54	)
Equity and index contracts		—			—			1,289			1,289
Embedded derivative financial instruments		—			2,937			(556	)		2,381
Foreign currency contracts		(697	)		—			—			(697	)
Other contracts—structured settlement annuity reinsurance agreement		53,257			—			—			53,257
Total	$	52,506		$	2,937		$	733		$	56,176
2016
Interest rate contracts	$	(30	)	$	—		$	—		$	(30	)
Equity and index contracts		—			—			405			405
Embedded derivative financial instruments		—			1,425			(702	)		723
Foreign currency contracts		431			—			—			431
Other contracts—structured settlement annuity reinsurance agreement		23,380			—			—			23,380
Total	$	23,781		$	1,425		$	(297	)	$	24,909
2015
Interest rate contracts	$	(178	)	$	—		$	—		$	(178	)
Equity and index contracts		—			—			(155	)		(155	)
Embedded derivative financial instruments		—			(792	)		283			(509	)
Foreign currency contracts		427			—			—			427
Other contracts—structured settlement annuity reinsurance agreement		(5,172	)		—			—			(5,172	)
Total	$	(4,923	)	$	(792	)	$	128		$	(5,587	)

Summary of Counterparty Credit Exposure by Counterparty Credit Rating

The following table summarizes the counterparty credit exposure as of December 31 by counterparty credit rating as it relates to the Company’s OTC derivatives.

($ in thousands)	2017								2016
Rating (1)	Number of counter- parties		Notional amount(2)		Credit exposure(2)		Exposure, net of collateral(2)		Number of counter- parties		Notional amount(2)		Credit exposure(2)		Exposure, net of collateral(2)
A+		2	$	13,640	$	305	$	305		4	$	34,304	$	734	$	734

⁽¹⁾  Rating is the lower of S&P or Moody’s ratings.

⁽²⁾  Only OTC derivatives with a net positive fair value are included for each counterparty.

Summary of Fair Value of Derivative Instruments with Termination, Cross-Default Or Collateral Credit-Risk-Contingent Features

The following summarizes the fair value of derivative instruments with termination, cross-default or collateral credit-risk-contingent features that are in a liability position as of December 31, as well as the fair value of assets that are netted against the liability in accordance with provisions within legally enforceable MNAs.

($ in thousands)	2017			2016
Gross liability fair value of contracts containing credit-risk-contingent features	$	12		$	—
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs		(12	)		—
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently	$	—		$	—