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Investments (Tables)
 12 Months Ended
Dec. 31, 2015
Investments, Debt and Equity Securities [Abstract]  
Components of net investment income
The components of net investment income for the following periods were:
 
 
 
Year Ended December 31,
 
 
 
 
2015
 
 
2014
 
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
$
326,207
 
 
$
317,756
 
 
$
304,024
 
Equity securities
 
 
4,355
 
 
 
4,849
 
 
 
3,698
 
Short-term and other investments
 
 
9,187
 
 
 
8,459
 
 
 
8,242
 
Other invested assets (equity method investments)
 
 
1,984
 
 
 
7,229
 
 
 
5,902
 
Total investment income
 
 
341,733
 
 
 
338,293
 
 
 
321,866
 
Investment expenses
 
 
(9,133
)
 
 
(8,478
)
 
 
(8,256
)
Net investment income
 
$
332,600
 
 
$
329,815
 
 
$
313,610
 
Summary of realized investment gains (losses)
Net realized investment gains (losses) for the following periods were:
 
 
 
Year Ended December 31,
 
 
 
 
2015
 
 
2014
 
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
$
10,289
 
 
$
8,150
 
 
$
18,480
 
Equity securities
 
 
1,378
 
 
 
2,793
 
 
 
3,765
 
Short-term investments and other
 
 
1,046
 
 
 
(26
)
 
 
-
 
Net realized investment gains
 
$
12,713
 
 
$
10,917
 
 
$
22,245
 
Unrealized gains and losses on fixed maturities and equity securities
The amortized cost or cost, unrealized investment gains and losses, fair values and other-than-temporary impairment (“OTTI”) included in accumulated other comprehensive income (loss) (“AOCI”) of all fixed maturities and equity securities in the portfolio were as follows:
 
 
Amortized
 
Unrealized
 
Unrealized
 
Fair
 
OTTI in
 
Cost/Cost
 
Gains
 
Losses
 
Value
 
AOCI (1)
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and federally sponsored agency obligations (2):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
 
$
461,862
 
 
$
44,413
 
 
$
1,861
 
 
$
504,414
 
 
$
-
 
Other, including
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
 
532,373
 
 
 
21,153
 
 
 
7,415
 
 
 
546,111
 
 
 
-
 
Municipal bonds
 
 
1,553,603
 
 
 
165,680
 
 
 
10,340
 
 
 
1,708,943
 
 
 
(4,140
)
Foreign government bonds
 
 
67,441
 
 
 
6,288
 
 
 
112
 
 
 
73,617
 
 
 
-
 
Corporate bonds
 
 
2,687,376
 
 
 
140,873
 
 
 
48,834
 
 
 
2,779,415
 
 
 
-
 
Other mortgage-backed securities
 
 
1,482,971
 
 
 
16,830
 
 
 
20,961
 
 
 
1,478,840
 
 
 
1,382
 
Totals
 
$
6,785,626
 
 
$
395,237
 
 
$
89,523
 
 
$
7,091,340
 
 
$
(2,758
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities (3)
 
$
95,722
 
 
$
8,405
 
 
$
4,330
 
 
$
99,797
 
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and federally sponsored agency obligations (2):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
 
$
484,561
 
 
$
52,555
 
 
$
1,390
 
 
$
535,726
 
 
$
-
 
Other, including
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
 
512,596
 
 
 
28,652
 
 
 
3,049
 
 
 
538,199
 
 
 
-
 
Municipal bonds
 
 
1,462,717
 
 
 
189,533
 
 
 
4,428
 
 
 
1,647,822
 
 
 
-
 
Foreign government bonds
 
 
52,552
 
 
 
6,984
 
 
 
-
 
 
 
59,536
 
 
 
-
 
Corporate bonds
 
 
2,608,633
 
 
 
237,372
 
 
 
11,256
 
 
 
2,834,749
 
 
 
-
 
Other mortgage-backed securities
 
 
1,254,178
 
 
 
28,772
 
 
 
5,892
 
 
 
1,277,058
 
 
 
2,879
 
Totals
 
$
6,375,237
 
 
$
543,868
 
 
$
26,015
 
 
$
6,893,090
 
 
$
2,879
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities (3)
 
$
99,904
 
 
$
14,159
 
 
$
3,408
 
 
$
110,655
 
 
$
-
 
 
(1)
Related to securities for which an unrealized loss was bifurcated to distinguish the credit-related portion and the portion driven by other market factors. Represents the amount of other-than-temporary impairment losses in AOCI which was not included in earnings; amounts also include unrealized gains/(losses) on such impaired securities relating to changes in the fair value of those securities subsequent to the impairment measurement date.
(2)
Fair value includes securities issued by Federal National Mortgage Association (“FNMA”) of $231,294 and $302,222; Federal Home Loan Mortgage Corporation (“FHLMC”) of $363,957 and $432,432; and Government National Mortgage Association (“GNMA”) of $130,940 and $137,867 as of December 31, 2015 and 2014, respectively.
(3)
Includes nonredeemable (perpetual) preferred stocks, common stocks and closed-end funds.
Summary of fair value and gross unrealized losses of fixed maturity securities and equity securities in an unrealized loss position
For equity securities, the Company has the ability and intent to hold the securities for the recovery of cost and recovery of cost is expected within a reasonable period of time. Therefore, no impairment of these securities was recorded at December 31, 2015.
 
 
 
12 months or less
 
 
More than 12 months
 
 
Total
 
 
 
 
 
 
Gross
 
 
 
 
 
Gross
 
 
 
 
 
Gross
 
 
 
 
 
 
Unrealized
 
 
 
 
 
Unrealized
 
 
 
 
 
Unrealized
 
 
 
Fair Value
 
 
Losses
 
 
Fair Value
 
 
Losses
 
 
Fair Value
 
 
Losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and federally sponsored agency obligations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
 
$
48,097
 
 
$
1,748
 
 
$
1,595
 
 
$
113
 
 
$
49,692
 
 
$
1,861
 
Other
 
 
248,478
 
 
 
7,338
 
 
 
1,921
 
 
 
77
 
 
 
250,399
 
 
 
7,415
 
Municipal bonds
 
 
168,939
 
 
 
5,382
 
 
 
21,717
 
 
 
4,958
 
 
 
190,656
 
 
 
10,340
 
Foreign government bonds
 
 
11,867
 
 
 
112
 
 
 
-
 
 
 
-
 
 
 
11,867
 
 
 
112
 
Corporate bonds
 
 
858,647
 
 
 
37,244
 
 
 
50,340
 
 
 
11,590
 
 
 
908,987
 
 
 
48,834
 
Other mortgage-backed securities
 
 
929,268
 
 
 
19,165
 
 
 
140,561
 
 
 
1,796
 
 
 
1,069,829
 
 
 
20,961
 
Total fixed maturity securities
 
 
2,265,296
 
 
 
70,989
 
 
 
216,134
 
 
 
18,534
 
 
 
2,481,430
 
 
 
89,523
 
Equity securities (1)
 
 
38,764
 
 
 
3,022
 
 
 
8,379
 
 
 
1,308
 
 
 
47,143
 
 
 
4,330
 
Combined totals
 
$
2,304,060
 
 
$
74,011
 
 
$
224,513
 
 
$
19,842
 
 
$
2,528,573
 
 
$
93,853
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of positions with a gross unrealized loss
 
 
684
 
 
 
 
 
 
 
78
 
 
 
 
 
 
 
762
 
 
 
 
 
Fair value as a percentage of total fixed maturities and equity securities fair value
 
 
32.0
%
 
 
 
 
 
 
3.1
%
 
 
 
 
 
 
35.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and federally sponsored agency obligations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
 
$
2
 
 
$
-
 
 
$
39,809
 
 
$
1,390
 
 
$
39,811
 
 
$
1,390
 
Other
 
 
10,317
 
 
 
34
 
 
 
117,615
 
 
 
3,015
 
 
 
127,932
 
 
 
3,049
 
Municipal bonds
 
 
31,821
 
 
 
200
 
 
 
59,715
 
 
 
4,228
 
 
 
91,536
 
 
 
4,428
 
Foreign government bonds
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
Corporate bonds
 
 
213,612
 
 
 
6,883
 
 
 
76,099
 
 
 
4,373
 
 
 
289,711
 
 
 
11,256
 
Other mortgage-backed securities
 
 
477,877
 
 
 
4,797
 
 
 
88,663
 
 
 
1,095
 
 
 
566,540
 
 
 
5,892
 
Total fixed maturity securities
 
 
733,629
 
 
 
11,914
 
 
 
381,901
 
 
 
14,101
 
 
 
1,115,530
 
 
 
26,015
 
Equity securities (1)
 
 
12,955
 
 
 
2,568
 
 
 
6,635
 
 
 
840
 
 
 
19,590
 
 
 
3,408
 
Combined totals
 
$
746,584
 
 
$
14,482
 
 
$
388,536
 
 
$
14,941
 
 
$
1,135,120
 
 
$
29,423
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of positions with a gross unrealized loss
 
 
234
 
 
 
 
 
 
 
112
 
 
 
 
 
 
 
346
 
 
 
 
 
Fair value as a percentage of total fixed maturities and equity securities fair value
 
 
10.7
%
 
 
 
 
 
 
5.5
%
 
 
 
 
 
 
16.2
%
 
 
 
 
 
(1)
Includes nonredeemable (perpetual) preferred stocks, common stocks and closed-end funds.
Summary of cumulative credit losses
The following table summarizes the cumulative amounts related to the Company’s credit loss component of the other-than-temporary impairment losses on fixed maturity securities held as of December 31, 2015 and 2014 that the Company did not intend to sell as of those dates, and it was not more likely than not that the Company would be required to sell the securities before the anticipated recovery of the amortized cost bases, for which the non-credit portions of the other-than-temporary impairment losses were recognized in other comprehensive income (loss):
 
 
 
Year Ended December 31,
 
 
 
2015
 
 
2014
 
Cumulative credit loss (1)
 
 
 
 
 
 
 
 
Beginning of period
 
$
2,877
 
 
$
4,097
 
New credit losses
 
 
4,967
 
 
 
280
 
Losses related to securities sold or paid down during the period
 
 
-
 
 
 
(1,500
)
End of period
 
$
7,844
 
 
$
2,877
 
 
(1)
The cumulative credit loss amounts exclude other-than-temporary impairment losses on securities held as of the periods indicated that the Company intended to sell or it was more likely than not that the Company would be required to sell the security before the recovery of the amortized cost basis.
Distribution of the Company's fixed maturity portfolio by estimated expected maturity
The following table presents the distribution of the Company’s fixed maturity securities portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers' utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, including mortgage-backed securities and other asset-backed securities, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
Percent of
 
 
Amortized
 
 
Fair
 
 
Total Fair
 
 
Cost
 
 
Value
 
 
Value
Estimated expected maturity:
 
 
 
 
 
 
 
 
 
 
 
 
Due in 1 year or less
 
$
210,171
 
 
$
219,639
 
 
 
3.1
%
Due after 1 year through 5 years
 
 
1,641,139
 
 
 
1,715,078
 
 
 
24.2
 
Due after 5 years through 10 years
 
 
2,688,583
 
 
 
2,809,712
 
 
 
39.6
 
Due after 10 years through 20 years
 
 
1,420,578
 
 
 
1,484,580
 
 
 
20.9
 
Due after 20 years
 
 
825,155
 
 
 
862,331
 
 
 
12.2
 
Total
 
$
6,785,626
 
 
$
7,091,340
 
 
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Average option-adjusted duration, in years
 
 
5.8
 
 
 
 
 
 
 
 
 
Proceeds received from sales of fixed maturities and equity securities
Proceeds received from sales of fixed maturities and equity securities, each determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each year were:
 
 
 
Year Ended December 31,
 
 
 
 
2015
 
 
 
2014
 
 
 
2013
 
Fixed maturity securities
 
 
 
        
        
 
 
        
        
 
 
 
Proceeds received
 
$
445,100
 
 
$
261,696
 
 
$
298,045
 
Gross gains realized
 
 
22,476
 
 
 
13,224
 
 
 
17,177
 
Gross losses realized
 
 
(5,487
)
 
 
(6,325
)
 
 
(4,945
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds received
 
$
31,621
 
 
$
17,194
 
 
$
18,643
 
Gross gains realized
 
 
6,604
 
 
 
3,206
 
 
 
4,368
 
Gross losses realized
 
 
(672
)
 
 
(482
)
 
 
(616
)
Reconciliation of net unrealized investment gains (losses) on fixed maturity securities and equity securities
The following table reconciles the net unrealized investment gains and losses, net of tax, included in accumulated other comprehensive income (loss), before the impact on deferred policy acquisition costs:
 
 
 
Year Ended December 31,
 
 
 
 
2015
 
 
 
2014
 
 
 
2013
 
Net unrealized investment gains (losses) on fixed maturity securities, net of tax
 
 
 
        
        
 
 
        
        
 
 
 
Beginning of period
 
$
336,604
 
 
$
146,489
 
 
$
423,004
 
Change in unrealized investment gains and losses
 
 
(131,202
)
 
 
195,413
 
 
 
(264,503
)
Reclassification of net realized investment (gains) losses to net income
 
 
 (6,688
)
 
 
(5,298
)
 
 
(12,012
) 
End of period
 
$
198,714
 
 
$
336,604
 
 
$
146,489
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net unrealized investment gains (losses) on equity securities, net of tax
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of period
 
$
6,988
 
 
$
4,618
 
 
$
720
 
Change in unrealized investment gains and losses
 
 
(3,443
)
 
 
4,185
 
 
 
6,345
 
Reclassification of net realized investment (gains) losses to net income
 
 
(896
)
 
 
(1,815
)
 
 
(2,447
)
End of period
 
$
2,649
 
 
$
6,988
 
 
$
4,618
 
Offsetting assets and liability
The following table presents the instruments that were subject to a master netting arrangement for the Company.
 
 
 
 
 
 
 
 
 
Net Amounts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
of Assets/
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
 
 
Liabilities
 
 
Gross Amounts Not Offset
 
 
 
 
 
 
 
 
 
Amounts
 
 
Presented
 
 
in the Consolidated
 
 
 
 
 
 
 
 
 
Offset in the
 
 
in the
 
 
Balance Sheets
 
 
 
 
 
 
 
 
 
Consolidated
 
 
Consolidated
 
 
 
 
 
Cash
 
 
 
 
 
 
Gross
 
 
Balance
 
 
Balance
 
 
Financial
 
 
Collateral
 
 
Net
 
 
 
Amounts
 
 
Sheets
 
 
Sheets
 
 
Instruments
 
 
Received
 
 
Amount
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset derivatives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Free-standing derivatives
 
    $
2,501    
 
 
          $
-          
 
 
          $
2,501          
 
 
        $
-        
 
 
    $
2,617    
 
 
     $
(116)    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset derivatives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Free-standing derivatives
 
 
2,458    
 
 
 
-          
 
 
 
2,458          
 
 
 
-        
 
 
 
1,955    
 
 
 
503