Investments (Tables)
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3 Months Ended |
Mar. 31, 2018 |
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| Investments, Debt and Equity Securities [Abstract] |
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| Unrealized gains and losses on fixed maturities and equity securities |
The amortized cost, net unrealized investment gains and losses, fair values and other-than-temporary impairment (OTTI) included in AOCI of all fixed maturity securities in the portfolio were as follows: | | | | | | | | | | | | | | | | | | | | | | ($ in thousands) | | Amortized Cost/Cost | | Unrealized Investment Gains | | Unrealized Investment Losses | | Fair Value | | OTTI in AOCI (2) | March 31, 2018 (1) | | | | | | | | | | | Fixed maturity securities | | | | | | | | | | | U.S. Government and federally sponsored agency obligations (3): | | | | | | | | | | | Mortgage-backed securities | | $ | 699,629 |
| | $ | 22,930 |
| | $ | 11,601 |
| | $ | 710,958 |
| | $ | — |
| Other, including U.S. Treasury securities | | 760,390 |
| | 18,797 |
| | 17,220 |
| | 761,967 |
| | — |
| Municipal bonds | | 1,721,046 |
| | 149,774 |
| | 9,516 |
| | 1,861,304 |
| | — |
| Foreign government bonds | | 94,870 |
| | 4,307 |
| | 136 |
| | 99,041 |
| | — |
| Corporate bonds | | 2,383,394 |
| | 112,451 |
| | 14,575 |
| | 2,481,270 |
| | — |
| Other mortgage-backed securities | | 1,714,223 |
| | 16,621 |
| | 10,702 |
| | 1,720,142 |
| | — |
| Totals | | $ | 7,373,552 |
| | $ | 324,880 |
| | $ | 63,750 |
| | $ | 7,634,682 |
| | $ | — |
| | | | | | | | | | | | December 31, 2017 | | | | | | | | | | | Fixed maturity securities | | | | | | | | | | | U.S. Government and federally sponsored agency obligations (3): | | | | | | | | | | | Mortgage-backed securities | | $ | 669,297 |
| | $ | 30,460 |
| | $ | 3,032 |
| | $ | 696,725 |
| | $ | — |
| Other, including U.S. Treasury securities | | 714,613 |
| | 26,311 |
| | 5,516 |
| | 735,408 |
| | — |
| Municipal bonds | | 1,711,581 |
| | 184,107 |
| | 2,435 |
| | 1,893,253 |
| | — |
| Foreign government bonds | | 96,780 |
| | 5,958 |
| | — |
| | 102,738 |
| | — |
| Corporate bonds | | 2,409,426 |
| | 173,862 |
| | 4,334 |
| | 2,578,954 |
| | — |
| Other mortgage-backed securities | | 1,701,253 |
| | 22,935 |
| | 7,191 |
| | 1,716,997 |
| | — |
| Totals | | $ | 7,302,950 |
| | $ | 443,633 |
| | $ | 22,508 |
| | $ | 7,724,075 |
| | $ | — |
| | | | | | | | | | | | Equity securities (4) | | $ | 116,320 |
| | $ | 19,425 |
| | $ | 279 |
| | $ | 135,466 |
| | $ | — |
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________________ | | (1) | Effective January 1, 2018, with the adoption of new accounting guidance for recognition and measurement of financial instruments, available for sale equity securities were reclassified to equity securities at fair value and are excluded from the table above as of March 31, 2018. |
| | (2) | 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 OTTI losses in AOCI which was not included in earnings; amounts also include net unrealized investment gains and losses on such impaired securities relating to changes in the fair value of those securities subsequent to the impairment measurement date. |
| | (3) | Fair value includes securities issued by Federal National Mortgage Association (FNMA) of $386,398 thousand and $361,955 thousand; Federal Home Loan Mortgage Corporation (FHLMC) of $396,957 thousand and $400,001 thousand; and Government National Mortgage Association (GNMA) of $98,056 thousand and $104,168 thousand as of March 31, 2018 and December 31, 2017, respectively. |
| | (4) | Includes nonredeemable (perpetual) preferred stocks, common stocks and closed-end funds. |
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| Summary of fair value and gross unrealized losses of fixed maturity securities and equity securities in an unrealized loss position |
The following table presents the fair value and gross unrealized losses of securities in an unrealized loss position at March 31, 2018 and December 31, 2017, respectively. The Company views the decrease in value of all of the securities with unrealized losses at March 31, 2018 -- which was driven largely by changes in interest rates, spread widening, financial market illiquidity and/or market volatility from the date of acquisition -- as temporary. For fixed maturity securities, management does not have the intent to sell the securities and it is not more likely than not the Company will be required to sell the securities before the anticipated recovery of the amortized cost bases, and management expects to recover the entire amortized cost bases of the fixed maturity securities. Therefore, no impairment of fixed maturity securities was recorded at March 31, 2018. | | | | | | | | | | | | | | | | | | | | | | | | | | ($ in thousands) | | 12 Months or Less | | More than 12 Months | | Total | | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | March 31, 2018 (1) | | | | | | | | | | | | | Fixed maturity securities | | | | | | | | | | | | | U.S. Government and federally sponsored agency obligations: | | | | | | | | | | | | | Mortgage-backed securities | | $ | 301,927 |
| | $ | 8,346 |
| | $ | 39,339 |
| | $ | 3,255 |
| | $ | 341,266 |
| | $ | 11,601 |
| Other | | 393,555 |
| | 9,415 |
| | 118,166 |
| | 7,805 |
| | 511,721 |
| | 17,220 |
| Municipal bonds | | 224,400 |
| | 4,614 |
| | 76,577 |
| | 4,902 |
| | 300,977 |
| | 9,516 |
| Foreign government bonds | | 6,390 |
| | 136 |
| | — |
| | — |
| | 6,390 |
| | 136 |
| Corporate bonds | | 450,467 |
| | 11,923 |
| | 37,572 |
| | 2,652 |
| | 488,039 |
| | 14,575 |
| Other mortgage-backed securities | | 607,571 |
| | 6,298 |
| | 146,659 |
| | 4,404 |
| | 754,230 |
| | 10,702 |
| Total | | $ | 1,984,310 |
| | $ | 40,732 |
| | $ | 418,313 |
| | $ | 23,018 |
| | $ | 2,402,623 |
| | $ | 63,750 |
| | | | | | | | | | | | | | Number of positions with a gross unrealized loss | | 837 |
| | | | 153 |
| | | | 990 |
| | | Fair value as a percentage of total fixed maturity securities fair value | | 25.6 | % | | | | 5.4 | % | | | | 31.0 | % | | | | | | | | | | | | | | | | December 31, 2017 | | | | | | | | | | | | | Fixed maturity securities | | | | | | | | | | | | | U.S. Government and federally sponsored agency obligations: | | | | | | | | | | | | | Mortgage-backed securities | | $ | 134,032 |
| | $ | 1,053 |
| | $ | 40,606 |
| | $ | 1,979 |
| | $ | 174,638 |
| | $ | 3,032 |
| Other | | 168,634 |
| | 1,849 |
| | 122,753 |
| | 3,667 |
| | 291,387 |
| | 5,516 |
| Municipal bonds | | 29,437 |
| | 100 |
| | 79,140 |
| | 2,335 |
| | 108,577 |
| | 2,435 |
| Foreign government bonds | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Corporate bonds | | 115,113 |
| | 2,701 |
| | 36,081 |
| | 1,633 |
| | 151,194 |
| | 4,334 |
| Other mortgage-backed securities | | 457,166 |
| | 2,791 |
| | 168,972 |
| | 4,400 |
| | 626,138 |
| | 7,191 |
| Total fixed maturity securities | | 904,382 |
| | 8,494 |
| | 447,552 |
| | 14,014 |
| | 1,351,934 |
| | 22,508 |
| Equity securities (2) | | 6,027 |
| | 249 |
| | 1,277 |
| | 30 |
| | 7,304 |
| | 279 |
| Combined totals | | $ | 910,409 |
| | $ | 8,743 |
| | $ | 448,829 |
| | $ | 14,044 |
| | $ | 1,359,238 |
| | $ | 22,787 |
| | | | | | | | | | | | | | Number of positions with a gross unrealized loss | | 354 |
| | | | 158 |
| | | | 512 |
| | | Fair value as a percentage of total fixed maturity and equity securities fair value | | 11.6 | % | | | | 5.7 | % | | | | 17.3 | % | | |
________________ | | (1) | Effective January 1, 2018, with the adoption of new accounting guidance for recognition and measurement of financial instruments, available for sale equity securities were reclassified to equity securities at fair value and are excluded from the table above as of March 31, 2018. |
| | (2) | Includes nonredeemable (perpetual) preferred stocks, common stocks and closed-end funds. |
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| Summary of cumulative credit losses |
The following table summarizes the cumulative amounts related to the Company’s credit loss component of OTTI losses on fixed maturity securities held as of March 31, 2018 and 2017 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 OTTI losses were recognized in OCI: | | | | | | | | | | ($ in thousands) | | Three Months Ended March 31, | | | 2018 | | 2017 | Cumulative credit loss (1) | | | | | Beginning of period | | $ | 3,825 |
| | $ | 13,703 |
| New credit losses | | — |
| | — |
| Increases to previously recognized credit losses | | — |
| | 726 |
| Gains (losses) related to securities sold or paid down during the period | | — |
| | (2 | ) | End of period | | $ | 3,825 |
| | $ | 14,427 |
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________________ (1) The cumulative credit loss amounts exclude OTTI 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.
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| 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. | | | | | | | | | | | | | | | | ($ in thousands) | | Percent of Total Fair Value | | March 31, 2018 | | | March 31, 2018 | | December 31, 2017 | | Fair Value | | Amortized Cost | Estimated expected maturity: | | | | | | | | | Due in 1 year or less | | 4.0 | % | | 3.2 | % | | $ | 303,914 |
| | $ | 299,275 |
| Due after 1 year through 5 years | | 25.4 |
| | 26.7 |
| | 1,936,362 |
| | 1,887,648 |
| Due after 5 years through 10 years | | 32.7 |
| | 32.6 |
| | 2,498,529 |
| | 2,457,018 |
| Due after 10 years through 20 years | | 24.7 |
| | 24.2 |
| | 1,884,116 |
| | 1,800,969 |
| Due after 20 years | | 13.2 |
| | 13.3 |
| | 1,011,761 |
| | 928,642 |
| Total | | 100.0 | % | | 100.0 | % | | $ | 7,634,682 |
| | $ | 7,373,552 |
| | | | | | | | | | Average option-adjusted duration, in years | | 6.0 |
| | 5.9 |
| | | | |
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| Proceeds received from sales of fixed maturities and equity securities |
Proceeds received from sales of fixed maturity 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 period were: | | | | | | | | | | ($ in thousands) | | Three Months Ended March 31, | | | 2018 | | 2017 | Fixed maturity securities | | | | | Proceeds received | | $ | 89,894 |
| | $ | 110,872 |
| Gross gains realized | | 1,670 |
| | 2,489 |
| Gross losses realized | | (53 | ) | | (881 | ) | | | | | | Equity securities | | | | | Proceeds received | | $ | 2,048 |
| | $ | 5,489 |
| Gross gains realized | | 616 |
| | 1,048 |
| Gross losses realized | | (34 | ) | | (192 | ) |
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| Net Realized Investment Gains (Losses) |
The following table reconciles the net investment gains and losses (pretax) by transaction type: | | | | | | | | | | | ($ in thousands) | | Three Months Ended March 31, | | | 2018 | | 2017 | | | | | | Impairment write-downs | | $ | — |
| | $ | (1,777 | ) | Change in intent write-downs | | (110 | ) | | (1,020 | ) | Net other-than-temporary impairment losses recognized in earnings | | (110 | ) | — |
| (2,797 | ) | Sales and other | | 2,203 |
| | 2,484 |
| Change in fair value - equity securities (1) | | (5,186 | ) | | — |
| Change in fair value and gains (losses) realized on settlements - derivative instruments | | 1,439 |
| | 71 |
| Net investment gains (losses) | | $ | (1,654 | ) | — |
| $ | (242 | ) |
________________ (1) Effective January 1, 2018, with the adoption of new accounting guidance for recognition and measurement of financial instruments, equity securities are reported at fair value with change in fair value recognized in Net investment gains (losses) and are no longer included in impairment write-downs or change in intent write-downs.
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| 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 AOCI, before the impact of deferred policy acquisition costs (DAC): | | | | | | | | | | | ($ in thousands) | | | Three Months Ended March 31, | | | | 2018 | | 2017 | Net unrealized investment gains and losses on securities, net of tax | | | | | | Beginning of period | | | $ | 286,176 |
| | $ | 202,941 |
| Change in net unrealized investment gains and losses | | | (67,285 | ) | | 25,193 |
| Reclassification of net investments (gains) losses to net income | | | 2,443 |
| | 203 |
| Reclassification of unrealized gains on equity securities, net of tax, to Retained earnings (1) | | | (15,041 | ) | | — |
| End of period | | | $ | 206,293 |
| | $ | 228,337 |
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________________ (1) Effective January 1, 2018, with the adoption of new accounting guidance for recognition and measurement of financial instruments, available for sale equity securities were reclassified to equity securities at fair value and the related unrealized gains were reclassified from AOCI to Retained earnings.
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| Offsetting assets and liability |
The following table presents the instruments that were subject to a master netting arrangement for the Company. | | | | | | | | | | | | | | | | | | | | | | | | | | ($ in thousands) | | | | Gross Amounts Offset in the | | Net Amounts of Assets/ Liabilities Presented in the | | Gross Amounts Not Offset in the Consolidated Balance Sheets | | | | | Gross Amounts | | Consolidated Balance Sheets | | Consolidated Balance Sheets | | Financial Instruments | | Cash Collateral Received | | Net Amount | March 31, 2018 | | | | | | | | | | | | | Asset derivatives: | | | | | | | | | | | | | Free-standing derivatives | | $ | 12,630 |
| | $ | — |
| | $ | 12,630 |
| | $ | — |
| | $ | 13,174 |
| | $ | (544 | ) | | | | | | | | | | | | | | December 31, 2017 | | | | | | | | | | | | | Asset derivatives: | | | | | | | | | | | | | Free-standing derivatives | | $ | 15,550 |
| | $ | — |
| | $ | 15,550 |
| | $ | — |
| | $ | 15,584 |
| | $ | (34 | ) |
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