Accumulated Other Comprehensive Income (Loss)

The changes in AOCI, net of tax, by component for the three and nine months ended September 30, 2017 and 2016 are as follows:



Three Months Ended September 30, 2017 (U.S. dollars in thousands)	Unrealized Gains (Losses) on Investments (1)			OTTI Losses Recognized in AOCI			Foreign Currency Translation Adjustments			Underfunded Pension Liability			Cash Flow Hedge			Total
Balance, beginning of period, net of tax	$	893,292		$	(48,013	)	$	99,816		$	(25,820	)	$	1,890		$	921,165
OCI before reclassifications	112,881			—			24,882			(273		)	—			137,490
Amounts reclassified from AOCI	(64,136		)	1,746			—			—			(48		)	(62,438		)
Tax benefit (expense) (2)	(738		)	(25		)	(26,491		)	(35		)	—			(27,289		)
Net current period OCI - net of tax	48,007			1,721			(1,609		)	(308		)	(48		)	47,763
Balance, end of period, net of tax	$	941,299		$	(46,292	)	$	98,207		$	(26,128	)	$	1,842		$	968,928

Three Months Ended September 30, 2016 (U.S. dollars in thousands)
Balance, beginning of period, net of tax	$	1,475,078		$	(53,383	)	$	10,401		$	(25,590	)	$	2,081		$	1,408,587
OCI before reclassifications	203,451			—			45,185			4,037			—			252,673
Amounts reclassified from AOCI	(150,482		)	1,497			—			—			(47		)	(149,032		)
Tax benefit (expense)	8,600			(36		)	(987		)	—			—			7,577
Net current period OCI - net of tax	61,569			1,461			44,198			4,037			(47		)	111,218
Balance, end of period, net of tax	$	1,536,647		$	(51,922	)	$	54,599		$	(21,553	)	$	2,034		$	1,519,805

Nine Months Ended September 30, 2017 (U.S. dollars in thousands)
Balance, beginning of period, net of tax	$	730,429		$	(50,952	)	$	58,970		$	(24,887	)	$	1,986		$	715,546
OCI before reclassifications	442,069			—			71,114			(1,153		)	—			512,030
Amounts reclassified from AOCI	(211,281		)	4,712			—			—			(144		)	(206,713		)
Tax benefit (expense) (2)	(19,918		)	(52		)	(31,877		)	(88		)	—			(51,935		)
Net current period OCI - net of tax	210,870			4,660			39,237			(1,241		)	(144		)	253,382
Balance, end of period, net of tax	$	941,299		$	(46,292	)	$	98,207		$	(26,128	)	$	1,842		$	968,928

Nine Months Ended September 30, 2016 (U.S. dollars in thousands)
Balance, beginning of period, net of tax	$	803,094		$	(57,502	)	$	(36,503	)	$	(24,641	)	$	2,168		$	686,616
OCI before reclassifications	1,171,094			—			101,687			3,088			—			1,275,869
Amounts reclassified from AOCI	(379,974		)	5,618			—			—			(134		)	(374,490		)
Tax benefit (expense)	(57,567		)	(38		)	(10,585		)	—			—			(68,190		)
Net current period OCI - net of tax	733,553			5,580			91,102			3,088			(134		)	833,189
Balance, end of period, net of tax	$	1,536,647		$	(51,922	)	$	54,599		$	(21,553	)	$	2,034		$	1,519,805

____________

(1)

For certain annuity contracts that are subject to the GreyCastle Life Retro Arrangements, policy benefit reserves were historically increased for the impact of changes in unrealized gains on investments supporting such contracts as if the gains had been realized, with a corresponding entry to other comprehensive income ("Shadow Adjustments"). Upon completion of the GreyCastle Life Retro Arrangements, no further Shadow Adjustments were recorded. At December 31, 2016, the cumulative impact of the Shadow Adjustments was $212.1 million. During the nine months ended September 30, 2017, net movements of $(14.0) million were recorded, resulting in a total cumulative net impact of Shadow Adjustments on future policy benefit reserves of $198.1 million at September 30, 2017.

(2)

During the three months ended September 30, 2017, the Company recorded an out-of-period reduction of $17.4 million to "Foreign currency translation adjustments, net of tax," within the Unaudited Consolidated Statements of Comprehensive Income. This adjustment arose from a previously unrecognized tax liability on foreign exchange movements that should have been reflected in the comprehensive income of a prior period. The Company has evaluated the quantitative and qualitative aspects of this correction and concluded that the impact of recognizing it during this quarter is not material to the Unaudited Consolidated Financial Statements, nor is it material to any prior period consolidated financial statements.

The reclassifications out of AOCI along with the associated Unaudited Consolidated Statements of Income line items affected by component, and the total related tax (expense) benefit for the three and nine months ended September 30, 2017 and 2016 are as follows:



Gross Amount Reclassified From AOCI
Details About AOCI Components - Affected Line Items in the Unaudited Consolidated Statements of Income (U.S. dollars in thousands)	Three months ended September 30, 2017			Three months ended September 30, 2016			Nine months ended September 30, 2017			Nine months ended September 30, 2016
Unrealized gains and losses on investments:
Net realized gains (losses) on investments sold	$	(55,949	)	$	(150,661	)	$	(184,587	)	$	(407,106	)
OTTI on investments	3,598			10,019			11,632			64,977
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets	(11,785		)	(5,309		)	(38,326		)	(33,314		)
Income (loss) from investment affiliates	—			(4,531		)	—			(4,531		)
Total before tax	$	(64,136	)	$	(150,482	)	$	(211,281	)	$	(379,974	)
Provision (benefit) for income tax	1,937			5,291			2,106			8,501
Net of tax	$	(62,199	)	$	(145,191	)	$	(209,175	)	$	(371,473	)
OTTI losses recognized in OCI:
Net realized gains (losses) on investments sold	$	1,683		$	1,497		$	4,599		$	5,876
OTTI on investments transferred to (from) OCI	63			—			113			(258		)
Total before tax	$	1,746		$	1,497		$	4,712		$	5,618
Provision (benefit) for income tax	(25		)	(36		)	(52		)	(38		)
Net of tax	$	1,721		$	1,461		$	4,660		$	5,580
Gains and losses on cash flow hedges:
Interest Expense	$	(48	)	$	(47	)	$	(144	)	$	(134	)
Net of tax	$	(48	)	$	(47	)	$	(144	)	$	(134	)
Total reclassifications for the period, gross of tax	$	(62,438	)	$	(149,032	)	$	(206,713	)	$	(374,490	)
Tax benefit (expense)	1,912			5,255			2,054			8,463
Total reclassifications for the period, net of tax	$	(60,526	)	$	(143,777	)	$	(204,659	)	$	(366,027	)