INVESTMENTS

Fixed Maturities and Equity Securities

The following tables set forth information relating to fixed maturities and equity securities (excluding investments classified as trading), as of the dates indicated:



	September 30, 2017
	Amortized Cost or Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCI(3)
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	5,028,572	$	5,978	$	340,444	$	4,694,106	$	0
Obligations of U.S. states and their political subdivisions	101,051		1,243		751		101,543		0
Foreign government bonds	117,975		7,240		80		125,135		0
Public utilities	548,161		25,021		2,964		570,218		0
Redeemable preferred stock	29,524		867		0		30,391		0
All other U.S. public corporate securities	1,408,362		82,644		2,447		1,488,559		0
All other U.S. private corporate securities	1,039,396		37,163		5,695		1,070,864		0
All other foreign public corporate securities	183,645		6,313		452		189,506		0
All other foreign private corporate securities	622,040		29,557		4,668		646,929		0
Asset-backed securities(1)	366,108		3,546		53		369,601		(19		)
Commercial mortgage-backed securities	503,210		8,423		3,720		507,913		0
Residential mortgage-backed securities(2)	170,595		3,868		284		174,179		(4		)
Total fixed maturities, available-for-sale	$	10,118,639	$	211,863	$	361,558	$	9,968,944	$	(23	)
Equity securities, available-for-sale:
Common stocks:
Industrial, miscellaneous & other	$	0	$	0	$	0	$	0
Mutual funds	14		4		0		18
Total equity securities, available-for-sale	$	14	$	4	$	0	$	18


(1)	Includes credit-tranched securities collateralized by loan obligations, sub-prime mortgages, auto loans, credit cards, education loans and other asset types.


(2)	Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.


(3)	Represents the amount of OTTI losses in "Accumulated other comprehensive income (loss)" ("AOCI"), which were not included in earnings. Amount excludes $9.0 million of net unrealized gains on impaired available-for-sale securities relating to changes in the value of such securities subsequent to the impairment measurement date.



	December 31, 2016
	Amortized Cost or Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCI(3)
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	4,998,652	$	2,487	$	536,114	$	4,465,025	$	0
Obligations of U.S. states and their political subdivisions	92,107		566		2,699		89,974		0
Foreign government bonds	64,352		5,404		370		69,386		0
Public utilities	448,349		13,155		10,348		451,156		0
Redeemable preferred stock	29,581		288		633		29,236		0
All other U.S. public corporate securities	1,619,814		73,819		10,153		1,683,480		(771		)
All other U.S. private corporate securities	951,324		27,234		13,810		964,748		(694		)
All other foreign public corporate securities	183,253		5,410		1,022		187,641		0
All other foreign private corporate securities	501,140		5,349		20,450		486,039		0
Asset-backed securities(1)	248,547		3,227		465		251,309		0
Commercial mortgage-backed securities	484,673		6,793		6,753		484,713		0
Residential mortgage-backed securities(2)	196,506		4,063		513		200,056		(5		)
Total fixed maturities, available-for-sale	$	9,818,298	$	147,795	$	603,330	$	9,362,763	$	(1,470	)
Equity securities, available-for-sale:
Common stocks:
Industrial, miscellaneous & other	$	351	$	0	$	351	$	0
Mutual funds	14		4		0		18
Total equity securities, available-for-sale	$	365	$	4	$	351	$	18


(1)	Includes credit-tranched securities collateralized by loan obligations, sub-prime mortgages, auto loans, credit cards, education loans and other asset types.


(2)	Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.


(3)	Represents the amount of OTTI losses in AOCI, which were not included in earnings. Amount excludes $0.2 million of net unrealized gains on impaired available-for-sale securities relating to changes in the value of such securities subsequent to the impairment measurement date.

The following tables set forth the fair value and gross unrealized losses aggregated by investment category and length of time that individual fixed maturity and equity securities had been in a continuous unrealized loss position, as of the dates indicated:



	September 30, 2017
	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	1,410,256	$	69,022	$	3,045,887	$	271,422	$	4,456,143	$	340,444
Obligations of U.S. states and their political subdivisions	58,449		641		3,980		110		62,429		751
Foreign government bonds	15,564		77		145		3		15,709		80
Public utilities	106,170		1,592		23,175		1,372		129,345		2,964
Redeemable preferred stock	0		0		0		0		0		0
All other U.S. public corporate securities	182,387		940		83,448		1,507		265,835		2,447
All other U.S. private corporate securities	268,926		4,384		41,675		1,311		310,601		5,695
All other foreign public corporate securities	64,229		452		0		0		64,229		452
All other foreign private corporate securities	57,066		654		78,062		4,014		135,128		4,668
Asset-backed securities	36,356		50		177		3		36,533		53
Commercial mortgage-backed securities	181,908		2,131		62,060		1,589		243,968		3,720
Residential mortgage-backed securities	37,156		274		278		10		37,434		284
Total fixed maturities, available-for-sale	$	2,418,467	$	80,217	$	3,338,887	$	281,341	$	5,757,354	$	361,558
Equity securities, available-for-sale	$	0	$	0	$	0	$	0	$	0	$	0



	December 31, 2016
	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	4,254,477	$	536,114	$	0	$	0	$	4,254,477	$	536,114
Obligations of U.S. states and their political subdivisions	73,885		2,699		0		0		73,885		2,699
Foreign government bonds	32,107		370		0		0		32,107		370
Public utilities	240,041		8,019		17,097		2,329		257,138		10,348
Redeemable preferred stock	12,948		633		0		0		12,948		633
All other U.S. public corporate securities	530,904		8,798		12,981		1,355		543,885		10,153
All other U.S. private corporate securities	453,976		13,632		12,304		178		466,280		13,810
All other foreign public corporate securities	89,962		1,016		9,994		6		99,956		1,022
All other foreign private corporate securities	247,111		11,661		58,214		8,789		305,325		20,450
Asset-backed securities	67,246		439		16,489		26		83,735		465
Commercial mortgage-backed securities	293,651		6,753		0		0		293,651		6,753
Residential mortgage-backed securities	68,283		513		0		0		68,283		513
Total fixed maturities, available-for-sale	$	6,364,591	$	590,647	$	127,079	$	12,683	$	6,491,670	$	603,330
Equity securities, available-for-sale	$	0	$	351	$	0	$	0	$	0	$	351

As of September 30, 2017 and December 31, 2016, the gross unrealized losses on fixed maturity securities were composed of $356.6 million and $594.9 million, respectively, related to "1" highest quality or "2" high quality securities based on the National Association of Insurance Commissioners (“NAIC”) or equivalent rating and $4.9 million and $8.4 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of September 30, 2017, the $281.3 million of gross unrealized losses on fixed maturity securities of twelve months or more were concentrated in U.S. government bonds, the consumer non-cyclical sector of the Company’s corporate securities and in commercial mortgage-backed securities. As of December 31, 2016, the $12.7 million of gross unrealized losses on fixed maturity securities of twelve months or more were concentrated in the consumer non-cyclical, finance and utility sectors of the Company’s corporate securities. In accordance with its policy described in Note 2 to the Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, the Company concluded that an adjustment to earnings for OTTI for these fixed maturity securities was not warranted at either September 30, 2017 or December 31, 2016. These conclusions were based on a detailed analysis of the underlying credit and cash flows on each security. Gross unrealized losses are primarily attributable to general credit spread widening, increases in interest rates and foreign currency exchange rate movements. As of September 30, 2017, the Company did not intend to sell these securities, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the remaining amortized cost basis.

As of September 30, 2017, there were no gross unrealized losses on equity securities. As of December 31, 2016, all of the gross unrealized losses on equity securities represented declines in value of greater than 20%, all of which had been in that position for less than six months. In accordance with its policy described in Note 2 to the Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, the Company concluded that an adjustment to earnings for OTTI for these equity securities was not warranted.

The following table sets forth the amortized cost and fair value of fixed maturities by contractual maturities, as of the date indicated:



	September 30, 2017
	Amortized Cost		Fair Value
	(in thousands)
Fixed maturities, available-for-sale:
Due in one year or less	$	409,701	$	411,603
Due after one year through five years	1,160,347		1,188,688
Due after five years through ten years	1,516,165		1,592,338
Due after ten years	5,992,513		5,724,622
Asset-backed securities	366,108		369,601
Commercial mortgage-backed securities	503,210		507,913
Residential mortgage-backed securities	170,595		174,179
Total fixed maturities, available-for-sale	$	10,118,639	$	9,968,944

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Asset-backed, commercial mortgage-backed and residential mortgage-backed securities are shown separately in the table above, as they do not have a single maturity date.

The following table sets forth the sources of fixed maturity and equity security proceeds and related investment gains (losses), as well as losses on impairments of both fixed maturities and equity securities, for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(in thousands)
Fixed maturities, available-for-sale:
Proceeds from sales(1)	$	115,316		$	80,589		$	382,792		$	3,280,497
Proceeds from maturities/prepayments	156,822			100,931			480,794			295,769
Gross investment gains from sales and maturities	(1,299		)	10,238			2,461			98,157
Gross investment losses from sales and maturities	(1,406		)	(257		)	(2,081		)	(1,303		)
OTTI recognized in earnings(2)	41			(82		)	(4,787		)	(2,020		)
Equity securities, available-for-sale:
Proceeds from sales	$	0		$	0		$	0		$	0
Gross investment gains from sales	0			0			0			0
Gross investment losses from sales	0			0			0			0
OTTI recognized in earnings	0			0			0			0


(1)	Includes $8.7 million and $46.1 million of non-cash related proceeds for the nine months ended September 30, 2017 and 2016, respectively.


(2)	Excludes the portion of OTTI recorded in “Other comprehensive income (loss)” ("OCI"), representing any difference between the fair value of the impaired debt security and the net present value of its projected future cash flows at the time of the impairment.

The following table sets forth the amount of pre-tax credit loss impairments on fixed maturity securities held by the Company for which a portion of the OTTI loss was recognized in OCI and the corresponding changes in such amounts, for the periods indicated:



	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017			Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
	(in thousands)
Credit loss impairments:
Balance, beginning of period	$	200		$	1,325		$	43		$	86
New credit loss impairments	(1		)	365			0			0
Increases due to the passage of time on previously recorded credit losses	1			9			18			24
Reductions for securities which matured, paid down, prepaid or were sold during the period	(3		)	(18		)	(128		)	(1,972		)
Reductions for securities impaired to fair value during the period(1)	0			(1,481		)	82			1,271
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected	(8		)	(11		)	(6		)	(7		)
Assets transferred to parent and affiliates	0			0			0			607
Balance, end of period	$	189		$	189		$	9		$	9


(1)	Represents circumstances where the Company determined in the current period that it intends to sell the security or it is more likely than not that it will be required to sell the security before recovery of the security's amortized cost.

Trading Account Assets

The following table sets forth the composition of “Trading account assets,” as of the dates indicated:



	September 30, 2017				December 31, 2016
	Amortized Cost or Cost		Fair Value		Amortized Cost or Cost		Fair Value
	(in thousands)
Fixed maturities	$	161,385	$	162,811	$	147,057	$	139,513
Equity securities	11,320		15,836		7,551		10,358
Total trading account assets	$	172,705	$	178,647	$	154,608	$	149,871

The net change in unrealized gains (losses) from trading account assets still held at period end, recorded within “Asset administration fees and other income,” was $2.3 million and $(0.1) million for the three months ended September 30, 2017 and 2016, respectively, and $10.7 million and $15.5 million for the nine months ended September 30, 2017 and 2016, respectively.

Commercial Mortgage and Other Loans

The following table sets forth the composition of "Commercial mortgage and other loans," as of the dates indicated:



	September 30, 2017					December 31, 2016
	Amount (in thousands)			% of Total		Amount (in thousands)			% of Total
Commercial mortgage and agricultural property loans by property type:
Apartments/Multi-Family	$	327,526		23.2	%	$	277,296		22.5	%
Industrial	296,149			21.0		263,705			21.4
Hospitality	3,818			0.3		3,925			0.3
Office	309,119			21.9		294,304			23.8
Other	124,660			8.8		87,465			7.1
Retail	266,482			18.9		223,252			18.1
Total commercial mortgage loans	1,327,754			94.1		1,149,947			93.2
Agricultural property loans	83,725			5.9		84,235			6.8
Total commercial mortgage and agricultural property loans by property type	1,411,479			100.0	%	1,234,182			100.0	%
Valuation allowance	(2,819		)			(2,289		)
Total commercial mortgage and other loans	$	1,408,660				$	1,231,893

As of September 30, 2017, the commercial mortgage and agricultural property loans were geographically dispersed throughout the United States (with the largest concentrations in California (28%), Texas (12%) and New Jersey (6%)) and included loans secured by properties in Europe and Australia.

The following tables set forth the activity in the allowance for credit losses for commercial mortgage and other loans, as of the dates indicated:



	September 30, 2017
	Commercial Mortgage Loans		Agricultural Property Loans		Total
	(in thousands)
Allowance for credit losses:
Balance, beginning of year	$	2,267	$	22	$	2,289
Addition to (release of) allowance for losses	504		26		530
Charge-offs, net of recoveries	0		0		0
Total ending balance	$	2,771	$	48	$	2,819



	December 31, 2016
	Commercial Mortgage Loans		Agricultural Property Loans		Total
	(in thousands)
Allowance for credit losses:
Balance, beginning of year	$	622	$	21	$	643
Addition to (release of) allowance for losses	1,645		1		1,646
Charge-offs, net of recoveries	0		0		0
Total ending balance	$	2,267	$	22	$	2,289

The following tables set forth the allowance for credit losses and the recorded investment in commercial mortgage and other loans, as of the dates indicated:



	September 30, 2017
	Commercial Mortgage Loans		Agricultural Property Loans		Total
	(in thousands)
Allowance for credit losses:
Individually evaluated for impairment	$	0	$	0	$	0
Collectively evaluated for impairment	2,771		48		2,819
Total ending balance(1)	$	2,771	$	48	$	2,819
Recorded investment(2):
Individually evaluated for impairment	$	1,608	$	5,509	$	7,117
Collectively evaluated for impairment	1,326,146		78,216		1,404,362
Total ending balance(1)	$	1,327,754	$	83,725	$	1,411,479


(1)	As of September 30, 2017, there were no loans acquired with deteriorated credit quality.


(2)	Recorded investment reflects the carrying value gross of related allowance.



	December 31, 2016
	Commercial Mortgage Loans		Agricultural Property Loans		Total
	(in thousands)
Allowance for credit losses:
Individually evaluated for impairment	$	0	$	0	$	0
Collectively evaluated for impairment	2,267		22		2,289
Total ending balance(1)	$	2,267	$	22	$	2,289
Recorded investment(2):
Individually evaluated for impairment	$	1,715	$	0	$	1,715
Collectively evaluated for impairment	1,148,232		84,235		1,232,467
Total ending balance(1)	$	1,149,947	$	84,235	$	1,234,182


(1)	As of December 31, 2016, there were no loans acquired with deteriorated credit quality.


(2)	Recorded investment reflects the carrying value gross of related allowance.

The following tables set forth certain key credit quality indicators for commercial mortgage and agricultural property loans based upon the recorded investment gross of allowance for credit losses, as of the dates indicated:



	September 30, 2017
	Debt Service Coverage Ratio
	≥ 1.2X		1.0X to <1.2X		< 1.0X		Total
	(in thousands)
Loan-to-Value Ratio:
0%-59.99%	$	742,332	$	19,212	$	1,786	$	763,330
60%-69.99%	531,006		1,341		0		532,347
70%-79.99%	98,239		15,126		0		113,365
80% or greater	1,387		0		1,050		2,437
Total loans	$	1,372,964	$	35,679	$	2,836	$	1,411,479



	December 31, 2016
	Debt Service Coverage Ratio
	≥ 1.2X		1.0X to <1.2X		< 1.0X		Total
	(in thousands)
Loan-to-Value Ratio:
0%-59.99%	$	667,051	$	16,921	$	4,610	$	688,582
60%-69.99%	406,728		0		3,817		410,545
70%-79.99%	108,770		15,493		0		124,263
80% or greater	9,725		0		1,067		10,792
Total loans	$	1,192,274	$	32,414	$	9,494	$	1,234,182

The following tables set forth an aging of past due commercial mortgage and other loans based upon the recorded investment gross of allowance for credit losses, as well as the amount of commercial mortgage and other loans on non-accrual status, as of the dates indicated:



	September 30, 2017
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due(1)		Total Loans		Non-Accrual Status(2)
	(in thousands)
Commercial mortgage loans	$	1,327,754	$	0	$	0	$	0	$	1,327,754	$	0
Agricultural property loans	83,725		0		0		0		83,725		0
Total	$	1,411,479	$	0	$	0	$	0	$	1,411,479	$	0


(1)	As of September 30, 2017, there were no loans in this category accruing interest.


(2)	For additional information regarding the Company's policies for accruing interest on loans, see Note 2 to the Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.



	December 31, 2016
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due(1)		Total Loans		Non-Accrual Status(2)
	(in thousands)
Commercial mortgage loans	$	1,149,947	$	0	$	0	$	0	$	1,149,947	$	0
Agricultural property loans	84,235		0		0		0		84,235		0
Total	$	1,234,182	$	0	$	0	$	0	$	1,234,182	$	0


(1)	As of December 31, 2016, there were no loans in this category accruing interest.


(2)	For additional information regarding the Company's policies for accruing interest on loans, see Note 2 to the Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.

For the three and nine months ended September 30, 2017 and 2016, there were no commercial mortgage and other loans acquired, other than those through direct origination, and there were no commercial mortgage and other loans sold. For both the three and nine months ended September 30, 2017, the Company received no commercial mortgage and other loans from related parties. For the three months ended September 30, 2016, there were no transfers of commercial mortgage and other loans from related parties. For the nine months ended September 30, 2016, the Company received $580 million of commercial mortgage and other loans from related parties.

The Company’s commercial mortgage and other loans may occasionally be involved in a troubled debt restructuring. For the three and nine months ended September 30, 2017 and 2016, there were no new troubled debt restructurings related to commercial mortgage and other loans and no payment defaults on commercial mortgage and other loans that were modified as a troubled debt restructuring within the twelve months preceding. As of both September 30, 2017 and December 31, 2016, the Company had no significant commitments to provide additional funds to borrowers that had been involved in a troubled debt restructuring. For additional information relating to the accounting for troubled debt restructurings, see Note 2 to the Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.

Other Long-Term Investments

The following table sets forth the composition of “Other long-term investments,” as of the dates indicated:



	September 30, 2017		December 31, 2016
	(in thousands)
Joint ventures and limited partnerships:
Private equity	$	30,178	$	30,513
Hedge funds	104,849		98,554
Real estate-related	47,009		109,043
Total joint ventures and limited partnerships	182,036		238,110
Derivatives	7,984		313,821
Total other long-term investments	$	190,020	$	551,931

Net Investment Income

The following table sets forth "Net investment income" by investment type, for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(in thousands)
Fixed maturities, available-for-sale	$	83,198		$	75,271		$	246,853		$	168,655
Trading account assets	1,176			1,128			3,429			2,193
Commercial mortgage and other loans	12,777			11,730			36,313			28,106
Policy loans	114			185			810			517
Short-term investments and cash equivalents	9,700			10,615			22,618			18,312
Other long-term investments	4,771			20,176			15,718			23,162
Gross investment income	111,736			119,105			325,741			240,945
Less: investment expenses	(3,783		)	(3,787		)	(11,431		)	(7,798		)
Net investment income	$	107,953		$	115,318		$	314,310		$	233,147

Realized Investment Gains (Losses), Net

The following table sets forth "Realized investment gains (losses), net," by investment type, for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(in thousands)
Fixed maturities	$	(2,664	)	$	9,899		$	(4,407	)	$	94,834
Commercial mortgage and other loans	(430		)	(422		)	(660		)	(1,823		)
Joint ventures and limited partnerships	(3		)	(167		)	(37		)	(649		)
Derivatives(1)	1,173,163			(45,139		)	(322,456		)	(2,590,550		)
Short-term investments and cash equivalents	11			104			48			527
Realized investment gains (losses), net	$	1,170,077		$	(35,725	)	$	(327,512	)	$	(2,497,661	)


(1)	Includes the hedged items offset in qualifying fair value hedge accounting relationships.

Net Unrealized Gains (Losses) on Investments

The following table sets forth net unrealized gains (losses) on investments, as of the dates indicated:



	September 30, 2017			December 31, 2016
	(in thousands)
Fixed maturity securities, available-for-sale — with OTTI	$	8,985		$	(1,261	)
Fixed maturity securities, available-for-sale — all other	(158,680		)	(454,274		)
Equity securities, available-for-sale	4			(347		)
Affiliated notes	937			1,181
Derivatives designated as cash flow hedges(1)	(15,398		)	11,745
Other investments	(97		)	(619		)
Net unrealized gains (losses) on investments	$	(164,249	)	$	(443,575	)


(1)	See Note 5 for more information on cash flow hedges.

Securities Lending and Repurchase Agreements

In the normal course of business, the Company sells securities under agreements to repurchase and enters into securities lending transactions. The following table sets forth the composition of "Cash collateral for loaned securities," which represents the liability to return cash collateral received for the following types of securities loaned, as of the dates indicated:



	September 30, 2017						December 31, 2016
	Remaining Contractual Maturities of the Agreements						Remaining Contractual Maturities of the Agreements
	Overnight & Continuous		Up to 30 Days		Total		Overnight & Continuous		Up to 30 Days		Total
	(in thousands)						(in thousands)
Foreign government bonds	$	83	$	0	$	83	$	10,712	$	0	$	10,712
U.S. public corporate securities	7,752		0		7,752		12,638		0		12,638
Foreign public corporate securities	0		0		0		0		0		0
Total cash collateral for loaned securities(1)	$	7,835	$	0	$	7,835	$	23,350	$	0	$	23,350


(1)	The Company did not have agreements with remaining contractual maturities of thirty days or greater, as of the dates indicated.

As of September 30, 2017 and December 31, 2016, the Company had no "Securities sold under agreements to repurchase."