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:



	December 31, 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	$	5,059,168	$	9,109	$	236,627	$	4,831,650	$	0
Obligations of U.S. states and their political subdivisions	102,709		2,089		158		104,640		0
Foreign government bonds	133,859		6,878		432		140,305		0
Public utilities	567,829		31,414		2,058		597,185		0
Redeemable preferred stock	29,504		615		59		30,060		0
All other U.S. public corporate securities	1,473,761		77,379		3,416		1,547,724		0
All other U.S. private corporate securities	938,144		35,327		3,795		969,676		0
All other foreign public corporate securities	194,201		5,663		918		198,946		0
All other foreign private corporate securities	638,785		38,030		3,231		673,584		0
Asset-backed securities(1)	341,277		4,438		128		345,587		(17		)
Commercial mortgage-backed securities	502,695		7,334		4,345		505,684		0
Residential mortgage-backed securities(2)	163,334		2,950		539		165,745		(4		)
Total fixed maturities, available-for-sale	$	10,145,266	$	221,226	$	255,706	$	10,110,786	$	(21	)
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 unrealized losses remaining in AOCI, from the impairment measurement date. Amount excludes $12.3 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 unrealized losses remaining in AOCI, from the impairment measurement date. 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:



	December 31, 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	$	13,174	$	23	$	4,550,472	$	236,604	$	4,563,646	$	236,627
Obligations of U.S. states and their political subdivisions	6,669		26		13,311		132		19,980		158
Foreign government bonds	37,466		428		143		4		37,609		432
Public utilities	84,260		1,357		22,420		701		106,680		2,058
Redeemable preferred stock	10,522		59		0		0		10,522		59
All other U.S. public corporate securities	206,988		1,034		118,002		2,382		324,990		3,416
All other U.S. private corporate securities	221,753		2,173		83,365		1,622		305,118		3,795
All other foreign public corporate securities	66,004		578		23,186		340		89,190		918
All other foreign private corporate securities	78,200		536		89,675		2,695		167,875		3,231
Asset-backed securities	30,234		128		0		0		30,234		128
Commercial mortgage-backed securities	113,423		1,225		129,458		3,120		242,881		4,345
Residential mortgage-backed securities	26,916		166		24,833		373		51,749		539
Total fixed maturities, available-for-sale	$	895,609	$	7,733	$	5,054,865	$	247,973	$	5,950,474	$	255,706
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 December 31, 2017 and 2016, the gross unrealized losses on fixed maturity securities were composed of $253.0 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 $2.7 million and $8.4 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of December 31, 2017, the $248.0 million of gross unrealized losses on fixed maturities of twelve months or more were concentrated in U.S. government bonds, commercial mortgage-backed securities and in the Company's corporate securities within the consumer non-cyclical and finance sectors. As of December 31, 2016, the $12.7 million of gross unrealized losses on fixed maturities of twelve months or more were concentrated in the Company's corporate securities within the consumer non-cyclical, finance and utility sectors. In accordance with its policy described in Note 2, the Company concluded that an adjustment to earnings for OTTI for these fixed maturity securities was not warranted at either December 31, 2017 or 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 December 31, 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 December 31, 2017, there were no gross unrealized losses on equity securities. As of December 31, 2016, $0 million of the gross unrealized losses on equity securities represented declines in value of 20% or more and had been in that position for less than six months. In accordance with its policy described in Note 2, the Company concluded that an adjustment to earnings for OTTI for these equity securities was not warranted at either December 31, 2017 or 2016.

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



	December 31, 2017
	Amortized Cost		Fair Value
	(in thousands)
Fixed maturities, available-for-sale:
Due in one year or less	$	253,164	$	253,552
Due after one year through five years	1,077,651		1,099,278
Due after five years through ten years	1,704,257		1,783,306
Due after ten years	6,102,888		5,957,634
Asset-backed securities	341,277		345,587
Commercial mortgage-backed securities	502,695		505,684
Residential mortgage-backed securities	163,334		165,745
Total fixed maturities, available-for-sale	$	10,145,266	$	10,110,786

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:



	Years Ended December 31,
	2017			2016			2015
	(in thousands)
Fixed maturities, available-for-sale
Proceeds from sales(1)	$	517,743		$	3,577,346		$	33,604
Proceeds from maturities/prepayments	630,140			495,465			453,016
Gross investment gains from sales and maturities	8,992			98,095			5,788
Gross investment losses from sales and maturities	(3,047		)	(5,412		)	(937		)
OTTI recognized in earnings(2)	(9,122		)	(6,499		)	(20		)


(1)	Includes $2.5 million, $0.6 million and $(0.0) million of non-cash related proceeds for the years ended December 31, 2017, 2016 and 2015, respectively.


(2)	Excludes the portion of OTTI recorded in 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:



	Years Ended December 31,
	2017			2016
	(in thousands)
Credit loss impairments:
Balance, beginning of period	$	1,325		$	86
New credit loss impairments	366			1,791
Additional credit loss impairments on securities previously impaired	606			0
Increases due to the passage of time on previously recorded credit losses	10			25
Reductions for securities which matured, paid down, prepaid or were sold during the period	(21		)	(1,170		)
Reductions for securities impaired to fair value during the period(1)	(1,481		)	0
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected	(13		)	(14		)
Assets transferred to parent and affiliates	0			607
Balance, end of period	$	792		$	1,325


(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:



	December 31, 2017				December 31, 2016
	Amortized Cost or Cost		Fair Value		Amortized Cost or Cost		Fair Value
	(in thousands)
Fixed maturities	$	161,393	$	166,360	$	147,057	$	139,513
Equity securities	11,600		15,357		7,551		10,358
Total trading account assets	$	172,993	$	181,717	$	154,608	$	149,871

The net change in unrealized gains (losses) from trading account assets still held at period end, recorded within “Asset administrative fees and other income,” was $13.5 million, $(4.8) million and $(0.6) million during the years ended December 31, 2017, 2016 and 2015, respectively.

Commercial Mortgage and Other Loans

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



	December 31, 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	$	348,718		25.0	%	$	277,296		22.5	%
Hospitality	3,782			0.3		3,925			0.3
Industrial	327,987			23.6		263,705			21.4
Office	294,072			21.2		294,304			23.8
Other	139,362			10.0		87,465			7.1
Retail	216,544			15.6		223,252			18.1
Total commercial mortgage loans	1,330,465			95.7		1,149,947			93.2
Agricultural property loans	59,197			4.3		84,235			6.8
Total commercial mortgage and agricultural property loans by property type	1,389,662			100.0	%	1,234,182			100.0	%
Valuation allowance	(2,650		)			(2,289		)
Total commercial mortgage and other loans	$	1,387,012				$	1,231,893

As of December 31, 2017, the commercial mortgage and agricultural property loans were geographically dispersed throughout the United States (with the largest concentrations in California (30%), Texas (11%) and New York (7%)) 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:



	December 31, 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	349		12		361
Charge-offs, net of recoveries	0		0		0
Total ending balance	$	2,616	$	34	$	2,650

	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:



	December 31, 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	2,616		34		2,650
Total ending balance(1)	$	2,616	$	34	$	2,650
Recorded investment(2):
Individually evaluated for impairment	$	1,571	$	4,865	$	6,436
Collectively evaluated for impairment	1,328,894		54,332		1,383,226
Total ending balance(1)	$	1,330,465	$	59,197	$	1,389,662


(1)	As of December 31, 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:



	December 31, 2017
	Debt Service Coverage Ratio
	> 1.2X		1.0X to <1.2X		< 1.0X		Total
			(in thousands)
Loan-to-Value Ratio:
0%-59.99%	$	667,338	$	14,426	$	4,566	$	686,330
60%-69.99%	503,922		1,329		0		505,251
70%-79.99%	182,368		13,281		0		195,649
80% or greater	1,387		0		1,045		2,432
Total commercial mortgage and agricultural property loans	$	1,355,015	$	29,036	$	5,611	$	1,389,662



	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 commercial mortgage and agricultural property 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:



	December 31, 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	$	1,330,465	$	0	$	0	$	0	$	1,330,465	$	0
Agricultural property loans	59,197		0		0		0		59,197		0
Total	$	1,389,662	$	0	$	0	$	0	$	1,389,662	$	0


(1)	As of December 31, 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.



	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.

For the years ended December 31, 2017 and 2016, there were no commercial mortgage and other loans acquired, other than those through direct origination. For the year ended December 31, 2017, there were $129 million of commercial mortgage and other loans sold. For the year ended December 31, 2016, there were no commercial mortgage and other loans sold. For the year ended December 31, 2017, there were no transfers of commercial mortgage and other loans to related parties. For the year ended December 31, 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. As of both December 31, 2017 and 2016, there were no new troubled debt restructurings related to commercial mortgage or other loans and no payment defaults on commercial mortgage or other loans that were modified as a troubled debt restructuring within the twelve months preceding. As of both December 31, 2017 and 2016, the Company had no significant commitments to borrowers that have been involved in a troubled debt restructuring. For additional information relating to the accounting for troubled debt restructurings, see Note 2.

Other Long-Term Investments

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



	December 31,
	2017		2016
	(in thousands)
Joint ventures and limited partnerships:
Private equity	$	29,301	$	30,513
Hedge funds	106,776		98,554
Real estate-related	48,555		109,043
Total joint ventures and limited partnerships	184,632		238,110
Derivatives	151,179		313,821
Total other long-term investments	$	335,811	$	551,931

As of both December 31, 2017 and 2016, the Company had no significant equity method investments.

Net Investment Income

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



	Years Ended December 31,
	2017			2016			2015
	(in thousands)
Fixed maturities, available-for-sale	$	332,148		$	249,496		$	115,998
Trading account assets	4,927			3,473			349
Commercial mortgage and other loans	48,598			40,258			22,696
Policy loans	1,069			444			794
Short-term investments and cash equivalents	31,505			26,831			396
Other long-term investments	20,626			29,160			4,638
Gross investment income	438,873			349,662			144,871
Less: investment expenses	(16,064		)	(11,292		)	(5,441		)
Net investment income	$	422,809		$	338,370		$	139,430

The carrying value of non-income producing assets included $1.9 million in fixed maturities as of December 31, 2017. Non-income producing assets represent investments that had not produced income for the twelve months preceding December 31, 2017.

Realized Investment Gains (Losses), Net

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



	Years Ended December 31,
	2017			2016			2015
	(in thousands)
Fixed maturities	$	(3,177	)	$	86,184		$	4,831
Commercial mortgage and other loans	(840		)	(2,326		)	(161		)
Derivatives(1)	(801,429		)	(3,526,514		)	1,381
Other long-term investments	(39		)	(648		)	1
Short-term investments and cash equivalents	85			544			0
Realized investment gains (losses), net	$	(805,400	)	$	(3,442,760	)	$	6,052


(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:



	December 31,
	2017			2016			2015
	(in thousands)
Fixed maturity securities, available-for-sale—with OTTI	$	12,311		$	(1,261	)	$	9
Fixed maturity securities, available-for-sale—all other	(46,791		)	(454,274		)	90,637
Equity securities, available-for-sale	4			(347		)	3
Derivatives designated as cash flow hedges(1)	(25,851		)	11,745			14,847
Affiliated notes	829			1,181			1,660
Other investments	86			(619		)	304
Net unrealized gains (losses) on investments	$	(59,412	)	$	(443,575	)	$	107,460


(1)	See Note 11 for more information on cash flow hedges.

Repurchase Agreements and Securities Lending

In the normal course of business, the Company sells securities under agreements to repurchase and enters into securities lending transactions. As of both December 31, 2017 and 2016, the Company had no repurchase agreements.

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:



	December 31, 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	$	10,505	$	0	$	10,505	$	10,712	$	0	$	10,712
U.S. public corporate securities	6,878		0		6,878		12,638		0		12,638
Total cash collateral for loaned securities(1)	$	17,383	$	0	$	17,383	$	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.

Securities Pledged, Restricted Assets and Special Deposits

The Company pledges as collateral investment securities it owns to unaffiliated parties through certain transactions, including securities lending, securities sold under agreements to repurchase, collateralized borrowings and postings of collateral with derivative counterparties. The following table sets forth the carrying value of investments pledged to third parties and the carrying amount of the associated liabilities supported by the pledged collateral, as of the dates indicated:



	December 31,
	2017		2016
	(in thousands)
Pledged collateral:
Fixed maturity securities, available-for-sale	$	16,825	$	21,908
Total securities pledged	$	16,825	$	21,908
Liabilities supported by pledged collateral:
Cash collateral for loaned securities	$	17,383	$	23,350
Total liabilities supported by pledged collateral	$	17,383	$	23,350

In the normal course of its business activities, the Company accepts collateral that can be sold or repledged. The primary sources of this collateral were securities purchased under agreements to resell. As of December 31, 2017, there was no such collateral. As of December 31, 2016, the fair value of this collateral was $255 million, none of which had either been sold or repledged.

As of December 31, 2017 and 2016, there were fixed maturities of $8.3 million and $7.5 million, respectively, on deposit with governmental authorities or trustees as required by certain insurance laws.