INVESTMENTS

Fixed Maturity Securities

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



	September 30, 2018
	Amortized 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	$	4,718,446	$	38	$	510,300	$	4,208,184	$	0
Obligations of U.S. states and their political subdivisions	134,396		433		3,967		130,862		0
Foreign government bonds	223,312		4,706		3,653		224,365		0
Public utilities	548,257		10,863		16,122		542,998		0
Redeemable preferred stock	29,445		0		786		28,659		0
All other U.S. public corporate securities	1,391,160		26,213		35,125		1,382,248		0
All other U.S. private corporate securities	846,203		13,898		20,665		839,436		0
All other foreign public corporate securities	284,819		2,075		5,761		281,133		0
All other foreign private corporate securities	672,681		14,883		16,638		670,926		0
Asset-backed securities(1)	510,463		3,333		1,685		512,111		(16		)
Commercial mortgage-backed securities	447,064		1,137		11,476		436,725		0
Residential mortgage-backed securities(2)	65,378		1,036		1,703		64,711		0
Total fixed maturities, available-for-sale	$	9,871,624	$	78,615	$	627,881	$	9,322,358	$	(16	)


(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 $(1.0) million of net unrealized losses on impaired available-for-sale securities relating to changes in the value of such securities subsequent to the impairment measurement date.



	December 31, 2017
	Amortized 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	)


(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.

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



	September 30, 2018
	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	$	998,734	$	28,769	$	3,194,749	$	481,531	$	4,193,483	$	510,300
Obligations of U.S. states and their political subdivisions	96,628		3,149		19,062		818		115,690		3,967
Foreign government bonds	138,696		2,510		23,115		1,143		161,811		3,653
Public utilities	284,042		12,460		61,961		3,662		346,003		16,122
Redeemable preferred stock	28,659		786		0		0		28,659		786
All other U.S. public corporate securities	755,392		29,258		134,461		5,867		889,853		35,125
All other U.S. private corporate securities	351,239		9,807		216,144		10,858		567,383		20,665
All other foreign public corporate securities	137,967		2,935		52,986		2,826		190,953		5,761
All other foreign private corporate securities	223,148		10,928		72,195		5,710		295,343		16,638
Asset-backed securities	268,933		1,539		5,052		146		273,985		1,685
Commercial mortgage-backed securities	137,333		2,773		181,463		8,703		318,796		11,476
Residential mortgage-backed securities	26,272		751		21,924		952		48,196		1,703
Total fixed maturities, available-for-sale	$	3,447,043	$	105,665	$	3,983,112	$	522,216	$	7,430,155	$	627,881



	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

As of September 30, 2018 and December 31, 2017, the gross unrealized losses on fixed maturity securities were composed of $617.5 million and $253.1 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 $10.4 million and $2.7 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of September 30, 2018, the $522.2 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, finance and utility sectors. 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. 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, 2017, the Company concluded that an adjustment to earnings for OTTI for these fixed maturity securities was not warranted at either September 30, 2018 or December 31, 2017. 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, 2018, 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.

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



	September 30, 2018
	Amortized Cost		Fair Value
	(in thousands)
Fixed maturities, available-for-sale:
Due in one year or less	$	216,375	$	217,322
Due after one year through five years	1,150,303		1,145,246
Due after five years through ten years	1,341,125		1,347,845
Due after ten years	6,140,916		5,598,398
Asset-backed securities	510,463		512,111
Commercial mortgage-backed securities	447,064		436,725
Residential mortgage-backed securities	65,378		64,711
Total fixed maturities, available-for-sale	$	9,871,624	$	9,322,358

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 proceeds and related investment gains (losses), as well as losses on impairments of fixed maturities, for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in thousands)
Fixed maturities, available-for-sale
Proceeds from sales(1)	$	391,271		$	115,316		$	1,834,190		$	382,792
Proceeds from maturities/prepayments	67,980			156,822			308,339			480,794
Gross investment gains from sales and maturities	2,532			(1,299		)	20,109			2,461
Gross investment losses from sales and maturities	(10,764		)	(1,406		)	(85,869		)	(2,081		)
OTTI recognized in earnings(2)	(2,523		)	41			(2,960		)	(4,787		)


(1)	Includes $(1.7) million and $8.7 million of non-cash related proceeds due to the timing of trade settlements for the nine months ended September 30, 2018 and 2017, 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 a rollforward of pre-tax amounts remaining in OCI related to fixed maturity securities with credit loss impairments recognized in earnings, for the periods indicated:



	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
	(in thousands)
Credit loss impairments:
Balance, beginning of period	$	753		$	792		$	200		$	1,325
New credit loss impairments	0			0			(1		)	365
Additional credit loss impairments on securities previously impaired	0			0			0			0
Increases due to the passage of time on previously recorded credit losses	1			2			1			9
Reductions for securities which matured, paid down, prepaid or were sold during the period	0			(40		)	(3		)	(18		)
Reductions for securities impaired to fair value during the period(1)	0			0			0			(1,481		)
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected	(1		)	(1		)	(8		)	(11		)
Assets transferred to parent and affiliates	0			0			0			0
Balance, end of period	$	753		$	753		$	189		$	189


(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.

Equity Securities

The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Asset administration fees and other income,” was $(0.3) million and $0.8 million during the three months ended September 30, 2018 and 2017, respectively.

The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Asset administration fees and other income,” was $0.1 million and $1.7 million during the nine months ended September 30, 2018 and 2017, 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, 2018					December 31, 2017
	Amount (in thousands)			% of Total		Amount (in thousands)			% of Total
Commercial mortgage and agricultural property loans by property type:
Apartments/Multi-Family	$	306,807		22.6	%	$	348,718		25.0	%
Hospitality	3,671			0.3		3,782			0.3
Industrial	358,883			26.5		327,987			23.6
Office	299,216			22.1		294,072			21.2
Other	135,790			10.0		139,362			10.0
Retail	195,520			14.4		216,544			15.6
Total commercial mortgage loans	1,299,887			95.9		1,330,465			95.7
Agricultural property loans	55,488			4.1		59,197			4.3
Total commercial mortgage and agricultural property loans by property type	1,355,375			100.0	%	1,389,662			100.0	%
Valuation allowance	(2,972		)			(2,650		)
Total commercial mortgage and other loans	$	1,352,403				$	1,387,012

As of September 30, 2018, the commercial mortgage and agricultural property loans were secured by properties geographically dispersed throughout the United States (with the largest concentrations in California (27%), Texas (14%) and New York (7%)) and included loans secured by properties in Europe (11%) and Australia (3%).

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, 2018
	Commercial Mortgage Loans		Agricultural Property Loans			Total
	(in thousands)
Allowance for credit losses:
Balance, beginning of year	$	2,616	$	34		$	2,650
Addition to (release of) allowance for losses	323		(1		)	322
Charge-offs, net of recoveries	0		0			0
Total ending balance	$	2,939	$	33		$	2,972



	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

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, 2018
	Commercial Mortgage Loans		Agricultural Property Loans		Total
	(in thousands)
Allowance for credit losses:
Individually evaluated for impairment	$	0	$	0	$	0
Collectively evaluated for impairment	2,939		33		2,972
Total ending balance(1)	$	2,939	$	33	$	2,972
Recorded investment(2):
Individually evaluated for impairment	$	0	$	4,333	$	4,333
Collectively evaluated for impairment	1,299,887		51,155		1,351,042
Total ending balance(1)	$	1,299,887	$	55,488	$	1,355,375


(1)	As of September 30, 2018, there were no loans acquired with deteriorated credit quality.


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



	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.

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, 2018
	Debt Service Coverage Ratio
	≥ 1.2X		1.0X to <1.2X		< 1.0X		Total
	(in thousands)
Loan-to-Value Ratio:
0%-59.99%	$	658,709	$	15,079	$	0	$	673,788
60%-69.99%	478,402		23,469		0		501,871
70%-79.99%	169,409		7,281		0		176,690
80% or greater	2,000		1,026		0		3,026
Total commercial mortgage and agricultural property loans	$	1,308,520	$	46,855	$	0	$	1,355,375



	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

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, 2018
	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	$	1,299,887	$	0	$	0	$	0	$	1,299,887	$	0
Agricultural property loans	55,488		0		0		0		55,488		0
Total	$	1,355,375	$	0	$	0	$	0	$	1,355,375	$	0


(1)	As of September 30, 2018, 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, 2017.



	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 to the Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

For the three and nine months ended September 30, 2018, there were no commercial mortgage and other loans acquired, other than those through direct origination, and there were $13 million and $96 million of commercial mortgage and other loans sold. For the three and nine months ended September 30, 2017, 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.

Other Invested Assets

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



	September 30, 2018		December 31, 2017
	(in thousands)
LPs/LLCs:
Equity method:
Private equity	$	26,480	$	25,801
Hedge funds	154,928		106,474
Real estate-related	57,875		46,043
Subtotal equity method	239,283		178,318
Fair value:
Private equity	4,216		3,500
Hedge funds	267		302
Real estate-related	3,084		2,512
Subtotal fair value(1)	7,567		6,314
Total LPs/LLCs	246,850		184,632
Real estate held through direct ownership	7,200		0
Derivative instruments	0		151,179
Total other invested assets(2)	$	254,050	$	335,811


(1)	As of December 31, 2017, $6.0 million was accounted for under the cost method.


(2)	Prior period amounts have been reclassified to conform to current period presentation. For additional information, see Note 2.

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,
	2018			2017			2018			2017
	(in thousands)
Fixed maturities, available-for-sale	$	81,551		$	83,198		$	235,487		$	246,853
Fixed maturities, trading	2,006			1,109			3,091			3,213
Equity securities, at fair value	72			67			248			216
Commercial mortgage and other loans	12,567			12,777			38,818			36,313
Policy loans	175			114			546			810
Short-term investments and cash equivalents	5,103			9,700			18,988			22,618
Other invested assets	5,573			4,771			14,083			15,718
Gross investment income	107,047			111,736			311,261			325,741
Less: investment expenses	(3,883		)	(3,783		)	(11,226		)	(11,431		)
Net investment income(1)	$	103,164		$	107,953		$	300,035		$	314,310


(1)	Prior period amounts have been reclassified to conform to current period presentation.

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,
	2018			2017			2018			2017
	(in thousands)
Fixed maturities(1)	$	(10,755	)	$	(2,664	)	$	(68,720	)	$	(4,407	)
Commercial mortgage and other loans	201			(430		)	53			(660		)
LPs/LLCs	0			(3		)	0			(37		)
Derivatives(2)	75,810			1,173,163			702,465			(322,456		)
Short-term investments and cash equivalents	17			11			24			48
Realized investment gains (losses), net	$	65,273		$	1,170,077		$	633,822		$	(327,512	)


(1)	Includes fixed maturity securities classified as available-for-sale and excludes fixed maturity securities classified as trading.


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

Net Unrealized Gains (Losses) on Investments within AOCI

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



	September 30, 2018			December 31, 2017
	(in thousands)
Fixed maturity securities, available-for-sale — with OTTI	$	(1,034	)	$	12,311
Fixed maturity securities, available-for-sale — all other	(548,232		)	(46,791		)
Equity securities, available-for-sale(1)	0			4
Derivatives designated as cash flow hedges(2)	(23,867		)	(25,851		)
Affiliated notes	635			829
Other investments	1,075			86
Net unrealized gains (losses) on investments	$	(571,423	)	$	(59,412	)


(1)	Effective January 1, 2018, unrealized gains (losses) on equity securities are recorded within “Asset administration fees and other income.”


(2)	For more information on cash flow hedges, see Note 4.

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 September 30, 2018 and December 31, 2017, 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:



	September 30, 2018						December 31, 2017
	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)
Foreign government bonds	$	0	$	0	$	0	$	10,505	$	0	$	10,505
U.S. public corporate securities	7,147		0		7,147		6,878		0		6,878
Total cash collateral for loaned securities(1)	$	7,147	$	0	$	7,147	$	17,383	$	0	$	17,383


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