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Investments
 9 Months Ended
Sep. 30, 2019
Investments [Abstract]  
Investments
3.    INVESTMENTS

Fixed Maturity Securities

The following tables set forth the composition of fixed maturity securities (excluding investments classified as trading), as of the dates indicated:
 
September 30, 2019
 
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
$
6,658,235

 
$
829,212

 
$
4,009

 
$
7,483,438

 
$
0

Obligations of U.S. states and their political subdivisions
134,157

 
8,133

 
7

 
142,283

 
0

Foreign government bonds
202,792

 
19,761

 
12

 
222,541

 
0

U.S. public corporate securities
1,636,880

 
129,488

 
1,745

 
1,764,623

 
0

U.S. private corporate securities
1,042,425

 
52,255

 
3,703

 
1,090,977

 
0

Foreign public corporate securities
289,283

 
17,738

 
52

 
306,969

 
0

Foreign private corporate securities
1,038,186

 
29,438

 
16,883

 
1,050,741

 
0

Asset-backed securities(1)
443,291

 
4,445

 
2,280

 
445,456

 
(11
)
Commercial mortgage-backed securities
554,117

 
30,064

 
0

 
584,181

 
0

Residential mortgage-backed securities(2)
76,854

 
4,743

 
11

 
81,586

 
0

Total fixed maturities, available-for-sale
$
12,076,220

 
$
1,125,277

 
$
28,702

 
$
13,172,795

 
$
(11
)

(1)
Includes credit-tranched securities collateralized by loan obligations, sub-prime mortgages, auto loans, equipment leases and education loans.
(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 $13.6 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, 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
$
5,240,519

 
$
20,065

 
$
376,493

 
$
4,884,091

 
$
0

Obligations of U.S. states and their political subdivisions
133,670

 
621

 
3,127

 
131,164

 
0

Foreign government bonds
199,044

 
4,748

 
4,156

 
199,636

 
0

U.S. public corporate securities
1,498,130

 
26,425

 
50,582

 
1,473,973

 
0

U.S. private corporate securities
1,070,400

 
15,430

 
22,877

 
1,062,953

 
0

Foreign public corporate securities
296,029

 
1,888

 
6,831

 
291,086

 
0

Foreign private corporate securities
829,588

 
10,415

 
27,771

 
812,232

 
0

Asset-backed securities(1)
505,862

 
3,147

 
3,765

 
505,244

 
(16
)
Commercial mortgage-backed securities
364,601

 
2,770

 
5,491

 
361,880

 
0

Residential mortgage-backed securities(2)
48,622

 
1,290

 
498

 
49,414

 
0

Total fixed maturities, available-for-sale
$
10,186,465

 
$
86,799

 
$
501,591

 
$
9,771,673

 
$
(16
)

(1)
Includes credit-tranched securities collateralized by loan obligations, sub-prime mortgages, auto loans, equipment leases, 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 $3.3 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.
 
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, 2019
 
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
$
112,315

 
$
3,984

 
$
5,844

 
$
25

 
$
118,159

 
$
4,009

Obligations of U.S. states and their political subdivisions
2,215

 
7

 
0

 
0

 
2,215

 
7

Foreign government bonds
0

 
0

 
129

 
12

 
129

 
12

U.S. public corporate securities
34,279

 
321

 
38,133

 
1,424

 
72,412

 
1,745

U.S. private corporate securities
45,488

 
880

 
57,084

 
2,823

 
102,572

 
3,703

Foreign public corporate securities
9,706

 
18

 
8,374

 
34

 
18,080

 
52

Foreign private corporate securities
223,052

 
5,389

 
116,892

 
11,494

 
339,944

 
16,883

Asset-backed securities
118,339

 
401

 
199,108

 
1,879

 
317,447

 
2,280

Commercial mortgage-backed securities
0

 
0

 
0

 
0

 
0

 
0

Residential mortgage-backed securities
265

 
11

 
7

 
0

 
272

 
11

Total fixed maturities, available-for-sale
$
545,659

 
$
11,011

 
$
425,571

 
$
17,691

 
$
971,230

 
$
28,702

 
 
December 31, 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
$
367,796

 
$
4,844

 
$
3,304,663

 
$
371,649

 
$
3,672,459

 
$
376,493

Obligations of U.S. states and their political subdivisions
25,764

 
322

 
83,950

 
2,805

 
109,714

 
3,127

Foreign government bonds
98,437

 
2,346

 
58,975

 
1,810

 
157,412

 
4,156

U.S. public corporate securities
627,589

 
28,474

 
386,599

 
22,108

 
1,014,188

 
50,582

U.S. private corporate securities
269,545

 
7,755

 
422,498

 
15,122

 
692,043

 
22,877

Foreign public corporate securities
97,367

 
2,521

 
107,286

 
4,310

 
204,653

 
6,831

Foreign private corporate securities
373,891

 
19,217

 
116,743

 
8,554

 
490,634

 
27,771

Asset-backed securities
358,668

 
3,501

 
24,529

 
264

 
383,197

 
3,765

Commercial mortgage-backed securities
45,432

 
355

 
159,638

 
5,136

 
205,070

 
5,491

Residential mortgage-backed securities
34

 
1

 
13,775

 
497

 
13,809

 
498

Total fixed maturities, available-for-sale
$
2,264,523

 
$
69,336

 
$
4,678,656

 
$
432,255

 
$
6,943,179

 
$
501,591



As of September 30, 2019 and December 31, 2018, the gross unrealized losses on fixed maturity securities were composed of $24.2 million and $485.7 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 $4.5 million and $15.9 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of September 30, 2019, the $17.7 million of gross unrealized losses of twelve months or more were concentrated in the Company’s corporate securities within the consumer non-cyclical, utility and capital goods sectors. As of December 31, 2018, the $432.3 million of gross unrealized losses of twelve months or more were concentrated in U.S. government bonds and in the Company’s corporate securities within the finance, consumer non-cyclical and capital goods 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, 2018, the Company concluded that an adjustment to earnings for OTTI for these fixed maturity securities was not warranted at either September 30, 2019 or December 31, 2018. 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, 2019, 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, 2019
 
Amortized Cost
 
Fair Value
 
(in thousands)
Fixed maturities, available-for-sale:
 
 
 
Due in one year or less
$
128,354

 
$
129,099

Due after one year through five years
1,107,727

 
1,133,628

Due after five years through ten years
1,649,659

 
1,736,529

Due after ten years
8,116,218

 
9,062,316

Asset-backed securities
443,291

 
445,456

Commercial mortgage-backed securities
554,117

 
584,181

Residential mortgage-backed securities
76,854

 
81,586

Total fixed maturities, available-for-sale
$
12,076,220

 
$
13,172,795



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,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Fixed maturities, available-for-sale
 
 
 
 
 
 
 
Proceeds from sales(1)
$
77,697

 
$
391,271

 
$
231,106

 
$
1,834,190

Proceeds from maturities/prepayments
125,432

 
67,980

 
379,849

 
308,339

Gross investment gains from sales and maturities
15

 
2,532

 
982

 
20,109

Gross investment losses from sales and maturities
(445
)
 
(10,764
)
 
(3,086
)
 
(85,869
)
OTTI recognized in earnings(2)
(769
)
 
(2,523
)
 
(2,794
)
 
(2,960
)

(1)
Includes $14.3 million and $(1.7) million of non-cash related proceeds due to the timing of trade settlements for the nine months ended September 30, 2019 and 2018, respectively.
(2)
Excludes the portion of OTTI amounts remaining 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,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Credit loss impairments:
 
Balance in OCI, beginning of period
$
1,142

 
$
753

 
$
(209
)
 
$
792

New credit loss impairments
0

 
0

 
1,343

 
0

Increases due to the passage of time on previously recorded credit losses
0

 
1

 
10

 
2

Reductions for securities which matured, paid down, prepaid or were sold during the period
0

 
0

 
(1
)
 
(40
)
Reductions for securities impaired to fair value during the period(1)
(1,351
)
 
0

 
(1,351
)
 
0

Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected
0

 
(1
)
 
(1
)
 
(1
)
Balance in OCI, end of period
$
(209
)
 
$
753

 
$
(209
)
 
$
753



(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 $(0.3) million during the three months ended September 30, 2019 and 2018, respectively, and $1.7 million and $0.1 million during the nine months ended September 30, 2019 and 2018, 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, 2019
 
December 31, 2018
 
Amount
(in thousands)
 
% of
Total
 
Amount
(in thousands)
 
% of
Total
Commercial mortgage and agricultural property loans by property type:
 
 
 
 
 
 
 
Apartments/Multi-Family
$
264,146

 
19.8
%
 
$
304,644

 
22.4
%
Hospitality
5,618

 
0.4

 
3,633

 
0.3

Industrial
438,973

 
32.8

 
355,758

 
26.2

Office
315,647

 
23.6

 
305,537

 
22.5

Other
128,779

 
9.6

 
137,781

 
10.2

Retail
123,138

 
9.2

 
194,646

 
14.4

Total commercial mortgage loans
1,276,301

 
95.4

 
1,301,999

 
96.0

Agricultural property loans
61,205

 
4.6

 
54,375

 
4.0

Total commercial mortgage and agricultural property loans by property type
1,337,506

 
100.0
%
 
1,356,374

 
100.0
%
Allowance for credit losses
(2,300
)
 
 
 
(2,896
)
 
 
Total commercial mortgage and other loans
$
1,335,206

 
 
 
$
1,353,478

 
 


As of September 30, 2019, the commercial mortgage and agricultural property loans were secured by properties geographically dispersed throughout the United States (with the largest concentrations in California (29%), Texas (13%) and New York (8%)) and included loans secured by properties in Europe (14%) and Australia (3%).

The following table sets forth the activity in the allowance for credit losses for commercial mortgage and other loans, as of the dates indicated:
 
Commercial Mortgage Loans
 
Agricultural Property Loans
 
Total
 
(in thousands)
Balance at December 31, 2017
$
2,616

 
$
34

 
$
2,650

Addition to (release of) allowance for credit losses
245

 
1

 
246

Charge-offs, net of recoveries
0

 
0

 
0

Balance at December 31, 2018
2,861

 
35

 
2,896

Addition to (release of) allowance for credit losses
(611
)
 
15

 
(596
)
Charge-offs, net of recoveries
0

 
0

 
0

Balance at September 30, 2019
$
2,250

 
$
50

 
$
2,300


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, 2019
 
Commercial Mortgage Loans
 
Agricultural Property Loans
 
Total
 
(in thousands)
Allowance for credit losses:
 
 
 
 
 
Individually evaluated for impairment
$
0

 
$
0

 
$
0

Collectively evaluated for impairment
2,250

 
50

 
2,300

Total ending balance(1)
$
2,250

 
$
50

 
$
2,300

Recorded investment(2):
 
 
 
 
 
Individually evaluated for impairment
$
0

 
$
0

 
$
0

Collectively evaluated for impairment
1,276,301

 
61,205

 
1,337,506

Total ending balance(1)
$
1,276,301

 
$
61,205

 
$
1,337,506


(1)
As of September 30, 2019, there were no loans acquired with deteriorated credit quality.
(2)
Recorded investment reflects the carrying value gross of related allowance.
 
December 31, 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
2,861

 
35

 
2,896

Total ending balance(1)
$
2,861

 
$
35

 
$
2,896

Recorded investment(2):
 
 
 
 
 
Individually evaluated for impairment
$
0

 
$
3,439

 
$
3,439

Collectively evaluated for impairment
1,301,999

 
50,936

 
1,352,935

Total ending balance(1)
$
1,301,999

 
$
54,375

 
$
1,356,374


(1)
As of December 31, 2018, 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, 2019
 
Debt Service Coverage Ratio
 
 
 
≥ 1.2X
 
1.0X to <1.2X
 
< 1.0X
 
Total
 
(in thousands)
Loan-to-Value Ratio:
 
 
 
 
 
 
 
0%-59.99%
$
635,907

 
$
6,801

 
$
3,615

 
$
646,323

60%-69.99%
465,223

 
13,525

 
0

 
478,748

70%-79.99%
179,558

 
30,696

 
0

 
210,254

80% or greater
1,177

 
1,004

 
0

 
2,181

Total commercial mortgage and agricultural property loans
$
1,281,865

 
$
52,026

 
$
3,615

 
$
1,337,506

 
December 31, 2018
 
Debt Service Coverage Ratio
 
 
 
≥ 1.2X
 
1.0X to <1.2X
 
< 1.0X
 
Total
 
(in thousands)
Loan-to-Value Ratio:
 
 
 
 
 
 
 
0%-59.99%
$
709,342

 
$
14,814

 
$
345

 
$
724,501

60%-69.99%
442,308

 
23,260

 
0

 
465,568

70%-79.99%
156,049

 
7,236

 
0

 
163,285

80% or greater
2,000

 
1,020

 
0

 
3,020

Total commercial mortgage and agricultural property loans
$
1,309,699

 
$
46,330

 
$
345

 
$
1,356,374



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, 2019
 
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
$
1,276,301

 
$
0

 
$
0

 
$
0

 
$
1,276,301

 
$
0

Agricultural property loans
61,205

 
0

 
0

 
0

 
61,205

 
0

Total
$
1,337,506

 
$
0

 
$
0

 
$
0

 
$
1,337,506

 
$
0


(1)
As of September 30, 2019, 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, 2018.
 
December 31, 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
$
1,301,999

 
$
0

 
$
0

 
$
0

 
$
1,301,999

 
$
0

Agricultural property loans
54,375

 
0

 
0

 
0

 
54,375

 
0

Total
$
1,356,374

 
$
0

 
$
0

 
$
0

 
$
1,356,374

 
$
0



(1)
As of December 31, 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, 2018.

For the three and nine months ended September 30, 2019, there were no commercial mortgage and other loans acquired, other than those through direct origination, and there were $105 million and $206 million, respectively, of commercial mortgage and other loans sold. For both 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, respectively, of 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, 2019
 
December 31, 2018
 
(in thousands)
LPs/LLCs:
 
 
 
Equity method:
 
 
 
Private equity
$
23,798

 
$
23,844

Hedge funds
242,784

 
179,014

Real estate-related
150,510

 
94,738

Subtotal equity method
417,092

 
297,596

Fair value:
 
 
 
Private equity
3,954

 
4,142

Hedge funds
238

 
263

Real estate-related
6,218

 
3,562

Subtotal fair value
10,410

 
7,967

Total LPs/LLCs
427,502

 
305,563

Derivative instruments
2

 
42,978

Total other invested assets
$
427,504

 
$
348,541



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,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Fixed maturities, available-for-sale
$
100,249

 
$
81,551

 
$
289,289

 
$
235,487

Fixed maturities, trading
2,579

 
2,006

 
7,497

 
3,091

Equity securities, at fair value
67

 
72

 
213

 
248

Commercial mortgage and other loans
12,761

 
12,567

 
37,661

 
38,818

Policy loans
153

 
175

 
430

 
546

Short-term investments and cash equivalents
31,807

 
5,103

 
62,313

 
18,988

Other invested assets
7,083

 
5,573

 
23,690

 
14,083

Gross investment income
154,699

 
107,047

 
421,093

 
311,261

Less: investment expenses
(5,332
)
 
(3,883
)
 
(14,685
)
 
(11,226
)
Net investment income
$
149,367

 
$
103,164

 
$
406,408

 
$
300,035



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,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Fixed maturities(1)
$
(1,199
)
 
$
(10,755
)
 
$
(4,898
)
 
$
(68,720
)
Commercial mortgage and other loans
950

 
201

 
(292
)
 
53

Derivatives
(537,079
)
 
75,810

 
(2,768,959
)
 
702,465

Short-term investments and cash equivalents
61

 
17

 
448

 
24

Realized investment gains (losses), net
$
(537,267
)
 
$
65,273

 
$
(2,773,701
)
 
$
633,822



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

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, 2019
 
December 31, 2018
 
(in thousands)
Fixed maturity securities, available-for-sale — with OTTI
$
13,584

 
$
(3,334
)
Fixed maturity securities, available-for-sale — all other
1,082,991

 
(411,458
)
Derivatives designated as cash flow hedges(1)
26,882

 
(3,849
)
Affiliated notes
641

 
658

Other investments
0

 
1,074

Net unrealized gains (losses) on investments
$
1,124,098

 
$
(416,909
)

(1)
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, 2019 and December 31, 2018, 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, 2019
 
December 31, 2018
 
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

 
$
0

 
$
0

 
$
0

U.S. public corporate securities
0

 
0

 
0

 
384

 
0

 
384

Total cash collateral for loaned securities(1)
$
0

 
$
0

 
$
0

 
$
384

 
$
0

 
$
384


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