XML 12 R17.htm IDEA: XBRL DOCUMENT v2.4.0.8
Fair Value of Assets and Liabilities (Tables)
 9 Months Ended
Sep. 30, 2013
Fair Value of Assets and Liabilities [Abstract]  
Fair Value, Assets and Liabilities Measured on Recurring Basis
   As of September 30, 2013
   Level 1Level 2Level 3 Netting (2)Total
   (in thousands)
Fixed maturities, available-for-sale:          
 U.S Treasury securities and obligations of U.S. government authorities and agencies$ -$ 5,258$ -$ -$ 5,258
 Obligations of U.S. states and their political subdivisions  -  68,649  -  -  68,649
 Foreign government bonds  -  32,100  -  -  32,100
 Corporate securities  -  2,705,166  93,835  -  2,799,001
 Asset-backed securities  -  103,997  80,642  -  184,639
 Commercial mortgage-backed securities  -  373,182  8,080  -  381,262
 Residential mortgage-backed securities  -  167,359  -  -  167,359
Sub-total  -  3,455,711  182,557  -  3,638,268
Trading account assets:          
  Equity securities  6,041  -  285  -  6,326
Sub-total  6,041  -  285  -  6,326
Equity securities, available-for-sale   -  16  -  -  16
Short-term investments   152,593  -  -  -  152,593
Other long-term investments  -  103,058  477  (91,700)  11,835
Reinsurance recoverables  -  -  1,252,905  -  1,252,905
Receivables from parent and affiliates  -  19,511  8,285  -  27,796
Sub-total excluding separate account assets   158,634  3,578,296  1,444,509  (91,700)  5,089,739
Separate account assets (1)   132,231  45,209,751  -  -  45,341,982
Total assets$ 290,865$ 48,788,047$ 1,444,509$ (91,700)$ 50,431,721
Future policy benefits$ -$ -$ 1,304,347$ -$ 1,304,347
Other liabilities  -  91,386  -  (91,386)  -
Total liabilities$ -$ 91,386$ 1,304,347$ (91,386)$ 1,304,347
             
             

   As of December 31, 2012
   Level 1Level 2Level 3 Netting (2)Total
   (in thousands)
Fixed maturities, available-for-sale:          
 U.S Treasury securities and obligations of U.S. government authorities and agencies$ -$ 4,686$ -$ -$ 4,686
 Obligations of U.S. states and their political subdivisions  -  102,116  -  -  102,116
 Foreign government securities  -  55,529  -  -  55,529
 Corporate securities  -  3,095,699  95,555  -  3,191,254
 Asset-backed securities  -  118,179  69,298  -  187,477
 Commercial mortgage-backed securities  -  394,902  -  -  394,902
 Residential mortgage-backed securities  -  267,486  -  -  267,486
Sub-total  -  4,038,597  164,853  -  4,203,450
Trading account assets:          
  Asset-backed securities  -  2,022  -  -  2,022
  Equity securities  5,687  -  207  -  5,894
Sub-total  5,687  2,022  207  -  7,916
Equity securities, available-for-sale   -  22  -  -  22
Short-term investments   103,761  -  -  -  103,761
Other long-term investments  -  173,348  1,054  (42,352)  132,050
Reinsurance recoverables  -  -  1,732,094  -  1,732,094
Receivables from parent and affiliates  -  20,632  1,995  -  22,627
Sub-total excluding separate account assets   109,448  4,234,621  1,900,203  (42,352)  6,201,920
Separate account assets (1)   122,142  44,479,578  -  -  44,601,720
Total assets$ 231,590$ 48,714,199$ 1,900,203$ (42,352)$ 50,803,640
Future policy benefits$ -$ -$ 1,793,137$ -$ 1,793,137
Other liabilities  -  42,352  -  (42,352)  -
Total liabilities$ -$ 42,352$ 1,793,137$ (42,352)$ 1,793,137
             

  • Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract value and not fair value in the Company's Unaudited Interim Statements of Financial Position.
  • “Netting” amounts represent swap variation margin of $0.3 million and $0 million as of September 30, 2013 and December 31, 2012, respectively, and the impact of offsetting asset and liability positions held with the same counterparty.

 
Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation
      Three Months Ended September 30, 2013 
      Fixed Maturities Available-For-Sale  Trading Account Assets - Equity Securities    
       Corporate Securities Asset- Backed Securities  Commercial Mortgage-Backed    Other Long-term Investments 
  (in thousands)
Fair Value, beginning of period assets/(liabilities) $ 96,192 $ 86,086 $ - $ 279 $ 407 
                  
  Included in earnings:                
   Realized investment gains (losses), net   -   -   -   -   (19) 
   Asset management fees and other income   -   -   -   6   14 
  Included in other comprehensive income (loss)   1,243   (226)   1   -   - 
 Net investment income   1,188   88   -   -   - 
 Purchases   -   -   -   -   75 
 Sales   -   -   8,079   -   - 
 Issuances   -   -   -   -   - 
 Settlements   (266)   (2,310)   -   -   - 
 Transfers into Level 3 (1)   -   -   -   -   - 
 Transfers out of Level 3 (1)   (4,522)   -   -   -   - 
 Other (3)   -   (2,996)   -   -   - 
Fair Value, end of period assets/(liabilities) $ 93,835 $ 80,642 $ 8,080 $ 285 $ 477 
                     
Unrealized gains (losses) for the period relating to those                
 Level 3 assets that were still held at the end of the period (2):                
  Included in earnings:                
   Realized investment gains (losses), net $ - $ - $ - $ - $ 721 
   Asset management fees and other income $ - $ - $ - $ 7 $ 14 
                     
      Three Months Ended September 30, 2013       
      Reinsurance Recoverables Receivables from parent and affiliates Future Policy Benefits       
  (in thousands)       
Fair Value, beginning of period assets/(liabilities) $ 654,058 $ 5,250 $ (669,989)       
 Total gains (losses) (realized/unrealized):                
  Included in earnings:                
   Realized investment gains (losses), net   539,919   -   (572,570)       
   Asset management fees and other income   -   -   -       
  Included in other comprehensive income (loss)   -   39   -       
 Net investment income   -   -   -       
 Purchases   58,928   2,996   -       
 Sales   -   (2,996)   -       
 Issuances   -   -   (61,788)       
 Settlements   -   -   -       
 Transfers into Level 3 (1)   -   -   -       
 Transfers out of Level 3 (1)   -   -   -       
 Other (3)   -   2,996   -       
Fair Value, end of period assets/(liabilities) $ 1,252,905 $ 8,285 $ (1,304,347)       
       .  .          
Unrealized gains (losses) for the period relating to those                
 Level 3 assets that were still held at the end of the period (2):                
  Included in earnings:                
   Realized investment gains (losses), net $ 545,040 $ - $ (577,920)       
   Asset management fees and other income $ - $ - $ -       

      Nine Months Ended September 30, 2013 
      Fixed Maturities Available-For-Sale  Trading Account Assets - Equity Securities    
       Corporate Securities Asset- Backed Securities  Commercial Mortgage-Backed    Other Long-term Investments 
  (in thousands)
Fair Value, beginning of period assets/(liabilities) $ 95,555 $ 69,298 $ - $ 207 $ 1,054 
 Total gains (losses) (realized/unrealized):                
  Included in earnings:                
   Realized investment gains (losses), net   49   -   -   -   (740) 
   Asset management fees and other income   -   -   -   78   51 
  Included in other comprehensive income (loss)   (2,817)   (215)   18   -   - 
 Net investment income   3,518   404   -   -   - 
 Purchases   1,243   25,980   17,169   -   112 
 Sales   -   -   -   -   - 
 Issuances   -   -   -   -   - 
 Settlements   (4,167)   (11,829)   -   -   - 
 Transfers into Level 3 (1)   4,976   -   -   -   - 
 Transfers out of Level 3 (1)   (4,522)   -   (9,107)   -   - 
 Other (3)   -   (2,996)   -   -   - 
Fair Value, end of period assets/(liabilities) $ 93,835 $ 80,642 $ 8,080 $ 285 $ 477 
                     
Unrealized gains (losses) for the period relating to those                
 Level 3 assets that were still held at the end of the period (2):                
  Included in earnings:                
   Realized investment gains (losses), net $ - $ - $ - $ - $ - 
   Asset management fees and other income $ - $ - $ - $ 79 $ 51 
                     
      Nine Months Ended September 30, 2013       
      Reinsurance Recoverables Receivables from parent and affiliates Future Policy Benefits       
  (in thousands)       
Fair Value, beginning of period assets/(liabilities) $ 1,732,094 $ 1,995 $ (1,793,136)       
 Total gains (losses) (realized/unrealized):                
  Included in earnings:                
   Realized investment gains (losses), net   (655,869)   -   674,014       
   Asset management fees and other income   -   -   -       
  Included in other comprehensive income (loss)   -   40   -       
 Net investment income   -   -   -       
 Purchases   176,680   6,250   -       
 Sales   -   (2,996)   -       
 Issuances   -   -   (185,225)       
 Settlements   -   -   -       
 Transfers into Level 3 (1)   -   -   -       
 Transfers out of Level 3 (1)   -   -   -       
 Other (3)   -   2,996   -       
Fair Value, end of period assets/(liabilities) $ 1,252,905 $ 8,285 $ (1,304,347)       
       .             
Unrealized gains (losses) for the period relating to those                
 Level 3 assets that were still held at the end of the period (2):                
  Included in earnings:                
   Realized investment gains (losses), net $ (618,782) $ - $ 636,071       
   Asset management fees and other income $ - $ - $ -       

      Three Months Ended September 30, 2012
      Fixed Maturities Available-For-Sale - Corporate Securities Fixed Maturities Available-For-Sale - Asset Backed Securities Other Trading Securities - Equity Unaffiliated  Other Long-term Investments Reinsurance Recoverables
  (in thousands)
Fair Value, beginning of period assets/(liabilities) $ 92,461 $ 51,766 $ 197 $ 305 $ 1,761,274 
 Total gains or (losses) (realized/unrealized):                
  Included in earnings:                
   Realized investment gains (losses), net   1,567   -   -   (646)   4,037 
   Asset management fees and other income   -   -   (2)   10   - 
  Included in other comprehensive income (loss)   2,143   10   -   -   - 
 Net investment income   1,120   151   -   -   - 
 Purchases   -   7,992   -   2,089   57,012 
 Sales   -   -   -   -   - 
 Issuances   -   -   -   -   - 
 Settlements   (1,901)   (2,216)   -   (1)   - 
 Transfers into Level 3 (1)   -   -   -   -   - 
 Transfers out of Level 3 (1)   -   -   -   -   - 
Fair Value, end of period assets/(liabilities) $ 95,390 $ 57,703 $ 195 $ 1,757 $ 1,822,323 
                     
Unrealized gains (losses) for the period relating to                 
 those Level 3 assets that were still held                
 at the end of the period (2):                
  Included in earnings:                
   Realized investment gains (losses), net $ - $ - $ - $ - $ 16,488 
   Asset management fees and other income  $ - $ - $ (2) $ 10 $ - 
                     
     Three Months Ended September 30, 2012           
     Future Policy Benefits          
 (in thousands)           
Fair Value, beginning of period assets/(liabilities) $ (1,795,715)           
 Total gains or (losses) (realized/unrealized):              
  Included in earnings:              
   Realized investment gains (losses), net   (31,202)           
   Asset management fees and other income    -           
   Included in other comprehensive income (loss)   -           
  Net investment income    -           
  Purchases   -           
  Sales   -           
  Issuances   (59,731)           
  Settlements   -           
  Transfers into Level 3 (1)   -           
  Transfers out of Level 3 (1)   -           
Fair Value, end of period assets/(liabilities) $ (1,886,648)           
                     
Unrealized gains (losses) for the period relating to                 
 those Level 3 assets that were still held                
 at the end of the period (2):                
  Included in earnings:                
   Realized investment gains (losses), net $ (43,763)           

      Nine Months Ended September 30, 2012
      Fixed Maturities Available-For-Sale -Corporate Securities Fixed Maturities Available-For-Sale - Asset Backed Securities Trading Account Assets - Equity Securities Other Long-term Investments Reinsurance Recoverable 
  (in thousands)
Fair Value, beginning of period assets/(liabilities) $ 89,658 $ 48,563 $ 203 $ 1,213 $ 1,747,757 
 Total gains or (losses) (realized/unrealized):                
  Included in earnings:                
   Realized investment gains (losses), net   1,576   -   -   (1,623)   (93,818) 
   Asset management fees and other income    -   -   (8)   12   - 
  Included in other comprehensive income (loss)   2,883   963   -   -   - 
 Net investment income   3,497   502   -   -   - 
 Purchases   5,400   15,492   -   2,149   168,384 
 Sales   (29)   -   -   -   - 
 Issuances   -   -   -   -   - 
 Settlements   (7,896)   (7,817)   -   6   - 
 Transfers into Level 3 (1)   11,992   -   -   -   - 
 Transfers out of Level 3 (1)   (11,691)   -   -   -   - 
Fair Value, end of period assets/(liabilities) $ 95,390 $ 57,703 $ 195 $ 1,757 $ 1,822,323 
Unrealized gains (losses) for the period relating to those                
 Level 3 assets that were still held at the                
 end of the period (2):                
  Included in earnings:                
   Realized investment gains (losses), net $ - $ - $ - $ - $ (55,459) 
   Asset management fees and other income $ - $ - $ (8) $ 12 $ - 
                     
     Nine Months Ended September 30, 2012            
     Future Policy Benefits           
 (in thousands)            
Fair Value, beginning of period assets/(liabilities) $ (1,783,595)             
 Total gains or (losses) (realized/unrealized):                
  Included in earnings:                
   Realized investment gains (losses), net   73,429             
   Asset management fees and other income    -             
   Included in other comprehensive income (loss)   -             
 Net investment income    -             
 Purchases   -             
 Sales   -             
 Issuances   (176,482)             
 Settlements   -             
 Transfers into Level 3 (1)   -             
 Transfers out of Level 3 (1)   -             
Fair Value, end of period assets/(liabilities) $ (1,886,648)             
Unrealized gains (losses) for the period relating to                
 Level 3 assets that were still held at the                
 end of the period (2):                
  Included in earnings:                
   Realized investment gains (losses), net $ 34,583             

(1) Transfers into or out of Level 3 are generally reported as the value as of the beginning of the quarter in which the transfer occurs.

(2) Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts.

(3) “Other” primarily represents reclasses of certain assets between reporting categories.

 

 
Fair Value Disclosure Financial Instruments Not Carried at Fair Value
    September 30, 2013  December 31, 2012 
    Fair Value Carrying Amount (1)  Fair Value Carrying Amount 
    Level 1 Level 2 Level 3 Total Total  Total Total 
                   
 (in thousands)      
Assets:                
 Commercial mortgage and other loans$ -$ 2,630$ 429,280$ 431,910$ 404,203 $ 473,964$ 426,981 
 Policy loans  -  -  12,594  12,594  12,594   11,957  11,957 
 Cash  649  -  -  649  649   266  266 
 Accrued investment income  -  40,732  -  40,732  40,732   44,656  44,656 
 Receivables from parent and affiliates  -  27,682  -  27,682  27,682   199  199 
 Other assets  -  1,035  -  1,035  1,035   12,410  12,410 
  Total assets$ 649$ 72,079$ 441,874$ 514,602$ 486,895 $ 543,452$ 496,469 
                   
Liabilities:                
 Policyholders' Account Balances - Investment contracts$ -$ -$ 81,865$ 81,865$ 83,307 $ 78,159$ 75,242 
 Cash collateral for loaned securities  -  39,147  -  39,147  39,147   38,976  38,976 
 Long-term debt  -  428,954  -  428,954  400,000   426,827  400,000 
 Payables to parent and affiliates  -  51,800  -  51,800  51,800   94,953  94,953 
 Other liabilities  -  88,332  -  88,332  88,332   99,094  99,094 
 Separate account liabilities - investment contracts  -  829  -  829  829   964  964 
  Total liabilities$ -$ 609,062$ 81,865$ 690,927$ 663,415 $ 738,973$ 709,229 

  • Carrying values presented herein differ from those in the Company's Unaudited Interim Statements of Financial Position because certain items within the respective financial statement captions are not considered financial instruments or out of scope under authoritative guidance relating to disclosures of the fair value of financial instruments. Financial statement captions excluded from the above table are not considered financial instruments
Fair Value Inputs Quantitative Information [Table Text Block]
 As of September 30, 2013  
  Fair Value Primary Valuation Techniques Unobservable Inputs Minimum Maximum Weighted Average Impact of Increase in Input on Fair Value (1)
 (in thousands)  
Assets:              
Corporate securities$ 91,777 Discounted cash flow Discount rate 3.55% 15.00% 3.93% Decrease
               
Reinsurance recoverables$ 1,252,905 Fair values are determined in the same manner as future policy benefits  
               
Liabilities:              
Future policy benefits (2)$ 1,304,347 Discounted cash flow Lapse rate (3) 0% 11%   Decrease
      NPR spread (4) 0.08% 1.32%   Decrease
      Utilization rate (5) 70% 94%   Increase
      Withdrawal rate (6) 86% 100%   Increase
      Mortality rate (7) 0% 13%   Decrease
      Equity Volatility curve 16% 28%   Increase
               
 As of December 31, 2012  
  Fair Value Primary Valuation Techniques Unobservable Inputs Minimum Maximum Weighted Average Impact of Increase in Input on Fair Value (1)
 (in thousands)  
Assets:              
Corporate securities$ 92,263 Discounted cash flow Discount rate 3.27% 17.50% 3.74% Decrease
    Cap at call price Call price 100.00% 100.00%   Increase
Reinsurance recoverables$ 1,732,094 Fair values are determined in the same manner as future policy benefits  
               
Liabilities:              
Future policy benefits (2)$ 1,793,137 Discounted cash flow Lapse rate (3) 0% 14%   Decrease
      NPR spread (4) 0.20% 1.60%   Decrease
      Utilization rate (5) 70% 94%   Increase
      Withdrawal rate (6) 85% 100%   Increase
      Mortality rate (7) 0% 13%   Decrease
      Equity Volatility curve 19% 34%   Increase

 

  • Conversely, the impact of a decrease in input would have the opposite impact for the fair value as that presented in the table.
  • Future policy benefits primarily represent general account liabilities for the optional living benefit features of the Company's variable annuity contracts which are accounted for as embedded derivatives. Since the valuation methodology for these liabilities uses a range of inputs that vary at the contract level over the cash flow projection period, presenting a range, rather than weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.
  • Base lapse rates are adjusted at the contract level based on a comparison of the benefit amount and the current contractholder account value as well as other factors, such as the applicability of any surrender charges. A dynamic lapse adjustment reduces the base lapse rate when the benefit amount is greater than the account value, as in-the-money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower for the period where surrender charges apply.
  • To reflect NPR, the Company incorporates an additional spread over LIBOR into the discount rate used in the valuation of individual living benefit contracts in a liability position and generally not to those in a contra-liability position. In determining the NPR spread, the Company reflects the financial strength ratings of the Company and its affiliates as these are insurance liabilities and senior to debt. The additional spread over LIBOR is determined by utilizing the credit spreads associated with issuing funding agreements adjusted for any illiquidity risk premium.
  • The utilization rate assumption estimates the percentage of contracts that will utilize the benefit during the contract duration, and begin lifetime withdrawals at various time intervals from contract inception. The remaining contractholders are assumed to either begin lifetime withdrawals immediately or never utilize the benefit. These assumptions vary based on the product type, the age of the contractholder, and the age of the contract. The impact of changes in these assumptions is highly dependent on the contract type and age of the contractholder at the time of the sale and the timing of the first lifetime income withdrawal.
  • The withdrawal rate assumption estimates the magnitude of annual contractholder withdrawals relative to the maximum allowable amount under the contract. The fair value of the liability will generally increase the closer the withdrawal rate is to 100%.
  • Range reflects the mortality rate for the vast majority of business with living benefits, with contractholders ranging from 35 to 90 years old. While the majority of living benefits have a minimum age requirement, certain benefits do not have an age restriction. This results in contractholders for certain benefits with mortality rates approaching 0%. Based on historical experience, the Company applies a set of age and duration specific mortality rate adjustments compared to standard industry tables. A mortality improvement assumption is also incorporated into the overall mortality table.
Fair Value Level Three Amounts By Pricing Source [Table Text Block]
 As of September 30, 2013
  Internal (1) External (2) Total
 (in thousands)
Corporate securities$ 91,777$ 2,058$ 93,835
Asset-backed securities  -  80,642  80,642
Commercial mortgage-backed securities  -  8,080  8,080
Equity securities  -  285  285
Other long-term Investments  -  477  477
Reinsurance recoverables  1,252,905  -  1,252,905
Receivables from parent and affiliates  -  8,285  8,285
Total assets$ 1,344,682$ 99,827$ 1,444,509
       
Future policy benefits  1,304,347  -  1,304,347
Total liabilities $ 1,304,347$ -$ 1,304,347
       
 As of December 31, 2012
  Internal (1) External (2) Total
 (in thousands)
Corporate securities$ 92,263$ 3,292$ 95,555
Asset-backed securities  -  69,298  69,298
Equity securities  -  207  207
Other long-term Investments  739  315  1,054
Reinsurance recoverables  1,732,094  -  1,732,094
Receivables from parent and affiliates  -  1,995  1,995
Total assets$ 1,825,096$ 75,107$ 1,900,203
       
Future policy benefits  1,793,137  -  1,793,137
Total liabilities $ 1,793,137$ -$ 1,793,137

  • Represents valuations which could incorporate internally-derived and market inputs. See below for additional information related to internally-developed valuation for significant items in the above table.
  • Represents unadjusted prices from independent pricing services and independent non-binding broker quotes where pricing inputs are not readily available.