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Fair Value of Assets and Liabilities (Tables)
 3 Months Ended
Mar. 31, 2015
Fair Value of Assets and Liabilities [Abstract]  
Fair Value, Assets and Liabilities Measured on Recurring Basis
   As of March 31, 2015
   Level 1Level 2Level 3 Netting (1)Total
   (in thousands)
Fixed maturities, available-for-sale:          
 U.S Treasury securities and obligations of U.S. government authorities and agencies$ -$ 6,398$ -$ -$ 6,398
 Obligations of U.S. states and their political subdivisions  -  22,115  -  -  22,115
 Foreign government bonds  -  37,481  -  -  37,481
 Corporate securities  -  1,940,764  118,322  -  2,059,086
 Asset-backed securities  -  103,934  48,838  -  152,772
 Commercial mortgage-backed securities  -  288,823  -  -  288,823
 Residential mortgage-backed securities  -  126,648  -  -  126,648
Sub-total  -  2,526,163  167,160  -  2,693,323
Trading account assets:          
  Equity securities  6,068  -  -  -  6,068
Sub-total  6,068  -  -  -  6,068
Equity securities, available-for-sale   -  17  -  -  17
Short-term investments   101,798  -  -  -  101,798
Cash equivalents  -  -  225  -  225
Other long-term investments  -  153,312  635  (14,108)  139,839
Reinsurance recoverables  -  -  3,300,612  -  3,300,612
Receivables from parent and affiliates  -  16,768  24,015  -  40,783
Sub-total excluding separate account assets   107,866  2,696,260  3,492,647  (14,108)  6,282,665
Separate account assets (2)   -  44,111,486  -  -  44,111,486
Total assets$ 107,866$ 46,807,746$ 3,492,647$ (14,108)$ 50,394,151
Future policy benefits (3)$ -$ -$ 3,430,249$ -$ 3,430,249
Payables to parent and affiliates  -  16,185  -  (16,185)  -
Total liabilities$ -$ 16,185$ 3,430,249$ (16,185)$ 3,430,249
             
             

   As of December 31, 2014
   Level 1Level 2Level 3 Netting (1)Total
   (in thousands)
Fixed maturities, available-for-sale:          
 U.S Treasury securities and obligations of U.S. government authorities and agencies$ -$ 6,336$ -$ -$ 6,336
 Obligations of U.S. states and their political subdivisions  -  70,789  -  -  70,789
 Foreign government securities  -  37,355  -  -  37,355
 Corporate securities  -  1,985,614  116,070  -  2,101,684
 Asset-backed securities  -  108,487  40,524  -  149,011
 Commercial mortgage-backed securities  -  302,185  -  -  302,185
 Residential mortgage-backed securities  -  133,233  -  -  133,233
Sub-total  -  2,643,999  156,594  -  2,800,593
Trading account assets:          
  Equity securities  6,131  -  -  -  6,131
Sub-total  6,131  -  -  -  6,131
Equity securities, available-for-sale   -  17  -  -  17
Short-term investments   57,185  -  -  -  57,185
Cash equivalents  -  -  225  -  225
Other long-term investments  -  118,846  633  (24,288)  95,191
Reinsurance recoverables  -  -  2,996,154  -  2,996,154
Receivables from parent and affiliates  -  18,748  22,320  -  41,068
Sub-total excluding separate account assets   63,316  2,781,610  3,175,926  (24,288)  5,996,564
Separate account assets (2)   -  44,101,699  -  -  44,101,699
Total assets$ 63,316$ 46,883,309$ 3,175,926$ (24,288)$ 50,098,263
Future policy benefits (3)$ -$ -$ 3,112,411$ -$ 3,112,411
Payables to parent and affiliates  -  21,249  -  (21,249)  -
Total liabilities$ -$ 21,249$ 3,112,411$ (21,249)$ 3,112,411
             

 

  • “Netting” amounts represent cash collateral of ($2.1) million and $3.0 million as of March 31, 2015 and December 31, 2014, respectively, and the impact of offsetting asset and liability positions held with the same counterparty, subject to master netting arrangements.
  • 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.
  • As of March 31, 2015, the net embedded derivative liability position of $3,430 million includes $41 million of embedded derivatives in an asset position and $3,471 million of embedded derivatives in a liability position. As of December 31, 2014, the net embedded derivative liability position of $3,112 million includes $55 million of embedded derivatives in an asset position and $3,167 million of embedded derivatives in a liability position.

 
Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation
      Three Months Ended March 31, 2015 
      Fixed Maturities Available-For-Sale Cash Equivalents Other Long-term Investments  Reinsurance Recoverables 
       Corporate Securities Asset- Backed Securities       
  (in thousands)
Fair Value, beginning of period assets/(liabilities) $116,070 $40,524 $225 $633 $2,996,154 
 Total gains (losses) (realized/unrealized):                
  Included in earnings:                
   Realized investment gains (losses), net  62   -   -   -  246,814 
   Asset management fees and other income   -   -   -  2   - 
  Included in other comprehensive income (loss)  (219)  81   -   -   - 
 Net investment income  1,277  12   -  7   - 
 Purchases  17,270   -   -   -  57,644 
 Sales  (15,212)   -   -   -   - 
 Issuances   -   -   -   -   - 
 Settlements  (926)  (579)   -  (7)   - 
 Transfers into Level 3 (1)   -  9,783   -   -   - 
 Transfers out of Level 3 (1)   -  (983)   -   -   - 
Fair Value, end of period assets/(liabilities) $118,322 $48,838 $225 $635 $3,300,612 
                     
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 $ - $ - $ - $ - $272,379 
   Asset management fees and other income $ - $ - $ - $ 2 $ - 
                     
      Three Months Ended March 31, 2015          
      Receivables from parent and affiliates  Future Policy Benefits        
  (in thousands)          
Fair Value, beginning of period assets/(liabilities) $22,320  (3,112,411)          
 Total gains (losses) (realized/unrealized):                
  Included in earnings:                
   Realized investment gains (losses), net  1  (257,315)          
   Asset management fees and other income   -   -          
  Included in other comprehensive income (loss)  (292)   -          
 Net investment income   -   -          
 Purchases   -   -          
 Sales   -   -          
 Issuances   -  (60,523)          
 Settlements   -   -          
 Transfers into Level 3 (1)  1,986   -          
 Transfers out of Level 3 (1)   -   -          
Fair Value, end of period assets/(liabilities) $24,015  (3,430,249)          
       .  .  .       
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 $ - $(283,739)          
   Asset management fees and other income $ - $ -          

      Three Months Ended March 31, 2014 
      Fixed Maturities Available-For-Sale      
       Corporate Securities Asset- Backed Securities  Commercial Mortgage-Backed Securities  Trading Account Assets - Equity Securities  Equity Securities Available-for -Sale 
  (in thousands)
Fair Value, beginning of period assets/(liabilities) $ 96,796 $ 63,789 $ - $ 313 $ 192 
 Total gains (losses) (realized/unrealized):                
  Included in earnings:                
   Realized investment gains (losses), net   -   -   -   -   - 
   Asset management fees and other income   -   -   -   15   - 
  Included in other comprehensive income (loss)   247   178   (83)   -   - 
 Net investment income   1,224   44   -   -   - 
 Purchases   1,489   14,933   45,448   -   - 
 Sales   -   -   -   -   - 
 Issuances   -   -   -   -   - 
 Settlements   (501)   (3,882)   -   -   - 
 Transfers into Level 3 (1)   -   27,663   -   -   - 
 Transfers out of Level 3 (1)   -   -   -   -   - 
 Other (3)   -   -   -   -   - 
Fair Value, end of period assets/(liabilities) $ 99,255 $ 102,725 $ 45,365 $ 328 $ 192 
                     
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 $ - $ - $ - $ 15 $ - 
                     
      Three Months Ended March 31, 2014 
      Cash Equivalents Other Long-term Investments Reinsurance Recoverables  Receivables from parent and affiliates Future Policy Benefits
  (in thousands) 
Fair Value, beginning of period assets/(liabilities) $ - $ 486 $ 748,005 $ 6,347 $ (778,226) 
 Total gains (losses) (realized/unrealized):                
  Included in earnings:                
   Realized investment gains (losses), net   -   -   537,854   1   (562,219) 
   Asset management fees and other income   -   (9)   -   -   - 
  Included in other comprehensive income (loss)   -   -   -   11   - 
 Net investment income   -   -   -   -   - 
 Purchases   400   43   58,728   -   - 
 Sales   -   -   -   -   - 
 Issuances   -   -   -   -   (61,584) 
 Settlements   -   -   -   -   - 
 Transfers into Level 3 (1)   -   -   -   1,985   - 
 Transfers out of Level 3 (1)   -   -   -   -   - 
 Other (3)   -   -   -   -   - 
Fair Value, end of period assets/(liabilities) $ 400 $ 520 $ 1,344,587 $ 8,344 $ (1,402,029) 
       .  .          
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 $ - $ - $ 662,178 $ - $ (692,458) 
   Asset management fees and other income $ - $ - $ - $ - $ - 

(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 reclassifications of certain assets between reporting categories.

 

 

 
Fair Value Disclosure Financial Instruments Not Carried at Fair Value
    March 31, 2015 
    Fair Value Carrying Amount (1) 
    Level 1 Level 2 Level 3 Total Total 
              
 (in thousands) 
Assets:           
 Commercial mortgage and other loans$ -$ 2,791$ 444,889$ 447,680$ 418,082 
 Policy loans  -  -  13,334  13,334  13,334 
 Other long-term investments  -  -  2,674  2,674  2,334 
 Cash and cash equivalents  15,990  -  -  15,990  15,990 
 Accrued investment income  -  27,792  -  27,792  27,792 
 Receivables from parent and affiliates  -  18,920  -  18,920  18,920 
 Other assets  -  7,295  -  7,295  7,295 
  Total assets$ 15,990$ 56,798$ 460,897$ 533,685$ 503,747 
              
Liabilities:           
 Policyholders' account balances - investment contracts$ -$ 6,164$ 93,388$ 99,552$ 100,540 
 Cash collateral for loaned securities  -  9,132  -  9,132  9,132 
 Short-term debt  -  24,007  -  24,007  24,007 
 Payables to parent and affiliates  -  43,517  -  43,517  43,517 
 Other liabilities  -  95,727  -  95,727  95,727 
 Separate account liabilities - investment contracts  -  435  -  435  435 
  Total liabilities$ -$ 178,982$ 93,388$ 272,370$ 273,358 

    December 31, 2014 
    Fair Value Carrying Amount (1) 
    Level 1 Level 2 Level 3 Total Total 
              
 (in thousands) 
Assets:           
 Commercial mortgage and other loans$ -$ 2,779$ 447,157$ 449,936$ 422,563 
 Policy loans  -  -  13,355  13,355  13,355 
 Other long-term investments  -  -  2,639  2,639  2,238 
 Cash and cash equivalents  369  -  -  369  369 
 Accrued investment income  -  25,008  -  25,008  25,008 
 Receivables from parent and affiliates  -  10,367  -  10,367  10,367 
 Other assets  -  1,009  -  1,009  1,009 
  Total assets$ 369$ 39,163$ 463,151$ 502,683$ 474,909 
              
Liabilities:           
 Policyholders' account balances - investment contracts$ -$ -$ 91,217$ 91,217$ 92,663 
 Cash collateral for loaned securities  -  5,285  -  5,285  5,285 
 Short-term debt  -  54,354  -  54,354  54,354 
 Payables to parent and affiliates  -  37,415  -  37,415  37,415 
 Other liabilities  -  89,956  -  89,956  89,956 
 Separate account liabilities - investment contracts  -  487  -  487  487 
  Total liabilities$ -$ 187,497$ 91,217$ 278,714$ 280,160 

  • Carrying values presented herein differ from those in the Company's Unaudited Interim Statement 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 March 31, 2015 
  Fair Value Primary Valuation TechniquesUnobservable InputsMinimumMaximumWeighted AverageImpact of Increase in Input on Fair Value (1)
 (in thousands) 
Assets:         
Corporate securities$ 101,595 Discounted cash flowDiscount rate3.29%15.05%3.76%Decrease
          
Reinsurance recoverables$ 3,300,612 Fair values are determined in the same manner as future policy benefits 
          
Liabilities:         
Future policy benefits (2)$ 3,430,249 Discounted cash flowLapse rate (3)0%14% Decrease
     NPR spread (4)0.06%1.50% Decrease
     Utilization rate (5)63%95% Increase
     Withdrawal rate (6)74%100% Increase
     Mortality rate (7)0%14% Decrease
     Equity volatility curve15%28% Increase
          
 As of December 31, 2014 
  Fair Value Primary Valuation TechniquesUnobservable InputsMinimumMaximumWeighted AverageImpact of Increase in Input on Fair Value (1)
 (in thousands) 
Assets:         
Corporate securities$ 99,209 Discounted cash flowDiscount rate3.55%11.75%3.96%Decrease
Reinsurance recoverables$ 2,996,154 Fair values are determined in the same manner as future policy benefits 
          
Liabilities:         
Future policy benefits (2)$ 3,112,411 Discounted cash flowLapse rate (3)0%14% Decrease
     NPR spread (4)0.00%1.30% Decrease
     Utilization rate (5)63%95% Increase
     Withdrawal rate (6)74%100% Increase
     Mortality rate (7)0%14% Decrease
     Equity volatility curve17%28% 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 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.
  • Lapse rates are adjusted at the contract level based on the in-the-moneyness of the living benefit, and reflect other factors, such as the applicability of any surrender charges. Lapse rates are reduced when contracts are more in-the-money. 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. The NPR spread 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. Utilization assumptions may vary by product type, tax status, and age. The impact of changes in these assumptions is highly dependent on the product type, the 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. These assumptions may vary based on the product type, contractholder age, tax status, and withdrawal timing. 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 policyholders 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 March 31, 2015
  Internal(1) External(2) Total
  (in thousands)
Corporate securities$ 101,595$ 16,727$ 118,322
Asset-backed securities  -  48,838  48,838
Cash equivalents  225  -  225
Other long-term investments  -  635  635
Reinsurance recoverables  3,300,612  -  3,300,612
Receivables from parent and affiliates  -  24,015  24,015
Total assets$ 3,402,432$ 90,215$ 3,492,647
       
Future policy benefits  3,430,249  -  3,430,249
Total liabilities $ 3,430,249$ -$ 3,430,249
       
 As of December 31, 2014
  Internal(1) External(2) Total
  (in thousands)
Corporate securities$ 99,209$ 16,861$ 116,070
Asset-backed securities  -  40,524  40,524
Cash equivalents  225  -  225
Other long-term investments  -  633  633
Reinsurance recoverables  2,996,154  -  2,996,154
Receivables from parent and affiliates  -  22,320  22,320
Total assets$ 3,095,588$ 80,338$ 3,175,926
       
Future policy benefits  3,112,411  -  3,112,411
Total liabilities $ 3,112,411$ -$ 3,112,411

  • Represents valuations reflecting both internally-derived and market inputs, as well as third-party pricing information or quotes. 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 indicative broker quotes where pricing inputs are not readily available.