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Derivative Instruments (Tables)
 9 Months Ended
Sep. 30, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule Of Derivative Instruments In Statement Of Financial Position Fair Value
The following table presents the notional amounts and gross fair value of derivative instruments prior to taking into account the netting effects of master netting agreements as of September 30, 2014 and December 31, 2013 (dollars in thousands):
 
 
 
September 30, 2014
 
December 31, 2013
 
 
Notional
 
Carrying Value/Fair Value
 
Notional
 
Carrying Value/Fair Value
 
 
Amount
 
Assets
 
Liabilities
 
Amount
 
Assets
 
Liabilities
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
1,135,243

 
$
64,064

 
$
4,933

 
$
1,592,943

 
$
32,555

 
$
21,873

Interest rate options
 
240,000

 
6,705

 
—

 
240,000

 
2,554

 
—

Financial futures
 
215,732

 
—

 
—

 
123,780

 
—

 
—

Foreign currency forwards
 
40,000

 
—

 
10,408

 
79,618

 
—

 
12,772

Consumer price index swaps
 
58,780

 
32

 
133

 
59,922

 
—

 
309

Credit default swaps
 
763,700

 
10,384

 
2,881

 
682,700

 
10,438

 
2,156

Equity options
 
571,236

 
40,966

 
—

 
757,352

 
33,902

 
—

Longevity swaps
 
350,000

 
4,407

 
—

 
—

 
—

 
—

Mortality swaps
 
50,000

 
—

 
320

 
—

 
—

 
—

Synthetic guaranteed investment contracts
 
5,651,263

 
—

 
—

 
4,629,859

 
—

 
—

Embedded derivatives in:
 
 
 
 
 
 
 
 
 
 
 
 
Modified coinsurance or funds withheld arrangements
 
—

 
36,617

 
—

 
—

 
—

 
176,270

Indexed annuity products
 
—

 
—

 
911,549

 
—

 
—

 
838,670

Variable annuity products
 
—

 
—

 
106,378

 
—

 
—

 
30,055

Total non-hedging derivatives
 
9,075,954

 
163,175

 
1,036,602

 
8,166,174

 
79,449

 
1,082,105

Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
120,000

 
—

 
10,634

 
49,131

 
—

 
4,606

Foreign currency swaps
 
682,206

 
52,236

 
—

 
728,674

 
21,903

 
620

Total hedging derivatives
 
802,206

 
52,236

 
10,634

 
777,805

 
21,903

 
5,226

Total derivatives
 
$
9,878,160

 
$
215,411

 
$
1,047,236

 
$
8,943,979

 
$
101,352

 
$
1,087,331
Offsetting Assets And Liabilities
The following table provides information relating to the Company’s derivative instruments as of September 30, 2014 and December 31, 2013 (dollars in thousands):
 
 
 
 
 
 
 
 
Gross Amounts Not
Offset in the Balance Sheet
 
 
 
 
Gross Amounts   
Recognized
 
Gross Amounts
Offset in the
Balance Sheet   
 
Net Amounts
Presented in the
Balance Sheet   
 
Financial
Instruments     
 
Cash Collateral   
Pledged/
Received
 
Net Amount   
September 30, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets
 
$
178,794

 
$
(10,833
)
 
$
167,961

 
$
(31,421
)
 
$
(117,525
)
 
$
19,015

Derivative liabilities
 
29,309

 
(10,833
)
 
18,476

 
(31,334
)
 
(941
)
 
(13,799
)
December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets
 
$
101,352

 
$
(26,125
)
 
$
75,227

 
$
(11,095
)
 
$
(51,006
)
 
$
13,126

Derivative liabilities
 
42,336

 
(26,125
)
 
16,211

 
(18,081
)
 
(8,033
)
 
(9,903
)
The Company has elected to include all derivatives, except embedded derivatives, in the tables below, irrespective of whether the
Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) [Table Text Block]
The following table presents the components of AOCI, before income tax, and the condensed consolidated income statement classification where the gain or loss is recognized related to cash flow hedges for the three and nine months ended September 30, 2014 and 2013 (dollars in thousands):
 
 
Three months ended September 30,
 
 
2014
 
2013
Accumulated other comprehensive income (loss), balance beginning of period
 
$
457

 
$
(5,037
)
Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges
 
(10,679
)
 
2,583

Amounts reclassified to investment income
 
(393
)
 
(291
)
Accumulated other comprehensive income (loss), balance end of period
 
$
(10,615
)
 
$
(2,745
)
 
 
 
 
 
 
 
Nine months ended September 30,
 
 
2014
 
2013
Accumulated other comprehensive income (loss), balance beginning of period
 
$
(4,578
)
 
$
403

Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges
 
(5,105
)
 
(2,352
)
Amounts reclassified to investment income
 
(932
)
 
(796
)
Accumulated other comprehensive income (loss), balance end of period
 
$
(10,615
)
 
$
(2,745
)
Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location [Table Text Block]
The following table presents the effects of derivatives in cash flow hedging relationships on the condensed consolidated statements of income and AOCI for the three and nine months ended September 30, 2014 and 2013 (dollars in thousands):
 
Derivatives in Cash Flow
Hedging Relationships
 
Amount of Gains
(Losses) Deferred in
AOCI on Derivatives
 
Amount and Location of Gains (Losses)
Reclassified from AOCI into Income (Loss)
 
Amount and Location of Gains (Losses)
Recognized in Income (Loss) on Derivatives
 
 
(Effective Portion)   
 
(Effective Portion)
 
(Ineffective Portion and Amounts Excluded
from Effectiveness Testing)
 
 
 
 
   Investment Related   
Gains (Losses)
 
Investment Income   
 
   Investment Related   
Gains (Losses)
 
Investment Income   
For the three months ended September 30, 2014:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(10,679
)
 
$
—

 
$
393

 
$
8

 
$
—

For the three months ended September 30, 2013:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
2,583

 
$
—

 
$
291

 
$
(3
)
 
$
—

For the nine months ended September 30, 2014:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(5,105
)
 
$
—

 
$
932

 
$
9

 
$
—

For the nine months ended September 30, 2013:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(2,352
)
 
$
—

 
$
796

 
$
11

 
$
—
Derivatives Hedging Instruments In Net Investment Hedging Relationships
The following table illustrates the Company’s net investments in foreign operations (“NIFO”) hedges for the three and nine months ended September 30, 2014 and 2013 (dollars in thousands):
 
 
Derivative Gains (Losses) Deferred in AOCI     
 
For the three months ended September 30,
 
For the nine months ended September 30,
Type of NIFO Hedge (1) (2)
2014
 
2013
 
2014
 
2013
Foreign currency swaps
$
27,931

 
$
(14,600
)
 
$
28,675

 
$
20,235

 
(1)
There were no sales or substantial liquidations of net investments in foreign operations that would have required the reclassification of gains or losses from accumulated other comprehensive income (loss) into investment income during the periods presented.
(2)
There was no ineffectiveness recognized for the Company’s hedges of net investments in foreign operations.
Derivative Instruments Gain Loss By Income Statement Location
A summary of the effect of non-hedging derivatives, including embedded derivatives, on the Company’s income statement for the three and nine months ended September 30, 2014 and 2013 is as follows (dollars in thousands):
 
 
 
 
Gain (Loss) for the three months ended        
September 30,
Type of Non-hedging Derivative
 
Income Statement Location of Gain (Loss)
 
2014
 
2013
Interest rate swaps
 
Investment related gains (losses), net
 
$
9,121

 
$
(8,221
)
Interest rate options
 
Investment related gains (losses), net
 
865

 
(2,374
)
Financial futures
 
Investment related gains (losses), net
 
6,446

 
(1,140
)
Foreign currency forwards
 
Investment related gains (losses), net
 
(5,277
)
 
629

CPI swaps
 
Investment related gains (losses), net
 
(274
)
 
(39
)
Credit default swaps
 
Investment related gains (losses), net
 
(1,389
)
 
10,807

Equity options
 
Investment related gains (losses), net
 
1,018

 
(24,113
)
Longevity swaps
 
Other revenues
 
4,499

 
—

Mortality swaps
 
Other revenues
 
(320
)
 
—

Subtotal
 
 
 
14,689

 
(24,451
)
Embedded derivatives in:
 
 
 
 
 
 
Modified coinsurance or funds withheld arrangements
 
Investment related gains (losses), net
 
56,811

 
(67,461
)
Indexed annuity products
 
Interest credited
 
(35,650
)
 
28,379

Variable annuity products
 
Investment related gains (losses), net
 
(47,479
)
 
19,829

Total non-hedging derivatives
 
 
 
$
(11,629
)
 
$
(43,704
)
 
 
 
 
 
 
 
 
 
 
 
Gain (Loss) for the nine months ended        
September 30,
Type of Non-hedging Derivative
 
Income Statement Location of Gain (Loss)
 
2014
 
2013
Interest rate swaps
 
Investment related gains (losses), net
 
$
61,025

 
$
(68,900
)
Interest rate options
 
Investment related gains (losses), net
 
4,151

 
(8,373
)
Financial futures
 
Investment related gains (losses), net
 
(2,822
)
 
(7,306
)
Foreign currency forwards
 
Investment related gains (losses), net
 
(2,945
)
 
(7,988
)
CPI swaps
 
Investment related gains (losses), net
 
193

 
(2,027
)
Credit default swaps
 
Investment related gains (losses), net
 
1,280

 
17,138

Equity options
 
Investment related gains (losses), net
 
(16,748
)
 
(59,784
)
Longevity swaps
 
Other revenues
 
4,499

 
—

Mortality swaps
 
Other revenues
 
(320
)
 
—

Subtotal
 
 
 
48,313

 
(137,240
)
Embedded derivatives in:
 
 
 
 
 
 
Modified coinsurance or funds withheld arrangements
 
Investment related gains (losses), net
 
212,887

 
70,514

Indexed annuity products
 
Interest credited
 
(86,775
)
 
(32,637
)
Variable annuity products
 
Investment related gains (losses), net
 
(76,323
)
 
106,952

Total non-hedging derivatives
 
 
 
$
98,102

 
$
7,589
Disclosure Of Credit Derivatives
The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of credit default swaps sold by the Company at September 30, 2014 and December 31, 2013 (dollars in thousands):
 
 
September 30, 2014
 
December 31, 2013
Rating Agency Designation of Referenced Credit Obligations(1)
 
Estimated Fair
Value of Credit  
Default Swaps
 
Maximum
Amount of Future
Payments under
Credit Default
Swaps(2)
 
Weighted
Average
Years to
Maturity(3)
 
Estimated Fair
Value of Credit  
Default Swaps
 
Maximum
Amount of Future
Payments under
Credit Default
Swaps(2)
 
Weighted
Average
Years to
Maturity(3)  
AAA/AA-/A+/A/A-
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps
 
$
1,356

 
$
140,500

 
4.8

 
$
614

 
$
117,500

 
5.1

Credit default swaps referencing indices
 
—

 
—

 
—

 
—

 
—

 
—

Subtotal
 
1,356

 
140,500

 
4.8

 
614

 
117,500

 
5.1

BBB+/BBB/BBB-
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps
 
(161
)
 
212,200

 
5.2

 
656

 
142,200

 
4.9

Credit default swaps referencing indices
 
6,515

 
406,000

 
4.7

 
7,295

 
405,000

 
5.0

Subtotal
 
6,354

 
618,200

 
4.9

 
7,951

 
547,200

 
5.0

BB+
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps
 
(207
)
 
5,000

 
4.7

 
—

 
—

 
—

Credit default swaps referencing indices
 
—

 
—

 
—

 
—

 
—

 
—

Subtotal
 
(207
)
 
5,000

 
4.7

 
—

 
—

 
—

Total
 
$
7,503

 
$
763,700

 
4.9

 
$
8,565

 
$
664,700

 
4.4

 
(1)
The rating agency designations are based on ratings from Standard and Poor’s (“S&P”).
(2)
Assumes the value of the referenced credit obligations is zero.
(3)
The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts.
Changes In Estimated Fair Value Related To Embedded Derivatives
The related gains (losses) and the effect on net income after amortization of deferred acquisition costs (“DAC”) and income taxes for the three and nine months ended September 30, 2014 and 2013 are reflected in the following table (dollars in thousands):
 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
Embedded derivatives in modco or funds withheld arrangements included in investment related gains
$
56,812

 
$
(67,461
)
 
$
212,888

 
$
70,514

After the associated amortization of DAC and taxes, the related amounts included in net income
13,353

 
(15,693
)
 
49,394

 
19,842

Embedded derivatives in variable annuity contracts included in investment related gains
(47,479
)
 
19,829

 
(76,323
)
 
106,954

After the associated amortization of DAC and taxes, the related amounts included in net income
26,542

 
11,052

 
6,388

 
52,326

Amounts related to embedded derivatives in equity-indexed annuities included in benefits and expenses
(35,650
)
 
28,379

 
(86,775
)
 
(32,637
)
After the associated amortization of DAC and taxes, the related amounts included in net income
(23,920
)
 
6,622

 
(57,896
)
 
(53,772
)
Credit Risk
Information regarding the Company’s credit exposure related to its over-the-counter derivative contracts, centrally cleared derivative contracts and margin account for exchange-traded futures, excluding longevity and mortality swaps, at September 30, 2014 and December 31, 2013 are reflected in the following table (dollars in thousands):
 
 
September 30, 2014
 
December 31, 2013
Estimated fair value of derivatives in net asset position
 
$
145,398

 
$
59,016

Cash provided as collateral(1)
 
941

 
8,033

Securities pledged to counterparties as collateral(2)
 
31,334

 
18,081

Cash pledged from counterparties as collateral(3)
 
(117,525
)
 
(51,006
)
Securities pledged from counterparties as collateral(4)
 
(31,421
)
 
(11,095
)
Initial margin for cleared derivatives
 
(14,289
)
 
(13,350
)
Net credit exposure
 
$
14,438

 
$
9,679

Margin account related to exchange-traded futures(5)
 
$
6,555

 
$
2,566

 
(1)
Consists of receivable from counterparty, included in other assets.
(2)
Included in other invested assets, primarily consists of U.S. Treasury securities.
(3)
Included in cash and cash equivalents, with obligation to return cash collateral recorded in other liabilities.
(4)
Consists of U.S. Treasury securities.
(5)
Included in cash and cash equivalents.