Investments

Fixed Maturity and Equity Securities Available-for-Sale

The following tables provide information relating to investments in fixed maturity and equity securities by sector as of March 31, 2017 and December 31, 2016 (dollars in thousands):



March 31, 2017:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate securities	$	19,281,539	$	1,037,337	$	157,423	$	20,161,453	61.8	%	$	—
Canadian and Canadian provincial governments	2,601,403		1,122,418		3,457		3,720,364		11.4		—
Residential mortgage-backed securities	1,281,171		34,382		11,676		1,303,877		4.0		—
Asset-backed securities	1,379,251		14,480		13,141		1,380,590		4.2		275
Commercial mortgage-backed securities	1,272,020		24,353		7,035		1,289,338		3.9		—
U.S. government and agencies	1,522,651		15,135		55,334		1,482,452		4.5		—
State and political subdivisions	566,553		40,471		11,567		595,457		1.8		—
Other foreign government, supranational and foreign government-sponsored enterprises	2,635,979		136,850		11,567		2,761,262		8.4		—
Total fixed maturity securities	$	30,540,567	$	2,425,426	$	271,200	$	32,694,793	100.0	%	$	275
Non-redeemable preferred stock	$	33,656	$	360	$	2,801	$	31,215	28.0	%
Other equity securities	83,473		532		3,604		80,401		72.0
Total equity securities	$	117,129	$	892	$	6,405	$	111,616	100.0	%



December 31, 2016:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate securities	$	18,924,711	$	911,618	$	217,245	$	19,619,084	61.1	%	$	—
Canadian and Canadian provincial governments	2,561,605		1,085,982		3,541		3,644,046		11.4		—
Residential mortgage-backed securities	1,258,039		33,917		13,380		1,278,576		4.0		(375		)
Asset-backed securities	1,443,822		9,350		23,828		1,429,344		4.5		275
Commercial mortgage-backed securities	1,342,440		28,973		7,759		1,363,654		4.2		—
U.S. government and agencies	1,518,702		12,644		63,044		1,468,302		4.6		—
State and political subdivisions	566,761		37,499		12,464		591,796		1.8		—
Other foreign government, supranational and foreign government-sponsored enterprises	2,595,707		123,054		19,938		2,698,823		8.4		—
Total fixed maturity securities	$	30,211,787	$	2,243,037	$	361,199	$	32,093,625	100.0	%	$	(100	)
Non-redeemable preferred stock	$	55,812	$	1,648	$	6,337	$	51,123	18.6	%
Other equity securities	229,767		1,792		7,321		224,238		81.4
Total equity securities	$	285,579	$	3,440	$	13,658	$	275,361	100.0	%

The Company enters into various collateral arrangements with counterparties that require both the pledging and acceptance of fixed maturity securities as collateral. Pledged fixed maturity securities are included in fixed maturity securities, available-for-sale in the condensed consolidated balance sheets. Fixed maturity securities received as collateral are held in separate custodial accounts and are not recorded on the Company’s condensed consolidated balance sheets. Subject to certain constraints, the Company is permitted by contract to sell or repledge collateral it receives; however, as of March 31, 2017 and December 31, 2016, none of the collateral received had been sold or repledged. The Company also holds assets in trust to satisfy collateral requirements under certain third-party reinsurance treaties. The following table includes fixed maturity securities pledged and received as collateral and assets in trust held to satisfy collateral requirements under derivative transactions and certain third-party reinsurance treaties as of March 31, 2017 and December 31, 2016 (dollars in thousands):



	March 31, 2017				December 31, 2016
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities pledged as collateral	$	183,860	$	189,387	$	207,066	$	210,676
Fixed maturity securities received as collateral	n/a		414,893		n/a		300,925
Assets in trust held to satisfy collateral requirements	12,157,811		13,015,274		12,135,258		12,874,370

The Company monitors its concentrations of financial instruments on an ongoing basis and mitigates credit risk by maintaining a diversified investment portfolio which limits exposure to any one issuer. The Company’s exposure to concentrations of credit risk from single issuers greater than 10% of the Company’s stockholders’ equity included securities of the U.S. government and its agencies as well as the securities disclosed below as of March 31, 2017 and December 31, 2016 (dollars in thousands).



	March 31, 2017				December 31, 2016
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities guaranteed or issued by:
Canadian province of Quebec	$	1,020,682	$	1,644,422	$	1,004,261	$	1,612,957
Canadian province of Ontario	852,739		1,157,169		832,764		1,126,433

The amortized cost and estimated fair value of fixed maturity securities classified as available-for-sale at March 31, 2017 are shown by contractual maturity in the table below (dollars in thousands). Actual maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Asset and mortgage-backed securities are shown separately in the table below, as they are not due at a single maturity date.



	Amortized Cost		Estimated Fair Value
Available-for-sale:
Due in one year or less	$	837,801	$	849,530
Due after one year through five years	6,853,278		7,132,145
Due after five years through ten years	9,113,078		9,548,835
Due after ten years	9,803,968		11,190,478
Asset and mortgage-backed securities	3,932,442		3,973,805
Total	$	30,540,567	$	32,694,793

Corporate Fixed Maturity Securities

The tables below show the major industry types of the Company’s corporate fixed maturity holdings as of March 31, 2017 and December 31, 2016 (dollars in thousands):



March 31, 2017:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	6,862,721	$	7,103,865	35.2	%
Industrial	10,398,548		10,889,185		54.0
Utility	2,020,270		2,168,403		10.8
Total	$	19,281,539	$	20,161,453	100.0	%

December 31, 2016:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	6,725,199	$	6,888,968	35.2	%
Industrial	10,228,813		10,639,613		54.2
Utility	1,970,699		2,090,503		10.6
Total	$	18,924,711	$	19,619,084	100.0	%

Other-Than-Temporary Impairments - Fixed Maturity and Equity Securities

As discussed in Note 2 – “Summary of Significant Accounting Policies” of the 2016 Annual Report, a portion of certain other-than-temporary impairment (“OTTI”) losses on fixed maturity securities is recognized in AOCI. For these securities, the net amount recognized in the condensed consolidated statements of income (“credit loss impairments”) represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. Any remaining difference between the fair value and amortized cost is recognized in AOCI. The following table sets forth the amount of pre-tax credit loss impairments on fixed maturity securities held by the Company as of the dates indicated, for which a portion of the OTTI loss was recognized in AOCI, and the corresponding changes in such amounts (dollars in thousands):



	Three months ended March 31,
	2017			2016
Balance, beginning of period	$	6,013		$	7,284
Credit loss OTTI previously recognized on securities impaired to fair value during the period	(2,336		)	—
Balance, end of period	$	3,677		$	7,284

Unrealized Losses for Fixed Maturity and Equity Securities Available-for-Sale

The following table presents the total gross unrealized losses for the 1,308 and 1,535 fixed maturity and equity securities as of March 31, 2017 and December 31, 2016, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):



	March 31, 2017				December 31, 2016
	Gross Unrealized Losses		% of Total		Gross Unrealized Losses		% of Total
Less than 20%	$	251,640	90.7	%	$	337,831	90.1	%
20% or more for less than six months	4,113		1.5		19,438		5.2
20% or more for six months or greater	21,852		7.8		17,588		4.7
Total	$	277,605	100.0	%	$	374,857	100.0	%

The Company’s determination of whether a decline in value is other-than-temporary includes analysis of the underlying credit and the extent and duration of a decline in value. The Company’s credit analysis of an investment includes determining whether the issuer is current on its contractual payments, evaluating whether it is probable that the Company will be able to collect all amounts due according to the contractual terms of the security and analyzing the overall ability of the Company to recover the amortized cost of the investment. In the Company’s impairment review process, the duration and severity of an unrealized loss position for equity securities are given greater weight and consideration given the lack of contractual cash flows or deferability features.

The following tables present the estimated fair values and gross unrealized losses, including other-than-temporary impairment losses reported in AOCI, for 1,308 and 1,535 fixed maturity and equity securities that have estimated fair values below amortized cost as of March 31, 2017 and December 31, 2016, respectively (dollars in thousands). These investments are presented by class and grade of security, as well as the length of time the related fair value has remained below amortized cost.



	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
March 31, 2017:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate securities	$	3,658,776	$	89,271	$	412,413	$	33,285	$	4,071,189	$	122,556
Canadian and Canadian provincial governments	137,014		3,457		—		—		137,014		3,457
Residential mortgage-backed securities	467,812		9,394		101,886		2,277		569,698		11,671
Asset-backed securities	381,219		4,213		270,456		8,248		651,675		12,461
Commercial mortgage-backed securities	370,152		6,816		7,398		111		377,550		6,927
U.S. government and agencies	1,122,884		55,334		—		—		1,122,884		55,334
State and political subdivisions	155,720		7,963		13,086		3,604		168,806		11,567
Other foreign government, supranational and foreign government-sponsored enterprises	432,726		9,041		40,431		1,985		473,157		11,026
Total investment grade securities	6,726,303		185,489		845,670		49,510		7,571,973		234,999
Below investment grade securities:
Corporate securities	195,427		3,023		110,909		31,844		306,336		34,867
Residential mortgage-backed securities	—		—		122		5		122		5
Asset-backed securities	—		—		11,463		680		11,463		680
Commercial mortgage-backed securities	1,891		108		—		—		1,891		108
Other foreign government, supranational and foreign government-sponsored enterprises	9,704		84		14,163		457		23,867		541
Total below investment grade securities	207,022		3,215		136,657		32,986		343,679		36,201
Total fixed maturity securities	$	6,933,325	$	188,704	$	982,327	$	82,496	$	7,915,652	$	271,200
Non-redeemable preferred stock	$	—	$	—	$	24,289	$	2,801	$	24,289	$	2,801
Other equity securities	70,591		3,604		—		—		70,591		3,604
Total equity securities	$	70,591	$	3,604	$	24,289	$	2,801	$	94,880	$	6,405



	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
December 31, 2016:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate securities	$	4,661,706	$	124,444	$	549,273	$	43,282	$	5,210,979	$	167,726
Canadian and Canadian provincial governments	101,578		3,541		—		—		101,578		3,541
Residential mortgage-backed securities	490,473		9,733		112,216		3,635		602,689		13,368
Asset-backed securities	563,259		12,010		257,166		9,653		820,425		21,663
Commercial mortgage-backed securities	368,465		6,858		10,853		166		379,318		7,024
U.S. government and agencies	1,056,101		63,044		—		—		1,056,101		63,044
State and political subdivisions	187,194		9,396		13,635		3,068		200,829		12,464
Other foreign government, supranational and foreign government-sponsored enterprises	524,236		13,372		51,097		2,981		575,333		16,353
Total investment grade securities	7,953,012		242,398		994,240		62,785		8,947,252		305,183
Below investment grade securities:
Corporate securities	330,757		7,914		163,152		41,605		493,909		49,519
Residential mortgage-backed securities	—		—		412		12		412		12
Asset-backed securities	5,904		700		12,581		1,465		18,485		2,165
Commercial mortgage-backed securities	5,815		735		—		—		5,815		735
Other foreign government, supranational and foreign government-sponsored enterprises	32,355		1,258		39,763		2,327		72,118		3,585
Total below investment grade securities	374,831		10,607		215,908		45,409		590,739		56,016
Total fixed maturity securities	$	8,327,843	$	253,005	$	1,210,148	$	108,194	$	9,537,991	$	361,199
Non-redeemable preferred stock	$	10,831	$	831	$	21,879	$	5,506	$	32,710	$	6,337
Other equity securities	202,068		7,020		6,751		301		208,819		7,321
Total equity securities	$	212,899	$	7,851	$	28,630	$	5,807	$	241,529	$	13,658

The Company has no intention to sell, nor does it expect to be required to sell, the securities outlined in the table above, as of the dates indicated. However, unforeseen facts and circumstances may cause the Company to sell fixed maturity and equity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality and liquidity guidelines.

Unrealized losses on below investment grade securities as of March 31, 2017 are primarily related to high-yield corporate securities. Changes in unrealized losses are primarily being driven by changes in credit spreads and interest rates.

Investment Income, Net of Related Expenses

Major categories of investment income, net of related expenses, consist of the following (dollars in thousands):



	Three months ended March 31,
	2017			2016
Fixed maturity securities available-for-sale	$	324,500		$	312,414
Mortgage loans on real estate	44,347			39,792
Policy loans	15,272			16,134
Funds withheld at interest	127,578			55,980
Short-term investments and cash and cash equivalents	1,510			2,191
Other	19,827			8,608
Investment income	533,034			435,119
Investment expense	(18,670		)	(17,853		)
Investment income, net of related expenses	$	514,364		$	417,266

Investment Related Gains (Losses), Net

Investment related gains (losses), net consist of the following (dollars in thousands):



	Three months ended March 31,
	2017			2016
Fixed maturity and equity securities available for sale:
Other-than-temporary impairment losses on fixed maturity securities recognized in earnings	$	(17,189	)	$	(33,817	)
Gain on investment activity	17,893			27,192
Loss on investment activity	(12,563		)	(11,787		)
Other impairment losses and change in mortgage loan provision	(99		)	(2,060		)
Derivatives and other, net	72,481			(100,414		)
Total investment related gains (losses), net	$	60,523		$	(120,886	)

The fixed maturity impairments for the three months ended March 31, 2017 and 2016 were largely related to high-yield energy and emerging market corporate securities. The fluctuations in investment related gains (losses) for derivatives and other for the three months ended March 31, 2017, compared to the same period in 2016, are primarily due to changes in the fair value of embedded derivatives and interest rate swaps.

During the three months ended March 31, 2017 and 2016, the Company sold fixed maturity and equity securities with fair values of $576.2 million and $242.6 million at losses of $12.6 million and $11.8 million, respectively. The Company generally does not buy and sell securities on a short-term basis.

Securities Borrowing, Lending and Other

The Company participates in securities borrowing programs whereby securities, which are not reflected on the Company’s condensed consolidated balance sheets, are borrowed from third parties. The borrowed securities are used to provide collateral under affiliated reinsurance transactions. The Company is required to maintain a minimum of 100% of the fair value, or par value, under certain programs, of the borrowed securities as collateral. The collateral consists of rights to reinsurance treaty cash flows. If cash flows from the reinsurance treaties are insufficient to maintain the minimum collateral requirement, the Company may substitute cash or securities to meet the requirement. No cash or securities have been pledged by the Company for this purpose.

The Company also participates in a securities lending program whereby securities, reflected as investments on the Company’s consolidated balance sheets, are loaned to a third party. The Company receives securities as collateral, in an amount equal to a minimum of 105% of the fair value of the securities lent. The securities received are not reflected on the Company’s condensed consolidated balance sheets.

The Company also participates in repurchase/reverse repurchase programs in which securities, reflected as investments on the Company’s condensed consolidated balance sheets, are pledged to third parties. In return, the Company receives securities from the third parties with an estimated fair value equal to a minimum of 100% of the securities pledged. The securities received are not reflected on the Company’s condensed consolidated balance sheets.

The Company also participates in a repurchase program in which securities, reflected as investments on the Company’s condensed consolidated balance sheets, are pledged to a third party. In return, the Company receives cash from the third party, which is reflected as a payable to the third party and included in other liabilities on the condensed consolidated balance sheets. The Company is required to maintain a minimum collateral balance with a fair value of 102% of the cash received.

The following table includes the amount of borrowed securities, securities lent and securities collateral received as part of the securities lending program and repurchased/reverse repurchased securities pledged and received as of March 31, 2017 and December 31, 2016 (dollars in thousands).



	March 31, 2017				December 31, 2016
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Borrowed securities	$	265,180	$	279,637	$	263,820	$	279,186
Securities lending:
Securities loaned	87,865		88,486		74,389		73,625
Securities received	n/a		94,000		n/a		80,000
Repurchase program/reverse repurchase program:
Securities pledged	480,965		504,645		476,531		499,891
Securities received	n/a		518,358		n/a		515,200

The Company also held cash collateral for repurchase program/reverse repurchase programs of $30.5 million and $28.8 million at March 31, 2017 and December 31, 2016, respectively.

The following table presents information on the Company’s securities lending and repurchase transactions as of March 31, 2017 and December 31, 2016 (dollars in thousands). Collateral associated with certain borrowed securities is not included within the table, as the collateral pledged to each counterparty is the right to reinsurance treaty cash flows.



	March 31, 2017
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
Securities lending transactions:
Corporate securities	$	—	$	—	$	—	$	88,486	$	88,486
Total	$	—	$	—	$	—	$	88,486	$	88,486
Repurchase transactions:
Corporate securities	$	—	$	—	$	2,531	$	172,119	$	174,650
Residential mortgage-backed securities	—		—		—		90,422		90,422
U.S. government and agencies	—		—		30,006		185,811		215,817
Foreign government	—		—		—		20,411		20,411
Other	3,345		—		—		—		3,345
Total	3,345		—		32,537		468,763		504,645
Total borrowings	$	3,345	$	—	$	32,537	$	557,249	$	593,131

Gross amount of recognized liabilities for securities lending and repurchase transactions in preceding table									$	642,874
Amounts related to agreements not included in offsetting disclosure									$	49,743



	December 31, 2016
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
Securities lending transactions:
Corporate securities	$	—	$	—	$	4,017	$	69,608	$	73,625
Total	$	—	$	—	$	4,017	$	69,608	$	73,625
Repurchase transactions:
Corporate securities	$	—	$	—	$	3,220	$	166,979	$	170,199
Residential mortgage-backed securities	—		—		—		92,546		92,546
U.S. government and agencies	—		—		—		216,000		216,000
Foreign government	—		—		—		19,900		19,900
Other	1,246		—		—		—		1,246
Total	1,246		—		3,220		495,425		499,891
Total borrowings	$	1,246	$	—	$	7,237	$	565,033	$	573,516

Gross amount of recognized liabilities for securities lending and repurchase transactions in preceding table									$	624,032
Amounts related to agreements not included in offsetting disclosure									$	50,516

The Company has elected to offset amounts recognized as receivables and payables resulting from the repurchase/reverse repurchase programs. After the effect of offsetting, the net amount presented on the consolidated balance sheets was a liability of $2.5 million and $5.5 million as of March 31, 2017 and December 31, 2016, respectively. As of March 31, 2017 and December 31, 2016, the Company recognized payables resulting from cash received as collateral associated with a repurchase agreement, as discussed above. Amounts owed to and due from the counterparties may be settled in cash or offset, in accordance with the agreements.

Mortgage Loans on Real Estate

Mortgage loans represented approximately 8.5% and 8.4% of the Company’s total investments as of March 31, 2017 and December 31, 2016. The Company makes mortgage loans on income producing properties that are geographically diversified throughout the U.S. with the largest concentration being in the state of California, which represented 23.5% and 22.1% of mortgage loans on real estate as of March 31, 2017 and December 31, 2016, respectively. The recorded investment in mortgage loans on real estate presented below is gross of unamortized deferred loan origination fees and expenses, and valuation allowances.

The distribution of mortgage loans by property type is as follows as of March 31, 2017 and December 31, 2016 (dollars in thousands):



	March 31, 2017					December 31, 2016
Property type:	Carrying Value			% of Total		Carrying Value			% of Total
Office building	$	1,329,399		34.2	%	$	1,270,113		33.6	%
Retail	1,202,317			31.0		1,179,936			31.2
Industrial	750,978			19.4		713,461			18.8
Apartment	425,614			11.0		447,088			11.8
Other commercial	171,461			4.4		172,609			4.6
Recorded investment	3,879,769			100.0	%	$	3,783,207		100.0	%
Unamortized balance of loan origination fees and expenses	(674		)			—
Valuation allowances	(7,786		)			(7,685		)
Total mortgage loans on real estate	$	3,871,309				$	3,775,522

The maturities of the mortgage loans as of March 31, 2017 and December 31, 2016 are as follows (dollars in thousands):



	March 31, 2017				December 31, 2016
	Recorded Investment		% of Total		Recorded Investment		% of Total
Due within five years	$	907,453	23.4	%	$	822,073	21.7	%
Due after five years through ten years	2,144,303		55.3		2,099,559		55.5
Due after ten years	828,013		21.3		861,575		22.8
Total	$	3,879,769	100.0	%	$	3,783,207	100.0	%

The following tables set forth certain key credit quality indicators of the Company’s recorded investment in mortgage loans as of March 31, 2017 and December 31, 2016 (dollars in thousands):



	Recorded Investment
	Debt Service Ratios
	>1.20x		1.00x - 1.20x		<1.00x		Total		% of Total
March 31, 2017:
Loan-to-Value Ratio
0% - 59.99%	$	1,967,449	$	64,541	$	1,183	$	2,033,173	52.3	%
60% - 69.99%	1,259,650		34,584		—		1,294,234		33.4
70% - 79.99%	368,504		20,734		24,207		413,445		10.7
Greater than 80%	103,896		—		35,021		138,917		3.6
Total	$	3,699,499	$	119,859	$	60,411	$	3,879,769	100.0	%



	Recorded Investment
	Debt Service Ratios
	>1.20x		1.00x - 1.20x		<1.00x		Total		% of Total
December 31, 2016:
Loan-to-Value Ratio
0% - 59.99%	$	1,859,640	$	64,749	$	1,366	$	1,925,755	50.8	%
60% - 69.99%	1,257,788		34,678		—		1,292,466		34.2
70% - 79.99%	370,092		20,869		24,369		415,330		11.0
Greater than 80%	114,297		—		35,359		149,656		4.0
Total	$	3,601,817	$	120,296	$	61,094	$	3,783,207	100.0	%

None of the payments due to the Company on its recorded investment in mortgage loans were delinquent as of March 31, 2017 and December 31, 2016.

The following table presents the recorded investment in mortgage loans, by method of measuring impairment, and the related valuation allowances as of March 31, 2017 and December 31, 2016 (dollars in thousands):



	March 31, 2017		December 31, 2016
Mortgage loans:
Individually measured for impairment	$	2,099	$	2,216
Collectively measured for impairment	3,877,670		3,780,991
Recorded investment	$	3,879,769	$	3,783,207
Valuation allowances:
Individually measured for impairment	$	—	$	—
Collectively measured for impairment	7,786		7,685
Total valuation allowances	$	7,786	$	7,685

Information regarding the Company’s loan valuation allowances for mortgage loans for the three months ended March 31, 2017 and 2016 is as follows (dollars in thousands):



	Three months ended March 31,
	2017		2016
Balance, beginning of period	$	7,685	$	6,813
Provision (release)	101		11
Balance, end of period	$	7,786	$	6,824

Information regarding the portion of the Company’s mortgage loans that were impaired as of March 31, 2017 and December 31, 2016 is as follows (dollars in thousands):



	Unpaid Principal Balance		Recorded Investment		Related Allowance		Carrying Value
March 31, 2017:
Impaired mortgage loans with no valuation allowance recorded	$	2,641	$	2,099	$	—	$	2,099
Impaired mortgage loans with valuation allowance recorded	—		—		—		—
Total impaired mortgage loans	$	2,641	$	2,099	$	—	$	2,099
December 31, 2016:
Impaired mortgage loans with no valuation allowance recorded	$	2,758	$	2,216	$	—	$	2,216
Impaired mortgage loans with valuation allowance recorded	—		—		—		—
Total impaired mortgage loans	$	2,758	$	2,216	$	—	$	2,216

The Company’s average investment balance of impaired mortgage loans and the related interest income are reflected in the table below for the periods indicated (dollars in thousands):
	Three months ended March 31,
	2017				2016
	Average Recorded Investment⁽¹⁾		Interest Income		Average Recorded Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	2,157	$	33	$	2,421	$	12
Impaired mortgage loans with valuation allowance recorded	—		—		10,918		144
Total impaired mortgage loans	$	2,157	$	33	$	13,339	$	156

(1) Average recorded investment represents the average loan balances as of the beginning of period and all subsequent quarterly end of period balances.

The Company did not acquire any impaired mortgage loans during the three months ended March 31, 2017 and 2016. The Company had no mortgage loans that were on a nonaccrual status at March 31, 2017 and December 31, 2016.

Policy Loans

Policy loans comprised approximately 3.1% and 3.2% of the Company’s total investments as of March 31, 2017 and December 31, 2016, respectively, the majority of which are associated with one client. These policy loans present no credit risk because the amount of the loan cannot exceed the obligation due to the ceding company upon the death of the insured or surrender of the underlying policy. The provisions of the treaties in force and the underlying policies determine the policy loan interest rates. The Company earns a spread between the interest rate earned on policy loans and the interest rate credited to corresponding liabilities.

Funds Withheld at Interest

Funds withheld at interest comprised approximately 13.1% of the Company’s total investments for both March 31, 2017 and December 31, 2016. Of the $5.9 billion funds withheld at interest balance, net of embedded derivatives, as of March 31, 2017, $4.1 billion of the balance is associated with one client. For reinsurance agreements written on a modified coinsurance basis and certain agreements written on a coinsurance funds withheld basis, assets equal to the net statutory reserves are withheld and legally owned and managed by the ceding company and are reflected as funds withheld at interest on the Company’s condensed consolidated balance sheets. In the event of a ceding company’s insolvency, the Company would need to assert a claim on the assets supporting its reserve liabilities. However, the risk of loss to the Company is mitigated by its ability to offset amounts it owes the ceding company for claims or allowances against amounts owed to the Company from the ceding company.

Other Invested Assets

Other invested assets include equity securities, limited partnership interests, joint ventures (other than operating joint ventures), derivative contracts and fair value option (“FVO”) contractholder-directed unit-linked investments. Other invested assets also include Federal Home Loan Bank of Des Moines (“FHLB”) common stock, real estate held-for-investment, equity release mortgages and structured loans, all of which are included in other in the table below. The fair value option was elected for contractholder-directed investments supporting unit-linked variable annuity type liabilities which do not qualify for presentation and reporting as separate accounts. Other invested assets represented approximately 3.1% and 3.6% of the Company’s total investments as of March 31, 2017 and December 31, 2016, respectively. Carrying values of these assets as of March 31, 2017 and December 31, 2016 are as follows (dollars in thousands):



	March 31, 2017		December 31, 2016
Equity securities	$	111,616	$	275,361
Limited partnership interests and real estate joint ventures	706,143		687,522
Derivatives	170,183		229,108
FVO contractholder-directed unit-linked investments	193,600		190,120
Other	247,633		209,829
Total other invested assets	$	1,429,175	$	1,591,940