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Investments
 9 Months Ended
Sep. 30, 2017
Investments [Abstract]  
Investments
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 September 30, 2017 and December 31, 2016 (dollars in thousands):
September 30, 2017:
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Estimated Fair Value
 
% of Total
 
Other-than-
temporary impairments in AOCI
Available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
 
$
21,418,741

 
$
1,209,999

 
$
92,910

 
$
22,535,830

 
61.9
%
 
$
—

Canadian and Canadian provincial governments
 
2,850,982

 
1,142,635

 
2,432

 
3,991,185

 
11.0

 
—

Residential mortgage-backed securities
 
1,645,379

 
42,202

 
8,276

 
1,679,305

 
4.6

 
—

Asset-backed securities
 
1,680,918

 
18,713

 
5,063

 
1,694,568

 
4.7

 
275

Commercial mortgage-backed securities
 
1,293,296

 
25,471

 
5,445

 
1,313,322

 
3.6

 
—

U.S. government and agencies
 
1,621,053

 
13,614

 
30,998

 
1,603,669

 
4.4

 
—

State and political subdivisions
 
614,099

 
52,919

 
5,987

 
661,031

 
1.8

 
—

Other foreign government, supranational and foreign government-sponsored enterprises
 
2,765,500

 
145,025

 
7,693

 
2,902,832

 
8.0

 
—

Total fixed maturity securities
 
$
33,889,968

 
$
2,650,578

 
$
158,804

 
$
36,381,742

 
100.0
%
 
$
275

Non-redeemable preferred stock
 
$
41,878

 
$
312

 
$
3,289

 
$
38,901

 
34.4
%
 
 
Other equity securities
 
74,514

 
633

 
1,117

 
74,030

 
65.6

 
 
Total equity securities
 
$
116,392

 
$
945

 
$
4,406

 
$
112,931

 
100.0
%
 
 
 
December 31, 2016:
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Estimated Fair Value
 
% of Total
 
Other-than-
temporary impairments 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 September 30, 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 September 30, 2017 and December 31, 2016 (dollars in thousands):
 
September 30, 2017
 
December 31, 2016
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
Fixed maturity securities pledged as collateral
$
68,841

 
$
72,365

 
$
207,066

 
$
210,676

Fixed maturity securities received as collateral
n/a

 
461,237

 
n/a

 
300,925

Assets in trust held to satisfy collateral requirements
14,598,404

 
15,598,457

 
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 September 30, 2017 and December 31, 2016 (dollars in thousands).
 
September 30, 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
$
1,115,505

 
$
1,766,749

 
$
1,004,261

 
$
1,612,957

Canadian province of Ontario
932,872

 
1,231,201

 
832,764

 
1,126,433


The amortized cost and estimated fair value of fixed maturity securities classified as available-for-sale at September 30, 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
 
$
910,821

 
$
915,586

Due after one year through five years
 
7,339,134

 
7,618,692

Due after five years through ten years
 
9,581,912

 
10,090,704

Due after ten years
 
11,438,508

 
13,069,565

Asset and mortgage-backed securities
 
4,619,593

 
4,687,195

Total
 
$
33,889,968

 
$
36,381,742


Corporate Fixed Maturity Securities
The tables below show the major industry types of the Company’s corporate fixed maturity holdings as of September 30, 2017 and December 31, 2016 (dollars in thousands): 
September 30, 2017:
 
 
 
Estimated
 
 
 
 
Amortized Cost    
 
Fair Value
 
% of Total           
Finance
 
$
7,797,576

 
$
8,146,891

 
36.2
%
Industrial
 
11,323,024

 
11,914,845

 
52.8

Utility
 
2,298,141

 
2,474,094

 
11.0

Total
 
$
21,418,741

 
$
22,535,830

 
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 September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Balance, beginning of period
 
$
3,677

 
$
6,974

 
$
6,013

 
$
7,284

Credit loss OTTI previously recognized on securities which matured, paid down, prepaid or were sold during the period
 
—

 
—

 
(2,336
)
 
(310
)
Balance, end of period
 
$
3,677

 
$
6,974

 
$
3,677

 
$
6,974



Unrealized Losses for Fixed Maturity and Equity Securities Available-for-Sale
The following table presents the total gross unrealized losses for the 1,165 and 1,535 fixed maturity and equity securities as of September 30, 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):
 
 
September 30, 2017
 
December 31, 2016
 
 
Gross
Unrealized
Losses
 
% of Total    
 
Gross
Unrealized
Losses
 
% of Total    
Less than 20%
 
$
140,313

 
86.0
%
 
$
337,831

 
90.1
%
20% or more for less than six months
 
3,407

 
2.1

 
19,438

 
5.2

20% or more for six months or greater
 
19,490

 
11.9

 
17,588

 
4.7

Total
 
$
163,210

 
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 1,165 and 1,535 fixed maturity and equity securities that have estimated fair values below amortized cost as of September 30, 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
September 30, 2017:
 
Estimated
 
Unrealized
 
Estimated
 
Unrealized
 
Estimated
 
Unrealized
 
 
Fair Value
 
Losses
 
Fair Value
 
Losses
 
Fair Value
 
Losses
Investment grade securities:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
 
$
2,035,856

 
$
15,923

 
$
1,213,026

 
$
49,422

 
$
3,248,882

 
$
65,345

Canadian and Canadian provincial governments
 
97,100

 
1,320

 
46,663

 
1,112

 
143,763

 
2,432

Residential mortgage-backed securities
 
507,372

 
5,084

 
154,469

 
3,189

 
661,841

 
8,273

Asset-backed securities
 
516,613

 
2,318

 
133,848

 
2,213

 
650,461

 
4,531

Commercial mortgage-backed securities
 
293,834

 
3,224

 
61,707

 
2,221

 
355,541

 
5,445

U.S. government and agencies
 
1,302,732

 
29,712

 
56,595

 
1,286

 
1,359,327

 
30,998

State and political subdivisions
 
53,977

 
743

 
62,530

 
5,156

 
116,507

 
5,899

Other foreign government, supranational and foreign government-sponsored enterprises
 
327,813

 
2,529

 
104,333

 
4,865

 
432,146

 
7,394

Total investment grade securities
 
5,135,297

 
60,853

 
1,833,171

 
69,464

 
6,968,468

 
130,317

 
Below investment grade securities:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities
 
170,023

 
3,780

 
95,089

 
23,785

 
265,112

 
27,565

Residential mortgage-backed securities
 
—

 
—

 
93

 
3

 
93

 
3

Asset-backed securities
 
—

 
—

 
5,611

 
532

 
5,611

 
532

State and political subdivisions
 
919

 
88

 
—

 
—

 
919

 
88

Other foreign government, supranational and foreign government-sponsored enterprises
 
11,219

 
77

 
15,667

 
222

 
26,886

 
299

Total below investment grade securities
 
182,161

 
3,945

 
116,460

 
24,542

 
298,621

 
28,487

Total fixed maturity securities
 
$
5,317,458

 
$
64,798

 
$
1,949,631

 
$
94,006

 
$
7,267,089

 
$
158,804

Non-redeemable preferred stock
 
$
6,712

 
$
345

 
$
25,983

 
$
2,944

 
$
32,695

 
$
3,289

Other equity securities
 
6,446

 
396

 
58,206

 
721

 
64,652

 
1,117

Total equity securities
 
$
13,158

 
$
741

 
$
84,189

 
$
3,665

 
$
97,347

 
$
4,406

 
 
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 September 30, 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 September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Fixed maturity securities available-for-sale
$
359,157

 
$
325,089

 
$
1,039,392

 
$
961,096

Mortgage loans on real estate
50,040

 
39,802

 
138,829

 
121,494

Policy loans
15,404

 
15,391

 
45,870

 
47,897

Funds withheld at interest
102,144

 
104,609

 
327,089

 
273,482

Short-term investments and cash and cash equivalents
1,977

 
1,752

 
5,266

 
6,265

Other invested assets
47,595

 
21,138

 
90,488

 
57,896

Investment income
576,317

 
507,781

 
1,646,934

 
1,468,130

Investment expense
(19,399
)
 
(18,054
)
 
(57,114
)
 
(53,471
)
Investment income, net of related expenses
$
556,918

 
$
489,727

 
$
1,589,820

 
$
1,414,659


Investment Related Gains (Losses), Net
Investment related gains (losses), net consist of the following (dollars in thousands): 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Fixed maturity and equity securities available for sale:
 
 
 
 
 
 
 
Other-than-temporary impairment losses on fixed maturity securities recognized in earnings
$
(390
)
 
$
—

 
$
(20,980
)
 
$
(34,663
)
Impairment losses on equity securities
(889
)
 
—

 
(889
)
 
—

Gain on investment activity
19,522

 
46,346

 
91,635

 
127,153

Loss on investment activity
(7,678
)
 
(9,054
)
 
(30,712
)
 
(43,397
)
Other impairment losses and change in mortgage loan provision
(2,446
)
 
(262
)
 
(9,220
)
 
(2,111
)
Derivatives and other, net
14,534

 
49,594

 
109,637

 
37,020

Total investment related gains (losses), net
$
22,653

 
$
86,624

 
$
139,471

 
$
84,002


The fixed maturity impairments for the three and nine months ended September 30, 2017 and 2016 were largely related to high-yield and emerging market corporate securities. The equity impairments for the three and nine months ended September 30, 2017 were related to an equity position received as part of a debt restructuring. The other impairment losses and change in mortgage loan provision for the three and nine months ended September 30, 2017 and 2016 were primarily due to impairments on limited partnerships. The fluctuations in investment related gains (losses) for derivatives and other for the three and nine months ended September 30, 2017, compared to the same periods in 2016, are primarily due to changes in the fair value of embedded derivatives and interest rate swaps.
During the three months ended September 30, 2017 and 2016, the Company sold fixed maturity and equity securities with fair values of $484.7 million and $317.3 million at losses of $7.7 million and $9.1 million, respectively. During the nine months ended September 30, 2017 and 2016, the Company sold fixed maturity and equity securities with fair values of $1,771.4 million and $903.1 million at losses of $30.7 million and $43.4 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 condensed 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 as collateral 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 September 30, 2017 and December 31, 2016 (dollars in thousands).
 
September 30, 2017
 
December 31, 2016
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
Borrowed securities
$
360,475

 
$
379,101

 
$
263,820

 
$
279,186

Securities lending:
 
 
 
 
 
 
 
Securities loaned
117,219

 
121,958

 
74,389

 
73,625

Securities received
n/a

 
120,000

 
n/a

 
80,000

Repurchase program/reverse repurchase program:
 
 
 
 
 
 
 
Securities pledged
491,824

 
512,613

 
476,531

 
499,891

Securities received
n/a

 
522,354

 
n/a

 
515,200


The Company also held cash collateral for securities lending and the repurchase program/reverse repurchase programs of $38.5 million and $28.8 million at September 30, 2017 and December 31, 2016, respectively.
The following table presents information on the Company’s securities lending and repurchase transactions as of September 30, 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.
 
September 30, 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
$
—

 
$
—

 
$
—

 
$
121,958

 
$
121,958

Total
—

 
—

 
—

 
121,958

 
121,958

Repurchase transactions:
 
 
 
 
 
 
 
 
 
Corporate securities
—

 
1,472

 
5,402

 
175,258

 
182,132

Residential mortgage-backed securities
—

 
—

 
—

 
87,418

 
87,418

U.S. government and agencies
—

 
—

 
23,206

 
196,040

 
219,246

Foreign government
—

 
—

 
—

 
21,370

 
21,370

Other
2,447

 
—

 
—

 
—

 
2,447

Total
2,447

 
1,472

 
28,608

 
480,086

 
512,613

Total transactions
$
2,447

 
$
1,472

 
$
28,608

 
$
602,044

 
$
634,571

 
 
 
 
 
 
 
 
 
 
Gross amount of recognized liabilities for securities lending and repurchase transactions in preceding table
 
$
680,850

Amounts related to agreements not included in offsetting disclosure
 
$
46,279


 
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 condensed consolidated balance sheets was a liability of $7.9 million and $5.5 million of September 30, 2017 and December 31, 2016, respectively. As of September 30, 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 8.7% and 8.4% of the Company’s total investments as of September 30, 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 21.2% and 22.1% of mortgage loans on real estate as of September 30, 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 September 30, 2017 and December 31, 2016 (dollars in thousands):
 
 
September 30, 2017
 
December 31, 2016
 Property type:
 
Carrying Value
 
% of Total
 
Carrying Value
 
% of Total
Office building
 
$
1,426,673

 
32.9
%
 
$
1,270,113

 
33.6
%
Retail
 
1,316,463

 
30.4

 
1,179,936

 
31.2

Industrial
 
891,051

 
20.6

 
713,461

 
18.8

Apartment
 
508,367

 
11.7

 
447,088

 
11.8

Other commercial
 
191,443

 
4.4

 
172,609

 
4.6

Recorded investment
 
4,333,997

 
100.0
%
 
$
3,783,207

 
100.0
%
Unamortized balance of loan origination fees and expenses
 
(2,531
)
 
 
 
—

 
 
Valuation allowances
 
(9,137
)
 
 
 
(7,685
)
 
 
Total mortgage loans on real estate
 
$
4,322,329

 
 
 
$
3,775,522

 
 

The maturities of the mortgage loans as of September 30, 2017 and December 31, 2016 are as follows (dollars in thousands):
 
 
September 30, 2017
 
December 31, 2016
 
 
Recorded
Investment
 
% of Total
 
Recorded
Investment
 
% of Total
Due within five years
 
$
1,086,700

 
25.1
%
 
$
822,073

 
21.7
%
Due after five years through ten years
 
2,334,113

 
53.8

 
2,099,559

 
55.5

Due after ten years
 
913,184

 
21.1

 
861,575

 
22.8

Total
 
$
4,333,997

 
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 September 30, 2017 and December 31, 2016 (dollars in thousands):
 
Recorded Investment
 
Debt Service Ratios
 
 
 
 
 
>1.20x
 
1.00x - 1.20x
 
<1.00x
 
Total
 
% of Total
September 30, 2017:
 
 
 
 
 
 
 
 
 
Loan-to-Value Ratio
 
 
 
 
 
 
 
 
 
0% - 59.99%
$
2,060,277

 
$
51,162

 
$
4,698

 
$
2,116,137

 
48.8
%
60% - 69.99%
1,515,469

 
86,613

 
44,358

 
1,646,440

 
38.0

70% - 79.99%
424,195

 
32,664

 
19,850

 
476,709

 
11.0

Greater than 80%
51,348

 
19,951

 
23,412

 
94,711

 
2.2

Total
$
4,051,289

 
$
190,390

 
$
92,318

 
$
4,333,997

 
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 September 30, 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 September 30, 2017 and December 31, 2016 (dollars in thousands):
 
 
September 30, 2017
 
December 31, 2016
Mortgage loans:
 
 
 
 
Individually measured for impairment
 
$
5,856

 
$
2,216

Collectively measured for impairment
 
4,328,141

 
3,780,991

Recorded investment
 
$
4,333,997

 
$
3,783,207

Valuation allowances:
 
 
 
 
Individually measured for impairment
 
$
—

 
$
—

Collectively measured for impairment
 
9,137

 
7,685

Total valuation allowances
 
$
9,137

 
$
7,685

Information regarding the Company’s loan valuation allowances for mortgage loans for the three and nine months ended September 30, 2017 and 2016 is as follows (dollars in thousands):
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Balance, beginning of period
 
$
8,156

 
$
6,499

 
$
7,685

 
$
6,813

Provision (release)
 
977

 
247

 
1,444

 
(67
)
Translation adjustment
 
4

 
—

 
8

 
—

Balance, end of period
 
$
9,137

 
$
6,746

 
$
9,137

 
$
6,746


Information regarding the portion of the Company’s mortgage loans that were impaired as of September 30, 2017 and December 31, 2016 is as follows (dollars in thousands):
 
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Related
Allowance
 
Carrying
Value
September 30, 2017:
 
 
 
 
 
 
 
 
Impaired mortgage loans with no valuation allowance recorded
 
$
6,427

 
$
5,856

 
$
—

 
$
5,856

Impaired mortgage loans with valuation allowance recorded
 
—

 
—

 
—

 
—

Total impaired mortgage loans
 
$
6,427

 
$
5,856

 
$
—

 
$
5,856

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 in impaired mortgage loans and the related interest income are reflected in the table below for the periods indicated (dollars in thousands):
 
 
Three months ended September 30,
 
 
2017
 
2016
 
 
Average
Recorded
Investment(1)
 
Interest
Income
 
Average
Recorded
  Investment(1)
 
Interest
Income
Impaired mortgage loans with no valuation allowance recorded
 
$
3,967

 
$
33

 
$
6,953

 
$
107

 
Impaired mortgage loans with valuation allowance recorded
 
—

 
—

 
—

 
—

Total impaired mortgage loans
 
$
3,967

 
$
33

 
$
6,953

 
$
107

 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30,
 
 
2017
 
2016
 
 
Average
Recorded
Investment(1)
 
Interest
Income
 
Average
Recorded
Investment(1)
 
Interest
Income
Impaired mortgage loans with no valuation allowance recorded
 
$
3,062

 
$
100

 
$
4,687

 
$
324

 
Impaired mortgage loans with valuation allowance recorded
 
—

 
—

 
5,459

 
—

Total impaired mortgage loans
 
$
3,062

 
$
100

 
$
10,146

 
$
324


(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 nine months ended September 30, 2017 and 2016. The Company had no mortgage loans that were on a nonaccrual status at September 30, 2017 and December 31, 2016.
Policy Loans
Policy loans comprised approximately 2.7% and 3.2% of the Company’s total investments as of September 30, 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 12.1% and 13.1% of the Company’s total investments as of September 30, 2017 and December 31, 2016, respectively. Of the $6.0 billion funds withheld at interest balance, net of embedded derivatives, as of September 30, 2017, $4.0 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, 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 September 30, 2017 and December 31, 2016, respectively. Carrying values of these assets as of September 30, 2017 and December 31, 2016 are as follows (dollars in thousands):
 
 
September 30, 2017
 
December 31, 2016
Equity securities
 
$
112,931

 
$
275,361

Limited partnership interests and real estate joint ventures
 
761,739

 
687,522

Derivatives
 
133,405

 
229,108

FVO contractholder-directed unit-linked investments
 
210,660

 
190,120

Other
 
313,788

 
209,829

Total other invested assets
 
$
1,532,523

 
$
1,591,940