XML 33 R30.htm IDEA: XBRL DOCUMENT v3.19.3
Derivative Instruments (Tables)
 9 Months Ended
Sep. 30, 2019
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, 2019 and December 31, 2018 (dollars in thousands):
 
 
 
 
September 30, 2019
 
December 31, 2018
 
 
Primary Underlying Risk
 
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
 
Interest rate
 
$
929,963

 
$
84,306

 
$
2,778

 
$
1,040,588

 
$
47,652

 
$
961

Financial futures
 
Equity
 
361,030

 
—

 
—

 
325,620

 
—

 
—

Foreign currency swaps
 
Foreign currency
 
149,698

 
—

 
12,454

 
149,698

 
504

 
4,659

Foreign currency forwards
 
Foreign currency
 
125,000

 
337

 
—

 
25,000

 
—

 
234

Consumer price index swaps
 
CPI
 
422,068

 
360

 
33,245

 
385,580

 
—

 
11,384

Credit default swaps
 
Credit
 
1,337,800

 
5,888

 
139

 
1,338,300

 
6,003

 
1,166

Equity options
 
Equity
 
386,536

 
24,844

 
—

 
439,158

 
42,836

 
—

Longevity swaps
 
Longevity
 
871,920

 
51,620

 
—

 
917,360

 
47,789

 
—

Mortality swaps
 
Mortality
 
25,000

 
—

 
853

 
25,000

 
—

 
369

Synthetic guaranteed investment contracts
 
Interest rate
 
13,919,866

 
—

 
—

 
13,397,729

 
—

 
—

Embedded derivatives in:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Modified coinsurance or funds withheld arrangements
 
 
 
—

 
121,275

 
—

 
—

 
109,597

 
—

Indexed annuity products
 
 
 
—

 
—

 
779,128

 
—

 
—

 
776,940

Variable annuity products
 
 
 
—

 
—

 
210,041

 
—

 
—

 
167,925

Total non-hedging derivatives
 
 
 
18,528,881

 
288,630

 
1,038,638

 
18,044,033

 
254,381

 
963,638

Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Foreign currency/Interest rate
 
435,000

 
—

 
34,467

 
435,000

 
—

 
27,257

Foreign currency swaps
 
Foreign currency
 
366,193

 
26,384

 
7,615

 
494,461

 
51,311

 
—

Foreign currency forwards
 
Foreign currency
 
1,025,548

 
43,441

 
—

 
911,197

 
50,974

 
—

Total hedging derivatives
 
 
 
1,826,741

 
69,825

 
42,082

 
1,840,658

 
102,285

 
27,257

Total derivatives
 
 
 
$
20,355,622

 
$
358,455

 
$
1,080,720

 
$
19,884,691

 
$
356,666

 
$
990,895
Schedule of Fair Value Hedging Instruments, Statements of Financial Performance and Financial Position, Location [Table Text Block] The gain or loss on the hedged item attributable to a change in foreign currency and the offsetting gain or loss on the related foreign currency swaps as of September 30, 2019 and 2018, were (dollars in thousands):
Type of Fair Value Hedge
 
Hedged Item
 
Gains (Losses) Recognized for Derivatives
 
Gains (Losses) Recognized for Hedged Items
 
 
 
 
Investment Related Gains (Losses)
For the three months ended September 30, 2019:
 
 
 
 
Foreign currency swaps
 
Foreign-denominated fixed maturity securities
 
$
(5,995
)
 
$
4,088

For the three months ended September 30, 2018:
 
 
 
 
Foreign currency swaps
 
Foreign-denominated fixed maturity securities
 
$
(2,258
)
 
$
2,832

For the nine months ended September 30, 2019:
 
 
 
 
Foreign currency swaps
 
Foreign-denominated fixed maturity securities
 
$
(10,422
)
 
$
4,503

For the nine months ended September 30, 2018:
 
 
 
 
Foreign currency swaps
 
Foreign-denominated fixed maturity securities
 
$
(5,284
)
 
$
9,666
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, 2019 and 2018 (dollars in thousands):
 
 
Three months ended September 30,
 
 
2019
 
2018
Balance beginning of period
 
$
(14,862
)
 
$
22,656

Gains (losses) deferred in other comprehensive income (loss)
 
(32,123
)
 
6,671

Amounts reclassified to investment income
 
38

 
(50
)
Amounts reclassified to interest expense
 
(255
)
 
(234
)
Balance end of period
 
$
(47,202
)
 
$
29,043

 
 
 
 
 
 
 
Nine months ended September 30,
 
 
2019
 
2018
Balance beginning of period
 
$
8,788

 
$
2,619

Gains (losses) deferred in other comprehensive income (loss)
 
(54,902
)
 
26,586

Amounts reclassified to investment income
 
19

 
(270
)
Amounts reclassified to interest expense
 
(1,107
)
 
108

Balance end of period
 
$
(47,202
)
 
$
29,043
Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location [Table Text Block]
The following table presents the effect of derivatives in cash flow hedging relationships on the condensed consolidated statements of income and the condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2019 and 2018 (dollars in thousands):
Derivative Type
 
Gain (Loss) Deferred in AOCI
 
Gain (Loss) Reclassified into Income from AOCI
 
 
 
 
Investment Income
 
Interest Expense
For the three months ended September 30, 2019:
 
 
 
 
 
 
Interest rate
 
$
(24,846
)
 
$
—

 
$
255

Currency/Interest rate
 
(7,277
)
 
(38
)
 
—

Total
 
$
(32,123
)
 
$
(38
)
 
$
255

For the three months ended September 30, 2018:
 
 
 
 
 
 
Interest rate
 
$
7,490

 
$
—

 
$
234

Currency/Interest rate
 
(819
)
 
50

 
—

Total
 
$
6,671

 
$
50

 
$
234

 
 
 
 
 
 
 
For the nine months ended September 30, 2019:
 
 
 
 
 
 
Interest rate
 
$
(46,816
)
 
$
—

 
$
1,107

Currency/Interest rate
 
(8,086
)
 
(19
)
 
—

Total
 
$
(54,902
)
 
$
(19
)
 
$
1,107

For the nine months ended September 30, 2018:
 
 
 
 
 
 
Interest rate
 
$
27,217

 
$
—

 
$
(108
)
Currency/Interest rate
 
(631
)
 
270

 
—

Total
 
$
26,586

 
$
270

 
$
(108
)
Schedule of Net Investment Hedges, Statements of Financial Performance and Financial Position, Location [Table Text Block] The following table illustrates the Company’s net investments in foreign operations (“NIFO”) hedges for the three and nine months ended September 30, 2019 and 2018 (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)
 
2019
 
2018
 
2019
 
2018
Foreign currency swaps
 
$
3,930

 
$
(5,877
)
 
$
(5,563
)
 
$
11,125

Foreign currency forwards
 
16,427

 
(11,562
)
 
(7,669
)
 
11,737

Total
 
$
20,357

 
$
(17,439
)
 
$
(13,232
)
 
$
22,862

 
(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.
Derivatives Not Designated as Hedging Instruments [Table Text Block]
A summary of the effect of non-hedging derivatives, including embedded derivatives, on the Company’s condensed consolidated statements of income for the three and nine months ended September 30, 2019 and 2018 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)
 
2019
 
2018
Interest rate swaps
 
Investment related gains (losses), net
 
$
38,701

 
$
(12,228
)
Financial futures
 
Investment related gains (losses), net
 
322

 
(6,544
)
Foreign currency swaps
 
Investment related gains (losses), net
 
867

 
—

Foreign currency forwards
 
Investment related gains (losses), net
 
337

 
(58
)
CPI swaps
 
Investment related gains (losses), net
 
(8,235
)
 
(4,223
)
Credit default swaps
 
Investment related gains (losses), net
 
1,961

 
4,689

Equity options
 
Investment related gains (losses), net
 
243

 
(9,793
)
Longevity swaps
 
Other revenues
 
2,063

 
2,426

Mortality swaps
 
Other revenues
 
—

 
473

Subtotal
 
 
 
36,259

 
(25,258
)
Embedded derivatives in:
 
 
 
 
 
 
Modified coinsurance or funds withheld arrangements
 
Investment related gains (losses), net
 
8,508

 
(2,081
)
Indexed annuity products
 
Interest credited
 
(44,972
)
 
(25,347
)
Variable annuity products
 
Investment related gains (losses), net
 
(42,233
)
 
32,133

Total non-hedging derivatives
 
 
 
$
(42,438
)
 
$
(20,553
)
 
 
 
 
 
 
 
 
 
 
 
Gain (Loss) for the nine months ended        
September 30,
Type of Non-hedging Derivative
 
Income Statement Location of Gain (Loss)
 
2019
 
2018
Interest rate swaps
 
Investment related gains (losses), net
 
$
96,079

 
$
(47,399
)
Financial futures
 
Investment related gains (losses), net
 
(29,641
)
 
(7,312
)
Foreign currency swaps
 
Investment related gains (losses), net
 
(4,790
)
 
—

Foreign currency forwards
 
Investment related gains (losses), net
 
571

 
3

CPI swaps
 
Investment related gains (losses), net
 
(23,898
)
 
(996
)
Credit default swaps
 
Investment related gains (losses), net
 
21,539

 
5,371

Equity options
 
Investment related gains (losses), net
 
(27,269
)
 
(15,207
)
Longevity swaps
 
Other revenues
 
6,390

 
6,983

Mortality swaps
 
Other revenues
 
(484
)
 
(326
)
Subtotal
 
 
 
38,497

 
(58,883
)
Embedded derivatives in:
 
 
 
 
 
 
Modified coinsurance or funds withheld arrangements
 
Investment related gains (losses), net
 
11,678

 
20,335

Indexed annuity products
 
Interest credited
 
(50,361
)
 
6,523

Variable annuity products
 
Investment related gains (losses), net
 
(42,116
)
 
62,242

Total non-hedging derivatives
 
 
 
$
(42,302
)
 
$
30,217
Disclosure of Credit Derivatives [Table Text Block]
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, 2019 and December 31, 2018 (dollars in thousands):
 
 
September 30, 2019
 
December 31, 2018
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+/AA/AA-/A+/A/A-
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps
 
$
1,018

 
$
117,500

 
1.6
 
$
1,953

 
$
152,000

 
2.2
Credit default swaps referencing indices
 
342

 
240,000

 
10.2
 
—

 
—

 
0.0
Subtotal
 
1,360

 
357,500

 
7.4
 
1,953

 
152,000

 
2.2
BBB+/BBB/BBB-
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps
 
4,103

 
337,700

 
2.0
 
2,930

 
353,700

 
2.2
Credit default swaps referencing indices
 
111

 
632,600

 
2.9
 
(76
)
 
817,600

 
6.4
Subtotal
 
4,214

 
970,300

 
2.6
 
2,854

 
1,171,300

 
5.1
BB+/BB/BB-
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps
 
175

 
10,000

 
2.7
 
30

 
15,000

 
0.7
Subtotal
 
175

 
10,000

 
2.7
 
30

 
15,000

 
0.7
Total
 
$
5,749

 
$
1,337,800

 
3.9
 
$
4,837

 
$
1,338,300

 
4.7
(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.
Offsetting Assets [Table Text Block]
The following table provides information relating to the Company’s derivative instruments as of September 30, 2019 and December 31, 2018 (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 (1)    
 
Cash Collateral   
Pledged/
Received
 
Net Amount   
September 30, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets
 
$
237,180

 
$
(43,461
)
 
$
193,719

 
$
—

 
$
(205,890
)
 
$
(12,171
)
Derivative liabilities
 
91,551

 
(43,461
)
 
48,090

 
(81,090
)
 
(60,080
)
 
(93,080
)
December 31, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets
 
$
247,069

 
$
(18,581
)
 
$
228,488

 
$
—

 
$
(235,611
)
 
$
(7,123
)
Derivative liabilities
 
46,030

 
(18,581
)
 
27,449

 
(71,376
)
 
(24,080
)
 
(68,007
)
(1)
Includes initial margin posted to a central clearing partner.
Offsetting Liabilities [Table Text Block]
The following table provides information relating to the Company’s derivative instruments as of September 30, 2019 and December 31, 2018 (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 (1)    
 
Cash Collateral   
Pledged/
Received
 
Net Amount   
September 30, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets
 
$
237,180

 
$
(43,461
)
 
$
193,719

 
$
—

 
$
(205,890
)
 
$
(12,171
)
Derivative liabilities
 
91,551

 
(43,461
)
 
48,090

 
(81,090
)
 
(60,080
)
 
(93,080
)
December 31, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets
 
$
247,069

 
$
(18,581
)
 
$
228,488

 
$
—

 
$
(235,611
)
 
$
(7,123
)
Derivative liabilities
 
46,030

 
(18,581
)
 
27,449

 
(71,376
)
 
(24,080
)
 
(68,007
)
(1)
Includes initial margin posted to a central clearing partner.