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Derivative Instruments (Tables)
 9 Months Ended
Sep. 30, 2013
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, 2013 and December 31, 2012 (dollars in thousands):
 
 
 
September 30, 2013
 
December 31, 2012
 
 
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
 
$
1,510,467

 
$
45,280

 
$
15,694

 
$
2,195,059

 
$
123,085

 
$
17,867

Interest rate options
 
240,000

 
5,699

 
—

 
—

 
—

 
—

Financial futures
 
84,192

 
—

 
—

 
127,877

 
—

 
—

Foreign currency forwards
 
79,618

 
—

 
8,928

 
74,400

 
1,017

 
2,105

Consumer price index swaps
 
76,306

 
131

 
19

 
85,135

 
1,446

 
—

Credit default swaps
 
689,700

 
5,744

 
3,810

 
714,000

 
2,228

 
5,922

Equity options
 
704,402

 
43,621

 
—

 
696,776

 
62,514

 
—

Synthetic guaranteed investment contracts
 
3,978,244

 
—

 
—

 
2,018,073

 
—

 
—

Embedded derivatives in:
 
 
 
 
 
 
 
 
 
 
 
 
Modified coinsurance or funds withheld arrangements
 
—

 
—

 
175,933

 
—

 
—

 
243,177

Indexed annuity products
 
—

 
—

 
760,746

 
—

 
—

 
740,256

Variable annuity products
 
—

 
—

 
65,153

 
—

 
—

 
172,105

Total non-hedging derivatives
 
7,362,929

 
100,475

 
1,030,283

 
5,911,320

 
190,290

 
1,181,432

Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
51,335

 
—

 
2,770

 
57,275

 
344

 
786

Foreign currency swaps
 
780,274

 
9,344

 
4,325

 
629,512

 
—

 
27,398

Total hedging derivatives
 
831,609

 
9,344

 
7,095

 
686,787

 
344

 
28,184

Total derivatives
 
$
8,194,538

 
$
109,819

 
$
1,037,378

 
$
6,598,107

 
$
190,634

 
$
1,209,616
Offsetting Assets And Liabilities
The following table provides information relating to the Company’s derivative instruments as of September 30, 2013 and December 31, 2012 (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, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets
 
$
109,819

 
$
(22,398
)
 
$
87,421

 
$
(10,624
)
 
$
(64,027
)
 
$
12,770

Derivative liabilities
 
35,546

 
(22,398
)
 
13,148

 
(15,238
)
 
(8,150
)
 
(10,240
)
December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets
 
$
190,634

 
$
(22,426
)
 
$
168,208

 
$
(22,458
)
 
$
(136,414
)
 
$
9,336

Derivative liabilities
 
54,078

 
(22,426
)
 
31,652

 
(1,565
)
 
(27,867
)
 
2,220
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, 2013 and 2012 (dollars in thousands):
 
 
Three months ended September 30,
 
 
2013
 
2012
Accumulated other comprehensive income (loss), balance beginning of period
 
$
(5,037
)
 
$
(719
)
Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges
 
2,583

 
(2,831
)
Amounts reclassified to investment income
 
(291
)
 
(351
)
Accumulated other comprehensive income (loss), balance end of period
 
$
(2,745
)
 
$
(3,901
)
 
 
 
 
 
 
 
Nine months ended September 30,
 
 
2013
 
2012
Accumulated other comprehensive income (loss), balance beginning of period
 
$
403

 
$
(828
)
Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges
 
(2,352
)
 
(2,044
)
Amounts reclassified to investment income
 
(796
)
 
(1,029
)
Accumulated other comprehensive income (loss), balance end of period
 
$
(2,745
)
 
$
(3,901
)
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, 2013 and 2012 (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, 2013:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
2,583

 
$
—

 
$
291

 
$
(3
)
 
$
—

 For the three months ended September 30, 2012:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(2,831
)
 
$
—

 
$
351

 
$
(3
)
 
$
—

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

 
$
796

 
$
11

 
$
—

For the nine months ended September 30, 2012:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(2,044
)
 
$
—

 
$
1,029

 
$
—

 
$
—
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, 2013 and 2012 (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)
 
2013
 
2012
 
2013
 
2012
Foreign currency swaps
 
$
(14,600
)
 
$
(19,454
)
 
$
20,235

 
$
(23,457
)
 
(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, 2013 and 2012 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)
 
2013
 
2012
Interest rate swaps
 
Investment related gains (losses), net
 
$
(8,221
)
 
$
(1,437
)
Interest rate options
 
Investment related gains (losses), net
 
(2,374
)
 
—

Financial futures
 
Investment related gains (losses), net
 
(1,140
)
 
(3,977
)
Foreign currency forwards
 
Investment related gains (losses), net
 
629

 
519

CPI swaps
 
Investment related gains (losses), net
 
(39
)
 
422

Credit default swaps
 
Investment related gains (losses), net
 
10,807

 
7,817

Equity options
 
Investment related gains (losses), net
 
(24,113
)
 
(23,916
)
Embedded derivatives in:
 
 
 
 
 
 
Modco or funds withheld arrangements
 
Investment related gains (losses), net
 
(67,461
)
 
54,836

Indexed annuity products
 
Policy acquisition costs and other insurance expenses
 
—

 
(224
)
Indexed annuity products
 
Interest credited
 
28,379

 
(33,597
)
Variable annuity products
 
Investment related gains (losses), net
 
19,829

 
2,579

Total non-hedging derivatives
 
 
 
$
(43,704
)
 
$
3,022

 
 
 
 
 
 
 
 
 
 
 
Gain (Loss) for the nine months ended        
September 30,
Type of Non-hedging Derivative
 
Income Statement Location of Gain (Loss)
 
2013
 
2012
Interest rate swaps
 
Investment related gains (losses), net
 
$
(68,900
)
 
$
24,553

Interest rate options
 
Investment related gains (losses), net
 
(8,373
)
 
—

Financial futures
 
Investment related gains (losses), net
 
(7,306
)
 
(10,312
)
Foreign currency forwards
 
Investment related gains (losses), net
 
(7,988
)
 
(574
)
CPI swaps
 
Investment related gains (losses), net
 
(2,027
)
 
(1,811
)
Credit default swaps
 
Investment related gains (losses), net
 
17,138

 
14,835

Equity options
 
Investment related gains (losses), net
 
(59,784
)
 
(58,532
)
Embedded derivatives in:
 
 
 
 
 
 
Modco or funds withheld arrangements
 
Investment related gains (losses), net
 
70,514

 
40,955

Indexed annuity products
 
Policy acquisition costs and other insurance expenses
 
—

 
(363
)
Indexed annuity products
 
Interest credited
 
(32,637
)
 
(26,059
)
Variable annuity products
 
Investment related gains (losses), net
 
106,952

 
74,025

Total non-hedging derivatives
 
 
 
$
7,589

 
$
56,717
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, 2013 and December 31, 2012 (dollars in thousands):
 
 
September 30, 2013
 
December 31, 2012
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
 
$
(80
)
 
$
112,500

 
5.2

 
$
(2,077
)
 
$
124,500

 
5.9

Credit default swaps referencing indices
 
—

 
—

 
—

 
—

 
—

 
—

Subtotal
 
(80
)
 
112,500

 
5.2

 
(2,077
)
 
124,500

 
5.9

BBB+/BBB/BBB-
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps
 
(1,734
)
 
144,200

 
5.0

 
(2,345
)
 
135,500

 
5.5

Credit default swaps referencing indices
 
3,936

 
415,000

 
4.2

 
937

 
430,000

 
5.0

Subtotal
 
2,202

 
559,200

 
4.4

 
(1,408
)
 
565,500

 
5.1

BB+
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps
 
—

 
—

 
—

 
(222
)
 
6,000

 
4.5

Credit default swaps referencing indices
 
—

 
—

 
—

 
—

 
—

 
—

Subtotal
 
—

 
—

 
—

 
(222
)
 
6,000

 
4.5

Total
 
$
2,122

 
$
671,700

 
4.6

 
$
(3,707
)
 
$
696,000

 
5.2

 
(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, 2013 and 2012 are reflected in the following table (dollars in thousands):
 
Three months ended September 30,
 
Nine months ended September 30,
 
2013
 
2012
 
2013
 
2012
Embedded derivatives in modco or funds withheld arrangements included in investment related gains
$
(67,461
)
 
$
54,836

 
$
70,514

 
$
40,955

After the associated amortization of DAC and taxes, the related amounts included in net income
(15,693
)
 
11,228

 
19,842

 
10,563

Embedded derivatives in variable annuity contracts included in investment related gains
19,829

 
2,579

 
106,952

 
74,025

After the associated amortization of DAC and taxes, the related amounts included in net income
11,052

 
1,588

 
52,326

 
494

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

 
(33,821
)
 
(32,637
)
 
(26,422
)
After the associated amortization of DAC and taxes, the related amounts included in net income
6,622

 
(22,529
)
 
(53,772
)
 
6,465
Credit Risk
Information regarding the Company’s credit exposure related to its over-the-counter derivative contracts and margin account for exchange-traded futures at September 30, 2013 and December 31, 2012 are reflected in the following table (dollars in thousands):
 
 
 
September 30, 2013
 
December 31, 2012
Estimated fair value of derivatives in net asset position
 
$
74,273

 
$
136,558

Cash provided as collateral(1)
 
8,150

 
27,867

Securities pledged to counterparties as collateral(2)
 
15,238

 
1,565

Cash pledged from counterparties as collateral(3)
 
(64,027
)
 
(136,414
)
Securities pledged from counterparties as collateral(4)
 
(10,624
)
 
(22,458
)
Initial margin for cleared derivatives
 
(10,869
)
 
—

Net credit exposure
 
$
12,141

 
$
7,118

Margin account related to exchange-traded futures(5)
 
$
3,833

 
$
5,605

 
(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.