3.	Investments

The amortized cost, gross unrealized gains and losses and fair value for fixed maturities as of December 31, 2018 and 2017 were as follows:


December 31, 2018			Gross		Gross
($ in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Fixed maturities, available for sale
U.S. Treasury Securities and Obligations of U.S. Government Authority and Agencies	$	305,336	$	5,423	$	(8,833	)	$	301,926
Obligations of U.S. States and Political Subdivisions		747,872		21,407		(6,814	)		762,465
Foreign government		22,476		8		(2,507	)		19,977
All other corporate securities		5,830,098		22,671		(328,363	)		5,524,406
ABS		404,935		422		(13,312	)		392,045
CMBS		307,430		1,494		(7,957	)		300,967
RMBS		83,965		4,289		(566	)		87,688
Redeemable preferred stock		14,800		—		—			14,800

Total fixed maturities, available for sale	$	7,716,912	$	55,714	$	(368,352	)	$	7,404,274


December 31, 2017			Gross		Gross
($ in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Fixed maturities, available for sale
U.S. Treasury Securities and Obligations of U.S. Government Authority and Agencies	$	416,639	$	5,322	$	(12,366	)	$	409,595
Obligations of U.S. States and Political Subdivisions		741,343		37,908		(2,720	)		776,531
Foreign government		24,242		234		(1,685	)		22,791
All other corporate securities		6,169,204		258,440		(37,898	)		6,389,746
ABS		478,329		5,289		(3,395	)		480,223
CMBS		189,596		1,377		(3,148	)		187,825
RMBS		127,439		6,520		(509	)		133,450
Redeemable preferred stock		14,800		—		—			14,800

Total fixed maturities, available for sale	$	8,161,592	$	315,090	$	(61,721	)	$	8,414,961

Scheduled Maturities

The scheduled maturities for fixed maturities, available for sale, were as follows as of December 31, 2018:


($ in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	198,865	$	198,415
Due after one year through five years		782,318		783,443
Due after five years through ten years		801,362		783,970
Due after ten years		4,927,645		4,651,395

Total before asset and mortgage-backed securities	$	6,710,190	$	6,417,223
Asset and mortgage-backed securities		1,006,722		987,051

Total fixed maturities	$	7,716,912	$	7,404,274

Actual maturities may differ from those scheduled as a result of calls and make-whole payments by the issuers. Asset and mortgage-backed securities are shown separately because of the potential for prepayment of principal prior to contractual maturity dates.

Commercial Mortgage Loans

The Company diversifies its commercial mortgage loan portfolio by geographical region to reduce concentration risk. The Company’s commercial mortgage loan portfolio by geographical region was as follows as of December 31, 2018 and 2017:


($ in thousands)	December 31, 2018		December 31, 2017
Alabama	$	815	$	1,056
Arizona		36,110		20,009
California		145,023		173,101
Colorado		61,191		57,293
Florida		54,630		103,869
Georgia		20,144		63,526
Hawaii		3,895		5,020
Illinois		86,832		87,957
Iowa		538		791
Kansas		9,200		9,200
Kentucky		—		6,538
Maryland		—		19,851
Massachusetts		29,836		53,605
Minnesota		23,612		116,923
Nevada		80,396		80,768
New Jersey		20,773		34,101
New York		48,375		50,691
North Carolina		33,447		34,022
Ohio		12,322		12,526
Pennsylvania		50,351		1,007
South Carolina		24,766		1,310
Texas		109,735		100,066
Utah		—		7,823
Virginia		248		975
Washington		—		77
Wisconsin		834		1,082
General allowance for loan loss		—		—

Total commercial mortgage loans	$	853,073	$	1,043,187

Credit Quality of Commercial Mortgage Loans

The credit quality of commercial mortgage loans held-for-investment was as follows at December 31, 2018 and 2017:


December 31, 2018	Recorded Investment
	Debt Service Coverage Ratios
($ in thousands)	> 1.20x		1.00x - 1.20x		< 1.00x		Total		% of Total			Estimated Fair Value		% of Total
Loan-to-value ratios:
Less than 65%	$	628,279	$	88,404	$	37,446	$	754,129		88.4	%	$	752,667		88.3	%
65% to 75%		50,000		48,944		—		98,944		11.6	%		99,367		11.7	%
76% to 80%		—		—		—		—		0.0	%		—		0.0	%
Greater than 80%		—		—		—		—		0.0	%		—		0.0	%

Total	$	678,279	$	137,348	$	37,446	$	853,073		100.0	%	$	852,034		100.0	%


December 31, 2017	Recorded Investment
	Debt Service Coverage Ratios
($ in thousands)	> 1.20x		1.00x - 1.20x		< 1.00x		Total		% of Total			Estimated Fair Value		% of Total
Loan-to-value ratios:
Less than 65%	$	731,577	$	48,895	$	—	$	780,472		74.8	%	$	782,640		74.9	%
65% to 75%		222,771		39,944		—		262,715		25.2	%		261,891		25.1	%
76% to 80%		—		—		—		—		0.0	%		—		0.0	%
Greater than 80%		—		—		—		—		0.0	%		—		0.0	%

Total	$	954,348	$	88,839	$	—	$	1,043,187		100.0	%	$	1,044,531		100.0	%

As of December 31, 2018 and 2017, the Company had no allowance for credit losses for commercial mortgage loans. As of December 31, 2018, $853.1 million of commercial mortgage and other loans were in current status with no commercial mortgage or other loans classified as past due. As of December 31, 2017, $1,043.2 million of commercial mortgage loans were in current status with no commercial mortgage or other loans classified as past due. The Company defines current in its aging of past due commercial mortgage and other loans as less than 30 days past due.

Impaired loans include those loans for which it is probable that all amounts due will not be collected according to the contractual terms of the loan agreement. During 2018 and 2017, the Company did not record any impairments related to commercial mortgage loans.

The Company’s commercial mortgages may occasionally be involved in a troubled debt restructuring. As of December 31, 2018 and 2017, the Company had no commitments to fund to borrowers that have been involved in a troubled debt restructuring. As of December 31, 2018 and 2017, the Company had no new troubled debt restructurings related to commercial mortgages and no payment defaults on commercial mortgages.

Other Invested Assets

Other invested assets were as follows as of December 31, 2018 and 2017:


	December 31, 2018		December 31, 2017
($ in thousands)
Low income housing tax credit properties	$	—	$	138
Derivatives		2,976		21,045

	$	2,976	$	21,183

Net Investment Income

Net investment income for the years ended December 31, 2018, 2017 and 2016 was as follows:


	2018		2017		2016
($ in thousands)
Fixed maturities, available for sale	$	332,082	$	345,299	$	330,253
Fixed maturties, trading		5,963		3,424		—
Fixed maturities, fair value option		234		331		454
Common stock		314		224		—
Commercial mortgage loans		43,781		56,510		69,360
Cash, cash equivalents and short-term investments		4,262		1,718		1,007
Other investments		8,703		8,421		8,845

Gross investment income	$	395,339	$	415,927	$	409,919
Investment expenses		14,527		14,814		12,836

Net investment income	$	380,812	$	401,113	$	397,083

Realized Investment Gains and Losses

Realized investment gains and losses for the years ended December 31, 2018, 2017 and 2016 were as follows:


	2018			2017			2016
($ in thousands)
Realized investment gains, net
Fixed maturities, available for sale	$	(45,240	)	$	11,434		$	66,560
Fixed maturities, trading		(1,864	)		1,081			—
Fixed maturties, fair value option		(247	)		405			(733	)
Commercial mortgage loans		1,201			5,935			4,037
Derivatives		(7,136	)		19,360			3,856
Other invested assets		(9	)		(92	)		—

Net realized gains (losses)	$	(53,295	)	$	38,123		$	73,720

There were $4.8 million in other-than-temporary impairment losses recorded in the year ended December 31, 2018. These securities were impaired to fair value as of the impairment date and were considered credit impairments. There were $4.4 million in other-than-temporary impairment losses recorded in the year ended December 31, 2017. There were no other-than-temporary impairment losses recorded in the year ended December 31, 2016.

Proceeds from sales of fixed maturities and gross realized investment gains and losses for the years ended December 31, 2018, 2017 and 2016 were as follows:


	2018			2017			2016
($ in thousands)
Fixed maturities, available-for-sale
Proceeds from sales	$	919,347		$	1,496,242		$	3,027,998
Gross investment gains from sales		4,682			29,271			109,282
Gross investment losses from sales		(42,996	)		(11,893	)		(35,136	)

Proceeds from sales excludes non-taxable exchanges of $5.4 million, $11.0 million, and $11.1 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Unrealized Investment Gains and Losses

The gross unrealized losses and fair value of fixed maturities, available for sale, by the length of time that individual securities have been in a continuous unrealized loss position were as follows as of December 31, 2018 and 2017:


December 31, 2018	Less than 12 months					Greater than 12 months
($ in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. Treasury Securities and Obligations of U.S. Government Authority and Agencies	$	40,085	$	(1,337	)	$	139,944	$	(7,496	)	$	180,029	$	(8,833	)
Obligations of U.S. States and Political Subdivisions		113,634		(1,932	)		75,444		(4,882	)		189,078		(6,814	)
Foreign government		8,894		(2	)		10,573		(2,505	)		19,467		(2,507	)
All other corporate securities		3,626,045		(222,408	)		805,107		(105,955	)		4,431,152		(328,363	)
ABS		237,153		(4,935	)		107,437		(8,377	)		344,590		(13,312	)
CMBS		110,483		(2,936	)		86,765		(5,021	)		197,248		(7,957	)
RMBS		10,028		(85	)		13,793		(481	)		23,821		(566	)

Total fixed maturities	$	4,146,322	$	(233,635	)	$	1,239,063	$	(134,717	)	$	5,385,385	$	(368,352	)

December 31, 2017	Less than 12 months					Greater than 12 months
($ in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. Treasury Securities and Obligations of U.S. Government Authority and Agencies	$	215,767	$	(3,499	)	$	107,344	$	(8,867	)	$	323,111	$	(12,366	)
Obligations of U.S. States and Political Subdivisions		38,171		(825	)		45,877		(1,895	)		84,048		(2,720	)
Foreign government		296		(4	)		11,098		(1,681	)		11,394		(1,685	)
All other corporate securities		740,795		(6,841	)		489,367		(31,057	)		1,230,162		(37,898	)
ABS		77,050		(689	)		99,327		(2,706	)		176,377		(3,395	)
CMBS		72,725		(593	)		36,540		(2,555	)		109,265		(3,148	)
RMBS		6,908		(118	)		21,835		(391	)		28,743		(509	)

Total fixed maturities	$	1,151,712	$	(12,569	)	$	811,388	$	(49,152	)	$	1,963,100	$	(61,721	)

Portfolio Monitoring

The Company has a comprehensive portfolio monitoring process to identify and evaluate each fixed maturity security whose carrying value may be other-than-temporarily impaired.

For each fixed maturity security in an unrealized loss position, the Company assesses whether management with the appropriate authority has made the decision to sell or whether it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If a security meets either of these criteria, the security’s decline in fair value is considered other than temporary and is recorded in earnings.

If the Company has not made the decision to sell the fixed maturity security and it is not more likely than not the Company will be required to sell the fixed maturity security before recovery of its amortized cost basis, the Company evaluates whether it expects to receive cash flows sufficient to recover the entire amortized cost basis of the security. The Company calculates the estimated recovery value by discounting the best estimate of future cash flows at the security’s original or current effective rate, as appropriate, and compares this to the amortized cost of the security. If the Company does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the fixed maturity security, the credit loss component of the impairment is recorded in earnings, with the remaining amount of the unrealized loss related to other factors recognized in other comprehensive income.

The Company’s portfolio monitoring process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its amortized cost is below established thresholds. The process also includes the monitoring of other impairment indicators such as ratings, ratings downgrades and payment defaults. The securities identified, in addition to other securities for which the Company may have a concern, are evaluated for potential other-than-temporary impairment using all reasonably available information relevant to the collectability or recovery of the security. Inherent in the Company’s evaluation of other-than-temporary impairment for these fixed maturity securities are assumptions and estimates about the financial condition and future earnings potential of the issue or issuer. Some of the factors that may be considered in evaluating whether a decline in fair value is other than temporary are: 1) the financial condition, near-term and long-term prospects of the issue or issuer, including relevant industry specific market conditions and trends, geographic location and implications of rating agency actions and offering prices; 2) the specific reasons that a security is in an unrealized loss position, including overall market conditions which could affect liquidity; and 3) the length of time and extent to which the fair value has been less than amortized cost.

Net Unrealized Investment Gains and Losses in AOCI

The changes in unrealized gains and losses in accumulated other comprehensive income (loss) (“AOCI”) were as follows for the years ended December 31, 2018, 2017 and 2016:


($ in thousands)	Net Unrealized Gain (Losses) on Investments			VOBA			Future Policy Benefits and Policyholders’ Account Balances			Deferred Income Tax (Liability) Benefit			Accumulated Other Comprehensive Income (Loss) Related to Net Unrealized Investment Gains (Losses)
Balance, December 31, 2015	$	(327,781	)	$	36,774		$	52,906		$	83,402		$	(154,699	)
Net investment gains and losses on investments arising during the period		160,311			—			—			(56,111	)		104,200
Reclassification adjustment for gains and losses included in net income		(81,920	)		—			—			28,672			(53,248	)
Impact of net unrealized investment gains and losses on VOBA		—			(30,948	)		—			10,832			(20,116	)
Impact of net unrealized investment gains and losses on future policy benefits and policyholders’ account balances		—			—			(28,924	)		10,123			(18,801	)

Balance, December 31, 2016	$	(85,550	)	$	5,826		$	23,982		$	19,574		$	(36,168	)
Net investment gains and losses on investments arising during the period		332,918			—			—			(111,486	)		221,432
Reclassification adjustment for gains and losses included in net income		(6,001	)		—			—			2,100			(3,901	)
Impact of net unrealized investment gains and losses on VOBA		—			(21,843	)		—			7,645			(14,198	)
Impact of net unrealized investment gains and losses on future policy benefits and policyholders’ account balances		—			—			(157,156	)		55,005			(102,151	)

Balance, December 31, 2017	$	253,369		$	(16,017	)	$	(133,174	)	$	(31,362	)	$	72,816
Net investment gains and losses on investments arising during the period		(560,739	)		—			—			117,756			(442,983	)
Reclassification adjustment for gains and losses included in net income		5,268			—			—			(1,106	)		4,162
Establishement of valuation allowance related to deferred income tax assets		—			—			—			(65,654	)		(65,654	)
Impact of net unrealized investment gains and losses on VOBA		—			45,560			—			(9,568	)		35,992
Impact of net unrealized investment gains and losses on future policy benefits and policyholders’ account balances		—			—			251,235			(52,760	)		198,475
Implementation of accounting standard related to the reclassification of certain tax effects		—			—			—			9,558			9,558

Balance, December 31, 2018	$	(312,638	)	$	29,543		$	118,061		$	(30,924	)	$	(195,958	)