UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, ~~D. C.~~DC 20549

FORM 10-Q

ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, ~~2018~~

2019

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 001-11339

PROTECTIVE LIFE CORPORATION

(Exact name of registrant as specified in its charter)



DELAWARE		95-2492236
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

2801 HIGHWAY 280 SOUTH

BIRMINGHAM, ALABAMA 35223

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code (205) 268-1000

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See ~~definition~~the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer o		Accelerated Filer o

Non-accelerated filer x	~~(Do not check if a smaller reporting company)~~	Smaller Reporting Company o

		Emerging Growth Company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Number of shares of Common Stock, $0.01 Par Value, outstanding as of April 23, ~~2018:~~2019: 1,000

PROTECTIVE LIFE CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR QUARTERLY PERIOD ENDED MARCH 31, ~~2018~~2019

TABLE OF CONTENTS

PART I



		Page
Item 1.	Financial Statements (unaudited):
	Consolidated Condensed Statements of Income For The Three Months Ended March 31, ~~2018~~2019 and ~~2017~~2018	2
	Consolidated Condensed Statements of Comprehensive Income (Loss) For The Three Months Ended March 31, ~~2018~~2019 and ~~2017~~2018	3
	Consolidated Condensed Balance Sheets as of March 31, ~~2018~~2019 and December 31, ~~2017~~2018	4
	Consolidated Condensed ~~Statement~~Statements of ~~Shareowner's~~Shareowner’s Equity For The Three Months Ended March 31, 2019 and 2018	6
	Consolidated Condensed Statements of Cash Flows For The Three Months Ended March 31, ~~2018~~2019 and ~~2017~~2018	7
	Notes to Consolidated Condensed Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5354
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	98100
Item 4.	Controls and Procedures	98100

PART II

Item 1A.	Risk Factors	98101
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~103~~102
Item 6.	Exhibits	~~104~~103
	Signature	~~105~~104

PROTECTIVE LIFE CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Revenues
Premiums and policy fees	$	889,166		$	860,586		$	930,328		$	889,166
Reinsurance ceded	(345,423		)	(316,076		)	(318,377		)	(345,423		)
Net of reinsurance ceded	543,743			544,510			611,951			543,743
Net investment income	520,863			506,413			685,924			520,863
Realized investment gains (losses):
Derivative financial instruments	78,059			(69,878		)
All other investments	(87,599		)	22,841
Realized investment gains (losses)							9,919			(9,540		)
Other-than-temporary impairment losses	(691		)	(2,725		)	(1,295		)	(691		)
Portion recognized in other comprehensive income (before taxes)	(2,954		)	(5,106		)	(1,847		)	(2,954		)
Net impairment losses recognized in earnings	(3,645		)	(7,831		)	(3,142		)	(3,645		)
Other income	114,411			109,242			109,378			114,411
Total revenues	1,165,832			1,105,297			1,414,030			1,165,832
Benefits and expenses
Benefits and settlement expenses, net of reinsurance ceded: (2018 - $347,637; 2017 - $263,377)	786,802			749,642
Benefits and settlement expenses, net of reinsurance ceded: (2019 - $254,828; 2018 - $347,637)							972,766			786,802
Amortization of deferred policy acquisition costs and value of business acquired	57,981			20,519			30,400			57,981
Other operating expenses, net of reinsurance ceded: (2018 - $43,117; 2017 - $51,017)	229,251			222,787
Other operating expenses, net of reinsurance ceded: (2019 - $51,291; 2018 - $43,117)							235,949			229,251
Total benefits and expenses	1,074,034			992,948			1,239,115			1,074,034
Income before income tax	91,798			112,349			174,915			91,798
Income tax expense	17,686			36,935			36,631			17,686
Net income	$	74,112		$	75,414		$	138,284		$	74,112

PROTECTIVE LIFE CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

For The
Three Months Ended
March 31,
2018 2017
(Dollars In Thousands)
Net income $ 74,112
$ 75,414
Other comprehensive income (loss):

Change in net unrealized gains (losses) on investments, net of income tax: (2018 - $(153,379); 2017 - $85,962) (577,712 ) 159,641
Reclassification adjustment for investment amounts included in net income, net of income tax: (2018 - $181; 2017 - $(578)) 681
(1,072 )
Change in net unrealized gains (losses) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (2018 - $3; 2017 - $1,995) 11
3,703
Change in accumulated (loss) gain - derivatives, net of income tax: (2018 - $129; 2017 - $(362)) 487
(672 )
Reclassification adjustment for derivative amounts included in net income, net of income tax: (2018 - $24; 2017 - $72) 89
133
Change in postretirement benefits liability adjustment, net of income tax: (2018 - $0; 2017 - $0) —
—
Total other comprehensive income (loss) (576,444 ) 161,733
Total comprehensive income (loss) $ (502,332 ) $ 237,147



	For The Three Months Ended March 31,
	2019			2018
	(Dollars In Thousands)
Net income	$	138,284		$	74,112
Other comprehensive income (loss):
Change in net unrealized gains (losses) on investments, net of income tax: (2019 - $302,063; 2018 - $(153,379))	1,136,331			(577,712		)
Reclassification adjustment for investment amounts included in net income, net of income tax: (2019 - $(415); 2018 - $181)	(1,560		)	681
Change in net unrealized gains (losses) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (2019 - $2,337; 2018 - $3)	8,792			11
Change in accumulated (loss) gain - derivatives, net of income tax: (2019 - $(522) ; 2018 - $129)	(1,966		)	487
Reclassification adjustment for derivative amounts included in net income, net of income tax: (2019 - $58 ; 2018 - $24)	220			89
Change in postretirement benefits liability adjustment, net of income tax: (2019 - $0; 2018 - $0)	—			—
Total other comprehensive income (loss)	1,141,817			(576,444		)
Total comprehensive income (loss)	$	1,280,101		$	(502,332	)

PROTECTIVE LIFE CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)


	As of				As of
	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018
	(Dollars In Thousands)				(Dollars In Thousands)
Assets
Fixed maturities, at fair value (amortized cost: 2018 - $41,165,316 ; 2017 - $41,153,551)	$	40,023,550	$	41,176,052
Fixed maturities, at amortized cost (fair value: 2018 - $2,674,129; 2017 - $2,776,327)	2,699,826		2,718,904
Equity securities, at fair value (cost: 2018 - $676,451; 2017 - $740,813)	681,520		754,360
Mortgage loans (related to securitizations: 2018 - $1,367; 2017 - $226,409)	6,846,633		6,817,723
Investment real estate, net of accumulated depreciation (2018 - $154; 2017 - $132)	7,531		8,355
Fixed maturities, at fair value (amortized cost: 2019 - $54,367,022; 2018 - $54,466,305)					$	53,777,352	$	51,904,699
Fixed maturities, at amortized cost (fair value: 2019 - $2,594,441; 2018 - $2,547,210)					2,607,356		2,633,474
Equity securities, at fair value (cost: 2019 - $619,483; 2018 - $627,087)					619,440		595,884
Mortgage loans (related to securitizations: 2019 - $17; 2018 - $134)					7,701,465		7,724,733
Investment real estate, net of accumulated depreciation (2019 - $283; 2018 - $251)					6,478		6,816
Policy loans	1,594,642		1,615,615		1,677,442		1,695,886
Other long-term investments	920,939		915,595		853,117		759,354
Short-term investments	441,781		615,210		817,642		807,283
Total investments	53,216,422		54,621,814		68,060,292		66,128,129
Cash	307,724		252,310		280,250		173,714
Accrued investment income	497,984		491,802		646,996		634,921
Accounts and premiums receivable	127,762		124,934		153,833		113,507
Reinsurance receivables	5,090,572		5,075,698		4,660,567		4,764,743
Deferred policy acquisition costs and value of business acquired	2,434,154		2,199,577		2,986,686		3,023,154
Goodwill	793,470		793,470		825,511		825,511
Other intangibles, net of accumulated amortization (2018 - $154,449; 2017 - $140,368)	651,707		663,572
Property and equipment, net of accumulated depreciation (2018 - $25,492; 2017 - $22,926)	108,682		111,417
Other intangibles, net of accumulated amortization (2019 - $211,899; 2018 - $197,583)					601,603		613,431
Property and equipment, net of accumulated depreciation (2019 - $37,450; 2018 - $33,199)					206,781		184,957
Other assets	208,366		227,357		261,136		250,036
Income tax receivable	6,753		76,543
Assets related to separate accounts
Assets related to separate accounts:
Variable annuity	13,549,068		13,956,071		12,737,450		12,288,919
Variable universal life	1,019,250		1,035,202		1,041,397		937,732
Total assets	$	78,011,914	$	79,629,767	$	92,462,502	$	89,938,754

PROTECTIVE LIFE CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(continued)


	As of						As of
	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
	(Dollars In Thousands)						(Dollars In Thousands)
Liabilities
Future policy benefits and claims	$	30,690,409		$	30,957,592		$	42,125,544		$	41,901,552
Unearned premiums	863,162			875,405			874,253			872,594
Total policy liabilities and accruals	31,553,571			31,832,997			42,999,797			42,774,146
Stable value product account balances	4,699,614			4,698,371			5,527,816			5,234,731
Annuity account balances	11,060,885			10,921,190			13,665,415			13,720,081
Other policyholders’ funds	1,114,823			1,267,198			1,166,378			1,128,379
Other liabilities	2,454,942			2,353,565			2,646,033			2,374,112
Income tax payable							131,817			38,547
Deferred income taxes	1,068,091			1,232,407			1,069,207			839,316
Non-recourse funding obligations	2,728,689			2,747,477			2,607,021			2,632,497
Secured financing liabilities	778,947			1,017,749			184,012			495,307
Debt	1,096,368			945,052			1,083,672			1,101,827
Subordinated debt securities	495,324			495,289
Liabilities related to separate accounts
Subordinated debt							605,460			605,426
Liabilities related to separate accounts:
Variable annuity	13,549,068			13,956,071			12,737,450			12,288,919
Variable universal life	1,019,250			1,035,202			1,041,397			937,732
Total liabilities	71,619,572			72,502,568			85,465,475			84,171,020
Commitments and contingencies - Note 11
Commitments and contingencies - Note 12
Shareowner’s equity
Common Stock: 2018 and 2017 - $0.01 par value; shares authorized: 5,000; shares issued: 1,000	—			—
Common Stock: 2019 and 2018 - $0.01 par value; shares authorized: 5,000; shares issued: 1,000							—			—
Additional paid-in-capital	5,554,059			5,554,059			5,554,059			5,554,059
Retained earnings	1,412,583			1,560,444			1,726,917			1,639,441
Accumulated other comprehensive income (loss):
Net unrealized (losses) gains on investments, net of income tax: (2018 - $(149,309); 2017 - $6,883)	(561,687		)	25,896
Net unrealized losses relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (2018 - $(3); 2017 - $(6))	(11		)	(22		)
Accumulated gain (loss) - derivatives, net of income tax: (2018 - $352; 2017 - $198)	1,323			747
Postretirement benefits liability adjustment, net of income tax: (2018 - $(3,469); 2017 - $(3,469))	(13,925		)	(13,925		)
Net unrealized (losses) gains on investments, net of income tax: (2019 - $(67,182); 2018 - $(368,830))							(252,733		)	(1,387,504		)
Net unrealized losses relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (2019 - $(3,717); 2018 - $(6,054))							(13,981		)	(22,773		)
Accumulated gain (loss) - derivatives, net of income tax: (2019 - $(466); 2018 - $(2))							(1,753		)	(7		)
Postretirement benefits liability adjustment, net of income tax: (2019 - $(4,112); 2018 - $(4,112))							(15,482		)	(15,482		)
Total shareowner’s equity	6,392,342			7,127,199			6,997,027			5,767,734
Total liabilities and shareowner’s equity	$	78,011,914		$	79,629,767		$	92,462,502		$	89,938,754

PROTECTIVE LIFE CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF SHAREOWNER’S EQUITY

(Unaudited)

Common
Stock

Additional
Paid-In-
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Total
Shareowner’s
Equity
(Dollars In Thousands)
Balance, December 31, 2017 $ —
$ 5,554,059
$ 1,560,444
$ 12,696
$ 7,127,199
Net income for the three months ended March 31, 2018

74,112

74,112
Other comprehensive loss

(576,444 ) (576,444 )
Comprehensive loss for the three months ended March 31, 2018

(502,332 )
Cumulative effect adjustments (81,973 ) (10,552 ) (92,525 )
Dividends to parent (140,000 ) (140,000 )
Balance, March 31, 2018 $ —
$ 5,554,059
$ 1,412,583
$ (574,300 ) $ 6,392,342



	Common Stock		Additional Paid-In- Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareowner’s Equity
	(Dollars In Thousands)
Balance, December 31, 2018	$	—	$	5,554,059	$	1,639,441		$	(1,425,766	)	5,767,734
Net income for the three months ended March 31, 2019					138,284						138,284
Other comprehensive income								1,141,817			1,141,817
Comprehensive income for the three months ended March 31, 2019											1,280,101
Cumulative effect adjustments					(50,808		)				(50,808		)
Balance, March 31, 2019	$	—	$	5,554,059	$	1,726,917		$	(283,949	)	$	6,997,027



	Common Stock		Additional Paid-In- Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareowner’s Equity
	(Dollars In Thousands)
Balance, December 31, 2017	$	—	$	5,554,059	$	1,560,444		$	12,696		$	7,127,199
Net income for the three months ended March 31, 2018					74,112						74,112
Other comprehensive loss								(576,444		)	(576,444		)
Comprehensive loss for the three months ended March 31, 2018											(502,332		)
Cumulative effect adjustments					(81,973		)	(10,552		)	(92,525		)
Dividends to parent					(140,000		)				(140,000		)
Balance, March 31, 2018	$	—	$	5,554,059	$	1,412,583		$	(574,300	)	6,392,342

PROTECTIVE LIFE CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Cash flows from operating activities
Net income	$	74,112		$	75,414		$	138,284		$	74,112
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash used in operating activities:
Realized investment (gains) losses	13,185			54,868			(6,777		)	13,185
Amortization of DAC and VOBA	57,981			20,519			30,400			57,981
Capitalization of DAC	(99,246		)	(81,474		)	(95,994		)	(99,246		)
Depreciation and amortization expense	16,763			15,474			18,737			16,763
Deferred income tax	20,965			29,133			(59,652		)	20,965
Accrued income tax	69,790			6,737			93,270			69,790
Interest credited to universal life and investment products	178,238			160,239			285,588			197,458
Policy fees assessed on universal life and investment products	(351,128		)	(335,883		)	(407,380		)	(351,128		)
Change in reinsurance receivables	(14,874		)	15,219			104,176			(14,874		)
Change in accrued investment income and other receivables	(7,185		)	(9,368		)	(10,902		)	(7,185		)
Change in policy liabilities and other policyholders’ funds of traditional life and health products	(111,356		)	(94,234		)	(200,148		)	(121,289		)
Trading securities:
Maturities and principal reductions of investments	53,420			44,041			30,111			53,420
Sale of investments	67,298			85,382			142,370			67,298
Cost of investments acquired	(129,346		)	(114,390		)	(149,133		)	(129,346		)
Other net change in trading securities	(10,901		)	3,801			1,662			(10,901		)
Amortization of premiums and accretion of discounts on investments and mortgage loans	73,529			142,613			67,060			73,529
Change in other liabilities	27,947			19,373			17,380			27,947
Other, net	(21,303		)	2,554			(10,511		)	(21,303		)
Net cash (used in) provided by operating activities	$	(92,111	)	$	40,018
Net cash used in operating activities							$	(11,459	)	$	(82,824	)

PROTECTIVE LIFE CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(continued)


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Cash flows from investing activities
Maturities and principal reductions of investments, available-for-sale	$	151,227		$	166,419		$	400,015		$	151,227
Sale of investments, available-for-sale	436,969			269,509			994,633			436,969
Cost of investments acquired, available-for-sale	(674,513		)	(623,564		)	(1,332,657		)	(674,513		)
Change in investments, held-to-maturity	18,000			11,000			25,000			18,000
Mortgage loans:
New lendings	(248,231		)	(373,108		)	(155,798		)	(248,231		)
Repayments	206,111			177,142			170,322			206,111
Change in investment real estate, net	583			832			477			583
Change in policy loans, net	20,973			14,729			18,444			20,973
Change in other long-term investments, net	(136,969		)	(33,832		)	(8,652		)	(136,969		)
Change in short-term investments, net	187,652			31,859			(6,655		)	187,652
Net unsettled security transactions	48,994			7,361			(36,814		)	48,994
Purchase of property, equipment, and intangibles	(2,244		)	(8,118		)	(5,542		)	(2,244		)
Net cash provided by (used in) investing activities	$	8,552		$	(359,771	)
Net cash provided by investing activities							$	62,773		$	8,552
Cash flows from financing activities
Borrowings under line of credit arrangements and debt	$	375,000		$	255,000
Principal payments on line of credit arrangement and debt	(211,412		)	(98,498		)
Borrowings under line of credit arrangement, debt, and subordinated debt							$	—		$	375,000
Principal payments on line of credit arrangement, debt, and subordinated debt							(9,325		)	(211,412		)
Issuance (repayment) of non-recourse funding obligations	(18,000		)	(11,000		)	(25,000		)	(18,000		)
Secured financing liabilities	(238,802		)	29,504			(311,295		)	(238,802		)
Dividends to shareowner	(140,000		)	(143,848		)	—			(140,000		)
Investment product deposits and change in universal life deposits	884,607			901,387			1,380,615			892,365
Investment product withdrawals	(512,323		)	(551,597		)	(979,532		)	(529,368		)
Other financing activities, net	(97		)	—			(241		)	(97		)
Net cash provided by financing activities	$	138,973		$	380,948		$	55,222		$	129,686
Change in cash	55,414			61,195			106,536			55,414
Cash at beginning of period	252,310			348,182			173,714			252,310
Cash at end of period	$	307,724		$	409,377		$	280,250		$	307,724

PROTECTIVE LIFE CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

Basis of Presentation

On February 1, 2015, Protective Life Corporation (the “Company”) became a wholly owned subsidiary of The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan (now known as Dai-ichi Life Holdings, Inc., “Dai-ichi Life”), when DL Investment (Delaware), Inc., a wholly owned subsidiary of Dai-ichi Life, merged with and into the ~~Company.~~Company (the “Merger”). Prior to February 1, 2015, the Company’s stock was publicly traded on the New York Stock Exchange. Subsequent to the Merger, ~~date,~~ the Company remains as an SEC registrant within the United States. The Company is a holding company with subsidiaries that provide financial services through the production, distribution, and administration of insurance and investment products. The Company markets individual life insurance, credit life and disability insurance, guaranteed investment contracts, guaranteed funding agreements, fixed and variable annuities, and extended service contracts throughout the United States. The Company also maintains a separate segment devoted to the acquisition of insurance policies from other companies. Founded in 1907, Protective Life Insurance Company (“PLICO”) is the Company’s largest operating subsidiary.

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for the interim periods presented herein. In the opinion of management, the accompanying financial statements reflect all adjustments (consisting only of normal recurring items) necessary for a fair statement of the results for the interim periods presented. Operating results for the three months ended March 31, ~~2018,~~2019, are not necessarily indicative of the results of operations that may be expected for the year ending December 31, ~~2018.~~2019. The year-end consolidated condensed financial data included herein was derived from audited financial statements but this report does not include all disclosures required by ~~GAAP within this report.~~GAAP. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

The operating results of companies in the insurance industry have historically been subject to significant fluctuations due to changing competition, economic conditions, interest rates, investment performance, insurance ratings, claims, persistency, and other factors.

Certain reclassifications have been made in previously reported financial statements and accompanying notes to make prior period amounts comparable to those of the current period. Such reclassifications had no effect on previously reported net income or shareowner’s equity.

Entities Included

The consolidated condensed financial statements in this report include the accounts of Protective Life Corporation and subsidiaries and its affiliate companies in which the Company holds a majority voting or economic interest. Intercompany balances and transactions have been eliminated.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

For a full description of significant accounting policies, see Note 2 to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. There were no significant changes to the ~~Company's~~Company’s accounting policies during the three months ended March 31, ~~2018 other than those discussed below.~~

~~Property and Casualty Insurance Products~~

Property and casualty insurance products include service contract business, surety bonds, and guaranteed asset protection ("GAP"). Premiums and fees associated with service contracts and GAP products are recognized based on expected claim patterns. For all other products, premiums are generally recognized over the terms of the contract on a pro-rata basis. Commissions and fee income associated with other products are recognized as earned when the related services are provided to the customer. Unearned premium reserves are maintained for the portion of the premiums that is related to the unexpired period of the policy. Benefit reserves are recorded when insured events occur. Benefit reserves include case basis reserves for known but unpaid claims as of the balance sheet date as well as incurred but not reported ("IBNR") reserves for claims where the insured event has occurred but has not been reported to the Company as of the balance sheet date. The case basis reserves and IBNR are calculated based on historical experience and on assumptions relating to claim severity and frequency, the level of used vehicle prices, and other factors. These assumptions are modified as necessary to reflect anticipated trends.

~~Effective January 1, 2018, the Company adopted Accounting Standards Update ("ASU") No. 2014-09,~~ ~~Revenue from Contracts with Customers~~. In consideration of the amendments in this Update, the Company revised its recognition pattern for administrative fees associated with certain vehicle service and GAP products. Previously, these fees were recognized based on the work effort involved in satisfying the Company’s contract obligations. The Company will recognize these fees on a claims occurrence basis in future periods. To reflect this change in accounting principle, the Company recorded a cumulative effect adjustment as of January 1, 2018 that resulted in a decrease in retained earnings of $92.5 million. The pre-tax impact to each affected line item on the Company’s financial statements is reflected in the table below:

As Reported Previous Accounting Method
For The Three Months Ended March 31, 2018
(Dollars In Millions)
Financial Statement Line Item:
Balance Sheet
Deferred policy acquisition costs and value of business acquired $ 2,434.2
$ 2,295.2
Other liabilities $ 2,454.9
$ 2,193.3
Statements of Income
Other income $ 114.4
$ 113.2
Amortization of deferred policy acquisition costs and value of business acquired $ 58.0
$ 44.2
Other operating expenses, net of reinsurance ceded $ 229.3
$ 243.5
2019.

Accounting Pronouncements Recently Adopted

~~ASU~~Accounting Standards Update (“ASU” or “Update”) No. ~~2014-09~~2016-02 - ~~Revenue from Contracts with Customers (Topic 606).~~ This Update provides for significant revisions to the recognition of revenue from contracts with customers across various industries. Under the new guidance, entities are required to apply a prescribed 5-step process to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting for revenues associated with insurance products is not within the scope of this Update. The Update was originally effective for annual and interim periods beginning after December 15, 2016. However, in August 2015, the FASB issued ASU No. 2015-14 - ~~Revenues from Contracts with Customers: Deferral of the Effective Date~~, to defer the effective date of ASU No. 2014-09 by one year to annual and interim periods beginning after December 15, 2017. The Company adopted this Update using the modified retrospective approach via a cumulative effect adjustment to retained earnings as of January 1, 2018. The amendments in the Update, along with clarifying updates issued subsequent to ASU 2014-09, impacted some of the Company's smaller lines of business, specifically revenues at the Company's affiliated broker dealers and insurance agency, and certain revenues associated with the Company's Asset Protection products. The lines of business to which the revised guidance applies are not material to the Company’s financial statements. In consideration of the amendments in this Update, the Company revised its recognition pattern for administrative fees associated with certain vehicle service and GAP products. Previously, these fees were recognized based on the work effort involved in satisfying the Company’s contract obligations. The Company will recognize these fees on a claims occurrence basis in future periods. To reflect this change in accounting principle, the Company recorded a cumulative effect adjustment as of January 1, 2018 that resulted in a decrease in retained earnings of $92.5 million. The Company also implemented minor changes to its accounting and disclosures with respect to the lines of business referenced above to ensure compliance with the revised guidance. See above for additional discussion.

~~ASU No. 2016-01 - Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities.~~Leases. The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of ~~financial instruments. Most notably,~~leases. The most significant change relates to the accounting model used by lessees. The Update requires ~~that equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) be measured at fair value~~all leases with changes in fair value recognized in net income. The Update also introduces a single-step impairment model for equity investments without a readily determinable fair value. Additionally, the Update requires changes in instrument-specific credit risk for fair value option liabilitiesterms greater than 12 months to be recorded on the balance sheet in ~~other comprehensive income.~~the form of a lease asset and liability. The lease asset and liability are measured at the present value of the minimum lease payments less any upfront payments or fees. The amendments in ~~this~~the Update ~~are~~became effective for annual and interim periods beginning after December 15, ~~2017 and were applied~~2018 on a modified retrospective basis. The Company recorded a ~~cumulative-effect~~cumulative effect adjustment atas of the date of adoption, January 1, ~~2018, transferring unrealized gains~~2019, establishing a right of use asset and ~~losses~~lease liability of $21.5 million on ~~available-for-sale equity securities to retained earnings from accumulated other comprehensive income. The impact of this adjustment, net of income tax, resulted~~its consolidated condensed balance sheet reflected in ~~a $10.6 million increase to retained earnings~~the property and ~~a corresponding decrease to accumulated other comprehensive income, resulting in no net impact to consolidated shareowner's equity. The Company has updated its disclosures in Note 4,~~ ~~Investment Operations~~equipment and ~~Note 5,~~ ~~Fair Value of Financial Instruments~~other liabilities ~~in accordance with the ASU.~~line items, respectively.

ASU No. ~~2016-15~~2017-08 - ~~Statement of Cash Flows: Classification of Certain Cash Receipts~~Receivables - Nonrefundable Fees and ~~Cash Payments.~~Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in this Update require that premiums on callable debt securities be amortized to the first call date. This is a change from previous guidance, under which premiums are ~~intended~~amortized to ~~reduce diversity in practice in how certain transactions are classified in~~ the ~~statement~~maturity date of ~~cash flows. Specific transactions addressed in~~ the ~~new guidance include:~~security. Debt prepayment/extinguishment costs, contingent consideration payments, proceeds from the settlement of corporate-owned life insurance policies, and distributions received from equity method investments. The ~~Update does not introduce any new accounting or financial reporting requirements, and is~~amendments became effective for annual and interim periods beginning after December 15, ~~2017 using the retrospective method. There was no financial impact.~~

~~ASU No. 2016-18 - Statement of Cash Flows (Topic 230): Restricted Cash (a consensus~~2018. The Company recorded a cumulative effect adjustment as of the ~~FASB Emerging Task Force).~~ adoption date, January 1, 2019, resulting~~The amendments~~ in ~~this update provide guidance on the presentation~~a $50.8 million reduction to retained earnings, net of restricted cash or restricted cash equivalents in the statement of cash flows, thereby reducing diversity in practice related to the presentation of these amounts. The amendments require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Update is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. There was no impact to the Company on adoption.income tax.

ASU No. ~~2017-01~~2017-12 - ~~Business Combinations~~Derivatives and Hedging (Topic ~~805)~~815): ~~Clarifying the Definition of a Business.~~ ~~The purpose of this update is~~Targeted Improvements to ~~clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted~~Accounting for as acquisitions (or disposals) of assets or businesses. The amendments in the Update provide a specific test by which an entity may determine whether an acquisition involves a set of assets or a business.Hedging Activities. The amendments in ~~the~~this Update are designed to permit hedge accounting to be applied ~~prospectively~~to a broader range of hedging strategies as well as to more closely align hedge accounting and risk management objectives. Specific provisions include requiring

changes in the fair value of a hedging instrument be recorded in the same income statement line as the hedged item when it affects earnings. In addition, after a hedge has initially qualified as an effective hedge the Update permits the use of a qualitative hedge effectiveness test in subsequent periods. The amendments in this Update became effective for annual and interim periods beginning after December 15, ~~2017. The Company has reviewed the revised requirements,~~2018 and ~~does not anticipate that the changes will impact its policies or recent conclusions related to its acquisition activities.~~

~~ASU No. 2017-07 - Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.~~ ~~The amendments in~~early adoption is permitted. At adoption, January 1, 2019, this update require entities to disaggregate the current-service-cost component from other components of net benefit cost and present it with other current compensation costs in the income statement. The other components of net benefit cost must be presented outside of income from operations if that subtotal is presented. In addition, the Update requires entities to disclose the income statement lines that contain the other components if they are not presented on appropriately described separate lines. The amendments in this update are effective for interim and annual periods beginning after December 15, 2017. As provided for in the ASU, the Company expects to apply the provisions of the statement retrospectively for components of net periodic pension costs and prospectively for capitalization of the service costs component of net periodic costs and net periodic postretirement benefits. The Updatestandard did not have an impact on the Company’s ~~financial position, results of~~ operations or ~~current disclosures.~~financial results.

Accounting Pronouncements Not Yet Adopted

~~ASU No. 2016-02 - Leases.~~ The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of leases. The most significant change will relate to the accounting model used by lessees. The Update will require all leases with terms greater than 12 months to be recorded on the balance sheet in the form of a lease asset and liability. The lease asset and liability will be measured at the present value of the minimum lease payments less any upfront payments or fees. The Update also requires numerous disclosure changes for which the Company is assessing the impact. The amendments in the Update are effective for annual and interim periods beginning after December 15, 2018 on a modified retrospective basis. The Company has completed an inventory of all leases in the organization and is currently assessing the impact of the Update and updating internal processes to ensure compliance with the revised guidance.

ASU No. 2016-13 - Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments.

The amendments in this Update introduce a new current expected credit loss (“CECL”) model for certain financial assets, including mortgage loans and reinsurance receivables. The new model will not apply to debt securities classified as available-for-sale. For assets within the scope of the new model, an entity will recognize as an allowance against earnings its estimate of the contractual cash flows not expected to be collected on day one of the asset’s acquisition. The allowance may be reversed through earnings if a security recovers in value. This differs from the current impairment model, which requires recognition of credit losses when they have been incurred and recognizes a security’s subsequent recovery in value in other comprehensive income. The Update also makes targeted changes to the current impairment model for available-for-sale debt securities, which comprise the majority of the Company’s invested assets. Similar to the CECL model, credit loss impairments will be recorded in an allowance against earnings that may be reversed for subsequent recoveries in value. The amendments in this Update, along with related amendments in ASU No. 2018-19 - Codification Improvements to Topic 326, Financial Instruments-Credit Losses, are effective for annual and interim periods beginning after December 15, 2019 on a modified retrospective basis. The Company is reviewing its policies and processes to ensure compliance with the requirements in this Update, upon adoption, and assessing the impact this standard will have on its operations and financial results.

ASU No. ~~2017-08~~2018-12 - ~~Receivables~~Financial Services - ~~Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.~~ The amendments in this update require that premiums on callable debt securities be amortized to the first call date. This is a change from current guidance, under which premiums are amortized to the maturity date of the security. The amendments are effective for annual and interim periods beginning after December 31, 2018, and early adoption is permitted. Transition will be through a modified retrospective approach in which the cumulative effect of application is recorded to retained earnings at the beginning of the annual period in which an entity adopts the revised guidance. The Company is currently reviewing its systems and processes to determine the financial and operational impact of implementing the Update, as well as to determine whether early adoption of the revised guidance is practicable.

~~ASU No. 2017-12 - Derivatives and Hedging~~Insurance (Topic ~~815)~~944): Targeted Improvements to Accounting for ~~Hedging Activities.~~ Long-Duration Contracts.The amendments in this ~~update~~Update are designed to ~~permit hedge accounting~~make improvements to the existing recognition, measurement, presentation, and disclosure requirements for certain long-duration contracts issued by an insurance company. The new amendments require insurance entities to provide a more current measure of the liability for future policy benefits for traditional and limited-payment contracts by regularly refining the liability for actual past experience and updated future assumptions. This differs from current requirements where assumptions are locked-in at contract issuance for these contract types. In addition, the updated liability will be ~~applied~~discounted using an upper-medium grade (low-credit-risk) fixed income instrument yield that reflects the characteristics of the liability which differs from currently used rates based on the invested assets supporting the liability. In addition, the amendments introduce new requirements to assess market-based insurance contract options and guarantees for Market Risk Benefits and measure them at fair value. This Update also requires insurance entities to amortize deferred acquisition costs on a ~~broader range~~constant-level basis over the expected life of ~~hedging strategies as well as to more closely align hedge accounting~~the contract. Finally this Update requires new disclosures including liability rollforwards and ~~risk management objectives. Specific provisions include requiring changes~~information about significant inputs, judgements, assumptions, and methods used in the fair value of a hedging instrument be recorded in the same income statement line as the hedged item when it affects earnings. In addition, after a hedge has initially qualified as an effective hedge the Update permits the use of a qualitative hedge effectiveness test in subsequent periods.measurement. The amendments in this Update are effective for annual and interim periods beginning after December 15, ~~2018 and~~2020 with early adoption is permitted. The Company is currently ~~assessing~~reviewing its policies, processes, and applicable systems to determine the impact this standard will have on its operations and financial results.

3.SIGNIFICANT TRANSACTIONS

The Lincoln National Life Insurance Company

On May 1, 2018, The Lincoln National Life Insurance Company (“Lincoln Life”) completed its previously announced acquisition (the “Closing”) of Liberty Mutual Group Inc.’s (“Liberty Mutual”) Group Benefits Business and Individual Life and Annuity Business (the “Life Business”) through the acquisition of all of the issued and outstanding capital stock of Liberty Life Assurance Company of Boston (“Liberty”). In connection with the Closing and pursuant to the Master Transaction Agreement, dated January 18, 2018 (the “Master Transaction Agreement”), previously reported in our Current Report on Form 8-K filed on January 23, 2018, PLICO and Protective Life and Annuity Insurance Company (“PLAIC”), a wholly owned subsidiary of PLICO, entered into reinsurance agreements (the “Liberty Reinsurance Agreements”) and related ancillary documents (including administrative services agreements and transition services agreements) providing for the reinsurance and administration of the Life Business.

Pursuant to the Liberty Reinsurance Agreements, Liberty ceded to PLICO and PLAIC the insurance policies related to the Life Business on a 100% coinsurance basis. The aggregate ceding commission for the reinsurance of the Life Business was $422.4 million, which is the purchase price.

All policies issued in states other than New York were ceded to PLICO under a reinsurance agreement between Liberty and PLICO, and all policies issued in New York were ceded to PLAIC under a reinsurance agreement between Liberty and PLAIC. The aggregate statutory reserves of Liberty ceded to PLICO and PLAIC as of the closing of the Transaction were approximately $13.2 billion, which amount was based on initial estimates and is subject to adjustment following the Closing. Pursuant to the terms of the Liberty Reinsurance Agreements, each of PLICO and PLAIC are required to maintain assets in trust for the benefit of Liberty to secure their respective obligations to Liberty under the Liberty Reinsurance Agreements. The trust accounts were initially funded by each of PLICO and PLAIC principally with the investment assets that were received from Liberty. Additionally, PLICO and PLAIC have each agreed to provide, on behalf of Liberty, administration and policyholder servicing of the Life Business reinsured by it pursuant to administrative services agreements between Liberty and each of PLICO and PLAIC.

3.The terms of the Liberty Reinsurance Agreements resulted in an acquisition of the Life Business by the Company in accordance with ASC Topic 805, Business Combinations.

The following table details the purchase consideration and preliminary allocation of assets acquired and liabilities assumed from the Life Business reinsurance transaction as of the transaction date. These estimates remain preliminary and are subject to adjustment. While they are not expected to be materially different than those shown, any material adjustments to the estimates will be reflected, retroactively, as of the date of the acquisition.



	Fair Value as of May 1, 2018
	(Dollars In Thousands)
ASSETS
Fixed maturities	$	12,588,512
Mortgage loans	435,405
Policy loans	131,489
Total investments	13,155,406
Cash	38,456
Accrued investment income	152,030
Reinsurance receivables	272
Value of business acquired	338,303
Other assets	916
Total assets	13,685,383
LIABILITIES
Future policy benefits and claims	$	11,748,942
Unearned premiums	—
Total policy liabilities and accruals	11,748,942
Annuity account balances	1,823,444
Other policyholders’ funds	41,936
Other liabilities	71,061
Total liabilities	13,685,383
NET ASSETS ACQUIRED	$	—

The following unaudited pro forma condensed consolidated results of operations assumes that the aforementioned transactions of the Life Business were completed as of January 1, 2017. The unaudited pro forma condensed results of operations are presented solely for information purposes and are not necessarily indicative of the consolidated condensed results of operations that might have been achieved had the transaction been completed as of the date indicated:



	Unaudited
	For The Three Months Ended March 31, 2018
	(Dollars In Thousands)
Revenue	$	1,416,320
Net income	$	112,869

Great-West Life & Annuity Insurance Company

On January 23, 2019, PLICO entered into a Master Transaction Agreement (the “GWL&A Master Transaction Agreement”) with Great-West Life & Annuity Insurance Company (“GWL&A”), Great-West Life & Annuity Insurance Company of New York (“GWL&A of NY”), The Canada Life Assurance Company (“CLAC”) and The Great-West Life Assurance Company (“GWL” and, together with GWL&A, GWL&A of NY and CLAC, the “Sellers”), pursuant to which PLICO will acquire via reinsurance (the “Transaction”) substantially all of the Sellers’ individual life insurance and annuity business (the “Individual Life Business”). Pursuant to the GWL&A Master Transaction Agreement, PLICO and PLAIC will enter into reinsurance agreements (the “GWL&A Reinsurance Agreements”) and related ancillary documents at the closing of the Transaction. On the terms and subject to the conditions of the GWL&A Reinsurance Agreements, the Sellers will cede to PLICO and PLAIC, effective as of the closing of the Transaction, substantially all of the insurance policies relating to the Individual Life Business. To support its obligations under the GWL&A Reinsurance Agreements, PLICO will establish trust accounts for the benefit of GWL&A, CLAC and GWL, and PLAIC will establish a trust account for the benefit of GWL&A of NY. The Sellers will retain a block of participating policies, which will be administered by the Company.

The Transaction is subject to the satisfaction or waiver of customary closing conditions, including regulatory approvals and the execution of the GWL&A Reinsurance Agreements and related ancillary documents. The GWL&A Master Transaction Agreement and other transaction documents contain certain customary representations and warranties made by each of the parties, and certain customary covenants regarding the Sellers and the Individual Life Business, and provide for indemnification, among other things, for breaches of those representations, warranties and covenants.

4. MONY CLOSED BLOCK OF BUSINESS

In 1998, MONY Life Insurance Company (“MONY”) converted from a mutual insurance company to a stock corporation (“demutualization”). In connection with its demutualization, an accounting mechanism known as a closed block (the “Closed Block”) was established for certain individuals’ participating policies in force as of the date of demutualization. Assets, liabilities, and earnings of the Closed Block are specifically identified to support its participating policyholders. The Company acquired the Closed Block in conjunction with the acquisition of MONY in 2013.

Assets allocated to the Closed Block inure solely to the benefit of each Closed Block’s policyholders and will not revert to the benefit of MONY or the Company. No reallocation, transfer, borrowing or lending of assets can be made between the Closed Block and other portions of MONY’s general account, any of MONY’s separate accounts or any affiliate of MONY without the approval of the Superintendent of The New York State Department of Financial Services (the “Superintendent”). Closed Block assets and liabilities are carried on the same basis as similar assets and liabilities held in the general account.

The excess of Closed Block liabilities over Closed Block assets (adjusted to exclude the impact of related amounts in ~~AOCI)~~accumulated other comprehensive income (loss) “AOCI”) at the acquisition date of October 1, 2013, represented the estimated maximum future post-tax earnings from the Closed Block that would be recognized in income from continuing operations over the period the policies and contracts in the Closed Block remain in force. In connection with the acquisition of MONY, the Company developed an actuarial calculation of the expected timing of MONY’s Closed Block’s earnings as of October 1, 2013. Pursuant to the acquisition of the Company by Dai-ichi Life, this actuarial calculation of the expected timing of ~~MONY's~~MONY’s Closed Block earnings was recalculated and reset as February 1, 2015, along with the establishment of a policyholder dividend obligation as of such date.

If the actual cumulative earnings from the Closed Block are greater than the expected cumulative earnings, only the expected earnings will be recognized in the Company’s net income. Actual cumulative earnings in excess of expected cumulative earnings at any point in time are recorded as a policyholder dividend obligation because they will ultimately be paid to Closed Block policyholders as an additional policyholder dividend unless offset by future performance that is less favorable than originally expected. If a policyholder dividend obligation has been previously established and the actual Closed Block earnings in a subsequent period are less than the expected earnings for that period, the policyholder dividend obligation would be reduced (but not below zero). If, over the period the policies and contracts in the Closed Block remain in force, the actual cumulative earnings of the Closed Block are less than the expected cumulative earnings, only actual earnings would be recognized in income from continuing operations. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside the Closed Block.

Many expenses related to Closed Block operations, including amortization of VOBA, are charged to operations outside of the Closed Block; accordingly, net revenues of the Closed Block do not represent the actual profitability of the Closed Block operations. Operating costs and expenses outside of the Closed Block are, therefore, disproportionate to the business outside of the Closed Block.

Summarized financial information for the Closed Block as of March 31, ~~2018,~~2019, and December 31, ~~2017,~~2018, is as follows:


	As of					As of
	March 31, 2018			December 31, 2017		March 31, 2019		December 31, 2018
	(Dollars In Thousands)					(Dollars In Thousands)
Closed block liabilities
Future policy benefits, policyholders’ account balances and other policyholder liabilities	$	5,760,621		$	5,791,867	$	5,643,484	$	5,679,732
Policyholder dividend obligation	—			160,712		11,803		—
Other liabilities	34,796			30,764		33,254		22,505
Total closed block liabilities	5,795,417			5,983,343		5,688,541		5,702,237
Closed block assets
Fixed maturities, available-for-sale, at fair value	$	4,497,521		$	4,669,856	$	4,404,945	$	4,257,437
Mortgage loans on real estate	107,826			108,934		75,062		75,838
Policy loans	692,632			700,769		666,270		672,213
Cash	39,464			31,182		115,204		116,225
Other assets	113,120			122,637		107,204		136,388
Total closed block assets	5,450,563			5,633,378		5,368,685		5,258,101
Excess of reported closed block liabilities over closed block assets	344,854			349,965		319,856		444,136
Portion of above representing accumulated other comprehensive income:
Net unrealized investment gains (losses) net of policyholder dividend obligation: $(162,429) and $(13,429); and net of income tax: $34,911 and $2,820	(3,014		)	—
Net unrealized investment gains (losses) net of policyholder dividend obligation: $(118,670) and $(141,128); and net of income tax: $24,921 and $61,676						—		(120,528		)
Future earnings to be recognized from closed block assets and closed block liabilities	$	341,840		$	349,965	$	319,856	$	323,608

Reconciliation of the policyholder dividend obligation is as follows:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Policyholder dividend obligation, beginning of period	$	160,712		$	31,932		$	—		$	160,712
Applicable to net revenue (losses)	(11,712		)	(16,753		)	(10,655		)	(11,712		)
Change in net unrealized investment gains (losses) allocated to the policyholder dividend obligation	(149,000		)	26,001			22,458			(149,000		)
Policyholder dividend obligation, end of period	$	—		$	41,180		$	11,803		$	—

Closed Block revenues and expenses were as follows:


	For The Three Months Ended March 31,					For The Three Months Ended March 31,
	2018			2017		2019			2018
	(Dollars In Thousands)					(Dollars In Thousands)
Revenues
Premiums and other income	$	39,612		$	42,836	$	37,444		$	39,612
Net investment income	50,543			51,359		51,128			50,543
Net investment gains	(237		)	63		(454		)	(237		)
Total revenues	89,918			94,258		88,118			89,918
Benefits and other deductions
Benefits and settlement expenses	79,952			80,108		78,666			79,952
Other operating expenses	(319		)	166		359			(319		)
Total benefits and other deductions	79,633			80,274		79,025			79,633
Net revenues before income taxes	10,285			13,984		9,093			10,285
Income tax expense	2,160			4,895		1,910			2,160
Net revenues	$	8,125		$	9,089	$	7,183		$	8,125

4.5. INVESTMENT OPERATIONS

Net realized gains (losses) ~~for all other investments~~ are summarized as follows:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Fixed maturities	$	2,783		$	9,490		$	5,117		$	2,783
Equity gains and losses⁽¹⁾	(8,786		)	(9		)	30,717			(8,786		)
Impairments	(3,645		)	(7,831		)
Modco trading portfolio	(84,709		)	18,552			94,902			(84,709		)
Other investments	3,113			(5,192		)	(1,146		)	3,113
Total realized gains (losses) - investments	$	(91,244	)	$	15,010
Realized gains (losses) - all other investments							129,590			(87,599		)
Realized gains (losses) - derivatives⁽¹⁾							(119,671		)	78,059
Realized investment gains (losses)							$	9,919		$	(9,540	)

(1) Beginning in the three month period ending March 31, 2018, all changes in the fair market value of equity securities are recorded as a realized gains (loss) as a result of the adoption of ASU No. 2016-01
Net impairments losses recognized in earnings							$	(3,142	)	$	(3,645	)

(1) See Note 7, Derivative Financial Instruments

Gross realized gains and gross realized losses on investments available-for-sale (fixed maturities and short-term investments) are as follows:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Gross realized gains	$	8,049		$	10,738		$	7,870		$	8,049
Gross realized losses:
Impairment losses	$	(3,645	)	$	(7,831	)	$	(3,142	)	$	(3,645	)
Other realized losses	$	(5,267	)	$	(1,257	)	$	(2,753	)	$	(5,267	)

The chart below summarizes the fair value (proceeds) and the gains (losses) realized on securities the Company sold that were in an unrealized gain position and an unrealized loss position.


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Securities in an unrealized gain position:
Fair value (proceeds)	$	142,133		$	169,134		$	648,891		$	142,133
Gains realized	$	8,049		$	10,738		$	7,870		$	8,049

Securities in an unrealized loss position⁽¹⁾:
Fair value (proceeds)	$	56,984		$	12,452		$	178,004		$	56,984
Losses realized	$	(5,267	)	$	(1,257	)	$	(2,753	)	$	(5,267	)

(1) The Company made the decision to exit these holdings in conjunction with its overall asset liability management process.
(1) The Company made the decision to exit these holdings in conjunction with its overall asset/liability management process.							(1) The Company made the decision to exit these holdings in conjunction with its overall asset/liability management process.

The chart below summarizes the realized gains (losses) on equity securities sold during the period and equity securities still held at the reporting date.


	For The Three Months Ended March 31,			For The Three Months Ended March 31,
	2018			2019		2018
	(Dollars In Thousands)			(Dollars In Thousands)
Net gains (losses) recognized during the period on equity securities	$	(8,786	)	$	30,717	$	(8,786	)
Less: net gains (losses) recognized on equity securities sold during the period	$	(1,702	)	$	60	$	(1,702	)
Gains (losses) recognized during the period on equity securities still held	$	(7,084	)	$	30,657	$	(7,084	)

The amortized cost and fair value of the Company’s investments classified as available-for-sale are as follows:


As of March 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Total OTTI Recognized in OCI⁽¹⁾
As of March 31, 2019													Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Total OTTI Recognized in OCI⁽¹⁾
	(Dollars In Thousands)												(Dollars In Thousands)
Fixed maturities:
Residential mortgage-backed securities	$	2,430,278	$	11,723	$	(47,631	)	$	2,394,370	$	14		$	3,880,305	$	57,389	$	(29,406	)	$	3,908,288	$	—
Commercial mortgage-backed securities	1,899,618		583		(58,695		)	1,841,506		—			2,363,988		17,199		(27,843		)	2,353,344		—
Other asset-backed securities	1,238,929		15,376		(9,653		)	1,244,652		—			1,359,813		18,421		(15,623		)	1,362,611		—
U.S. government-related securities	1,377,633		168		(50,001		)	1,327,800		—			1,439,136		2,382		(30,412		)	1,411,106		—
Other government-related securities	282,664		6,421		(11,626		)	277,459		—			523,701		12,343		(11,883		)	524,161		—
States, municipals, and political subdivisions	1,767,604		6,162		(73,487		)	1,700,279		—			3,632,880		84,040		(25,256		)	3,691,664		1,021
Corporate securities	29,487,086		261,484		(1,188,797		)	28,559,773		—			38,586,159		576,720		(1,213,985		)	37,948,894		(18,719		)
Redeemable preferred stock	94,362		336		(4,129		)	90,569		—
Redeemable preferred stocks													87,579		368		(4,124		)	83,823		—
	38,578,174		302,253		(1,444,019		)	37,436,408		14			51,873,561		768,862		(1,358,532		)	51,283,891		(17,698		)
Short-term investments	371,290		—		—			371,290		—			783,011		—		—			783,011		—
	$	38,949,464	$	302,253	$	(1,444,019	)	$	37,807,698	$	14		$	52,656,572	$	768,862	$	(1,358,532	)	$	52,066,902	$	(17,698	)

As of December 31, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Total OTTI Recognized in OCI⁽¹⁾
As of December 31, 2018													Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Total OTTI Recognized in OCI⁽¹⁾
	(Dollars In Thousands)												(Dollars In Thousands)
Fixed maturities:
Residential mortgage-backed securities	$	2,330,832	$	19,413	$	(23,033	)	$	2,327,212	$	10		$	3,650,539	$	23,247	$	(62,196	)	$	3,611,590	$	(18	)
Commercial mortgage-backed securities	1,914,998		5,010		(30,186		)	1,889,822		—			2,349,274		3,911		(58,101		)	2,295,084		—
Other asset-backed securities	1,234,376		20,936		(5,763		)	1,249,549		—			1,410,059		17,232		(35,398		)	1,391,893		—
U.S. government-related securities	1,255,244		185		(32,177		)	1,223,252		—			1,683,432		1,795		(45,722		)	1,639,505		—
Other government-related securities	282,767		9,463		(4,948		)	287,282		—			545,522		4,292		(33,850		)	515,964		—
States, municipals, and political subdivisions	1,770,299		16,959		(45,613		)	1,741,645		(37		)	3,682,037		25,706		(118,902		)	3,588,841		876
Corporate securities	29,606,484		623,713		(528,187		)	29,702,010		(1		)	38,634,888		112,992		(2,385,052		)	36,362,828		(29,685		)
Redeemable preferred stock	94,362		232		(3,503		)	91,091		—
Redeemable preferred stocks													94,362		—		(11,560		)	82,802		—
	38,489,362		695,911		(673,410		)	38,511,863		(28		)	52,050,113		189,175		(2,750,781		)	49,488,507		(28,827		)
Equity securities	735,569		22,318		(8,771		)	749,116		—
Short-term investments	558,949		—		—			558,949		—			776,357		—		—			776,357		—
	$	39,783,880	$	718,229	$	(682,181	)	$	39,819,928	$	(28	)	$	52,826,470	$	189,175	$	(2,750,781	)	$	50,264,864	$	(28,827	)

(1) These amounts are included in the gross unrealized gains and gross unrealized losses columns above.

The Company holds certain investments pursuant to certain modified coinsurance (“Modco”) arrangements. The fixed maturities held as part of these arrangements are classified as trading securities. The fair value of the ~~Company's~~ investments ~~classified as trading~~held pursuant to these Modco arrangements are as follows:


	As of March 31, 2018		As of December 31, 2017		As of March 31, 2019		As of December 31, 2018
	(Dollars In Thousands)				(Dollars In Thousands)
Fixed maturities:
Residential mortgage-backed securities	$	265,547	$	259,694	$	213,259	$	241,836
Commercial mortgage-backed securities	146,633		146,804		209,482		188,925
Other asset-backed securities	129,714		138,097		149,541		159,907
U.S. government-related securities	37,575		27,234		59,627		59,794
Other government-related securities	40,368		63,925		23,640		44,207
States, municipals, and political subdivisions	318,142		326,925		292,796		286,413
Corporate securities	1,645,899		1,698,183		1,533,256		1,423,833
Redeemable preferred stock	3,264		3,327
Redeemable preferred stocks					11,860		11,277
	2,587,142		2,664,189		2,493,461		2,416,192
Equity securities	5,366		5,244		9,207		9,892
Short-term investments	70,491		56,261		34,631		30,926
	$	2,662,999	$	2,725,694	$	2,537,299	$	2,457,010

The amortized cost and fair value of available-for-sale and held-to-maturity fixed maturities as of March 31, ~~2018,~~2019, by expected maturity, are shown below. Expected maturities of securities without a single maturity date are allocated based on estimated rates of prepayment that may differ from actual rates of prepayment.


	Available-for-sale				Held-to-maturity				Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars In Thousands)								(Dollars In Thousands)
Due in one year or less	$	912,935	$	909,757	$	—	$	—	$	1,259,571	$	1,257,644	$	—	$	—
Due after one year through five years	7,026,832		6,915,584		—		—		8,954,924		8,938,604		—		—
Due after five years through ten years	6,881,555		6,721,386		—		—		8,979,403		9,034,109		—		—
Due after ten years	23,756,852		22,889,681		2,699,826		2,674,129		32,679,663		32,053,534		2,607,356		2,594,441
	$	38,578,174	$	37,436,408	$	2,699,826	$	2,674,129	$	51,873,561	$	51,283,891	$	2,607,356	$	2,594,441

The ~~charts~~chart below summarizes the ~~Company's~~Company’s other-than-temporary impairments of investments. All of the impairments were related to fixed ~~maturities or equity securities.~~maturities.

For The
Three Months Ended
March 31,
2018

Fixed
Maturities
(Dollars In Thousands)
Other-than-temporary impairments $ (691 )
Non-credit impairment losses recorded in other comprehensive income (2,954 )
Net impairment losses recognized in earnings $ (3,645 )


	For The Three Months Ended March 31,									For The Three Months Ended March 31,
	2017									2019			2018
	Fixed Maturities			Equity Securities			Total Securities			Fixed Maturities			Fixed Maturities
	(Dollars In Thousands)									(Dollars In Thousands)
Other-than-temporary impairments	$	(95	)	$	(2,630	)	$	(2,725	)	$	(1,295	)	$	(691	)
Non-credit impairment losses recorded in other comprehensive income	(5,106		)	—			(5,106		)
Non-credit impairment losses recorded in other comprehensive income (loss)										(1,847		)	(2,954		)
Net impairment losses recognized in earnings	$	(5,201	)	$	(2,630	)	$	(7,831	)	$	(3,142	)	$	(3,645	)

There were no other-than-temporary impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell for the three months ended March 31, ~~2018~~2019 and ~~2017.~~2018.

The following chart is a rollforward of available-for-sale credit losses on fixed maturities held by the Company for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (loss):


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Beginning balance	$	3,268		$	12,685		$	24,868		$	3,268
Additions for newly impaired securities	—			—			751			—
Additions for previously impaired securities	—			—			2,347			—
Reductions for previously impaired securities due to a change in expected cash flows	(1,033		)	(12,685		)	(632		)	(1,033		)
Reductions for previously impaired securities that were sold in the current period	—			—			(119		)	—
Ending balance	$	2,235		$	—		$	27,215		$	2,235

The following table includes the gross unrealized losses and fair value of the Company’s investments that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of March 31, ~~2018:~~2019:


	Less Than 12 Months					12 Months or More					Total					Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(Dollars In Thousands)															(Dollars In Thousands)
Residential mortgage-backed securities	$	1,426,703	$	(29,466	)	$	394,955	$	(18,165	)	$	1,821,658	$	(47,631	)	$	158,901	$	(1,772	)	$	1,242,286	$	(27,634	)	$	1,401,187	$	(29,406	)
Commercial mortgage-backed securities	984,307		(24,232		)	756,845		(34,463		)	1,741,152		(58,695		)	52,747		(1,235		)	1,478,365		(26,608		)	1,531,112		(27,843		)
Other asset-backed securities	143,917		(1,784		)	129,840		(7,869		)	273,757		(9,653		)	531,548		(11,905		)	192,201		(3,718		)	723,749		(15,623		)
U.S. government-related securities	145,876		(3,108		)	1,054,322		(46,893		)	1,200,198		(50,001		)	43,977		(640		)	1,045,717		(29,772		)	1,089,694		(30,412		)
Other government-related securities	90,010		(4,221		)	112,461		(7,405		)	202,471		(11,626		)	51,767		(1,279		)	198,112		(10,604		)	249,879		(11,883		)
States, municipalities, and political subdivisions	505,864		(10,768		)	1,007,246		(62,719		)	1,513,110		(73,487		)
States, municipals, and political subdivisions																60,555		(369		)	911,555		(24,887		)	972,110		(25,256		)
Corporate securities	12,307,646		(337,936		)	10,410,752		(850,861		)	22,718,398		(1,188,797		)	3,340,636		(136,453		)	17,623,264		(1,077,532		)	20,963,900		(1,213,985		)
Redeemable preferred stock	57,050		(1,408		)	22,859		(2,721		)	79,909		(4,129		)
Redeemable preferred stocks																10,154		(3		)	68,291		(4,121		)	78,445		(4,124		)
	$	15,661,373	$	(412,923	)	$	13,889,280	$	(1,031,096	)	$	29,550,653	$	(1,444,019	)	$	4,250,285	$	(153,656	)	$	22,759,791	$	(1,204,876	)	$	27,010,076	$	(1,358,532	)

~~RMBS~~Residential mortgage-backed securities (“RMBS”) and ~~CMBS~~commercial mortgage-backed securities (“CMBS”) had gross unrealized losses greater than twelve months of ~~$18.2~~$27.6 million and ~~$34.5~~$26.6 million ~~respectively,~~ as of March 31, ~~2018.~~2019. Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.

The other asset-backed securities had a gross unrealized loss greater than twelve months of ~~$7.9~~$3.7 million as of March 31, ~~2018.~~2019. This category predominately includes student loan backed auction rate securities (“ARS”) whose underlying collateral is at least 97%

guaranteed by the Federal Family Education Loan Program (“FFELP”). At this time, the Company has no reason to believe that the U.S. Department of Education would not honor the FFELP guarantee, if it were necessary.

The U.S. government-related securities and the other government-related securities had gross unrealized losses greater than twelve months of ~~$46.9~~$29.8 million and ~~$7.4~~$10.6 million, respectively, as of March 31, ~~2018, respectively.~~2019. These declines were related to changes in interest rates.

The states, ~~municipalities,~~municipals, and political subdivisions category had gross unrealized losses greater than twelve months of ~~$62.7~~$24.9 million as of March 31, ~~2018. These declines were related~~2019. The aggregate decline in market value of these securities was deemed temporary due to ~~changes in interest rates.~~positive factors supporting the recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, and other pertinent information.

The corporate securities category had gross unrealized losses greater than twelve months of ~~$850.9 million~~$1.1 billion as of March 31, ~~2018.~~2019. The aggregate decline in market value of these securities was deemed temporary due to positive factors supporting the recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, and other pertinent information.

As of March 31, ~~2018,~~2019, the Company had a total of ~~2,428~~2,473 positions that were in an unrealized loss position, but the Company does not consider these unrealized loss positions to be other-than-temporary. This is based on the aggregate factors discussed previously and because the Company has the ability and intent to hold these investments until the fair values recover,

and the Company does not intend to sell or expect to be required to sell the securities before recovering the Company’s amortized cost of the securities.

Less Than 12 Months 12 Months or More Total
Fair
Value Unrealized
Loss Fair
Value Unrealized
Loss Fair
Value Unrealized
Loss
(Dollars In Thousands)
Residential mortgage-backed securities $ 766,599
$ (9,671 ) $ 416,221
$ (13,362 ) $ 1,182,820
$ (23,033 )
Commercial mortgage-backed securities 757,471
(8,592 ) 796,456
(21,594 ) 1,553,927
(30,186 )
Other asset-backed securities 86,506
(322 ) 134,316
(5,441 ) 220,822
(5,763 )
U.S. government-related securities 94,110
(688 ) 1,072,232
(31,489 ) 1,166,342
(32,177 )
Other government-related securities 24,830
(169 ) 115,294
(4,778 ) 140,124
(4,947 )
States, municipalities, and political subdivisions 170,268
(1,738 ) 1,027,747
(43,874 ) 1,198,015
(45,612 )
Corporate securities 5,054,316
(55,795 ) 10,962,689
(472,394 ) 16,017,005
(528,189 )
Redeemable preferred stock 22,048
(1,120 ) 23,197
(2,383 ) 45,245
(3,503 )
Equities 86,586
(1,401 ) 91,195
(7,370 ) 177,781
(8,771 )
$ 7,062,734
$ (79,496 ) $ 14,639,347
$ (602,685 ) $ 21,702,081
$ (682,181 )

RMBS and CMBS had gross unrealized losses greater than twelve months of $13.4 million and $21.6 million, respectively, as of December 31, 2017. Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.

The other asset-backed securities had a gross unrealized loss greater than twelve months of $5.4 million as of December 31, 2017. This category predominately includes student loan backed auction rate securities whose underlying collateral is at least 97% guaranteed by the FFELP. At this time, the Company has no reason to believe that the U.S. Department of Education would not honor the FFELP guarantee, if it were necessary.

The U.S. government-related securities and other government-related securities had gross unrealized losses greater than twelve months of $31.5 million and $4.8 million as of December 31, 2017, respectively. These declines were related to changes in interest rates.

The states, municipalities, and political subdivisions category had gross unrealized losses greater than twelve months of $43.9 million as of December 31, 2017. These declines were related to changes in interest rates.

The corporate securities category had gross unrealized losses greater than twelve months of $472.4 million as of December 31, 2017. The aggregate decline in market value of these securities was deemed temporary due to positive factors supporting the recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, and other pertinent information.



	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(Dollars In Thousands)
Residential mortgage-backed securities	$	1,485,009	$	(31,302	)	$	804,364	$	(30,894	)	$	2,289,373	$	(62,196	)
Commercial mortgage-backed securities	422,438		(7,442		)	1,429,384		(50,659		)	1,851,822		(58,101		)
Other asset-backed securities	687,271		(30,963		)	148,871		(4,435		)	836,142		(35,398		)
U.S. government-related securities	130,290		(4,668		)	1,085,654		(41,054		)	1,215,944		(45,722		)
Other government-related securities	226,201		(15,267		)	131,569		(18,583		)	357,770		(33,850		)
States, municipals, and political subdivisions	1,004,262		(27,180		)	1,129,152		(91,722		)	2,133,414		(118,902		)
Corporate securities	18,326,331		(970,553		)	12,859,732		(1,414,499		)	31,186,063		(2,385,052		)
Redeemable preferred stocks	41,147		(4,467		)	41,655		(7,093		)	82,802		(11,560		)
	$	22,322,949	$	(1,091,842	)	$	17,630,381	$	(1,658,939	)	$	39,953,330	$	(2,750,781	)

As of March 31, ~~2018,~~2019, the Company had securities in its available-for-sale portfolio which were rated below investment grade of ~~$1.8~~$1.6 billion and had an amortized cost of ~~$1.9~~$1.7 billion. In addition, included in the Company’s trading portfolio, the

Company held ~~$217.2~~$120.7 million of securities which were rated below investment grade. Approximately ~~$307.5~~$264.2 million of the available-for-sale and trading securities that were below investment grade were not publicly traded.

The change in unrealized gains (losses), net of income tax, on fixed maturities, classified as available-for-sale is summarized as follows:

For The
Three Months Ended
March 31,
2018 2017
(Dollars In Thousands)
Fixed maturities $ (884,219 ) $ 224,115



	For The Three Months Ended March 31,
	2019		2018
	(Dollars In Thousands)
Fixed maturities	$	1,557,829	$	(884,219	)

The amortized cost and fair value of the Company’s investments classified as held-to-maturity as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, are as follows:

As of March 31, 2018 Amortized
Cost
Gross
Unrecognized
Holding
Gains

Gross
Unrecognized
Holding
Losses
Fair
Value Total OTTI
Recognized
in OCI
(Dollars In Thousands)
Fixed maturities:

Securities issued by affiliates:
Red Mountain LLC $ 718,826
$ —
$ (56,007 ) $ 662,819
$ —
Steel City LLC 1,981,000
30,310
—
2,011,310
—
$ 2,699,826
$ 30,310
$ (56,007 ) $ 2,674,129
$ —

As of December 31, 2017 Amortized
Cost
Gross
Unrecognized
Holding
Gains

Gross
Unrecognized
Holding
Losses
Fair
Value Total OTTI
Recognized
in OCI
(Dollars In Thousands)
Fixed maturities:
Securities issued by affiliates:
Red Mountain LLC $ 704,904
$ —
$ (19,163 ) $ 685,741
$ —
Steel City LLC 2,014,000
76,586
—
2,090,586
—
$ 2,718,904
$ 76,586
$ (19,163 ) $ 2,776,327
$ —



As of March 31, 2019	Amortized Cost		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Fair Value		Total OTTI Recognized in OCI
	(Dollars In Thousands)
Fixed maturities:
Securities issued by affiliates:
Red Mountain, LLC	$	764,356	$	—	$	(56,483	)	$	707,873	$	—
Steel City, LLC	1,843,000		43,568		—			1,886,568		—
	$	2,607,356	$	43,568	$	(56,483	)	$	2,594,441	$	—

As of December 31, 2018	Amortized Cost		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Fair Value		Total OTTI Recognized in OCI
	(Dollars In Thousands)
Fixed maturities:
Securities issued by affiliates:
Red Mountain, LLC	$	750,474	$	—	$	(81,657	)	$	668,817	$	—
Steel City, LLC	1,883,000		—		(4,607		)	1,878,393		—
	$	2,633,474	$	—	$	(86,264	)	$	2,547,210	$	—

During the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, the Company recorded no other-than-temporary impairments on held-to-maturity securities.

The Company’s held-to-maturity securities had ~~$30.3~~$43.6 million of gross unrecognized holding gains and ~~$56.0~~$56.5 million of gross unrecognized holding losses ~~by maturity~~ as of March 31, ~~2018.~~2019. The Company does not consider these unrecognized holding losses to be other-than-temporary based on certain positive factors associated with the securities which include credit ratings of the guarantor, financial health of the issuer and guarantor, continued access of the issuer to capital markets and other pertinent information. These held-to-maturity securities are issued by affiliates of the Company which are considered variable interest entities ~~("VIE's"~~(“VIEs”). The Company is not the primary beneficiary of these entities and thus the securities are not eliminated in consolidation. These securities are collateralized by non-recourse funding obligations issued by captive insurance companies that are affiliates of the Company.

The Company’s held-to-maturity securities had ~~$76.6 million of gross unrecognized holding gains and $19.2~~$86.3 million of gross unrecognized holding losses ~~by maturity~~ as of December 31, ~~2017.~~2018. The Company does not consider these unrecognized holding losses to be other-than-temporary based on certain positive factors associated with the securities which include credit ratings of the guarantor, financial health of the issuer and guarantor, continued access of the issuer to capital markets and other pertinent information.

Variable Interest Entities

The Company holds certain investments in entities in which its ownership interests could possibly be considered variable interests under Topic 810 of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC” or “Codification”) (excluding debt and equity securities held as trading, available for sale, or held to maturity). The Company reviews the characteristics of each of these applicable entities and compares those characteristics to applicable criteria to determine whether the entity is a VIE. If the entity is determined to be a VIE, the Company then performs a detailed review to determine whether the interest would be considered a variable interest under the guidance. The Company then performs a qualitative review of all variable interests with the entity and determines whether the Company is the primary beneficiary. ASC 810 provides that an entity is the primary beneficiary of a VIE if the entity has 1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and 2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE.

Based on this analysis, the Company had an interest in two subsidiaries as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, Red Mountain, LLC ("(“Red ~~Mountain"~~Mountain”) and Steel City, LLC ("(“Steel ~~City"~~City”), that were determined to be VIEs.

The activity most significant to Red Mountain is the issuance of a note in connection with a financing transaction involving Golden Gate V Vermont Captive Insurance Company (“Golden Gate V”) in which Golden Gate V issued non-recourse funding obligations to Red Mountain and Red Mountain issued a note (the ~~"Red~~“Red Mountain ~~Note"~~Note”) to Golden Gate V. For details of this transaction, see Note ~~10,~~11, Debt and Other Obligations. The Company had the power, via its 100% ownership through an affiliate, to direct the activities of the VIE, but did not have the obligation to absorb losses related to the primary risks or sources of variability to the VIE. The variability of loss would be borne primarily by the third party in its function as provider of credit enhancement on the Red Mountain Note. Accordingly, it was determined that the Company is not the primary beneficiary of the VIE. The Company’s risk of loss related to the VIE is limited to its investment, through an affiliate, of $10,000. Additionally, the Company

has guaranteed Red Mountain’s payment obligation for the credit enhancement fee to the unrelated third party provider. As of March 31, ~~2018,~~2019, no payments have been made or required related to this guarantee.

Steel City, a wholly owned subsidiary of the Company, entered into a financing agreement on January 15, 2016 involving Golden Gate Captive Insurance Company ("Golden Gate"), in which Golden Gate issued non-recourse funding obligations to Steel City and Steel City issued three notes (the “Steel City Notes”) to Golden Gate. Credit enhancement on the Steel City Notes is provided by unrelated third parties. For details of the financing transaction, see Note ~~10,~~11, Debt and Other Obligations. The activity most significant to Steel City is the issuance of the Steel City Notes. The Company had the power, via its 100% ownership, to direct the activities of the VIE, but did not have the obligation to absorb losses related to the primary risks or sources of variability to the VIE. The variability of loss would be borne primarily by the third parties in their function as providers of credit enhancement on the Steel City Notes. Accordingly, it was determined that the Company is not the primary beneficiary of the VIE. The Company’s risk of loss related to the VIE is limited to its investment of $10,000. Additionally, the Company has guaranteed Steel City’s payment obligation for the credit enhancement fee to the unrelated third party providers. As of March 31, ~~2018,~~2019, no payments have been made or required related to this guarantee.

5.6. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company determined the fair value of its financial instruments based on the fair value hierarchy established in FASB guidance referenced in the Fair Value Measurements and Disclosures Topic which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company has adopted the provisions from the FASB guidance that is referenced in the Fair Value Measurements and Disclosures Topic for non-financial assets and liabilities (such as property and equipment, goodwill, and other intangible assets) that are required to be measured at fair value on a periodic basis. The effect on the Company’s periodic fair value measurements for non-financial assets and liabilities was not material.

The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded at fair value on the consolidated balance sheets are categorized as follows:

•Level 1: Unadjusted quoted prices for identical assets or liabilities in an active market.

Level 2: Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly. Level 2 inputs include the following:

a.a) Quoted prices for similar assets or liabilities in active ~~markets~~markets;

b.b) Quoted prices for identical or similar assets or liabilities in non-active ~~markets~~markets;

c.c) Inputs other than quoted market prices that are ~~observable~~observable; and


d.d)	Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management’s own ~~assumptions~~estimates about the assumptions a market participant would use in pricing the asset or liability.

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of March 31, ~~2018:~~2019:


	Measurement Category	Level 1		Level 2		Level 3		Total		Measurement Category	Level 1		Level 2		Level 3		Total
		(Dollars In Thousands)									(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	4	$	—	$	2,394,370	$	—	$	2,394,370	4	$	—	$	3,908,288	$	—	$	3,908,288
Commercial mortgage-backed securities	4	—		1,841,506		—		1,841,506		4	—		2,353,344		—		2,353,344
Other asset-backed securities	4	—		740,863		503,789		1,244,652		4	—		942,520		420,091		1,362,611
U.S. government-related securities	4	1,041,123		286,677		—		1,327,800		4	911,137		499,969		—		1,411,106
State, municipalities, and political subdivisions	4	—		1,700,279		—		1,700,279
State, municipals, and political subdivisions										4	—		3,691,664		—		3,691,664
Other government-related securities	4	—		277,459		—		277,459		4	—		524,161		—		524,161
Corporate securities	4	—		27,933,364		626,409		28,559,773		4	—		37,300,286		648,608		37,948,894
Redeemable preferred stock	4	72,244		18,325		—		90,569
Redeemable preferred stocks										4	66,650		17,173		—		83,823
Total fixed maturity securities - available-for-sale		1,113,367		35,192,843		1,130,198		37,436,408			977,787		49,237,405		1,068,699		51,283,891
Fixed maturity securities - trading
Residential mortgage-backed securities	3	—		265,547		—		265,547		3	—		213,259		—		213,259
Commercial mortgage-backed securities	3	—		146,633		—		146,633		3	—		209,482		—		209,482
Other asset-backed securities	3	—		94,756		34,958		129,714		3	—		83,057		66,484		149,541
U.S. government-related securities	3	31,684		5,891		—		37,575		3	26,880		32,747		—		59,627
State, municipalities, and political subdivisions	3	—		318,142		—		318,142
State, municipals, and political subdivisions										3	—		292,796		—		292,796
Other government-related securities	3	—		40,368		—		40,368		3	—		23,640		—		23,640
Corporate securities	3	—		1,640,575		5,324		1,645,899		3	—		1,528,005		5,251		1,533,256
Redeemable preferred stock	3	3,264		—		—		3,264
Redeemable preferred stocks										3	11,860		—		—		11,860
Total fixed maturity securities - trading		34,948		2,511,912		40,282		2,587,142			38,740		2,382,986		71,735		2,493,461
Total fixed maturity securities		1,148,315		37,704,755		1,170,480		40,023,550			1,016,527		51,620,391		1,140,434		53,777,352
Equity securities	3	615,423		36		66,061		681,520		3	555,009		37		64,394		619,440
Other long-term investments⁽¹⁾	3 & 4	87,558		354,855		144,352		586,765		3 & 4	68,379		359,864		109,532		537,775
Short-term investments	3	327,834		113,947		—		441,781		3	722,906		94,736		—		817,642
Total investments		2,179,130		38,173,593		1,380,893		41,733,616			2,362,821		52,075,028		1,314,360		55,752,209
Cash	3	307,724		—		—		307,724		3	278,630		—		—		278,630
Other assets	3	34,463		—		—		34,463		3	32,510		—		—		32,510
Assets related to separate accounts
Variable annuity	3	13,549,068		—		—		13,549,068		3	12,737,450		—		—		12,737,450
Variable universal life	3	1,019,250		—		—		1,019,250		3	1,041,397		—		—		1,041,397
Total assets measured at fair value on a recurring basis		$	17,089,635	$	38,173,593	$	1,380,893	$	56,644,121		$	16,452,808	$	52,075,028	$	1,314,360	$	69,842,196
Liabilities:
Annuity account balances ⁽²⁾	3	$	—	$	—	$	81,399	$	81,399	3	$	—	$	—	$	74,613	$	74,613
Other liabilities⁽¹⁾	3 & 4	7,397		189,206		621,102		817,705		3 & 4	18,581		156,493		797,891		972,965
Total liabilities measured at fair value on a recurring basis		$	7,397	$	189,206	$	702,501	$	899,104		$	18,581	$	156,493	$	872,504	$	1,047,578

(1) Includes certain freestanding and embedded derivatives.																			(2) Represents liabilities related to fixed indexed annuities.
(3) Fair Value through Net Income
(4) Fair Value through Other Comprehensive Income
(4) Fair Value through Other Comprehensive Income (Loss)

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, ~~2017:~~

2018:


	Level 1		Level 2		Level 3		Total		Measurement Category	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)									(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	2,327,212	$	—	$	2,327,212	4	$	—	$	3,611,590	$	—	$	3,611,590
Commercial mortgage-backed securities	—		1,889,822		—		1,889,822		4	—		2,295,084		—		2,295,084
Other asset-backed securities	—		745,184		504,365		1,249,549		4	—		970,251		421,642		1,391,893
U.S. government-related securities	958,775		264,477		—		1,223,252		4	1,010,485		629,020		—		1,639,505
State, municipalities, and political subdivisions	—		1,741,645		—		1,741,645
State, municipals, and political subdivisions									4	—		3,588,841		—		3,588,841
Other government-related securities	—		287,282		—		287,282		4	—		515,964		—		515,964
Corporate securities	—		29,075,109		626,901		29,702,010		4	—		35,724,552		638,276		36,362,828
Redeemable preferred stock	72,471		18,620		—		91,091
Redeemable preferred stocks									4	65,536		17,266		—		82,802
Total fixed maturity securities - available-for-sale	1,031,246		36,349,351		1,131,266		38,511,863			1,076,021		47,352,568		1,059,918		49,488,507
Fixed maturity securities - trading
Residential mortgage-backed securities	—		259,694		—		259,694		3	—		241,836		—		241,836
Commercial mortgage-backed securities	—		146,804		—		146,804		3	—		188,925		—		188,925
Other asset-backed securities	—		102,875		35,222		138,097		3	—		133,851		26,056		159,907
U.S. government-related securities	21,183		6,051		—		27,234		3	27,453		32,341		—		59,794
State, municipalities, and political subdivisions	—		326,925		—		326,925
State, municipals, and political subdivisions									3	—		286,413		—		286,413
Other government-related securities	—		63,925		—		63,925		3	—		44,207		—		44,207
Corporate securities	—		1,692,741		5,442		1,698,183		3	—		1,417,591		6,242		1,423,833
Redeemable preferred stock	3,327		—		—		3,327
Redeemable preferred stocks									3	11,277		—		—		11,277
Total fixed maturity securities - trading	24,510		2,599,015		40,664		2,664,189			38,730		2,345,164		32,298		2,416,192
Total fixed maturity securities	1,055,756		38,948,366		1,171,930		41,176,052			1,114,751		49,697,732		1,092,216		51,904,699
Equity securities	688,214		36		66,110		754,360		3	531,523		36		64,325		595,884
Other long-term investments⁽¹⁾	51,102		417,969		136,004		605,075		3&4	83,047		180,438		112,344		375,829
Short-term investments	482,461		132,749		—		615,210		3	730,067		77,216		—		807,283
Total investments	2,277,533		39,499,120		1,374,044		43,150,697			2,459,388		49,955,422		1,268,885		53,683,695
Cash	252,310		—		—		252,310		3	173,714		—		—		173,714
Other assets	28,771		—		—		28,771		3	29,257		—		—		29,257
Assets related to separate accounts
Variable annuity	13,956,071		—		—		13,956,071		3	12,288,919		—		—		12,288,919
Variable universal life	1,035,202		—		—		1,035,202		3	937,732		—		—		937,732
Total assets measured at fair value on a recurring basis	$	17,549,887	$	39,499,120	$	1,374,044	$	58,423,051		$	15,889,010	$	49,955,422	$	1,268,885	$	67,113,317
Liabilities:
Annuity account balances⁽²⁾	$	—	$	—	$	83,472	$	83,472	3	$	—	$	—	$	76,119	$	76,119
Other liabilities⁽¹⁾	5,755		240,927		760,890		1,007,572		3&4	56,018		69,501		629,942		755,461
Total liabilities measured at fair value on a recurring basis	$	5,755	$	240,927	$	844,362	$	1,091,044		$	56,018	$	69,501	$	706,061	$	831,580

(1) Includes certain freestanding and embedded derivatives.																		(2) Represents liabilities related to fixed indexed annuities.
(3) Fair Value through Net Income
(4) Fair Value through Other Comprehensive Income (Loss)									(4) Fair Value through Other Comprehensive Income (Loss)

Determination of fair values

The valuation methodologies used to determine the fair values of assets and liabilities reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The Company determines the fair values of certain financial assets and financial liabilities based on quoted market prices, where available. The Company also determines certain fair values based on future cash flows discounted at the appropriate current market rate. Fair values reflect adjustments for counterparty credit quality, the Company’s credit standing, liquidity, and where appropriate, risk margins on unobservable parameters. The following is a discussion of the methodologies used to determine fair values for the financial instruments as listed in the above table.

The fair value of fixed maturity, short-term, and equity securities is determined by management after considering one of three primary sources of information: third party pricing services, non-binding independent broker quotations, or pricing matrices. Security pricing is applied using a ~~"waterfall"~~“waterfall” approach whereby publicly available prices are first sought from third party pricing services, the remaining unpriced securities are submitted to independent brokers for non-binding prices, or lastly, securities are priced using a pricing matrix. Typical inputs used by these three pricing methods include, but are not limited to: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Third party pricing services price ~~approximately 92.4%~~93.5% of the ~~Company's~~Company’s available-for-sale and trading fixed maturity securities. Based on the typical trading volumes and the lack of quoted market prices for available-for-sale and trading fixed maturities, third party pricing services derive the majority of security prices from observable market inputs such as recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information outlined above. If there are no recent reported trades, the third party pricing services and brokers may use matrix or model processes to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Certain securities are priced via independent non-binding broker quotations, which are considered to have no significant unobservable inputs. When using non-binding independent broker quotations, the Company obtains one quote per security, typically from the broker from which we purchased the security. A pricing matrix is used to price securities for which the Company is unable to obtain or effectively rely on either a price from a third party pricing service or an independent broker quotation.

The pricing matrix used by the Company begins with current spread levels to determine the market price for the security. The credit spreads, assigned by brokers, incorporate the issuer’s credit rating, liquidity discounts, weighted- average of contracted cash flows, risk premium, if warranted, due to the issuer’s industry, and the security’s time to maturity. The Company uses credit ratings provided by nationally recognized rating agencies.

For securities that are priced via non-binding independent broker quotations, the Company assesses whether prices received from independent brokers represent a reasonable estimate of fair value through an analysis using internal and external cash flow models developed based on spreads and, when available, market indices. The Company uses a market-based cash flow analysis to validate the reasonableness of prices received from independent brokers. These analytics, which are updated daily, incorporate various metrics (yield curves, credit spreads, prepayment rates, etc.) to determine the valuation of such holdings. As a result of this analysis, if the Company determines there is a more appropriate fair value based upon the analytics, the price received from the independent broker is adjusted accordingly. The Company did not adjust any quotes or prices received from brokers during the three months ended March 31, ~~2018.~~2019.

The Company has analyzed the third party pricing services’ valuation methodologies and related inputs and has also evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs that is in accordance with the Fair Value Measurements and Disclosures Topic of the ASC. Based on this evaluation and investment class analysis, each price was classified into Level 1, 2, or 3. Most prices provided by third party pricing services are classified into Level 2 because the significant inputs used in pricing the securities are market observable and the observable inputs are corroborated by the Company. Since the matrix pricing of certain debt securities includes significant non-observable inputs, they are classified as Level 3.

Asset-Backed Securities

This category mainly consists of residential mortgage-backed securities, commercial mortgage-backed securities, and other asset-backed securities (collectively referred to as asset-backed securities or “ABS”). As of March 31, ~~2018,~~2019, the Company held ~~$5.5~~$7.7 billion of ABS classified as Level 2. These securities are priced from information provided by a third party pricing service and independent broker quotes. The third party pricing services and brokers mainly value securities using both a market and income approach to valuation. As part of this valuation process they consider the following characteristics of the item being measured to be relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, and 7) credit ratings of the securities.

After reviewing these characteristics of the ABS, the third party pricing service and brokers use certain inputs to determine the value of the security. For ABS classified as Level 2, the valuation would consist of predominantly market observable inputs such as, but not limited to: 1) monthly principal and interest payments on the underlying assets, 2) average life of the security, 3) prepayment speeds, 4) credit spreads, 5) treasury and swap yield curves, and 6) discount margin. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.

As of March 31, ~~2018,~~2019, the Company held ~~$538.7~~$486.6 million of Level 3 ABS, which included ~~$503.7~~$420.1 million of other asset-backed securities classified as available-for-sale and ~~$35.0~~$66.5 million of other asset-backed securities classified as trading. These securities are predominantly ARS whose underlying collateral is at least 97% guaranteed by the FFELP. ~~The~~As a result of the ARS market collapse during 2008, the Company prices its ARS using an income approach valuation model. As part of the valuation

process the Company reviews the following characteristics

of the ARS in determining the relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, 7) credit ratings of the securities, 8) liquidity premium, and 9) paydown rate. In periods where market activity increases and there are transactions at a price that is not the result of a distressed or forced sale we consider those prices as part of our valuation. If the market activity during a period is solely the result of the issuer redeeming positions we consider those transactions in our valuation, but still consider them to be ~~level three~~Level 3 measurements due to the nature of the transaction.

Corporate Securities, Redeemable Preferred Stocks, U.S. Government-Related Securities, States, Municipals, and Political Subdivisions, and Other ~~Government Related~~Government-Related Securities

As of March 31, ~~2018,~~2019, the Company classified approximately ~~$32.2~~$43.9 billion of corporate securities, redeemable preferred stocks, U.S. government-related securities, states, municipals, and political subdivisions, and other government-related securities as Level 2. The fair value of the Level 2 securities is predominantly priced by broker quotes and a third party pricing service. The Company has reviewed the valuation techniques of the brokers and third party pricing service and has determined that such techniques used Level 2 market observable inputs. The following characteristics of the securities are considered to be the primary relevant inputs to the valuation: 1) ~~weighted- average~~weighted-average coupon rate, 2) weighted-average years to maturity, 3) seniority, and 4) credit ratings. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.

The brokers and third party pricing service utilize valuation models that consist of a hybrid income and market approach to valuation. The pricing models utilize the following inputs: 1) principal and interest payments, 2) treasury yield curve, 3) credit spreads from new issue and secondary trading markets, 4) dealer quotes with adjustments for issues with early redemption features, 5) liquidity premiums present on private placements, and 6) discount margins from dealers in the new issue market.

As of March 31, ~~2018,~~2019, the Company classified approximately ~~$631.7~~$653.9 million of securities as Level 3 valuations. Level 3 securities primarily represent investments in illiquid bonds for which no price is readily available. To determine a price, the Company uses a discounted cash flow model with both observable and unobservable inputs. These inputs are entered into an industry standard pricing model to determine the final price of the security. These inputs include: 1) principal and interest payments, 2) coupon rate, 3) sector and issuer level spread over treasury, 4) underlying collateral, 5) credit ratings, 6) maturity, 7) embedded options, 8) recent new issuance, 9) comparative bond analysis, and 10) an illiquidity premium.

Equities

As of March 31, ~~2018,~~2019, the Company held approximately ~~$66.1~~$64.4 million of equity securities classified as Level 2 and Level 3. Of this total, ~~$65.5~~$63.4 million represents Federal Home Loan Bank (“FHLB”) stock. The Company believes that the cost of the FHLB stock approximates fair value.

Other Long-term Investments and Other Liabilities

Other long-term investments and other liabilities consist entirely of free-standing and embedded derivative financial instruments. Refer to Note 6,7, Derivative Financial Instruments for additional information related to derivatives. Derivative financial instruments are valued using exchange prices, independent broker quotations, or pricing valuation models, which utilize market data inputs. Excluding embedded derivatives, as of March 31, ~~2018,~~2019, 100% of derivatives based upon notional values were priced using exchange prices or independent broker quotations. Inputs used to value derivatives include, but are not limited to, interest swap rates, credit spreads, interest rate and equity market volatility indices, equity index levels, and treasury rates. The Company performs monthly analysis on derivative valuations that includes both quantitative and qualitative analyses.

Derivative instruments classified as Level 1 generally include futures and options, which are traded on active exchange markets.

Derivative instruments classified as Level 2 primarily include swaps, options, and swaptions, which are traded over-the-counter. Level 2 also includes certain centrally cleared derivatives. These derivative valuations are determined using independent broker quotations, which are corroborated with observable market inputs.

Derivative instruments classified as Level 3 ~~were~~are embedded derivatives and include at least one significant non-observable input. A derivative instrument containing Level 1 and Level 2 inputs will be classified as a Level 3 financial instrument in its entirety if it has at least one significant Level 3 input.

The Company utilizes derivative instruments to manage the risk associated with certain assets and liabilities. However, the derivative instruments may not be classified within the same fair value hierarchy level as the associated assets and liabilities. Therefore, the changes in fair value on derivatives reported in Level 3 may not reflect the offsetting impact of the changes in fair value of the associated assets and liabilities.

The embedded derivatives are carried at fair value in ~~“other~~other long-term ~~investments”~~investments and ~~“other liabilities”~~other liabilities on the Company’s consolidated condensed balance sheet. The changes in fair value are recorded in earnings as ~~“Realized~~Realized investment gains (losses) ~~- Derivative financial instruments”~~. Refer to Note 6,7, Derivative Financial Instruments for more information related to each embedded derivatives gains and losses.

The fair value of the guaranteed living withdrawal benefits ~~("GLWB"~~(“GLWB”) embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using multiple risk neutral stochastic equity scenarios and policyholder behavior assumptions. The risk neutral scenarios are generated using the current swap curve and projected equity

volatilities and correlations. The projected equity volatilities are based on a blend of historical volatility and ~~near- term~~near-term equity

market implied volatilities. The equity correlations are based on historical price observations. For policyholder behavior assumptions, expected lapse and utilization assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the Ruark 2015 ALB table, with attained age factors varying from ~~91.1%~~87.0% - ~~106.6%.~~100.0% based on company experience. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR plus a credit spread (to represent the Company’s non-performance risk). As a result of using significant unobservable inputs, the GLWB embedded derivative is categorized as Level 3. Policyholder assumptions are reviewed on an annual basis.

The balance of the ~~FIA~~fixed indexed annuity (“FIA”) embedded derivative is impacted by policyholder cash flows associated with the FIA product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the FIA embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the ~~1994 Variable Annuity MGDB~~2015 Ruark ALB mortality table, ~~modified with company experience,~~ with attained age factors varying from ~~46%~~87% - ~~113%.~~100% based on company experience. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the ~~Company's~~Company’s non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the FIA embedded derivative is categorized as Level 3.

The balance of the indexed universal life (“IUL”) embedded derivative is impacted by policyholder cash flows associated with the IUL product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the IUL embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the SOA 2015 VBT Primary Tables, ~~modified with company experience,~~ with attained age factors varying from ~~34%~~37% - ~~152%.~~577% based on company experience. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the ~~Company's~~Company’s non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the IUL embedded derivative is categorized as Level 3.

The Company has assumed and ceded certain blocks of policies under modified coinsurance agreements in which the investment results of the underlying portfolios inure directly to the reinsurers. As a result, these agreements contain embedded derivatives that are reported at fair value. Changes in their fair value are reported in earnings. The investments supporting these agreements are designated as “trading securities”; therefore changes in their fair value are also reported in earnings. As of March 31, ~~2018,~~2019, the fair value of the embedded derivative is based upon the relationship between the statutory policy liabilities (net of policy loans) of ~~$2.4~~$2.3 billion and the statutory unrealized gain (loss) of the securities of ~~$134.1~~$113.0 million. As a result, changes in the fair value of the embedded derivatives are largely offset by the changes in fair value of the related investments and each are reported in earnings. The fair value of the embedded derivative is considered a Level 3 valuation due to the unobservable nature of the policy liabilities.

Annuity Account Balances

The Company records a certain legacy block of FIA reserves at fair value. Based on the characteristics of these reserves, the Company believes that the fund value approximates fair value. The fair value measurement of these reserves is considered a Level 3 valuation due to the unobservable nature of the fund values. The Level 3 fair value as of March 31, ~~2018~~2019 is ~~$81.4~~$74.6 million.

Separate Accounts

Separate account assets are invested in open-ended mutual funds and are included in Level 1.

Valuation of Level 3 Financial Instruments

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:

Fair Value
As of
March 31, 2018

Valuation

Technique

Unobservable

Input

Range

(Weighted Average)

Fair Value
As of
March 31, 2019

Valuation

Technique

Unobservable

Input

Range

(Weighted Average)

(Dollars In Thousands)

Assets:

Other asset-backed securities

503,672

Liquidation

Liquidation value

$90 - $97 ($94.92)

419,915

Liquidation

Liquidation value

$95.39 - $99.99 ($98.00)

Discounted cash flow

Liquidity premium

0.07% - 1.09% (0.73%)

Discounted cash flow

Liquidity premium

0.04% - 1.27% (0.54%)

Paydown rate

11.63% - 12.53% (12.16%)

Paydown rate

10.90% - 13.09% (11.97%)

Corporate securities

617,724

Discounted cash flow

Spread over treasury

0.96% - 4.35% (1.61%)

648,608

Discounted cash flow

Spread over treasury

0.92% - 3.87% (1.65%)

Liabilities:⁽¹⁾

Embedded derivatives - GLWB⁽²⁾

55,468

Actuarial cash flow model

Mortality

91.1% to 106.6% of

203,696

Actuarial cash flow model

Mortality

87% to 100% of

Ruark 2015 ALB table

Lapse

0.3% - 15%, depending on

Lapse

Ruark Predictive Model

product/duration/funded

Utilization

99%. 10% of policies have a one-

status of guarantee

time over-utilization of 400%

Utilization

99%. 10% of policies have a one-

Nonperformance risk

0.23% - 1.01%

Embedded derivative - FIA

264,430

Actuarial cash flow model

Expenses

$145 per policy

time over-utilization of 400%

Withdrawal rate

1.5% prior to age 70, 100% of the

Nonperformance risk

0.14% - 0.95%

Embedded derivative - FIA

218,340

Actuarial cash flow model

Expenses

$146 per policy

Withdrawal rate

1.5% prior to age 70, 100% of the

RMD for ages 70+

Mortality

87% to 100% of Ruark 2015 ALB

Mortality

1994 MGDB table with company

table

experience

Lapse

1.0% - 30.0%, depending

Lapse

1.0% - 30.0%, depending

on duration/surrender

charge period

Dynamically adjusted for WB moneyness and projected market rates vs credited rates

Nonperformance risk

0.14% - 0.95%

Nonperformance risk

0.23% - 1.01%

Embedded derivative - IUL

77,350

Actuarial cash flow model

Mortality

34% - 152% of 2015

112,814

Actuarial cash flow model

Mortality

37% - 577% of 2015

VBT Primary Tables

Lapse

0.5% - 10.0%, depending

Lapse

0.5% - 10.0%, depending

on duration/distribution

channel and smoking class

Nonperformance risk

0.14% - 0.95%

Nonperformance risk

0.23% - 1.01%

(1) Excludes modified coinsurance arrangements.

(2) The fair value for the GLWB embedded derivative is presented as a net liability.

The chart above excludes Level 3 financial instruments that are valued using broker quotes and for which book value approximates fair value.

The Company has considered all reasonably available quantitative inputs as of March 31, ~~2018,~~2019, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in ~~$49.5~~$72.7 million of financial instruments being classified as Level 3 as of March 31, ~~2018.~~2019. Of the ~~$49.5~~$72.7 million, ~~$35.1~~$66.7 million are other asset-backed securities, ~~$14.0~~$5.2 million are corporate securities, and ~~$0.4~~$0.8 million are equity securities.

In certain cases, the Company has determined that book value materially approximates fair value. As of March 31, ~~2018,~~2019, the Company held ~~$65.7~~$63.6 million of financial instruments where book value approximates fair value which was predominantly FHLB stock.

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:

Fair Value
As of
December 31, 2017

Valuation

Technique

Unobservable

Input

Range

(Weighted Average)

Fair Value
As of
December 31, 2018

Valuation

Technique

Unobservable

Input

Range

(Weighted Average)

(Dollars In Thousands)

Assets:

Other asset-backed securities

504,228

Liquidation

Liquidation value

$90 - $97 ($94.91)

421,458

Liquidation

Liquidation value

$85.75 - $99.99 ($95.36)

Discounted Cash Flow

Liquidity premium

0.06% - 1.17% (0.75%)

Discounted Cash Flow

Liquidity premium

0.02% - 1.25% (0.64%)

Paydown rate

11.31% - 11.97% (11.54%)

Paydown rate

10.96% - 13.11% (12.03%)

Corporate securities

617,770

Discounted cash flow

Spread over treasury

0.81% - 3.95% (1.06%)

631,068

Discounted cash flow

Spread over treasury

0.84% - 3.0% (1.84%)

Liabilities:⁽¹⁾

Embedded derivatives - GLWB⁽²⁾

111,760

Actuarial cash flow model

Mortality

91.1% to 106.6% of

184,071

Actuarial cash flow model

Mortality

87% to 100% of

Ruark 2015 ALB table

Lapse

1.0% - 30.0%, depending on

product/duration/funded

Ruark 2015 ALB table

status of guarantee

Lapse

Ruark Predictive Model

Utilization

99%. 10% of policies have a one-

Utilization

99%. 10% of policies have a one-

time over-utilization of 400%

Nonperformance risk

0.11% - 0.79%

Nonperformance risk

0.21% - 1.16%

Embedded derivative - FIA

218,676

Actuarial cash flow model

Expenses

$146 per policy

217,288

Actuarial cash flow model

Expenses

$145 per policy

Withdrawal rate

1.5% prior to age 70, 100% of the

Withdrawal rate

1.5% prior to age 70, 100% of the

RMD for ages 70+

Mortality

1994 MGDB table with company

Mortality

87% to 100% of Ruark 2015 ALB

experience

table

Lapse

1.0% - 30.0%, depending

Lapse

1.0% - 30.0%, depending

on duration/surrender

charge period

Nonperformance risk

0.11% - 0.79%

Nonperformance risk

0.21% - 1.16%

Embedded derivative - IUL

80,212

Actuarial cash flow model

Mortality

34% - 152% of 2015

90,231

Actuarial cash flow model

Mortality

37% - 577% of 2015

VBT Primary Tables

Lapse

0.5% - 10.0%, depending

Lapse

0.5% - 10.0%, depending

on duration/distribution

channel and smoking class

Nonperformance risk

0.11% - 0.79%

Nonperformance risk

0.21% - 1.16%

(1) Excludes modified coinsurance arrangements.

(2) The fair value for the GLWB embedded derivative is presented as a net liability.

The chart above excludes Level 3 financial instruments that are valued using broker quotes and for which book value approximates fair value.

The Company had considered all reasonably available quantitative inputs as of December 31, ~~2017,~~2018, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in ~~$50.4~~$40.4 million of financial instruments being classified as Level 3 as of December 31, ~~2017.~~2018. Of the ~~$50.4~~$40.4 million, ~~$35.4~~$26.2 million are other asset-backed securities, ~~$14.6~~$13.5 million are corporate securities, and ~~$0.4~~$0.7 million are equity securities.

In certain cases the Company has determined that book value materially approximates fair value. As of December 31, ~~2017,~~2018, the Company held ~~$65.7~~$63.6 million of financial instruments where book value approximates fair value which was predominantly FHLB stock.

The asset-backed securities classified as Level 3 are predominantly ARS. A change in the paydown rate (the projected annual rate of principal reduction) of the ARS can significantly impact the fair value of these securities. A decrease in the paydown rate would increase the projected weighted average life of the ARS and increase the sensitivity of the ARS’ fair value to changes in interest rates. An increase in the liquidity premium would result in a decrease in the fair value of the securities, while a decrease in the liquidity premium would increase the fair value of these securities. The liquidation ~~value~~values for these securities are sensitive to the ~~issuer's~~issuer’s available cash flows and ability to redeem the securities, as well as the current ~~holders'~~holders’ willingness to liquidate at the specified price.

The fair value of corporate bonds classified as Level 3 is sensitive to changes in the interest rate spread over the corresponding U.S. Treasury rate. This spread represents a risk premium that is impacted by ~~company specific~~company-specific and market factors. An increase in the spread can be caused by a perceived increase in credit risk of a specific issuer and/or an increase in the overall market risk premium associated with similar securities. The fair values of corporate bonds are sensitive to changes in spread. When

holding the treasury rate constant, the fair value of corporate bonds increases when spreads decrease, and decreases when spreads increase.

The fair value of the GLWB embedded derivative is sensitive to changes in the discount rate which includes the Company’s nonperformance risk, volatility, lapse, and mortality assumptions. The volatility assumption is an observable input as it is based on market inputs. The Company’s nonperformance risk, lapse, and mortality are unobservable. An increase in the three unobservable assumptions would result in a decrease in the fair value of the liability and conversely, if there is a decrease in the assumptions the fair value would increase. The fair value is also dependent on the assumed policyholder utilization of the GLWB where an increase in assumed utilization would result in an increase in the fair value of the liability and conversely, if there is a decrease in the assumption, the fair value would decrease.

The fair value of the FIA embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the FIA embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and nonperformance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

The fair value of the IUL embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the IUL embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and non-performance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended March 31, 2019, for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																							Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	—	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—		$	—		$	—	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	421,642		446		8,147		(20		)	(331		)	—		(10,008		)	—		—		—			215			420,091		—
Corporate securities	638,276		—		18,585		—			(3,012		)	34,000		(28,773		)	—		—		(10,095		)	(373		)	648,608		—
Total fixed maturity securities - available-for-sale	1,059,918		446		26,732		(20		)	(3,343		)	34,000		(38,781		)	—		—		(10,095		)	(158		)	1,068,699		—
Fixed maturity securities - trading
Other asset-backed securities	26,056		3,196		—		(116		)	—			15,463		(5,111		)	—		—		27,064			(68		)	66,484		5,330
Corporate securities	6,242		101		—		(31		)	—			—		(1,036		)	—		—		—			(25		)	5,251		34
Total fixed maturity securities - trading	32,298		3,297		—		(147		)	—			15,463		(6,147		)	—		—		27,064			(93		)	71,735		5,364
Total fixed maturity securities	1,092,216		3,743		26,732		(167		)	(3,343		)	49,463		(44,928		)	—		—		16,969			(251		)	1,140,434		5,364
Equity securities	64,325		82		—		(13		)	—			—		—			—		—		—			—			64,394		69
Other long-term investments⁽¹⁾	112,344		13,222		—		(16,034		)	—			—		—			—		—		—			—			109,532		(2,812		)
Total investments	1,268,885		17,047		26,732		(16,214		)	(3,343		)	49,463		(44,928		)	—		—		16,969			(251		)	1,314,360		2,621
Total assets measured at fair value on a recurring basis	$	1,268,885	$	17,047	$	26,732	$	(16,214	)	$	(3,343	)	$	49,463	$	(44,928	)	$	—	$	—	$	16,969		$	(251	)	$	1,314,360	$	2,621
Liabilities:
Annuity account balances⁽²⁾	$	76,119	$	—	$	—	$	(326	)	$	—		$	—	$	—		$	11	$	1,843	$	—		$	—		$	74,613	$	—
Other liabilities⁽¹⁾	629,942		11,670		—		(179,619		)	—			—		—			—		—		—			—			797,891		(167,949		)
Total liabilities measured at fair value on a recurring basis	$	706,061	$	11,670	$	—	$	(179,945	)	$	—		$	—	$	—		$	11	$	1,843	$	—		$	—		$	872,504	$	(167,949	)

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

For the three months ended March 31, 2019, there were $36.0 million of securities transferred into Level 3.

For the three months ended March 31, 2019, there were $19.0 million of securities transferred into Level 2 from Level 3.These transfers resulted from securities that were priced internally using significant unobservable inputs where market observable inputs were not available in previous periods but were priced by independent pricing services or brokers as of March 31, 2019.

For the three months ended March 31, 2019, there were no transfers from Level 2 into Level 1.

For the three months ended March 31, 2019, there were no transfers from Level 1 into Level 2.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended March 31, 2018, for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																						Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3		Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	—	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—	$	—		$	—	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Other asset-backed securities	504,365		—		514		—			(1,634		)	—		(14		)	—		—		—		558			503,789		—
Corporate securities	626,901		—		1,399		—			(12,101		)	35,000		(23,635		)	—		—		—		(1,155		)	626,409		—
Total fixed maturity securities - available-for-sale	1,131,266		—		1,913		—			(13,735		)	35,000		(23,649		)	—		—		—		(597		)	1,130,198		—
Fixed maturity securities - trading
Other asset-backed securities	35,222		194		—		(28		)	—			—		(396		)	—		—		—		(34		)	34,958		166
Corporate securities	5,442		—		—		(94		)	—			—		—			—		—		—		(24		)	5,324		(94		)
Total fixed maturity securities - trading	40,664		194		—		(122		)	—			—		(396		)	—		—		—		(58		)	40,282		72
Total fixed maturity securities	1,171,930		194		1,913		(122		)	(13,735		)	35,000		(24,045		)	—		—		—		(655		)	1,170,480		72
Equity securities	66,110		—		—		(49		)	—			—		—			—		—		—		—			66,061		(49		)
Other long-term investments⁽¹⁾	136,004		8,864		—		(516		)	—			—		—			—		—		—		—			144,352		8,348
Total investments	1,374,044		9,058		1,913		(687		)	(13,735		)	35,000		(24,045		)	—		—		—		(655		)	1,380,893		8,371
Total assets measured at fair value on a recurring basis	$	1,374,044	$	9,058	$	1,913	$	(687	)	$	(13,735	)	$	35,000	$	(24,045	)	$	—	$	—	$	—	$	(655	)	$	1,380,893	$	8,371
Liabilities:
Annuity account balances⁽²⁾	$	83,472	$	—	$	—	$	(794	)	$	—		$	—	$	—		$	441	$	3,308	$	—	$	—		$	81,399	$	—
Other liabilities⁽¹⁾	760,890		161,318		—		(21,530		)	—			—		—			—		—		—		—			621,102		139,788
Total liabilities measured at fair value on a recurring basis	$	844,362	$	161,318	$	—	$	(22,324	)	$	—		$	—	$	—		$	441	$	3,308	$	—	$	—		$	702,501	$	139,788

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

For the three months ended March 31, 2018, there were no securities transferred into Level 3.

For the three months ended March 31, 2018, there were no securities transferred into Level 2 from Level 3.

For the three months ended March 31, 2018, there were no transfers from Level 2 tointo Level 1.

For the three months ended March 31, 2018, there were no transfers ~~from Level 1 into Level 2.~~

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended March 31, 2017, for which the Company has used significant unobservable inputs (Level 3):

Total
Realized and Unrealized
Gains

Total
Realized and Unrealized
Losses
Total Gains (losses) included in Earnings related to Instruments still held at
the
Reporting
Date

Beginning
Balance

Included
in
Earnings

Included
in
Other
Comprehensive
Income

Included
in
Earnings

Included
in
Other
Comprehensive
Income
Purchases Sales Issuances Settlements
Transfers
in/out of
Level 3
Other
Ending
Balance

(Dollars In Thousands)
Assets:

Fixed maturity securities available-for-sale

Residential mortgage-backed securities $ 3
$ —
$ —
$ —
$ —
$ —
$ (3 ) $ —
$ —
$ —
$ —
$ —
$ —
Commercial mortgage-backed securities —
—
—
—
—
—
—
—
—
—
—
—
—
Other asset-backed securities 562,604
—
3,530
—
(831 ) —
(2,015 ) —
—
(6,643 ) 291
556,936
—
Corporate securities 664,046
—
7,771
—
(282 ) 37,259
(38,884 ) —
—
(2,647 ) (558 ) 666,705
—
Total fixed maturity securities - available-for-sale 1,226,653
—
11,301
—
(1,113 ) 37,259
(40,902 ) —
—
(9,290 ) (267 ) 1,223,641
—
Fixed maturity securities - trading

Other asset-backed securities 84,563
3,474
—
(586 ) —
—
(19,308 ) —
—
—
609
68,752
2,888
Corporate securities 5,492
34
—
—
—
—
—
—
—
—
(22 ) 5,504
34
Total fixed maturity securities - trading 90,055
3,508
—
(586 ) —
—
(19,308 ) —
—
—
587
74,256
2,922
Total fixed maturity securities 1,316,708
3,508
11,301
(586 ) (1,113 ) 37,259
(60,210 ) —
—
(9,290 ) 320
1,297,897
2,922
Equity securities 69,010
—
2
(2,630 ) —
—
—
—
—
3
(1 ) 66,384
1
Other long-term investments⁽¹⁾
124,325
11,061
—
(1,958 ) —
—
—
—
—
—
—
133,428
9,103
Total investments 1,510,043
14,569
11,303
(5,174 ) (1,113 ) 37,259
(60,210 ) —
—
(9,287 ) 319
1,497,709
12,026
Total assets measured at fair value on a recurring basis $ 1,510,043
$ 14,569
$ 11,303
$ (5,174 ) $ (1,113 ) $ 37,259
$ (60,210 ) $ —
$ —
$ (9,287 ) $ 319
$ 1,497,709
$ 12,026
Liabilities:

Annuity account balances⁽²⁾
$ 87,616
$ —
$ —
$ (887 ) $ —
$ —
$ —
$ 180
$ 2,268
$ —
$ —
$ 86,415
$ —
Other liabilities⁽¹⁾
571,843
44,263
—
(59,494 ) —
—
—
—
—
—
—
587,074
(15,231 )
Total liabilities measured at fair value on a recurring basis $ 659,459
$ 44,263
$ —
$ (60,381 ) $ —
$ —
$ —
$ 180
$ 2,268
$ —
$ —
$ 673,489
$ (15,231 )

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

~~For the three months ended March 31, 2017, there was an immaterial amount of transfers of securities into Level 3.~~

For the three months ended March 31, 2017, $9.3 million of securities were transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were priced internally using significant unobservable inputs where market observable inputs were not available in previous periods but were priced by independent pricing services or brokers as of March 31, 2017.

~~For the three months ended March 31, 2017, there were no securities transferred from Level 2 to Level 1.~~

~~For the three months ended March 31, 2017, there were no securities transferred~~ from Level 1 into Level 2.

Total realized and unrealized gains (losses) on Level 3 assets and liabilities are primarily reported in either realized investment gains (losses) within the consolidated condensed statements of income (loss) or other comprehensive income (loss) within shareowner’s equity based on the appropriate accounting treatment for the item.

Purchases, sales, issuances, and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily relates to purchases and sales of fixed maturity securities and issuances and settlements of fixed indexed annuities.

The Company reviews the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting period in which the changes occur. The asset transfers

in the table(s) above primarily related to positions moved from Level 3 to Level 2 as the Company determined that certain inputs were observable.

The amount of total gains (losses) for assets and liabilities still held as of the reporting date primarily represents changes in fair value of trading securities and certain derivatives that exist as of the reporting date and the change in fair value of fixed indexed annuities.

Estimated Fair Value of Financial Instruments

The carrying amounts and estimated fair values of the Company’s financial instruments as of the periods shown below are as follows:


		As of									As of
		March 31, 2018				December 31, 2017					March 31, 2019				December 31, 2018
	Fair Value Level	Carrying Amounts		Fair Values		Carrying Amounts		Fair Values		Fair Value Level	Carrying Amounts		Fair Values		Carrying Amounts		Fair Values
		(Dollars In Thousands)									(Dollars In Thousands)
Assets:
Mortgage loans on real estate	3	$	6,846,633	$	6,646,782	$	6,817,723	$	6,740,177	3	$	7,701,465	$	7,624,622	$	7,724,733	$	7,447,702
Policy loans	3	1,594,642		1,594,642		1,615,615		1,615,615		3	1,677,442		1,677,442		1,695,886		1,695,886
Fixed maturities, held-to-maturity⁽¹⁾	3	2,699,826		2,674,129		2,718,904		2,776,327		3	2,607,356		2,594,441		2,633,474		2,547,210
Liabilities:
Stable value product account balances	3	$	4,699,614	$	4,658,178	$	4,698,371	$	4,698,868	3	$	5,527,816	$	5,536,721	$	5,234,731	$	5,200,723
Future policy benefits and claims⁽²⁾	3	220,307		220,307		220,498		220,498		3	1,637,741		1,644,622		1,671,414		1,671,434
Other policyholders' funds⁽³⁾	3	135,202		135,921		133,508		134,253
Other policyholders’ funds⁽³⁾										3	105,141		107,975		131,150		131,782
Debt:⁽⁴⁾
Bank borrowings	3	$	325,000	$	325,000	$	—	$	—	3	$	—	$	—	$	—	$	—
Senior Notes	2	769,776		751,951		943,370		933,926		2	1,080,878		1,076,623		1,100,508		1,065,338
Subordinated debt securities	2	495,324		486,595		495,289		501,215
Subordinated debentures										2	495,460		501,945		495,426		494,265
Subordinated funding obligations										3	110,000		99,026		110,000		95,476
Non-recourse funding obligations⁽⁵⁾	3	2,728,689		2,706,594		2,747,477		2,804,983		3	2,607,021		2,656,379		2,632,497		2,550,237

Except as noted below, fair values were estimated using quoted market prices.
(1) Securities purchased from unconsolidated affiliates, Red Mountain LLC and Steel City LLC.
(1) Securities purchased from unconsolidated affiliates, Red Mountain, LLC and Steel City, LLC.										(1) Securities purchased from unconsolidated affiliates, Red Mountain, LLC and Steel City, LLC.
(2) Single premium immediate annuity without life contingencies.																			(3) Supplementary contracts without life contingencies.
(4) Excludes capital lease obligations of $1.6 million.
(5) As of March 31, 2018, carrying amount of $2.6 billion and a fair value of $2.7 billion related to non-recourse funding obligations issued by Golden Gate and Golden Gate V. As of December 31, 2017, carrying amount of $2.7 billion and a fair value of $2.8 billion related to non-recourse funding obligations issued by Golden Gate and Golden Gate V.
(4) Excludes capital lease obligations of $2.8 million and $1.3 million as of March 31, 2019 and December 31, 2018, respectively.										(4) Excludes capital lease obligations of $2.8 million and $1.3 million as of March 31, 2019 and December 31, 2018, respectively.
(5) As of March 31, 2019, carrying amount of $2.5 billion and a fair value of $2.6 billion related to non-recourse funding obligations issued by Golden Gate and Golden Gate V. As of December 31, 2018, carrying amount of $2.6 billion and a fair value of $2.5 billion related to non-recourse funding obligations issued by Golden Gate and Golden Gate V.										(5) As of March 31, 2019, carrying amount of $2.5 billion and a fair value of $2.6 billion related to non-recourse funding obligations issued by Golden Gate and Golden Gate V. As of December 31, 2018, carrying amount of $2.6 billion and a fair value of $2.5 billion related to non-recourse funding obligations issued by Golden Gate and Golden Gate V.

Fair Value Measurements

Mortgage loans on real estate

The Company estimates the fair value of mortgage loans using an internally developed model. This model includes inputs derived by the Company based on assumed discount rates relative to the Company’s current mortgage loan lending rate and an expected cash flow analysis based on a review of the mortgage loan terms. The model also contains the Company’s determined representative risk adjustment assumptions related to credit and liquidity risks.

Policy loans

The Company believes the fair value of policy loans approximates book value. Policy loans are funds provided to ~~policy holders~~policyholders in return for a claim on the policy. The funds provided are limited to the cash surrender value of the underlying policy. The nature of policy loans is to have a negligible default risk as the loans are fully collateralized by the value of the policy. Policy loans do not have a stated maturity and the balances and accrued interest are repaid either by the policyholder or with proceeds from the policy. Due to the collateralized nature of policy loans and unpredictable timing of repayments, the Company believes the ~~fair~~carrying value of policy loans approximates ~~carrying~~fair value.

Fixed maturities, held-to-maturity

The Company estimates the fair value of its fixed maturity, held-to-maturity securities using internal discounted cash flow models. The discount rates used in the model are based on a current market yield for similar financial instruments.

Stable value product and other investment contract balances

The Company estimates the fair value of stable value product account balances and other investment contract balances (included in Future policy benefits and claims as well as Other ~~policyholder~~policyholders’ funds line items on our consolidated condensed balance sheet) using models based on discounted expected cash flows. The discount rates used in the models are based on a current market rate for similar financial instruments.

Debt

Bank borrowings

The Company believes the carrying value of its bank borrowings approximates fair value as the borrowings pay a floating interest rate plus a spread based on the rating of the Company’s senior debt which the Company believes approximates a market interest rate.

~~Non-recourse funding~~Senior notes and subordinated debt securities

The Company estimates the fair value of its Senior Notes and Subordinated debt securities using quoted market prices from third party pricing services, where available. The Company also determines certain fair values based on future cash flows discounted at the appropriate current market rate.

Funding obligations

The Company estimates the fair value of its subordinated and non-recourse funding obligations using internal discounted cash flow models. The discount rates used in the model are based on a current market yield for similar financial instruments.

6.7. DERIVATIVE FINANCIAL INSTRUMENTS

Types of Derivative Instruments and Derivative Strategies

The Company utilizes a risk management strategy that incorporates the use of derivative financial instruments to reduce exposure to certain risks, including but not limited to, interest rate risk, currency exchange risk, volatility risk, and equity market risk. These strategies are developed through the Company’s analysis of data from financial simulation models and other internal and industry sources, and are then incorporated into the Company’s risk management program.

Derivative instruments expose the Company to credit and market risk and could result in material changes from period to period. The Company attempts to minimize its credit risk by entering into transactions with highly rated counterparties. The Company manages the market risk by establishing and monitoring limits as to the types and degrees of risk that may be undertaken. The Company monitors its use of derivatives in connection with its overall asset/liability management programs and risk management strategies. In addition, all derivative programs are monitored by our risk management department.

Derivatives Related to Interest Rate Risk Management

Derivative instruments that are used as part of the Company’s interest rate risk management strategy include interest rate swaps, interest rate futures, interest rate caps, and interest rate swaptions.

Derivatives Related to Foreign Currency Exchange Risk Management

Derivative instruments that are used as part of the Company’s foreign currency exchange risk management strategy include foreign currency swaps, foreign currency futures, foreign equity futures, and foreign equity options.

Derivatives Related to Risk Mitigation of Certain Annuity Contracts

The Company may use the following types of derivative contracts to mitigate its exposure to certain guaranteed benefits related to VAvariable annuity (“VA”) contracts, ~~and~~ fixed indexed ~~annuities:~~annuities, and indexed universal life contracts:

•Foreign Currency Futures

•Variance Swaps

•Interest Rate Futures

•Equity Options

•Equity Futures

•Credit Derivatives

•Interest Rate Swaps

•Interest Rate Swaptions

•Volatility Futures

•Volatility Options

•Total Return Swaps

Accounting for Derivative Instruments

The Company records its derivative financial instruments in the consolidated balance sheet in ~~“other~~other long-term ~~investments”~~investments and ~~“other liabilities”~~other liabilities in accordance with GAAP, which requires that all derivative instruments be recognized in the balance sheet at fair value. The change in the fair value of derivative financial instruments is reported either in the statement of income or in other comprehensive income (loss), depending upon whether it qualified for and also has been properly identified as being part of a hedging relationship, and also on the type of hedging relationship that exists.

It is the Company's policy not to offset assets and liabilities associated with open derivative contracts. However, the Chicago Mercantile Exchange (“CME”) rules characterize variation margin transfers as settlement payments, as opposed to adjustments to collateral. As a result, derivative assets and liabilities associated with centrally cleared derivatives for which the CME serves as the central clearing party are presented as if these derivatives had been settled as of the reporting date.

For a derivative financial instrument to be accounted for as an accounting hedge, it must be identified and documented as such on the date of designation. For cash flow hedges, the effective portion of their realized gain or loss is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged item impacts earnings. Any remaining gain or loss, the ineffective portion, is recognized in current earnings. For fair value hedge derivatives, their gain or loss as well as the offsetting loss or gain attributable to the hedged risk of the hedged item is recognized in current earnings. Effectiveness of the Company’s hedge relationships is assessed on a quarterly basis.

The Company reports changes in fair values of derivatives that are not part of a qualifying hedge relationship through earnings in the period of change. Changes in the fair value of derivatives that are recognized in current earnings are reported in ~~“Realized~~realized investment gains (losses)~~-Derivative financial instruments”~~.

Derivative Instruments Designated and Qualifying as Hedging Instruments

Cash-Flow Hedges

To hedge a fixed rate note denominated in a foreign currency, the Company entered into a fixed-to-fixed foreign currency swap in order to hedge the foreign currency exchange risk associated with the note. The cash flows received on the swap are identical to the cash flows paid on the note.

To hedge a floating rate note, the Company entered into an interest rate swap to exchange the floating rate on the note for a fixed rate in order to hedge the interest rate risk associated with the note. The cash flows received on the swap are identical to the cash flow variability paid on the note.

Derivative Instruments Not Designated and Not Qualifying as Hedging Instruments

The Company uses various other derivative instruments for risk management purposes that do not qualify for hedge accounting treatment. Changes in the fair value of these derivatives are recognized in earnings during the period of change.

Derivatives Related to Variable Annuity Contracts

The Company uses equity futures, equity options, total return swaps, interest rate futures, interest rate swaps, interest rate swaptions, currency futures, volatility futures, volatility options, and variance swaps to mitigate the risk related to certain guaranteed minimum benefits, including GLWB, within its VA products. In general, the cost of such benefits varies with the level of equity and interest rate markets, foreign currency levels, and overall volatility.

The Company markets certain VA products with a GLWB rider. The GLWB component is considered an embedded derivative, not considered to be clearly and closely related to the host contract.

Derivatives Related to Fixed Annuity Contracts

The Company uses equity futures and options to mitigate the risk within its fixed indexed annuity products. In general, the cost of such benefits varies with the level of equity markets and overall volatility.

The Company markets certain fixed indexed annuity products. The FIA component is considered an embedded derivative as it is, not considered to be clearly and closely related to the host contract.

Derivatives Related to Indexed Universal Life Contracts

The Company uses equity futures and options to mitigate the risk within its indexed universal life products. In general, the cost of such benefits varies with the level of equity markets.

The Company markets certain IUL products. The IUL component is considered an embedded derivative as it is not considered to be clearly and closely related to the host contract.

Other Derivatives

The Company uses various swaps and other types of derivatives to manage risk related to other exposures.

The Company is involved in various modified coinsurance and funds withheld arrangements which contain embedded derivatives. Changes in their fair value are recorded in current period earnings. The investment portfolios that support the related modified coinsurance reserves and funds withheld arrangements had fair value changes which substantially offset the gains or losses on these embedded derivatives.

The following table sets forth realized investments gains and losses for the periods shown:

Realized investment gains (losses) - derivative financial instruments

For The
Three Months Ended
March 31,
2018 2017
(Dollars In Thousands)
Derivatives related to VA contracts:

Interest rate futures - VA $ (16,892 ) $ 3,448
Equity futures - VA (6,428 ) (30,817 )
Currency futures - VA (7,583 ) (6,256 )
Equity options - VA 12,016
(40,185 )
Interest rate swaptions - VA (14 ) (1,469 )
Interest rate swaps - VA (63,710 ) (8,957 )
Total return swaps - VA 6,490
—
Embedded derivative - GLWB 56,292
33,632
Total derivatives related to VA contracts (19,829 ) (50,604 )
Derivatives related to FIA contracts:

Embedded derivative - FIA 11,330
(12,411 )
Equity futures - FIA (161 ) 297
Equity options - FIA (4,669 ) 10,700
Total derivatives related to FIA contracts 6,500
(1,414 )
Derivatives related to IUL contracts:

Embedded derivative - IUL 9,884
(2,090 )
Equity futures - IUL 136
(799 )
Equity options - IUL (1,250 ) 2,891
Total derivatives related to IUL contracts 8,770
2
Embedded derivative - Modco reinsurance treaties 82,658
(17,865 )
Other derivatives (40 ) 3
Total realized gains (losses) - derivatives $ 78,059
$ (69,878 )



	For The Three Months Ended March 31,
	2019			2018
	(Dollars In Thousands)
Derivatives related to VA contracts:
Interest rate futures	$	(6,022	)	$	(16,892	)
Equity futures	29,738			(6,428		)
Currency futures	2,244			(7,583		)
Equity options	(71,695		)	12,016
Interest rate swaptions	—			(14		)
Interest rate swaps	74,861			(63,710		)
Total return swaps	(40,027		)	6,490
Embedded derivative - GLWB	(19,626		)	56,292
Total derivatives related to VA contracts	(30,527		)	(19,829		)
Derivatives related to FIA contracts:
Embedded derivative	(38,814		)	11,330
Equity futures	(429		)	(161		)
Equity options	42,050			(4,669		)
Total derivatives related to FIA contracts	2,807			6,500
Derivatives related to IUL contracts:
Embedded derivative	(13,370		)	9,884
Equity futures	171			136
Equity options	6,180			(1,250		)
Total derivatives related to IUL contracts	(7,019		)	8,770
Embedded derivative - Modco reinsurance treaties	(84,998		)	82,658
Other derivatives	66			(40		)
Total realized gains (losses) - derivatives	$	(119,671	)	$	78,059

The following table presents the components of the gain or loss on derivatives that qualify as a cash flow hedging relationship.

Gain (Loss) on Derivatives in Cash Flow Hedging Relationship


	Amount of Gains (Losses) Deferred in Accumulated Other Comprehensive Income (Loss) on Derivatives			Amount and Location of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)			Amount and Location of (Losses) Recognized in Income (Loss) on Derivatives		Amount of Gains (Losses) Deferred in Accumulated Other Comprehensive Income (Loss) on Derivatives			Amount and Location of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)			Amount and Location of (Losses) Recognized in Income (Loss) on Derivatives
	(Effective Portion)			(Effective Portion)			(Ineffective Portion)		(Effective Portion)			(Effective Portion)			(Ineffective Portion)
				Benefits and settlement			Realized investment					Benefits and settlement			Realized investment
				expenses			gains (losses)					expenses			gains (losses)
				(Dollars In Thousands)								(Dollars In Thousands)
For The Three Months Ended March 31, 2019
Foreign currency swaps									$	(1,893	)	$	(207	)	$	—
Interest rate swaps									(595		)	(71		)	—
Total									$	(2,488	)	$	(278	)	$	—

For The Three Months Ended March 31, 2018
Foreign currency swaps	$	615		$	(113	)	$	—	$	615		$	(113	)	$	—
Total	$	615		$	(113	)	$	—	$	615		$	(113	)	$	—

For The Three Months Ended March 31, 2017
Foreign currency swaps	$	(1,034	)	$	(205	)	$	—
Total	$	(1,034	)	$	(205	)	$	—

Based on expected cash flows of the underlying hedged items, the Company expects to reclassify ~~$0.4~~$1.0 million out of accumulated other comprehensive income (loss) into earnings during the next twelve months.

The table below presents information about the nature and accounting treatment of the Company’s primary derivative financial instruments and the location in and effect on the consolidated condensed financial statements for the periods presented below:


	As of								As of
	March 31, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	Notional Amount		Fair Value		Notional Amount		Fair Value		Notional Amount		Fair Value		Notional Amount		Fair Value
	(Dollars In Thousands)								(Dollars In Thousands)
Other long-term investments
Cash flow hedges:
Foreign currency swaps	$	117,178	$	12,131	$	117,178	$	6,016
Derivatives not designated as hedging instruments:
Interest rate swaps	1,065,000		25,943		1,265,000		55,411		$	1,583,000	$	47,915	$	1,515,500	$	28,501
Total return swaps	448,872		18,678		190,938		135		562,658		2,292		138,070		3,971
Embedded derivative - Modco reinsurance treaties	64,798		497		64,472		1,009		39,878		38		585,294		7,072
Embedded derivative - GLWB	5,264,710		143,855		4,897,069		134,995		3,922,844		109,494		3,984,070		105,272
Interest rate futures	375,718		8,059		1,071,870		3,178		295,638		7,267		286,208		10,302
Equity futures	272,807		11,218		62,266		154		70,902		1,261		12,633		483
Currency futures	150,801		1,127		1,117		2		174,407		718		—		—
Equity options	5,168,294		365,097		4,436,467		403,961		6,061,873		368,624		5,624,081		220,092
Interest rate swaptions	225,000		—		225,000		14		—		—		—		—
Other	157		160		157		200		157		166		157		136
	$	13,153,335	$	586,765	$	12,331,534	$	605,075	$	12,711,357	$	537,775	$	12,146,013	$	375,829
Other liabilities
Cash flow hedges:
Interest rate swaps									$	350,000	$	—	$	350,000	$	—
Foreign currency swaps									117,178		1,996		117,178		904
Derivatives not designated as hedging instruments:
Interest rate swaps	$	997,500	$	12,157	$	597,500	$	2,960	525,000		2,591		775,000		11,367
Total return swaps	—		—		243,388		318		54,342		276		768,177		23,054
Embedded derivative - Modco reinsurance treaties	2,375,807		126,090		2,390,539		215,247		2,325,352		107,457		1,795,287		32,828
Embedded derivative - GLWB	4,378,592		199,322		4,718,311		246,755		6,276,475		313,190		8,466,019		289,343
Embedded derivative - FIA	2,109,420		218,340		1,951,650		218,676		2,639,780		263,445		2,576,033		217,288
Embedded derivative - IUL	186,173		77,350		168,349		80,212		247,241		112,814		233,550		90,231
Interest rate futures	872,564		4,630		230,404		917		870,669		13,231		863,706		20,100
Equity futures	95,918		1,288		318,795		2,593		172,853		3,512		659,357		33,753
Currency futures	95,062		971		255,248		2,087		57,073		8		202,747		2,163
Equity options	3,623,922		177,557		3,112,812		237,807		4,161,969		153,460		4,199,687		34,178
Other									8,498		985		3,288		252
	$	14,734,958	$	817,705	$	13,986,996	$	1,007,572	$	17,806,430	$	972,965	$	21,010,029	$	755,461

7.8. OFFSETTING OF ASSETS AND LIABILITIES

Certain of the Company's derivative instruments are subject to enforceable master netting arrangements that provide for the net settlement of all derivative contracts between the Company and a counterparty in the event of default or upon the occurrence of certain termination events. Collateral support agreements associated with each master netting arrangement provide that the Company will receive or pledge financial collateral in the event either minimum thresholds, or in certain cases ratings levels, have been reached. Additionally, certain of the Company's repurchase agreements provide for net settlement on termination of the agreement. Refer to Note ~~10,~~11, Debt and Other Obligations for details of the Company’s repurchase agreement programs.

Collateral received includes both cash and non-cash collateral. Cash collateral received by the Company is recorded on the consolidated condensed balance sheet as “cash”, with a corresponding amount recorded in “other liabilities” to represent the Company’s obligation to return the collateral. Non-cash collateral received by the Company is not recognized on the consolidated condensed balance sheet unless the Company exercises its right to sell or re-pledge the underlying asset. As of March 31, 2019, the fair value of non-cash collateral received was $31.0 million. As of December 31, 2018, the fair value of non-cash collateral received was $45.0 million.

The tables below present the derivative instruments by assets and liabilities for the Company as of March 31, ~~2018:~~2019:


	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position			Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position							Gross Amounts of Recognized Assets			Gross Amounts Offset in the Statement of Financial Position			Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
	Gross Amounts of Recognized Assets				Financial Instruments			Collateral Received		Net Amount				Financial Instruments				Gross Amounts Offset in the Statement of Financial Position		Collateral Received			Net Amount
	(Dollars In Thousands)														Gross Amounts of Recognized Assets		(Dollars In Thousands)
Offsetting of Assets			Gross Amounts Offset in the Statement of Financial Position
Derivatives:
Free-Standing derivatives	$	442,253	$	—		$	442,253	$	194,876	$	126,320	$	121,057		$	428,077		$	—		$	428,077	$	165,785	$	152,924	$	109,368
Total derivatives, subject to a master netting arrangement or similar arrangement	442,253		—			442,253		194,876		126,320		121,057			428,077			—			428,077		165,785		152,924		109,368
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	497		—			497		—		—		497			38			—			38		—		—		38
Embedded derivative - GLWB	143,855		—			143,855		—		—		143,855			109,494			—			109,494		—		—		109,494
Other	160		—			160		—		—		160			166			—			166		—		—		166
Total derivatives, not subject to a master netting arrangement or similar arrangement	144,512		—			144,512		—		—		144,512			109,698			—			109,698		—		—		109,698
Total derivatives	586,765		—			586,765		194,876		126,320		265,569			537,775			—			537,775		165,785		152,924		219,066
Total Assets	$	586,765	$	—		$	586,765	$	194,876	$	126,320	$	265,569		$	537,775		$	—		$	537,775	$	165,785	$	152,924	$	219,066


	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position			Net Amounts of Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position							Gross Amounts of Recognized Liabilities			Gross Amounts Offset in the Statement of Financial Position			Net Amounts of Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
					Financial Instruments			Collateral Posted		Net Amount				Financial Instruments						Collateral Posted			Net Amount
	(Dollars In Thousands)																(Dollars In Thousands)
Offsetting of Liabilities
Derivatives:
Free-Standing derivatives	$	196,603	$	—		$	196,603	$	194,876	$	1,727	$	—		$	175,074		$	—		$	175,074	$	165,785	$	9,289	$	—
Total derivatives, subject to a master netting arrangement or similar arrangement	196,603		—			196,603		194,876		1,727		—			175,074			—			175,074		165,785		9,289		—
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	126,090		—			126,090		—		—		126,090			107,457			—			107,457		—		—		107,457
Embedded derivative - GLWB	199,322		—			199,322		—		—		199,322			313,190			—			313,190		—		—		313,190
Embedded derivative - FIA	218,340		—			218,340		—		—		218,340			263,445			—			263,445		—		—		263,445
Embedded derivative - IUL	77,350		—			77,350		—		—		77,350			112,814			—			112,814		—		—		112,814
Other															985			—			985		—		—		985
Total derivatives, not subject to a master netting arrangement or similar arrangement	621,102		—			621,102		—		—		621,102			797,891			—			797,891		—		—		797,891
Total derivatives	817,705		—			817,705		194,876		1,727		621,102			972,965			—			972,965		165,785		9,289		797,891
Repurchase agreements⁽¹⁾	665,000		—			665,000		—		—		665,000			89,275			—			89,275		—		—		89,275
Total Liabilities	$	1,482,705	$	—		$	1,482,705	$	194,876	$	1,727	$	1,286,102		$	1,062,240		$	—		$	1,062,240	$	165,785	$	9,289	$	887,166

(1) Borrowings under repurchase agreements are for a term less than 90 days.

The tables below present the derivative instruments by assets and liabilities for the Company as of December 31, ~~2017:~~2018:


	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position			Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position							Gross Amounts of Recognized Assets			Gross Amounts Offset in the Statement of Financial Position			Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
	Gross Amounts of Recognized Assets				Financial Instruments			Collateral Received		Net Amount				Financial Instruments				Gross Amounts Offset in the Statement of Financial Position		Collateral Received			Net Amount
	(Dollars In Thousands)														Gross Amounts of Recognized Assets		(Dollars In Thousands)
Offsetting of Assets			Gross Amounts Offset in the Statement of Financial Position
Derivatives:
Free-Standing derivatives	$	468,871	$	—		$	468,871	$	242,105	$	108,830	$	117,936		$	263,349		$	—		$	263,349	$	70,322	$	99,199	$	93,828
Total derivatives, subject to a master netting arrangement or similar arrangement	468,871		—			468,871		242,105		108,830		117,936			263,349			—			263,349		70,322		99,199		93,828
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	1,009		—			1,009		—		—		1,009			7,072			—			7,072		—		—		7,072
Embedded derivative - GLWB	134,995		—			134,995		—		—		134,995			105,272			—			105,272		—		—		105,272
Other	200		—			200		—		—		200			136			—			136		—		—		136
Total derivatives, not subject to a master netting arrangement or similar arrangement	136,204		—			136,204		—		—		136,204			112,480			—			112,480		—		—		112,480
Total derivatives	605,075		—			605,075		242,105		108,830		254,140			375,829			—			375,829		70,322		99,199		206,308
Total Assets	$	605,075	$	—		$	605,075	$	242,105	$	108,830	$	254,140		$	375,829		$	—		$	375,829	$	70,322	$	99,199	$	206,308


	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position			Net Amounts of Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position							Gross Amounts of Recognized Liabilities			Gross Amounts Offset in the Statement of Financial Position			Net Amounts of Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
					Financial Instruments			Collateral Posted		Net Amount				Financial Instruments						Collateral Posted			Net Amount
	(Dollars In Thousands)																(Dollars In Thousands)
Offsetting of Liabilities
Derivatives:
Free-Standing derivatives	$	246,682	$	—		$	246,682	$	242,105	$	4,577	$	—		$	125,519		$	—		$	125,519	$	70,322	$	47,856	$	7,341
Total derivatives, subject to a master netting arrangement or similar arrangement	246,682		—			246,682		242,105		4,577		—			125,519			—			125,519		70,322		47,856		7,341
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	215,247		—			215,247		—		—		215,247			32,828			—			32,828		—		—		32,828
Embedded derivative - GLWB	246,755		—			246,755		—		—		246,755			289,343			—			289,343		—		—		289,343
Embedded derivative - FIA	218,676		—			218,676		—		—		218,676			217,288			—			217,288		—		—		217,288
Embedded derivative - IUL	80,212		—			80,212		—		—		80,212			90,231			—			90,231		—		—		90,231
Other															252			—			252		—		—		252
Total derivatives, not subject to a master netting arrangement or similar arrangement	760,890		—			760,890		—		—		760,890			629,942			—			629,942		—		—		629,942
Total derivatives	1,007,572		—			1,007,572		242,105		4,577		760,890			755,461			—			755,461		70,322		47,856		637,283
Repurchase agreements⁽¹⁾	885,000		—			885,000		—		—		885,000			418,090			—			418,090		—		—		418,090
Total Liabilities	$	1,892,572	$	—		$	1,892,572	$	242,105	$	4,577	$	1,645,890		$	1,173,551		$	—		$	1,173,551	$	70,322	$	47,856	$	1,055,373

(1) Borrowings under repurchase agreements are for a term less than 90 days.

8.9. MORTGAGE LOANS

Mortgage Loans

The Company invests a portion of its investment portfolio in commercial mortgage loans. As of March 31, ~~2018,~~2019, the Company’s mortgage loan holdings were approximately ~~$6.8~~$7.7 billion. The Company has specialized in making loans on credit-oriented commercial properties, credit-anchored strip shopping centers, senior living facilities, and apartments. The Company’s underwriting procedures relative to its commercial loan portfolio are based, in the Company’s view, on a conservative and disciplined approach. The Company concentrates on a small number of commercial real estate asset types associated with the necessities of life (retail, multi-family, senior living, professional office buildings, and warehouses). The Company believes that these asset types tend to weather economic downturns better than other commercial asset classes in which it has chosen not to participate. The Company believes this disciplined approach has helped to maintain a relatively low delinquency and foreclosure rate throughout its history. The majority of the ~~Company's~~Company’s mortgage loans portfolio was underwritten by the Company. From time to time, the Company may acquire loans in conjunction with an acquisition.

The ~~Company's~~Company’s commercial mortgage loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, and net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the ~~loan's~~loan’s contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts and prepayment fees are reported in net investment income.

Certain of the mortgage loans have call options that occur within the next 1210 years. However, if interest rates were to significantly increase, the Company may be unable to exercise the call options on its existing mortgage loans commensurate with the significantly increased market rates. As of March 31, ~~2018,~~2019, assuming the loans are called at their next call dates, approximately ~~$143.6~~$77.7 million of principal would become due for the remainder of ~~2018, $873.1~~2019, $837.4 million in ~~2019~~2020 through ~~2023, $105.0~~2024 and $60.6 million in ~~2024~~2025 through ~~2028, and $2.0 million thereafter.~~2029.

The Company offers a type of commercial mortgage loan under which the Company will permit a loan-to-value ratio of up to 85% in exchange for a participating interest in the cash flows from the underlying real estate. As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, approximately ~~$672.1~~$727.8 million and ~~$669.3~~$700.6 million, respectively, of the Company’s total mortgage loans principal balance have this participation feature. Cash flows received as a result of this participation feature are recorded as interest income. During the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, the Company recognized ~~$7.3~~$2.2 million and ~~$6.8~~$7.3 million, respectively, of participating mortgage loan income.

As of March 31, ~~2018, none of~~2019, the ~~Company's~~Company’s invested assets consisted of an immaterial amount of nonperforming mortgage loans, restructured mortgage loans, or mortgage loans that were foreclosed and were converted to real estate properties. ~~For all mortgage loans, the impact~~The Company does not expect these investments to adversely affect its liquidity or ability to maintain proper matching of ~~troubled debt restructurings is generally reflected in our investment balance~~assets and ~~in the allowance for mortgage loan credit losses.~~liabilities. During the three months ended March 31, ~~2018, the Company recognized no~~2019, two mortgage loan transactions occurred that were accounted for as troubled debt restructurings as a result of granting concessions to a borrower. These concessions were each the result of an agreement between the creditor and the debtor and resulted in the Company accepting an amount less than the outstanding principal balance of $2.7 million in satisfaction of the borrower’s obligation. During the three months ended March 31, 2019, the Company did not ~~identify~~recognize any ~~loans whose principal was permanently impaired.~~

The Company’s mortgage loan portfolio consists of two categories of loans: 1) those not subject to a pooling and servicing agreement and 2) those subject to a contractual pooling and servicing agreement. As of March 31, 2018, the Company did not have mortgage loans not subject to a pooling and servicing agreement that were nonperforming mortgage loans, restructured, or mortgage loans that were foreclosed and were converted to real estate properties. The Company did not ~~foreclose on~~identify any ~~nonperforming~~ loans ~~not subject to a pooling and servicing agreement~~whose principal was permanently impaired during the three months ended March 31, ~~2018.~~2019.

As of March 31, 2018, none of the loans subject to a pooling and servicing agreement were nonperforming or restructured. The Company did not foreclose on any nonperforming loans subject to a pooling and servicing agreement during the three months ended March 31, 2018.

~~As of March 31, 2018~~2019 and December 31, ~~2017, there were no allowances~~2018, the Company had an allowance for mortgage loan credit ~~losses.~~losses of $1.9 million and $1.3 million, respectively. Due to the Company’s loss experience and nature of the loan portfolio, the Company believes that a collectively evaluated allowance would be inappropriate. The Company believes an allowance calculated through an analysis of specific loans that are believed to have a higher risk of credit impairment provides a more accurate presentation of expected losses in the portfolio and is consistent with the applicable guidance for loan impairments in ASC Subtopic 310. Since the Company uses the specific identification method for calculating the allowance, it is necessary to review the economic situation of each borrower to determine those that have higher risk of credit impairment. The Company has a team of professionals that monitors borrower conditions such as payment practices, borrower credit, operating performance, and property conditions, as well as ensuring the timely payment of property taxes and insurance. Through this monitoring process, the Company assesses the risk of each loan. When issues are identified, the severity of the issues are assessed and reviewed for possible credit impairment. If a loss is probable, an expected loss calculation is performed and an allowance is established for that loan based on the expected loss. The expected loss is calculated as the excess carrying value of a loan over either the present value of expected future cash flows discounted at the loan’s original effective interest rate, or the current estimated fair value of the loan’s underlying collateral. A loan may be subsequently charged off at such point that the Company no longer expects to receive cash payments, the present value of future expected payments of the renegotiated loan is less than the current principal balance, or at such time that the Company is party to foreclosure or bankruptcy proceedings associated with the borrower and does not expect to recover the principal balance of the loan.

A charge off is recorded by eliminating the allowance against the mortgage loan and recording the renegotiated loan or the collateral property related to the loan as investment real estate on the balance sheet, which is carried at the lower of the appraised fair value of the property or the unpaid principal balance of the loan, less estimated selling costs associated with the property. ~~The Company did not have any charge offs or recovery for the three months ended March 31, 2018.~~



	As of March 31, 2019			As of December 31, 2018
	(Dollars In Thousands)
Beginning balance	$	1,296		$	—
Charge offs	(350		)	—
Recoveries	—			(209		)
Provision	1,000			1,505
Ending balance	$	1,946		$	1,296

It is the Company’s policy to cease to carry accrued interest on loans that are over 90 days delinquent. For loans less than 90 days delinquent, interest is accrued unless it is determined that the accrued interest is not collectible. If a loan becomes over 90 days delinquent, it is the Company’s general policy to initiate foreclosure proceedings unless a workout arrangement to bring the loan current is in place. For loans subject to a pooling and servicing agreement, there are certain additional restrictions and/or requirements related to workout proceedings, and as such, these loans may have different attributes and/or circumstances affecting the status of delinquency or categorization of those in nonperforming status. An analysis of the delinquent loans is shown in the following chart.


					Greater								Greater
	30-59 Days		60-89 Days		than 90 Days		Total		30-59 Days		60-89 Days		than 90 Days		Total
As of March 31, 2018	Delinquent		Delinquent		Delinquent		Delinquent
As of March 31, 2019									Delinquent		Delinquent		Delinquent		Delinquent
	(Dollars In Thousands)								(Dollars In Thousands)
Commercial mortgage loans	$	814	$	—	$	—	$	814	$	637	$	—	$	83	$	720
Number of delinquent commercial mortgage loans	1		—		—		1		2		—		1		3

As of December 31, 2017
As of December 31, 2018
Commercial mortgage loans	$	1,817	$	—	$	—	$	1,817	$	1,044	$	—	$	1,234	$	2,278
Number of delinquent commercial mortgage loans	2		—		—		2		4		—		1		5

The Company’s commercial mortgage loan portfolio consists of mortgage loans that are collateralized by real estate. Due to the collateralized nature of the loans, any assessment of impairment and ultimate loss given a default on the loans is based upon a consideration of the estimated fair value of the real estate. The Company limits accrued interest income on impaired loans to 90 days of interest. Once accrued interest on the impaired loan is received, interest income is recognized on a cash basis.



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income
	(Dollars In Thousands)
As of March 31, 2019
Commercial mortgage loans:
With no related allowance recorded	$	83	$	83	$	—	$	83	$	—	$	—
With an allowance recorded	$	8,331	$	8,196	$	1,946	$	4,165	$	128	$	156
As of December 31, 2018
Commercial mortgage loans:
With no related allowance recorded	$	—	$	—	$	—	$	—	$	—	$	—
With an allowance recorded	$	5,684	$	5,309	$	1,296	$	1,895	$	267	$	293

Mortgage loans that were modified in a troubled debt restructuring as of March 31, ~~2018~~2019 and December 31, ~~2017~~2018 were as follows:


	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(Dollars In Thousands)					(Dollars In Thousands)
As of March 31, 2018
As of March 31, 2019
Troubled debt restructuring:
Commercial mortgage loans	0	$	—	$	—	—	$	—	$	—

As of December 31, 2017
As of December 31, 2018
Troubled debt restructuring:
Commercial mortgage loans	1	$	418	$	418	1	$	2,688	$	1,742

9.10. GOODWILL

The balance of goodwill for the Company as of March 31, ~~2018~~2019 was ~~$793.5~~$825.5 million. There has been no change to goodwill during the three months ended March 31, ~~2018.~~2019.

Accounting for goodwill requires an estimate of the future profitability of the associated lines of business to assess the recoverability of the capitalized acquisition goodwill. The Company evaluates the carrying value of goodwill at the segment (or reporting unit) level at least annually and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to: 1) a significant adverse change in legal factors or in business climate, 2) unanticipated competition, or 3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, the Company first determines through qualitative analysis whether relevant events and circumstances indicate that it is more likely than not that segment goodwill balances are impaired as of the testing date. If it is determined that it is more likely than not that impairment exists, the Company compares its estimate of the fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. The Company utilizes a fair value measurement (which includes a discounted cash flows analysis) to assess the carrying value of the reporting units in consideration of the recoverability of the goodwill balance assigned to each reporting unit as of the measurement date. The Company’s material goodwill balances are attributable to certain of its operating segments (which are each

considered to be reporting units). The cash flows used to determine the fair value of the Company’s reporting units are dependent on a number of significant assumptions. The Company’s estimates, which consider a market participant view of fair value, are subject to change given the inherent uncertainty in predicting future results and cash flows, which are impacted by such things as policyholder behavior, competitor pricing, capital limitations, new product introductions, and specific industry and market conditions.

The balance recognized as goodwill is not amortized, but is reviewed for impairment on an annual basis, or more frequently as events or circumstances may warrant, including those circumstances which would more likely than not reduce the fair value of the Company’s reporting units below its carrying amount. During the fourth quarter of ~~2017,~~2018, the Company performed its annual qualitative evaluation of goodwill based on ~~information~~the circumstances that existed as of October 1, ~~2017,~~2018 and determined that there was

no indication that its segment goodwill was more likely than not impaired and no adjustment to impair goodwill was necessary. The Company has assessed whether events have occurred subsequent to October 1, 2018 that would impact the Company’s conclusion and no such events were identified. After consideration of applicable factors and circumstances noted as part of the annual assessment, the Company determined that no triggering events had occurred and it was more likely than not that the increase in the fair value of the reporting unit would exceed the increase in the carrying value of the reporting units.

During the three months ended March 31, ~~2018,~~2019, the Company did not identify any events or circumstances which would indicate that the fair value of its operating segments would have declined below their book value, either individually or in the aggregate.

~~10.~~11. DEBT AND OTHER OBLIGATIONS

Debt and Subordinated Debt ~~Securities~~

Debt and subordinated debt ~~securities~~ are summarized as follows:


	As of								As of
	March 31, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	Outstanding Principal		Carrying Amounts		Outstanding Principal		Carrying Amounts		Outstanding Principal		Carrying Amounts		Outstanding Principal		Carrying Amounts
	(Dollars In Thousands)								(Dollars In Thousands)
Debt (year of issue):
Credit Facility	$	325,000	$	325,000	$	—	$	—	$	—	$	—	$	—	$	—
Capital lease obligation	1,591		1,591		1,682		1,682		2,794		2,794		1,319		1,319
6.40% Senior Notes (2007), due 2018	—		—		150,000		150,518
7.375% Senior Notes (2009), due 2019	400,000		431,015		400,000		435,806		400,000		411,562		400,000		416,469
8.45% Senior Notes (2009), due 2039	221,516		338,762		232,928		357,046		180,719		273,713		190,044		288,547
4.30% Senior Notes (2018), due 2028									400,000		395,603		400,000		395,492
	$	948,107	$	1,096,368	$	784,610	$	945,052	$	983,513	$	1,083,672	$	991,363	$	1,101,827
Subordinated debt securities (year of issue):
Subordinated debt (year of issue):
5.35% Subordinated Debentures (2017), due 2052	$	500,000	$	495,324	$	500,000	$	495,289	$	500,000	$	495,460	$	500,000	$	495,426
3.55% Subordinated Funding Obligations (2018), due 2038									55,000		55,000		55,000		55,000
3.55% Subordinated Funding Obligations (2018), due 2038									55,000		55,000		55,000		55,000
	$	500,000	$	495,324	$	500,000	$	495,289	$	610,000	$	605,460	$	610,000	$	605,426

During the three months ended March 31, ~~2018,~~2019, the Company repurchased and subsequently extinguished ~~$17.5~~$14.1 million (par value - ~~$11.4~~$9.3 million) of the ~~Company's~~Company’s 8.45% Senior Notes due 2039. These repurchases resulted in a ~~$0.5~~$1.1 million pre-tax gain for the Company. The gain is recorded in other income in the consolidated condensed statements of income.

During ~~2017,~~2018, PLICO issued $110.0 million of Subordinated Funding Obligations at a rate of 3.55% due 2038. These obligations are non-recourse to the Company.

During 2018, the Company issued ~~$500.0~~$400.0 million of its ~~Subordinated Debentures~~Senior Notes at a rate of 4.30%, due ~~2052.~~2028. These ~~Subordinated Debentures~~notes were issued net of a discount of $1.0 million. These notes are carried on the ~~Company's~~Company’s balance sheet net of the discount and the associated deferred issuance expenses of ~~$4.8~~$3.7 million. The Company used the net proceeds from the offering for general corporate purposes, including the repayment of amounts outstanding under our Credit Facility.

Under a revolving line of credit arrangement that was in effect until May 3, 2018 (the “2015 Credit Facility”), the Company had the ability to ~~call~~borrow on an unsecured basis up to an aggregate principal amount of $1.0 billion. The Company had the right in certain circumstances to request that the commitment under the 2015 Credit Facility be increased up to a maximum principal amount of $1.25 billion. Balances outstanding under the 2015 Credit Facility accrued interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of the Company’s Senior Debt, or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent’s Prime rate, (y) 0.50% above the Funds rate, or (z) the one-month LIBOR plus 1.00% and ~~redeem,~~(B) a spread based on the ratings of the Company’s Senior Debt. The 2015 Credit Facility also provided for a facility fee at ~~par,~~a rate that varies with the ~~entire $150.0 million~~ratings of ~~6.00% Subordinated Debentures due 2042~~the Company’s Senior Debt and ~~$287.5 million~~that is calculated on the aggregate amount of ~~6.25% Subordinated Debentures due 2042.~~commitments under the 2015 Credit Facility, whether used or unused. The annual facility fee rate is 0.125% of the aggregate principal amount. The 2015 Credit Facility provides that the Company is liable for the full amount of any obligations for borrowings or letters of credit, including those of PLICO, under the 2015 Credit Facility. The maturity date of the 2015 Credit Facility was February 2, 2020.

~~The~~On May 3, 2018, the Company amended the 2015 Credit Facility (as amended, the "Credit Facility"). Under the Credit Facility, the Company has the ability to borrow on an unsecured basis up to an aggregate principal amount of $1.0 ~~billion under a Credit Facility.~~billion. The Company has the right in certain circumstances to request that the commitment under the Credit Facility be increased up to a

maximum principal amount of ~~$1.25~~$1.5 billion. Balances outstanding under the Credit Facility accrue interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of the Company’s Senior Debt, or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent’s Prime rate, (y) 0.50% above the Funds rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of the ~~Company's~~Company’s Senior Debt. The Credit Facility also provided for a facility fee at a rate that varies with the ratings of the Company’s Senior Debt and that is calculated on the aggregate amount of commitments under the Credit Facility, whether used or unused. The annual facility fee rate is 0.125% of the aggregate principal amount. The Credit Facility provides that the Company is liable for the full amount of any obligations for borrowings or letters of credit, including those of PLICO, under the Credit Facility. The maturity date of the Credit Facility is ~~February 2, 2020.~~May 3, 2023. The Company is not aware of any non-compliance with the financial debt covenants of the Credit Facility as of March 31, ~~2018.~~2019. There was anno outstanding balance ~~of $325.0 million bearing interest at a rate of LIBOR plus 1.00%~~ as of March 31, ~~2018.~~2019.

Non-Recourse Funding Obligations

Non-recourse funding obligations outstanding as of March 31, 2019, on a consolidated basis, are shown in the following table:



Issuer	Outstanding Principal		Carrying Value⁽¹⁾		Maturity Year	Year-to-Date Weighted-Avg Interest Rate
	(Dollars In Thousands)
Golden Gate Captive Insurance Company⁽²⁾⁽³⁾	$	1,843,000	$	1,843,000	2039	4.75	%
Golden Gate II Captive Insurance Company	20,600		17,717		2052	5.60	%
Golden Gate V Vermont Captive Insurance Company⁽²⁾⁽³⁾	685,000		743,981		2037	5.12	%
MONY Life Insurance Company⁽³⁾	1,091		2,323		2024	6.19	%
Total	$	2,549,691	$	2,607,021

(1) Carrying values include premiums and discounts and do not represent unpaid principal balances.
(2) Obligations are issued to non-consolidated subsidiaries of the Company. These obligations collateralize certain held-to-maturity securities issued by wholly owned subsidiaries of PLICO.
(3) Fixed rate obligations

Non-recourse funding obligations outstanding as of December 31, 2018, on a consolidated basis, are shown in the following table:

Issuer Outstanding Principal
Carrying Value⁽¹⁾
Maturity
Year Year-to-Date
Weighted-Avg
Interest Rate
(Dollars In Thousands)
Golden Gate Captive Insurance Company⁽²⁾⁽³⁾
$ 1,981,000
$ 1,981,000
2039 4.75 %
Golden Gate II Captive Insurance Company 58,600
49,464
2052 4.29 %
Golden Gate V Vermont Captive Insurance Company⁽²⁾⁽³⁾
635,000
695,836
2037 5.12 %
MONY Life Insurance Company⁽³⁾
1,091
2,389
2024 6.19 %
Total $ 2,675,691
$ 2,728,689

(1) Carrying values include premiums and discounts and do not represent unpaid principal balances.
(2) Obligations are issued to non-consolidated subsidiaries of the Company. These obligations collateralize certain held-to-maturity securities issued by wholly owned subsidiaries of PLICO.
(3) Fixed rate obligations

~~Non-recourse funding obligations outstanding as of December 31, 2017, on a consolidated basis, are shown in the following table:~~


Issuer	Outstanding Principal		Carrying Value⁽¹⁾		Maturity Year	Year-to-Date Weighted-Avg Interest Rate		Outstanding Principal		Carrying Value⁽¹⁾		Maturity Year	Year-to-Date Weighted-Avg Interest Rate
	(Dollars In Thousands)							(Dollars In Thousands)
Golden Gate Captive Insurance Company⁽²⁾⁽³⁾	$	2,014,000	$	2,014,000	2039	4.75	%	$	1,883,000	$	1,883,000	2039	4.75	%
Golden Gate II Captive Insurance Company	58,600		49,787		2052	3.88	%	20,600		17,703		2052	4.99	%
Golden Gate V Vermont Captive Insurance Company⁽²⁾⁽³⁾	620,000		681,285		2037	5.12	%	670,000		729,454		2037	5.12	%
MONY Life Insurance Company⁽³⁾	1,091		2,405		2024	6.19	%	1,091		2,340		2024	6.19	%
Total	$	2,693,691	$	2,747,477				$	2,574,691	$	2,632,497

(1) Carrying values include premiums and discounts and do not represent unpaid principal balances.															(2) Obligations are issued to non-consolidated subsidiaries of the Company. These obligations collateralize certain held-to-maturity securities issued by wholly owned subsidiaries of PLICO.	(3) Fixed rate obligations

Secured Financing Transactions

Repurchase Program Borrowings

While the Company anticipates that the cash flows of its operating subsidiaries will be sufficient to meet its investment commitments and operating cash needs in a normal credit market environment, the Company recognizes that investment commitments scheduled to be funded may, from time to time, exceed the funds then available. Therefore, the Company has established repurchase agreement programs for certain of its insurance subsidiaries to provide liquidity when needed. The Company expects that the rate received on its investments will equal or exceed its borrowing rate. Under this program, the Company may, from time to time, sell an investment security at a specific price and agree to repurchase that security at another specified price at a later date. These borrowings are typically for a term less than 90 days. The market value of securities to be repurchased is

monitored and collateral levels are adjusted where appropriate to protect the counterparty against credit exposure. Cash received is invested in fixed maturity securities, and the agreements provided for net settlement in the event of default or on termination of the agreements. As of March 31, ~~2018,~~2019, the fair value of securities pledged under the repurchase program was ~~$753.6~~$92.9 million, and the repurchase obligation of ~~$665.0~~$89.3 million was included in the Company’s consolidated condensed balance sheets (at an average borrowing rate of ~~173~~254 basis points). During the three months ended March 31, 2019, the maximum balance outstanding at any one point in time related to these programs was $473.3 million. The average daily balance was $203.1 million (at an average borrowing rate of 249 basis points) during the three months ended March 31, 2019. As of December 31, 2018, the fair value of securities pledged under the repurchase program was $451.9 million, and the repurchase obligation of $418.1 million was included in the Company’s consolidated condensed balance sheets (at an average borrowing rate of 245 basis points). During 2018, the maximum balance outstanding at any one point in time related to these programs was $885.0 million. The average daily balance was ~~$808.0~~$511.4 million (at an average borrowing rate of 149 basis points) during the three months ended March 31, 2018. As of December 31, 2017, the fair value of securities pledged under the repurchase program was $1,006.6 million, and the repurchase obligation of $885.0 million was included in the Company's consolidated condensed balance sheets (at an average borrowing rate of 142 basis points). During 2017, the maximum balance outstanding at any one point in time related to these programs was $988.5 million. The average daily balance was $624.7 million (at an average borrowing rate of 101184 basis points) during the year ended December 31, ~~2017.~~2018.

Securities Lending

The Company participates in securities lending, primarily as an investment yield enhancement, whereby securities that are held as investments are loaned out to third parties for short periods of time. The Company requires initial collateral of 102% of the ~~market~~fair value of the loaned securities to be separately maintained. The loaned securities’ ~~market~~fair value is monitored on a daily basis. As of March 31, ~~2018,~~2019, securities with a ~~market~~fair value of ~~$107.0~~$89.0 million were loaned under this program. As collateral for the loaned securities, the Company receives short-term investments, which are recorded in ~~“short-term investments”~~short-term investments with a corresponding liability recorded in ~~“secured~~ secured financing ~~liabilities”~~liabilities to account for its obligation to return the collateral. As of March 31, ~~2018,~~2019, the fair value of the collateral related to this program was ~~$113.9~~$94.7 million and the Company has an obligation to return ~~$113.9~~$94.7 million of collateral to the securities borrowers.

The following table provides the amount by asset class of securities of collateral pledged for repurchase agreements and securities that have been loaned as part of securities lending transactions as of March 31, ~~2018~~2019 and December 31, ~~2017:~~2018:

Repurchase Agreements, Securities Lending Transactions, and Repurchase-to-Maturity Transactions

Accounted for as Secured Borrowings


	Remaining Contractual Maturity of the Agreements										Remaining Contractual Maturity of the Agreements
	As of March 31, 2018										As of March 31, 2019
	(Dollars In Thousands)										(Dollars In Thousands)
	Overnight and Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total		Overnight and Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions
U.S. Treasury and agency securities	$	293,539	$	—	$	—	$	—	$	293,539	$	83,512	$	9,360	$	—	$	—	$	92,872
Other asset-backed securities	—		—		—		—		—
Mortgage loans	460,072		—		—		—		460,072
Total repurchase agreements and repurchase-to-maturity transactions	753,611		—		—		—		753,611		83,512		9,360		—		—		92,872
Securities lending transactions
Corporate securities	94,155		—		—		—		94,155		87,234		—		—		—		87,234
Equity securities	12,798		—		—		—		12,798
Redeemable preferred stock	75		—		—		—		75
Other government related securities											1,755		—		—		—		1,755
Total securities lending transactions	107,028		—		—		—		107,028		88,989		—		—		—		88,989
Total securities	$	860,639	$	—	$	—	$	—	$	860,639	$	172,501	$	9,360	$	—	$	—	$	181,861

Repurchase Agreements, Securities Lending Transactions, and Repurchase-to-Maturity Transactions

Accounted for as Secured Borrowings


	Remaining Contractual Maturity of the Agreements										Remaining Contractual Maturity of the Agreements
	As of December 31, 2017										As of December 31, 2018
	(Dollars In Thousands)										(Dollars In Thousands)
	Overnight and Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total		Overnight and Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions
U.S. Treasury and agency securities	$	307,633	$	—	$	—	$	—	$	307,633	$	433,182	$	18,713	$	—	$	—	$	451,895
Corporate securities	—		—		—		—		—
Mortgage loans	698,974		—		—		—		698,974		—		—		—		—		—
Total securities	$	1,006,607	$	—	$	—	$	—	$	1,006,607	$	433,182	$	18,713	$	—	$	—	$	451,895

Securities lending transactions
Corporate securities	$	118,817	$	—	$	—	$	—	$	118,817
Fixed maturity securities											$	71,285	$	—	$	—	$	—	$	71,285
Equity securities	5,699		—		—		—		5,699		891		—		—		—		891
Redeemable preferred stock	755		—		—		—		755
Total securities lending transactions	125,271		—		—		—		125,271		72,176		—		—		—		72,176
Total securities	$	1,131,878	$	—	$	—	$	—	$	1,131,878	$	505,358	$	18,713	$	—	$	—	$	524,071

~~11.~~12. COMMITMENTS AND CONTINGENCIES

The Company has entered into indemnity agreements with each of its current directors other than those that are employees of Dai-ichi Life that provide, among other things and subject to certain limitations, a contractual right to indemnification to the fullest extent permissible under the law. The Company has agreements with certain of its officers providing up to $10 million in indemnification. These obligations are in addition to the customary obligation to indemnify officers and directors contained in the Company’s governance documents.

The Company leases administrative and marketing office space in approximately 17 cities (excluding the home office building), as well as various office equipment. Most leases have terms ranging from one year to ten years. Leases with an initial term of 12 months or less are not recorded on the consolidated condensed balance sheet. The Company accounts for lease components separately from non-lease components (e.g., common area maintenance). Certain of the Company’s lease agreements include options to renew at its discretion. Management has concluded, the Company is not reasonably certain to elect any of these renewal options. The Company will use the interest rates received on its funding agreement backed notes as the collateralized discount rate when calculating the present value of remaining lease payments when the rate implicit in the lease is unavailable. Additionally, the Company previously leased a building contiguous to its home office. The lease was renewed in December 2013 and was extended to December 2018. At the end of the lease term in December 2018, the Company purchased the building for approximately $75 million. The building is recorded in property and equipment on the consolidated condensed balance sheet.

Under the insurance guaranty fund laws in most states, insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. From time to time, companies may be asked to contribute amounts beyond prescribed limits. It is possible that the Company could be assessed with respect to product lines not offered by the Company. In addition, legislation may be introduced in various states with respect to guaranty fund assessment laws related to insurance products, including long term care insurance and other specialty products, that increases the cost of future assessments or alters future premium tax offsets received in connection with guaranty fund assessments. The Company cannot predict the amount, nature or timing of any future assessments or legislation, any of which could have a material and adverse impact on the ~~Company's~~Company’s financial condition or results of operations.

A number of civil jury verdicts have been returned against insurers, broker-dealers, and other providers of financial services involving sales, refund or claims practices, alleged agent misconduct, failure to properly supervise representatives, relationships with agents or persons with whom the insurer does business, and other matters. Often these lawsuits have resulted in the award of substantial judgments that are disproportionate to the actual damages, including material amounts of punitive and non-economic compensatory damages. In some states, juries, judges, and arbitrators have substantial discretion in awarding punitive and non-economic compensatory damages which creates the potential for unpredictable material adverse judgments or awards in any given lawsuit or arbitration. Arbitration awards are subject to very limited appellate review. In addition, in some class action and other lawsuits, companies have made material settlement payments. The financial services and insurance industries in particular are also sometimes the target of law enforcement and regulatory investigations relating to the numerous laws and regulations that govern such companies. Some companies have been the subject of law enforcement or regulatory actions or other actions resulting from such investigations. The Company, in the ordinary course of business, is involved in such matters.

The Company establishes liabilities for litigation and regulatory actions when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. For matters where a loss is believed to be reasonably possible, but not probable, no liability is established. For such matters, the Company may provide an estimate of the possible loss or range of loss

or a statement that such an estimate cannot be made. The Company reviews relevant information with respect to litigation and regulatory matters on a quarterly and annual basis and updates its established liabilities, disclosures and estimates of reasonably possible losses or range of loss based on such reviews.

Certain of the Company’s insurance subsidiaries, as well as certain other insurance companies for which the Company has coinsured blocks of life insurance and annuity policies, are under audit for compliance with the unclaimed property laws of a number of states. The audits are being conducted on behalf of the treasury departments or unclaimed property administrators in such states. The focus of the audits is on whether there have been unreported deaths, maturities, or policies that have exceeded

limiting age with respect to which death benefits or other payments under life insurance or annuity policies should be treated as unclaimed property that should be escheated to the state. The Company is presently unable to estimate the reasonably possible loss or range of loss that may result from the audits due to a number of factors, including uncertainty as to the legal theory or theories that may give rise to liability, the early stages of the audits being conducted, and uncertainty as to whether the Company or other companies are responsible for the liabilities, if any, arising in connection with certain co-insured policies. The Company will continue to monitor the matter for any developments that would make the loss contingency associated with the audits reasonably estimable.

Certain of the Company’s subsidiaries are under a targeted multi-state examination with respect to their claims paying practices and their use of the U.S. Social Security Administration’s Death Master File or similar databases (a “Death Database”) to identify unreported deaths in their life insurance policies, annuity contracts and retained asset accounts. There is no clear basis in previously existing law for requiring a life insurer to search for unreported deaths in order to determine whether a benefit is owed, and substantial legal authority exists to support the position that the prevailing industry practice was lawful. A number of life insurers, however, have entered into settlement or consent agreements with state insurance regulators under which the life insurers agreed to implement procedures for periodically comparing their life insurance and annuity contracts and retained asset accounts against a Death Database, treating confirmed deaths as giving rise to a death benefit under their policies, locating beneficiaries and paying them the benefits and interest, escheating the benefits and interest to the state if the beneficiary could not be found, and paying penalties to the state, if required. It has been publicly reported that the life insurers have paid administrative and/or examination fees to the insurance regulators in connection with the settlement or consent agreements. The Company believes that insurance regulators could demand from the Company administrative and/or examination fees relating to the targeted multi-state examination. Based on publicly reported payments by other life insurers, the Company does not believe such fees, if assessed, would have a material effect on its financial statements.

Advance Trust & Life Escrow Services, LTA, as Securities Intermediary of Life Partners Position Holder Trust v. Protective Life Insurance Company, Case No. 2:18-CV-01290, is a putative class action that was filed on August 13, 2018 in the United States District Court for the Northern District of Alabama. Plaintiff alleges that PLICO required policyholders to pay unlawful and excessive cost of insurance charges. Plaintiff seeks to represent all owners of universal life and variable universal life policies issued or administered by PLICO or its predecessors that provide that cost of insurance rates are to be determined based on expectations of future mortality experience. The plaintiff seeks class certification, compensatory damages, pre-judgment and post-judgment interest, costs, and other unspecified relief. The Company is vigorously defending this matter and cannot predict the outcome of or reasonably estimate the possible loss or range of loss that might result from this litigation.

~~12.~~Scottish Re (U.S.), Inc. ("SRUS") was placed in rehabilitation on March 6, 2019 by the State of Delaware. Under the related order, the Insurance Commissioner of the State of Delaware has been appointed the receiver of SRUS and provided with authority to conduct and continue the business of SRUS in the interest of its cedents, creditors, and stockholder. The order was accompanied by an injunction requiring the continued payment of reinsurance premiums to SRUS and temporarily prohibiting cedents, including the Company, from offsetting premiums payable against receivables from SRUS.

As of March 31, 2019, the Company had outstanding claims receivable from SRUS of $13.4 million, and other exposures associated with reinsurance receivables of approximately $106.8 million and statutory reserve credit of approximately $127.2 million. The Company continues to monitor both the financial health of SRUS and the actions of the receiver through discussions with legal counsel and review of publicly available information. However, management does not have access to current information about the assets or capital position of SRUS. Additionally, it is unclear how the rehabilitation process will proceed or whether or to what extent the ultimate outcome of the rehabilitation process will be unfavorable to the Company.

The Company considered whether the accrual of a loss contingency under FASB ASC Topic 450, Contingencies, was appropriate with respect to amounts receivable from SRUS for ceded claims and reserves as of March 31, 2019. Due to the lack of sufficient information to support an analysis of SRUS's financial condition as of March 31, 2019 and uncertainty regarding whether and to what extent the ultimate outcome of the rehabilitation process will result in an outcome unfavorable to the Company, management concluded that any possible impairment of its reinsurance receivables balance could not be reasonably estimated.

13. EMPLOYEE BENEFIT PLANS

Components of the net periodic benefit cost for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, are as follows:


	For The Three Months Ended March 31,										For The Three Months Ended March 31,
	2018					2017					2019					2018
	Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan		Qualified Pension Plan			Nonqualified Excess Pension Plan
	(Dollars In Thousands)										(Dollars In Thousands)
Service cost — benefits earned during the period	$	3,441		$	387	$	3,348		$	334	$	3,114		$	285	$	3,441		$	387
Interest cost on projected benefit obligation	2,397			359		2,191			297		2,778			371		2,397			359
Expected return on plan assets	(4,026		)	—		(3,352		)	—		(4,463		)	—		(4,026		)	—
Amortization of prior service cost	—			—		—			—		—					—			—
Amortization of actuarial loss/(gain)	—			265		—			118
Preliminary net periodic benefit cost	1,812			1,011		2,187			749
Settlement/curtailment expense	—			—		—			—
Amortization of actuarial loss											—			74		—			265
Total net periodic benefit costs	$	1,812		$	1,011	$	2,187		$	749	$	1,429		$	730	$	1,812		$	1,011

During the three months ended March 31, ~~2018,~~2019, the Company did not make a contribution to its defined benefit pension plan. The Company will make contributions in future periods as necessary to at least satisfy minimum funding requirements, to maintain an adjusted funding target attainment percentage (“AFTAP”) of at least 80% and to avoid certain Pension Benefit Guaranty Corporation (“PBGC”) reporting triggers. The Company may also make additional discretionary contributions in excess of the contribution amounts established by the current funding policy.

~~13.~~14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables summarize the changes in the accumulated balances for each component of accumulated other comprehensive income (loss) (“AOCI”) as of March 31, ~~2018~~2019 and December 31, ~~2017.~~2018.

Changes in Accumulated Other Comprehensive Income (Loss) by Component

Unrealized
Gains and Losses
on Investments⁽²⁾
Accumulated
Gain and Loss
Derivatives
Minimum
Pension Liability
Adjustment
Total
Accumulated
Other
Comprehensive
Income (Loss)
(Dollars In Thousands, Net of Tax)
Beginning Balance, December 31, 2017 $ 25,874
$ 747
$ (13,925 ) $ 12,696
Other comprehensive income (loss) before reclassifications (577,712 ) 487
—
(577,225 )
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings 681
—
—
681
Amounts reclassified from accumulated other
comprehensive income (loss)⁽¹⁾
11
89
—
100
Net current-period other comprehensive income (loss) (577,020 ) 576
—
(576,444 )
Cumulative effect adjustments (10,552 ) —
—
(10,552 )
Ending Balance, March 31, 2018 $ (561,698 ) $ 1,323
$ (13,925 ) $ (574,300 )

(1) See Reclassification table below for details.
(2) As of March 31, 2018, net unrealized losses reported in AOCI were offset by $340.2 million due to the impact those net unrealized losses would have had on certain of the Company’s insurance assets and liabilities if the net unrealized losses had been recognized in net income.

~~Changes in Accumulated Other Comprehensive Income (Loss) by Component~~

Unrealized
Gains and Losses
on Investments⁽²⁾
Accumulated
Gain and Loss
Derivatives
Minimum
Pension Liability
Adjustment
Total
Accumulated
Other
Comprehensive
Income (Loss)
(Dollars In Thousands, Net of Tax)
Beginning Balance, December 31, 2016 $ (656,322 ) $ 727
$ 1,072
$ (654,523 )
Other comprehensive income (loss) before reclassifications 700,536
(563 ) (15,726 ) 684,247
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings 7,153
—
—
7,153
Amounts reclassified from accumulated other
comprehensive income (loss)⁽¹⁾
642
451
501
1,594
Net current-period other comprehensive income (loss) 708,331
(112 ) (15,225 ) 692,994
Cumulative effect adjustments (26,135 ) 132
228
(25,775 )
Ending Balance, December 31, 2017 $ 25,874
$ 747
$ (13,925 ) $ 12,696

(1) See Reclassification table below for details.
(2) As of December 31, 2016 and December 31, 2017, net unrealized losses reported in AOCI were offset by $424.1 million and $(6.3) million, respectively, due to the impact those net unrealized losses would have had on certain of the Company’s insurance assets and liabilities if the net unrealized losses had been recognized in net income.



	Unrealized Gains and Losses on Investments⁽²⁾			Accumulated Gain and Loss Derivatives			Minimum Pension Liability Adjustment			Total Accumulated Other Comprehensive Income (Loss)
	(Dollars In Thousands, Net of Tax)
Balance, December 31, 2017	$	25,874		$	747		$	(13,925	)	$	12,696
Other comprehensive income (loss) before reclassifications	(1,420,499		)	(1,884		)	(3,546		)	(1,425,929		)
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings	(20,751		)	—			—			(20,751		)
Amounts reclassified from accumulated other comprehensive income (loss)⁽¹⁾	15,651			1,130			1,989			18,770
Cumulative effect adjustments	(10,552		)	—			—			(10,552		)
Balance, December 31, 2018	$	(1,410,277	)	$	(7	)	$	(15,482	)	$	(1,425,766	)
Other comprehensive income (loss) before reclassifications	1,136,331			(1,966		)	—			1,134,365
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings	8,792			—			—			8,792
Amounts reclassified from accumulated other comprehensive income (loss)⁽¹⁾	(1,560		)	220			—			(1,340		)
Cumulative effect adjustments	—			—			—			—
Balance, March 31, 2019	$	(266,714	)	$	(1,753	)	$	(15,482	)	$	(283,949	)

(1) See Reclassifications Out of Accumulated Other Comprehensive Income (Loss) table below for details.
(2) As of December 31, 2018 and March 31, 2019, net unrealized losses reported in AOCI were offset by $613.4 million and $199.1 million, respectively, due to the impact those net unrealized losses would have had on certain of the Company’s insurance assets and liabilities if the net unrealized losses had been recognized in net income.

The following tables summarize the reclassifications amounts out of AOCI for the three months ended March 31, ~~2018~~2019 and ~~2017.~~

~~Reclassifications Out of Accumulated Other Comprehensive Income (Loss)~~

Amount
Reclassified
from Accumulated
Other Comprehensive Affected Line Item in the
For The Three Months Ended March 31, 2018 Income (Loss) Consolidated Condensed Statements of Income
(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit⁽¹⁾
$ (113 ) Benefits and settlement expenses, net of reinsurance ceded
(113 ) Total before tax
24
Tax (expense) or benefit
$ (89 ) Net of tax
Unrealized gains and losses on available-for-sale securities

Net investment gains (losses) $ 2,783
Realized investment gains (losses): All other investments
Impairments recognized in earnings (3,645 ) Net impairment losses recognized in earnings
(862 ) Total before tax
181
Tax (expense) or benefit
$ (681 ) Net of tax

(1) See Note 6, Derivative Financial Instruments for additional information
2018.

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

Amount
Reclassified
from Accumulated
Other Comprehensive Affected Line Item in the
For The Three Months Ended March 31, 2017 Income (Loss) Consolidated Condensed Statements of Income
(Dollars In Thousands)
Gains and losses on derivative instruments

Net settlement (expense)/benefit⁽¹⁾
$ (205 ) Benefits and settlement expenses, net of reinsurance ceded
(205 ) Total before tax
72
Tax (expense) or benefit
$ (133 ) Net of tax
Unrealized gains and losses on available-for-sale securities

Net investment gains (losses) $ 9,481
Realized investment gains (losses): All other investments
Impairments recognized in earnings (7,831 ) Net impairment losses recognized in earnings
1,650
Total before tax
(578 ) Tax (expense) or benefit
$ 1,072
Net of tax



	Affected Line Item in the Condensed Consolidated
Gains/(losses) in net income:	Statements of Income	For The Three Months Ended March 31,
		2019			2018
		(Dollars In Thousands)
Derivative instruments	Benefits and settlement expenses, net of reinsurance ceded⁽¹⁾	$	(278	)	$	(113	)
	Tax (expense) benefit	58			24
		$	(220	)	$	(89	)

Unrealized gains and losses on available-for-sale securities	Realized investment gains (losses): All other investments	$	5,117		$	2,783
	Net impairment losses recognized in earnings	(3,142		)	(3,645		)
	Tax (expense) benefit	(415		)	181
		$	1,560		$	(681	)

(1) See Note 7, Derivative Financial Instruments for additional information.

~~14.~~15. INCOME TAXES

The Company used its respective estimates for its annual ~~2018~~2019 and ~~2017~~2018 incomes in computing its effective income tax rates for the three months ended March 31, ~~2018~~2019 and ~~2017.~~2018. The ~~estimate~~estimates of the annual 2019 and 2018 income excluded unrealized gains and losses on equity securities due to an inability to forecast future gains and losses. The ~~Company's~~ effective tax ~~rate related to continuing operations varied from the maximum federal income tax~~ rates ~~as follows:~~

For The Three Months Ended March 31,
2018 2017
Statutory federal income tax rate applied to pre-tax income 21.0 % 35.0 %
State income taxes 1.2
0.6
Investment income not subject to tax (2.8 ) (3.2 )
Unrealized tax positions —
0.5
Other (0.1 ) —
19.3 % 32.9 %

In 2012, the IRS proposed favorable and unfavorable adjustments to the Company's 2003 through 2007 reported taxable income. The Company protested certain unfavorable adjustments and sought resolution at the IRS' Appeals Division. In October 2015, Appeals accepted the Company's earlier proposed settlement offer. In September 2015, the IRS proposed favorable and unfavorable adjustments to the Company's 2008 through 2011 reported taxable income. The Company agreed to these adjustments. In April 2017, a routine review by Congress’ Joint Committee on Taxation was finalized without change and the Company received an approximate $6.2 million net refund in the fourth quarter of 2017.

~~The resulting net adjustment to the Company's current income taxes~~ for the ~~years 2003 through 2011 did not materially affect the Company or its effective tax rate.~~

~~In July 2016, the IRS proposed favorable~~three months ended March 31, 2019 and ~~unfavorable adjustments to the Company's 2012~~2018, were 20.9% and ~~2013 reported taxable income. The Company agreed to these adjustments. The resulting settlement paid in September 2016 did not materially impact the Company or its effective tax rate.~~19.3% respectively.

There have been no material changes to the balance of unrecognized tax benefits, where the changes impact earnings, during the quarter ending March 31, ~~2018.~~2019. The Company believes that in the next twelve months, none of the unrecognized tax benefits will be reduced.

In general, the Company is no longer subject to income tax examinations by taxing authorities for tax years that began before 2014. ~~Furthermore, due~~Due to ~~the aforementioned~~ IRS adjustments to the Company's pre-2014 taxable income, the Company has amended certain of its 2003 through 2013 state income tax returns. Such amendments will cause such years to remain open, pending the states' acceptances of the returns.

During the year ended December 31, 2016, the Company entered into a reinsurance transaction. This transaction generated an operating loss on the Company’s consolidated 2016 U.S. income tax return. The Company partially carried back this loss and received refunds for substantially all of the U.S. income taxes it paid in 2014 and 2015 and expects to fully utilize the remaining operating loss carryforward during the carryforward period. Based on the Company’s current assessment of future taxable income, including available tax planning opportunities, the Company anticipates that it is more likely than not that it will generate sufficient taxable income to realize all of its material deferred tax assets. The Company did not record a valuation allowance against its material deferred tax assets as of March 31, 2018 and December 31, 2017.

In the tax year ended December 31, 2017, the Company recognized provisional impacts related to the revaluation of certain deferred tax assets under the Tax Reform Act under Staff Accounting Bulletin No. 118. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional regulatory guidance that may be issued, additional analysis, and resulting changes in interpretations and assumptions the Company has made. Any adjustments to these provisional amounts will be reported as a component of income tax expense (benefit) in the reporting period in which any such adjustments are determined. There are no such adjustments for the three months ended March 31, 2018. The accounting is expected to be complete by December 22, 2018.

~~15.~~16. OPERATING SEGMENTS

The Company has several operating segments, each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. The Company periodically evaluates its operating segments and makes adjustments to its segment reporting as needed. A brief description of each segment follows.

The Life Marketing segment markets fixed universal life (“UL”), indexed universal life ~~("IUL"~~(“IUL”), variable universal life (“VUL”), bank-owned life insurance (“BOLI”), and level premium term insurance (“traditional”) products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, independent marketing organizations, and affinity groups.

The Acquisitions segment focuses on acquiring, converting, and servicing policies and contracts acquired from other companies. The segment’s primary focus is on life insurance policies and annuity products that were sold to individuals. The level of the segment’s acquisition activity is predicated upon many factors, including available capital, operating capacity, potential return on capital, and market dynamics. Policies acquired through the Acquisitions segment are typically blocks of business where no new policies are being marketed. Therefore earnings and account values are expected to decline as the result of lapses, deaths, and other terminations of coverage unless new acquisitions are made.

The Annuities segment markets fixed and VA products. These products are primarily sold through broker-dealers, financial institutions, and independent agents and brokers.

The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. This segment also issues funding agreements to the FHLB, and markets guaranteed investment contracts ~~("GICs"~~(“GICs”) to 401(k) and other qualified retirement savings plans. The Company also has an unregistered funding agreement-backed notes program which provides for offers of notes to both domestic and international institutional investors.

The Asset Protection segment markets extended service contracts, ~~GAP~~guaranteed asset protection (“GAP”) products, credit life and disability insurance, and other specialized ancillary products to protect consumers’ investments in automobiles, recreational vehicles, watercraft, and powersports. GAP products are designed to cover the difference between the scheduled loan pay-off amount and an asset’s actual cash value in the case of a total loss.

Each type of specialized ancillary product protects against damage or other loss to a particular aspect of the underlying asset.

The Corporate and Other segment primarily consists of net investment income on assets supporting our equity capital, unallocated corporate overhead and expenses not attributable to the segments above (including interest on corporate debt). This segment includes earnings from several non-strategic or runoff lines of business, various financing and investment related transactions, and the operations of several small subsidiaries.

The Company's management and Board of Directors analyzes and assesses the operating performance of each segment using "pre-tax adjusted operating income (loss)" and "after-tax adjusted operating income (loss)". Consistent with GAAP accounting guidance for segment reporting, pre-tax adjusted operating income (loss) is the Company's measure of segment performance. Pre-tax adjusted operating income (loss) is calculated by adjusting "income (loss) before income tax," by excluding the following items:

realized gains and losses on investments and derivatives,

changes in the GLWB embedded derivatives exclusive of the portion attributable to the economic cost of the GLWB,

actual GLWB incurred claims, and

the amortization of deferred policy acquisition costs ~~("DAC"~~(“DAC”), value of business acquired ~~("VOBA"~~(“VOBA”), and certain policy liabilities that is impacted by the exclusion of these items.

The items excluded from adjusted operating income (loss) are important to understanding the overall results of operations. Pre-tax adjusted operating income (loss) and after-tax adjusted operating income (loss) are not substitutes for income before income taxes or net income (loss), respectively. These measures may not be comparable to similarly titled measures reported by other companies. The Company believes that pre-tax and after-tax adjusted operating income (loss) enhances ~~management's~~management’s and the Board of ~~Directors'~~Directors’ understanding of the ongoing operations, the underlying profitability of each segment, and helps facilitate the allocation of resources.

After-tax adjusted operating income (loss) is derived from pre-tax adjusted operating income (loss) with the inclusion of income tax expense or benefits associated with pre-tax adjusted operating income. Income tax expense or benefits is allocated to the items excluded from pre-tax adjusted operating income (loss) at the statutory federal income tax rate for the associated period. For periods ending on and prior to December 31, 2017, a rate of 35% was used. Beginning in 2018, a statutory federal income tax rate of 21% will be used to allocate income tax expense or benefits to items excluded from pre-tax adjusted operating income (loss). Income tax expense or benefits allocated to after-tax adjusted operating income (loss) can vary period to period based on changes in the ~~Company's~~Company’s effective income tax rate.

In determining the components of the pre-tax adjusted operating income (loss) for each segment, premiums and policy fees, other income, benefits and settlement expenses, and amortization of DAC and VOBA are attributed directly to each operating segment. Net investment income is allocated based on directly related assets required for transacting the business of that segment. Realized investment gains (losses) and other operating expenses are allocated to the segments in a manner that most appropriately reflects the operations of that segment. Investments and other assets are allocated based on statutory policy liabilities net of associated statutory policy assets, while DAC/VOBA and goodwill are shown in the segments to which they are attributable.

There were no significant intersegment transactions during the three months ended March 31, ~~2018~~2019 and ~~2017.~~2018.

The following tables present a summary of results and reconciles pre-tax adjusted operating income (loss) to consolidated income before income tax and net income:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Revenues
Life Marketing	$	434,916		$	421,392		$	457,340		$	434,916
Acquisitions	379,094			401,367			609,942			379,094
Annuities	150,713			108,642			139,217			150,713
Stable Value Products	53,868			40,843			59,579			53,868
Asset Protection	76,375			80,083			76,198			76,375
Corporate and Other	70,866			52,970			71,754			70,866
Total revenues	$	1,165,832		$	1,105,297		$	1,414,030		$	1,165,832
Pre-tax Adjusted Operating Income (Loss)
Life Marketing	$	(17,849	)	$	18,945		$	1,234		$	(17,849	)
Acquisitions	55,520			53,667			74,912			55,520
Annuities	40,531			53,007			54,216			40,531
Stable Value Products	29,080			23,899			22,239			29,080
Asset Protection	6,218			5,599			9,743			6,218
Corporate and Other	(20,679		)	(19,728		)	(19,674		)	(20,679		)
Pre-tax adjusted operating income	92,821			135,389			142,670			92,821
Realized (losses) gains on investments and derivatives	(1,023		)	(23,040		)	32,245			(1,023		)
Income before income tax	91,798			112,349			174,915			91,798
Income tax expense	(17,686		)	(36,935		)	(36,631		)	(17,686		)
Net income	$	74,112		$	75,414		$	138,284		$	74,112

Pre-tax adjusted operating income	$	92,821		$	135,389		$	142,670		$	92,821
Adjusted operating income tax (expense) benefit	(18,044		)	(44,999		)	(29,859		)	(18,044		)
After-tax adjusted operating income	74,777			90,390			112,811			74,777
Realized (losses) gains on investments and derivatives	(1,023		)	(23,040		)	32,245			(1,023		)
Income tax benefit (expense) on adjustments	358			8,064			(6,772		)	358
Net income	$	74,112		$	75,414		$	138,284		$	74,112

Realized investment (losses) gains:
Derivative financial instruments	$	78,059		$	(69,878	)	$	(119,671	)	$	78,059
All other investments	(87,599		)	22,841			129,590			(87,599		)
Net impairment losses recognized in earnings	(3,645		)	(7,831		)	(3,142		)	(3,645		)
Less: related amortization⁽¹⁾	9,156			(10,744		)	(4,361		)	9,156
Less: VA GLWB economic cost	(21,318		)	(21,084		)	(21,107		)	(21,318		)
Realized (losses) gains on investments and derivatives	$	(1,023	)	$	(23,040	)	$	32,245		$	(1,023	)

(1) Includes amortization of DAC/VOBA and benefits and settlement expenses that are impacted by realized gains (losses).


	Operating Segment Assets As of March 31, 2018								Operating Segment Assets As of March 31, 2019
	(Dollars In Thousands)								(Dollars In Thousands)
	Life Marketing		Acquisitions		Annuities		Stable Value Products		Life Marketing		Acquisitions		Annuities		Stable Value Products
Investments and other assets	$	14,744,343	$	19,275,508	$	20,535,539	$	4,571,793	$	15,038,044	$	31,805,017	$	20,690,159	$	5,401,470
DAC and VOBA	1,374,149		90,466		800,941		6,133		1,496,282		431,788		885,926		5,249
Other intangibles	277,489		33,909		166,784		7,889		258,010		32,776		153,452		7,222
Goodwill	200,274		14,524		336,677		113,813		215,254		23,862		343,247		113,924
Total assets	$	16,596,255	$	19,414,407	$	21,839,941	$	4,699,628	$	17,007,590	$	32,293,443	$	22,072,784	$	5,527,865


	Asset Protection		Corporate and Other		Total Consolidated		Asset Protection		Corporate and Other		Total Consolidated
Investments and other assets	$	1,016,586	$	13,988,814	$	74,132,583	$	1,025,637	$	14,088,375	$	88,048,702
DAC and VOBA	162,465		—		2,434,154		167,441		—		2,986,686
Other intangibles	130,573		35,063		651,707		120,046		30,097		601,603
Goodwill	128,182		—		793,470		129,224		—		825,511
Total assets	$	1,437,806	$	14,023,877	$	78,011,914	$	1,442,348	$	14,118,472	$	92,462,502


	Operating Segment Assets As of December 31, 2017								Operating Segment Assets As of December 31, 2018
	(Dollars In Thousands)								(Dollars In Thousands)
	Life Marketing		Acquisitions		Annuities		Stable Value Products		Life Marketing		Acquisitions		Annuities		Stable Value Products
Investments and other assets	$	14,914,418	$	19,588,133	$	20,938,409	$	4,569,639	$	14,575,702	$	31,859,520	$	20,199,597	$	5,107,334
DAC and VOBA	1,320,776		74,862		772,634		6,864		1,499,386		458,977		889,697		6,121
Other intangibles	282,361		34,548		170,117		8,056		262,758		31,975		156,785		7,389
Goodwill	200,274		14,524		336,677		113,813		215,254		23,862		343,247		113,924
Total assets	$	16,717,829	$	19,712,067	$	22,217,837	$	4,698,372	$	16,553,100	$	32,374,334	$	21,589,326	$	5,234,768


	Asset Protection		Corporate and Other		Total Consolidated		Asset Protection		Corporate and Other		Total Consolidated
Investments and other assets	$	918,952	$	15,043,597	$	75,973,148	$	1,019,297	$	12,715,208	$	85,476,658
DAC and VOBA	24,441		—		2,199,577		168,973		—		3,023,154
Other intangibles	133,234		35,256		663,572		122,590		31,934		613,431
Goodwill	128,182		—		793,470		129,224		—		825,511
Total assets	$	1,204,809	$	15,078,853	$	79,629,767	$	1,440,084	$	12,747,142	$	89,938,754

~~16.~~17. SUBSEQUENT EVENTS

The Company has evaluated the effects of events subsequent to March 31, ~~2018,~~2019, and through the date we filed our consolidated condensed financial statements with the United States Securities and Exchange Commission. All accounting and disclosure requirements related to subsequent events are included in our consolidated condensed financial statements.

On May 1, 2018, The Lincoln National Life Insurance Company (“Lincoln Life”) completed its previously announced acquisition (the “Closing”) of Liberty Mutual Group Inc.’s (“Liberty Mutual”) Group Benefits Business and Individual Life and Annuity Business (the “Life Business”) through the acquisition of all of the issued and outstanding capital stock of Liberty Life Assurance Company of Boston (“Liberty”). In connection with the Closing and pursuant to the Master Transaction Agreement, dated January 18, 2018 (the “Master Transaction Agreement”), previously reported in the Company's Current Report on Form 8-K filed on January 23, 2018, PLICO and Protective Life and Annuity Insurance Company (“PLAIC”), a wholly owned subsidiary of PLICO, entered into reinsurance agreements (the “Reinsurance Agreements”) and related ancillary documents (including administrative services agreements and transition services agreements) providing for the reinsurance and administration of the Life Business.

Pursuant to the Reinsurance Agreements, Liberty ceded to PLICO and PLAIC the insurance policies related to the Life Business on a 100% coinsurance basis. The aggregate ceding commission for the reinsurance of the Life Business was $422.9 million. All policies issued in states other than New York were ceded to PLICO under a reinsurance agreement between Liberty and PLICO, and all policies issued in New York were ceded to PLAIC under a reinsurance agreement between Liberty and PLAIC. The aggregate statutory reserves of Liberty ceded to PLICO and PLAIC as of the closing of the Transaction were approximately

$13.3 billion, which amount was based on initial estimates and is subject to adjustment following the Closing. Pursuant to the terms of the Reinsurance Agreements, each of PLICO and PLAIC are required to maintain assets in trust for the benefit of Liberty to secure their respective obligations to Liberty under the Reinsurance Agreements. The trust accounts were initially funded by each of PLICO and PLAIC principally with the investment assets that were received from Liberty. Additionally, PLICO and PLAIC have each agreed to provide, on behalf of Liberty, administration and policyholder servicing of the Life Business reinsured by it pursuant to administrative services agreements between Liberty and each of PLICO and PLAIC.

On May 3, 2018, the Company and PLICO (together with the Company, the “Borrowers”) entered into the First Amendment (the “First Amendment”) to the Amended and Restated Credit Agreement dated February 2, 2015 (the “Credit Agreement”) with the several lenders from time to time a party thereto (collectively, the “Lenders”) and with Regions Bank in its capacity as Administrative Agent for the Lenders (the “Administrative Agent”). The Credit Agreement, as amended by the First Amendment, continues to provide for a $1 billion, five-year unsecured revolving credit facility (the “Credit Facility”), including a $500 million sublimit for the potential issuance of letters of credit and a $50 million sublimit for swingline advances. Borrowings made available under the Credit Facility may be used for general corporate purposes, including the refinancing of indebtedness. The First Amendment, among other things, extends the commitment termination date and final maturity date under the Credit Agreement from February 2, 2020 to May 3, 2023, allows the Borrowers in certain circumstances to request that the commitment amount under the Credit Facility be increased to a maximum amount of $1.5 billion (increased from the maximum $1.25 billion amount originally provided in the Credit Agreement), and changes the reference dates and base amounts used to calculate the minimum Adjusted Consolidated Net Worth that the Company is required to maintain under the Credit Agreement.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our consolidated condensed financial statements included under Part I, Item 1, Financial Statements (Unaudited), of this Quarterly Report on Form 10-Q and our audited consolidated financial statements for the year ended December 31, ~~2017,~~2018, included in our most recent Annual Report on Form 10-K.

For a more complete understanding of our business and current period results, please read the following MD&A in conjunction with our latest Annual Report on Form 10-K and other filings with the United States Securities and Exchange Commission (the “SEC”).

Certain reclassifications have been made in the previously reported financial statements and accompanying notes to make the prior period amounts comparable to those of the current period. Such reclassifications had no effect on previously reported net income or shareowner’s equity.

FORWARD-LOOKING STATEMENTS — CAUTIONARY LANGUAGE

This report reviews our financial condition and results of operations, including our liquidity and capital resources. Historical information is presented and discussed, and where appropriate, factors that may affect future financial performance are also identified and discussed. Certain statements made in this report include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that may predict, forecast, indicate, or imply future results, performance, or achievements instead of historical facts and may contain words like “believe,” “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “plan,” “will,” “shall,” “may,” and other words, phrases, or expressions with similar meaning. Forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially from the results contained in the forward-looking statements, and we cannot give assurances that such statements will prove to be correct. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise. For more information about the risks, uncertainties, and other factors that could affect our future results, please refer to Part I, Item 2, ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Part II, Item 1A, Risk Factors, of this report, as well as Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018.

IMPORTANT INVESTOR INFORMATION

We file reports with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other reports as required. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer and the SEC maintains an internet site at http://www.sec.gov that contains ~~these~~our annual quarterly and current reports and other information filed electronically by ~~us.~~ the Company.

We make available through our website, http://www.protective.com, our annual reports on Form 10-K, ~~quarterly reports~~Quarterly Reports on Form 10-Q, ~~current reports~~Current Reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC. The information found on our website is not part of this or any other report filed with or furnished to the SEC. We will furnish such documents to anyone who requests such copies in writing. Requests for copies should be directed to: Financial Information, Protective Life Corporation, P. O. Box 2606, Birmingham, Alabama 35202, Telephone (205) 268-3912, Fax (205) 268-3642.

We also make available to the public current information, including financial information, regarding the Company and our affiliates on the Financial Information page of our website, www.protective.com. We encourage investors, the media and others interested in us and our affiliates to review the information we post on our website. The information found on our website is not part of this or any other report filed with or furnished to the SEC.

OVERVIEW

~~Our Business~~

On February 1, 2015, Protective Life Corporation (the ~~"Company"~~“Company”) became a wholly owned subsidiary of The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan (now known as Dai-ichi Life Holdings, Inc., ~~"Dai-ichi Life"~~“Dai-ichi Life”), when DL Investment (Delaware), Inc., a wholly owned subsidiary of Dai-ichi Life, merged with and into the Company (the ~~"Merger"~~“Merger”). Prior to February 1, 2015, our stock was publicly traded on the New York Stock Exchange. Subsequent to the Merger, we remain an SEC registrant for financial reporting purposes in the United States. The Company, which is headquartered in Birmingham, Alabama, operates as a holding company for its insurance and other subsidiaries that provide financial services primarily in the United States through the production, distribution, and administration of insurance and investment products. Founded in 1907, Protective Life Insurance Company ~~("PLICO"~~(“PLICO”) is our largest operating subsidiary. Unless the context otherwise requires, the ~~"Company," "we," "us,"~~“Company,” “we,” “us,” or ~~"our"~~“our” refers to the consolidated group of Protective Life Corporation and our subsidiaries.

We have several operating segments, each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. We periodically evaluate our operating segments and make adjustments to our segment reporting as needed.

Our operating segments are Life Marketing, Acquisitions, Annuities, Stable Value Products, and Asset ~~Protection, and~~Protection. We have an additional reporting segment referred to as Corporate and Other.

Life Marketing—We market fixed universal life (“UL”), indexed universal life (“IUL”), variable universal life (“VUL”), bank-owned life insurance (“BOLI”), and level premium term insurance (“traditional”) products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, independent distribution organizations, and affinity groups.

Acquisitions—We focus on acquiring, converting, and/or servicing policies and contracts from other companies. This segment’s primary focus is on life insurance policies and annuity products that were sold to individuals. The level of the segment’s acquisition activity is predicated upon many factors, including available capital, operating capacity, potential return on capital, and market dynamics. Policies acquired through the Acquisitions segment are typically blocks of business where no new policies are being marketed. Therefore earnings and account values are expected to decline as the result of lapses, deaths, and other terminations of coverage unless new acquisitions are made.

Annuities—We market fixed and variable annuity (“VA”) products. These products are primarily sold through broker-dealers, financial institutions, and independent agents and brokers.

Stable Value Products—We sell fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. The segment also issues funding agreements to the Federal Home Loan Bank (“FHLB”), and markets guaranteed investment contracts (“GICs”) to 401(k) and other qualified retirement savings plans. We also have an unregistered funding agreement-backed notes program which provides for offers of notes to both domestic and international institutional investors.

Asset Protection—We market extended service contracts, guaranteed asset protection (“GAP”) products, credit life and disability insurance, and other specialized ancillary products to protect consumers’ investments in automobiles, recreational vehicles, watercraft, and powersports. GAP products are designed to cover the difference between the scheduled loan pay-off amount and an asset’s actual cash value in the case of a total loss. Each type of specialized ancillary product protects against damage or other loss to a particular aspect of the underlying asset.

Corporate and Other—This segment primarily consists of net investment income on assets supporting our equity capital, unallocated corporate overhead, and expenses not attributable to the segments above (including interest on corporate debt). This segment includes earnings from several non-strategic or runoff lines of business, financing and investment related transactions, and the operations of several small subsidiaries.

RECENT ~~DEVELOPMENTS~~SIGNIFICANT TRANSACTIONS

Great-West Life & Annuity Insurance Company

On ~~May 1, 2018, The Lincoln National~~January 23, 2019, PLICO entered into a Master Transaction Agreement (the “ GWL&A Master Transaction Agreement”) with Great-West Life & Annuity Insurance Company (“~~Lincoln Life”~~GWL&A”), Great-West Life & Annuity Insurance Company of New York (“GWL&A of NY”), The Canada Life Assurance Company (“CLAC”) ~~completed its previously announced acquisition~~and The Great-West Life Assurance Company (“GWL” and, together with GWL&A, GWL&A of NY and CLAC, the “Sellers”), pursuant to which PLICO will acquire via reinsurance (the ~~“Closing”~~“Transaction”) ~~of Liberty Mutual Group Inc.’s (“Liberty Mutual”) Group Benefits Business and Individual Life and Annuity Business (the “Life Business”) through the acquisition of~~substantially all of the ~~issued~~Sellers’ individual life insurance and ~~outstanding capital stock of Liberty~~annuity business (the “Individual Life ~~Assurance Company of Boston (“Liberty”~~Business”). ~~In connection with the Closing and pursuant~~Pursuant to the GWL&A Master Transaction Agreement, ~~dated January 18, 2018 (the “Master Transaction Agreement”), previously reported in our Current Report on Form 8-K filed on January 23, 2018,~~ PLICO and Protective Life and Annuity Insurance Company (“PLAIC”), ~~a wholly owned subsidiary of PLICO, entered~~will enter into reinsurance agreements (the ~~“Reinsurance~~“GWL&A Reinsurance Agreements”) and related ancillary documents ~~(including administrative services agreements and transition services agreements) providing for~~at the ~~reinsurance and administration~~closing of the ~~Life Business.~~

~~Pursuant~~Transaction. On the terms and subject to the conditions of the GWL&A Reinsurance Agreements, ~~Liberty ceded~~the Sellers will cede to PLICO and PLAIC, the insurance policies related to the Life Business on a 100% coinsurance basis. The aggregate ceding commission for the reinsurance of the Life Business was $422.9 million. All policies issued in states other than New York were ceded to PLICO under a reinsurance agreement between Liberty and PLICO, and all policies issued in New York were ceded to PLAIC under a reinsurance agreement between Liberty and PLAIC. The aggregate statutory reserves of Liberty ceded to PLICO and PLAICeffective as of the closing of the Transaction, ~~were approximately $13.3 billion, which amount was based on initial estimates and is subject to adjustment following~~substantially all of the ~~Closing. Pursuant~~insurance policies relating to the ~~terms of~~Individual Life Business. To support its obligations under the GWL&A Reinsurance Agreements, ~~each of~~ PLICO ~~and PLAIC are required to maintain assets in~~will establish trust accounts for the benefit of ~~Liberty~~GWL&A, CLAC and GWL, and PLAIC will establish a trust account for the benefit of GWL&A of NY. The Sellers will retain a block of participating policies, which will be administered by the Company.

The Transaction is subject to ~~secure their respective obligations to Liberty under~~ the satisfaction or waiver of customary closing conditions, including regulatory approvals and the execution of the GWL&A Reinsurance ~~Agreements.~~Agreements and related ancillary documents. The ~~trust accounts were initially funded~~GWL&A Master Transaction Agreement and other transaction documents contain certain customary representations and warranties made by each of ~~PLICO~~the parties, and ~~PLAIC principally with~~certain customary covenants regarding the ~~investment assets that were received from Liberty. Additionally, PLICO~~Sellers and ~~PLAIC have each agreed to provide, on behalf of Liberty, administration and policyholder servicing of~~ the Individual Life Business, ~~reinsured by it pursuant to administrative services agreements between Liberty~~ and ~~each~~provide for indemnification, among other things, for breaches of ~~PLICO~~those representations, warranties and ~~PLAIC.~~covenants.

RISKS AND UNCERTAINTIES

The factors which could affect our future results include, but are not limited to, general economic conditions and the following risks and uncertainties:

General

we are controlled by Dai-ichi Life, which has the ability to make important decisions affecting our business;

exposure to risks related to natural and man-made disasters and catastrophes, such as diseases, epidemics, pandemics, malicious acts, ~~cyber-attacks,~~cyber attacks, terrorist acts, and climate change, which could adversely affect our operations and results;

a disruption or cyber attack affecting the electronic, communication and information technology systems or other technologies of the Company or those on whom the Company relies could adversely affect our business, financial condition, and results of operations;

confidential information maintained in the systems of the Company or other parties upon which ~~the Company relies~~we rely could be compromised or misappropriated as a result of security breaches or other related lapses or incidents, damaging our business and reputation and adversely affecting our financial condition and results of operations;

our results and financial condition may be negatively affected should actual experience differ from ~~management's~~management’s models, assumptions, ~~and~~or estimates;

we may not realize our anticipated financial results from our acquisitions strategy;

we may experience competition in our acquisition segment;

assets allocated to the MONY Closed Block benefit only the holders of certain policies; adverse performance of Closed Block assets or adverse experience of Closed Block liabilities may negatively affect us;

we are dependent on the performance of others;

our risk management policies, practices, and procedures could leave us exposed to unidentified or unanticipated risks, which could negatively affect our business or result in losses;

our strategies for mitigating risks arising from our day-to-day operations may prove ineffective resulting in a material adverse effect on our results of operations and financial condition;

events that damage our reputation or the reputation of our industry could adversely impact our business, results of operations, or financial condition;

we may not be able to protect our intellectual property and may be subject to infringement claims;

developments in technology may impact our business;

Financial Environment

interest rate fluctuations orand sustained periods of ~~high~~low or ~~low~~high interest rates could negatively affect our interest earnings and spread income, or otherwise impact our business;

our investments are subject to market and credit risks, which could be heightened during periods of extreme volatility or disruption in financial and credit markets;

credit market volatility or disruption could adversely impact the Company’s financial condition or results from operations;

disruption of the capital and credit markets could negatively affect the Company’s ability to meet its liquidity and financial needs;

equity market volatility could negatively impact our business;

our use of derivative financial instruments within our risk management strategy may not be effective or sufficient;

~~credit market volatility or disruption could adversely impact our financial condition or results from operations;~~

our ability to grow depends in large part upon the continued availability of capital;

we could be ~~adversely affected by a ratings downgrade or other negative action by a rating organization;~~

~~we could be~~ forced to sell investments at a loss to cover policyholder withdrawals;

~~disruption of the capital and credit markets could negatively affect our ability to meet our liquidity and financing needs;~~

difficult general economic conditions could materially adversely affect our business and results of operations;

we may be required to establish a valuation allowance against our deferred tax assets, which could have a material adverse effect on our results of operations, financial condition, and capital position;

we could be adversely affected by an inability to access our credit facility;

the amount of statutory capital or risk-based capital that we have and the amount of statutory capital or risk-based capital that we must hold to maintain our financial strength and credit ratings and meet other requirements can vary significantly from time to time and is sensitive to a number of factors outside of our control;

we could be adversely affected by a ratings downgrade or other negative action by a rating organization;

we operate as a holding company and depend on the ability of our subsidiaries to transfer funds to us to meet our obligations;

we could be adversely affected by an inability to access FHLB lending;

our securities lending program may subject us to liquidity and other risks;

our financial condition or results of operations could be adversely impacted if our assumptions regarding the fair value and future performance of our investments differ from actual experience;

adverse actions of certain funds or their advisers could have a detrimental impact on our ability to sell our variable life and annuity products, or maintain current levels of assets in those products;

~~we operate as a holding company and depend on the ability of our subsidiaries to transfer funds to us to meet our obligations;~~

Industry and Regulation

the business of our company is highly regulated and is subject to routine audits, examinations, and actions by regulators, law enforcement agencies, and self-regulatory organizations;

we may be subject to regulations of, or regulations influenced by, international regulatory authorities or initiatives;

NAIC actions, pronouncements and initiatives may affect our product profitability, reserve and capital requirements, financial condition or results of operations;

our use of captive reinsurance companies to finance statutory reserves related to our term and universal life products and to reduce volatility affecting our variable annuity products, may be limited or adversely affected by regulatory action, pronouncements and interpretations;

laws, regulations and initiatives related to unreported deaths and unclaimed property and death benefits may result in operational burdens, fines, unexpected payments or escheatments;

we are subject to insurance guaranty fund laws, rules and regulations ~~which~~that could adversely affect our financial condition or results of operations;

we are subject to insurable interest laws, rules and regulations ~~which~~that could adversely affect our financial condition or results of operations;

the Healthcare Act and related regulations could adversely affect our results of operations or financial condition;

laws, rules and regulations promulgated in connection with the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act may adversely affect our results of operations or financial condition;

new and amended regulations regarding the standard of care or standard of conduct applicable to investment professionals, insurance agencies, and financial institutions that recommend or sell annuities or life insurance products

may have a material adverse impact on our ability to sell annuities and other products and to retain in-force business and on our financial condition or results of operations;

we may be subject to regulation, investigations, enforcement actions, fines and penalties imposed by the SEC, FINRA and other federal and international regulators in connection with our business operations;

changes to tax law, ~~such as the effect of the Tax Reform Act enacted on December 22, 2017,~~ or interpretations of existing tax law could adversely affect our ability to compete with non-insurance products or reduce the demand for certain insurance products;

financial services companies are frequently the targets of legal proceedings, including class action litigation, which could result in substantial judgments;

the financial services and insurance industries are sometimes the target of law enforcement investigations and the focus of increased regulatory scrutiny;

new accounting rules, changes to existing accounting rules, or the grant of permitted accounting practices to competitors could negatively impact us;

if our business does not perform well, we may be required to recognize an impairment of our goodwill and indefinite lived intangible assets which could adversely affect our results of operations or financial condition;

use of reinsurance introduces variability in our statements of income;

our reinsurers could fail to meet assumed obligations, increase rates, terminate agreements or be subject to adverse developments that could affect us;

our policy claims fluctuate from period to period resulting in earnings volatility;

we operate in a mature, highly competitive industry, which could limit our ability to gain or maintain our position in the industry and negatively affect profitability; and

our ability to maintain competitive unit costs is dependent upon the level of new sales and persistency of existing ~~business; and~~

~~we may not be able to protect our intellectual property and may be subject to infringement claims.~~business.

For more information about the risks, uncertainties, and other factors that could affect our future results, please see Part II, Item 1A of this report and our Annual Report on Form 10-K.

CRITICAL ACCOUNTING POLICIES

Our accounting policies require the use of judgments relating to a variety of assumptions and estimates, including, but not limited to expectations of current and future mortality, morbidity, persistency, expenses, and interest rates, as well as expectations around the valuations of securities. Because of the inherent uncertainty when using the assumptions and estimates, the effect of certain accounting policies under different conditions or assumptions could be materially different from those reported in the consolidated condensed financial statements. For a complete listing of our critical accounting policies, refer to our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

RESULTS OF OPERATIONS

Our management and Board of Directors analyzes and assesses the operating performance of each segment using "pre-tax adjusted operating income (loss)" and "after-tax adjusted operating income (loss)". Consistent with GAAP accounting guidance for segment reporting, pre-tax adjusted operating income (loss) is our measure of segment performance. Pre-tax adjusted operating income (loss) is calculated by adjusting "income (loss) before income tax," by excluding the following items:

realized gains and losses on investments and derivatives,

changes in the guaranteed living withdrawal benefits ~~("GLWB"~~(“GLWB”) embedded derivatives exclusive of the portion attributable to the economic cost of the GLWB,

actual GLWB incurred claims, and

After-tax adjusted operating income (loss) is derived from pre-tax adjusted operating income (loss) with the inclusion of income tax expense or benefits associated with pre-tax adjusted operating income. Income tax expense or benefits is allocated to the items excluded from pre-tax adjusted operating income (loss) at the statutory federal income tax rate for the associated period. For periods ending on and prior to December 31, 2017 a rate of 35% was used. Beginning in 2018, a statutory federal income tax rate of 21% will be used to allocate income tax expense or benefits to items excluded from pre-tax adjusted operating income (loss). Income tax expense or benefits allocated to after-tax adjusted operating income (loss) can vary period to period based on changes in our effective income tax rate.

The items excluded from adjusted operating income (loss) are important to understanding the overall results of operations. Pre-tax adjusted operating income (loss) and after-tax adjusted operating income (loss) are not substitutes for income before income taxes or net income (loss), respectively. These measures may not be comparable to similarly titled measures reported by other companies. Our belief is that pre-tax and after-tax adjusted operating income (loss) enhances ~~management's~~management’s and the Board of ~~Directors'~~Directors’ understanding of the ongoing operations, the underlying profitability of each segment, and helps facilitate the allocation of resources.

In determining the components of the pre-tax adjusted operating income (loss) for each segment, premiums and policy fees, other income, benefits and settlement expenses, and amortization of DAC and VOBA are attributed directly to each operating segment. Net investment income is allocated based on directly related assets required for transacting the business of that segment. Realized investment gains (losses) and other operating expenses are allocated to the segments in a manner that most appropriately reflects the operations of that segment. Investments and other assets are allocated based on policy liabilities net of associated policy assets, while DAC/VOBA and goodwill are shown in the segments to which they are attributable.

We periodically review and update as appropriate our key assumptions used to measure certain balances related to insurance products, including future mortality, expenses, lapses, premium persistency, benefit utilization, investment yields, interest

rates, and separate account fund returns. Changes to these assumptions result in adjustments which increase or decrease DAC and VOBA amortization and/or benefits and expenses. ~~The~~Assumptions may be updated as part of our annual assumption review process, as well as during our quarterly update of historical business activity. This periodic review and updating of assumptions is collectively referred to as “unlocking.” When referring to unlocking the reference is to changes in all balance sheet components associated with these ~~assumption~~ changes. The adjustments associated with unlocking can create significant variability from period to period in the profitability of certain of the Company’s operating segments.

The following table presents a summary of results and reconciles pre-tax adjusted operating income (loss) to consolidated income before income tax and net income:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Pre-tax Adjusted Operating Income (Loss)
Life Marketing	$	(17,849	)	$	18,945		$	1,234		$	(17,849	)
Acquisitions	55,520			53,667			74,912			55,520
Annuities	40,531			53,007			54,216			40,531
Stable Value Products	29,080			23,899			22,239			29,080
Asset Protection	6,218			5,599			9,743			6,218
Corporate and Other	(20,679		)	(19,728		)	(19,674		)	(20,679		)
Pre-tax adjusted operating income	92,821			135,389			142,670			92,821
Realized (losses) gains on investments and derivatives	(1,023		)	(23,040		)	32,245			(1,023		)
Income before income tax	91,798			112,349			174,915			91,798
Income tax expense	(17,686		)	(36,935		)	(36,631		)	(17,686		)
Net income	$	74,112		$	75,414		$	138,284		$	74,112

Pre-tax adjusted operating income	$	92,821		$	135,389		$	142,670		$	92,821
Adjusted operating income tax (expense) benefit	(18,044		)	(44,999		)	(29,859		)	(18,044		)
After-tax adjusted operating income	74,777			90,390			112,811			74,777
Realized (losses) gains on investments and derivatives	(1,023		)	(23,040		)	32,245			(1,023		)
Income tax benefit (expense) on adjustments	358			8,064			(6,772		)	358
Net income	$	74,112		$	75,414		$	138,284		$	74,112

Realized investment (losses) gains:
Derivative financial instruments	$	78,059		$	(69,878	)	$	(119,671	)	$	78,059
All other investments	(87,599		)	22,841			129,590			(87,599		)
Net impairment losses recognized in earnings	(3,645		)	(7,831		)	(3,142		)	(3,645		)
Less: related amortization⁽¹⁾	9,156			(10,744		)	(4,361		)	9,156
Less: VA GLWB economic cost	(21,318		)	(21,084		)	(21,107		)	(21,318		)
Realized (losses) gains on investments and derivatives	$	(1,023	)	$	(23,040	)	$	32,245		$	(1,023	)

(1) Includes amortization of DAC/VOBA and benefits and settlement expenses that are impacted by realized gains (losses).

For The Three Months Ended March 31, ~~2018,~~2019, as compared to The Three Months Ended March 31, ~~2017~~2018

Net income for the three months ended March 31, ~~2018 included a $42.6~~2019 was $138.3 million, ~~or 31.4%, decrease in pre-tax~~an increase of $64.2 million. Pre-tax adjusted operating ~~income.~~income was $142.7 million, an increase of $49.8 million. The ~~decrease~~increase consisted of a ~~$36.8~~$19.1 million ~~decrease~~increase in the Life Marketing segment, a ~~$12.5 million decrease in the Annuities segment, and a $1.0 million decrease in the Corporate & Other segment. These decreases were partially offset by a $1.9~~$19.4 million increase in the Acquisitions segment, a ~~$5.2~~$13.7 million increase in the Annuities segment, a $3.5 million increase in the Asset Protection segment, and a $1.0 million increase in the Corporate and Other segment. These increases were partially offset by a $6.8 million decrease in the Stable Value Products ~~segment, and an increase of $0.6 million in the Asset Protection~~ segment.

Net realized ~~losses~~gains on investments and derivatives for the three months ended March 31, ~~2018~~2019 was $32.2 million as compared to net realized losses of $1.0 ~~million.~~

~~Life Marketing segment pre-tax adjusted operating loss was $17.8~~ million for the three months ended March 31, ~~2018,~~2018.

Life Marketing segment pre-tax adjusted operating income was $1.2 million for the three months ended March 31, 2019, representing ~~a decrease~~an increase of ~~$36.8~~$19.1 million from the three months ended March 31, ~~2017.~~2018. The ~~decrease~~increase was primarily due to ~~an increase in~~lower claims and ~~lower~~higher premiums in the traditional life ~~net premiums, offset by an increase in universal~~block. Traditional life ~~net policy fees. Life~~ claims were approximately ~~$33.4~~$5.9 million ~~higher~~lower for the three months ended March 31, ~~2018~~2019 when compared to three months ended March 31, 2018.

Acquisitions segment pre-tax adjusted operating income was $74.9 million for the three months ended March 31, 2019, an increase of $19.4 million as compared to the three months ended March 31, ~~2017.~~2018, primarily due to the favorable impact of $19.8 million from the Liberty reinsurance transaction completed on May 1, 2018, partly offset by the expected runoff of the in-force blocks of business.

~~Acquisitions~~Annuities segment pre-tax adjusted operating income was ~~$55.5~~$54.2 million for the three months ended March 31, 2019, as compared to $40.5 million for the three months ended March 31, 2018, an increase of ~~$1.9 million as compared to the three months ended March 31, 2017, primarily due to a decrease in overall benefit expense and favorable adjustments to reinsurance premiums.~~

Annuities segment pre-tax adjusted operating income was $40.5 million for the three months ended March 31, 2018, as compared to $53.0 million for the three months ended March 31, 2017, a decrease of $12.5$13.7 million, or ~~23.5%~~33.8%. This variance was primarily the result of ~~unfavorable~~favorable unlocking, ~~an unfavorable~~increased interest spreads, and a favorable change in ~~single premium immediate annuities ("SPIA") mortality, and higher non-deferred expenses,~~guaranteed benefit reserves, partially offset by ~~increased interest spreads.~~a decline in variable annuity (“VA”) fee income. Segment results were ~~negatively~~positively impacted by $7.7 million of favorable unlocking for the three months ended March 31, 2019, as compared to $5.2 million of unfavorable unlocking for the three months ended March 31, ~~2018, as compared to $1.6 million of favorable unlocking for the three months ended March 31, 2017.~~2018.

Stable Value segment pre-tax adjusted operating income was ~~$29.1~~$22.2 million and ~~increased $5.2~~decreased $6.8 million, or ~~21.7%~~23.5%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017.~~2018. The ~~increase~~decrease in pre-tax adjusted operating ~~earnings~~income primarily resulted from lower participating mortgage income in addition to lower interest spreads driven by higher ~~average account values.~~credited rates on newly issued contracts. Participating mortgage income for the three months ended March 31, ~~2018,~~2019, was ~~$6.9~~$0.8 million as compared to ~~$6.8~~$6.9 million for the three months ended March 31, ~~2017.~~2018. The adjusted operating spread, which excludes participating income, decreased by ~~four~~30 basis points for the three months ended March 31, ~~2018,~~2019, from the prior year, due primarily to an increase in credited interest.

Asset Protection segment pre-tax adjusted operating income was ~~$6.2~~$9.7 million, representing an increase of ~~$0.6~~$3.5 million, or ~~11.1%~~56.7%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, 2017. Service contract earnings increased $1.2 million primarily due to favorable loss ratios and higher investment income. Credit insurance earnings decreased $0.5 million primarily due to lower volume.2018. Earnings from the GAP product line ~~decreased $0.1 million.~~increased $2.7 million due to lower loss ratios. Service contract earnings increased $0.5 million primarily due to higher investment income. The credit insurance product line increased $0.3 million primarily due to lower expenses.

The Corporate and Other segment pre-tax adjusted operating loss was $19.7 million for the three months ended March 31, 2019, as compared to a pre-tax adjusted operating loss of $20.7 million for the three months ended March 31, ~~2018, as compared to a pre-tax adjusted operating loss of $19.7 million for the three months ended March 31, 2017.~~2018. The ~~higher~~decreased operating loss was primarily due to ~~an increase in corporate overhead expenses, partly offset by~~ an increase in investment income due to higher invested asset balances, ~~and improved yields.~~partially offset by increased interest expense.

Life Marketing

Segment Results of Operations

Segment results were as follows:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
REVENUES
Gross premiums and policy fees	$	487,950		$	453,135		$	488,105		$	487,950
Reinsurance ceded	(220,022		)	(190,335		)	(208,409		)	(220,022		)
Net premiums and policy fees	267,928			262,800			279,696			267,928
Net investment income	135,356			137,543			141,219			135,356
Other income	31,909			26,378			30,980			31,909
Total operating revenues	435,193			426,721			451,895			435,193
Realized gains (losses) - investments	(9,047		)	(5,330		)
Realized gains (losses) - derivatives	8,770			1
Realized investment gains (losses)							5,445			(277		)
Total revenues	434,916			421,392			457,340			434,916
BENEFITS AND EXPENSES
Benefits and settlement expenses	361,151			332,058			369,096			361,151
Amortization of DAC/VOBA	31,654			30,415			32,019			31,654
Other operating expenses	60,237			45,303			49,546			60,237
Operating benefits and settlement expenses	453,042			407,776			450,661			453,042
Amortization related to benefits and settlement expenses	3,418			(3,165		)	172			3,418
Amortization of DAC/VOBA related to realized gains (losses) - investments	(94		)	344			1,348			(94		)
Total benefits and expenses	456,366			404,955			452,181			456,366
INCOME (LOSS) BEFORE INCOME TAX	(21,450		)	16,437			5,159			(21,450		)
Less: realized gains (losses)	(277		)	(5,329		)	5,445			(277		)
Less: amortization related to benefits and settlement expenses	(3,418		)	3,165			(172		)	(3,418		)
Less: related amortization of DAC/VOBA	94			(344		)	(1,348		)	94
PRE-TAX ADJUSTED OPERATING INCOME (LOSS)	$	(17,849	)	$	18,945		$	1,234		$	(17,849	)

The following table summarizes key data for the Life Marketing segment:


	For The Three Months Ended March 31,				For The Three Months Ended March 31,
	2018		2017		2019		2018
	(Dollars In Thousands)				(Dollars In Thousands)
Sales By Product⁽¹⁾
Traditional life	$	12,592	$	182	$	14,145	$	12,592
Universal life	29,759		43,189		28,097		29,759
	$	42,351	$	43,371	$	42,242	$	42,351
Sales By Distribution Channel
Traditional brokerage	$	35,951	$	37,368	$	27,279	$	33,810
Institutional	4,169		3,819		12,865		6,310
Direct	2,231		2,184		2,098		2,231
	$	42,351	$	43,371	$	42,242	$	42,351
Average Life Insurance In-force⁽²⁾
Traditional	$	345,308,377	$	352,440,121	$	357,069,540	$	345,308,377
Universal life	272,872,804		237,765,536		285,422,652		272,872,804
	$	618,181,181	$	590,205,657	$	642,492,192	$	618,181,181
Average Account Values
Universal life	$	7,716,915	$	7,546,119	$	7,794,474	$	7,716,915
Variable universal life	767,121		680,920		743,377		767,121
	$	8,484,036	$	8,227,039	$	8,537,851	$	8,484,036

(1) Sales data for traditional life insurance is based on annualized premiums. Universal life sales are based on annualized planned premiums, or "target" premiums if lesser, plus 6% of amounts received in excess of target premiums and 10% of single premiums. "Target" premiums for universal life are those premiums upon which full first year commissions are paid.
(1) Sales data for traditional life insurance is based on annualized premiums. Universal life sales are based on annualized planned premiums, or “target” premiums if lesser, plus 6% of amounts received in excess of target premiums and 10% of single premiums. “Target” premiums for universal life are those premiums upon which full first year commissions are paid.					(1) Sales data for traditional life insurance is based on annualized premiums. Universal life sales are based on annualized planned premiums, or “target” premiums if lesser, plus 6% of amounts received in excess of target premiums and 10% of single premiums. “Target” premiums for universal life are those premiums upon which full first year commissions are paid.
(2) Amounts are not adjusted for reinsurance ceded.

Operating expenses detail

Other operating expenses for the segment were as follows:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Insurance companies:
First year commissions	$	48,352		$	50,543		$	44,072		$	48,352
Renewal commissions	9,829			9,841			9,928			9,829
First year ceding allowances	(132		)	(701		)	(171		)	(132		)
Renewal ceding allowances	(34,775		)	(42,423		)	(44,957		)	(34,775		)
General & administrative	55,865			55,483			55,484			55,865
Taxes, licenses, and fees	10,546			8,465			9,838			10,546
Other operating expenses incurred	89,685			81,208			74,194			89,685
Less: commissions, allowances & expenses capitalized	(63,163		)	(63,982		)	(57,582		)	(63,163		)
Other insurance company operating expenses	26,522			17,226			16,612			26,522
Distribution companies:
Commissions	23,353			19,998			23,713			23,353
Other operating expenses	10,362			8,079			9,221			10,362
Other distribution company operating expenses	33,715			28,077			32,934			33,715
Other operating expenses	$	60,237		$	45,303		$	49,546		$	60,237

For The Three Months Ended March 31, ~~2018,~~2019, as compared to The Three Months Ended March 31, ~~2017~~2018

Pre-tax adjusted operating income (loss)

Pre-tax adjusted operating ~~loss~~income was ~~$17.8~~$1.2 million for the three months ended March 31, ~~2018,~~2019, representing ~~a decrease~~an increase of ~~$36.8~~$19.1 million from the three months ended March 31, ~~2017.~~2018. The ~~decrease~~increase was primarily due to ~~an increase in~~lower claims and ~~lower~~higher premiums in the traditional life ~~net premiums, offset by an increase in universal~~block. Traditional life ~~net policy fees. Life~~ claims were approximately ~~$33.4~~$5.9 million ~~higher~~lower for the three months ended March 31, ~~2018~~2019 when compared to the three months ended March 31, ~~2017.~~2018.

Operating revenues

Total operating revenues for the three months ended March 31, ~~2018,~~2019, increased ~~$8.5~~$16.7 million, or ~~2.0%~~3.8%, as compared to the three months ended March 31, ~~2017.~~2018. This increase was driven by higher ~~policy fees~~traditional life premiums for the three months ended March 31, 2019 when compared to the three months ended March 31, 2018. Additionally, investment income increased $5.9 million for the three months ended March 31, 2019, as compared to the three months ended March 31, 2018, driven by higher universal life investment income of $3.7 million, due to growth in reserves in the block, and higher distribution company ~~revenue.~~investment income of $2.1 million.

Net premiums and policy fees

Net premiums and policy fees increased by ~~$5.1~~$11.8 million, or ~~2.0%~~4.4%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017,~~2018, due to ~~an increase in policy fees associated with continued growth in universal life business. Offsetting this was a decrease in~~higher traditional life ~~premiums.~~net premium for the three months ended March 31, 2019 when compared to the three months ended March 31, 2018.

Net investment income

Net investment income in the segment ~~decreased $2.2~~increased $5.9 million, or ~~1.6%~~4.3%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017, due to lower traditional life and distribution company investment income of $1.9 million and $1.0 million, respectively, offset~~2018, driven by higher universal life investment income of ~~$0.7~~$3.7 million, due to growth in reserves in the block, and higher distribution company investment income of $2.1 million.

Other income

Other income ~~increased $5.5~~decreased $0.9 million for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017~~2018 due to ~~higher~~lower revenue in the ~~segment's~~segment’s non-insurance operations.

Benefits and settlement expenses

Benefits and settlement expenses increased by ~~$29.1~~$7.9 million, or ~~8.8%~~2.2%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017, due to~~2018, driven by an increase in ~~claims,~~universal life reserves, partly offset by ~~a decrease in traditional life reserves.~~ unlocking.

For the three months ended March 31, ~~2018,~~2019, universal life unlocking ~~increased~~decreased policy benefits and settlement expenses ~~$3.8~~$3.1 million, as compared to ~~a decrease~~an increase of ~~$0.9~~$3.8 million for the three months ended March 31, ~~2017.~~2018.

Amortization of DAC/VOBA

DAC/VOBA amortization increased ~~$1.2~~$0.4 million, or ~~4.1%~~1.2%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017,~~2018, due to higher ~~VOBA~~ amortization mostly offset by unlocking in the universal life ~~block, offset by lower VOBA amortization in the traditional blocks.~~block. For the three months ended March 31, ~~2018,~~2019, universal life unlocking ~~increased~~decreased amortization ~~$4.2~~$1.5 million, as compared to an increase of ~~$0.3~~$4.2 million for the three months ended March 31, ~~2017.~~2018.

Other operating expenses

Other operating expenses ~~increased $14.9~~decreased $10.7 million for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017.~~2018. This ~~increase~~decrease was primarily driven by higher ~~general~~ceding allowances and ~~administrative expenses,~~lower commissions, ~~and taxes, licenses and fees, along with a decrease in ceding allowances.~~offset by higher new business costs after capitalization.

Sales

Sales for the segment decreased ~~$1.0~~$0.1 million for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017,~~2018, primarily due to lower sales in the universal life block, ~~mostly~~ offset by higher traditional life sales. The change between products was due to a shift in sales focus from a product within the universal life block to a new term life product.

Reinsurance

Currently, the Life Marketing segment reinsures significant amounts of its life insurance in-force. Pursuant to the underlying reinsurance contracts, reinsurers pay allowances to the segment as a percentage of both first year and renewal premiums. Reinsurance allowances represent the amount the reinsurer is willing to pay for reimbursement of acquisition costs incurred by the direct writer of the business. A portion of reinsurance allowances received is deferred as part of DAC and a portion is recognized immediately as a reduction of other operating expenses. As the non-deferred portion of allowances reduces operating expenses in the period received, these amounts represent a net increase to adjusted operating income during that period.

Reinsurance allowances do not affect the methodology used to amortize DAC or the period over which such DAC is amortized. However, they do affect the amounts recognized as DAC amortization. DAC on universal life-type, limited-payment long duration, and investment contracts business is amortized based on the estimated gross profits of the policies in-force. Reinsurance allowances are considered in the determination of estimated gross profits, and therefore, impact DAC amortization on these lines of business. Deferred reinsurance allowances on level term business are recorded as ceded DAC, which is amortized over estimated ceded premiums of the policies in-force. Thus, deferred reinsurance allowances may impact DAC amortization. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018.

Impact of reinsurance

Reinsurance impacted the Life Marketing segment line items as shown in the following table:

Life Marketing Segment

Line Item Impact of Reinsurance


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
REVENUES
Reinsurance ceded	$	(220,022	)	$	(190,335	)	$	(208,409	)	$	(220,022	)
BENEFITS AND EXPENSES
Benefits and settlement expenses	(233,138		)	(165,493		)	(168,095		)	(233,138		)
Amortization of DAC/VOBA	(1,323		)	(1,416		)	(1,165		)	(1,323		)
Other operating expenses⁽¹⁾	(33,476		)	(41,338		)	(43,418		)	(33,476		)
Total benefits and expenses	(267,937		)	(208,247		)	(212,678		)	(267,937		)

NET IMPACT OF REINSURANCE	$	47,915		$	17,912		$	4,269		$	47,915

Allowances received	$	(34,908	)	$	(43,124	)	$	(45,128	)	$	(34,908	)
Less: Amount deferred	1,432			1,786			1,710			1,432
Allowances recognized (ceded other operating expenses)⁽¹⁾	$	(33,476	)	$	(41,338	)	$	(43,418	)	$	(33,476	)
(1) Other operating expenses ceded per the income statement are equal to reinsurance allowances recognized after capitalization.

The table above does not reflect the impact of reinsurance on our net investment income. By ceding business to the assuming companies, we forgo investment income on the reserves ceded. Conversely, the assuming companies will receive investment income on the reserves assumed, which will increase the assuming companies’ profitability on the business that we cede. The net investment income impact to us and the assuming companies has not been quantified. The impact of including foregone investment income would be to substantially reduce the favorable net impact of reinsurance reflected above. We estimate that the impact of foregone investment income would be to reduce the net impact of reinsurance presented in the table above by ~~305%~~265% to ~~390%~~308%. The Life Marketing segment’s reinsurance programs do not materially impact the ~~“other income”~~other income line of our income statement.

As shown above, reinsurance ~~had~~generally has a favorable impact on the Life Marketing segment’s operating income ~~for the periods presented above.~~results. The impact of reinsurance is largely due to our quota share coinsurance program in place prior to mid-2005. Under that program, generally 90% of the segment’s traditional new business was ceded to reinsurers. Since mid-2005, a much smaller percentage of overall term business has been ceded due to a change in reinsurance strategy on traditional business. In addition, since 2012, a much smaller percentage of the segment’s new universal life business has been ceded. As a result of that change, the relative impact of reinsurance on the Life Marketing segment’s overall results is expected to decrease over time. While the significance of reinsurance is expected to decline over time, the overall impact of reinsurance for a given period may fluctuate due to variations in mortality and the unlocking of balances.

For The Three Months Ended March 31, ~~2018,~~2019, as compared to The Three Months Ended March 31, ~~2017~~2018

The ~~higher~~lower ceded premium and policy fees for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017,~~2018, was caused primarily by ~~higher~~lower ceded traditional life premiums of ~~$22.7~~$25.2 million, ~~and~~partially offset by higher universal life policy fees of ~~$6.4~~$13.6 million.

Ceded benefits and settlement expenses were ~~higher~~lower for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017,~~2018, primarily due to ~~higher~~lower ceded claims. ~~Traditional~~Universal life and traditional life ceded ~~benefits~~claims were $5.4 million lower and ~~settlement expenses increased $58.4~~$57.0 million ~~for the three months ended March 31, 2018,~~lower, respectively, as compared to the three months ended March 31, 2017, primarily due to higher ceded reserves and claims. Universal life ceded benefits increased $7.2 million for the three months ended March 31, 2018, as compared to the three months ended March 31, 2017, primarily due to higher ceded claims, partially offset by lower ceded reserves. Ceded universal life claims were $32.8 million higher and ceded traditional life claims were $39.1 million higher for the three months ended March 31, 2018, as compared to the three months ended March 31, 2017.2018.

Ceded amortization of DAC and VOBA decreased slightly for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017.~~2018.

Ceded other operating expenses increased for the three months ended March 31, 2019, as compared to the three months ended March 31, 2018, primarily due to a settlement in the prior year that reduced ceding allowances by approximately $6.2 million. Ceded other operating expenses reflect the impact of reinsurance allowances, net of amounts deferred.

Acquisitions

Segment Results of Operations

Segment results were as follows:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
REVENUES
Gross premiums and policy fees	$	276,789		$	281,450		$	323,372		$	276,789
Reinsurance ceded	(77,652		)	(80,250		)	(60,932		)	(77,652		)
Net premiums and policy fees	199,137			201,200			262,440			199,137
Net investment income	183,597			190,969			324,511			183,597
Other income	3,589			2,788			3,768			3,589
Total operating revenues	386,323			394,957			590,719			386,323
Realized gains (losses) - investments	(90,611		)	22,905
Realized gains (losses) - derivatives	83,382			(16,495		)
Realized investment gains (losses)							19,223			(7,229		)
Total revenues	379,094			401,367			609,942			379,094
BENEFITS AND EXPENSES
Benefits and settlement expenses	306,094			316,368			476,657			306,094
Amortization of VOBA	(1,174		)	(3,085		)	(1,470		)	(1,174		)
Other operating expenses	25,883			28,007			40,620			25,883
Operating benefits and expenses	330,803			341,290			515,807			330,803
Amortization related to benefits and settlement expenses	1,164			2,448			2,163			1,164
Amortization of VOBA related to realized gains (losses) - investments	(457		)	13			394			(457		)
Total benefits and expenses	331,510			343,751			518,364			331,510
INCOME BEFORE INCOME TAX	47,584			57,616			91,578			47,584
Less: realized gains (losses)	(7,229		)	6,410			19,223			(7,229		)
Less: amortization related to benefits and settlement expenses	(1,164		)	(2,448		)	(2,163		)	(1,164		)
Less: related amortization of VOBA	457			(13		)	(394		)	457
PRE-TAX ADJUSTED OPERATING INCOME	$	55,520		$	53,667		$	74,912		$	55,520

The following table summarizes key data for the Acquisitions segment:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Average Life Insurance In-Force⁽¹⁾
Traditional	$	218,130,008		$	233,273,368		$	224,558,834		$	218,130,008
Universal life	26,216,455			28,243,487			31,826,162			26,216,455
	$	244,346,463		$	261,516,855		$	256,384,996		$	244,346,463
Average Account Values
Universal life	$	4,160,089		$	4,211,856		$	8,009,880		$	4,160,089
Fixed annuity⁽²⁾	3,545,506			3,523,668			11,650,096			3,545,506
Variable annuity	1,205,383			1,167,104			1,067,411			1,205,383
	$	8,910,978		$	8,902,628		$	20,727,387		$	8,910,978
Interest Spread - Fixed Annuities
Net investment income yield	4.14		%	3.99		%	4.28		%	4.14		%
Interest credited to policyholders	3.24		%	3.31		%	3.55		%	3.24		%
Interest spread⁽³⁾	0.90		%	0.68		%	0.73		%	0.90		%

(1) Amounts are not adjusted for reinsurance ceded.													(2) Includes general account balances held within variable annuity products and is net of coinsurance ceded.	(3) Earned rates exclude portfolios supporting modified coinsurance and crediting rates exclude 100% cessions.

For The Three Months Ended March 31, ~~2018,~~2019, as compared to The Three Months Ended March 31, ~~2017~~2018

Pre-tax adjusted operating income

Pre-tax adjusted operating income was ~~$55.5~~$74.9 million for the three months ended March 31, ~~2018,~~2019, an increase of ~~$1.9~~$19.4 million as compared to the three months ended March 31, ~~2017,~~2018, primarily due to ~~a decrease in overall benefit expense and~~the favorable ~~adjustments to~~impact of $19.8 million from the Liberty reinsurance ~~premiums.~~transaction completed on May 1, 2018, partly offset by the expected runoff of the in-force blocks of business.

Operating revenues

Net premiums and policy fees ~~decreased $2.1~~increased $63.3 million, or ~~1.0%~~31.8%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017,~~2018, primarily due to the premiums associated with the Liberty reinsurance transaction more than offsetting the expected runoff of the in-force blocks of business. Net investment income ~~decreased $7.4~~increased $140.9 million, or 76.8%, for the three months ended March 31, ~~2018, as compared~~2019, primarily due to the ~~three months ended March 31, 2017 due to~~$144.3 million impact of the Liberty reinsurance transaction, partly offset by the expected runoff of the in-force blocks of business.

Total benefits and expenses

Total benefits and expenses ~~decreased $12.2~~increased $186.9 million, or ~~3.6%~~56.4%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017.~~2018. The ~~decrease~~increase was primarily due to the Liberty reinsurance transaction, which increased benefits and expenses $200.5 million. This was partly offset by the expected runoff of the in-force blocks of ~~business, partly offset by unfavorable mortality experience and higher amortization of VOBA.~~business.

Reinsurance

The Acquisitions segment currently reinsures portions of both its life and annuity in-force. The cost of reinsurance to the segment is reflected in the chart shown below. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018.

Impact of reinsurance

Reinsurance impacted the Acquisitions segment line items as shown in the following table:

Acquisitions Segment

Line Item Impact of Reinsurance


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
REVENUES
Reinsurance ceded	$	(77,652	)	$	(80,250	)	$	(60,932	)	$	(77,652	)
BENEFITS AND EXPENSES
Benefits and settlement expenses	(83,031		)	(68,210		)	(59,469		)	(83,031		)
Amortization of value of business acquired	(201		)	(117		)
Amortization of VOBA							(124		)	(201		)
Other operating expenses	(8,814		)	(9,122		)	(7,552		)	(8,814		)
Total benefits and expenses	(92,046		)	(77,449		)	(67,145		)	(92,046		)

NET IMPACT OF REINSURANCE⁽¹⁾	$	14,394		$	(2,801	)	$	6,213		$	14,394

(1) Assumes no investment income on reinsurance. Foregone investment income would substantially reduce the favorable impact of reinsurance.

The segment’s reinsurance programs do not materially impact the other income line of ~~the~~our income statement. In addition, net investment income generally has no direct impact on reinsurance cost. However, by ceding business to the assuming companies, we forgo investment income on the reserves ceded to the assuming companies. Conversely, the assuming companies will receive investment income on the reserves assumed which will increase the assuming companies’ profitability on business assumed from the Company. For business ceded under modified coinsurance arrangements, the amount of investment income attributable to the assuming company is included as part of the overall change in policy reserves and, as such, is reflected in benefit and settlement expenses. The net investment income impact to us and the assuming companies has not been quantified as it is not fully reflected in our consolidated financial statements.

The net impact of reinsurance was ~~more~~less favorable by ~~$17.2~~$8.2 million for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017,~~2018, primarily due to ~~higher~~lower ceded ~~claims.~~benefits and expenses partly offset by lower ceded revenue. For the three months ended March 31, ~~2018,~~2019, ceded revenues decreased by ~~$2.6~~$16.7 million, while ceded benefits and expenses ~~increased~~decreased by ~~$14.6 million primarily due to higher claims.~~$24.9 million.

Annuities

Segment Results of Operations

Segment results were as follows:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
REVENUES
Gross premiums and policy fees	$	38,644		$	37,883		$	33,430		$	38,644
Reinsurance ceded	—			—			—			—
Net premiums and policy fees	38,644			37,883			33,430			38,644
Net investment income	82,009			78,988			93,202			82,009
Realized gains (losses) - derivatives	(21,318		)	(21,084		)
Realized investment gains (losses)							(21,107		)	(21,318		)
Other income	43,430			43,514			38,728			43,430
Total operating revenues	142,765			139,301			144,253			142,765
Realized gains (losses) - investments	(41		)	275
Realized gains (losses) - derivatives, net of economic cost	7,989			(30,934		)
Realized investment gains (losses)							(5,036		)	7,948
Total revenues	150,713			108,642			139,217			150,713
BENEFITS AND EXPENSES
Benefits and settlement expenses	57,370			50,711			57,946			57,370
Amortization of DAC/VOBA	6,367			(559		)	(6,197		)	6,367
Other operating expenses	38,497			36,142			38,288			38,497
Operating benefits and expenses	102,234			86,294			90,037			102,234
Amortization related to benefits and settlement expenses	(77		)	1,316			3,784			(77		)
Amortization of DAC/VOBA related to realized gains (losses) - investments	5,202			(11,700		)	(12,222		)	5,202
Total benefits and expenses	107,359			75,910			81,599			107,359
INCOME BEFORE INCOME TAX	43,354			32,732			57,618			43,354
Less: realized gains (losses) - investments	(41		)	275
Less: realized gains (losses) - derivatives, net of economic cost	7,989			(30,934		)
Less: realized investment gains (losses)							(5,036		)	7,948
Less: amortization related to benefits and settlement expenses	77			(1,316		)	(3,784		)	77
Less: related amortization of DAC/VOBA	(5,202		)	11,700			12,222			(5,202		)
PRE-TAX ADJUSTED OPERATING INCOME	$	40,531		$	53,007		$	54,216		$	40,531

The following tables summarize key data for the Annuities segment:

For The
Three Months Ended
March 31,
2018 2017
(Dollars In Thousands)
Sales⁽¹⁾

Fixed annuity $ 418,642
$ 196,617
Variable annuity 88,886
113,561
$ 507,528
$ 310,178
Average Account Values
.
Fixed annuity⁽²⁾
$ 8,580,851
$ 8,159,205
Variable annuity 13,153,489
12,855,580
$ 21,734,340
$ 21,014,785
Interest Spread - Fixed Annuities⁽³⁾

Net investment income yield 3.65 % 3.65 %
Interest credited to policyholders 2.51
2.53
Interest spread 1.14 % 1.12 %

(1) Sales are measured based on the amount of purchase payments received less surrenders occurring within twelve months of the purchase payments.
(2) Includes general account balances held within VA products.
(3) Interest spread on average general account values.

For The
Three Months Ended
March 31,
2018 2017
(Dollars In Thousands)
Derivatives related to VA contracts:

Interest rate futures - VA $ (16,892 ) $ 3,448
Equity futures - VA (6,428 ) (30,817 )
Currency futures - VA (7,583 ) (6,256 )
Equity options - VA 12,016
(40,185 )
Interest rate swaptions - VA (14 ) (1,469 )
Interest rate swaps - VA (63,710 ) (8,957 )
Total return swaps - VA 6,490
—
Embedded derivative - GLWB⁽¹⁾
56,292
33,632
Total derivatives related to VA contracts (19,829 ) (50,604 )
Derivatives related to FIA contracts:

Embedded derivative - FIA 11,330
(12,411 )
Equity futures - FIA (161 ) 297
Equity options - FIA (4,669 ) 10,700
Total derivatives related to FIA contracts 6,500
(1,414 )
VA GLWB economic cost⁽²⁾
21,318
21,084
Realized gains (losses) - derivatives, net of economic cost $ 7,989
$ (30,934 )

(1) Includes impact of nonperformance risk of $19.5 million and $(14.5) million for the three months ended March 31, 2018 and 2017.
(2) Economic cost is the long-term expected average cost of providing the product benefit over the life of the policy based on product pricing assumptions. These include assumptions about the economic/market environment, and elective and non-elective policy owner behavior (e.g. lapses, withdrawal timing, mortality, etc.).



	For The Three Months Ended March 31,
	2019			2018
	(Dollars In Thousands)
Sales⁽¹⁾
Fixed annuity	$	332,578		$	418,642
Variable annuity	45,333			88,886
	$	377,911		$	507,528
Average Account Values				.
Fixed annuity⁽²⁾	$	9,531,961		$	8,580,851
Variable annuity	11,963,395			13,153,489
	$	21,495,356		$	21,734,340
Interest Spread - Fixed Annuities⁽³⁾
Net investment income yield	3.78		%	3.65		%
Interest credited to policyholders	2.46			2.51
Interest spread	1.32		%	1.14		%

(1) Sales are measured based on the amount of purchase payments received less surrenders occurring within twelve months of the purchase payments.
(2) Includes general account balances held within VA products.
(3) Interest spread on average general account values.

As of
March 31, 2018 December 31, 2017
(Dollars In Thousands)
GMDB - Net amount at risk⁽¹⁾
$ 93,678
$ 72,825
GMDB Reserves 31,334
30,944
GLWB and GMAB Reserves 55,468
111,760
Account value subject to GLWB rider 9,368,564
9,718,263
GLWB Benefit Base 10,489,544
10,560,893
GMAB Benefit Base 3,029
3,298
S&P 500® Index 2,641
2,674

(1) Guaranteed benefits in excess of contract holder account balance.



	For The Three Months Ended March 31,
	2019			2018
	(Dollars In Thousands)
Derivatives related to VA contracts:
Interest rate futures	$	(6,022	)	$	(16,892	)
Equity futures	29,738			(6,428		)
Currency futures	2,244			(7,583		)
Equity options	(71,695		)	12,016
Interest rate swaptions	—			(14		)
Interest rate swaps	74,861			(63,710		)
Total return swaps	(40,027		)	6,490
Embedded derivative - GLWB⁽¹⁾	(19,626		)	56,292
Total derivatives related to VA contracts	(30,527		)	(19,829		)
Derivatives related to FIA contracts:
Embedded derivative	(38,814		)	11,330
Equity futures	(429		)	(161		)
Equity options	42,050			(4,669		)
Total derivatives related to FIA contracts	2,807			6,500
Other	35			—
VA GLWB economic cost⁽²⁾	21,107			21,318
Realized gains (losses) - derivatives, net of economic cost	$	(6,578	)	$	7,989

(1) Includes impact of nonperformance risk of $17.1 million and $19.5 million for the three months ended March 31, 2019 and 2018, respectively.
(2) Economic cost is the long-term expected average cost of providing the product benefit over the life of the policy based on product pricing assumptions. These include assumptions about the economic/market environment, and elective and non-elective policy owner behavior (e.g. lapses, withdrawal timing, mortality, etc.).



	As of
	March 31, 2019		December 31, 2018
	(Dollars In Thousands)
GMDB - Net amount at risk⁽¹⁾	$	107,875	$	274,399
GMDB Reserves	35,865		39,240
GLWB and GMAB Reserves	203,696		184,071
Account value subject to GLWB rider	8,634,151		8,399,300
GLWB Benefit Base	10,198,754		10,265,545
GMAB Benefit Base	566		1,238
S&P 500® Index	2,834		2,507

(1) Guaranteed benefits in excess of contract holder account balance.

For The Three Months Ended March 31, ~~2018,~~2019, as compared to The Three Months Ended March 31, ~~2017~~2018

Pre-tax adjusted operating income

Pre-tax adjusted operating income was $54.2 million for the three months ended March 31, 2019, as compared to $40.5 million for the three months ended March 31, 2018, ~~as compared to $53.0 million for the three months ended March 31, 2017, a decrease~~an increase of ~~$12.5~~$13.7 million, or ~~23.5%~~33.8%. This variance was primarily the result of ~~unfavorable~~favorable unlocking, ~~an unfavorable~~increased interest spreads, and a favorable change in ~~SPIA mortality, and higher non-deferred expenses,~~guaranteed benefit reserves, partially offset by ~~increased interest spreads.~~a decline in VA fee income. Segment results were ~~negatively~~positively impacted by $7.7 million of favorable unlocking for the three months ended March 31, 2019, as compared to $5.2 million of unfavorable unlocking for the three months ended March 31, ~~2018, as compared to $1.6 million of favorable unlocking for the three months ended March 31, 2017.~~2018.

Operating revenues

Segment operating revenues increased ~~$3.5~~$1.5 million, or ~~2.5%~~1.0%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017,~~2018, primarily due to higher investment income, partially offset by lower VA fee income. The higher investment income related to growth in fixed account value and lower VA fee income related to a decline in variable

account value. Average fixed account balances increased ~~5.2%~~11.1% and average variable account balances ~~increased 2.3%~~decreased 9.0% for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017.~~2018.

Benefits and settlement expenses

Benefits and settlement expenses increased ~~$6.7~~$0.6 million, or ~~13.1%~~1.0%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017.~~2018. This increase was primarily the result of ~~an unfavorable change in SPIA mortality,~~ higher credited interest and an unfavorable unlocking, partially offset by a favorable change in guaranteed benefit reserves. Included in benefits and settlement expenses was $1.4 million of unfavorable unlocking for the three months ended March 31, 2019, as compared to $0.1 million of unfavorable unlocking for the three months ended March 31, ~~2018, as compared to $0.1 million of favorable unlocking for the three months ended March 31, 2017.~~2018.

Amortization of DAC and VOBA

DAC and VOBA amortization ~~unfavorably~~favorably changed by ~~$6.9~~$12.6 million for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017.~~2018. The ~~unfavorable~~favorable change was primarily due to ~~unfavorable~~favorable unlocking. DAC and VOBA unlocking for the three months ended March 31, ~~2018,~~2019, was $9.1 million favorable as compared to $5.1 million unfavorable ~~as compared to $1.4 million favorable~~ for the three months ended March 31, ~~2017.~~2018.

Other operating expenses

Other operating expenses ~~increased $2.4~~decreased $0.2 million, or ~~6.5%~~0.5%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017. Increases in~~2018. Lower non-deferred ~~acquisition expense and~~ commission expenses were partially offset by ~~lower~~higher non-deferred acquisition expense and maintenance and overhead expense.

Sales

Total sales ~~increased $197.4~~decreased $129.6 million, or ~~63.6%~~25.5%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017.~~2018. Sales of variable annuities decreased ~~$24.7~~$43.6 million, or ~~21.7%~~49.0% for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017,~~2018, primarily due to ~~disruptions in the broader market driven by regulatory rule changes and~~ the relative competitiveness of our product within the market. Sales of fixed annuities ~~increased~~decreased by ~~$222.0~~$86.1 million, or ~~112.9%~~20.6%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017,~~2018, primarily due to ~~an increase~~a decrease in single premium deferred annuities (“SPDA”) sales.

Stable Value Products

Segment Results of Operations

Segment results were as follows:


	For The Three Months Ended March 31,					For The Three Months Ended March 31,
	2018			2017		2019		2018
	(Dollars In Thousands)					(Dollars In Thousands)
REVENUES
Net investment income	$	53,893		$	39,346	$	57,621	$	53,893
Other income	178			—		—		178
Total operating revenues	54,071			39,346		57,621		54,071
Realized gains (losses)	(203		)	1,497
Realized investment gains (losses)						1,958		(203		)
Total revenues	53,868			40,843		59,579		53,868
BENEFITS AND EXPENSES
Benefits and settlement expenses	23,643			14,448		33,840		23,643
Amortization of deferred policy acquisition costs	730			456
Amortization of DAC						873		730
Other operating expenses	618			543		669		618
Total benefits and expenses	24,991			15,447		35,382		24,991
INCOME BEFORE INCOME TAX	28,877			25,396		24,197		28,877
Less: realized gains (losses)	(203		)	1,497		1,958		(203		)
PRE-TAX ADJUSTED OPERATING INCOME	$	29,080		$	23,899	$	22,239	$	29,080

The following table summarizes key data for the Stable Value Products segment:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Sales⁽¹⁾
GIC	$	10,000		$	55,000		$	—		$	10,000
GFA	—			200,000			650,000			—
	$	10,000		$	255,000		$	650,000		$	10,000

Average Account Values	$	4,710,531		$	3,590,453		$	5,453,739		$	4,710,531
Ending Account Values	$	4,699,614		$	3,614,225		$	5,527,816		$	4,699,614

Operating Spread
Net investment income yield	4.58		%	4.39		%	4.22		%	4.58		%
Other income yield	0.02			—			—			0.02
Interest credited	(2.01		)	(1.61		)	2.48			2.01
Operating expenses	(0.12		)	(0.11		)	0.11			0.12
Operating spread	2.47		%	2.67		%	1.63		%	2.47		%

Adjusted operating spread⁽²⁾	1.87		%	1.91		%	1.57		%	1.87		%

(1) Sales are measured at the time the purchase payments are received.													(2) Excludes participating mortgage loan income.

For The Three Months Ended March 31, ~~2018,~~2019, as compared to The Three Months Ended March 31, ~~2017~~2018

Pre-tax adjusted operating income

Pre-tax adjusted operating income was ~~$29.1~~$22.2 million and ~~increased $5.2~~decreased $6.8 million, or ~~21.7%~~23.5%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017.~~2018. The ~~increase~~decrease in pre-tax adjusted operating ~~earnings~~income primarily resulted from lower participating mortgage income in addition to lower interest spreads driven by higher ~~average account values.~~credited rates on newly issued contracts. Participating mortgage income for the three months ended March 31, ~~2018,~~2019, was ~~$6.9~~$0.8 million as compared to ~~$6.8~~$6.9 million for the three months ended March 31, ~~2017.~~2018. The adjusted operating spread, which excludes participating income, decreased by ~~four~~30 basis points for the three months ended March 31, ~~2018,~~2019, from the prior year, due primarily to an increase in credited interest.

Asset Protection

Segment Results of Operations

Segment results were as follows:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
REVENUES
Gross premiums and policy fees	$	82,600		$	84,691		$	82,177		$	82,600
Reinsurance ceded	(47,744		)	(45,432		)	(48,920		)	(47,744		)
Net premiums and policy fees	34,856			39,259			33,257			34,856
Net investment income	6,969			6,326			8,206			6,969
Other income	34,550			34,498			34,735			34,550
Total operating revenues	76,375			80,083			76,198			76,375
BENEFITS AND EXPENSES
Benefits and settlement expenses	29,109			31,804			23,946			29,109
Amortization of DAC/VOBA	15,753			4,635			15,655			15,753
Other operating expenses	25,295			38,045			26,854			25,295
Total benefits and expenses	70,157			74,484			66,455			70,157
INCOME BEFORE INCOME TAX	6,218			5,599			9,743			6,218
Less: realized gains (losses)							—			—
PRE-TAX ADJUSTED OPERATING INCOME	$	6,218		$	5,599		$	9,743		$	6,218

The following table summarizes key data for the Asset Protection segment:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Sales⁽¹⁾
Credit insurance	$	3,166		$	4,074		$	2,280		$	3,166
Service contracts	96,503			97,834			92,582			96,503
GAP	15,596			31,347			16,726			15,596
	$	115,265		$	133,255		$	111,588		$	115,265
Loss Ratios⁽²⁾
Credit insurance	29.8		%	26.2		%	26.2		%	29.8		%
Service contracts	54.4			62.1			56.2			54.4
GAP	139.2			120.7			120.2			139.2

(1) Sales are based on the amount of single premiums and fees received													(2) Incurred claims as a percentage of earned premiums

For The Three Months Ended March 31, ~~2018,~~2019, as compared to The Three Months Ended March 31, ~~2017~~2018

Pre-tax adjusted operating income

Pre-tax adjusted operating income was ~~$6.2~~$9.7 million, representing an increase of ~~$0.6~~$3.5 million, or ~~11.1%~~56.7%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, 2017. Service contract earnings increased $1.2 million primarily due to favorable loss ratios and higher investment income. Credit insurance earnings decreased $0.5 million primarily due to lower volume.2018. Earnings from the GAP product line ~~decreased $0.1 million.~~increased $2.7 million due to lower loss ratios. Service contract earnings increased $0.5 million primarily due to higher investment income. Earnings from the credit insurance product line increased $0.3 million primarily due to lower expenses.

Net premiums and policy fees

Net premiums and policy fees decreased ~~$4.4~~$1.6 million, or ~~11.2%~~4.6%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017. Service contract premiums decreased $1.3 million primarily due to higher ceded premiums in existing distribution channels.~~2018. GAP premiums decreased ~~$2.0~~$3.5 million and credit insurance premiums decreased ~~$1.1~~$0.3 million as a result of lower sales. This was partly offset by an increase in service contract premiums of $2.2 million.

Other income

Other income increased ~~$0.1~~$0.2 million ~~or 0.2%,~~ for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017.~~2018. Other income from the service contract line increased $0.7 million. Other income from the GAP product line decreased $0.5 million.

Benefits and settlement expenses

Benefits and settlement expenses decreased ~~$2.7~~$5.2 million, or ~~8.5%~~17.7%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017. Service contract~~2018. GAP claims decreased ~~$2.5~~$6.6 million due to lower volume and lower loss ratios. Credit insurance claims decreased $0.2 million due to lower ~~volume. GAP~~loss ratios. Service contract claims ~~were consistent as compared~~increased $1.6 million due to ~~the prior year.~~higher volume and higher loss ratios.

Amortization of DAC and VOBA and Other operating expenses

Amortization of DAC and VOBA ~~increased $11.1~~decreased $0.1 million and other operating expenses ~~decreased $12.8~~increased $1.6 million for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017. The changes were due to the impact of an accounting change implemented in conjunction with the adoption of ASU No. 2014-09.~~2018.

Sales

Total segment sales decreased ~~$18.0~~$3.7 million, or ~~13.5%~~3.2%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017. GAP sales decreased $15.8 million due to discontinuing the relationship with a significant distribution partner.~~2018. Service contract sales decreased ~~$1.3~~$3.9 million primarily due to lower volume resulting from the impact of previous price increases. Credit insurance sales decreased $0.9 million due to decreasing demand for the product. GAP sales increased $1.1 million.

Reinsurance

The majority of the Asset Protection segment’s reinsurance activity relates to the cession of single premium credit life and credit accident and health insurance, vehicle service contracts, and guaranteed asset protection insurance to producer affiliated reinsurance companies (“PARCs”). These arrangements are coinsurance contracts ceding the business on a first dollar quota share basis at 100% to limit ~~our~~the segment’s exposure and allow the PARCs to share in the underwriting income of the product. Reinsurance contracts do not relieve usthe Asset Protection segment from ~~our~~ obligations to ~~our~~ policyholders. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies, to ~~our~~the Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018.

Impact of Reinsurance

Reinsurance impacted the Asset Protection segment line items as shown in the following table:

Asset Protection Segment

Line Item Impact of Reinsurance


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
REVENUES
Reinsurance ceded	$	(47,744	)	$	(45,432	)	$	(48,920	)	$	(47,744	)
BENEFITS AND EXPENSES
Benefits and settlement expenses	(19,990		)	(18,369		)	(21,139		)	(19,990		)
Amortization of DAC/VOBA	(1,032		)	(676		)	(981		)	(1,032		)
Other operating expenses	(799		)	(1,209		)	(299		)	(799		)
Total benefits and expenses	(21,821		)	(20,254		)	(22,419		)	(21,821		)
NET IMPACT OF REINSURANCE⁽¹⁾	$	(25,923	)	$	(25,178	)	$	(26,501	)	$	(25,923	)

(1) Assumes no investment income on reinsurance. Foregone investment income would substantially change the impact of reinsurance.

For The Three Months Ended March 31, ~~2018,~~2019, as compared to The Three Months Ended March 31, ~~2017~~2018

Reinsurance premiums ceded increased ~~$2.3~~$1.2 million, or ~~5.1%~~2.5%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017.~~2018. The increase was primarily due to an increase in ceded service contract premiums somewhat offset by a decrease in ceded credit insurance premiums.

Benefits and settlement expenses ceded increased ~~$1.6~~$1.1 million, or ~~8.8%~~5.7%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017.~~2018. The increase was primarily due to higher ceded losses in the service contract product ~~line and GAP product~~ line.

Amortization of DAC and VOBA ceded ~~increased $0.4~~decreased $0.1 million for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017,~~2018, as the result of changes in ceded activity in ~~the service contract and credit~~all product lines. Other operating expenses ceded decreased ~~$0.4~~$0.5 million for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017,~~2018, as a result of changes in ceded activity in all product lines.

Net investment income has no direct impact on reinsurance cost. However, by ceding business to the assuming companies, ~~we forgo~~the Asset Protection segment forgoes investment income on the reserves ceded. Conversely, the assuming companies will receive investment income on the reserves assumed which generally will increase the assuming companies’ profitability on business ~~we cede.~~ceded. The net investment income impact ~~to us and the assuming companies~~ has not been quantified as it is not reflected in ~~our~~the consolidated financial statements.

Corporate and Other

Segment Results of Operations

Segment results were as follows:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
REVENUES
Gross premiums and policy fees	$	3,183		$	3,427		$	3,244		$	3,183
Reinsurance ceded	(5		)	(59		)	(116		)	(5		)
Net premiums and policy fees	3,178			3,368			3,128			3,178
Net investment income	59,039			53,241			61,165			59,039
Other income	755			2,064			1,167			755
Total operating revenues	62,972			58,673			65,460			62,972
Realized gains (losses) - investments	8,658			(4,337		)
Realized gains (losses) - derivatives	(764		)	(1,366		)
Realized investment gains (losses)							6,294			7,894
Total revenues	70,866			52,970			71,754			70,866
BENEFITS AND EXPENSES
Benefits and settlement expenses	4,930			3,654			5,162			4,930
Amortization of DAC and VOBA	—			—
Amortization of DAC/VOBA							—			—
Other operating expenses	78,721			74,747			79,972			78,721
Total benefits and expenses	83,651			78,401			85,134			83,651
INCOME (LOSS) BEFORE INCOME TAX	(12,785		)	(25,431		)	(13,380		)	(12,785		)
Less: realized gains (losses) - investments	8,658			(4,337		)
Less: realized gains (losses) - derivatives	(764		)	(1,366		)
Less: realized investment gains (losses)							6,294			7,894
PRE-TAX ADJUSTED OPERATING INCOME (LOSS)	$	(20,679	)	$	(19,728	)	$	(19,674	)	$	(20,679	)

For The Three Months Ended March 31, ~~2018,~~2019, as compared to The Three Months Ended March 31, ~~2017~~2018

Pre-tax adjusted operating income (loss)

Pre-tax adjusted operating loss was $19.7 million for the three months ended March 31, 2019, as compared to a pre-tax adjusted operating loss of $20.7 million for the three months ended March 31, ~~2018, as compared to a pre-tax adjusted operating loss of $19.7 million for the three months ended March 31, 2017.~~2018. The ~~higher~~decreased operating loss was primarily due to ~~an increase in corporate overhead expenses, partly offset by~~ an increase in investment income due to higher invested asset balances, ~~and improved yields.~~partially offset by increased interest expense.

Operating revenues

Net investment income for the segment increased ~~$5.8~~$2.1 million, or ~~10.9%~~3.6%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017.~~2018. The increase was primarily due to an increase in invested asset ~~balances and yields.~~balances.

Total benefits and expenses

Total benefits and expenses increased ~~$5.3~~$1.5 million or ~~6.7%~~1.8%, for the three months ended March 31, ~~2018,~~2019, as compared to the three months ended March 31, ~~2017,~~2018, primarily due to increases in interest expense and corporate overhead expenses.

CONSOLIDATED INVESTMENTS

As of March 31, ~~2018,~~2019, our investment portfolio was approximately ~~$53.2~~$68.1 billion. The types of assets in which we may invest are influenced by various state insurance laws which prescribe qualified investment assets. Within the parameters of these laws, we invest in assets giving consideration to such factors as liquidity and capital needs, investment quality, investment return, matching of assets and liabilities, and the overall composition of the investment portfolio by asset type and credit exposure. ~~We do not have material exposure to financial guarantee insurance companies with respect to our investment portfolio.~~

Within our fixed maturity investments, we maintain portfolios classified as “available-for-sale”, “trading”, and “held-to-maturity”. We purchase our available-for-sale investments with the intent to hold to maturity by purchasing investments that match future cash flow needs. However, we may sell any of our available-for-sale and trading investments to maintain proper matching of assets and liabilities. Accordingly, we classified ~~$37.4~~$51.3 billion, or ~~87.6%~~91.0%, of our fixed maturities as “available-for-sale” as of March 31, ~~2018.~~2019. These securities are carried at fair value on our consolidated condensed balance sheets. Changes in fair value for our available-for-sale portfolio, net of tax and the related impact on certain insurance assets and liabilities are recorded directly to shareowner’s equity. Declines in fair value that are other-than-temporary are recorded as realized losses in the consolidated condensed statements of income, net of any applicable non-credit component of the loss, which is recorded as an adjustment to other comprehensive income (loss).

Trading securities are carried at fair value and changes in fair value are recorded on the income statement as they occur. Our trading portfolio accounted for ~~$2.6~~$2.5 billion, or ~~6.1%~~4.4%, of our fixed maturities and ~~$70.5~~$34.6 million of short-term investments as of March 31, ~~2018.~~2019. Changes in fair value on the Modco trading portfolios, including gains and losses from sales, are passed to third party reinsurers through the contractual terms of the related reinsurance arrangements. Partially offsetting these amounts are corresponding changes in the fair value of the embedded derivative associated with the underlying reinsurance arrangement.

Fixed maturities with respect to which we have both the positive intent and ability to hold to maturity are classified as “held-to-maturity”. We classified ~~$2.7~~$2.6 billion, or ~~6.3%~~4.6%, of our fixed maturities as “held-to-maturity” as of March 31, ~~2018.~~2019. These securities are carried at amortized cost on our consolidated condensed balance sheets.

Fair values for private, non-traded securities are determined as follows: 1) we obtain estimates from independent pricing services and 2) we estimate fair value based upon a comparison to quoted issues of the same issuer or issues of other issuers with similar terms and risk characteristics. We analyze the independent pricing services valuation methodologies and related inputs, including an assessment of the observability of market inputs. Upon obtaining this information related to fair value, management makes a determination as to the appropriate valuation amount. For more information about the fair values of our investments please refer to Note 5,6, Fair Value of Financial Instruments, to the financial statements.

The following table presents the reported values of our invested assets:


	As of								As of
	March 31, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	(Dollars In Thousands)								(Dollars In Thousands)
Publicly issued bonds (amortized cost: 2018 - $30,779,523; 2017 - $30,880,196)	$	29,830,326	56.1	%	$	30,860,541	56.5	%
Privately issued bonds (amortized cost: 2018 - $12,987,993; 2017 - $12,984,569)	12,799,217		24.1		12,939,997		23.7
Preferred stock (amortized cost: 2018 - $97,626 ; 2017 - $97,690)	93,833		0.2		94,418		0.1
Publicly issued bonds (amortized cost: 2019 - $39,844,482; 2018 - $40,496,617)									$	39,262,915	57.7	%	$	38,346,708	58.1	%
Privately issued bonds (amortized cost: 2019 - $17,030,458; 2018 - $16,497,523)									17,026,110		25.0		16,097,386		24.3
Redeemable preferred stocks (amortized cost: 2019 - $99,438; 2018 - $105,639)									95,683		0.1		94,079		0.1
Fixed maturities	42,723,376		80.4	%	43,894,956		80.3	%	56,384,708		82.8	%	54,538,173		82.5	%
Equity securities (cost: 2018 - $676,451; 2017 - $740,813)	681,520		1.3		754,360		1.4
Equity securities (cost: 2019 - $619,483; 2018 - $627,087)									619,440		0.9		595,884		0.9
Mortgage loans	6,846,633		12.8		6,817,723		12.5		7,701,465		11.3		7,724,733		11.7
Investment real estate	7,531		—		8,355		—		6,478		—		6,816		—
Policy loans	1,594,642		3.0		1,615,615		3.0		1,677,442		2.5		1,695,886		2.6
Other long-term investments	920,939		1.7		915,595		1.7		853,117		1.3		759,354		1.1
Short-term investments	441,781		0.8		615,210		1.1		817,642		1.2		807,283		1.2
Total investments	$	53,216,422	100.0	%	$	54,621,814	100.0	%	$	68,060,292	100.0	%	$	66,128,129	100.0	%

Included in the preceding table are ~~$2.6~~$2.5 billion and ~~$2.7~~$2.4 billion of fixed maturities and ~~$70.5~~$34.6 million and ~~$56.3~~$30.9 million of short-term investments classified as trading securities as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. All of the fixed maturities in the trading portfolio are invested assets that are held pursuant to Modco arrangements under which the economic risks and benefits of the investments are passed to third party reinsurers. Also included above are ~~$2.7~~$2.6 billion and ~~$2.7~~$2.6 billion of securities classified as held-to-maturity as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

Fixed Maturity Investments

As of March 31, ~~2018,~~2019, our fixed maturity investment holdings were approximately ~~$42.7~~$56.4 billion. The approximate percentage distribution of our fixed maturity investments by quality rating is as follows:


	As of									As of
Rating	March 31, 2018				December 31, 2017					March 31, 2019				December 31, 2018
	(Dollars In Thousands)									(Dollars In Thousands)
AAA	$	5,848,800	13.7	%	$	5,740,115	13.1	%		$	7,134,040	12.7	%	$	6,822,118	12.5	%
AA	3,476,571		8.1		3,577,512		8.2			6,281,009		11.1		6,219,579		11.4
A	13,362,349		31.3		13,969,721		31.8			18,622,551		33.0		17,694,697		32.4
BBB	15,296,986		35.8		15,752,970		35.9			20,004,167		35.5		19,455,634		35.7
Below investment grade	2,038,844		4.8		2,135,734		4.8			1,735,585		3.1		1,712,671		3.2
Not rated⁽¹⁾	2,699,826		6.3		2,718,904		6.2			2,607,356		4.6		2,633,474		4.8
	$	42,723,376	100.0	%	$	43,894,956	100.0	%		$	56,384,708	100.0	%	$	54,538,173	100.0	%

(1) Our "not rated" securities are $2.7 billion or 6.3% of our fixed maturity investments, of held-to-maturity securities issued by affiliates of the Company which are considered variable interest entities ("VIE's") and are discussed in Note 4, Investment Operations, to the consolidated condensed financial statements. We are not the primary beneficiary of these entities and thus these securities are not eliminated in consolidation. These securities are collateralized by non-recourse funding obligations issued by captive insurance companies that are wholly owned subsidiaries of the Company.
(1) Our “not rated” securities are $2.6 billion or 4.6% of our fixed maturity investments, of held-to-maturity securities issued by affiliates of the Company which are considered variable interest entities (“VIEs”) and are discussed in Note 5, Investment Operations, to the consolidated condensed financial statements. We are not the primary beneficiary of these entities and thus these securities are not eliminated in consolidation. These securities are collateralized by non-recourse funding obligations issued by captive insurance companies that are wholly owned subsidiaries of the Company.									(1) Our “not rated” securities are $2.6 billion or 4.6% of our fixed maturity investments, of held-to-maturity securities issued by affiliates of the Company which are considered variable interest entities (“VIEs”) and are discussed in Note 5, Investment Operations, to the consolidated condensed financial statements. We are not the primary beneficiary of these entities and thus these securities are not eliminated in consolidation. These securities are collateralized by non-recourse funding obligations issued by captive insurance companies that are wholly owned subsidiaries of the Company.

We use various Nationally Recognized Statistical Rating Organizations’ (“NRSRO”) ratings when classifying securities by quality ratings. When the various NRSRO ratings are not consistent for a security, we use the second-highest convention in assigning the rating. When there are no such published ratings, we assign a rating based on the statutory accounting rating system if such ratings are available.

The distribution of our fixed maturity investments by type is as follows:


	As of				As of
Type	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018
	(Dollars In Thousands)				(Dollars In Thousands)
Corporate securities	$	30,205,672	$	31,400,193	$	39,482,150	$	37,786,661
Residential mortgage-backed securities	2,659,917		2,586,906		4,121,547		3,853,426
Commercial mortgage-backed securities	1,988,139		2,036,626		2,562,826		2,484,009
Other asset-backed securities	1,374,366		1,387,646		1,512,152		1,551,800
U.S. government-related securities	1,365,375		1,250,486		1,470,733		1,699,299
Other government-related securities	317,827		351,207		547,801		560,171
States, municipals, and political subdivisions	2,018,421		2,068,570		3,984,460		3,875,254
Redeemable preferred stock	93,833		94,418
Redeemable preferred stocks					95,683		94,079
Securities issued by affiliates	2,699,826		2,718,904		2,607,356		2,633,474
Total fixed income portfolio	$	42,723,376	$	43,894,956	$	56,384,708	$	54,538,173

We periodically update our industry segmentation based on an industry accepted index. Updates to this index can result in a change in segmentation for certain securities between periods.

The industry segment composition of our fixed maturity securities is presented in the following table:


	As of March 31, 2018		% Fair Value		As of December 31, 2017		% Fair Value		As of March 31, 2019		% Fair Value		As of December 31, 2018		% Fair Value
	(Dollars In Thousands)								(Dollars In Thousands)
Banking	$	4,165,556	9.9	%	$	4,301,821	9.8	%	$	5,644,232	9.9	%	$	5,260,725	9.6	%
Other finance	58,718		0.1		60,697		0.1		258,291		0.5		255,445		0.5
Electric utility	3,807,591		9.0		3,977,035		9.1		4,575,169		8.1		4,550,917		8.3
Energy	3,847,300		9.1		4,009,926		9.1		4,216,909		7.5		4,064,340		7.5
Natural gas	694,907		1.6		736,626		1.7		868,404		1.5		829,685		1.5
Insurance	3,522,587		8.2		3,689,572		8.4		4,157,172		7.4		3,916,905		7.2
Communications	1,645,436		3.9		1,691,391		3.9		2,144,609		3.8		2,086,592		3.8
Basic industrial	1,552,618		3.6		1,629,349		3.7		1,834,718		3.3		1,744,853		3.2
Consumer noncyclical	3,692,177		8.6		3,816,011		8.7		5,425,813		9.6		5,217,111		9.6
Consumer cyclical	1,195,713		2.8		1,232,991		2.8		1,948,226		3.5		1,850,868		3.4
Finance companies	156,666		0.4		162,673		0.4		200,977		0.4		192,074		0.4
Capital goods	1,808,520		4.2		1,910,950		4.4		2,796,061		5.0		2,711,728		5.0
Transportation	1,161,945		2.7		1,210,272		2.8		1,738,054		3.1		1,669,627		3.1
Other industrial	234,963		0.5		239,368		0.5		419,027		0.7		382,138		0.7
Brokerage	912,479		2.1		921,295		2.1		1,119,106		2.0		999,554		1.8
Technology	1,696,725		4.0		1,756,746		4.0		1,998,238		3.5		1,908,823		3.5
Real estate	81,590		0.2		82,125		0.2		199,169		0.4		206,795		0.4
Other utility	64,014		0.1		65,763		0.1		33,658		—		32,560		0.1
Commercial mortgage-backed securities	1,988,139		4.7		2,036,626		4.6		2,562,826		4.5		2,484,009		4.6
Other asset-backed securities	1,374,366		3.2		1,387,646		3.2		1,512,152		2.7		1,551,800		2.8
Residential mortgage-backed non-agency securities	1,926,327		4.5		1,861,883		4.2		3,297,336		5.8		3,017,064		5.5
Residential mortgage-backed agency securities	733,590		1.7		725,023		1.7		824,211		1.5		836,362		1.5
U.S. government-related securities	1,365,375		3.2		1,250,486		2.8		1,470,733		2.6		1,699,299		3.1
Other government-related securities	317,827		0.7		351,207		0.8		547,801		1.0		560,171		1.0
State, municipals, and political divisions	2,018,421		4.7		2,068,570		4.7		3,984,460		7.1		3,875,254		7.1
Securities issued by affiliates	2,699,826		6.3		2,718,904		6.2		2,607,356		4.6		2,633,474		4.8
Total	$	42,723,376	100.0	%	$	43,894,956	100.0	%	$	56,384,708	100.0	%	$	54,538,173	100.0	%

The total Modco trading portfolio fixed maturities by rating is as follows:


	As of				As of
Rating	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018
	(Dollars In Thousands)				(Dollars In Thousands)
AAA	$	350,048	$	355,719	$	289,694	$	301,155
AA	267,909		277,984		283,482		299,438
A	888,105		911,490		844,782		798,691
BBB	863,977		890,101		954,762		872,613
Below investment grade	217,103		228,895		120,741		144,295
Total Modco trading fixed maturities	$	2,587,142	$	2,664,189
					$	2,493,461	$	2,416,192

A portion of our bond portfolio is invested in residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”), and other asset-backed securities (collectively referred to as asset-backed securities or “ABS”). ABS are securities that are backed by a pool of assets. These holdings as of March 31, ~~2018,~~2019, were approximately ~~$6.0~~$8.2 billion. ~~Mortgage-backed~~Mortgage-

backed securities (“MBS”) are constructed from pools of mortgages and may have cash flow volatility as a result of changes in the rate at which prepayments of principal occur with respect to the underlying loans. Excluding limitations on access to lending and other extraordinary economic conditions, prepayments of principal on the underlying loans can be expected to accelerate with decreases in market interest rates and diminish with increases in interest rates.

The following tables include the percentage of our collateral grouped by rating category and categorizes the estimated fair value by year of security origination for our Prime, Non-Prime, Commercial, and Other asset-backed securities as of March 31, ~~2018~~2019 and December 31, ~~2017.~~2018.


	As of March 31, 2018																														As of March 31, 2019
	Prime⁽¹⁾						Non-Prime⁽¹⁾						Commercial						Other asset-backed						Total						Prime⁽¹⁾						Non-Prime⁽¹⁾						Commercial						Other asset-backed						Total
	Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized
	Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost
	(Dollars In Millions)																														(Dollars In Millions)
Rating $
AAA	$	2,352.1		$	2,387.0		$	—		$	—		$	1,222.7		$	1,256.6		$	584.3		$	585.4		$	4,159.1		$	4,229.0		$	3,216.8		$	3,187.8		$	—		$	—		$	1,451.4		$	1,456.0		$	513.2		$	507.4		$	5,181.4		$	5,151.2
AA	—			—			—			—			517.6			536.6			179.8			173.5			697.4			710.1			2.7			2.7			0.2			0.2			541.1			548.7			170.1			166.4			714.1			718.0
A	6.3			6.2			15.2			15.2			244.7			249.9			498.9			499.1			765.1			770.4			826.1			827.3			11.2			11.2			513.5			512.0			686.0			692.0			2,036.8			2,042.5
BBB	6.2			6.3			2.7			2.7			3.2			3.2			49.6			49.3			61.7			61.5			3.1			3.1			3.0			3.0			56.8			56.8			103.1			102.9			166.0			165.8
Below	77.5			77.4			199.9			201.0			—			—			61.7			61.3			339.1			339.7			17.2			17.2			41.2			41.2			—			—			39.8			40.6			98.2			99.0
	$	2,442.1		$	2,476.9		$	217.8		$	218.9		$	1,988.2		$	2,046.3		$	1,374.3		$	1,368.6		$	6,022.4		$	6,110.7		$	4,065.9		$	4,038.1		$	55.6		$	55.6		$	2,562.8		$	2,573.5		$	1,512.2		$	1,509.3		$	8,196.5		$	8,176.5

Rating %
AAA	96.2		%	96.3		%	—		%	—		%	61.5		%	61.4		%	42.5		%	42.7		%	69.1		%	69.2		%	79.1		%	78.9		%	—		%	—		%	56.7		%	56.6		%	33.9		%	33.6		%	63.2		%	63.0		%
AA	—			—			—			—			26.0			26.2			13.1			12.7			11.6			11.6			0.1			0.1			0.4			0.4			21.1			21.3			11.3			11.0			8.7			8.8
A	0.3			0.3			7.0			6.9			12.3			12.2			36.3			36.5			12.7			12.6			20.3			20.5			20.0			20.0			20.0			19.9			45.4			45.9			24.9			25.0
BBB	0.3			0.3			1.2			1.2			0.2			0.2			3.6			3.6			1.0			1.0			0.1			0.1			5.4			5.4			2.2			2.2			6.8			6.8			2.0			2.0
Below	3.2			3.1			91.8			91.9			—			—			4.5			4.5			5.6			5.6			0.4			0.4			74.2			74.2			—			—			2.6			2.7			1.2			1.2
	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

Estimated Fair Value of Security by Year of Security Origination
2014 and prior	$	1,058.0		$	1,070.7		$	217.8		$	218.9		$	1,233.3		$	1,269.0		$	763.7		$	759.6		$	3,272.8		$	3,318.2
2015	450.8			456.3			—			—			209.8			211.5			18.7			18.2			679.3			686.0
2015 and prior																															$	1,719.4		$	1,712.1		$	55.6		$	55.6		$	1,818.6		$	1,824.4		$	776.9		$	769.8		$	4,370.5		$	4,361.9
2016	232.4			239.2			—			—			441.4			459.1			231.9			231.9			905.7			930.2			346.2			346.8			—			—			451.8			460.2			184.0			184.8			982.0			991.8
2017	552.4			562.2			—			—			99.6			102.6			329.3			328.2			981.3			993.0			691.3			698.1			—			—			127.0			127.8			416.1			418.7			1,234.4			1,244.6
2018	148.5			148.5			—			—			4.1			4.1			30.7			30.7			183.3			183.3			1,079.6			1,055.7			—			—			142.7			138.7			126.3			127.1			1,348.6			1,321.5
2019																															229.4			225.4			—			—			22.7			22.4			8.9			8.9			261.0			256.7
Total	$	2,442.1		$	2,476.9		$	217.8		$	218.9		$	1,988.2		$	2,046.3		$	1,374.3		$	1,368.6		$	6,022.4		$	6,110.7		$	4,065.9		$	4,038.1		$	55.6		$	55.6		$	2,562.8		$	2,573.5		$	1,512.2		$	1,509.3		$	8,196.5		$	8,176.5

(1) Included in Residential Mortgage-Backed securities.


	As of December 31, 2017																														As of December 31, 2018
	Prime⁽¹⁾						Non-Prime⁽¹⁾						Commercial						Other asset-backed						Total						Prime⁽¹⁾						Non-Prime⁽¹⁾						Commercial						Other asset-backed						Total
	Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized
	Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost
	(Dollars In Millions)																														(Dollars In Millions)
Rating $
AAA	$	2,264.2		$	2,268.0		$	—		$	—		$	1,258.2		$	1,271.1		$	591.5		$	590.5		$	4,113.9		$	4,129.6		$	2,900.5		$	2,930.7		$	—		$	—		$	1,398.8		$	1,427.2		$	533.3		$	536.3		$	4,832.6		$	4,894.2
AA	1.4			1.4			—			—			522.9			533.6			158.5			150.1			682.8			685.1			2.9			2.9			0.2			0.2			543.1			562.7			209.8			207.2			756.0			773.0
A	1.1			1.1			15.9			15.9			252.2			253.9			512.9			508.6			782.1			779.5			837.9			846.6			19.0			19.0			503.5			509.9			671.1			687.5			2,031.5			2,063.0
BBB	1.5			1.5			1.5			1.5			3.3			3.3			50.2			49.6			56.5			55.9			3.7			3.7			3.1			3.1			38.6			38.5			99.5			100.4			144.9			145.7
Below	92.5			92.1			208.8			209.0			—			—			74.5			73.7			375.8			374.8			22.4			22.4			63.7			63.7			—			—			38.1			38.6			124.2			124.7
	$	2,360.7		$	2,364.1		$	226.2		$	226.4		$	2,036.6		$	2,061.9		$	1,387.6		$	1,372.5		$	6,011.1		$	6,024.9		$	3,767.4		$	3,806.3		$	86.0		$	86.0		$	2,484.0		$	2,538.3		$	1,551.8		$	1,570.0		$	7,889.2		$	8,000.6

Rating %
AAA	95.9		%	95.9		%	—		%	—		%	61.7		%	61.6		%	42.6		%	43.0		%	68.4		%	68.5		%	77.0		%	77.0		%	—		%	—		%	56.2		%	56.2		%	34.4		%	34.1		%	61.3		%	61.1		%
AA	0.1			0.1			—			—			25.7			25.9			11.4			10.9			11.4			11.4			0.1			0.1			0.3			0.3			21.9			22.2			13.5			13.2			9.6			9.7
A	—			—			7.0			7.0			12.4			12.3			37.0			37.1			13.0			12.9			22.2			22.2			22.1			22.1			20.3			20.1			43.2			43.8			25.7			25.8
BBB	0.1			0.1			0.6			0.6			0.2			0.2			3.6			3.6			0.9			0.9			0.1			0.1			3.6			3.6			1.6			1.5			6.4			6.4			1.8			1.8
Below	3.9			3.9			92.4			92.4			—			—			5.4			5.4			6.3			6.3			0.6			0.6			74.0			74.0			—			—			2.5			2.5			1.6			1.6
	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

Estimated Fair Value of Security by Year of Security Origination
2013 and prior	$	897.4		$	898.8		$	226.2		$	226.4		$	1,025.2		$	1,039.4		$	761.2		$	752.4		$	2,910.0		$	2,917.0
2014	203.8			202.8			—			—			239.0			243.8			31.2			31.6			474.0			478.2
2014 and prior																															$	1,114.3		$	1,121.7		$	86.0		$	86.0		$	1,510.6		$	1,538.9		$	729.0		$	730.7		$	3,439.9		$	3,477.3
2015	456.4			458.4			—			—			213.7			211.9			29.4			28.7			699.5			699.0			579.1			586.5			—			—			298.7			303.1			64.4			66.2			942.2			955.8
2016	237.0			240.0			—			—			456.2			463.8			232.9			230.3			926.1			934.1			340.6			348.2			—			—			441.0			460.1			227.5			230.0			1,009.1			1,038.3
2017	566.1			564.1			—			—			102.5			103.0			332.9			329.5			1,001.5			996.6			666.6			689.1			—			—			123.0			126.4			406.1			415.5			1,195.7			1,231.0
2018																															1,066.8			1,060.8			—			—			110.7			109.8			124.8			127.6			1,302.3			1,298.2
Total	$	2,360.7		$	2,364.1		$	226.2		$	226.4		$	2,036.6		$	2,061.9		$	1,387.6		$	1,372.5		$	6,011.1		$	6,024.9		$	3,767.4		$	3,806.3		$	86.0		$	86.0		$	2,484.0		$	2,538.3		$	1,551.8		$	1,570.0		$	7,889.2		$	8,000.6

(1) Included in Residential Mortgage-Backed securities

The majority of our RMBS holdings as of March 31, ~~2018,~~2019, were super senior or senior bonds in the capital structure. Our total non-agency portfolio has a weighted-average life of ~~12.11~~13.91 years. The following table categorizes the weighted-average life for our non-agency portfolio, by category of material holdings, as of March 31, ~~2018:~~2019:



		Weighted-Average
Non-agency portfolio		Life
Prime		~~12.69~~13.94
Alt-A		~~3.31~~3.64
Sub-prime		~~3.21~~1.77

Mortgage Loans

We invest a portion of our investment portfolio in commercial mortgage loans. As of March 31, ~~2018,~~2019, our mortgage loan holdings were approximately ~~$6.8~~$7.7 billion. We have specialized in making loans on either credit-oriented commercial properties or credit-anchored strip shopping centers and apartments. Our underwriting procedures relative to our commercial loan portfolio are based, in our view, on a conservative and disciplined approach. We concentrate on a small number of commercial real estate asset types associated with the necessities of life (retail, multi-family, senior living, professional office buildings, and warehouses). We believe that these asset types tend to weather economic downturns better than other commercial asset classes in which we have chosen not to participate. We believe this disciplined approach has helped to maintain a relatively low delinquency and foreclosure rate throughout our history. The majority of our mortgage loans portfolio was underwritten and funded by us. From time to time, we may acquire loans in conjunction with an acquisition.

Our commercial mortgage loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, and net of ~~valuation allowances.~~an allowance for loan losses. Interest income is accrued on the principal amount of the loan based on the loan’s contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts, and prepayment fees are reported in net investment income.

Certain of the mortgage loans have call options that occur within the next 1210 years. However, if interest rates were to significantly increase, we may be unable to exercise the call options on our existing mortgage loans commensurate with the significantly increased market rates. As of March 31, ~~2018,~~2019, assuming the loans are called at their next call dates, approximately ~~$143.6~~$77.7 million of principal would become due for the remainder of ~~2018, $873.1~~2019, $837.4 million in ~~2019~~2020 through ~~2023, $105.0~~2024, and $60.6 million in ~~2024~~2025 through ~~2028, and $2.0 million thereafter.~~2029.

We offer a type of commercial mortgage loan under which we will permit a loan-to-value ratio of up to 85% in exchange for a participating interest in the cash flows from the underlying real estate. As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, approximately ~~$672.1~~$727.8 million and ~~$669.3~~$700.6 million, respectively, of our total mortgage loans principal balance have this participation feature. Cash flows received as a result of this participation feature are recorded as interest income. During the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, we recognized ~~$7.3~~$2.2 million, and ~~$6.8~~$7.3 million, respectively, of participating mortgage loan income.

The following table includes a breakdown of our commercial mortgage loan portfolio:



Commercial Mortgage Loan Portfolio Profile
	As of March 31, 2019		As of December 31, 2018
	(Dollars In Thousands)
Total number of loans	1,709		1,732
Total amortized cost	7,701,465		7,724,733
Total unpaid principal balance	7,588,296		7,602,389
Current allowance for loan losses	(1,946	)	(1,296	)
Average loan size	4,440		4,389

Weighted-average amortization	22.5 years		22.5 years
Weighted-average coupon	4.60	%	4.60	%
Weighted-average LTV	55.39	%	55.39	%
Weighted-average debt coverage ratio	1.55		1.55

We record mortgage loans net of an allowance for credit losses. This allowance is calculated through analysis of specific loans that have indicators of potential impairment based on current information and events. As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, there were ~~no allowances~~allowance for mortgage loan credit ~~losses.~~ losses of $1.9 million and $1.3 million, respectively.

While our mortgage loans do not have quoted market values, as of March 31, ~~2018,~~2019, we estimated the fair value of our mortgage loans to be ~~$6.6~~$7.6 billion (using an internal fair value model which calculates the value of most loans by using the ~~loan's~~loan’s discounted cash flows to the ~~loan's~~loan’s call or maturity date), which was approximately ~~2.92%~~1.0% less than the amortized cost, less any related loan loss reserve.

At the time of origination, our mortgage lending criteria targets that the loan-to-value ratio on each mortgage is 75% or less. We target projected rental payments from credit anchors (i.e., excluding rental payments from smaller local tenants) of 70% of the property’s projected operating expenses and debt service.

As of March 31, ~~2018, none of the Company's~~2019, our invested assets consisted of an immaterial amount of nonperforming mortgage loans, restructured mortgage loans, or mortgage loans that were foreclosed and were converted to real estate properties. For all mortgage loans, the impact of troubled debt restructurings is reflected in our investment balance and in the allowance for mortgage loan credit losses. During the three months ended March 31, 2018, we recognized no troubled debt restructurings and we did not identify any loans whose principal was permanently impaired.

Our mortgage loan portfolio consists of two categories of loans: 1) those not subject to a pooling and servicing agreement and 2) those subject to a contractual pooling and servicing agreement. As of March 31, 2018, the Company did not have mortgage loans not subject to a pooling and servicing agreement that were nonperforming mortgage loans, restructured, or mortgage loans that were foreclosed and were converted to real estate properties. We did not foreclose on any nonperforming loans not subject to a pooling and servicing agreement during the three months ended March 31, 2018.

As of March 31, 2018, none of the loans subject to a pooling and servicing agreement were nonperforming or restructured. We did not foreclose on any nonperforming loans subject to a pooling and servicing agreement during the three months ended March 31, 2018.

We do not expect these investments to adversely affect our liquidity or ability to maintain proper matching of assets and liabilities. During the three months ended March 31, 2019, two mortgage loan transactions occurred that were accounted for as troubled debt restructurings as a result of granting concessions to a borrower. These concessions were each the result of an agreement between the creditor and the debtor and resulted in the company accepting an amount less than the outstanding principal balance of $2.7 million in satisfaction of the borrowers’ obligation. During the three months ended March 31, 2019, we did not recognize any mortgage loans that were foreclosed and were converted to real estate properties. We did not identify any loans whose principal was permanently impaired during the three months ended March 31, 2019.

It is our policy to cease to carry accrued interest on loans that are over 90 days delinquent. For loans less than 90 days delinquent, interest is accrued unless it is determined that the accrued interest is not collectible. If a loan becomes over 90 days delinquent, it is our general policy to initiate foreclosure proceedings unless a workout arrangement to bring the loan current is in place. For loans subject to a pooling and servicing agreement, there are certain additional restrictions and/or requirements related to workout proceedings, and as such, these loans may have different attributes and/or circumstances affecting the status of delinquency or categorization of those in nonperforming status.

Unrealized Gains and Losses — Available-for-Sale Securities

The information presented below relates to investments at a certain point in time and is not necessarily indicative of the status of the portfolio at any time after March 31, ~~2018,~~2019, the balance sheet date. Information about unrealized gains and losses is subject to rapidly changing conditions, including volatility of financial markets and changes in interest rates. Management considers a number of factors in determining if an unrealized loss is other-than-temporary, including the expected cash to be collected and the intent, likelihood, and/or ability to hold the security until recovery. Consistent with our long-standing practice, we do not utilize a “bright line test” to determine other-than-temporary impairments. On a quarterly basis, we perform an analysis on every security with an unrealized loss to determine if an other-than-temporary impairment has occurred. This analysis includes reviewing several

metrics including collateral, expected cash flows, ratings, and liquidity. Furthermore, since the timing of recognizing realized gains and losses is largely based on management’s decisions as to the timing and selection of investments to be sold, the tables and information provided below should be considered within the context of the overall unrealized gain/(loss) position of the portfolio. We had an overall net unrealized loss of ~~$1.1 billion,~~$589.7 million, prior to tax and the related impact of certain insurance assets and liabilities offsets, as of March 31, ~~2018,~~2019, and an overall net unrealized ~~gain~~loss of ~~$36.0 million~~$2.6 billion as of December 31, ~~2017.~~

2018.

For fixed maturity securities held that are in an unrealized loss position as of March 31, ~~2018,~~2019, the fair value, amortized cost, unrealized loss, and total time period that the security has been in an unrealized loss position are presented in the table below:


	Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		Unrealized Loss			% Unrealized Loss		Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		Unrealized Loss			% Unrealized Loss
	(Dollars In Thousands)													(Dollars In Thousands)
<= 90 days	$	9,939,975	33.8	%	$	10,173,366	32.8	%	$	(233,391	)	16.2	%	$	582,337	2.2	%	$	591,639	2.2	%	$	(9,302	)	0.8	%
>90 days but <= 180 days	5,207,611		17.6		5,366,018		17.3		(158,407		)	11.0		873,608		3.2		895,513		3.2		(21,905		)	1.6
>180 days but <= 270 days	391,672		1.3		408,208		1.3		(16,536		)	1.1		1,282,406		4.7		1,345,343		4.7		(62,937		)	4.6
>270 days but <= 1 year	122,114		0.4		126,703		0.4		(4,589		)	0.3		1,511,935		5.6		1,571,445		5.5		(59,510		)	4.4
>1 year but <= 2 years	6,447,678		21.8		6,799,375		21.9		(351,697		)	24.3		10,575,701		39.2		10,864,140		38.3		(288,439		)	21.2
>2 years but <= 3 years	605,113		2.0		666,698		2.2		(61,585		)	4.3		5,634,974		20.9		5,900,356		20.8		(265,382		)	19.5
>3 years but <= 4 years	6,836,490		23.1		7,454,304		24.1		(617,814		)	42.8		409,129		1.5		463,363		1.6		(54,234		)	4.0
>4 years but <= 5 years	—		—		—		—		—			—		6,139,986		22.7		6,736,809		23.7		(596,823		)	43.9
>5 years	—		—		—		—		—			—		—		—		—		—		—			—
Total	$	29,550,653	100.0	%	$	30,994,672	100.0	%	$	(1,444,019	)	100.0	%	$	27,010,076	100.0	%	$	28,368,608	100.0	%	$	(1,358,532	)	100.0	%

The range of maturity dates for securities in an unrealized loss position as of March 31, 2019, varies, with 23.6% maturing in less than 5 years, 12.7% maturing between 5 and 10 years, and 63.7% maturing after 10 years. The following table shows the credit rating of securities in an unrealized loss position as of March 31, 2019:



S&P or Equivalent	Fair		% Fair		Amortized		% Amortized		Unrealized			% Unrealized
Designation	Value		Value		Cost		Cost		Loss			Loss
	(Dollars In Thousands)
AAA/AA/A	$	14,878,062	55.0	%	$	15,376,778	54.2	%	$	(498,716	)	36.7	%
BBB	11,168,913		41.4		11,883,517		41.9		(714,604		)	52.6
Investment grade	26,046,975		96.4	%	27,260,295		96.1	%	(1,213,320		)	89.3	%
BB	561,208		2.1		616,946		2.2		(55,738		)	4.1
B	181,623		0.7		225,106		0.8		(43,483		)	3.2
CCC or lower	220,270		0.8		266,261		0.9		(45,991		)	3.4
Below investment grade	963,101		3.6	%	1,108,313		3.9	%	(145,212		)	10.7	%
Total	$	27,010,076	100.0	%	$	28,368,608	100.0	%	$	(1,358,532	)	100.0	%

As of March 31, ~~2018,~~2019, the Barclays Investment Grade Index was priced at ~~107~~113.6 bps versus a 10 year average of ~~173~~145.6 bps. Similarly, the Barclays High Yield Index was priced at ~~370~~414.4 bps versus a 10 year average of ~~642~~556.7 bps. As of March 31, ~~2018,~~2019, the five, ten, and thirty-year U.S. Treasury obligations were trading at levels of ~~2.6%~~2.2%, ~~2.7%~~2.4%, and ~~3.0%~~2.8%, as compared to 10 year averages of 1.7%, ~~2.6%~~2.5%, and ~~3.4%,~~3.3, respectively.

As of March 31, ~~2018, 93.4%~~2019, 89.3% of the unrealized loss was associated with securities that were rated investment grade. We have examined the performance of the underlying collateral and cash flows and expect that our investments will continue to perform in accordance with their contractual terms. Factors such as credit enhancements within the deal structures and the underlying collateral performance/characteristics support the recoverability of the investments. Based on the factors discussed, we do not consider these unrealized loss positions to be other-than-temporary. However, from time to time, we may sell securities in the ordinary course of managing our portfolio to meet diversification, credit quality, yield enhancement, asset/liability management, and liquidity requirements.

Expectations that investments in mortgage-backed and asset-backed securities will continue to perform in accordance with their contractual terms are based on assumptions that a market participant would use in determining the current fair value. It is reasonably possible that the underlying collateral of these investments will perform worse than current market expectations and that such an event may lead to adverse changes in the cash flows on our holdings of these types of securities. This could lead to potential future write-downs within our portfolio of mortgage-backed and asset-backed securities. Expectations that our investments in corporate securities and/or debt obligations will continue to perform in accordance with their contractual terms are based on evidence gathered through our normal credit surveillance process. Although we do not anticipate such events, it is reasonably possible that issuers of our investments in corporate securities will perform worse than current expectations. Such events may lead us to recognize potential future write-downs within our portfolio of corporate securities. It is also possible that such unanticipated

events would lead us to dispose of those certain holdings and recognize the effects of any such market movements in our financial statements.

~~As of March 31, 2018, there were estimated gross unrealized losses~~ ~~of $3.2 million related to our mortgage-backed securities collateralized by Alt-A mortgage loans.~~ Gross unrealized losses in our securities collateralized by Alt-A residential mortgage loans as of March 31, 2018, were primarily the result of continued widening spreads, representing marketplace uncertainty arising from higher defaults in Alt-A residential mortgage loans and rating agency downgrades of securities collateralized by Alt-A residential mortgage loans.

We have no material concentrations of issuers or guarantors of fixed maturity securities. The industry segment composition of all securities in an unrealized loss position held as of March 31, 2018, is presented in the following table:

Fair
Value

% Fair
Value

Amortized
Cost

% Amortized
Cost

Unrealized
Loss

% Unrealized
Loss
(Dollars In Thousands)
Banking $ 2,928,357
9.9 % $ 3,013,567
9.8 % $ (85,210 ) 5.9 %
Other finance 37,275
0.1
40,361
0.1
(3,086 ) 0.2
Electric utility 3,358,549
11.5
3,592,299
11.6
(233,750 ) 16.2
Energy 2,307,388
7.8
2,423,585
7.8
(116,197 ) 8.0
Natural gas 614,596
2.1
652,025
2.1
(37,429 ) 2.6
Insurance 2,841,971
9.6
2,990,448
9.6
(148,477 ) 10.3
Communications 1,405,429
4.8
1,513,078
4.9
(107,649 ) 7.5
Basic industrial 999,869
3.4
1,055,087
3.4
(55,218 ) 3.8
Consumer noncyclical 2,938,886
9.9
3,097,456
10.0
(158,570 ) 11.0
Consumer cyclical 857,433
2.9
903,586
2.9
(46,153 ) 3.2
Finance companies 72,642
0.2
76,040
0.2
(3,398 ) 0.2
Capital goods 1,509,374
5.1
1,581,897
5.1
(72,523 ) 5.0
Transportation 1,021,678
3.5
1,074,082
3.5
(52,404 ) 3.6
Other industrial 189,392
0.6
203,821
0.7
(14,429 ) 1.0
Brokerage 628,657
2.1
646,279
2.1
(17,622 ) 1.2
Technology 1,011,003
3.4
1,049,908
3.4
(38,905 ) 2.7
Real estate 29,836
0.1
30,458
0.1
(622 ) —
Other utility 45,973
0.2
47,257
0.2
(1,284 ) 0.1
Commercial mortgage-backed securities 1,741,151
5.9
1,799,846
5.8
(58,695 ) 4.1
Other asset-backed securities 273,757
0.9
283,410
0.9
(9,653 ) 0.7
Residential mortgage-backed non-agency securities 1,280,462
4.3
1,313,164
4.2
(32,702 ) 2.3
Residential mortgage-backed agency securities 541,196
1.8
556,125
1.8
(14,929 ) 1.0
U.S. government-related securities 1,200,197
4.1
1,250,198
4.0
(50,001 ) 3.5
Other government-related securities 202,472
0.7
214,098
0.7
(11,626 ) 0.8
States, municipals, and political divisions 1,513,110
5.1
1,586,597
5.1
(73,487 ) 5.1
Total $ 29,550,653
100.0 % $ 30,994,672
100.0 % $ (1,444,019 ) 100.0 %

We have no material concentrations of issuers or guarantors of fixed maturity securities. The industry segment composition of all securities in an unrealized loss position held as of December 31, 2017, is presented in the following table:

Fair
Value

% Fair
Value

Amortized
Cost

% Amortized
Cost

Unrealized
Loss

% Unrealized
Loss
(Dollars In Thousands)
Banking $ 1,733,309
8.0 % $ 1,758,549
7.9 % $ (25,240 ) 3.7 %
Other finance 54,454
0.3
58,198
0.3
(3,744 ) 0.5
Electric utility 3,111,719
14.3
3,242,952
14.5
(131,233 ) 19.2
Energy 1,397,312
6.4
1,458,690
6.5
(61,378 ) 9.0
Natural gas 604,431
2.8
624,203
2.8
(19,772 ) 2.9
Insurance 1,697,233
7.8
1,743,140
7.8
(45,907 ) 6.7
Communications 1,238,082
5.7
1,303,264
5.8
(65,182 ) 9.6
Basic industrial 581,249
2.7
603,248
2.7
(21,999 ) 3.2
Consumer noncyclical 2,016,112
9.3
2,077,552
9.3
(61,440 ) 9.0
Consumer cyclical 630,915
2.9
651,415
2.9
(20,500 ) 3.0
Finance companies 39,710
0.2
40,581
0.2
(871 ) 0.1
Capital goods 1,121,919
5.2
1,146,545
5.1
(24,626 ) 3.6
Transportation 791,776
3.6
812,358
3.6
(20,582 ) 3.0
Other industrial 174,797
0.8
185,701
0.8
(10,904 ) 1.6
Brokerage 380,331
1.8
384,860
1.7
(4,529 ) 0.7
Technology 576,855
2.7
598,112
2.7
(21,257 ) 3.1
Real estate 43,096
0.2
43,610
0.2
(514 ) 0.1
Other utility 46,731
0.1
47,514
0.2
(783 ) 0.3
Commercial mortgage-backed securities 1,553,928
7.2
1,584,114
7.1
(30,186 ) 4.4
Other asset-backed securities 220,822
1.0
226,586
1.0
(5,764 ) 0.8
Residential mortgage-backed non-agency securities 822,794
3.8
838,846
3.7
(16,052 ) 2.4
Residential mortgage-backed agency securities 360,025
1.7
367,006
1.6
(6,981 ) 1.0
U.S. government-related securities 1,166,342
5.4
1,198,519
5.4
(32,177 ) 4.7
Other government-related securities 140,124
0.6
145,071
0.6
(4,947 ) 0.7
States, municipals, and political divisions 1,198,015
5.5
1,243,628
5.6
(45,613 ) 6.7
Total $ 21,702,081
100.0 % $ 22,384,262
100.0 % $ (682,181 ) 100.0 %

The range of maturity dates for securities in an unrealized loss position as of March 31, 2018, varies, with 22.9% maturing in less than 5 years, 18.2% maturing between 5 and 10 years, and 58.9% maturing after 10 years. The following table shows the credit rating of securities in an unrealized loss position as of March 31, 2018:

S&P or Equivalent Fair % Fair Amortized % Amortized Unrealized % Unrealized
Designation Value Value Cost Cost Loss Loss
(Dollars In Thousands)
AAA/AA/A $ 17,442,833
59.0 % $ 18,217,557
58.8 % $ (774,724 ) 53.7 %
BBB 11,312,582
38.4
11,885,322
38.3
(572,740 ) 39.7
Investment grade 28,755,415
97.4 % 30,102,879
97.1 % (1,347,464 ) 93.4 %
BB 480,529
1.6
525,907
1.7
(45,378 ) 3.1
B 185,318
0.6
218,636
0.7
(33,318 ) 2.3
CCC or lower 129,391
0.4
147,250
0.5
(17,859 ) 1.2
Below investment grade 795,238
2.6 % 891,793
2.9 % (96,555 ) 6.6 %
Total $ 29,550,653
100.0 % $ 30,994,672
100.0 % $ (1,444,019 ) 100.0 %

As of March 31, ~~2018,~~2019, we held a total of ~~2,428~~2,473 positions that were in an unrealized loss position. Included in that amount were 94124 positions of below investment grade securities with a fair value of ~~$795.2~~$963.1 million that were in an unrealized loss position. Total unrealized losses related to below investment grade securities were ~~$96.6~~$145.2 million, ~~$70.8~~$135.1 million of which had been in an unrealized loss position for more than twelve months. Below investment grade securities in an unrealized loss position were ~~1.5%~~1.4% of invested assets.

As of March 31, ~~2018,~~2019, securities in an unrealized loss position that were rated as below investment grade represented ~~2.6%~~3.6% of the total fair value and ~~6.6%~~10.7% of the total unrealized loss. We have the ability and intent to hold these securities to maturity. After a review of each security and its expected cash flows, we believe the decline in ~~market~~fair value to be temporary.

The following table includes the fair value, amortized cost, unrealized loss, and total time period that the security has been in an unrealized loss position for all below investment grade securities as of March 31, ~~2018:~~2019:


	Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		Unrealized Loss			% Unrealized Loss		Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		Unrealized Loss			% Unrealized Loss
	(Dollars In Thousands)													(Dollars In Thousands)
<= 90 days	$	227,428	28.6	%	$	234,456	26.3	%	$	(7,028	)	29.5	%	$	38,364	4.0	%	$	39,849	3.5	%	$	(1,485	)	0.9	%
>90 days but <= 180 days	128,478		16.2		139,348		15.6		(10,870		)	14.9		36,015		3.7		37,136		3.4		(1,121		)	0.8
>180 days but <= 270 days	50,109		6.3		57,246		6.4		(7,137		)	6.1		22,708		2.4		25,223		2.3		(2,515		)	1.7
>270 days but <= 1 year	9,720		1.2		10,473		1.2		(753		)	1.1		102,273		10.6		107,299		9.7		(5,026		)	3.5
>1 year but <= 2 years	31,900		4.0		35,655		4.0		(3,755		)	3.8		292,485		30.4		317,745		28.7		(25,260		)	17.4
>2 years but <= 3 years	103,166		13.0		124,674		14.0		(21,508		)	13.4		116,937		12.1		132,155		11.9		(15,218		)	10.5
>3 years but <= 4 years	244,437		30.7		289,941		32.5		(45,504		)	31.2		135,805		14.1		169,294		15.3		(33,489		)	23.1
>4 years but <= 5 years	—		—		—		—		—			—		218,514		22.7		279,612		25.2		(61,098		)	42.1
>5 years	—		—		—		—		—			—		—				—				—			—
Total	$	795,238	100.0	%	$	891,793	100.0	%	$	(96,555	)	100.0	%	$	963,101	100.0	%	$	1,108,313	100.0	%	$	(145,212	)	100.0	%



	Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		Unrealized Loss			% Unrealized Loss
	(Dollars In Thousands)
Banking	$	2,521,199	9.3	%	$	2,574,714	9.2	%	$	(53,515	)	4.1	%
Other finance	42,713		0.2		46,607		0.2		(3,894		)	0.3
Electric utility	3,249,579		12.0		3,469,184		12.2		(219,605		)	16.2
Energy	1,915,476		7.1		2,042,988		7.2		(127,512		)	9.4
Natural gas	599,048		2.2		633,563		2.2		(34,515		)	2.5
Insurance	2,731,458		10.1		2,874,364		10.1		(142,906		)	10.5
Communications	1,275,030		4.7		1,380,615		4.9		(105,585		)	7.8
Basic industrial	800,044		3.0		856,303		3.0		(56,259		)	4.1
Consumer noncyclical	2,849,123		10.5		3,076,653		10.8		(227,530		)	16.7
Consumer cyclical	952,356		3.5		1,009,022		3.6		(56,666		)	4.2
Finance companies	52,618		0.2		57,018		0.2		(4,400		)	0.3
Capital goods	1,564,445		5.8		1,636,488		5.8		(72,043		)	5.3
Transportation	933,789		3.5		985,418		3.5		(51,629		)	3.8
Other industrial	171,689		0.6		177,479		0.6		(5,790		)	0.4
Brokerage	587,578		2.2		607,885		2.1		(20,307		)	1.5
Technology	757,863		2.8		792,719		2.8		(34,856		)	2.6
Real estate	23,753		0.1		23,868		0.1		(115		)	—
Other utility	14,583		0.1		15,565		0.1		(982		)	0.1
Commercial mortgage-backed securities	1,531,112		5.7		1,558,955		5.5		(27,843		)	2.0
Other asset-backed securities	723,749		2.7		739,372		2.6		(15,623		)	1.1
Residential mortgage-backed non-agency securities	969,284		3.6		991,514		3.5		(22,230		)	1.6
Residential mortgage-backed agency securities	431,904		1.6		439,080		1.5		(7,176		)	0.5
U.S. government-related securities	1,089,694		4.0		1,120,106		3.9		(30,412		)	2.2
Other government-related securities	249,879		0.9		261,762		0.9		(11,883		)	0.9
States, municipals, and political divisions	972,110		3.6		997,366		3.5		(25,256		)	1.9
Total	$	27,010,076	100.0	%	$	28,368,608	100.0	%	$	(1,358,532	)	100.0	%

We have no material concentrations of issuers or guarantors of fixed maturity securities. The industry segment composition of all securities in an unrealized loss position held as of December 31, 2018, is presented in the following table:



	Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		Unrealized Loss			% Unrealized Loss
	(Dollars In Thousands)
Banking	$	4,446,658	10.9	%	$	4,653,309	10.8	%	$	(206,651	)	7.5	%
Other finance	106,041		0.3		111,260		0.3		(5,219		)	0.2
Electric utility	4,070,115		10.2		4,426,609		10.4		(356,494		)	13.0
Energy	3,380,552		8.5		3,679,048		8.6		(298,496		)	10.9
Natural gas	723,330		1.8		782,418		1.8		(59,088		)	2.1
Insurance	3,420,321		8.6		3,699,793		8.7		(279,472		)	10.2
Communications	1,834,029		4.6		2,030,590		4.8		(196,561		)	7.1
Basic industrial	1,393,953		3.5		1,509,059		3.5		(115,106		)	4.2
Consumer noncyclical	4,256,258		10.7		4,629,877		10.8		(373,619		)	13.6
Consumer cyclical	1,391,705		3.5		1,496,425		3.5		(104,720		)	3.8
Finance companies	143,679		0.4		154,974		0.4		(11,295		)	0.4
Capital goods	2,258,807		5.7		2,406,722		5.6		(147,915		)	5.4
Transportation	1,394,137		3.5		1,489,670		3.5		(95,533		)	3.5
Other industrial	191,055		0.5		203,221		0.5		(12,166		)	0.4
Brokerage	807,667		2.0		848,231		2.0		(40,564		)	1.5
Technology	1,359,020		3.4		1,449,903		3.4		(90,883		)	3.3
Real estate	73,098		0.2		74,323		0.2		(1,225		)	—
Other utility	18,442		—		20,047		—		(1,605		)	—
Commercial mortgage-backed securities	1,851,821		4.6		1,909,922		4.5		(58,101		)	2.1
Other asset-backed securities	836,141		2.1		871,539		2.0		(35,398		)	1.3
Residential mortgage-backed non-agency securities	1,749,478		4.4		1,798,817		4.2		(49,339		)	1.8
Residential mortgage-backed agency securities	539,896		1.4		552,753		1.3		(12,857		)	0.5
U.S. government-related securities	1,215,944		3.0		1,261,666		3.0		(45,722		)	1.7
Other government-related securities	357,770		0.9		391,620		0.9		(33,850		)	1.2
States, municipals, and political divisions	2,133,413		5.3		2,252,315		5.3		(118,902		)	4.3
Total	$	39,953,330	100.0	%	$	42,704,111	100.0	%	$	(2,750,781	)	100.0	%

Risk Management and Impairment Review

We monitor the overall credit quality of our portfolio within established guidelines. The following table includes our available-for-sale fixed maturities by credit rating as of March 31, ~~2018:~~2019:


			Percent of				Percent of
Rating	Fair Value		Fair Value		Fair Value		Fair Value
	(Dollars In Thousands)				(Dollars In Thousands)
AAA	$	5,498,752	14.7	%	$	6,844,345	13.3	%
AA	3,208,662		8.6		5,997,527		11.7
A	12,474,244		33.3		17,777,769		34.7
BBB	14,433,009		38.5		19,049,406		37.1
Investment grade	35,614,667		95.1		49,669,047		96.8
BB	1,277,498		3.4		1,088,982		2.1
B	289,596		0.8		257,388		0.5
CCC or lower	254,647		0.7		268,474		0.6
Below investment grade	1,821,741		4.9		1,614,844		3.2
Total	$	37,436,408	100.0	%	$	51,283,891	100.0	%

Not included in the table above are $2.4 billion of investment grade and ~~$217.2~~$120.7 million of below investment grade fixed maturities classified as trading securities and ~~$2.7~~$2.6 billion of fixed maturities classified as held-to-maturity.

Limiting bond exposure to any creditor group is another way we manage credit risk. We held no credit default swaps on the positions listed below as of March 31, ~~2018.~~2019. The following table summarizes our ten largest fixed maturity exposures to an individual creditor group as of March 31, ~~2018:~~2019:

Fair Value��of
Funded Unfunded Total
Creditor Securities Exposures Fair Value
(Dollars In Millions)
Federal Home Loan Bank $ 236.6
$ —
$ 236.6
Southern Co. 205.8
—
205.8
AT&T, Inc. 205.0
—
205.0
Duke Energy Corp. 202.9
—
202.9
Morgan Stanley 192.5
—
192.5
Exelon Corp. 188.1
—
188.1
Goldman Sachs Group Inc. 187.9
—
187.9
Wells Fargo & Co. 185.4
1.6
187.0
Anheuser-Busch Inbev. 185.7
—
185.7
Bank of America Corp. 181.1
0.5
181.6
Total $ 1,971.0
$ 2.1
$ 1,973.1



	Fair Value of
	Funded		Unfunded		Total
Creditor	Securities		Exposures		Fair Value
	(Dollars In Millions)
Federal Home Loan Bank	$	327.3	$	—	$	327.3
Berkshire Hathaway Inc	249.3		—		249.3
AT&T Inc	248.4		—		248.4
Comcast Corp	232.6		—		232.6
Duke Energy Corp	230.0		—		230.0
UnitedHealth Group Inc	229.0		—		229.0
Wells Fargo & Co	220.3		—		220.3
JPMorgan Chase & Co	215.7		1.6		217.3
HSBC Holdings Plc	216.8		0.5		217.3
Exelon Corp	215.7		—		215.7
Total	$	2,385.1	$	2.1	$	2,387.2

Determining whether a decline in the current fair value of invested assets is an other-than-temporary decline in value is both objective and subjective, and can involve a variety of assumptions and estimates, particularly for investments that are not actively traded in established markets. We review our positions on a monthly basis for possible credit concerns and review our current exposure, credit enhancement, and delinquency experience.

Management considers a number of factors when determining the impairment status of individual securities. These include the economic condition of various industry segments and geographic locations and other areas of identified risks. Since it is possible for the impairment of one investment to affect other investments, we engage in ongoing risk management to safeguard against and limit any further risk to our investment portfolio. Special attention is given to correlative risks within specific industries, related parties, and business markets.

For certain securitized financial assets with contractual cash flows, including RMBS, CMBS, and other asset-backed securities (collectively referred to as asset-backed securities or “ABS”), GAAP requires us to periodically update our best estimate of cash flows over the life of the security. If the fair value of a securitized financial asset is less than its cost or amortized cost and there has been a decrease in the present value of the expected cash flows since the last revised estimate, considering both timing and amount, an other-than-temporary impairment charge is recognized. Estimating future cash flows is a quantitative and qualitative process that incorporates information received from third party sources along with certain internal assumptions and judgments regarding the future performance of the underlying collateral. Projections of expected future cash flows may change based upon

new information regarding the performance of the underlying collateral. In addition, we consider our intent and ability to retain a temporarily depressed security until recovery.

Securities in an unrealized loss position are reviewed at least quarterly to determine if an other-than-temporary impairment is present based on certain quantitative and qualitative factors. We consider a number of factors in determining whether the impairment is other-than-temporary. These include, but are not limited to: 1) actions taken by rating agencies, 2) default by the issuer, 3) the significance of the decline, 4) an assessment of our intent to sell the security (including a more likely than not assessment of whether we will be required to sell the security) before recovering the security’s amortized cost, 5) the time period during which the decline has occurred, 6) an economic analysis of the issuer’s industry, and 7) the financial strength, liquidity, and recoverability of the issuer. Management performs a security-by-security review each quarter in evaluating the need for any other-than-temporary impairments. Although no set formula is used in this process, the investment performance, collateral position, and continued viability of the issuer are significant measures considered, along with an analysis regarding our expectations for recovery of the security’s entire amortized cost basis through the receipt of future cash flows. Based on our analysis, for the three months ended March 31, ~~2018,~~2019, we recognized approximately ~~$3.6~~$3.1 million of credit related impairments on investment securities in an unrealized loss position that were other-than-temporarily impaired resulting in a charge to earnings.

There are certain risks and uncertainties associated with determining whether declines in fair values are other-than-temporary. These include significant changes in general economic conditions and business markets, trends in certain industry segments, interest rate fluctuations, rating agency actions, changes in significant accounting estimates and assumptions, commission of fraud, and legislative actions. We continuously monitor these factors as they relate to the investment portfolio in determining the status of each investment.

We have deposits with certain financial institutions which exceed federally insured limits. We have reviewed the creditworthiness of these financial institutions and believe that there is minimal risk of a material loss.

Certain European countries have experienced varying degrees of financial stress, which could have a detrimental impact on regional or global economic conditions and on sovereign and non-sovereign obligations. The chart shown below includes our non-sovereign fair value exposures in these countries as of March 31, ~~2018.~~2019. As of March 31, ~~2018,~~2019, we had no material unfunded exposure and had no material direct sovereign exposure.


					Total Gross						Total Gross
	Non-sovereign Debt				Funded		Non-sovereign Debt				Funded
Financial Instrument and Country	Financial		Non-financial		Exposure		Financial		Non-financial		Exposure
	(Dollars In Millions)						(Dollars In Millions)
Securities:
United Kingdom	$	601.3	$	793.1	$	1,394.4	$	862.3	$	1,033.3	$	1,895.6
France							358.8		412.8		771.6
Netherlands	217.1		234.5		451.6		304.0		294.8		598.8
Germany							117.8		467.2		585.0
Switzerland	233.7		98.9		332.6		345.7		196.9		542.6
France	135.3		194.5		329.8
Germany	118.3		147.6		265.9
Spain	7.3		213.5		220.8		82.5		308.4		390.9
Belgium	—		181.1		181.1		—		176.2		176.2
Norway							4.1		145.1		149.2
Finland							146.5		—		146.5
Ireland							44.6		87.5		132.1
Italy							10.7		117.7		128.4
Luxembourg							—		68.4		68.4
Sweden	125.2		19.7		144.9		39.8		20.1		59.9
Norway	—		97.1		97.1
Ireland	15.1		43.3		58.4
Luxembourg	—		55.2		55.2
Italy	—		43.5		43.5
Denmark							38.4		—		38.4
Portugal							—		23.1		23.1
Total securities	1,453.3		2,122.0		3,575.3		2,355.2		3,351.5		5,706.7
Derivatives:
Germany	32.5		—		32.5		23.8		—		23.8
United Kingdom	22.7		—		22.7		17.9		—		17.9
Switzerland							7.3		—		7.3
France	11.6		—		11.6		1.1		—		1.1
Switzerland	2.5		—		2.5
Total derivatives	69.3		—		69.3		50.1		—		50.1
Total securities	$	1,522.6	$	2,122.0	$	3,644.6	$	2,405.3	$	3,351.5	$	5,756.8

Realized Gains and Losses

The following table sets forth realized investment gains and losses for the periods shown:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Fixed maturity gains - sales	$	8,049		$	10,738		$	7,870		$	8,049
Fixed maturity losses - sales	(5,266		)	(1,248		)	(2,753		)	(5,266		)
Equity gains and losses	(8,786		)	(9		)	30,717			(8,786		)
Impairments on fixed maturity securities	(3,645		)	(5,201		)	(3,142		)	(3,645		)
Impairments on equity securities	—			(2,630		)	—			—
Modco trading portfolio	(84,709		)	18,552			94,902			(84,709		)
Other	3,113			(5,192		)	(1,146		)	3,113
Total realized gains (losses) - investments	$	(91,244	)	$	15,010		126,448			(91,244		)
Derivatives related to VA contracts:
Interest rate futures - VA	$	(16,892	)	$	3,448
Equity futures - VA	(6,428		)	(30,817		)
Currency futures - VA	(7,583		)	(6,256		)
Equity options - VA	12,016			(40,185		)
Interest rate swaptions - VA	(14		)	(1,469		)
Interest rate swaps - VA	(63,710		)	(8,957		)
Total return swaps - VA	6,490			—
Interest rate futures							(6,022		)	(16,892		)
Equity futures							29,738			(6,428		)
Currency futures							2,244			(7,583		)
Equity options							(71,695		)	12,016
Interest rate swaptions							—			(14		)
Interest rate swaps							74,861			(63,710		)
Total return swaps							(40,027		)	6,490
Embedded derivative - GLWB	56,292			33,632			(19,626		)	56,292
Total derivatives related to VA contracts	(19,829		)	(50,604		)	(30,527		)	(19,829		)
Derivatives related to FIA contracts:
Embedded derivative - FIA	11,330			(12,411		)
Equity futures - FIA	(161		)	297
Equity options - FIA	(4,669		)	10,700
Embedded derivative							(38,814		)	11,330
Equity futures							(429		)	(161		)
Equity options							42,050			(4,669		)
Total derivatives related to FIA contracts	6,500			(1,414		)	2,807			6,500
Derivatives related to IUL contracts:
Embedded derivative - IUL	9,884			(2,090		)
Equity futures - IUL	136			(799		)
Equity options - IUL	(1,250		)	2,891
Embedded derivative							(13,370		)	9,884
Equity futures							171			136
Equity options							6,180			(1,250		)
Total derivatives related to IUL contracts	8,770			2			(7,019		)	8,770
Embedded derivative - Modco reinsurance treaties	82,658			(17,865		)	(84,998		)	82,658
Other derivatives	(40		)	3			66			(40		)
Total realized gains (losses) - derivatives	$	78,059		$	(69,878	)	(119,671		)	78,059
Total realized investment gains (losses)							$	6,777		$	(13,185	)

Realized gains and losses on investments reflect portfolio management activities designed to maintain proper matching of assets and liabilities and to enhance long-term investment portfolio performance. The change in net realized investment gains (losses), excluding impairments and Modco trading portfolio activity during the three months ended March 31, ~~2018,~~2019, primarily reflects the normal operation of our asset/liability program within the context of the changing interest rate and spread ~~environment, as well as tax planning strategies designed to utilize capital loss carryforwards.~~environment.

Realized losses are comprised of other-than-temporary impairments and actual sales of investments. These other-than-temporary impairments resulted from our analysis of circumstances and our belief that credit events, loss severity, changes in credit enhancement, and/or other adverse conditions of the respective issuers have caused, or will lead to, a deficiency in the contractual cash flows related to these investments. These other-than-temporary impairments are presented in the chart below:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Alt-A MBS	$	—		$	—
Other MBS	(31		)	(5		)	$	(43	)	$	(31	)
Corporate securities	(3,614		)	(5,196		)	(3,099		)	(3,614		)
Equities	—			(2,630		)	—			—
Other	—			—			—			—
Total	$	(3,645	)	$	(7,831	)	$	(3,142	)	$	(3,645	)

As previously discussed, management considers several factors when determining other-than-temporary impairments. Although we purchase securities with the intent to hold them until maturity, we may change our position as a result of a change in circumstances. Any such decision is consistent with our classification of all but a specific portion of our investment portfolio as available-for-sale. For the three months ended March 31, ~~2018,~~2019, we sold securities in an unrealized loss position with a fair value o~~f $57.0~~of $178.0 million. For such securities, the proceeds, realized loss, and total time period that the security had been in an unrealized loss position are presented in the table below:


	Proceeds		% Proceeds		Realized Loss			% Realized Loss		Proceeds		% Proceeds		Realized Loss			% Realized Loss
	(Dollars In Thousands)									(Dollars In Thousands)
<= 90 days	$	8,098	14.2	%	$	(934	)	17.7	%	$	160,870	90.4	%	$	(1,920	)	69.7	%
>90 days but <= 180 days	47,721		83.7		(4,181		)	79.4		—		—		—			—
>180 days but <= 270 days	—		—		—			—		—		—		—			—
>270 days but <= 1 year	—		—		—			—		—		—		—			—
>1 year	1,165		2.1		(152		)	2.9		17,134		9.6		(833		)	30.3
Total	$	56,984	100.0	%	$	(5,267	)	100.0	%	$	178,004	100.0	%	$	(2,753	)	100.0	%

For the three months ended March 31, ~~2018,~~2019, we sold securities in an unrealized loss position with a fair value (proceeds) of ~~$57.0~~$178.0 million. The ~~losses~~loss realized on the sale of these securities ~~were $5.3~~was $2.8 million. We made the decision to exit these holdings in conjunction with our overall asset liability management process.

For the three months ended March 31, ~~2018,~~2019, we sold securities in an unrealized gain position with a fair value of ~~$142.1~~$648.9 million. The ~~gains~~gain realized on the sale of these securities ~~were $8.0~~was $7.9 million.

The $3.1 million of other realized gains recognized for the three months ended March 31, 2018, included $3.4 million of realized gains associated with our mortgage loan portfolio, partnership gains of $0.1 million, fixed asset losses of $0.1 million, and real estate losses of $0.2 million, respectively.

For the three months ended March 31, ~~2018,~~2019, net ~~losses~~gains of ~~$84.7~~$94.9 million ~~primarily~~ related to changes in fair value on our Modco trading portfolios were included in realized gains and losses. Of ~~the $84.7 million for the three months ended March 31, 2018,~~this amount, approximately ~~$2.5~~$1.4 million of ~~losses~~gains were realized through the sale of certain securities, which will be ~~returned to us from~~reimbursed by our reinsurance partners over time through the reinsurance settlement process for this block of business. The Modco embedded derivative associated with the trading portfolios had realized pre-tax ~~gains~~losses of ~~$82.7~~ $85.0 million, during the three months ended March 31, ~~2018.~~2019. The ~~gains during~~losses on the ~~three months ended March 31, 2018,~~embedded derivative were due to ~~the~~treasury yields decreasing and credit spreads ~~widening~~tightening.

Realized investment gains and ~~treasury yields increasing.~~losses related to equity securities is primarily driven by changes in fair value due to market fluctuations as changes in fair value of equity securities are recorded in net income.

Realized investment gains and losses related to derivatives represent changes in their fair value during the period and termination gains/(losses) on those derivatives that were closed during the period.

We use various derivative instruments to manage risks related to certain life insurance and annuity products. We can use these derivatives as economic hedges against risks inherent in the products. These risks have a direct impact on the cost of these products and are correlated with the equity markets, interest rates, foreign currency levels, and overall volatility. The hedged risks are recorded through the recognition of embedded derivatives associated with the products. These products include the GLWB rider associated with the variable annuity, fixed indexed annuity products as well as indexed universal life products. During the three months ended March 31, ~~2018,~~2019, we experienced net realized losses on derivatives related to VA contracts of approximately ~~$19.8 million~~. $30.5 million. These net losses on derivatives related to VA contracts were affected by capital market impacts, changes in ~~our~~the Company’s non-performance risk, and variations in actual sub-account fund performance from the indices included in our hedging program during the three months ended March 31, ~~2018.~~2019.

We also use various swaps and other types of derivatives to mitigate risk related to other exposures. ~~For~~These contracts generated gains of $0.1 million for the threemonths endedMarch 31, ~~2018, these contracts generated immaterial losses.~~2019.

LIQUIDITY AND CAPITAL RESOURCES

The Holding Company

Overview

Our primary sources of funding are dividends from our operating subsidiaries; revenues from investment management, data processing, legal, and management services rendered to subsidiaries; investment income; and external financing. These sources of cash support our general corporate needs including our common stock dividends and debt service. We ~~expect to use~~did not pay a ~~portion of our positive cash flow from operations to pay dividends to our parent, Dai-ichi Life. We paid a $140.0 million~~ dividend ~~during~~for the three months ended March 31, ~~2018, and do not expect to pay a dividend for the remainder of 2018.~~2019.

The states in which our insurance subsidiaries are domiciled impose certain restrictions on the insurance subsidiaries’ ability to pay us dividends. These restrictions are based in part on the prior year’s statutory income and/or surplus. Generally, these restrictions pose no short-term liquidity concerns. We plan to retain portions of the earnings of our insurance subsidiaries in those companies primarily to support their future growth.

Debt and other capital resources

Our primary sources of capital are through retained income from our operating subsidiaries, capital infusions from our parent, Dai-ichi Life, as well as our ability to access debt financing markets. Additionally, we have access to the Credit Facility discussed below.

On May 3, 2018, we amended the Credit Facility (as amended the “Credit Facility”). We have the ability to borrow under athe Credit Facility ~~arrangement~~ on an unsecured basis up to an aggregate principal amount of $1.0 billion. We have the right in certain circumstances to request that the commitment under the Credit Facility be increased up to a maximum principal amount of ~~$1.25~~$1.5 billion. We are not aware of any non-compliance with thethe financial debt covenants of the Credit Facility as of March 31, ~~2018.~~2019. There was anno outstanding balance o~~f $325.0 million bearing interest at a rate of LIBOR plus 1.00%~~ as of March 31, ~~2018.~~2019.

Liquidity

Liquidity refers to a company’s ability to generate adequate amounts of cash to meet its needs. We meet our liquidity requirements primarily through positive cash flows from our operating subsidiaries. Primary sources of cash from the operating subsidiaries are premiums, deposits for policyholder accounts, investment sales and maturities, and investment income. Primary uses of cash include benefit payments, withdrawals from policyholder accounts, investment purchases, policy acquisition costs, interest payments, and other operating expenses. We believe that we have sufficient liquidity to fund our cash needs under normal operating scenarios.

In the event of significant unanticipated cash requirements beyond our normal liquidity needs, we have additional sources of liquidity available depending on market conditions and the amount and timing of the liquidity need. These additional sources of liquidity include cash flows from operations, the sale of liquid assets, accessing our credit facility, and other sources described herein. Our decision to sell investment assets could be impacted by accounting rules, including rules relating to the likelihood of a requirement to sell securities before recovery of our cost basis. Under stressful market and economic conditions, liquidity may broadly deteriorate, which could negatively impact our ability to sell investment assets. If we require on short notice significant amounts of cash in excess of normal requirements, we may have difficulty selling investment assets in a timely manner, be forced to sell them for less than we otherwise would have been able to realize, or both.

The liquidity requirements of our regulated insurance subsidiaries primarily relate to the liabilities associated with their various insurance and investment products, operating expenses, and income taxes. Liabilities arising from insurance and investment products include the payment of policyholder benefits, as well as cash payments in connection with policy surrenders and withdrawals, policy loans, and obligations to redeem funding ~~agreements~~.agreements.

Our insurance subsidiaries maintain investment strategies intended to provide adequate funds to pay benefits and expected surrenders, withdrawals, loans, and redemption obligations without forced sales of investments. In addition, our insurance subsidiaries hold highly liquid, high-quality short-term investment securities and other liquid investment grade fixed maturity securities to fund our expected operating expenses, surrenders, and withdrawals. As of March 31, ~~2018,~~2019, our total cash and invested assets were ~~$53.5~~$68.3 billion. The life insurance subsidiaries were committed as of March 31, ~~2018,~~2019, to fund mortgage loans in the amount of ~~$699.6~~$871.6 million.

Our ~~positive~~ cash flows are used to fund an investment portfolio that provides for future benefit payments. We employ a formal asset/liability program to manage the cash flows of our investment portfolio relative to our long-term benefit obligations. The holding company held ~~$96.0~~$116.7 million of cash and short-term investments, and our subsidiaries held approximately ~~$610.5~~$859.2 million in cash and short-term investments as of March 31, ~~2018.~~2019.

The following chart includes the cash flows provided by or used in operating, investing, and financing activities for the following periods:


	For The Three Months Ended March 31,						For The Three Months Ended March 31,
	2018			2017			2019			2018
	(Dollars In Thousands)						(Dollars In Thousands)
Net cash (used in) provided by operating activities	$	(92,111	)	$	40,018
Net cash provided by (used in) investing activities	8,552			(359,771		)
Net cash used in operating activities							$	(11,459	)	$	(82,824	)
Net cash provided by investing activities							62,773			8,552
Net cash provided by financing activities	138,973			380,948			55,222			129,686
Total	$	55,414		$	61,195		$	106,536		$	55,414

For The Three Months Ended March 31, ~~2018~~2019 as compared to the Three Months Ended March 31, ~~2017~~2018

Net cash provided by (used in) ~~provided by~~ operating activities - Cash flows from operating activities are affected by the timing of premiums received, investment income, and benefits and expenses paid. Principal sources of cash inflows from operating activities include sales of our products and services as well as income from investments. We typically generate positive cash flows from operating activities, as premiums and policy fees collected from our insurance and investment products exceed benefit payments and redemptions, and we invest the excess. Due to the nature of our business and the fact that many of the products we sell produce financing and investing cash flows it is important to consider cash flows generated by investing and financing activities in conjunction with those generated by operating ~~activities~~.activities.

Net cash provided by ~~(used in)~~ investing activities - Changes in cash from investing activities primarily related to our investment portfolio.

Net cash provided by financing activities - Changes in cash from financing activities included ~~$238.8~~$311.3 million of outflows from secured financing liabilities for the three months ended March 31, ~~2018,~~2019, as compared to the ~~$29.5~~$238.8 million of ~~inflows~~outflows for the three months ended March 31, ~~2017~~2018 and ~~$372.3~~$401.1 million inflows of investment product and universal life net activity as compared to ~~$349.8~~$363.0 million in the prior year. Net activity related to the ~~credit facility~~Credit Facility resulted in ~~inflows~~outflows of ~~$163.6~~$9.3 million for the three months ended March 31, ~~2018,~~2019, as compared to ~~$156.5~~$163.6 million of inflows for three months ended March 31, ~~2017.~~2018. Net repayment of non-recourse funding obligations equaled $25.0 million during the three months ended March 31, 2019, as compared to $18.0 million during the three months ended March 31, ~~2018, as compared to $11.0 million during the three months ended March 31, 2017.~~2018. The Company ~~paid~~did not pay a dividend during the three month period ended March 31, ~~2018 of $140.0 million,~~2019, as compared to a dividend of ~~$143.8~~$140.0 million during the three months ended March 31, ~~2017.~~2018.

Through our subsidiaries, we are members of the FHLB of Cincinnati and the FHLB of New York. FHLB advances provide an attractive funding source for short-term borrowing and for the sale of funding agreements. Membership in the FHLB requires that we purchase FHLB capital stock based on a minimum requirement and a percentage of the dollar amount of advances outstanding. Our borrowing capacity is determined by criteria established by each respective bank. In addition, our obligations under the advances must be collateralized. We maintain control over any such pledged assets, including the right of substitution. As of March 31, ~~2018,~~2019, we had ~~$595.8 million~~$1.2 billion of funding agreement-related advances and accrued interest outstanding under the FHLB program.

While we anticipate that the cash flows of our operating subsidiaries will be sufficient to meet our investment commitments and operating cash needs in a normal credit market environment, we recognize that investment commitments scheduled to be funded may, from time to time, exceed the funds then available. Therefore, we have established repurchase agreement programs for certain of our insurance subsidiaries to provide liquidity when needed. We expect that the rate received on its investments will equal or exceed its borrowing rate. Under this program, we may, from time to time, sell an investment security at a specific price and agree to repurchase that security at another specified price at a later date. These borrowings are typically for a term less than 90 days. The ~~market~~fair value of securities to be repurchased is monitored and collateral levels are adjusted where appropriate to protect the counterparty against credit exposure. Cash received is invested in fixed maturity securities, and the agreements ~~provided~~provide for net settlement in the event of default or on termination of the agreements. As of March 31, ~~2018,~~2019, the fair value of securities pledged under the repurchase program was ~~$753.6~~$92.9 million and the repurchase obligation of ~~$665.0~~$89.3 million was included in our consolidated condensed balance sheets (at an average borrowing rate of ~~173~~254 basis points). During the three months ended March 31, 2019, the maximum balance outstanding at any one point in time related to these programs was $473.3 million. The average daily balance was $203.1 million (at an average borrowing rate of 249 basis points) during the three months ended March 31, 2019. As of December 31, 2018, the fair value of securities pledged under the repurchase program was $451.9 million and the repurchase obligation of $418.1 million was included in our consolidated condensed balance sheets (at an average borrowing rate of 245 basis points). During the year ended December 31, 2018, the maximum balance outstanding at any one point in time related to these programs was $885.0 million. The average daily balance was ~~$808.0~~$511.4 million (at an average borrowing rate of 149 basis points) during the three months ended March 31, 2018. As of December 31, 2017, the fair value of securities pledged under the repurchase program was $1,006.6 million and the repurchase obligation of $885.0 million was included in our consolidated condensed balance sheets (at an average borrowing rate of 142 basis points). During 2017, the maximum balance outstanding at any one point in time related to these programs was $988.5 million. The average daily balance was $624.7 million (at an average borrowing rate of 101184 basis points) during the year ended December 31, ~~2017.~~2018.

We participate in securities lending, primarily as an investment yield enhancement, whereby securities that are held as investments are loaned out to third parties for short periods of time. We require initial collateral of 102% of the market value of the loaned securities to be separately maintained. The loaned securities’ ~~market~~fair value is monitored on a daily basis. As of March 31, ~~2018,~~2019, securities with a market value of ~~$107.0~~$89.0 million were loaned under this program. As collateral for the loaned securities, we receive short-term investments, which are recorded in ~~“short-term investments”~~short-term investments with a corresponding liability recorded in ~~“other liabilities”~~other liabilities to account for its obligation to return the collateral. As of March 31, ~~2018,~~2019, the fair value of the collateral related to this program was ~~$113.9~~$94.7 million and we have an obligation to return ~~$113.9~~$94.7 million of collateral to the securities borrowers.

Statutory Capital

A life insurance company’s statutory capital is computed according to rules prescribed by the NAIC, as modified by state law. Generally speaking, other states in which a company does business defer to the interpretation of the domiciliary state with respect to NAIC rules, unless inconsistent with the other state’s regulations. Statutory accounting rules are different from GAAP and are intended to reflect a more conservative view, for example, requiring immediate expensing of policy acquisition costs. The NAIC’s risk-based capital requirements require insurance companies to calculate and report information under a risk-based capital formula. The achievement of long-term growth will require growth in the statutory capital of our insurance subsidiaries. The subsidiaries may secure additional statutory capital through various sources, such as retained statutory earnings or our equity contributions. In general, dividends up to specified levels are considered ordinary and may be paid without prior approval of the insurance commissioner of the state of domicile. Dividends in larger amounts are considered extraordinary and are subject to affirmative prior approval by such commissioner. The maximum amount that would qualify as an ordinary dividend to us from our insurance subsidiaries in ~~2018~~2019 is approximately ~~$853.2~~$434.0 million.

State insurance regulators and the NAIC have adopted risk-based capital (“RBC”) requirements for life insurance companies to evaluate the adequacy of statutory capital and surplus in relation to investment and insurance risks. The requirements provide a means of measuring the minimum amount of statutory surplus appropriate for an insurance company to support its overall business operations based on its size and risk profile. A company’s risk-based statutory surplus is calculated by applying factors and performing calculations relating to various asset, premium, claim, expense, and reserve items. Regulators can then measure the adequacy of a company’s statutory surplus by comparing it to RBC. We manage our capital consumption by using the ratio of our total adjusted capital, as defined by the insurance regulators, to our company action level RBC (known as the RBC ratio), also as defined by insurance regulators.

Statutory reserves established for VA contracts are sensitive to changes in the equity markets and are affected by the level of account values relative to the level of any guarantees and product design. As a result, the relationship between reserve changes and equity market performance may be non-linear during any given reporting period. Market conditions greatly influence the capital required due to their impact on the valuation of reserves and derivative investments mitigating the risk in these reserves. Risk mitigation activities may result in material and sometimes counterintuitive impacts on statutory surplus and RBC ratio. Notably, as changes in these market and non-market factors occur, both our potential obligation and the related statutory reserves and/or required capital can vary at a non-linear rate.

Our statutory surplus is impacted by credit spreads as a result of accounting for the assets and liabilities on our fixed ~~MVA~~market value adjusted (“MVA”) annuities. Statutory separate account assets supporting the fixed MVA annuities are recorded at fair value. In determining the statutory reserve for the fixed MVA annuities, we are required to use current crediting rates based on U.S. Treasuries. In many capital market scenarios, current crediting rates based on U.S. Treasuries are highly correlated with market rates implicit in the fair value of statutory separate account assets. As a result, the change in the statutory reserve from period to period will likely substantially offset the change in the fair value of the statutory separate account assets. However, in periods of volatile credit markets, actual credit spreads on investment assets may increase or decrease sharply for certain sub-sectors of the overall credit market, resulting in statutory separate account asset market value gains or losses. As actual credit spreads are not fully reflected in current crediting rates based on U.S. Treasuries, the calculation of statutory reserves will not substantially offset the change in fair value of the statutory separate account assets resulting in a change in statutory surplus.

We cede material amounts of insurance and transfer related assets to other insurance companies through reinsurance. However, notwithstanding the transfer of related assets, we remain liable with respect to ceded insurance should any reinsurer fail to meet the obligations that it assumed. We evaluate the financial condition of our reinsurers and monitor the associated concentration of credit risk. For the three months ended March 31, ~~2018,~~2019, we ceded premiums to third party reinsurers amounting to ~~$345.4~~$318.4 million. In addition, we had receivables from reinsurers amounting to ~~$5.1~~$4.7 billion as of March 31, ~~2018.~~2019. We review reinsurance receivable amounts for collectability and establish bad debt reserves if deemed appropriate.

Scottish Re (U.S.), Inc. ("SRUS") was placed in rehabilitation on March 6, 2019 by the State of Delaware. Under the related order, the Insurance Commissioner of the State of Delaware has been appointed the receiver of SRUS and provided with authority to conduct and continue the business of SRUS in the interest of its cedents, creditors, and stockholder. The order was accompanied by an injunction requiring the continued payment of reinsurance premiums to SRUS and temporarily prohibiting cedents, including the Company, from offsetting premiums payable against receivables from SRUS.

As of March 31, 2019, we had outstanding claims receivable from SRUS of $13.4 million, and other exposures associated with GAAP reinsurance receivables of approximately $106.8 million, and statutory reserve credit of approximately $127.2 million. We continue to monitor both the financial health of SRUS and the actions of the receiver through discussions with legal counsel and review of publicly available information. We have considered the possible impact of an adverse outcome of the rehabilitation process and believes an adverse outcome would not have a material adverse impact on our operations, liquidity or financial condition.

Captive Reinsurance Companies

Our life insurance subsidiaries are subject to a regulation entitled “Valuation of Life Insurance Policies Model Regulation,” commonly known as “Regulation XXX,” and a supporting guideline entitled “The Application of the Valuation of Life Insurance Policies Model Regulation,” commonly known as “Guideline AXXX.”�� The regulation and supporting guideline require insurers to establish statutory reserves for term and universal life insurance policies with long-term premium guarantees that are consistent with the statutory reserves required for other individual life insurance policies with similar guarantees. Many market participants believe that these levels of reserves are non-economic. We use captive reinsurance companies to implement reinsurance and capital management actions to satisfy these reserve requirements by financing the non-economic reserves either through the issuance of non-recourse funding obligations by the captives or obtaining ~~Letters~~letters of ~~Credit~~credit from third-party financial institutions.

Our captive reinsurance companies assume business from affiliates only. Our captives are capitalized to a level we believe is sufficient to support the contractual risks and other general obligations of the respective captive entity. All of our captive reinsurance companies are wholly owned subsidiaries and are located domestically. The captive insurance companies are subject to regulations in the state of domicile.

The National Association of Insurance Commissioners (“NAIC”), through various committees, subgroups and dedicated task forces, is reviewing the use of captives and special purpose vehicles used to transfer insurance risk in relation to existing state laws and regulations, and several committees have adopted or exposed for comment white papers and reports that, if or when implemented, could impose additional requirements on the use of captives and other reinsurers. The Financial Condition (E) Committee of the NAIC established a Variable Annuity Issues Working Group to examine company use of variable annuity

captives. The Committee has proposed changes in the regulation of variable annuities and variable annuity captives, which could adversely affect our future financial condition and results of ~~operations.~~operations if adopted.

The NAIC has adopted Actuarial Guideline XLVIII ~~("AG48"~~(“AG48”) and the substantially similar ~~"Term~~“Term and Universal Life Insurance Reserve Financing Model ~~Regulation"~~Regulation” (the ~~"Reserve Model"~~“Reserve Model”) which establish national standards for new reserve financing arrangements for term life insurance and universal life insurance with secondary guarantees. AG48 and the Reserve Model govern collateral requirements for captive reinsurance arrangements. In order to obtain reserve credit, AG48 and the Reserve Model require a minimum level of funds, consisting of primary and other securities, to be held by or on behalf of ceding insurers as security under each captive life reinsurance treaty. As a result of AG48 and the Reserve Model, the implementation of new captive structures in the future may be less capital efficient, lead to lower product returns and/or increased product pricing or result in reduced sales of certain products. In some circumstances, AG48 and the Reserve Model could impact the Company’s ability to engage in certain reinsurance transactions with non-affiliates.

We also use a captive reinsurance company to reinsure risks associated with GLWB and ~~GMDB~~guaranteed minimum death benefits (“GMDB”) riders which helps us to manage those risks on an economic basis. In an effort to mitigate the equity market risks relative to our RBC ratio, in the fourth quarter of 2012, we established an insurance subsidiary, Shades Creek Captive Insurance Company (“Shades Creek”), to which PLICO has reinsured GLWB and GMDB riders related to its VA contracts. The purpose of Shades Creek is to reduce the volatility in RBC due to non-economic variables included within the RBC calculation.

We maintain an intercompany capital support agreement with Shades Creek that provides through a guarantee that we will contribute assets or purchase surplus notes (or cause an affiliate or third party to contribute assets or purchase surplus notes) in amounts necessary for Shades Creek’s regulatory capital levels to equal or exceed minimum thresholds as defined by the agreement. As of March 31, ~~2018,~~2019, Shades Creek maintained capital levels in excess of the required minimum thresholds. The maximum potential future payment amount which could be required under the capital support agreement will be dependent on numerous factors, including the performance of equity markets, the level of interest rates, performance of associated hedges, and related policyholder behavior.

Ratings

Various Nationally Recognized Statistical Rating Organizations (“rating organizations”) review the financial performance and condition of insurers, including our insurance subsidiaries, and publish their financial strength ratings as indicators of an insurer’s ability to meet policyholder and contract holder obligations. These ratings are important to maintaining public confidence in an insurer’s products, its ability to market its products and its competitive position. The following table summarizes the current financial strength ratings of our significant member companies from the major independent rating organizations:



			Standard &
Ratings	A.M. Best	Fitch	Poor’s	Moody’s

Insurance company financial strength rating:
Protective Life Insurance Company	A+	A+	AA-	A1
West Coast Life Insurance Company	A+	A+	AA-	A1
Protective Life and Annuity Insurance Company	A+	A+	AA-	—
Protective Property & Casualty Insurance Company	A	—	—	—
MONY Life Insurance Company	A+	A+	A+	A1

Our ratings are subject to review and change by the rating organizations at any time and without notice. A downgrade or other negative action by a ~~ratings~~rating organization with respect to the financial strength ratings of our insurance subsidiaries could adversely affect sales, relationships with distributors, the level of policy surrenders and withdrawals, competitive position in the marketplace, and the cost or availability of reinsurance. The rating agencies may take various actions, positive or negative, with respect to the financial strength ratings of our insurance subsidiaries, including as a result of our status as a subsidiary of Dai-ichi Life.

Rating organizations also publish credit ratings for the issuers of debt securities, including the Company. Credit ratings are indicators of a debt issuer’s ability to meet the terms of debt obligations in a timely manner. These ratings are important in the debt issuer’s overall ability to access credit markets and other types of liquidity. Ratings are not recommendations to buy our securities or products. A downgrade or other negative action by a ~~ratings~~rating organization with respect to our credit rating could limit our access to capital markets, increase the cost of issuing debt, and a downgrade of sufficient magnitude, combined with other negative factors, could require us to post collateral. The rating ~~agencies~~organizations may take various actions, positive or negative, with respect to our debt ratings, including as a result of our status as a subsidiary of Dai-ichi Life.

LIABILITIES

Many of our products contain surrender charges and other features that are designed to reward persistency and penalize the early withdrawal of funds. Certain stable value and annuity contracts have market-value adjustments that protect us against investment losses if interest rates are higher at the time of surrender than at the time of issue.

As of March 31, ~~2018,~~2019, we had policy liabilities and accruals of approximately ~~$31.6~~$43.0 billion. Our interest-sensitive life insurance policies have a weighted average minimum credited interest rate of approximately ~~3.47%~~3.46%.

Contractual Obligations

We enter into various obligations to third parties in the ordinary course of our operations. However, we do not believe that our cash flow requirements can be assessed solely based upon an analysis of these obligations. The most significant factors affecting our future cash flows are our ability to earn and collect cash from our customers, and the cash flows arising from our investment program. Future cash outflows, whether they are contractual obligations or not, will also vary based upon our future needs. Although some outflows are fixed, others depend on future events. Examples of fixed obligations include our obligations to pay principal and interest on fixed-rate borrowings. Examples of obligations that will vary include obligations to pay interest on variable-rate borrowings and insurance liabilities that depend on future interest rates, market performance, or surrender provisions. Many of our obligations are linked to cash-generating contracts. In addition, our operations involve significant expenditures that are not based upon contractual obligations. These include expenditures for income taxes and payroll.

As of March 31, ~~2018,~~2019, we carried a ~~$6.7~~$7.4 million liability for uncertain tax positions, including interest on unrecognized tax benefits. These amounts are not included in the long-term contractual obligations table because of the difficulty in making reasonably reliable estimates of the occurrence or timing of cash settlements with the respective taxing authorities.

The table below sets forth future maturities of our contractual obligations:

Payments due by period
Total
Less than
1 year
1-3 years 3-5 years
More than
5 years
(Dollars In Thousands)
Debt⁽¹⁾
$ 1,411,736
$ 57,230
$ 785,925
$ 37,436
$ 531,145
Non-recourse funding obligations⁽²⁾
4,537,137
274,628
639,274
646,513
2,976,722
Subordinated debt securities⁽³⁾
1,419,160
26,750
53,500
53,500
1,285,410
Stable value products⁽⁴⁾
4,932,320
1,324,421
2,386,621
1,081,314
139,964
Operating leases⁽⁵⁾
26,236
4,482
7,693
6,305
7,756
Home office lease⁽⁶⁾
76,849
76,849
—
—
—
Mortgage loan and investment commitments 812,206
698,358
113,848
—
—
Secured financing liabilities⁽⁷⁾
779,043
779,043
—
—
—
Policyholder obligations⁽⁸⁾
42,614,456
10,879,827
3,761,140
3,689,030
24,284,459
Total⁽⁹⁾
$ 56,609,143
$ 14,121,588
$ 7,748,001
$ 5,514,098
$ 29,225,456

(1) Debt includes all principal amounts owed on note agreements and expected interest payments due over the term of the notes.
(2) Non-recourse funding obligations include all undiscounted principal amounts owed and expected future interest payments due over the term of the notes. Of the total undiscounted cash flows, $1.7 billion relates to the Golden Gate V transaction. These cash outflows are matched and predominantly offset by the cash inflows Golden Gate V receives from notes issued by a nonconsolidated variable interest entity. Additionally, $2.7 billion relates to the Golden Gate transaction. These cash outflows are matched and predominantly offset by the cash inflows Golden Gate receives from notes issued by a nonconsolidated variable interest entity. The remaining amounts are associated with the Golden Gate II notes held by third parties as well as certain obligations assumed with the acquisition of MONY Life Insurance Company.
(3) Subordinated debt securities includes all principal amounts and interest payments due over the term of the obligations.
(4) Anticipated stable value products cash flows including interest.
(5) Includes all lease payments required under operating lease agreements.
(6) The lease payments shown assume we exercise our option to purchase the building at the end of the lease term.
(7) Represents secured borrowings and accrued interest as part of our repurchase program as well as liabilities associated with securities lending transactions.
(8) Estimated contractual policyholder obligations are based on mortality, morbidity, and lapse assumptions comparable to our historical experience, modified for recent observed trends. These obligations are based on current balance sheet values and include expected interest crediting, but do not incorporate an expectation of future market growth, or future deposits. Due to the significance of the assumptions used, the amounts presented could materially differ from actual results. As variable separate account obligations are legally insulated from general account obligations, the variable separate account obligations will be fully funded by cash flows from variable separate account assets. We expect to fully fund the general account obligations from cash flows from general account investments.
(9) Excluded from this table are certain pension obligations.



			Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(Dollars In Thousands)
Debt⁽¹⁾	$	1,473,785	$	448,450	$	64,942	$	64,942	$	895,451
Non-recourse funding obligations⁽²⁾	4,257,260		295,486		670,623		598,238		2,692,913
Subordinated debt⁽³⁾	1,576,930		30,655		61,310		61,310		1,423,655
Stable value products⁽⁴⁾	5,857,459		1,010,189		3,506,367		1,206,750		134,153
Leases⁽⁵⁾	24,646		5,501		8,040		6,499		4,606
Mortgage loan and investment commitments	981,164		765,406		215,758		—		—
Secured financing liabilities⁽⁶⁾	184,036		184,036		—		—		—
Policyholder obligations⁽⁷⁾	56,665,212		3,099,775		7,580,450		6,100,213		39,884,774
Total⁽⁸⁾	$	71,020,492	$	5,839,498	$	12,107,490	$	8,037,952	$	45,035,552

(1) Debt includes all principal amounts owed on note agreements and expected interest payments due over the term of the notes.
(2) Non-recourse funding obligations include all undiscounted principal amounts owed and expected future interest payments due over the term of the notes. Of the total undiscounted cash flows, $1.7 billion relates to the Golden Gate V transaction. These cash outflows are matched and predominantly offset by the cash inflows Golden Gate V receives from notes issued by a nonconsolidated variable interest entity. Additionally, $2.5 billion relates to the Golden Gate transaction. These cash outflows are matched and predominantly offset by the cash inflows Golden Gate receives from notes issued by a nonconsolidated variable interest entity. The remaining amounts are associated with the Golden Gate II notes held by third parties as well as certain obligations assumed with the acquisition of MONY Life Insurance Company.
(3) Subordinated debt includes all principal amounts and interest payments due over the term of the obligations.
(4) Anticipated stable value products includes cash flows including interest.
(5) Includes all lease payments required under operating and finance lease agreements.
(6) Represents secured borrowings and accrued interest as part of our repurchase program as well as liabilities associated with securities lending transactions.
(7) Estimated contractual policyholder obligations are based on mortality, morbidity, and lapse assumptions comparable to our historical experience, modified for recent observed trends. These obligations are based on current balance sheet values and include expected interest crediting, but do not incorporate an expectation of future market growth, or future deposits. Due to the significance of the assumptions used, the amounts presented could materially differ from actual results. As variable separate account obligations are legally insulated from general account obligations, the variable separate account obligations will be fully funded by cash flows from variable separate account assets. We expect to fully fund the general account obligations from cash flows from general account investments.
(8) Excluded from this table are certain pension obligations.

OFF-BALANCE SHEET ARRANGEMENTS

We have entered into indemnity agreements with each of our directors as well as operating leases that do not result in an obligation being recorded on the balance sheet. Refer to Note ~~11,~~12, Commitments and Contingencies, of the consolidated condensed financial statements for more information on our indemnity agreements.

MARKET RISK EXPOSURES

Our financial position and earnings are subject to various market risks including changes in interest rates, the yield curve, spreads between risk-adjusted and risk-free interest rates, foreign currency rates, used vehicle prices, ~~and~~ equity price risks and issuer defaults. We analyze and manage the risks arising from market exposures of financial instruments, as well as other risks, through an integrated asset/liability management process. The primary focus of our asset/liability program is the management of interest rate risk within the insurance operations. Our asset/liability management programs and procedures involve the monitoring of asset and liability durations for various product lines; cash flow testing under various interest rate scenarios; and the continuous rebalancing of assets and liabilities with respect to yield, credit and market risk, and cash flow characteristics. These programs also incorporate the use of derivative financial instruments primarily to reduce our exposure to interest rate risk, inflation risk, currency exchange risk, volatility risk, and equity market risk. See Note 6, ~~Derivative Financial Instruments, to the consolidated financial statements included in this report for additional information on our financial instruments.~~

The primary focus of our asset/liability program is the management of interest rate risk within the insurance operations. This includes monitoring the duration of both investments and insurance liabilitiescharacteristics to maintain an appropriate balance between risk and profitability for each product category, and for us as a whole.

It is our policy to maintain asset and liability durations within one year of one another, although, from time to time, a broader interval may be allowed.

We are exposed to credit risk within our investment portfolio and through derivative counterparties. Credit risk relates to the uncertainty of an obligor’s continued ability to make timely payments in accordance with the contractual terms of the instrument or contract. We manage credit risk through established investment policies which attempt to address quality of obligors and counterparties, credit concentration limits, diversification requirements, and acceptable risk levels under expected and stressed scenarios. Derivative counterparty credit risk is measured as the amount owed to us, net of collateral held, based upon current market conditions. In addition, we periodically assess exposure related to potential payment obligations between us and our counterparties. We minimize the credit risk in derivative financial instruments by entering into transactions with high quality

counterparties (A-rated or higher at the time we enter into the contract), and we maintain credit support annexes with certain of those counterparties.

We utilize a risk management strategy that incorporates the use of derivative financial instruments to reduce exposure to certain risks, including but not limited to, interest rate risk, currency exchange risk, volatility risk, and equity market risk. These strategies are developed through our analysis of data from financial simulation models and other internal and industry sources, and are then incorporated into our risk management program.

See Note 7, Derivative Financial Instruments, to the consolidated financial statements included in this report for additional information on our financial instruments.

Derivative instruments expose us to credit and market risk and could result in material changes from period to period. We attempt to minimize our credit risk by entering into transactions with highly rated counterparties. We manage the market risk by establishing and monitoring limits as to the types and degrees of risk that may be undertaken. We monitor our use of derivatives in connection with our overall asset/liability management programs and risk management strategies. In addition, all derivative programs are monitored by our risk management department.

Derivative instruments that are used as part of our interest rate risk management strategy include interest rate swaps, interest rate futures, interest rate caps, and interest rate swaptions.

Derivative instruments that are used as part of the ~~Company's~~Company’s foreign currency exchange risk management strategy include foreign currency swaps, foreign currency futures, foreign equity futures, and foreign equity options.

We may use the following types of derivative contracts to mitigate our exposure to certain guaranteed benefits related to VA ~~and~~contracts, fixed indexed ~~annuities:~~annuities, and indexed universal life:

•Foreign Currency Futures

•Variance Swaps

•Interest Rate Futures

•Equity Options

•Equity Futures

•Credit Derivatives

•Interest Rate Swaps

•Interest Rate Swaptions

•Volatility Futures

•Volatility Options

•Total Return Swaps

We believe that our asset/liability management programs and procedures and certain product features provide protection against the effects of changes in interest rates under various scenarios. Additionally, we believe our asset/liability management programs and procedures provide sufficient liquidity to enable us to fulfill our obligation to pay benefits under our various insurance and deposit contracts. However, our asset/liability management programs and procedures incorporate assumptions about the relationship between short-term and long-term interest rates (i.e., the slope of the yield curve), relationships between risk-adjusted and risk-free interest rates, market liquidity, spread movements, implied volatility, policyholder behavior, and other factors, and the effectiveness of our asset/liability management programs and procedures may be negatively affected whenever actual results differ from those assumptions.

In the ordinary course of our commercial mortgage lending operations, we may commit to provide a mortgage loan before the property to be mortgaged has been built or acquired. The mortgage loan commitment is a contractual obligation to fund a mortgage loan when called upon by the borrower. The commitment is not recognized in our financial statements until the commitment is actually funded. The mortgage loan commitment contains terms, including the rate of interest, which may be

different than prevailing interest rates. As of March 31, ~~2018,~~2019, we had outstanding mortgage loan commitments of ~~$699.6~~$871.6 million at an average rate of ~~4.2%~~5.31%.

Impact of Continued Low Interest Rate Environment

Significant changes in interest rates expose us to the risk of not realizing anticipated spreads between the interest rate earned on investments and the interest rate credited to in-force policies and contracts. In addition, certain of our insurance and investment products guarantee a minimum guaranteed interest rate (“MGIR”). In periods of prolonged low interest rates, the interest spread earned may be negatively impacted to the extent our ability to reduce policyholder crediting rates is limited by the guaranteed minimum credited interest rates. Additionally, those policies without account values may exhibit lower profitability in periods of prolonged low interest rates due to reduced investment income.

The tables below present account values by range of current minimum guaranteed interest rates and current crediting rates for our universal life and deferred fixed annuity products as of March 31, ~~2018,~~2019, and December 31, ~~2017:~~2018:

Credited Rate Summary

As of March 31, ~~2018~~2019


				1-50 bps			More than									1-50 bps			More than
Minimum Guaranteed Interest Rate	At			above			50 bps						At			above			50 bps
Account Value	MGIR			MGIR			above MGIR			Total			MGIR			MGIR			above MGIR			Total
	(Dollars In Millions)												(Dollars In Millions)
Universal Life Insurance
>2% - 3%	$	207		$	1,281		$	1,998		$	3,486		$	2,386		$	1,366		$	1,989		$	5,741
>3% - 4%	4,177			937			8			5,122			4,516			884			491			5,891
>4% - 5%	1,966			13			1			1,980			2,425			437			1			2,863
>5% - 6%	197			—			—			197			186			—			—			186
Subtotal	6,547			2,231			2,007			10,785			9,513			2,687			2,481			14,681
Fixed Annuities
1%	$	525		$	268		$	755		$	1,548		$	262		$	598		$	2,212		$	3,072
>1% - 2%	469			285			22			776			349			152			1,299			1,800
>2% - 3%	1,849			63			4			1,916			1,634			106			2			1,742
>3% - 4%	250			—			—			250			257			4			—			261
>4% - 5%	268			—			—			268			259			—			—			259
>5% - 6%	2			—			—			2			2			—			—			2
Subtotal	3,363			616			781			4,760			2,763			860			3,513			7,136
Total	$	9,910		$	2,847		$	2,788		$	15,545		$	12,276		$	3,547		$	5,994		$	21,817

Percentage of Total	64		%	18		%	18		%	100		%	56		%	16		%	28		%	100		%

Credited Rate Summary

As of December 31, ~~2017~~2018


				1-50 bps			More than									1-50 bps			More than
Minimum Guaranteed Interest Rate	At			above			50 bps						At			above			50 bps
Account Value	MGIR			MGIR			above MGIR			Total			MGIR			MGIR			above MGIR			Total
	(Dollars In Millions)												(Dollars In Millions)
Universal Life Insurance
>2% - 3%	$	206		$	1,252		$	2,006		$	3,464		$	2,392		$	1,322		$	2,031		$	5,745
>3% - 4%	4,146			993			8			5,147			4,512			924			499			5,935
>4% - 5%	1,987			13			1			2,001			2,445			435			1			2,881
>5% - 6%	199			—			—			199			188			—			—			188
Subtotal	6,538			2,258			2,015			10,811			9,537			2,681			2,531			14,749
Fixed Annuities
1%	$	571		$	239		$	540		$	1,350		$	341		$	584		$	2,278		$	3,203
>1% - 2%	473			331			70			874			370			165			1,145			1,680
>2% - 3%	1,897			63			4			1,964			1,686			102			3			1,791
>3% - 4%	254			—			—			254			261			4			—			265
>4% - 5%	271			—			—			271			260			—			—			260
>5% - 6%	2			—			—			2			2			—			—			2
Subtotal	3,468			633			614			4,715			2,920			855			3,426			7,201
Total	$	10,006		$	2,891		$	2,629		$	15,526		$	12,457		$	3,536		$	5,957		$	21,950

Percentage of Total	64		%	19		%	17		%	100		%	57		%	16		%	27		%	100		%

We are active in mitigating the impact of a continued low interest rate environment through product design, as well as adjusting crediting rates on current in-force policies and contracts. We also manage interest rate and reinvestment risks through our asset/liability management process. Our asset/liability management programs and procedures involve the monitoring of asset and liability durations; cash flow testing under various interest rate scenarios; and the regular rebalancing of assets and liabilities

with respect to yield, credit and market risk, and cash flow characteristics. These programs also incorporate the use of derivative financial instruments primarily to reduce our exposure to interest rate risk, inflation risk, currency exchange risk, volatility risk, and equity market risk.

IMPACT OF INFLATION

Inflation increases the need for life insurance. Many policyholders who once had adequate insurance programs may increase their life insurance coverage to provide the same relative financial benefit and protection. Higher interest rates may result in higher sales of certain of our investment products.

The higher interest rates that have traditionally accompanied inflation could also affect our operations. Policy loans increase as policy loan interest rates become relatively more attractive. As interest rates increase, disintermediation of stable value and annuity account balances and individual life policy cash values may increase. The market value of our fixed-rate, long-term investments may decrease, we may be unable to implement fully the interest rate reset and call provisions of our mortgage loans, and our ability to make attractive mortgage loans, including participating mortgage loans, may decrease. In addition, participating mortgage loan income may decrease. The difference between the interest rate earned on investments and the interest rate credited to life insurance and investment products may also be adversely affected by rising interest rates. During the periods covered by this report, we believe inflation has not had a material impact on our business.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 2, Summary of Significant Accounting Policies, to the consolidated condensed financial statements for information regarding recently issued accounting standards.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

See Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Liquidity and Capital Resources” ~~and Part II, Item 1A,~~ ~~Risk Factors, of this report for market risk disclosures.~~.

Item 4. Controls and Procedures

(a) Disclosure controls and procedures

In order to ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized, and reported on a timely basis, the ~~Company's~~Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as such term is defined in ~~Rules 13a-15(e) and 15d-15(e)~~Rule 13a -15(e) under the Securities Exchange Act of 1934, as amended (the ~~"Exchange Act"~~“Exchange Act”)), except as otherwise noted below. Based on their evaluation as of the end of the period covered by this Form 10-Q, the ~~Company's~~Company’s Chief Executive Officer and Chief Financial Officer have concluded that the ~~Company's~~Company’s disclosure controls and procedures were effective. It should be noted that any system of controls, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control ~~system's~~system’s objectives will be met. Further, the design of any control system is based in part upon certain judgments, including the costs and benefits of controls and the likelihood of future events. Because of these and other inherent limitations of control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected.

In conducting our evaluation of the effectiveness of internal control over financial reporting as of March 31, 2019, the Company has excluded those controls at Liberty Life Assurance Company of Boston (“Liberty Life”) that relate to systems and processes for assets and liabilities of the acquired business that were not integrated into our existing systems and internal control over financial reporting. The portion of the business not integrated into our existing systems and controls represents approximately $472.8 million of consolidated assets, approximately $80.1 million of consolidated revenue, approximately $182.7 million of consolidated benefits and expenses, and approximately $13.6 million of liabilities on the related consolidated financial statements.

(b) Changes in internal control over financial reporting

During the second quarter of 2018, the Company began the conversion and integration of administrative processing into its internal controls over financial reporting for the Liberty block of business. The conversion to the Company’s operating environment was in process as of March 31, 2019.

There were no changes in the Company’s internal control over financial reporting during the three months ended March 31, ~~2018,~~2019, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company’s internal controls exist within a dynamic environment and the Company continually strives to improve its internal controls and procedures to enhance the quality of its financial reporting.

PART II

Item 1A. Risk Factors

The operating results of companies in the insurance industry have historically been subject to significant fluctuations. The factors which could affect the Company’s future results include, but are not limited to, general economic conditions and known trends and uncertainties. In addition to other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A, Risk Factors, in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, which could materially affect the Company’s business, financial condition, or future results of operations which are discussed more fully below.

Risks Related to the Financial Environment

The Company may be required to establish a valuation allowance against its deferred tax assets, which could have a material adverse effect on the ~~Company's~~Company’s results of operations, financial condition, and capital position.

Deferred tax assets are attributable to certain differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets represent future ~~savings of taxes that would otherwise~~financial statement tax expense which will not be paid in cash. In general, the realization of ~~the~~ deferred tax assets is dependent upon the generation of sufficient future ordinary and capital taxable income. Realization may also be limited for other reasons, including but not limited to changes in the tax law. If it is determined that a certain deferred tax asset cannot be realized, then a deferred tax valuation allowance ~~must be~~is established, with a corresponding charge to either adjusted operating income or other comprehensive income (depending on the nature of the deferred tax asset).

Based on the ~~Company's~~Company’s current assessment of future taxable income, including available tax planning opportunities, ~~the Company anticipates that~~ it is more likely than not that itthe Company will generate sufficient taxable income to realize its material deferred tax assets net of any existing valuation allowance. The Company has recognized valuation allowances of ~~$5.9~~$7.3 million and ~~$5.0~~$6.4 million as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, related to ~~state operating loss and interest expense carryforwards~~certain deferred tax assets which are more likely than not to expire unutilized. These assets are state income tax-related. If future events differ from the ~~Company's~~Company’s current ~~forecasts,~~expectations, an additional valuation allowance ~~may need~~ to be established, which could have a material adverse effect on the ~~Company's~~Company’s results of operations, financial condition, or capital position.

~~The Company could be adversely affected by an inability to access FHLB lending.~~

Certain Company subsidiaries are members of the Federal Home Loan Bank (the “FHLB”) of Cincinnati and the FHLB of New York. Membership provides these Company subsidiaries with access to FHLB financial services, including advances that provide an attractive funding source for short-term borrowing and for the sale of funding agreements. The extent to which these services are available could be impacted by legislative or regulatory action at the state or federal level. It is unclear at this time whether or to what extent additional or new legislation or regulatory action regarding continued access to FHLB financial services will be enacted or adopted. Any developments that limit access to FHLB financial services could have a material adverse effect on the Company.

The amount of statutory capital or risk-based capital that the Company has and the amount of statutory capital or risk-based capital that it must hold to maintain its financial strength and credit ratings and meet other requirements can vary significantly from time to time and such amounts are sensitive to a number of factors outside of the Company’s control.

The Company primarily conducts business through licensed insurance company subsidiaries. Insurance regulators have established regulations that provide minimum capitalization requirements based on risk-based capital formulas for life and property and casualty companies. The risk-based capital formula for life insurance companies establishes capital requirements relating to

insurance, business, asset, interest rate, and certain other risks. The risk-based capital formula for property and casualty companies establishes capital requirements relating to asset, credit, underwriting, and certain other risks.

In any particular year, statutory surplus amounts and risk-based capital ratios may increase or decrease depending on a variety of factors, including, but not limited to, the amount of statutory income or losses generated by the Company’s insurance subsidiaries (which itself is sensitive to equity market and credit market conditions), the amount of additional capital its insurance subsidiaries must hold to support business growth, changes in the Company’s statutory reserve requirements, the Company’s ability to secure capital market solutions to provide statutory reserve relief, changes in equity market levels, the value of certain fixed-income and equity securities in its investment portfolio, the credit ratings of investments held in its portfolio, including those issued by, or explicitly or implicitly guaranteed by, a government, the value of certain derivative instruments, changes in interest rates, foreign currency exchange rates or tax rates, credit market volatility, changes in consumer behavior, and changes to the National Association of Insurance Commissioners (the "NAIC") risk-based capital formula. Most of these factors are outside of the Company’s control.

The NAIC is currently considering several changes to the formula used to calculate risk-based capital. One of the changes under consideration relates to the corporate tax rate. Previously, the NAIC risk-based capital formula used a tax factor that generally assumed a 35% corporate tax rate. In 2018, the maximum corporate tax rate was set at 21%. The NAIC's Capital Adequacy Task Force and its working groups have stated their intention to update the risk-based capital formula to reflect the lower corporate tax rate. Another contemplated change would update the factors used to calculate required capital for bonds. While the extent and timing of either such change is unknown, both changes would likely increase required capital upon becoming effective, which in turn would decrease the statutory risk-based capital ratios of U.S. life insurance companies, including the Company and its subsidiaries. Ultimately, the changes contemplated by the NAIC could have an individually or cumulatively material adverse effect on the Company’s financial condition and/or results of operations.

The Company’s financial strength and credit ratings are significantly influenced by the statutory surplus amounts and risk-based capital ratios of its insurance company subsidiaries. Rating agencies may implement changes to their internal models that have the effect of increasing or decreasing the amount of statutory capital the Company must hold in order to maintain its current ratings. In addition, rating agencies may downgrade the investments held in the Company’s portfolio, which could result in a reduction of the Company’s capital and surplus and/or its risk-based capital ratio.

In scenarios of equity market declines, the amount of additional statutory reserves or risk-based capital the Company is required to hold for its variable product guarantees may increase at a rate greater than the rate of change of the markets. Increases in reserves or risk-based capital could result in a reduction to the Company’s capital, surplus, and/or risk-based capital ratio. Also, in environments where there is not a correlative relationship between interest rates and spreads, the Company’s market value adjusted annuity product can have a material adverse effect on the Company’s statutory surplus position.

~~Industry and Regulatory Related Risks~~

~~The Company may be subject to regulations of, or regulations influenced by, international regulatory authorities or initiatives.~~

The NAIC and the Company’s state regulators may be influenced by the initiatives of international regulatory bodies, and those initiatives may not translate readily into the legal system under which U.S. insurers must operate. There is increasing pressure to conform to international standards due to the globalization of the business of insurance and the most recent financial crisis. In addition to developments at the NAIC and in the United States, the Financial Stability Board (“FSB”), consisting of representatives of national financial authorities of the G20 nations, and the G20 have issued a series of proposals intended to produce significant changes in how financial companies, particularly companies that are members of large and complex financial groups, should be regulated.

The International Association of Insurance Supervisors (“IAIS”), at the direction of the FSB, has published an evolving methodology for identifying “global systemically important insurers” (“G-SIIs”) and high-level policy measures that will apply to G-SIIs. The FSB, working with national authorities and the IAIS, has designated nine insurance groups as G-SIIs. The IAIS is working on the policy measures which include higher capital requirements and enhanced supervision. Although neither the Company nor Dai-ichi Life has been designated as a G-SII, the list of designated insurers will be updated periodically by the FSB. It is possible that the greater size and reach of the combined group as a result of the Company becoming a subsidiary of Dai-ichi Life, or a change in the methodologies or their application, could lead to the combined group’s designation as a G-SII.

The IAIS is also in the process of developing a common framework for the supervision of internationally active insurance groups (“IAIGs”). The framework, which is currently under discussion, may include a global capital measurement standard for insurance groups deemed to be IAIGs that could exceed the sum of state or other local capital requirements. In addition, the IAIS is developing a model framework for the supervision of IAIGs that contemplates “group wide supervision” across national boundaries and legal entities, which could require each IAIG to conduct its own risk and solvency assessment to monitor and manage its overall solvency. It is likely that, as a result of the Merger, the combined group will be deemed an IAIG, in which case it may be subject to supervision requirements and capital measurement standards beyond those applicable to any competitors who are not designated as an IAIG.

The Company’s sole stockholder, Dai-ichi Life, is also subject to regulation by the Japanese Financial Services Authority (“JFSA”). Under applicable laws and regulations, Dai-ichi Life is required to provide notice to or obtain the consent of the JFSA prior to taking certain actions or engaging in certain transactions, either directly or indirectly through its subsidiaries, including the Company and its consolidated subsidiaries, which could limit the ability of the Company to engage in certain transactions or business initiatives.

While it is not yet known how or the extent to which the Company will be impacted by these regulations, the Company may experience increased costs of compliance, increased disclosure, less flexibility in capital management, and more burdensome regulation and capital requirements for specific lines of business. In addition, such regulations could impact the business of the Company and its reserve and capital requirements, financial condition or results of operations.

The Company’s use of captive reinsurance companies to finance statutory reserves related to its term and universal life products and to reduce volatility affecting its variable annuity products may be limited or adversely affected by regulatory action, pronouncements and interpretations.

The Company currently uses affiliated captive reinsurance companies in various structures to finance certain statutory reserves based on a regulation entitled “Valuation of Life Insurance Policies Model Regulation,” commonly known as “Regulation XXX,” and a supporting guideline entitled “The Application of the Valuation of Life Insurance Policies Model Regulation,” commonly known as “Guideline AXXX,” which are associated with term life insurance and universal life insurance with secondary guarantees, respectively, as well as to reduce the volatility in statutory risk-based capital associated with certain guaranteed minimum withdrawal and death benefit riders associated with certain of the Company’s variable annuity products.

The NAIC has adopted Actuarial Guideline XLVIII ("AG48") and the substantially similar "Term and Universal Life Insurance Reserve Financing Model Regulation" (the "Reserve Model") which establish national standards for new reserve financing arrangements for term life insurance and universal life insurance with secondary guarantees. AG48 and the Reserve Model govern collateral requirements for captive reinsurance arrangements. In order to obtain reserve credit, AG48 and the Reserve Model require a minimum level of funds, consisting of primary and other securities, to be held by or on behalf of ceding insurers as security under each captive life reinsurance treaty. As a result of AG48 and the Reserve Model, the implementation of new captive structures in the future may be less capital efficient, lead to lower product returns and/or increased product pricing, or result in reduced sales of certain products. In some circumstances, AG48 and the Reserve Model could impact the Company’s ability to engage in certain reinsurance transactions with non-affiliates.

The Financial Condition (E) Committee of the NAIC established a Variable Annuity Issues Working Group ("VAIWG") in 2015 to oversee the NAIC’s efforts to study and address regulatory issues resulting in variable annuity captive reinsurance transactions. The VAIWG developed a Framework for Change (the “Framework”) which was adopted in 2015. The Framework suggests numerous changes to current NAIC rules and regulations that are intended to decrease incentives for insurers to establish variable annuities captives, which changes could potentially be applied to both in-force and new business. The Framework proposes that various NAIC groups consider and adopt recommended changes to current rules and regulations (with a likely effective date in 2020) and that, upon adoption, domestic regulators request that insurers ceding business to variable annuity captives recapture such business and dissolve such captives. If adopted, changes in the regulation of variable annuities and variable annuity captives could adversely affect our future financial condition and results of operations.

The NAIC adopted revisions to the Part A Laws and Regulations Preamble (the "Preamble") of the NAIC Financial Regulation Standards and Accreditation Program that includes within the definition of “multi-state insurer” certain insurer-owned captives and special purpose vehicles that are single-state licensed but assume reinsurance from cedants operating in multiple states. The revised definition subjects certain captives, including XXX/AXXX captives, variable annuity and long-term care captives, to all of the accreditation standards applicable to other traditional multi-state insurers, including standards related to capital and surplus requirements, risk-based capital requirements, investment laws and credit for reinsurance laws. Although we do not expect the revised definition to affect our existing life insurance captives (or our ability to engage in life insurance captive transactions in the future), such application will likely prevent us from engaging in variable annuity captive transactions on the same or a similar basis as in the past and, if applied retroactively, would likely cause us to recapture business from and unwind our existing variable annuity captive (“VA Captive”).

While the recapture of business from our existing VA Captive, caused either by actions of the VAIWG or the effect of the Preamble, would not have a material adverse effect on the Company given current market conditions, in the future the Company could experience fluctuations in its risk-based capital ratio due to market volatility if it were prohibited from engaging in similar transactions or required to unwind its existing VA Captive, which could adversely affect our future financial condition and results of operations.

Any regulatory action or change in interpretation that materially adversely affects the Company’s use or materially increases the Company’s cost of using captives or reinsurers for the affected business, either retroactively or prospectively, could have a material adverse impact on the Company’s financial condition or results of operations. If the Company were required to discontinue its use of captives for intercompany reinsurance transactions on a retroactive basis, adverse impacts would include early termination fees payable to third party finance providers with respect to certain structures, diminished capital position and higher cost of capital. Additionally, finding alternative means to support policy liabilities efficiently is an unknown factor that would be dependent, in part, on future market conditions and the Company’s ability to obtain required regulatory approvals. On a prospective basis, discontinuation of the use of captives could impact the types, amounts and pricing of products offered by the Company’s insurance subsidiaries.

Laws, regulations, and initiatives related to unreported deaths and unclaimed property and death benefits may result in operational burdens, fines, unexpected payments, or escheatments.

Since 2012, various states have enacted laws that require life insurers to search for unreported deaths. The National Conference of Insurance Legislators ~~("NCOIL"~~(“NCOIL”) has adopted the Model Unclaimed Life Insurance Benefits Act (the ~~"Unclaimed~~“Unclaimed Benefits ~~Act"~~Act”) and legislation or regulations have been enacted in numerous states that are similar to the Unclaimed Benefits Act, although each ~~state's~~state’s version differs in some respects. The Unclaimed Benefits Act, if adopted by any state, imposes ~~new~~ requirements on insurers to periodically compare their life insurance and annuity contracts and retained asset accounts against the U.S. Social Security ~~Administration's~~Administration’s Death Master File or similar databases (a ~~"Death Database"~~“Death Database”), investigate any potential matches to confirm the death and determine whether benefits are due, and to attempt to locate the beneficiaries of any benefits that are due or, if no beneficiary can be located, escheat the benefit to the state as unclaimed property. Other states in which the Company does business may also consider adopting legislation similar to the Unclaimed Benefits Act. The Company cannot predict whether such legislation will be proposed or enacted in additional states.

The Uniform Laws Commission has adopted revisions to the Uniform Unclaimed Property Act in a manner likely to impact state unclaimed property laws and requirements, though it is not clear at this time to what extent or whether requirements will conflict with otherwise imposed search requirements. Other life insurance industry associations and regulatory associations are also considering these matters. Certain states have amended or may amend their unclaimed property laws ~~to require insurers to compare in-force and certain terminated~~in a manner which creates additional obligations for life insurance policies, annuity contracts, and retained asset accounts against a Death Database, to investigate potential matches to determine whether the named insured is deceased, to attempt to locate and pay beneficiaries any unclaimed benefits required to be paid, and, if no beneficiary can be located, to escheat policy benefits to the appropriate state as unclaimed property.companies. The enactment or amendment of such unclaimed property laws may require the Company to incur significant expenses, including benefits with respect to terminated policies for which no reserves are currently held and unanticipated operational expenses. Any of the foregoing could have a material adverse effect on the ~~Company's~~Company’s financial condition and results of operations.

A number of state treasury departments and administrators of unclaimed property have audited life insurance companies for compliance with unclaimed property ~~laws. The focus~~laws, and state insurance regulators have initiated targeted multi-state examinations of ~~the audits has been to determine whether there have been maturities of policies or contracts, or policies that have exceeded limiting age~~life insurance companies with respect to ~~which death benefits or other payments under~~ the ~~policies should be treated as unclaimed property that should be escheated to the state. In addition, the audits have sought~~companies’ claims paying practices and use of a Death Database to identify unreported deaths ~~of insureds.~~in their life insurance policies, annuity contracts, and retained asset accounts. There is no clear basis in previously existing law for treating an unreported death as giving rise to a policy benefit that would be subject to unclaimed property procedures. AHowever, a number of life insurers ~~however,~~ have entered into resolution agreements with state treasury departments and administrators of unclaimed property ~~under which the life insurers agreed to procedures for comparing their previously issued life~~or settlement or consent agreements with state insurance and annuity contracts and retained asset accounts against a Death Database, treating confirmed deaths as giving rise to a death benefit under their policies, locating beneficiaries and paying them the benefits and interest, escheating the benefits and interest, in some cases at a negotiated rate, to the state if the beneficiary could not be found, and paying penalties to the state, if required.regulators. The amounts publicly reported to have been paid to beneficiaries, ~~and/or~~ escheated to the states, ~~have been substantial.~~

State insurance regulators have initiated targeted multi-state examinations of life insurance companies with respect to the companies' claims paying practices and use of a Death Database to identify unreported deaths in their life insurance policies, annuity contracts and retained asset accounts, despite having no clear basis in previously existing law for requiring a life insurer to search for unreported deaths in order to determine whether a benefit is owed. A number of life insurers, however, have entered into settlement and/or consent agreements with state insurance regulators under which the life insurers agreed to implement systems and procedures for periodically comparing their life insurance and annuity contracts and retained asset accounts against a Death Database, treating confirmed deathspaid as giving rise to a death benefit under their policies, locating beneficiaries and paying them the benefits and interest, escheating the benefits and interest to the state if the beneficiary could not be found, and paying penalties to the state, if required. It has been publicly reported that the life insurers have paid substantial administrative and/or examination fees to the insurance regulators in connection with the settlement or consent ~~agreements.~~agreements have been substantial.

Certain of the ~~Company's~~Company’s subsidiaries as well as certain other insurance companies from whom the Company has coinsured blocks of life insurance and annuity policies are subject to unclaimed property audits and/or targeted multi-state examinations by insurance regulators similar to those described above. It is possible that the audits, examinations, and/or the enactment of state laws similar to the Unclaimed Benefits Act could result in additional payments to beneficiaries, additional escheatment of funds deemed abandoned under state laws, payment of administrative penalties and/or examination fees to state authorities, and changes to the ~~Company's~~Company’s procedures for identifying unreported deaths and escheatment of abandoned property. It is possible any such additional payments and any costs related to changes in Company procedures could materially impact the ~~Company's~~Company’s financial condition and/or results of operations. It is also possible that life insurers, including the Company, may be subject to claims,

regulatory actions, law enforcement actions, and civil litigation arising from their prior business practices, unclaimed property practices, or related audits and examinations. Any resulting liabilities, payments, or costs, including initial and ongoing costs of changes to the ~~Company's~~Company’s procedures or systems, could be significant and could have a material adverse effect on the ~~Company's~~Company’s financial condition and/or results of operations.

~~During December 2012, the West Virginia Treasurer filed actions against the Company's subsidiaries Protective Life Insurance~~The Company ~~and West Coast Life Insurance Company in West Virginia state court (State of West Virginia ex rel. John D. Perdue v. Protective Life Insurance Company~~; ~~State of West Virginia ex rel. John D. Perdue v. West Coast Life Insurance Company; Defendants' Motions~~has been subject to Dismiss granted on December 27, 2013; Notice of Appeal filed on January 27, 2014; dismissal reversed by the West Virginia Supreme Court of Appeals on June 16, 2015; Petition for Rehearing filed by Defendant insurance companies denied on September 21, 2015). The actions, which also name numerous other life insurance companies, allege that the companies

~~violated~~litigation regarding compliance with the West Virginia Uniform Unclaimed Property Act, ~~seek to compel compliance with~~but the Act, and seek payment of unclaimed property, interest, and penalties. While the legal theory or theories that may give rise to liability in the West Virginia Treasurer litigation are uncertain, it is possible that other jurisdictions may pursue similar actions. The Company does not ~~currently~~ believe that losses ~~if any,~~ arising from the ~~West Virginia Treasurer~~ litigation will be material. The Company cannot, however, predict whether other jurisdictions will pursue similar actions or if they do, whether such actions will have a material impact on the ~~Company's~~Company’s financial condition and/or results of operations.

~~New~~The Company is subject to insurance guaranty fund laws, rules and ~~amended~~ regulations ~~regarding~~that could adversely affect the standard of care or standard of conduct applicable to investment professionals, insurance agencies, and financial institutions that recommend or sell annuities may have a material adverse impact on our ability to sell annuities and other products, to retain in-force business and on ourCompany’s financial condition or results of operations.

~~Sales of life~~Under insurance ~~policies, contracts, and annuities offered~~guaranty fund laws in most states, insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. From time to time, companies may be asked to contribute amounts beyond prescribed limits. It is possible that the Company are subject to regulations relating to sales practices adopted by a variety of federal and state regulatory authorities. Certain annuities and life insurance policies such as variable annuities and variable universal life insurance are regulated under the federal securities laws administered by the U.S. Securities and Exchange Commission (the “SEC”). On April 18, 2018, the SEC voted to propose rulemakings and interpretations relating to the standard of conduct applicable to broker-dealers, investment advisers, and their representatives when making certain recommendations to retail customers. Specifically, under the proposed regulations, a broker-dealer would be required to act in the best interest of a retail customer when recommending any securities transaction or investment strategy involving securities to a retail customer. The SEC also proposed an interpretation reaffirming and, in some cases, clarifying its views of the fiduciary duty that investment advisers owe to their clients. Another SEC proposal would require broker-dealers and investment advisers to provide each customer with a summary of the nature of the customer’s relationship with the investment professional, as well as a restriction on the use of the terms “adviser” and “advisor” by broker-dealers.

In addition, broker-dealers, insurance agencies and other financial institutions sell the Company’s annuities to employee benefit plans governed by provisions of the Employee Retirement Income Security Act (“ERISA”) and Individual Retirement Accounts (“IRAs”) that are governed by similar provisions under the Internal Revenue Code (the “Code”). Consequently, our activities and those of the firms that sell the Company’s products are subject to restrictions that require ERISA fiduciaries to perform their duties solely in the interests of ERISA plan participants and beneficiaries, and that prohibit ERISA fiduciaries from causing a covered plan or retirement account to engage in certain prohibited transactions absent an exemption. In general, the prohibited transaction provisions of ERISA and the Code restrict the receipt of compensation from third parties in connection with the provision of investment advice to ERISA plans and participants and IRAs.

In April of 2016, the U.S. Department of Labor (the “DOL”) issued new regulations expanding the definition of “investment advice fiduciary” under ERISA. These new regulations increased the number of circumstances in which the Company and broker-dealers, insurance agencies and other financial institutions that sell the Company’s products could be ~~deemed a fiduciary when providing investment advice~~assessed with respect to ERISA plans or IRAs. The DOL also issued amendments to long-standing exemptions from the provisions of ERISA and the Code that prohibit fiduciaries from engaging in certain types of transactions (“Prohibited Transaction Exemptions”) and adopted new Prohibited Transaction Exemptions.

Organizations that opposed the DOL’s fiduciary regulations have filed lawsuits aimed at overturning them. On March 15, 2018, the U.S. Court of Appeals for the Fifth Circuit issued a ruling vacating all aspects of the DOL’s fiduciary “rule,” including the changes to the definition of “investment advice fiduciary,” the creation of the Best Interest Contract Exemption, and the amendments to existing Prohibited Transaction Exemptions. This ruling is subject to challenge on appeal by the DOL or an intervening third party, however, and other courts considering the same or similar issues may reach a different legal conclusion.

In addition to the foregoing, the NAIC is considering revisions to the Suitability in Annuity Transactions Model Regulation which, if adopted by regulators, would impose a stricter standard of care upon insurers who sell annuities. Likewise, several states are considering legislation or regulatory measures that would implement new requirements and standards applicable to the sale of annuities and, in some cases, life insurance products. These standards vary widely in scope, applicability and timing of implementation. The adoption and enactment of these or any revised standards as law or regulation could have a material adverse effect upon the manner in which the Company's products are sold.

There remains significant uncertainty surrounding the final form that these regulations may take. Our current distributors may continue to move forward with their plans to limit the number of products they offer, including the types of productsproduct lines not offered by the Company. ~~The Company~~In 2017, the NAIC adopted revisions to the Life and Health Insurance Guaranty Association Model Act that, if adopted by states, would result in an increase to the percentage of liabilities attributable to any future long term care provider insolvency that can be assessed to life insurers. Legislation may ~~find it necessary~~be introduced in various states with respect to ~~change sales representative~~guaranty fund assessment laws related to insurance products, including long term care insurance and other specialty products, that differs from the revised Model Act and which increases the cost of future assessments and/or broker compensation, to limit the assistance or advice it can provide to owners of the Company’s annuities, to replace or engage additional distributors, or otherwise change the manner in which it designs and supports sales of its annuities. In addition, the Company continues to incur expensesalters future premium tax offsets received in connection with ~~initial and ongoing compliance obligations with respect to such rules, and in~~guaranty fund assessments. Additionally, judicial review may affect liquidation orders against insolvent companies, which could impact the aggregate these expenses may be significant. Any of the foregoing regulatory, legislative or judicial measures or the reaction to such activity by consumers or other members of the insurance industry could have a material adverse impact on our ability to sell annuities and other products, to retain in-force business, and on our financial condition or results of operations.

guaranty fund system. The Company ~~may be subject to regulation, investigations, enforcement actions, fines and penalties imposed by~~cannot predict the ~~SEC, FINRA and other federal and international regulators in connection with its business operations~~.

Certain life insurance policies, contracts, and annuities offered by the Company are subject to regulation under the federal securities laws administered by the SEC. The federal securities laws contain regulatory restrictions and criminal, administrative, and private remedial provisions. From time to time, the SEC and the Financial Industry Regulatory Authority (“FINRA”) examineamount, nature or ~~investigate the activities~~timing of ~~broker-dealers and investment advisors, including the Company’s affiliated broker-dealers and investment advisers. These examinations~~any future assessments or ~~investigations often focus on the activities of the registered representatives and~~

registered investment advisers doing business through such entities and the entities’ supervision of those persons. It is possible that any examination or investigation could lead to enforcement action by the regulator and/or may result in payments of fines and penalties, payments to customers, or both, as well as changes in systems or procedures of such entities,legislation, any of which could have a material and adverse ~~effect~~impact on the Company’s financial condition or results of operations.

The Company may also be subject to regulation by governments of the countries in which it currently does, or may in the future, do, business, as well as regulation by the U.S. Government with respect to its operations in foreign countries, such as the Foreign Corrupt Practices Act. Penalties for violating the various laws governing the Company’s business in other countries may include restrictions upon business operations, fines and imprisonment, both within the U.S. and abroad. U.S. enforcement of anti-corruption laws continues to increase in magnitude, and penalties may be substantial.

The Company is subject to conditions and requirements set forth in the Telephone Consumer Protection Act (“TCPA”), which places restrictions on the use of automated telephone and facsimile machines. Class action lawsuits alleging violations of the act have been filed against a number of companies, including life insurance carriers. These class action lawsuits contain allegations that defendant carriers were vicariously liable for the alleged wrongful conduct of agents who violated the TCPA. Some of the class actions have resulted in substantial settlements against other insurers. Any such actions against the Company could result in a material adverse effect upon our financial condition or results of operations.

Other types of regulation that could affect the Company and its subsidiaries include, but are not limited to, insurance company investment laws and regulations, state statutory accounting and reserving practices, antitrust laws, minimum solvency requirements, enterprise risk requirements, state securities laws, federal privacy laws, cybersecurity regulation, technology and data regulations, insurable interest laws, federal anti-money laundering and anti-terrorism laws, employment and immigration laws (including laws in Alabama where over half of the Company’s employees are located), and because the Company owns and operates real property, state, federal, and local environmental laws. Under some circumstances, severe penalties may be imposed for breach of these laws.

The Company cannot predict what form any future changes to laws and/or regulations affecting participants in the financial services sector and/or insurance industry, including the Company and its competitors or those entities with which it does business, may take, or what effect, if any, such changes may have.

~~The Company's ability to enter into certain transactions is influenced by how such a transaction might affect Dai-ichi Life's taxation in Japan.~~

Changes to tax law, such as the effect of the Tax Reform Act enacted on December 22, 2017, or interpretations of existing tax law could adversely affect the Company and its ability to compete with non-insurance products or reduce the demand for certain insurance products.

In general, existing law exempts policyholders from current taxation on the increase in value of most insurance and annuity products during these products’ accumulation phase. This favorable tax treatment provides some of the Company’s products with a competitive advantage over products offered by non-insurance companies. To the extent that the law is revised to either reduce the tax-deferred status of life insurance and annuity products, or to establish the tax-deferred status of competing products, then all life insurance companies, including the Company’s subsidiaries, would be adversely affected with respect to their ability to sell their products. Furthermore, such changes would generally cause increased surrenders of existing life insurance and annuity products. For example, a change in law that further restricts the deductibility of interest expense when a business owns a life insurance product would result in increased surrenders of these products.

The Company is subject to corporate income, excise, franchise, and premium taxes. Federal tax law provides certain benefits to the Company, such as the deferral of current taxation on derivatives' and securities' economic income and the current deduction for future policy benefits and claims. The Tax Cuts and Jobs Act (the "Tax Reform Act"), which was enacted in December 2017, will require the Company to report higher amounts of taxable income both now and in the future. However, the legislation also significantly reduced the corporate income tax rate. Overall, the Company expects to pay less income tax in the future.

The Company's mid-2005 transition from relying on reinsurance for newly-written traditional life products to reinsuring some of these products' reserves into its captive insurance companies resulted in a net reduction in its current taxes, offset by an increase in its deferred taxes. The resulting benefit of reduced current taxes is attributed to the applicable life products and is an important component of the profitability of these products. The Tax Reform Act, with its overall lower tax rate, has decreased the economic tax benefit associated with these products. Ultimately, the profitability and competitive position of these products is dependent on the Company’s ability to continue deducting its provision for future policy benefits and claims and the Company's ability to generate taxable income.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended March 31, ~~2018,~~2019, the Company sold no equity securities in transactions which were not registered under the Securities Act of 1933, as amended.

Purchases of Equity Securities by the Issuer

During the quarter ended March 31, ~~2018,~~2019, 100% of the Company’s common stock was owned by Dai-ichi Life Holdings, Inc., and was not available for repurchase by the Company.

Item 6. Exhibits



Exhibit
Number
2(a)2.1±		Master Transaction Agreement, dated as of January ~~18, 2018,~~23, 2019, by and among Protective Life Insurance Company, ~~Protective~~Great-West Life ~~Corporation, The Lincoln National Life~~& Annuity Insurance Company, ~~Lincoln National Corporation, Liberty Mutual~~Great-West Life & Annuity Insurance Company ~~Liberty Mutual Fire Insurance~~of New York, The Canada Life Assurance Company and ~~Liberty Mutual Group Inc., filed as~~The Great-West Life Assurance Company, incorporated by reference to Exhibit 2.1 to the ~~Company's~~Company’s Current Report on Form 8-K filed January ~~22, 2018~~25, 2019 (No. 001-11339).
3(a)3.1		Certificate of Incorporation of the Company effective as of February 1, 2015, incorporated by reference to Exhibit 3(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed February 26, 2015 (No. 001-11339).
3(b)3.2		Amended and Restated Bylaws of the Company, effective ~~January 4, 2016,~~as of February 25, 2019, incorporated by reference to Exhibit ~~3(b) to~~3.1 of the Company’s ~~Annual Report on Form 10-K for the year ended December 31, 2015 filed February 25, 2016 (No. 001-11339).~~
10		~~Amendment One to the Protective Life Corporation Long-Term Incentive Plan filed herewith. †~~
10(b)*		First Amendment to Amended and Restated Credit Agreement, dated as of May 3, 2018, among Protective Life Corporation and Protective Life Insurance Company, as Borrowers, the several lenders from time to time thereto, and Regions Bank, as Administrative Agent for Lenders, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed ~~May 9, 2018~~March 1, 2019 (No. 001-11339).
1210.1†		~~Computation~~The Company’s Deferred Compensation Plan, as Amended and Restated as of ~~Ratios of Consolidated Earnings to Fixed Charges.~~January 1, 2019, filed herewith.
~~31(a)~~10.2†		2019 Parent-Based Award Letter of the Company, filed herewith.
10.3†		2019 Parent-Based Award Provisions of the Company, filed herewith.
10.4†		2019 Performance Units Award Letter (for key officers) of the Company, filed herewith.
10.5†		2019 Performance Units Provisions (for key officers) of the Company, filed herewith.
10.6†		2019 Performance Units Award Letter of the Company, filed herewith.
10.7†		2019 Performance Units Provisions of the Company, filed herewith.
10.8†		2019 Restricted Units Award Letter (for key officers) of the Company, filed herewith.
10.9†		2019 Restricted Units Award Letter of the Company, filed herewith.
10.10†		2019 Restricted Units Provisions of the Company, filed herewith.
10.11†		2019 Long-Term Incentive Plan Awards Acceptance Form, filed herewith.
31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
~~31(b)~~31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
~~32(a)~~32.1		Certification Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~32(b)~~32.2		Certification Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		Financial statements from the quarterly report on Form 10-Q of Protective Life Corporation for the quarter ended March 31, ~~2018,~~2019, filed on May ~~11, 2018,~~7, 2019, formatted in XBRL: (i) the Consolidated Condensed Statements of Income, (ii) the Consolidated Condensed Statements of Comprehensive Income (Loss), (iii) the Consolidated Condensed Balance Sheets, (iv) the Consolidated Condensed Statement of Shareowner’s Equity, (v) the Consolidated Condensed Statements of Cash Flows, and (iv) the Notes to Consolidated Condensed Financial Statements.

*		Incorporated by Reference
†		Management contract or compensatory plan or arrangement
*±		~~Incorporated by Reference~~Pursuant to Item 601(b)(2) of Regulation S-K, the schedules have been omitted and will be furnished to the SEC supplementally upon request.

SIGNATURE

Pursuant to the requirements of ~~Section 13 or 15(d) of~~ the Securities Exchange Act of 1934, the ~~Company~~registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	PROTECTIVE LIFE CORPORATION


Date: May ~~11, 2018~~7, 2019	By:	/s/ PAUL R. WELLS

		Paul R. Wells
		Senior Vice President, Chief Accounting Officer, and
		Controller

~~105~~104



	As Reported		Previous Accounting Method
	For The Three Months Ended March 31, 2018
	(Dollars In Millions)
Financial Statement Line Item:
Balance Sheet
Deferred policy acquisition costs and value of business acquired	$	2,434.2	$	2,295.2
Other liabilities	$	2,454.9	$	2,193.3
Statements of Income
Other income	$	114.4	$	113.2
Amortization of deferred policy acquisition costs and value of business acquired	$	58.0	$	44.2
Other operating expenses, net of reinsurance ceded	$	229.3	$	243.5



	Amount Reclassified from Accumulated
	Other Comprehensive			Affected Line Item in the
For The Three Months Ended March 31, 2018	Income (Loss)			Consolidated Condensed Statements of Income
	(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit⁽¹⁾	$	(113	)	Benefits and settlement expenses, net of reinsurance ceded
	(113		)	Total before tax
	24			Tax (expense) or benefit
	$	(89	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains (losses)	$	2,783		Realized investment gains (losses): All other investments
Impairments recognized in earnings	(3,645		)	Net impairment losses recognized in earnings
	(862		)	Total before tax
	181			Tax (expense) or benefit
	$	(681	)	Net of tax

(1) See Note 6, Derivative Financial Instruments for additional information



	Fair Value��of
	Funded		Unfunded		Total
Creditor	Securities		Exposures		Fair Value
	(Dollars In Millions)
Federal Home Loan Bank	$	236.6	$	—	$	236.6
Southern Co.	205.8		—		205.8
AT&T, Inc.	205.0		—		205.0
Duke Energy Corp.	202.9		—		202.9
Morgan Stanley	192.5		—		192.5
Exelon Corp.	188.1		—		188.1
Goldman Sachs Group Inc.	187.9		—		187.9
Wells Fargo & Co.	185.4		1.6		187.0
Anheuser-Busch Inbev.	185.7		—		185.7
Bank of America Corp.	181.1		0.5		181.6
Total	$	1,971.0	$	2.1	$	1,973.1