Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jun. 30, 2014 | Jul. 23, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'PROTECTIVE LIFE CORP | ' |
Entity Central Index Key | '0000355429 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Jun-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 78,861,427 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q2 | ' |
CONSOLIDATED_CONDENSED_STATEME
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Revenues | ' | ' | ' | ' |
Premiums and policy fees | $851,802 | $756,331 | $1,667,698 | $1,483,178 |
Reinsurance ceded | -342,968 | -390,490 | -670,681 | -725,840 |
Net of reinsurance ceded | 508,834 | 365,841 | 997,017 | 757,338 |
Net investment income | 550,816 | 466,220 | 1,088,979 | 923,854 |
Realized investment gains (losses): | ' | ' | ' | ' |
Derivative financial instruments | -89,926 | 143,881 | -195,276 | 151,266 |
All other investments | 80,148 | -109,978 | 152,262 | -114,123 |
Other-than-temporary impairment losses | -461 | -1,789 | -884 | -3,129 |
Portion recognized in other comprehensive income (before taxes) | -999 | -2,211 | -2,167 | -5,455 |
Net impairment losses recognized in earnings | -1,460 | -4,000 | -3,051 | -8,584 |
Other income | 106,931 | 94,392 | 205,970 | 179,419 |
Total revenues | 1,155,343 | 956,356 | 2,245,901 | 1,889,170 |
Benefits and expenses | ' | ' | ' | ' |
Benefits and settlement expenses, net of reinsurance ceded: (three months: 2014 - $328,555; 2013 - $370,752; six months: 2014 - $633,387; 2013 - $678,058) | 747,816 | 557,866 | 1,476,335 | 1,139,746 |
Amortization of deferred policy acquisition costs and value of business acquired | 51,531 | 74,946 | 107,113 | 127,185 |
Other operating expenses, net of reinsurance ceded: (three months: 2014 - $46,545; 2013 - $50,406; six months: 2014 - $90,311; 2013 - $91,395) | 193,786 | 166,531 | 375,038 | 347,599 |
Total benefits and expenses | 993,133 | 799,343 | 1,958,486 | 1,614,530 |
Income before income tax | 162,210 | 157,013 | 287,415 | 274,640 |
Income tax expense | 54,233 | 53,814 | 95,799 | 93,150 |
Net income | $107,977 | $103,199 | $191,616 | $181,490 |
Net income - basic (in dollars per share) | $1.35 | $1.30 | $2.40 | $2.29 |
Net income - diluted (in dollars per share) | $1.33 | $1.27 | $2.36 | $2.24 |
Cash dividends paid per share (in dollars per share) | $0.24 | $0.20 | $0.44 | $0.38 |
Average shares outstanding - basic (in shares) | 79,979,153 | 79,404,770 | 79,794,831 | 79,272,814 |
Average shares outstanding - diluted (in shares) | 81,446,277 | 81,087,238 | 81,160,800 | 80,898,042 |
CONSOLIDATED_CONDENSED_STATEME1
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Parenthetical) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
CONSOLIDATED CONDENSED STATEMENTS OF INCOME | ' | ' | ' | ' |
Benefits and settlement expenses, reinsurance ceded | $328,555 | $370,752 | $633,387 | $678,058 |
Other operating expenses, reinsurance ceded | $46,545 | $50,406 | $90,311 | $91,395 |
CONSOLIDATED_CONDENSED_STATEME2
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ' | ' | ' | ' |
Net income | $107,977 | $103,199 | $191,616 | $181,490 |
Other comprehensive income (loss): | ' | ' | ' | ' |
Change in net unrealized gains (losses) on investments, net of income tax: (three months: 2014 - $216,476; 2013 - $(420,013); six months: 2014 - $476,065; 2013 - $(496,308)) | 402,027 | -780,022 | 884,120 | -921,713 |
Reclassification adjustment for investment amounts included in net income, net of income tax: (three months: 2014 - $(6,558); 2013 - $(6,131); six months: 2014 - $(8,581); 2013 - $(8,835)) | -12,180 | -11,387 | -15,936 | -16,409 |
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: (three months: 2014 - $(571); 2013 - $(1,293); six months: 2014 - $1,858; 2013 - $2,926) | -1,061 | -2,402 | 3,450 | 5,435 |
Change in accumulated (loss) gain - derivatives, net of income tax: (three months: 2014 - $(325); 2013 - $(1,606); six months: 2014 - $(9); 2013 - $(63)) | -604 | -2,983 | -17 | -117 |
Reclassification adjustment for derivative amounts included in net income, net of income tax: (three months: 2014 - $214; 2013 - $203; six months: 2014 - $449; 2013 - $377) | 399 | 377 | 835 | 700 |
Change in postretirement benefits liability adjustment, net of income tax: (three months: 2014 - $1896; 2013 - $(922); six months: 2014 - $1,264; 2013 - $(1,844)) | 3,520 | -1,712 | 2,347 | -3,424 |
Total other comprehensive income (loss) | 392,101 | -798,129 | 874,799 | -935,528 |
Total comprehensive income (loss) | $500,078 | ($694,930) | $1,066,415 | ($754,038) |
CONSOLIDATED_CONDENSED_STATEME3
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ' | ' | ' | ' |
Change in net unrealized gains (losses) on investments, income tax | $216,476 | ($420,013) | $476,065 | ($496,308) |
Reclassification adjustment for investment amounts included in net income, income tax | -6,558 | -6,131 | -8,581 | -8,835 |
Change in net unrealized gains (losses) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, income tax | -571 | -1,293 | 1,858 | 2,926 |
Change in accumulated (loss) gain - derivatives, income tax | -325 | -1,606 | -9 | -63 |
Reclassification adjustment for derivative amounts included in net income, income tax | 214 | 203 | 449 | 377 |
Change in postretirement benefits liability adjustment, income tax | $1,896 | ($922) | $1,264 | ($1,844) |
CONSOLIDATED_CONDENSED_BALANCE
CONSOLIDATED CONDENSED BALANCE SHEETS (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Assets | ' | ' |
Fixed maturities, at fair value (amortized cost: 2014 - $34,244,088; 2013 - $33,662,295) | $37,164,427 | $34,815,931 |
Fixed maturities, at amortized cost (fair value: 2014 - $451,382; 2013 - $335,676) | 400,000 | 365,000 |
Equity securities, at fair value (cost: 2014 - $771,004; 2013 - $675,758) | 792,047 | 646,027 |
Mortgage loans (2014 and 2013 includes: $531,141 and $627,731 related to securitizations) | 5,294,729 | 5,493,492 |
Investment real estate, net of accumulated depreciation (2014 - $1,123; 2013 - $1,066) | 18,856 | 20,413 |
Policy loans | 1,778,379 | 1,815,744 |
Other long-term investments | 475,719 | 521,811 |
Short-term investments | 208,624 | 134,146 |
Total investments | 46,132,781 | 43,812,564 |
Cash | 361,088 | 466,542 |
Accrued investment income | 485,620 | 465,333 |
Accounts and premiums receivable, net of allowance for uncollectible amounts (2014 - $4,322; 2013 - $4,283) | 101,891 | 101,039 |
Reinsurance receivables | 6,132,712 | 6,175,115 |
Deferred policy acquisition costs and value of business acquired | 3,273,275 | 3,570,215 |
Goodwill | 103,914 | 105,463 |
Property and equipment, net of accumulated depreciation (2014 - $115,056; 2013 - $111,579) | 53,421 | 52,403 |
Other assets | 385,060 | 432,151 |
Assets related to separate accounts | ' | ' |
Variable annuity | 13,304,455 | 12,791,438 |
Variable universal life | 823,747 | 783,618 |
Total assets | 71,157,964 | 68,755,881 |
Liabilities | ' | ' |
Future policy benefits and claims | 29,823,111 | 29,772,325 |
Unearned premiums | 1,586,785 | 1,549,815 |
Total policy liabilities and accruals | 31,409,896 | 31,322,140 |
Stable value product account balances | 2,435,995 | 2,559,552 |
Annuity account balances | 11,071,468 | 11,125,253 |
Other policyholders' funds | 1,400,817 | 1,214,380 |
Other liabilities | 1,381,570 | 1,143,371 |
Income tax payable | 99,869 | 12,761 |
Deferred income taxes | 1,489,331 | 1,050,533 |
Non-recourse funding obligations | 579,078 | 562,448 |
Repurchase program borrowings | 420,490 | 350,000 |
Debt | 1,445,000 | 1,585,000 |
Subordinated debt securities | 540,593 | 540,593 |
Liabilities related to separate accounts | ' | ' |
Variable annuity | 13,304,455 | 12,791,438 |
Variable universal life | 823,747 | 783,618 |
Total liabilities | 66,402,309 | 65,041,087 |
Commitments and contingencies - Note 10 | ' | ' |
Shareowners' equity | ' | ' |
Preferred Stock; $1 par value, shares authorized: 4,000,000; Issued: None | ' | ' |
Common Stock, $.50 par value, shares authorized: 2014 and 2013 - 160,000,000 shares issued: 2014 and 2013 - 88,776,960 | 44,388 | 44,388 |
Additional paid-in-capital | 610,451 | 606,934 |
Treasury stock, at cost (2014 - 9,915,533; 2013 - 10,199,514) | -194,838 | -200,416 |
Retained earnings | 2,926,789 | 2,769,822 |
Accumulated other comprehensive income (loss): | ' | ' |
Net unrealized gains (losses) on investments, net of income tax: (2014 - $757,392; 2013 - $289,908) | 1,406,584 | 538,400 |
Net unrealized (losses) gains relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (2014 - $2,183; 2013 - $325) | 4,053 | 603 |
Accumulated loss - derivatives, net of income tax: (2014 - $(226); 2013 - $(666)) | -417 | -1,235 |
Postretirement benefits liability adjustment, net of income tax: (2014 - $(22,268); 2013 - $(23,532)) | -41,355 | -43,702 |
Total shareowners' equity | 4,755,655 | 3,714,794 |
Total liabilities and shareowners' equity | $71,157,964 | $68,755,881 |
CONSOLIDATED_CONDENSED_BALANCE1
CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
CONSOLIDATED CONDENSED BALANCE SHEETS | ' | ' |
Fixed maturities, amortized cost | $34,244,088 | $33,662,295 |
Fixed maturities at amortized cost, fair value | 451,382 | 335,676 |
Equity securities, cost | 771,004 | 675,758 |
Mortgage loans, related to securitizations | 531,141 | 627,731 |
Investment real estate, accumulated depreciation | 1,123 | 1,066 |
Accounts and premiums receivable, allowance for uncollectible amounts | 4,322 | 4,283 |
Property and equipment, accumulated depreciation | 115,056 | 111,579 |
Preferred Stock, par value (in dollars per share) | $1 | $1 |
Preferred Stock, shares authorized (in shares) | 4,000,000 | 4,000,000 |
Preferred Stock, shares Issued (in shares) | 0 | 0 |
Common Stock, par value (in dollars per share) | $0.50 | $0.50 |
Common Stock, shares authorized (in shares) | 160,000,000 | 160,000,000 |
Common Stock, shares issued (in shares) | 88,776,960 | 88,776,960 |
Treasury stock, shares (in shares) | 9,915,533 | 10,199,514 |
Net unrealized gains (losses) on investments, income tax | 757,392 | 289,908 |
Net unrealized (losses) gains relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, income tax | 2,183 | 325 |
Accumulated loss - derivatives, income tax | -226 | -666 |
Postretirement benefits liability adjustment, income tax | ($22,268) | ($23,532) |
CONSOLIDATED_CONDENSED_STATEME4
CONSOLIDATED CONDENSED STATEMENTS OF SHAREOWNERS' EQUITY (USD $) | Total | Common Stock | Additional Paid-In-Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Income |
In Thousands, unless otherwise specified | ||||||
Balance at Dec. 31, 2013 | $3,714,794 | $44,388 | $606,934 | ($200,416) | $2,769,822 | $494,066 |
Increase (decrease) in shareowners' equity | ' | ' | ' | ' | ' | ' |
Net income | 191,616 | ' | ' | ' | 191,616 | ' |
Other comprehensive income | 874,799 | ' | ' | ' | ' | 874,799 |
Total comprehensive income (loss) | 1,066,415 | ' | ' | ' | ' | ' |
Cash dividends ($0.440 per share) | -34,649 | ' | ' | ' | -34,649 | ' |
Stock-based compensation | 9,095 | ' | 3,517 | 5,578 | ' | ' |
Balance at Jun. 30, 2014 | $4,755,655 | $44,388 | $610,451 | ($194,838) | $2,926,789 | $1,368,865 |
CONSOLIDATED_CONDENSED_STATEME5
CONSOLIDATED CONDENSED STATEMENTS OF SHAREOWNERS' EQUITY (Parenthetical) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
CONSOLIDATED CONDENSED STATEMENTS OF SHAREOWNERS' EQUITY | ' | ' | ' | ' |
Cash dividends (in dollars per share) | $0.24 | $0.20 | $0.44 | $0.38 |
CONSOLIDATED_CONDENSED_STATEME6
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 |
Cash flows from operating activities | ' | ' |
Net income | $191,616 | $181,490 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Realized investment losses (gains) | 46,065 | -28,559 |
Amortization of deferred policy acquisition costs and value of business acquired | 107,113 | 127,185 |
Capitalization of deferred policy acquisition costs | -136,561 | -163,676 |
Depreciation expense | 3,757 | 4,404 |
Deferred income tax | -30,728 | 87,166 |
Accrued income tax | 91,410 | 30,840 |
Interest credited to universal life and investment products | 422,306 | 448,223 |
Policy fees assessed on universal life and investment products | -481,402 | -442,576 |
Change in reinsurance receivables | 42,403 | -26,793 |
Change in accrued investment income and other receivables | -16,821 | 10,675 |
Change in policy liabilities and other policyholders' funds of traditional life and health products | 83,825 | 63,368 |
Trading securities: | ' | ' |
Maturities and principal reductions of investments | 47,888 | 101,838 |
Sale of investments | 112,473 | 167,872 |
Cost of investments acquired | -75,742 | -245,520 |
Other net change in trading securities | -52,325 | 13,544 |
Change in other liabilities | 104,961 | -91,691 |
Other income - gains on repurchase of non-recourse funding obligations | -4,587 | -3,359 |
Other, net | -32,161 | -43,064 |
Net cash provided by operating activities | 423,490 | 191,367 |
Cash flows from investing activities | ' | ' |
Maturities and principal reductions of investments, available-for-sale | 656,492 | 489,364 |
Sale of investments, available-for-sale | 768,785 | 1,336,778 |
Cost of investments acquired, available-for-sale | -2,071,692 | -2,684,864 |
Change in investments, held-to-maturity | -35,000 | -35,000 |
Mortgage loans: | ' | ' |
New lendings | -351,505 | -171,997 |
Repayments | 547,698 | 345,704 |
Change in investment real estate, net | 1,256 | 4,148 |
Change in policy loans, net | 37,365 | 9,611 |
Change in other long-term investments, net | -73,387 | -122,295 |
Change in short-term investments, net | -35,799 | 18,431 |
Net unsettled security transactions | 47,933 | 51,883 |
Purchase of property and equipment | -4,776 | -10,865 |
Sales of property and equipment | ' | 57 |
Payments for business acquisitions | -906 | ' |
Net cash used in investing activities | -513,536 | -769,045 |
Cash flows from financing activities | ' | ' |
Borrowings under line of credit arrangements and debt | 90,000 | 380,000 |
Principal payments on line of credit arrangement and debt | -230,000 | -320,000 |
Issuance (repayment) of non-recourse funding obligations | 16,630 | 18,900 |
Repurchase program borrowings | 70,490 | 190,000 |
Dividends to shareowners | -34,649 | -29,763 |
Investment product deposits and change in universal life deposits | 1,304,549 | 1,718,353 |
Investment product withdrawals | -1,232,428 | -1,492,901 |
Net cash (used in) provided by financing activities | -15,408 | 464,589 |
Change in cash | -105,454 | -113,089 |
Cash at beginning of period | 466,542 | 368,801 |
Cash at end of period | $361,088 | $255,712 |
BASIS_OF_PRESENTATION
BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2014 | |
BASIS OF PRESENTATION | ' |
BASIS OF PRESENTATION | ' |
1. BASIS OF PRESENTATION | |
Basis of Presentation | |
The accompanying unaudited consolidated condensed financial statements of Protective Life Corporation and subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. 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 and six month periods ended June 30, 2014, are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. The year-end consolidated condensed financial data was derived from audited financial statements but does not include all disclosures required by 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, 2013. | |
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. | |
Reclassifications | |
Certain reclassifications have been made in the previously reported financial statements and accompanying notes to make the prior year amounts comparable to those of the current year. Such reclassifications had no effect on previously reported net income or shareowners’ equity. | |
Entities Included | |
The consolidated condensed financial statements 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. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2014 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
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, 2013. There were no significant changes to the Company’s accounting policies during the six months ended June 30, 2014. | |
Accounting Pronouncements Not Yet Adopted | |
Accounting Standards Update (“ASU”) No. 2014-08 — Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity. This Update changes the requirements for reporting discontinued operations and related disclosures. The Update limits the definition of a discontinued operation to disposals that represent “strategic shifts” that will have a major effect on an entity’s operation and financial results. Additionally, the Update requires enhanced disclosures about the components of discontinued operations and the financial effects of the disposal. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2014. The Company is reviewing the additional disclosures required by the Update, and will apply the revised guidance to any disposals occurring after the effective date. | |
ASU No. 2014-09 — 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 is effective for annual and interim periods beginning after December 15, 2016. The Company is reviewing is reviewing its policies and processes to ensure compliance with the requirements in this Update. | |
ASU No. 2014-11 — Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. This Update changes the requirements for classification of certain repurchase agreements, and will expand the use of secured borrowing accounting for repurchase-to-maturity transactions. In addition, the Update requires additional disclosures for repurchase agreements accounted for both as sales and as secured borrowings. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2014. The Update will not impact the Company’s financial position or results of operations. The Company is reviewing its policies and processes to ensure compliance with the additional disclosure requirements in this Update. |
SIGNIFICANT_ACQUISITIONS
SIGNIFICANT ACQUISITIONS | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
SIGNIFICANT ACQUISITIONS | ' | |||||||
SIGNIFICANT ACQUISITIONS | ' | |||||||
3. SIGNIFICANT ACQUISITIONS | ||||||||
On October 1, 2013 Protective Life Insurance Company (“PLICO”) completed the acquisition contemplated by the master agreement (the “Master Agreement”) dated April 10, 2013. Pursuant to that Master Agreement with AXA Financial, Inc. (“AXA”) and AXA Equitable Financial Services, LLC (“AEFS”), PLICO acquired the stock of MONY Life Insurance Company (“MONY”) from AEFS and entered into a reinsurance agreement (the “Reinsurance Agreement”) pursuant to which it reinsured on a 100% indemnity reinsurance basis certain business (the “MLOA Business”) of MONY Life Insurance Company of America (“MLOA”). The final aggregate purchase price of MONY was $689 million. The ceding commission for the reinsurance of the MLOA Business was $370 million. Together, the purchase of MONY and reinsurance of the MLOA Business are hereto referred to as (the “MONY acquisition”). The MONY acquisition allowed the Company to invest its capital and increase the scale of its Acquisitions segment. The MONY acquisition business is comprised of traditional and universal life insurance policies and fixed and variable annuities, most of which were written prior to 2004. | ||||||||
The MONY acquisition was accounted for under the acquisition method of accounting under ASC Topic 805. In accordance with ASC 805-20-30, all identifiable assets acquired and liabilities assumed were measured at fair value as of the acquisition date. During the current quarter as a result of new information obtained about facts and circumstances that existed as of the acquisition date, the Company recorded certain measurement period adjustments to fixed maturities, mortgage loans, cash, accounts and premiums receivable, VOBA, other assets, deferred income taxes, future policy benefits and claims, other policyholders’ funds, and other liabilities. These were customary adjustments that occurred during the normal course of reviewing and integrating the MONY acquisition. The net result on the amount of VOBA recorded by the Company in relation to the MONY acquisition was to decrease VOBA by approximately $14.0 million. This impact has been revised in the comparative consolidated balance sheet presented as of December 31, 2013. The Company has determined that the impact on amortization and other related amounts within the comparative interim and annual periods from that previously presented in the annual or interim consolidated condensed statements of income is immaterial. The amounts presented in the following table related to the MONY acquisition (presented as of the acquisition date of October 1, 2013) have been retrospectively revised for the aforementioned measurement period adjustments. | ||||||||
The following table summarizes the consideration paid for the acquisition and the determination of the fair value of assets acquired and liabilities assumed at the acquisition date: | ||||||||
Fair Value | ||||||||
As of | ||||||||
October 1, 2013 | ||||||||
(Dollars In Thousands) | ||||||||
Assets | ||||||||
Fixed maturities, at fair value | $ | 6,557,853 | ||||||
Equity securities, at fair value | 108,413 | |||||||
Mortgage loans | 830,415 | |||||||
Policy loans | 967,534 | |||||||
Short-term investments | 130,963 | |||||||
Total investments | 8,595,178 | |||||||
Cash | 216,164 | |||||||
Accrued investment income | 114,695 | |||||||
Accounts and premiums receivable, net of allowance for uncollectible amounts | 26,055 | |||||||
Reinsurance receivables | 422,692 | |||||||
Value of business acquired | 205,767 | |||||||
Other assets | 5,104 | |||||||
Income tax receivables | 21,197 | |||||||
Deferred income taxes | 188,142 | |||||||
Separate account assets | 195,452 | |||||||
Total assets | $ | 9,990,446 | ||||||
Liabilities | ||||||||
Future policy benefits and claims | $ | 7,645,969 | ||||||
Unearned premiums | 3,066 | |||||||
Total policy liabilities and accruals | 7,649,035 | |||||||
Annuity account balances | 752,163 | |||||||
Other policyholders’ funds | 636,448 | |||||||
Other liabilities | 66,124 | |||||||
Non-recourse funding obligation | 2,548 | |||||||
Separate account liabilities | 195,344 | |||||||
Total liabilities | 9,301,662 | |||||||
Net assets acquired | $ | 688,784 | ||||||
The following (unaudited) pro forma condensed consolidated results of operations assumes that the aforementioned acquisition was completed as of January 1, 2012: | ||||||||
Unaudited | ||||||||
For The | For The | |||||||
Three Months Ended | Six Months Ended | |||||||
June 30, 2013 | June 30, 2013 | |||||||
(Dollars In Thousands) | ||||||||
Revenue | $ | 1,162,748 | $ | 2,316,066 | ||||
Net income | $ | 120,589 | $ | 205,516 | ||||
EPS - basic | $ | 1.52 | $ | 2.59 | ||||
EPS - diluted | $ | 1.49 | $ | 2.54 |
MONY_CLOSED_BLOCK_OF_BUSINESS
MONY CLOSED BLOCK OF BUSINESS | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
MONY CLOSED BLOCK OF BUSINESS | ' | |||||||
MONY CLOSED BLOCK OF BUSINESS | ' | |||||||
4. MONY CLOSED BLOCK OF BUSINESS | ||||||||
In 1998, 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 MONY acquisition as discussed in Note 3, Significant Acquisitions. | ||||||||
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 Insurance Department (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 accumulated other comprehensive income (loss) (“AOCI”)) at the acquisition date 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 has developed an actuarial calculation of the expected timing of MONY’s Closed Block’s earnings as of October 1, 2013. | ||||||||
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 from December 31, 2013 through June 30, 2014 is as follows: | ||||||||
As of | ||||||||
June 30, 2014 | December 31, 2013 | |||||||
(Dollars In Thousands) | ||||||||
Closed block liabilities | ||||||||
Future policy benefits, policyholders’ account balances and other | $ | 6,195,402 | $ | 6,261,819 | ||||
Policyholder dividend obligation | 328,872 | 190,494 | ||||||
Other liabilities | 59,751 | 1,259 | ||||||
Total closed block liabilities | 6,584,025 | 6,453,572 | ||||||
Closed block assets | ||||||||
Fixed maturities, available-for-sale, at fair value | $ | 4,402,851 | $ | 4,109,142 | ||||
Equity securities, available-for-sale, at fair value | 5,369 | 5,223 | ||||||
Mortgage loans on real estate | 512,800 | 601,959 | ||||||
Policy loans | 787,348 | 802,013 | ||||||
Cash and other invested assets | 70,954 | 140,577 | ||||||
Other assets | 237,931 | 207,265 | ||||||
Total closed block assets | 6,017,253 | 5,866,179 | ||||||
Excess of reported closed block liabilities over closed block assets | 566,772 | 587,393 | ||||||
Portion of above representing accumulated other comprehensive income: | ||||||||
Net unrealized investment gains (losses) net of deferred tax benefit of $0 and $1,074 net of policyholder dividend obligation of $86,196 and $12,720 | — | (1,994 | ) | |||||
Future earnings to be recognized from closed block assets and closed block liabilities | $ | 566,772 | $ | 585,399 | ||||
Reconciliation of the policyholder dividend obligation from December 31, 2013 through June 30, 2014 is as follows: | ||||||||
For The | ||||||||
Six Months Ended | ||||||||
June 30, 2014 | ||||||||
(Dollars In Thousands) | ||||||||
Policyholder dividend obligation, at December 31, 2013 | $ | 190,494 | ||||||
Applicable to net revenue (losses) | (6,951 | ) | ||||||
Change in net unrealized investment gains (losses) allocated to the policyholder dividend obligation | 145,329 | |||||||
Policyholder dividend obligation, end of period | $ | 328,872 | ||||||
Closed Block revenues and expenses were as follows: | ||||||||
For The | For The | |||||||
Three Months Ended | Six Months Ended | |||||||
June 30, 2014 | June 30, 2014 | |||||||
(Dollars In Thousands) | ||||||||
Revenues | ||||||||
Premiums and other income | $ | 53,073 | $ | 102,846 | ||||
Net investment income | 60,416 | 112,623 | ||||||
Net investment gains | 1,086 | 6,105 | ||||||
Total revenues | 114,575 | 221,574 | ||||||
Benefits and other deduction | ||||||||
Benefits and settlement expenses | 103,209 | 199,535 | ||||||
Other operating expenses | 383 | 90 | ||||||
Total benefits and other deductions | 103,592 | 199,625 | ||||||
Net revenues before income taxes | 10,983 | 21,949 | ||||||
Income tax expense | 3,844 | 7,682 | ||||||
Net revenues | $ | 7,139 | $ | 14,267 |
PROPOSED_DAIICHI_MERGER
PROPOSED DAI-ICHI MERGER | 6 Months Ended |
Jun. 30, 2014 | |
PROPOSED DAI-ICHI MERGER | ' |
PROPOSED DAI-ICHI MERGER | ' |
5. PROPOSED DAI-ICHI MERGER | |
On June 3, 2014, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan (“Dai-ichi”) and DL Investment (Delaware), Inc., a Delaware corporation and wholly owned subsidiary of Dai-ichi which provides for the merger of DL Investment (Delaware), Inc. with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Dai-ichi. | |
The Company’s Board of Directors unanimously (1) determined that the Merger and the other transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of, the Company and its shareowners, (2) approved the execution, delivery and performance of the Merger Agreement by the Company and the consummation of the Merger and the other transactions contemplated by the Merger Agreement, and (3) resolved to recommend the approval and adoption of the Merger Agreement and the transactions contemplated by the Merger Agreement by the shareowners of the Company. The Board of Directors received an opinion as to the fairness of the Merger consideration to be received by the shareowners of the Company from its financial advisor, Morgan Stanley & Co. LLC related to the terms of the Merger Agreement. | |
If the proposed Merger is completed, at the effective time of the Merger (the “Effective Time”), each share of the Company’s common stock, par value $0.50 per share, issued and outstanding immediately prior to the Effective Time, other than certain excluded shares, will be converted into the right to receive $70 in cash, without interest (the “Per Share Merger Consideration”). Shares of common stock held by Dai-ichi or the Company or their respective direct or indirect wholly-owned subsidiaries will not be entitled to receive the Merger Consideration. Stock appreciation rights, restricted stock units and performance shares issued under various benefit plans will be paid out as described below under “Treatment of Benefit Plans”. | |
Shareowners of the Company will be asked to vote on the adoption of the Merger Agreement and the Merger at a special shareowners meeting that will be held on a date to be announced. Completion of the Merger is subject to various closing conditions, including, but not limited to, (1) adoption of the Merger Agreement by the affirmative vote of the holders of at least a majority of all outstanding shares of the Company’s common stock (the “Shareowner Approval”), (2) requisite approval of the Japan Financial Services Agency of an application and notification filing by Dai-ichi and its affiliates, (3) the receipt of certain insurance regulatory approvals, (4) the absence of any laws that have been adopted or promulgated, or any order, injunction, decision or decree issued or remaining in effect, that would prohibit the Merger or make the Merger illegal, and (5) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which waiting period terminated on July 25, 2014, pursuant to a grant of early termination by the Federal Trade Commission. Each party’s obligation to consummate the Merger also is subject to certain additional conditions that include the accuracy of the other party’s representations and warranties contained in the Merger Agreement (subject to certain materiality qualifiers) and the other party’s compliance with its covenants and agreements contained in the Merger Agreement in all material respects. The Merger Agreement does not contain a financing condition. | |
The Merger Agreement contains representations and warranties customary for transactions of this type. The Company has agreed to various customary covenants and agreements, including, among others, agreements to conduct its business in the ordinary course during the period between the execution of the Merger Agreement and the Effective Time, not to engage in certain kinds of transactions during this period, and to convene and hold a meeting of its shareowners for the purpose of obtaining the Shareowners Approval. | |
In addition, and subject to certain limitations, either party may terminate the Merger Agreement if the Merger is not consummated by February 28, 2015, which date is extended until April 30, 2015 in the event of delays in obtaining regulatory approval. | |
Treatment of Benefit Plans | |
Pursuant to the Merger Agreement, at or immediately prior to the Effective Time, each stock appreciation right with respect to shares of Common Stock granted under any Stock Plan (each, a “SAR”) that is outstanding and unexercised immediately prior to the Effective Time and that has a base price per share of Common Stock underlying such SAR (the “Base Price”) that is less than the Per Share Merger Consideration (each such SAR, an “In-the-Money SAR”), whether or not exercisable or vested, will be cancelled and converted into the right to receive an amount in cash, without interest, determined by multiplying (i) the excess of the Per Share Merger Consideration over the Base Price of such In-the-Money SAR by (ii) the number of shares of Common Stock subject to such In-the-Money SAR (such amount, the “SAR Consideration”). At the Effective Time, each SAR that has a Base Price that is equal to or greater than the Per Share Merger Consideration, whether or not exercisable or vested, will be cancelled and the holder of such SAR will not be entitled to receive any payment in exchange for such cancellation. | |
Pursuant to the Merger Agreement, at or immediately prior to the Effective Time, each restricted share unit with respect to a share of Common Stock granted under any Stock Plan (each, a “RSU”) that is outstanding immediately prior to the Effective Time, whether or not vested, will be cancelled and converted into the right to receive an amount in cash, without interest, determined by multiplying (i) the Per Share Merger Consideration by (ii) the number of RSUs. | |
Pursuant to the Merger Agreement, at or immediately prior to the Effective Time, the number of performance shares earned for each award of performance shares granted under any Stock Plan will be calculated by determining the number of performance shares that would have been paid if the subject award period had ended on the December 31 immediately preceding the Effective Time (based on the conditions set for payment of performance share awards for the subject award period), provided that the number of performance shares earned for each award will not be less than the aggregate number of performance shares at the target performance level, and provided further that with respect to awards granted in the year in which the Effective Time occurs, performance shares will be earned at the same percentage as awards granted in the year preceding the year in which the Effective Time occurs. At or immediately prior to the Effective Time, each performance share so earned (each, a “Performance Share”) that is outstanding immediately prior to the Effective Time, whether or not vested, will be cancelled and converted into the right to receive an amount in cash, without interest, determined by multiplying (i) the Per Share Merger Consideration by (ii) the number of Performance Shares. |
INVESTMENT_OPERATIONS
INVESTMENT OPERATIONS | 6 Months Ended | |||||||||||||||||||
Jun. 30, 2014 | ||||||||||||||||||||
INVESTMENT OPERATIONS | ' | |||||||||||||||||||
INVESTMENT OPERATIONS | ' | |||||||||||||||||||
6. INVESTMENT OPERATIONS | ||||||||||||||||||||
Net realized gains (losses) for all other investments are summarized as follows: | ||||||||||||||||||||
For The | For The | |||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
Fixed maturities | $ | 20,198 | $ | 19,152 | $ | 27,568 | $ | 31,461 | ||||||||||||
Equity securities | — | 2,366 | — | 2,367 | ||||||||||||||||
Impairments on fixed maturity securities | (1,460 | ) | (2,910 | ) | (3,051 | ) | (6,497 | ) | ||||||||||||
Impairments on equity securities | — | (1,090 | ) | — | (2,087 | ) | ||||||||||||||
Modco trading portfolio | 60,989 | (126,694 | ) | 127,292 | (142,022 | ) | ||||||||||||||
Other investments | (1,039 | ) | (4,802 | ) | (2,598 | ) | (5,929 | ) | ||||||||||||
Total realized gains (losses) - investments | $ | 78,688 | $ | (113,978 | ) | $ | 149,211 | $ | (122,707 | ) | ||||||||||
For the three and six months ended June 30, 2014, gross realized gains on investments available-for-sale (fixed maturities, equity securities, and short-term investments) were $20.4 million and $28.1 million and gross realized losses were $1.6 million and $3.4 million, including $1.4 million and $2.9 million of impairment losses, respectively. | ||||||||||||||||||||
For the three and six months ended June 30, 2013, gross realized gains on investments available-for-sale (fixed maturities, equity securities, and short-term investments) were $23.9 million and $36.8 million and gross realized losses were $6.2 million and $11.1 million, including $3.8 million and $8.2 million of impairment losses, respectively. | ||||||||||||||||||||
For the three and six months ended June 30, 2014, the Company sold securities in an unrealized gain position with a fair value (proceeds) of $306.3 million and $571.0 million, respectively. The gain realized on the sale of these securities was $20.4 million and $28.1 million, respectively. | ||||||||||||||||||||
For the three and six months ended June 30, 2013, the Company sold securities in an unrealized gain position with a fair value (proceeds) of $409.9 million and $798.5 million, respectively. The gain realized on the sale of these securities was $23.9 million and $36.8 million, respectively. | ||||||||||||||||||||
For the three and six months ended June 30, 2014, the Company sold or otherwise disposed of securities in an unrealized loss position with a fair value (proceeds) of $1.6 million and $4.4 million, respectively. The losses realized on the sale of these securities were $0.2 million and $0.5 million, respectively. The Company made the decision to exit these holdings in conjunction with our overall asset liability management process. | ||||||||||||||||||||
For the three and six months ended June 30, 2013, the Company sold securities in an unrealized loss position with a fair value (proceeds) of $53.2 million and $57.2 million, respectively. The losses realized on the sale of these securities were $2.4 million and $3.0 million, respectively. The Company made the decision to exit these holdings in conjunction with our overall asset liability management process. | ||||||||||||||||||||
The amortized cost and fair value of the Company’s investments classified as available-for-sale as of June 30, 2014 and December 31, 2013, are as follows: | ||||||||||||||||||||
Gross | Gross | Total OTTI | ||||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | Recognized | ||||||||||||||||
Cost | Gains | Losses | Value | in OCI(1) | ||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
2014 | ||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||
Bonds | ||||||||||||||||||||
Residential mortgage-backed securities | $ | 1,398,009 | $ | 50,699 | $ | (13,971 | ) | $ | 1,434,737 | $ | 6,318 | |||||||||
Commercial mortgage-backed securities | 1,039,299 | 52,339 | (4,023 | ) | 1,087,615 | — | ||||||||||||||
Other asset-backed securities | 878,416 | 20,116 | (32,847 | ) | 865,685 | (82 | ) | |||||||||||||
U.S. government-related securities | 1,544,310 | 46,206 | (21,785 | ) | 1,568,731 | — | ||||||||||||||
Other government-related securities | 19,179 | 3,035 | — | 22,214 | — | |||||||||||||||
States, municipals, and political subdivisions | 1,372,418 | 234,104 | (3,673 | ) | 1,602,849 | — | ||||||||||||||
Corporate bonds | 25,137,768 | 2,669,336 | (79,197 | ) | 27,727,907 | — | ||||||||||||||
31,389,399 | 3,075,835 | (155,496 | ) | 34,309,738 | 6,236 | |||||||||||||||
Equity securities | 747,284 | 35,119 | (14,075 | ) | 768,328 | — | ||||||||||||||
Short-term investments | 117,511 | — | — | 117,511 | — | |||||||||||||||
$ | 32,254,194 | $ | 3,110,954 | $ | (169,571 | ) | $ | 35,195,577 | $ | 6,236 | ||||||||||
2013 | ||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||
Bonds | ||||||||||||||||||||
Residential mortgage-backed securities | $ | 1,435,477 | $ | 34,155 | $ | (24,564 | ) | $ | 1,445,068 | $ | 979 | |||||||||
Commercial mortgage-backed securities | 963,461 | 26,900 | (19,705 | ) | 970,656 | — | ||||||||||||||
Other asset-backed securities | 926,396 | 15,135 | (69,548 | ) | 871,983 | (51 | ) | |||||||||||||
U.S. government-related securities | 1,529,818 | 32,150 | (54,078 | ) | 1,507,890 | — | ||||||||||||||
Other government-related securities | 49,171 | 2,257 | (1 | ) | 51,427 | — | ||||||||||||||
States, municipals, and political subdivisions | 1,315,457 | 103,663 | (8,291 | ) | 1,410,829 | — | ||||||||||||||
Corporate bonds | 24,644,025 | 1,507,630 | (392,067 | ) | 25,759,588 | — | ||||||||||||||
30,863,805 | 1,721,890 | (568,254 | ) | 32,017,441 | 928 | |||||||||||||||
Equity securities | 654,579 | 6,631 | (36,362 | ) | 624,848 | — | ||||||||||||||
Short-term investments | 81,703 | — | — | 81,703 | — | |||||||||||||||
$ | 31,600,087 | $ | 1,728,521 | $ | (604,616 | ) | $ | 32,723,992 | $ | 928 | ||||||||||
(1)These amounts are included in the gross unrealized gains and gross unrealized losses columns above. | ||||||||||||||||||||
The amortized cost and fair value of the Company’s investments classified as held-to-maturity as of June 30, 2014 and December 31, 2013, are as follows: | ||||||||||||||||||||
Gross | Gross | Total OTTI | ||||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | Recognized | ||||||||||||||||
Cost | Gains | Losses | Value | in OCI | ||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
2014 | ||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||
Other | $ | 400,000 | $ | 51,382 | $ | — | $ | 451,382 | $ | — | ||||||||||
$ | 400,000 | $ | 51,382 | $ | — | $ | 451,382 | $ | — | |||||||||||
2013 | ||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||
Other | $ | 365,000 | $ | — | $ | (29,324 | ) | $ | 335,676 | $ | — | |||||||||
$ | 365,000 | $ | — | $ | (29,324 | ) | $ | 335,676 | $ | — | ||||||||||
During the six months ended June 30, 2014 and the year ended December 31, 2013, the Company did not record any other-than-temporary impairments on held-to-maturity securities. The Company’s held-to-maturity securities had no gross unrecognized holding losses for the period ended June 30, 2014 and $29.3 million for the year ended December 31, 2013. 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, financial health of the issuer, continued access of the issuer to capital markets and other pertinent information | ||||||||||||||||||||
As of June 30, 2014 and December 31, 2013, the Company had an additional $2.9 billion and $2.8 billion of fixed maturities, $23.7 million and $21.2 million of equity securities, and $91.1 million and $52.4 million of short-term investments classified as trading securities, respectively. | ||||||||||||||||||||
The amortized cost and fair value of available-for-sale and held-to-maturity fixed maturities as of June 30, 2014, 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 | |||||||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||||||
Cost | Value | Cost | Value | |||||||||||||||||
(Dollars In Thousands) | (Dollars In Thousands) | |||||||||||||||||||
Due in one year or less | $ | 438,145 | $ | 448,757 | $ | — | $ | — | ||||||||||||
Due after one year through five years | 6,023,849 | 6,427,870 | — | — | ||||||||||||||||
Due after five years through ten years | 8,650,531 | 9,173,945 | — | — | ||||||||||||||||
Due after ten years | 16,276,874 | 18,259,166 | 400,000 | 451,382 | ||||||||||||||||
$ | 31,389,399 | $ | 34,309,738 | $ | 400,000 | $ | 451,382 | |||||||||||||
During the three and six months ended June 30, 2014, the Company recorded pre-tax other-than-temporary impairments of investments of $0.5 million and $0.9 million, all of which related to fixed maturities, respectively. Credit impairments recorded in earnings during the three and six months ended June 30, 2014 were $1.5 million and $3.1 million, respectively. During the three and six months ended June 30, 2014, $1.0 million and $2.2 million of non-credit losses previously recorded in other comprehensive income (loss) were recorded in earnings as credit losses, respectively. For the three and six months ended June 30, 2014, 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. | ||||||||||||||||||||
During the three and six months ended June 30, 2013, the Company recorded pre-tax other-than-temporary impairments of investments of $1.8 million and $3.1 million, of which $0.7 million and $1.0 million related to debt securities and $1.1 million and $2.1 million related to equity securities, respectively. Credit impairments recorded in earnings during the three and six months ended June 30, 2013, were $4.0 million and $8.6 million, respectively. During the three and six months ended June 30, 2013, $2.2 million and $5.5 million of non-credit losses previously recorded in other comprehensive income were recorded in earnings as credit losses, respectively. For the three and six months ended June 30, 2013, there were no other-than-temporary impairments related to debt securities or equity securities that the Company intended to sell or expected to be required to sell. | ||||||||||||||||||||
The following chart is a rollforward of available-for-sale credit losses on debt securities held by the Company for which a portion of other-than-temporary impairments were recognized in other comprehensive income (loss): | ||||||||||||||||||||
For The | For The | |||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
Beginning balance | $ | 20,839 | $ | 63,183 | $ | 41,692 | $ | 122,121 | ||||||||||||
Additions for newly impaired securities | — | 618 | — | 1,615 | ||||||||||||||||
Additions for previously impaired securities | 553 | 1,568 | 1,027 | 3,054 | ||||||||||||||||
Reductions for previously impaired securities due to a change in expected cash flows | (3,407 | ) | (6,049 | ) | (24,734 | ) | (67,470 | ) | ||||||||||||
Reductions for previously impaired securities that were sold in the current period | — | (7,488 | ) | — | (7,488 | ) | ||||||||||||||
Ending balance | $ | 17,985 | $ | 51,832 | $ | 17,985 | $ | 51,832 | ||||||||||||
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 June 30, 2014: | ||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||
Value | Loss | Value | Loss | Value | Loss | |||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
Residential mortgage-backed securities | $ | 145,373 | $ | (10,089 | ) | $ | 94,770 | $ | (3,882 | ) | $ | 240,143 | $ | (13,971 | ) | |||||
Commercial mortgage-backed securities | 37,107 | (353 | ) | 126,051 | (3,670 | ) | 163,158 | (4,023 | ) | |||||||||||
Other asset-backed securities | 121,233 | (6,982 | ) | 524,614 | (25,865 | ) | 645,847 | (32,847 | ) | |||||||||||
U.S. government-related securities | 344,815 | (7,321 | ) | 314,356 | (14,464 | ) | 659,171 | (21,785 | ) | |||||||||||
Other government-related securities | — | — | — | — | — | — | ||||||||||||||
States, municipalities, and political subdivisions | 20,152 | (1,641 | ) | 22,254 | (2,032 | ) | 42,406 | (3,673 | ) | |||||||||||
Corporate bonds | 815,310 | (24,098 | ) | 1,447,963 | (55,099 | ) | 2,263,273 | (79,197 | ) | |||||||||||
Equities | 105,413 | (3,741 | ) | 77,077 | (10,334 | ) | 182,490 | (14,075 | ) | |||||||||||
$ | 1,589,403 | $ | (54,225 | ) | $ | 2,607,085 | $ | (115,346 | ) | $ | 4,196,488 | $ | (169,571 | ) | ||||||
RMBS have a gross unrealized loss greater than twelve months of $3.9 million as of June 30, 2014. 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. | ||||||||||||||||||||
CMBS have a gross unrealized loss greater than twelve months of $3.7 million as of June 30, 2014. 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 have a gross unrealized loss greater than twelve months of $25.9 million as of June 30, 2014. This category predominately includes student-loan backed auction rate securities, the underlying collateral, of which is at least 97% guaranteed by the Federal Family Education Loan Program (“FFELP”). These unrealized losses have occurred within the Company’s auction rate securities (“ARS”) portfolio since the market collapse during 2008. 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 category has gross unrealized losses greater than twelve months of $14.5 million as of June 30, 2014. These declines were entirely related to changes in interest rates. | ||||||||||||||||||||
The corporate bonds category has gross unrealized losses greater than twelve months of $55.1 million as of June 30, 2014. These declines were primarily related to changes in interest rates during the period. 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. | ||||||||||||||||||||
The equities category has a gross unrealized loss greater than twelve months of $10.3 million as of June 30, 2014. The aggregate decline in market value of these securities was deemed temporary due to factors supporting the recoverability of the respective investments. Positive factors include credit ratings, the financial health of the issuer, the continued access of the issuer to the capital markets, and other pertinent information. | ||||||||||||||||||||
The Company does not consider these unrealized loss positions to be other-than-temporary, based on the factors discussed and because the Company has the ability and intent to hold these investments until the fair values recover, and does not intend to sell or expect to be required to sell the securities before recovering the Company’s amortized cost of debt securities. | ||||||||||||||||||||
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 December 31, 2013: | ||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||
Value | Loss | Value | Loss | Value | Loss | |||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
Residential mortgage-backed securities | $ | 333,235 | $ | (14,051 | ) | $ | 210,486 | $ | (10,513 | ) | $ | 543,721 | $ | (24,564 | ) | |||||
Commercial mortgage-backed securities | 429,228 | (18,467 | ) | 13,840 | (1,238 | ) | 443,068 | (19,705 | ) | |||||||||||
Other asset-backed securities | 175,846 | (14,555 | ) | 497,512 | (54,993 | ) | 673,358 | (69,548 | ) | |||||||||||
U.S. government-related securities | 891,698 | (53,508 | ) | 6,038 | (570 | ) | 897,736 | (54,078 | ) | |||||||||||
Other government-related securities | 10,161 | (1 | ) | — | — | 10,161 | (1 | ) | ||||||||||||
States, municipalities, and political subdivisions | 172,157 | (8,113 | ) | 335 | (178 | ) | 172,492 | (8,291 | ) | |||||||||||
Corporate bonds | 7,484,010 | (353,211 | ) | 272,423 | (38,856 | ) | 7,756,433 | (392,067 | ) | |||||||||||
Equities | 376,776 | (27,861 | ) | 21,974 | (8,501 | ) | 398,750 | (36,362 | ) | |||||||||||
$ | 9,873,111 | $ | (489,767 | ) | $ | 1,022,608 | $ | (114,849 | ) | $ | 10,895,719 | $ | (604,616 | ) | ||||||
RMBS had a gross unrealized loss greater than twelve months of $10.5 million as of December 31, 2013. 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. | ||||||||||||||||||||
CMBS had a gross unrealized loss greater than twelve months of $1.2 million as of December 31, 2013. 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 $55.0 million as of December 31, 2013. This category predominately includes student-loan backed auction rate securities, the underlying collateral, of which is at least 97% guaranteed by the FFELP. These unrealized losses have occurred within the Company’s ARS portfolio since the market collapse during 2008. 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 corporate bonds category had gross unrealized losses greater than twelve months of $38.9 million as of December 31, 2013. 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. | ||||||||||||||||||||
The equities category had a gross unrealized loss greater than twelve months of $8.5 million as of December 31, 2013. The aggregate decline in market value of these securities was deemed temporary due to factors supporting the recoverability of the respective investments. Positive factors include credit ratings, the financial health of the issuer, the continued access of the issuer to the capital markets, and other pertinent information. | ||||||||||||||||||||
The Company does not consider these unrealized loss positions to be other-than-temporary, based on the factors discussed and because the Company has the ability and intent to hold these investments until the fair values recover, and does not intend to sell or expect to be required to sell the securities before recovering the Company’s amortized cost of debt securities. | ||||||||||||||||||||
As of June 30, 2014, the Company had securities in its available-for-sale portfolio which were rated below investment grade of $1.7 billion and had an amortized cost of $1.7 billion. In addition, included in the Company’s trading portfolio, the Company held $334.5 million of securities which were rated below investment grade. Approximately $817.9 million of the below investment grade securities were not publicly traded. | ||||||||||||||||||||
The change in unrealized gains (losses), net of income tax, on fixed maturity and equity securities, classified as available-for-sale is summarized as follows: | ||||||||||||||||||||
For The | For The | |||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
Fixed maturities | $ | 519,745 | $ | (849,033 | ) | $ | 1,148,357 | $ | (1,018,822 | ) | ||||||||||
Equity securities | 14,591 | (8,392 | ) | 33,004 | (4,602 | ) | ||||||||||||||
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 Variable Interest Entity (“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 one wholly owned subsidiary, Red Mountain, LLC (“Red Mountain”), that was classified as a VIE as of June 30, 2014 and December 31, 2013. 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”) and the Company in which Golden Gate V issued non-recourse funding obligations to Red Mountain and Red Mountain issued the note to Golden Gate V. Credit enhancement on the Red Mountain Note is provided by an unrelated third party. For details of this transaction, see Note 9, 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 of $10,000. Additionally, the holding company (“PLC”) has guaranteed the VIE’s payment obligation for the credit enhancement fee to the unrelated third party provider. As of June 30, 2014, no payments have been made or required related to this guarantee. |
MORTGAGE_LOANS
MORTGAGE LOANS | 6 Months Ended | |||||||||||||||||||
Jun. 30, 2014 | ||||||||||||||||||||
MORTGAGE LOANS | ' | |||||||||||||||||||
MORTGAGE LOANS | ' | |||||||||||||||||||
7. MORTGAGE LOANS | ||||||||||||||||||||
Mortgage Loans | ||||||||||||||||||||
The Company invests a portion of its investment portfolio in commercial mortgage loans. As of June 30, 2014, the Company’s mortgage loan holdings were approximately $5.3 billion. The Company has specialized in making loans on either credit-oriented commercial properties or credit-anchored strip shopping centers 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, professional office buildings, and warehouses). The Company believes 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 mortgage loans portfolio was underwritten and funded by the Company. From time to time, the Company may acquire loans in conjunction with an acquisition. | ||||||||||||||||||||
The 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 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 our mortgage loans have call options or interest rate reset options between 3 and 10 years. However, if interest rates were to significantly increase, we may be unable to exercise the call options or increase the interest rates on our existing mortgage loans commensurate with the significantly increased market rates. Assuming the loans are called at their next call dates, approximately $43.7 million would become due for the remainder of 2014, $1.1 billion in 2015 through 2019, $501.4 million in 2020 through 2024, and $130.5 million thereafter. | ||||||||||||||||||||
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 June 30, 2014 and December 31, 2013, approximately $613.8 million and $666.6 million, respectively, of the Company’s mortgage loans have this participation feature. Cash flows received as a result of this participation feature are recorded as interest income. During the three and six months ended June 30, 2014 and 2013, the Company recognized $2.8 million, $5.8 million, $5.8 million, and $9.2 million, respectively, of participating mortgage loan income. | ||||||||||||||||||||
As of June 30, 2014, approximately $5.9 million, or 0.01%, of invested assets consisted of nonperforming, restructured or mortgage loans that were foreclosed and were converted to real estate properties. The Company does not expect these investments to adversely affect its liquidity or ability to maintain proper matching of assets and liabilities. During the six months ended June 30, 2014, certain mortgage loan transactions occurred that were accounted for as troubled debt restructurings under Topic 310 of the FASB ASC. For all mortgage loans, the impact of troubled debt restructurings is generally reflected in our investment balance and in the allowance for mortgage loan credit losses. Transactions accounted for as troubled debt restructurings during the quarter included acceptance of assets in satisfaction of principal, and were the result of agreements between the creditor and the debtor. During the three and six month periods ending June 30, 2014, the Company accepted assets of $15.1 million in satisfaction of $16.0 million of principal resulting in a $0.9 million decrease in the Company’s investment in mortgage loans net of existing allowances for mortgage loan losses. No loans classified as troubled debt restructurings remained on the Company’s balance sheet as of June 30, 2014. | ||||||||||||||||||||
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 June 30, 2014, $3.7 million of mortgage loans not subject to a pooling and servicing agreement were nonperforming or restructured. None of these nonperforming loans have been restructured during the six months ended June 30, 2014. The Company did not foreclose on any loans during the six months ended June 30, 2014. | ||||||||||||||||||||
As of June 30, 2014, $2.2 million of loans subject to a pooling and servicing agreement were nonperforming. None of these nonperforming loans have been restructured during the six months ended June 30, 2014. The Company did not foreclose on any loans during the six months ended June 30, 2014. | ||||||||||||||||||||
As of June 30, 2014 and December 31, 2013, the Company had an allowance for mortgage loan credit losses of $4.3 million and $3.1 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: | ||||||||||||||||||||
As of | ||||||||||||||||||||
June 30, 2014 | December 31, 2013 | |||||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
Beginning balance | $ | 3,130 | $ | 2,875 | ||||||||||||||||
Charge offs | — | (6,838 | ) | |||||||||||||||||
Recoveries | (1,075 | ) | (1,016 | ) | ||||||||||||||||
Provision | 2,225 | 8,109 | ||||||||||||||||||
Ending balance | $ | 4,280 | $ | 3,130 | ||||||||||||||||
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 as of June 30, 2014. | ||||||||||||||||||||
Greater | ||||||||||||||||||||
30-59 Days | 60-89 Days | than 90 Days | Total | |||||||||||||||||
Delinquent | Delinquent | Delinquent | Delinquent | |||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
Commercial mortgage loans | $ | 24,562 | $ | — | $ | 5,908 | $ | 30,470 | ||||||||||||
Number of delinquent commercial mortgage loans | 9 | — | 4 | 13 | ||||||||||||||||
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. For information regarding impaired loans, please refer to the following chart as of June 30, 2014 and December 31, 2013: | ||||||||||||||||||||
Unpaid | Average | Interest | Cash Basis | |||||||||||||||||
Recorded | Principal | Related | Recorded | Income | Interest | |||||||||||||||
Investment | Balance | Allowance | Investment | Recognized | Income | |||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
2014 | ||||||||||||||||||||
Commercial mortgage loans: | ||||||||||||||||||||
With no related allowance recorded | $ | 5,275 | $ | 5,254 | $ | — | $ | 1,758 | $ | 64 | $ | 43 | ||||||||
With an allowance recorded | 23,754 | 23,738 | 4,280 | 3,959 | 314 | 314 | ||||||||||||||
2013 | ||||||||||||||||||||
Commercial mortgage loans: | ||||||||||||||||||||
With no related allowance recorded | $ | 2,208 | $ | 2,208 | $ | — | $ | 2,208 | $ | 31 | $ | — | ||||||||
With an allowance recorded | 21,288 | 21,281 | 3,130 | 5,322 | 304 | 304 |
GOODWILL
GOODWILL | 6 Months Ended |
Jun. 30, 2014 | |
GOODWILL | ' |
GOODWILL | ' |
8. GOODWILL | |
During the six months ended June 30, 2014, the Company decreased its goodwill balance by approximately $1.5 million. The decrease was due to an adjustment in the Acquisitions segment related to tax benefits realized during 2014 on the portion of tax goodwill in excess of GAAP basis goodwill. As of June 30, 2014, the Company had an aggregate goodwill balance of $103.9 million. | |
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. Additionally, the discount rate used is based on the Company’s judgment of the appropriate rate for each reporting unit based on the relative risk associated with the projected cash flows. As of December 31, 2013, the Company performed its annual evaluation of goodwill and determined that no adjustment to impair goodwill was necessary. During the six months ended June 30, 2014, no events occurred which indicate an impairment was required or which would invalidate the previous results of the Company’s impairment assessment. |
DEBT_AND_OTHER_OBLIGATIONS
DEBT AND OTHER OBLIGATIONS | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
DEBT AND OTHER OBLIGATIONS | ' | ||||||||
DEBT AND OTHER OBLIGATIONS | ' | ||||||||
9. DEBTAND OTHER OBLIGATIONS | |||||||||
The Company has access to a Credit Facility that provides the ability to borrow on an unsecured basis up to an aggregate principal amount of $750 million. 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 $1.0 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 unsecured long-term debt (“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 Federal Funds rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of the Company’s Senior Debt. The Credit Facility also provides 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 maturity date on the Credit Facility is July 17, 2017. The Company is not aware of any non-compliance with the financial debt covenants of the Credit Facility as of June 30, 2014. There was an outstanding balance of $345.0 million at an interest rate of LIBOR plus 1.20% under the Credit Facility as of June 30, 2014. | |||||||||
Non-RecourseFunding Obligations | |||||||||
Golden Gate II Captive Insurance Company | |||||||||
Golden Gate II Captive Insurance Company (“Golden Gate II”), a special purpose financial captive insurance company wholly owned by PLICO, had $575 million of outstanding non-recourse funding obligations as of June 30, 2014. These outstanding non-recourse funding obligations were issued to special purpose trusts, which in turn issued securities to third parties. Certain of our affiliates own a portion of these securities. As of June 30, 2014, securities related to $176.6 million of the outstanding balance of the non-recourse funding obligations were held by external parties and securities related to $398.4 million of the non-recourse funding obligations were held by our affiliates. The Company has entered into certain support agreements with Golden Gate II obligating the Company to make capital contributions or provide support related to certain of Golden Gate II’s expenses and in certain circumstances, to collateralize certain of the Company’s obligations to Golden Gate II. These support agreements provide that amounts would become payable by the Company to Golden Gate II if its annual general corporate expenses were higher than modeled amounts or if Golden Gate II’s investment income on certain investments or premium income was below certain actuarially determined amounts. As of June 30, 2014, no payments have been made under these agreements. | |||||||||
Golden Gate V Vermont Captive Insurance Company | |||||||||
On October 10, 2012, Golden Gate V and Red Mountain, indirect wholly owned subsidiaries of the Company, entered into a 20-year transaction to finance up to $945 million of “AXXX” reserves related to a block of universal life insurance policies with secondary guarantees issued by our direct wholly owned subsidiary PLICO and indirect wholly owned subsidiary, West Coast Life Insurance Company (“WCL”). Golden Gate V issued non-recourse funding obligations to Red Mountain, and Red Mountain issued a note with an initial principal amount of $275 million, increasing to a maximum of $945 million in 2027, to Golden Gate V for deposit to a reinsurance trust supporting Golden Gate V’s obligations under a reinsurance agreement with WCL, pursuant to which WCL cedes liabilities relating to the policies of WCL and retrocedes liabilities relating to the policies of PLICO. Through the structure, Hannover Life Reassurance Company of America (“Hannover Re”), the ultimate risk taker in the transaction, provides credit enhancement to the Red Mountain note for the 20-year term in exchange for a fee. The transaction is “non-recourse” to Golden Gate V, Red Mountain, WCL, PLICO and the Company, meaning that none of these companies are liable for the reimbursement of any credit enhancement payments required to be made. As of June 30, 2014, the principal balance of the Red Mountain note was $400 million. In connection with the transaction, the Company has entered into certain support agreements under which it guarantees or otherwise supports certain obligations of Golden Gate V or Red Mountain. Future scheduled capital contributions to prefund credit enhancement fees amount to approximately $144.3 million and will be paid in annual installments through 2031. The support agreements provide that amounts would become payable by the Company if Golden Gate V’s annual general corporate expenses were higher than modeled amounts or in the event write-downs due to other-than-temporary impairments on assets held in certain accounts exceed defined threshold levels. Additionally, the Company has entered into separate agreements to indemnify Golden Gate V with respect to material adverse changes in non-guaranteed elements of insurance policies reinsured by Golden Gate V, and to guarantee payment of certain fee amounts in connection with the credit enhancement of the Red Mountain note. As of June 30, 2014, no payments have been made under these agreements. | |||||||||
In connection with the transaction outlined above, Golden Gate V had a $400 million outstanding non-recourse funding obligation as of June 30, 2014. This non-recourse funding obligation matures in 2037, has scheduled increases in principal to a maximum of $945 million, and accrues interest at a fixed annual rate of 6.25%. | |||||||||
Non-recourse funding obligations outstanding as of June 30, 2014, on a consolidated basis, are shown in the following table: | |||||||||
Year-to-Date | |||||||||
Maturity | Weighted-Avg | ||||||||
Issuer | Balance | Year | Interest Rate | ||||||
(Dollars In Thousands) | |||||||||
Golden Gate II Captive Insurance Company | $ | 176,552 | 2052 | 1.12 | % | ||||
Golden Gate V Vermont Captive Insurance Company(1) | 400,000 | 2037 | 6.25 | % | |||||
MONY Life Insurance Company(1) | 2,526 | 2024 | 6.63 | % | |||||
Total | $ | 579,078 | |||||||
(1) Fixed rate obligations | |||||||||
During the six months ended June 30, 2014, the Company repurchased $18.3 million of its outstanding non-recourse funding obligations, at a discount, all of which was purchased in the current quarter. The repurchased resulted in a $4.6 million pre-tax gain for the Company. For the six months ended June 30, 2013, the Company repurchased $16.1 million of its outstanding non-recourse funding obligations, at a discount. The repurchase resulted in a $3.4 million pre-tax gain for the Company. These gains are recorded in other income in the consolidated condensed statements of income. | |||||||||
Letters of Credit | |||||||||
Golden Gate III Vermont Captive Insurance Company (“Golden Gate III”), a Vermont special purpose financial insurance company and wholly owned subsidiary of PLICO, is party to a Reimbursement Agreement (the “Reimbursement Agreement”) with UBS AG, Stamford Branch (“UBS”), as issuing lender. Under the original Reimbursement Agreement, dated April 23, 2010, UBS issued a letter of credit (the “LOC”) in the initial amount of $505 million to a trust for the benefit of WCL. The Reimbursement Agreement was subsequently amended and restated effective November 21, 2011 (the “First Amended and Restated Reimbursement Agreement”), to replace the existing LOC with one or more letters of credit from UBS, and to extend the maturity date from April 1, 2018, to April 1, 2022. On August 7, 2013, the Company entered into a Second Amended and Restated Reimbursement Agreement with UBS (the “Second Amended and Restated Reimbursement Agreement”), which amended and restated the First Amended and Restated Reimbursement Agreement. Under the Second and Amended and Restated Reimbursement Agreement a new LOC in an initial amount of $710 million was issued by UBS in replacement of the existing LOC issued under the First Amended and Restated Reimbursement Agreement. The term of the LOC was extended from April 1, 2022 to October 1, 2023, subject to certain conditions being satisfied including scheduled capital contributions being made to Golden Gate III by one of its affiliates. The maximum stated amount of the LOC was increased from $610 million to $720 million in 2015 if certain conditions are met. On June 25, 2014, the Company entered into a Third Amended and Restated Reimbursement Agreement with UBS (the “Third Amended and Restated Reimbursement Agreement”), which amended and restated the Second Amended and Restated Reimbursement Agreement. Under the Third Amended and Restated Reimbursement Agreement, a new LOC in an initial amount of $915 million was issued by UBS in replacement of the existing LOC issued under the Second Amended and Restated Reimbursement Agreement. The term of the LOC was extended from October 1, 2023 to April 1, 2025, subject to certain conditions being satisfied including scheduled capital contributions being made to Golden Gate III by one of its affiliates. The maximum stated amount of the LOC was increased from $720 million to $935 million in 2015 if certain conditions are met. The LOC is held in trust for the benefit of WCL, and supports certain obligations of Golden Gate III to WCL under an indemnity reinsurance agreement originally effective April 1, 2010, as amended and restated on November 21, 2011, and as further amended and restated on August 7, 2013 and on June 25, 2014 to include additional blocks of policies, and pursuant to which WCL cedes liabilities relating to the policies of WCL and retrocedes liabilities relating to the policies of PLICO. The LOC balance was $915 million as of June 30, 2014. Subject to certain conditions, the amount of the LOC will be periodically increased up to a maximum of $935 million in 2015. The term of the LOC is expected to be approximately 15 years from the original issuance date. This transaction is “non-recourse” to WCL, PLICO, and the Company, meaning that none of these companies other than Golden Gate III are liable for reimbursement on a draw of the LOC. The Company has entered into certain support agreements with Golden Gate III obligating the Company to make capital contributions or provide support related to certain of Golden Gate III’s expenses and in certain circumstances, to collateralize certain of the Company’s obligations to Golden Gate III. Future scheduled capital contributions amount to approximately $122.5 million and will be paid in three installments with the last payment occurring in 2021, and these contributions may be subject to potential offset against dividend payments as permitted under the terms of the Third Amended and Restated Reimbursement Agreement. The support agreements provide that amounts would become payable by the Company to Golden Gate III if its annual general corporate expenses were higher than modeled amounts or if specified catastrophic losses occur during defined time periods with respect to the policies reinsured by Golden Gate III. Pursuant to the terms of an amended and restated letter agreement with UBS, the Company has continued to guarantee the payment of fees to UBS as specified in the Third Amended and Restated Reimbursement Agreement. As of June 30, 2014, no payments have been made under these agreements. | |||||||||
Golden Gate IV Vermont Captive Insurance Company (“Golden Gate IV”), a Vermont special purpose financial insurance company and wholly owned subsidiary of PLICO, is party to a Reimbursement Agreement with UBS AG, Stamford Branch, as issuing lender. Under the Reimbursement Agreement, dated December 10, 2010, UBS issued an LOC in the initial amount of $270 million to a trust for the benefit of WCL. The LOC balance increased, in accordance with the terms of the Reimbursement Agreement, during the second quarter of 2014 and was $730 million as of June 30, 2014. Subject to certain conditions, the amount of the LOC will be periodically increased up to a maximum of $790 million in 2016. The term of the LOC is expected to be 12 years from the original issuance date (stated maturity of December 30, 2022). The LOC was issued to support certain obligations of Golden Gate IV to WCL under an indemnity reinsurance agreement, pursuant to which WCL cedes liabilities relating to the policies of WCL and retrocedes liabilities relating to the policies of PLICO. This transaction is “non-recourse” to WCL, PLICO, and the Company, meaning that none of these companies other than Golden Gate IV are liable for reimbursement on a draw of the LOC. The Company has entered into certain support agreements with Golden Gate IV obligating the Company to make capital contributions or provide support related to certain of Golden Gate IV’s expenses and in certain circumstances, to collateralize certain of the Company’s obligations to Golden Gate IV. The support agreements provide that amounts would become payable by the Company to Golden Gate IV if its annual general corporate expenses were higher than modeled amounts or if specified catastrophic losses occur during defined time periods with respect to the policies reinsured by Golden Gate IV. The Company has also entered into a separate agreement to guarantee the payments of LOC fees under the terms of the Reimbursement Agreement. As of June 30, 2014, no payments have been made under these agreements. | |||||||||
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 for a term less than ninety 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 June 30, 2014, the fair value of securities pledged under the repurchase program was $476.3 million and the repurchase obligation of $420.5 million was included in the Company’s consolidated condensed balance sheets (at an average borrowing rate of 11 basis points). During the six months ended June 30, 2014, the maximum balance outstanding at any one point in time related to these programs was $633.7 million. The average daily balance was $510.2 million (at an average borrowing rate of 10 basis points) during the six months ended June 30, 2014. As of December 31, 2013, the Company had a $350.0 million outstanding balance related to such borrowings. During 2013, the maximum balance outstanding at any one point in time related to these programs was $815.0 million. The average daily balance was $496.9 million (at an average borrowing rate of 11 basis points) during the year ended December 31, 2013. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2014 | |
COMMITMENTS AND CONTINGENCIES | ' |
COMMITMENTS AND CONTINGENCIES | ' |
10. COMMITMENTS AND CONTINGENCIES | |
The Company has entered into indemnity agreements with each of its current directors 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. | |
Under 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. In addition, from time to time, companies may be asked to contribute amounts beyond prescribed limits. Most insurance guaranty fund laws provide that an assessment may be excused or deferred if it would threaten an insurer’s own financial strength. The Company does not believe its insurance guaranty fund assessments will be materially different from amounts already provided for in the financial statements. | |
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 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. Publicly held companies in general and 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. | |
Since the entry into the Merger Agreement on June 3, 2014, four lawsuits have been filed against the Company, our directors, Dai-ichi and DL Investment (Delaware), Inc. on behalf of alleged Company shareowners. On June 11, 2014, a putative class action lawsuit styled Edelman, et al. v. Protective Life Corporation, et al., Civil Action No. 01-CV-2014-902474.00, was filed in the Circuit Court of Jefferson County, Alabama. On July 30, 2014, the plaintiff in Edelman filed an amended complaint. Three putative class action lawsuits have been filed in the Court of Chancery of the State of Delaware, including Martin, et al. v. Protective Life Corporation, et al., Civil Action No. 9794-CB, filed June 19, 2014, Leyendecker, et al. v. Protective Life Corporation, et al., Civil Action No. 9931-CB, filed July 22, 2014 and Hilburn, et al. v. Protective Life Corporation, et al., Civil Action No. 9937-CB, filed July 23, 2014. The Delaware Court of Chancery consolidated the Martin, Leyendecker and Hilburn actions under the caption In re Protective Life Corp. Stockholders Litigation, Consolidated Civil Action No. 9794-CB, designated the Hilburn complaint as the operative consolidated complaint and appointed Charlotte Martin, Samuel J. Leyendecker, Jr., and Deborah J. Hilburn to serve as co-lead plaintiffs. These lawsuits allege that our Board of Directors breached its fiduciary duties to our shareowners, that the Merger involves an unfair price, an inadequate sales process, and unreasonable deal protection devices that purportedly preclude competing offers, and that the preliminary proxy statement filed with the SEC on July 10, 2014 fails to disclose purportedly material information. The complaints also allege that the Company, Dai-ichi and DL Investment (Delaware), Inc. aided and abetted those alleged breaches of fiduciary duties. The complaints seek injunctive relief, including enjoining or rescinding the Merger, and attorneys’ and other fees and costs, in addition to other relief. The consolidated Delaware action also seeks an award of unspecified damages. The Company and our Board of Directors believe these claims are without merit and intend to vigorously defend these actions. The Company cannot predict the outcome of or estimate the possible loss or range of loss from these matters. | |
Although the Company cannot predict the outcome of any litigation or regulatory action, the Company does not believe that any such outcome will have an impact, either individually or in the aggregate, on its financial condition or results of operations that differs materially from the Company’s established liabilities. Given the inherent difficulty in predicting the outcome of such matters, however, it is possible that an adverse outcome in certain such matters could be material to the Company’s financial condition or results of operations for any particular reporting period. | |
The Company was audited by the IRS and 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. The case has followed normal procedure and is now under review at Congress’ Joint Committee on Taxation. The Company believes the matter will conclude within the next twelve months. If the IRS prevails on every issue that it identified in this audit, and the Company does not litigate these issues, then the Company will make an income tax payment of approximately $26.6 million. However, this payment, if it were to occur, would not materially impact the Company or its effective tax rate. | |
Through the acquisition of MONY by PLICO certain income tax credit carryforwards, which arose in MONY’s pre-acquisition tax years, transferred to the Company. This transfer was in accordance with the applicable rules of the Internal Revenue Code and the related Regulations. In spite of this transfer, AXA, the former parent of the consolidated income tax return group in which MONY was a member, retains the right to utilize these credits in the future to offset future increases in its 2010 through 2013 tax liabilities. The Company had determined that, based on all information known as of the acquisition date and through the March 31, 2014 reporting date, it was probable that a loss of the utilization of these carryforwards had been incurred. Due to indemnification received from AXA during the quarter ending June 30, 2014, the probability of loss of these carryforwards has been eliminated. Accordingly, in the table summarizing the fair value of net assets acquired from the Acquisition, the amount of the deferred tax asset from the credit carryforwards is no longer offset by a liability. | |
The Company has received notice from two third party auditors that certain of the Company’s insurance subsidiaries, as well as certain other insurance companies for which the Company has co-insured 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 has recorded a reserve with respect to life insurance policies issued by the Company’s subsidiaries and certain co-insured blocks of life insurance policies issued by other companies in connection with these pending audits. The Company does not consider the amount of this reserve to be material to the Company’s financial condition or results of operations. With respect to one block of life insurance policies that is co-insured by a subsidiary of the Company, the Company is presently unable to estimate the reasonably possible loss or range of loss due to a number of factors, including uncertainty as to the legal theory or theories that may give rise to liability, uncertainty as to whether the Company or other companies are responsible for the liabilities, if any, arising in connection with such policies, the distinct characteristics of this co-insured block of policies which differentiate it from the blocks of life insurance policies for which the Company has recorded a reserve, and the early stages of the audits being conducted. The Company will continue to monitor the matter for any developments that would make the loss contingency associated with this block of co-insured policies probable or reasonably estimable. | |
Certain of the Company’s subsidiaries have received notice that they are subject to 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, and escheating the benefits and interest as well as penalties to the state if the beneficiary could not be found. 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. The Company believes it is reasonably possible 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 estimates the range of such fees to be from $0 to $3.5 million. |
STOCKBASED_COMPENSATION
STOCK-BASED COMPENSATION | 6 Months Ended | ||||||
Jun. 30, 2014 | |||||||
STOCK-BASED COMPENSATION | ' | ||||||
STOCK-BASED COMPENSATION | ' | ||||||
11. STOCK-BASED COMPENSATION | |||||||
During the six months ended June 30, 2014, 203,295 performance shares with an estimated fair value of $10.5 million were awarded. The criteria for payment of the 2014 performance awards is based primarily on the Company’s average operating return on average equity (“ROE”) over a three-year period. If the Company’s ROE is below 10.5%, no award is earned. If the Company’s ROE is at or above 12.0%, the award maximum is earned. Awards are paid in shares of the Company’s common stock. | |||||||
Restricted stock units are awarded to participants and include certain restrictions relating to vesting periods. The Company issued 98,700 restricted stock units for the six months ended June 30, 2014. These awards had a total fair value at grant date of $5.1 million. Approximately half of these restricted stock units vest after three years from the grant date and the remainder vest after four years. | |||||||
Stock appreciation right (“SARs”) have historically been granted to certain officers of the Company to provide long-term incentive compensation based solely on the performance of the Company’s common stock. The SARs are exercisable either five years after the date of grant or in three or four equal annual installments beginning one year after the date of grant (earlier upon the death, disability, or retirement of the officer, or in certain circumstances, of a change in control of the Company) and expire after ten years or upon termination of employment. The SARs activity as well as weighted-average base price is as follows: | |||||||
Weighted-Average | |||||||
Base Price per share | No. of SARs | ||||||
Balance at December 31, 2013 | $ | 23.08 | 1,305,101 | ||||
SARs granted | — | — | |||||
SARs exercised / forfeited | 26.43 | (62,167 | ) | ||||
Balance at June 30, 2014 | $ | 22.91 | 1,242,934 | ||||
The Company will pay an amount in stock equal to the difference between the specified base price of the Company’s common stock and the market value at the exercise date for each SAR. There were no SARs issued for the six months ended June 30, 2014. | |||||||
For more information about the impact that the proposed merger with Dai-ichi will have on stock-based compensation, refer to Note 5, Proposed Dai-ichi Merger. |
EMPLOYEE_BENEFIT_PLANS
EMPLOYEE BENEFIT PLANS | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
EMPLOYEE BENEFIT PLANS | ' | |||||||||||||
EMPLOYEE BENEFIT PLANS | ' | |||||||||||||
12. EMPLOYEE BENEFIT PLANS | ||||||||||||||
Components of the net periodic benefit cost of the Company’s defined benefit pension plan and unfunded excess benefit plan are as follows: | ||||||||||||||
For The | For The | |||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
(Dollars In Thousands) | ||||||||||||||
Service cost — benefits earned during the period | $ | 2,453 | $ | 2,708 | $ | 4,906 | $ | 5,416 | ||||||
Interest cost on projected benefit obligation | 2,993 | 2,553 | 5,986 | 5,106 | ||||||||||
Expected return on plan assets | (3,065 | ) | (2,759 | ) | (6,130 | ) | (5,518 | ) | ||||||
Amortization of prior service cost/(credit) | (95 | ) | (95 | ) | (190 | ) | (190 | ) | ||||||
Amortization of actuarial losses | 1,897 | 2,729 | 3,794 | 5,458 | ||||||||||
Total benefit cost | $ | 4,183 | $ | 5,136 | $ | 8,366 | $ | 10,272 | ||||||
During the six months ended June 30, 2014, the Company contributed $2.3 million to its defined benefit pension plan for the 2013 plan year and $3.1 million for the 2014 plan year. During July of 2014, the Company contributed $3.1 million to the defined benefit pension plan for the 2014 plan year. The Company will continue to make contributions in future periods as necessary to at least satisfy minimum funding requirements. The Company may also make additional contributions in future periods to maintain an adjusted funding target attainment percentage (“AFTAP”) of at least 80% and to avoid certain Pension Benefit Guaranty Corporation (“PBGC”) reporting triggers. | ||||||||||||||
In addition to pension benefits, the Company provides life insurance benefits to eligible retirees and limited healthcare benefits to eligible retirees who are not yet eligible for Medicare. For a closed group of retirees over age 65, the Company provides a prescription drug benefit. The cost of these plans for the six months ended June 30, 2014, was immaterial to the Company’s financial statements. |
ACCUMULATED_OTHER_COMPREHENSIV
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ' | |||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ' | |||||||||||||
13. 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 June 30, 2014 and December 31, 2013. | ||||||||||||||
Changes in Accumulated Other Comprehensive Income (Loss) by Component | ||||||||||||||
Total | ||||||||||||||
Accumulated | ||||||||||||||
Unrealized | Accumulated | Postretirement | Other | |||||||||||
Gains and Losses | Gain and Loss | Benefits Liability | Comprehensive | |||||||||||
on Investments(2) | Derivatives | Adjustment | Income (Loss) | |||||||||||
(Dollars In Thousands, Net of Tax) | ||||||||||||||
Beginning Balance, December 31, 2013 | $ | 539,003 | $ | (1,235 | ) | $ | (43,702 | ) | $ | 494,066 | ||||
Other comprehensive income (loss) before reclassifications | 884,120 | (17 | ) | 884,103 | ||||||||||
Other comprehensive income (loss) relating to other- than-temporary impaired investments for which a portion has been recognized in earnings | 3,450 | — | — | 3,450 | ||||||||||
Amounts reclassified from accumulated other comprehensive income (loss)(1) | (15,936 | ) | 835 | 2,347 | (12,754 | ) | ||||||||
Net current-period other comprehensive income | 871,634 | 818 | 2,347 | 874,799 | ||||||||||
Ending Balance, June 30, 2014 | $ | 1,410,637 | $ | (417 | ) | $ | (41,355 | ) | $ | 1,368,865 | ||||
(1) See Reclassification table below for details. | ||||||||||||||
(2) These balances were offset by the impact of DAC and VOBA by $198.1 million and $413.4 million as of December 31, 2013 and | ||||||||||||||
June 30, 2014, respectively. | ||||||||||||||
Changes in Accumulated Other Comprehensive Income (Loss) by Component | ||||||||||||||
Total | ||||||||||||||
Accumulated | ||||||||||||||
Unrealized | Accumulated | Postretirement | Other | |||||||||||
Gains and Losses | Gain and Loss | Benefits Liability | Comprehensive | |||||||||||
on Investments(2) | Derivatives | Adjustment | Income (Loss) | |||||||||||
(Dollars In Thousands, Net of Tax) | ||||||||||||||
Beginning Balance, December 31, 2012 | $ | 1,813,516 | $ | (3,496 | ) | $ | (73,298 | ) | $ | 1,736,722 | ||||
Other comprehensive income (loss) before reclassifications | (1,250,498 | ) | 734 | 29,596 | (1,220,168 | ) | ||||||||
Other comprehensive income (loss) relating to other- than-temporary impaired investments for which a portion has been recognized in earnings | 4,591 | — | — | 4,591 | ||||||||||
Amounts reclassified from accumulated other comprehensive income (loss)(1) | (28,606 | ) | 1,527 | — | (27,079 | ) | ||||||||
Net current-period other comprehensive income (loss) | (1,274,513 | ) | 2,261 | 29,596 | (1,242,656 | ) | ||||||||
Ending Balance, December 31, 2013 | $ | 539,003 | $ | (1,235 | ) | $ | (43,702 | ) | $ | 494,066 | ||||
(1) See Reclassification table below for details. | ||||||||||||||
(2) These balances were offset by the impact of DAC and VOBA by $204.9 million and $198.1 million as of December 31, 2012 and | ||||||||||||||
December 31, 2013, respectively. | ||||||||||||||
The following tables summarize the reclassifications amounts out of AOCI for the three months ended June 30, 2014 and 2013. | ||||||||||||||
Reclassifications Out of Accumulated Other Comprehensive Income (Loss) | ||||||||||||||
Amount | ||||||||||||||
Reclassified | ||||||||||||||
from Accumulated | ||||||||||||||
Other Comprehensive | Affected Line Item in the | |||||||||||||
Income (Loss) | Consolidated Condensed Statements of Income | |||||||||||||
(Dollars In Thousands) | ||||||||||||||
For The Three Months Ended June 30, 2014 | ||||||||||||||
Gains and losses on derivative instruments | ||||||||||||||
Net settlement (expense)/benefit(1) | $ | (614 | ) | Benefits and settlement expenses, net of reinsurance ceded | ||||||||||
(614 | ) | Total before tax | ||||||||||||
215 | Tax (expense) or benefit | |||||||||||||
$ | (399 | ) | Net of tax | |||||||||||
Unrealized gains and losses on available-for-sale securities | ||||||||||||||
Net investment gains/losses | $ | 20,198 | Realized investment gains (losses): All other investments | |||||||||||
Impairments recognized in earnings | (1,460 | ) | Net impairment losses recognized in earnings | |||||||||||
18,738 | Total before tax | |||||||||||||
(6,558 | ) | Tax (expense) or benefit | ||||||||||||
$ | 12,180 | Net of tax | ||||||||||||
Postretirement benefits liability adjustment | ||||||||||||||
Amortization of net actuarial gain/(loss) | $ | (1,900 | ) | Other operating expenses | ||||||||||
Amortization of prior service credit/(cost) | 95 | Other operating expenses | ||||||||||||
(1,805 | ) | Total before tax | ||||||||||||
632 | Tax (expense) or benefit | |||||||||||||
$ | (1,173 | ) | Net of tax | |||||||||||
(1) See Note 17, Derivative Financial Instruments for additional information. | ||||||||||||||
Reclassifications Out of Accumulated Other Comprehensive Income (Loss) | ||||||||||||||
Amount | ||||||||||||||
Reclassified | ||||||||||||||
from Accumulated | ||||||||||||||
Other Comprehensive | Affected Line Item in the | |||||||||||||
Income (Loss) | Consolidated Condensed Statements of Income | |||||||||||||
(Dollars In Thousands) | ||||||||||||||
For The Three Months Ended June 30, 2013 | ||||||||||||||
Gains and losses on derivative instruments | ||||||||||||||
Net settlement (expense)/benefit(1) | $ | (580 | ) | Benefits and settlement expenses, net of reinsurance ceded | ||||||||||
(580 | ) | Total before tax | ||||||||||||
203 | Tax (expense) or benefit | |||||||||||||
$ | (377 | ) | Net of tax | |||||||||||
Unrealized gains and losses on available-for-sale securities | ||||||||||||||
Net investment gains/losses | $ | 21,518 | Realized investment gains (losses): All other investments | |||||||||||
Impairments recognized in earnings | (4,000 | ) | Net impairment losses recognized in earnings | |||||||||||
17,518 | Total before tax | |||||||||||||
(6,131 | ) | Tax (expense) or benefit | ||||||||||||
$ | 11,387 | Net of tax | ||||||||||||
(1) See Note 17, Derivative Financial Instruments for additional information. | ||||||||||||||
The following tables summarize the reclassifications amounts out of AOCI for the six months ended June 30, 2014 and 2013. | ||||||||||||||
Reclassifications Out of Accumulated Other Comprehensive Income (Loss) | ||||||||||||||
Amount | ||||||||||||||
Reclassified | ||||||||||||||
from Accumulated | ||||||||||||||
Other Comprehensive | Affected Line Item in the | |||||||||||||
Income (Loss) | Consolidated Condensed Statements of Income | |||||||||||||
(Dollars In Thousands) | ||||||||||||||
For The Six Months Ended June 30, 2014 | ||||||||||||||
Gains and losses on derivative instruments | ||||||||||||||
Net settlement (expense)/benefit(1) | $ | (1,284 | ) | Benefits and settlement expenses, net of reinsurance ceded | ||||||||||
(1,284 | ) | Total before tax | ||||||||||||
449 | Tax (expense) or benefit | |||||||||||||
$ | (835 | ) | Net of tax | |||||||||||
Unrealized gains and losses on available-for-sale securities | ||||||||||||||
Net investment gains/losses | $ | 27,568 | Realized investment gains (losses): All other investments | |||||||||||
Impairments recognized in earnings | (3,051 | ) | Net impairment losses recognized in earnings | |||||||||||
24,517 | Total before tax | |||||||||||||
(8,581 | ) | Tax (expense) or benefit | ||||||||||||
$ | 15,936 | Net of tax | ||||||||||||
Postretirement benefits liability adjustment | ||||||||||||||
Amortization of net actuarial gain/(loss) | $ | (3,800 | ) | Other operating expenses | ||||||||||
Amortization of prior service credit/(cost) | 190 | Other operating expenses | ||||||||||||
(3,610 | ) | Total before tax | ||||||||||||
1,263 | Tax (expense) or benefit | |||||||||||||
$ | (2,347 | ) | Net of tax | |||||||||||
(1) See Note 17, Derivative Financial Instruments for additional information. | ||||||||||||||
Reclassifications Out of Accumulated Other Comprehensive Income (Loss) | ||||||||||||||
Amount | ||||||||||||||
Reclassified | ||||||||||||||
from Accumulated | ||||||||||||||
Other Comprehensive | Affected Line Item in the | |||||||||||||
Income (Loss) | Consolidated Condensed Statements of Income | |||||||||||||
(Dollars In Thousands) | ||||||||||||||
For The Six Months Ended June 30, 2013 | ||||||||||||||
Gains and losses on derivative instruments | ||||||||||||||
Net settlement (expense)/benefit(1) | $ | (1,077 | ) | Benefits and settlement expenses, net of reinsurance ceded | ||||||||||
(1,077 | ) | Total before tax | ||||||||||||
377 | Tax (expense) or benefit | |||||||||||||
$ | (700 | ) | Net of tax | |||||||||||
Unrealized gains and losses on available-for-sale securities | ||||||||||||||
Net investment gains/losses | $ | 33,828 | Realized investment gains (losses): All other investments | |||||||||||
Impairments recognized in earnings | (8,584 | ) | Net impairment losses recognized in earnings | |||||||||||
25,244 | Total before tax | |||||||||||||
(8,835 | ) | Tax (expense) or benefit | ||||||||||||
$ | 16,409 | Net of tax | ||||||||||||
(1) See Note 17, Derivative Financial Instruments for additional information. |
EARNINGS_PER_SHARE
EARNINGS PER SHARE | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
EARNINGS PER SHARE | ' | |||||||||||||
EARNINGS PER SHARE | ' | |||||||||||||
14. EARNINGS PER SHARE | ||||||||||||||
Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period, including shares issuable under various deferred compensation plans. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares and dilutive potential common shares outstanding during the period, assuming the shares were not anti-dilutive, including shares issuable under various stock-based compensation plans and stock purchase contracts. | ||||||||||||||
A reconciliation of the numerators and denominators of the basic and diluted earnings per share is presented below: | ||||||||||||||
For The | For The | |||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
(Dollars In Thousands, Except Per Share Amounts) | ||||||||||||||
Calculation of basic earnings per share: | ||||||||||||||
Net income | $ | 107,977 | $ | 103,199 | $ | 191,616 | $ | 181,490 | ||||||
Average shares issued and outstanding | 78,852,583 | 78,456,663 | 78,740,416 | 78,332,481 | ||||||||||
Issuable under various deferred compensation plans | 1,126,570 | 948,107 | 1,054,415 | 940,333 | ||||||||||
Weighted shares outstanding - basic | 79,979,153 | 79,404,770 | 79,794,831 | 79,272,814 | ||||||||||
Per share: | ||||||||||||||
Net income - basic | $ | 1.35 | $ | 1.3 | $ | 2.4 | $ | 2.29 | ||||||
Calculation of diluted earnings per share: | ||||||||||||||
Net income | $ | 107,977 | $ | 103,199 | $ | 191,616 | $ | 181,490 | ||||||
Weighted shares outstanding - basic | 79,979,153 | 79,404,770 | 79,794,831 | 79,272,814 | ||||||||||
Stock appreciation rights (“SARs”)(1) | 492,463 | 449,726 | 479,430 | 444,971 | ||||||||||
Issuable under various other stock-based compensation plans | 716,327 | 874,019 | 641,411 | 843,554 | ||||||||||
Restricted stock units | 258,334 | 358,723 | 245,128 | 336,703 | ||||||||||
Weighted shares outstanding - diluted | 81,446,277 | 81,087,238 | 81,160,800 | 80,898,042 | ||||||||||
Per share: | ||||||||||||||
Net income - diluted | $ | 1.33 | $ | 1.27 | $ | 2.36 | $ | 2.24 | ||||||
(1)Excludes 629,800 SARs as of June 30, 2013 that are antidilutive. In the event the average market price exceeds the issue price of the SARs, such rights would be dilutive to the Company’s earnings per share and will be included in the Company’s calculation of the diluted average shares outstanding, for applicable periods. |
INCOME_TAXES
INCOME TAXES | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
INCOME TAXES | ' | |||||||
INCOME TAXES | ' | |||||||
15. INCOME TAXES | ||||||||
In the IRS audit that concluded in 2012, the IRS proposed favorable and unfavorable adjustments to the Company’s 2003 through 2007 reported taxable incomes. The Company protested certain unfavorable adjustments and is seeking resolution at the IRS’ Appeals Division. If the IRS prevails at Appeals, and the Company does not litigate these issues, then an acceleration of tax payments will occur. However, such accelerated payments would not materially impact the Company or its effective tax rate. | ||||||||
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: | ||||||||
As of | ||||||||
June 30, 2014 | December 31, 2013 | |||||||
(Dollars In Thousands) | ||||||||
Balance, beginning of period | $ | 105,881 | $ | 75,292 | ||||
Additions for tax positions of the current year | 948 | 7,465 | ||||||
Additions for tax positions of prior years | 41,246 | 26,386 | ||||||
Reductions of tax positions of prior years: | ||||||||
Changes in judgment | (10,548 | ) | (2,740 | ) | ||||
Settlements during the period | — | — | ||||||
Lapses of applicable statute of limitations | — | (522 | ) | |||||
Balance, end of period | $ | 137,527 | $ | 105,881 | ||||
The Company believes that it is possible that in the next 12 months approximately $18.5 million of these unrecognized tax benefits will be reduced due to the expected closure of the aforementioned Appeals process. In general, this closure would represent the Company’s possible successful negotiation of certain issues, coupled with its payment of the assessed taxes on the remaining issues. Regarding the amounts reported above for the six months ended June 30, 2014 and the twelve months ended December 31, 2013, discussions with the IRS during these periods, which related to their ongoing examination of tax years 2008 through 2011, prompted the Company to contemporaneously revise upward its measurement of unrecognized tax benefits. These revisions included increasing prior determinations of amounts accrued for in earlier years as well as reducing some previously accrued amounts. These changes were almost entirely related to timing issues. Therefore, aside from the cost of interest, such changes did not result in any impact on the Company’s effective tax rate. | ||||||||
Subsequent to June 30, 2014, the Internal Revenue Service issued guidance related to the tax method of accounting for hedges of guaranteed benefits on variable annuity contracts. The Company has issued contracts that provide such benefits. It has treated the derivatives that economically hedge the risk associated with such contracts as tax hedges. There are several uncertainties regarding the provisions of this guidance. Examples include its effective date and its scope. Therefore, it is uncertain at this time whether this guidance will be applicable to the Company and whether it will adopt this guidance’s prescribed methodology. Consequently, the Company currently believes that the amounts of unrecognized tax benefits that relate to this issue and that are disclosed above are appropriate. | ||||||||
The Company used its estimate of its annual 2014 and 2013 income in computing its effective income tax rates for the three and six months ended June 30, 2014 and 2013. The effective tax rates for the three and six months ended June 30, 2014 were 33.4% and 33.3%, respectively, and 34.3% and 33.9% for the three and six months ended June 30, 2013, respectively. | ||||||||
In general, the Company is no longer subject to U.S. federal, state, and local income tax examinations by taxing authorities for tax years that began before 2003. | ||||||||
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 June 30, 2014. |
FAIR_VALUE_OF_FINANCIAL_INSTRU
FAIR VALUE OF FINANCIAL INSTRUMENTS | 6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | ' | ||||||||||||||||||||||||||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | ' | ||||||||||||||||||||||||||||||||||||||||
16. 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) Quoted prices for similar assets or liabilities in active markets | |||||||||||||||||||||||||||||||||||||||||
b) Quoted prices for identical or similar assets or liabilities in non-active markets | |||||||||||||||||||||||||||||||||||||||||
c) Inputs other than quoted market prices that are observable | |||||||||||||||||||||||||||||||||||||||||
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 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 June 30, 2014: | |||||||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Fixed maturity securities - available-for-sale | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | — | $ | 1,434,727 | $ | 10 | $ | 1,434,737 | |||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | 1,087,615 | — | 1,087,615 | |||||||||||||||||||||||||||||||||||||
Other asset-backed securities | — | 297,588 | 568,097 | 865,685 | |||||||||||||||||||||||||||||||||||||
U.S. government-related securities | 1,295,535 | 273,196 | — | 1,568,731 | |||||||||||||||||||||||||||||||||||||
State, municipalities, and political subdivisions | — | 1,599,174 | 3,675 | 1,602,849 | |||||||||||||||||||||||||||||||||||||
Other government-related securities | — | 22,214 | — | 22,214 | |||||||||||||||||||||||||||||||||||||
Corporate bonds | 132 | 26,203,478 | 1,524,297 | 27,727,907 | |||||||||||||||||||||||||||||||||||||
Total fixed maturity securities - available-for-sale | 1,295,667 | 30,917,992 | 2,096,079 | 34,309,738 | |||||||||||||||||||||||||||||||||||||
Fixed maturity securities - trading | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | 298,684 | 842 | 299,526 | |||||||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | 159,899 | — | 159,899 | |||||||||||||||||||||||||||||||||||||
Other asset-backed securities | — | 95,012 | 176,386 | 271,398 | |||||||||||||||||||||||||||||||||||||
U.S. government-related securities | 212,167 | 4,948 | — | 217,115 | |||||||||||||||||||||||||||||||||||||
State, municipalities, and political subdivisions | — | 281,182 | — | 281,182 | |||||||||||||||||||||||||||||||||||||
Other government-related securities | — | 56,142 | — | 56,142 | |||||||||||||||||||||||||||||||||||||
Corporate bonds | — | 1,537,907 | 31,520 | 1,569,427 | |||||||||||||||||||||||||||||||||||||
Total fixed maturity securities - trading | 212,167 | 2,433,774 | 208,748 | 2,854,689 | |||||||||||||||||||||||||||||||||||||
Total fixed maturity securities | 1,507,834 | 33,351,766 | 2,304,827 | 37,164,427 | |||||||||||||||||||||||||||||||||||||
Equity securities | 621,868 | 88,395 | 81,784 | 792,047 | |||||||||||||||||||||||||||||||||||||
Other long-term investments(1) | 78,391 | 64,075 | 123,301 | 265,767 | |||||||||||||||||||||||||||||||||||||
Short-term investments | 202,443 | 6,181 | — | 208,624 | |||||||||||||||||||||||||||||||||||||
Total investments | 2,410,536 | 33,510,417 | 2,509,912 | 38,430,865 | |||||||||||||||||||||||||||||||||||||
Cash | 361,088 | — | — | 361,088 | |||||||||||||||||||||||||||||||||||||
Other assets | 11,692 | — | — | 11,692 | |||||||||||||||||||||||||||||||||||||
Assets related to separate accounts | |||||||||||||||||||||||||||||||||||||||||
Variable annuity | 13,304,455 | — | — | 13,304,455 | |||||||||||||||||||||||||||||||||||||
Variable universal life | 823,747 | — | — | 823,747 | |||||||||||||||||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 16,911,518 | $ | 33,510,417 | $ | 2,509,912 | $ | 52,931,847 | |||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances(2) | $ | — | $ | — | $ | 102,456 | $ | 102,456 | |||||||||||||||||||||||||||||||||
Other liabilities (1) | 36,608 | 64,374 | 484,747 | 585,729 | |||||||||||||||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 36,608 | $ | 64,374 | $ | 587,203 | $ | 688,185 | |||||||||||||||||||||||||||||||||
(1)Includes certain freestanding and embedded derivatives. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
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, 2013: | |||||||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Fixed maturity securities - available-for-sale | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | — | $ | 1,445,040 | $ | 28 | $ | 1,445,068 | |||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | 970,656 | — | 970,656 | |||||||||||||||||||||||||||||||||||||
Other asset-backed securities | — | 326,175 | 545,808 | 871,983 | |||||||||||||||||||||||||||||||||||||
U.S. government-related securities | 1,211,141 | 296,749 | — | 1,507,890 | |||||||||||||||||||||||||||||||||||||
State, municipalities, and political subdivisions | — | 1,407,154 | 3,675 | 1,410,829 | |||||||||||||||||||||||||||||||||||||
Other government-related securities | — | 51,427 | — | 51,427 | |||||||||||||||||||||||||||||||||||||
Corporate bonds | 107 | 24,209,541 | 1,549,940 | 25,759,588 | |||||||||||||||||||||||||||||||||||||
Total fixed maturity securities - available-for-sale | 1,211,248 | 28,706,742 | 2,099,451 | 32,017,441 | |||||||||||||||||||||||||||||||||||||
Fixed maturity securities - trading | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | 310,877 | — | 310,877 | |||||||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | 158,570 | — | 158,570 | |||||||||||||||||||||||||||||||||||||
Other asset-backed securities | — | 93,278 | 194,977 | 288,255 | |||||||||||||||||||||||||||||||||||||
U.S. government-related securities | 191,332 | 4,906 | — | 196,238 | |||||||||||||||||||||||||||||||||||||
State, municipalities, and political subdivisions | — | 260,892 | — | 260,892 | |||||||||||||||||||||||||||||||||||||
Other government-related securities | — | 57,097 | — | 57,097 | |||||||||||||||||||||||||||||||||||||
Corporate bonds | — | 1,497,362 | 29,199 | 1,526,561 | |||||||||||||||||||||||||||||||||||||
Total fixed maturity securities - trading | 191,332 | 2,382,982 | 224,176 | 2,798,490 | |||||||||||||||||||||||||||||||||||||
Total fixed maturity securities | 1,402,580 | 31,089,724 | 2,323,627 | 34,815,931 | |||||||||||||||||||||||||||||||||||||
Equity securities | 523,219 | 50,927 | 71,881 | 646,027 | |||||||||||||||||||||||||||||||||||||
Other long-term investments (1) | 56,469 | 54,965 | 196,133 | 307,567 | |||||||||||||||||||||||||||||||||||||
Short-term investments | 132,543 | 1,603 | — | 134,146 | |||||||||||||||||||||||||||||||||||||
Total investments | 2,114,811 | 31,197,219 | 2,591,641 | 35,903,671 | |||||||||||||||||||||||||||||||||||||
Cash | 466,542 | — | — | 466,542 | |||||||||||||||||||||||||||||||||||||
Other assets | 10,979 | — | — | 10,979 | |||||||||||||||||||||||||||||||||||||
Assets related to separate accounts | |||||||||||||||||||||||||||||||||||||||||
Variable annuity | 12,791,438 | — | — | 12,791,438 | |||||||||||||||||||||||||||||||||||||
Variable universal life | 783,618 | — | — | 783,618 | |||||||||||||||||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 16,167,388 | $ | 31,197,219 | $ | 2,591,641 | $ | 49,956,248 | |||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances (2) | $ | — | $ | — | $ | 107,000 | $ | 107,000 | |||||||||||||||||||||||||||||||||
Other liabilities (1) | 30,241 | 156,931 | 270,630 | 457,802 | |||||||||||||||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 30,241 | $ | 156,931 | $ | 377,630 | $ | 564,802 | |||||||||||||||||||||||||||||||||
(1)Includes certain freestanding and embedded derivatives. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
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” 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 90% of the 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 six months ended June 30, 2014. | |||||||||||||||||||||||||||||||||||||||||
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 June 30, 2014, the Company held $3.4 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 June 30, 2014, the Company held $745.3 million of Level 3 ABS, which included $568.1 million of other asset-backed securities classified as available-for-sale and $177.2 million of other asset-backed classified as trading. These securities are predominantly ARS whose underlying collateral is at least 97% guaranteed by the FFELP. 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. | |||||||||||||||||||||||||||||||||||||||||
Corporate bonds, U.S. Government-related securities, States, municipals, and political subdivisions, and other government related securities | |||||||||||||||||||||||||||||||||||||||||
As of June 30, 2014, the Company classified approximately $30.0 billion of corporate bonds, 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 bonds and 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 bonds and securities are considered to be the primary relevant inputs to the valuation: 1) 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 June 30, 2014, the Company classified approximately $1.6 billion of bonds and securities as Level 3 valuations. Level 3 bonds and 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 June 30, 2014, the Company held approximately $170.2 million of equity securities classified as Level 2 and Level 3. Of this total, $66.4 million represents Federal Home Loan Bank (“FHLB”) stock. The Company believes that the cost of the FHLB stock approximates fair value. The remainder of these equity securities is primarily investments in preferred stock. | |||||||||||||||||||||||||||||||||||||||||
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 17, 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 June 30, 2014, 96.6% of derivatives based upon notional values were priced using exchange prices or independent broker quotations. The remaining derivatives were priced by pricing valuation models, which predominantly utilize observable market data inputs. 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 puts, which are traded on active exchange markets. | |||||||||||||||||||||||||||||||||||||||||
Derivative instruments classified as Level 2 primarily include interest rate and inflation swaps, options, and swaptions. These derivative valuations are determined using independent broker quotations, which are corroborated with observable market inputs. | |||||||||||||||||||||||||||||||||||||||||
Derivative instruments classified as Level 3 were 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 long-term investments” and “other liabilities” on the Company’s consolidated balance sheet. The changes in fair value are recorded in earnings as “Realized investment gains (losses) — Derivative financial instruments”. Refer to Note 17, Derivative Financial Instruments for more information related to each embedded derivatives gains and losses. | |||||||||||||||||||||||||||||||||||||||||
The fair value of the guaranteed minimum withdrawal benefits (“GMWB”) 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 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 National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience, with attained age factors varying from 49% - 80%. 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 GMWB embedded derivative is categorized as Level 3. These assumptions are reviewed on a quarterly basis. | |||||||||||||||||||||||||||||||||||||||||
The balance of the fixed indexed annuities (“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 mortality table modified for company experience, with attained age factors varying from 49% - 80%. 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 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 2008 VBT Primary Tables modified for company experience, with attained age factors varying from 37% - 74%. 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 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. The fair value of the embedded derivative is the difference between the statutory policy liabilities (net of policy loans) of $2.6 billion and the fair value of the trading securities of $2.9 billion. 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 certain of its FIA reserves at fair value. The fair value is considered a Level 3 valuation. The FIA valuation model calculates the present value of future benefit cash flows less the projected future profits to quantify the net liability that is held as a reserve. This calculation is done using multiple risk neutral stochastic equity scenarios. The cash flows are discounted using LIBOR plus a credit spread. Best estimate assumptions are used for partial withdrawals, lapses, expenses and asset earned rate with a risk margin applied to each. These assumptions are reviewed at least annually as a part of the formal unlocking process. If an event were to occur within a quarter that would make the assumptions unreasonable, the assumptions would be reviewed within the quarter. | |||||||||||||||||||||||||||||||||||||||||
The discount rate for the fixed indexed annuities is based on an upward sloping rate curve which is updated each quarter. The discount rates for June 30, 2014, ranged from a one month rate of 0.26%, a 5 year rate of 2.24%, and a 30 year rate of 4.24%. A credit spread component is also included in the calculation to accommodate non-performance risk. | |||||||||||||||||||||||||||||||||||||||||
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 | Valuation | Unobservable | Range | ||||||||||||||||||||||||||||||||||||||
June 30, 2014 | Technique | Input | (Weighted Average) | ||||||||||||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Other asset-backed securities | $ | 567,480 | Discounted cash flow | Liquidity premium Paydown rate | 0.15% - 1.49% (0.57%) | ||||||||||||||||||||||||||||||||||||
9.04% - 20.69% (12.44%) | |||||||||||||||||||||||||||||||||||||||||
Corporate bonds | 1,461,997 | Discounted cash flow | Spread over treasury | 0.06% - 6.90% (1.88%) | |||||||||||||||||||||||||||||||||||||
Embedded derivatives - GMWB(1) | 26,579 | Actuarial cash flow model | Mortality | 49% to 80% of 1994 MGDB | |||||||||||||||||||||||||||||||||||||
table | |||||||||||||||||||||||||||||||||||||||||
Lapse | 0% - 24%, depending on | ||||||||||||||||||||||||||||||||||||||||
product/duration/funded status of | |||||||||||||||||||||||||||||||||||||||||
guarantee | |||||||||||||||||||||||||||||||||||||||||
97% - 103% | |||||||||||||||||||||||||||||||||||||||||
Utilization Nonperformance risk | 0.11% - 0.90% | ||||||||||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances(2) | $ | 102,456 | Actuarial cash flow model | Asset earned rate Expenses Withdrawal rate Mortality | 5.37% | ||||||||||||||||||||||||||||||||||||
$88 - $102 per policy | |||||||||||||||||||||||||||||||||||||||||
Lapse | 2.20% | ||||||||||||||||||||||||||||||||||||||||
49% to 80% of 1994 MGDB | |||||||||||||||||||||||||||||||||||||||||
table | |||||||||||||||||||||||||||||||||||||||||
Return on assets | 2.2% - 33.0%, depending on | ||||||||||||||||||||||||||||||||||||||||
duration/surrender charge period | |||||||||||||||||||||||||||||||||||||||||
Nonperformance risk | 1.50% - 1.85% depending on | ||||||||||||||||||||||||||||||||||||||||
surrender charge period | |||||||||||||||||||||||||||||||||||||||||
0.11% - 0.90% | |||||||||||||||||||||||||||||||||||||||||
Embedded derivative - FIA | 69,615 | Actuarial cash flow model | Expenses Withdrawal rate | $83 - $97 per policy | |||||||||||||||||||||||||||||||||||||
1.1% - 4.5% depending on | |||||||||||||||||||||||||||||||||||||||||
duration | |||||||||||||||||||||||||||||||||||||||||
Mortality | and tax qualification | ||||||||||||||||||||||||||||||||||||||||
49% — 80% of 1994 MGDB table | |||||||||||||||||||||||||||||||||||||||||
Lapse | 2.5% - 40.0%, depending on | ||||||||||||||||||||||||||||||||||||||||
duration/surrender charge period | |||||||||||||||||||||||||||||||||||||||||
0.11% - 0.90% | |||||||||||||||||||||||||||||||||||||||||
Nonperformance risk | |||||||||||||||||||||||||||||||||||||||||
Embedded derivative - IUL | 610 | Actuarial cash flow model | Mortality | 37% — 74% of 2008 | |||||||||||||||||||||||||||||||||||||
VBT Primary Tables | |||||||||||||||||||||||||||||||||||||||||
Lapse | 0.5% - 10.0%, depending on | ||||||||||||||||||||||||||||||||||||||||
duration/distribution channel | |||||||||||||||||||||||||||||||||||||||||
and smoking class | |||||||||||||||||||||||||||||||||||||||||
Nonperformance risk | 0.11% - 0.90% | ||||||||||||||||||||||||||||||||||||||||
(1)The fair value for the GMWB embedded derivative is presented as a net asset for the purposes of this chart. Excludes modified coinsurance arrangements. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
The chart above excludes Level 3 financial instruments that are valued using broker quotes and those which book value approximates fair value. | |||||||||||||||||||||||||||||||||||||||||
The Company has considered all reasonably available quantitative inputs as of June 30, 2014, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $263.0 million of financial instruments being classified as Level 3 as of June 30, 2014. Of the $263.0 million, $177.8 million are other asset-backed securities, $73.9 million are corporate bonds, and $11.3 million are equity securities. | |||||||||||||||||||||||||||||||||||||||||
In certain cases the Company has determined that book value materially approximates fair value. As of June 30, 2014, the Company held $94.1 million of financial instruments where book value approximates fair value. Of the $94.1 million, $70.5 million represents equity securities, which are predominantly FHLB stock, $19.9 million are corporate bonds, and $3.7 million of other fixed maturity securities. | |||||||||||||||||||||||||||||||||||||||||
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 | Valuation | Unobservable | Range | ||||||||||||||||||||||||||||||||||||||
December 31, 2013 | Technique | Input | (Weighted Average) | ||||||||||||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Other asset-backed securities | $ | 545,808 | Discounted cash flow | Liquidity premium Paydown rate | 1.00% - 1.68% (1.08%) | ||||||||||||||||||||||||||||||||||||
8.57% - 16.87% (12.05%) | |||||||||||||||||||||||||||||||||||||||||
Corporate bonds | 1,555,898 | Discounted cash flow | Spread over treasury | 0.11% - 6.75% (2.06%) | |||||||||||||||||||||||||||||||||||||
Embedded derivatives - GMWB(1) | 156,287 | Actuarial cash flow model | Mortality | 49% to 80% of 1994 MGDB | |||||||||||||||||||||||||||||||||||||
table | |||||||||||||||||||||||||||||||||||||||||
Lapse | 0% - 24%, depending on | ||||||||||||||||||||||||||||||||||||||||
product/duration/funded status of | |||||||||||||||||||||||||||||||||||||||||
guarantee | |||||||||||||||||||||||||||||||||||||||||
Utilization Nonperformance risk | 97% - 103% | ||||||||||||||||||||||||||||||||||||||||
0.15% - 1.06% | |||||||||||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances(2) | $ | 107,000 | Actuarial cash flow model | Asset earned rate Expenses Withdrawal rate Mortality | 5.37% | ||||||||||||||||||||||||||||||||||||
$88 - $102 per policy | |||||||||||||||||||||||||||||||||||||||||
Lapse | 2.20% | ||||||||||||||||||||||||||||||||||||||||
49% to 80% of 1994 MGDB | |||||||||||||||||||||||||||||||||||||||||
table | |||||||||||||||||||||||||||||||||||||||||
Return on assets | 2.2% - 33.0%, depending on | ||||||||||||||||||||||||||||||||||||||||
duration/surrender charge period | |||||||||||||||||||||||||||||||||||||||||
Nonperformance risk | 1.50% - 1.85% depending on | ||||||||||||||||||||||||||||||||||||||||
surrender charge period | |||||||||||||||||||||||||||||||||||||||||
0.15% - 1.06% | |||||||||||||||||||||||||||||||||||||||||
Embedded derivative - FIA | 25,324 | Actuarial cash flow model | Expenses Withdrawal rate | $83 - $97 per policy | |||||||||||||||||||||||||||||||||||||
1.1% - 4.5% depending on | |||||||||||||||||||||||||||||||||||||||||
Mortality | duration and tax qualification | ||||||||||||||||||||||||||||||||||||||||
49% to 80% of 1994 MGDB | |||||||||||||||||||||||||||||||||||||||||
Lapse | table | ||||||||||||||||||||||||||||||||||||||||
2.5% - 40.0%, depending on | |||||||||||||||||||||||||||||||||||||||||
duration/surrender charge period | |||||||||||||||||||||||||||||||||||||||||
Nonperformance risk | 0.15% - 1.06% | ||||||||||||||||||||||||||||||||||||||||
(1)The fair value for the GMWB embedded derivative is presented as a net asset for the purposes of this chart. Excludes modified coinsurance arrangements. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
The chart above excludes Level 3 financial instruments that are valued using broker quotes and those which book value approximates fair value. | |||||||||||||||||||||||||||||||||||||||||
The Company has considered all reasonably available quantitative inputs as of December 31, 2013, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $216.6 million of financial instruments being classified as Level 3 as of December 31, 2013. Of the $216.6 million, $195.0 million are other asset backed securities, $21.0 million are corporate bonds, and $0.6 million are equity securities. | |||||||||||||||||||||||||||||||||||||||||
In certain cases the Company has determined that book value materially approximates fair value. As of December 31, 2013, the Company held $77.2 million of financial instruments where book value approximates fair value. Of the $77.2 million, $71.3 million represents equity securities, which are predominantly FHLB stock, $2.2 million of other corporate bonds, and $3.7 million of other fixed maturity securities. | |||||||||||||||||||||||||||||||||||||||||
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 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 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 increase when spreads decrease, and decrease when spreads increase. | |||||||||||||||||||||||||||||||||||||||||
The fair value of the GMWB 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 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 GMWB where an increase in assumed utilization would result in an increase in the fair value and conversely, if there is a decrease in the assumption, the fair value would decrease. | |||||||||||||||||||||||||||||||||||||||||
The fair value of the FIA account balance liability is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the FIA account balance liability is sensitive to the asset earned rate and required return on assets. The value of the liability increases with an increase in required return on assets and a decrease in the asset earned rate and conversely, the value of the liability decreases with a decrease in required return on assets and an increase in the asset earned rate. | |||||||||||||||||||||||||||||||||||||||||
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. 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. 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 following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended June 30, 2014, for which the Company has used significant unobservable inputs (Level 3): | |||||||||||||||||||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||||||||||||||||
Gains (losses) | |||||||||||||||||||||||||||||||||||||||||
Total | Total | included in | |||||||||||||||||||||||||||||||||||||||
Realized and Unrealized | Realized and Unrealized | Earnings | |||||||||||||||||||||||||||||||||||||||
Gains | Losses | related to | |||||||||||||||||||||||||||||||||||||||
Included in | Included in | Instruments | |||||||||||||||||||||||||||||||||||||||
Other | Other | Transfers | still held at | ||||||||||||||||||||||||||||||||||||||
Beginning | Included in | Comprehensive | Included in | Comprehensive | in/out of | Ending | the Reporting | ||||||||||||||||||||||||||||||||||
Balance | Earnings | Income | Earnings | Income | Purchases | Sales | Issuances | Settlements | Level 3 | Other | Balance | Date | |||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Fixed maturity securities available-for-sale | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | 17 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (7 | ) | $ | — | $ | — | $ | — | $ | — | $ | 10 | $ | — | ||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 548,805 | — | 29,929 | — | (104 | ) | — | (9,534 | ) | — | — | — | (999 | ) | 568,097 | — | |||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals, and political subdivisions | 3,675 | — | — | — | — | — | — | — | — | — | — | 3,675 | — | ||||||||||||||||||||||||||||
Other government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Corporate bonds | 1,573,710 | 74 | 27,271 | — | (2,250 | ) | 60,845 | (65,172 | ) | — | — | (67,478 | ) | (2,703 | ) | 1,524,297 | — | ||||||||||||||||||||||||
Total fixed maturity securities - available-for-sale | 2,126,207 | 74 | 57,200 | — | (2,354 | ) | 60,845 | (74,713 | ) | — | — | (67,478 | ) | (3,702 | ) | 2,096,079 | — | ||||||||||||||||||||||||
Fixed maturity securities - trading | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | — | — | — | — | 842 | — | — | — | — | — | 842 | — | ||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 194,664 | 6,124 | — | (2,686 | ) | — | — | (21,883 | ) | — | — | — | 167 | 176,386 | 522 | ||||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals and politicalsubdivisions | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Corporate bonds | 30,946 | 340 | — | (40 | ) | — | 4,059 | (5,047 | ) | — | — | 1,250 | 12 | 31,520 | 280 | ||||||||||||||||||||||||||
Total fixed maturity securities - trading | 225,610 | 6,464 | — | (2,726 | ) | — | 4,901 | (26,930 | ) | — | — | 1,250 | 179 | 208,748 | 802 | ||||||||||||||||||||||||||
Total fixed maturity securities | 2,351,817 | 6,538 | 57,200 | (2,726 | ) | (2,354 | ) | 65,746 | (101,643 | ) | — | — | (66,228 | ) | (3,523 | ) | 2,304,827 | 802 | |||||||||||||||||||||||
Equity securities | 81,493 | — | 965 | — | — | — | (674 | ) | — | — | — | — | 81,784 | — | |||||||||||||||||||||||||||
Other long-term investments(1) | 143,808 | 240 | — | (20,747 | ) | — | — | — | — | — | — | — | 123,301 | (20,507 | ) | ||||||||||||||||||||||||||
Short-term investments | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Total investments | 2,577,118 | 6,778 | 58,165 | (23,473 | ) | (2,354 | ) | 65,746 | (102,317 | ) | — | — | (66,228 | ) | (3,523 | ) | 2,509,912 | (19,705 | ) | ||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 2,577,118 | $ | 6,778 | $ | 58,165 | $ | (23,473 | ) | $ | (2,354 | ) | $ | 65,746 | $ | (102,317 | ) | $ | — | $ | — | $ | (66,228 | ) | $ | (3,523 | ) | $ | 2,509,912 | $ | (19,705 | ) | |||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances(2) | $ | 105,593 | $ | — | $ | — | $ | (1,714 | ) | $ | — | $ | — | $ | — | $ | 63 | $ | 4,914 | $ | — | $ | — | $ | 102,456 | $ | — | ||||||||||||||
Other liabilities(1) | 371,365 | 13 | — | (113,395 | ) | — | — | — | — | — | — | — | 484,747 | (113,382 | ) | ||||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 476,958 | $ | 13 | $ | — | $ | (115,109 | ) | $ | — | $ | — | $ | — | $ | 63 | $ | 4,914 | $ | — | $ | — | $ | 587,203 | $ | (113,382 | ) | |||||||||||||
(1)Represents certain freestanding and embedded derivatives. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
For the three months ended June 30, 2014, $1.3 million of securities were transferred into Level 3. This amount was transferred from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods, using no significant unobservable inputs, but were priced internally using significant unobservable inputs where market observable inputs were no longer available as of June 30, 2014. | |||||||||||||||||||||||||||||||||||||||||
For the three months ended June 30, 2014, $67.5 million of securities were transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were previously priced internally using significant unobservable inputs, now being priced by independent pricing services or brokers. | |||||||||||||||||||||||||||||||||||||||||
For the three months ended June 30, 2014, there were no transfers from Level 2 to Level 1. | |||||||||||||||||||||||||||||||||||||||||
For the three months ended June 30, 2014, there were no transfers from Level 1. | |||||||||||||||||||||||||||||||||||||||||
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended June 30, 2013, for which the Company has used significant unobservable inputs (Level 3): | |||||||||||||||||||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||||||||||||||||
Gains (losses) | |||||||||||||||||||||||||||||||||||||||||
Total | Total | included in | |||||||||||||||||||||||||||||||||||||||
Realized and Unrealized | Realized and Unrealized | Earnings | |||||||||||||||||||||||||||||||||||||||
Gains | Losses | related to | |||||||||||||||||||||||||||||||||||||||
Included in | Included in | Instruments | |||||||||||||||||||||||||||||||||||||||
Other | Other | Transfers | still held at | ||||||||||||||||||||||||||||||||||||||
Beginning | Included in | Comprehensive | Included in | Comprehensive | in/out of | Ending | the Reporting | ||||||||||||||||||||||||||||||||||
Balance | Earnings | Income | Earnings | Income | Purchases | Sales | Issuances | Settlements | Level 3 | Other | Balance | Date | |||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Fixed maturity securities available-for-sale | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | 4 | $ | — | $ | — | $ | — | $ | (337 | ) | $ | 14,349 | $ | — | $ | — | $ | — | $ | 46 | $ | — | $ | 14,062 | $ | — | ||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 560,668 | — | 43,744 | — | — | 13,162 | (41,377 | ) | — | — | — | 199 | 576,396 | — | |||||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals, and political subdivisions | 4,335 | — | — | — | — | — | (5 | ) | — | — | — | — | 4,330 | — | |||||||||||||||||||||||||||
Other government-related securities | 20,003 | — | 1 | — | — | — | — | — | — | — | (4 | ) | 20,000 | — | |||||||||||||||||||||||||||
Corporate bonds | 124,555 | 116 | 81 | — | (7,682 | ) | 18,275 | (3,113 | ) | — | — | 62,330 | 333 | 194,895 | — | ||||||||||||||||||||||||||
Total fixed maturity securities - available-for-sale | 709,565 | 116 | 43,826 | — | (8,019 | ) | 45,786 | (44,495 | ) | — | — | 62,376 | 528 | 809,683 | — | ||||||||||||||||||||||||||
Fixed maturity securities - trading | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | — | — | — | — | 1,582 | — | — | — | — | — | 1,582 | — | ||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 71,383 | 1,389 | — | (2,610 | ) | — | 105,830 | (9,953 | ) | — | — | 2,210 | 602 | 168,851 | 511 | ||||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals and political subdivisions | — | — | — | — | — | 3,500 | — | — | — | — | — | 3,500 | — | ||||||||||||||||||||||||||||
Other government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Corporate bonds | 5,112 | — | — | (23 | ) | — | — | — | — | — | — | 3 | 5,092 | (23 | ) | ||||||||||||||||||||||||||
Total fixed maturity securities - trading | 76,495 | 1,389 | — | (2,633 | ) | — | 110,912 | (9,953 | ) | — | — | 2,210 | 605 | 179,025 | 488 | ||||||||||||||||||||||||||
Total fixed maturity securities | 786,060 | 1,505 | 43,826 | (2,633 | ) | (8,019 | ) | 156,698 | (54,448 | ) | — | — | 64,586 | 1,133 | 988,708 | 488 | |||||||||||||||||||||||||
Equity securities | 69,418 | — | — | — | — | — | — | — | — | — | — | 69,418 | — | ||||||||||||||||||||||||||||
Other long-term investments(1) | 57,117 | 43,317 | — | (362 | ) | — | — | — | — | — | — | — | 100,072 | 42,955 | |||||||||||||||||||||||||||
Short-term investments | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Total investments | 912,595 | 44,822 | 43,826 | (2,995 | ) | (8,019 | ) | 156,698 | (54,448 | ) | — | — | 64,586 | 1,133 | 1,158,198 | 43,443 | |||||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 912,595 | $ | 44,822 | $ | 43,826 | $ | (2,995 | ) | $ | (8,019 | ) | $ | 156,698 | $ | (54,448 | ) | $ | — | $ | — | $ | 64,586 | $ | 1,133 | $ | 1,158,198 | $ | 43,443 | ||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances(2) | $ | 123,681 | $ | — | $ | — | $ | (1,686 | ) | $ | — | $ | — | $ | — | $ | 65 | $ | 10,818 | $ | — | $ | — | $ | 114,614 | $ | — | ||||||||||||||
Other liabilities(1) | 539,814 | 219,947 | — | (15,714 | ) | — | — | — | — | — | — | — | 335,581 | 204,233 | |||||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 663,495 | $ | 219,947 | $ | — | $ | (17,400 | ) | $ | — | $ | — | $ | — | $ | 65 | $ | 10,818 | $ | — | $ | — | $ | 450,195 | $ | 204,233 | ||||||||||||||
(1)Represents certain freestanding and embedded derivatives. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
For the three months ended June 30, 2013, $64.6 million of securities were transferred into Level 3. This amount was transferred from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods, using no significant unobservable inputs, but were priced internally using significant unobservable inputs where market observable inputs were no longer available as of June 30, 2013. All transfers are recognized as of the end of the period. | |||||||||||||||||||||||||||||||||||||||||
For the three months ended June 30, 2013, there were no transfers out of Level 3. | |||||||||||||||||||||||||||||||||||||||||
For the three months ended June 30, 2013, there were no transfers from Level 2 to Level 1. | |||||||||||||||||||||||||||||||||||||||||
For the three months ended June 30, 2013, there were no transfers out of Level 1. | |||||||||||||||||||||||||||||||||||||||||
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the six months ended June 30, 2014, for which the Company has used significant unobservable inputs (Level 3): | |||||||||||||||||||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||||||||||||||||
Gains (losses) | |||||||||||||||||||||||||||||||||||||||||
Total | Total | included in | |||||||||||||||||||||||||||||||||||||||
Realized and Unrealized | Realized and Unrealized | Earnings | |||||||||||||||||||||||||||||||||||||||
Gains | Losses | related to | |||||||||||||||||||||||||||||||||||||||
Included in | Included in | Instruments | |||||||||||||||||||||||||||||||||||||||
Other | Other | Transfers | still held at | ||||||||||||||||||||||||||||||||||||||
Beginning | Included in | Comprehensive | Included in | Comprehensive | in/out of | Ending | the Reporting | ||||||||||||||||||||||||||||||||||
Balance | Earnings | Income | Earnings | Income | Purchases | Sales | Issuances | Settlements | Level 3 | Other | Balance | Date | |||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Fixed maturity securities available-for-sale | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | 28 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (18 | ) | $ | — | $ | — | $ | — | $ | — | $ | 10 | $ | — | ||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 545,808 | — | 34,066 | — | (1,233 | ) | — | (9,794 | ) | — | — | — | (750 | ) | 568,097 | — | |||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals, and political subdivisions | 3,675 | — | — | — | — | — | — | — | — | — | — | 3,675 | — | ||||||||||||||||||||||||||||
Other government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Corporate bonds | 1,549,940 | 969 | 54,288 | — | (7,265 | ) | 90,232 | (103,039 | ) | — | — | (55,293 | ) | (5,535 | ) | 1,524,297 | — | ||||||||||||||||||||||||
Total fixed maturity securities - available-for-sale | 2,099,451 | 969 | 88,354 | — | (8,498 | ) | 90,232 | (112,851 | ) | — | — | (55,293 | ) | (6,285 | ) | 2,096,079 | — | ||||||||||||||||||||||||
Fixed maturity securities - trading | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | — | — | — | — | 842 | — | — | — | — | — | 842 | — | ||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 194,977 | 6,851 | — | (3,114 | ) | — | — | (22,695 | ) | — | — | — | 367 | 176,386 | 654 | ||||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals and political subdivisions | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Corporate bonds | 29,199 | 878 | — | (53 | ) | — | 4,059 | (5,110 | ) | — | — | 2,522 | 25 | 31,520 | — | ||||||||||||||||||||||||||
Total fixed maturity securities - trading | 224,176 | 7,729 | — | (3,167 | ) | — | 4,901 | (27,805 | ) | — | — | 2,522 | 392 | 208,748 | 654 | ||||||||||||||||||||||||||
Total fixed maturity securities | 2,323,627 | 8,698 | 88,354 | (3,167 | ) | (8,498 | ) | 95,133 | (140,656 | ) | — | — | (52,771 | ) | (5,893 | ) | 2,304,827 | 654 | |||||||||||||||||||||||
Equity securities | 71,881 | — | 1,192 | — | (166 | ) | 9,551 | (674 | ) | — | — | — | — | 81,784 | — | ||||||||||||||||||||||||||
Other long-term investments(1) | 196,133 | 245 | — | (73,077 | ) | — | — | — | — | — | — | — | 123,301 | (72,832 | ) | ||||||||||||||||||||||||||
Short-term investments | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Total investments | 2,591,641 | 8,943 | 89,546 | (76,244 | ) | (8,664 | ) | 104,684 | (141,330 | ) | — | — | (52,771 | ) | (5,893 | ) | 2,509,912 | (72,178 | ) | ||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 2,591,641 | $ | 8,943 | $ | 89,546 | $ | (76,244 | ) | $ | (8,664 | ) | $ | 104,684 | $ | (141,330 | ) | $ | — | $ | — | $ | (52,771 | ) | $ | (5,893 | ) | $ | 2,509,912 | $ | (72,178 | ) | |||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances(2) | $ | 107,000 | $ | — | $ | — | $ | (3,123 | ) | $ | — | $ | — | $ | — | $ | 175 | $ | 7,842 | $ | — | $ | — | $ | 102,456 | $ | — | ||||||||||||||
Other liabilities(1) | 270,630 | 25 | — | (214,142 | ) | — | — | — | — | — | — | — | 484,747 | (214,117 | ) | ||||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 377,630 | $ | 25 | $ | — | $ | (217,265 | ) | $ | — | $ | — | $ | — | $ | 175 | $ | 7,842 | $ | — | $ | — | $ | 587,203 | $ | (214,117 | ) | |||||||||||||
(1)Represents certain freestanding and embedded derivatives. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2014, $31.0 million of securities were transferred into Level 3. This amount was transferred from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods, using no significant unobservable inputs, but were priced internally using significant unobservable inputs where market observable inputs were no longer available as of June 30, 2014. All transfers are recognized as of the end of the period. | |||||||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2014, $83.8 million of securities were transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were previously priced internally using significant unobservable inputs, now being priced by independent pricing services or brokers. | |||||||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2014, there were no transfers from Level 2 to Level 1. | |||||||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2014, there were no transfers out of Level 1. | |||||||||||||||||||||||||||||||||||||||||
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the six months ended June 30, 2013, for which the Company has used significant unobservable inputs (Level 3): | |||||||||||||||||||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||||||||||||||||
Gains (losses) | |||||||||||||||||||||||||||||||||||||||||
Total | Total | included in | |||||||||||||||||||||||||||||||||||||||
Realized and Unrealized | Realized and Unrealized | Earnings | |||||||||||||||||||||||||||||||||||||||
Gains | Losses | related to | |||||||||||||||||||||||||||||||||||||||
Included in | Included in | Instruments | |||||||||||||||||||||||||||||||||||||||
Other | Other | Transfers | still held at | ||||||||||||||||||||||||||||||||||||||
Beginning | Included in | Comprehensive | Included in | Comprehensive | in/out of | Ending | the Reporting | ||||||||||||||||||||||||||||||||||
Balance | Earnings | Income | Earnings | Income | Purchases | Sales | Issuances | Settlements | Level 3 | Other | Balance | Date | |||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Fixed maturity securities available-for-sale | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | 4 | $ | — | $ | — | $ | — | $ | (337 | ) | $ | 14,349 | $ | — | $ | — | $ | — | $ | 46 | $ | — | $ | 14,062 | $ | — | ||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 596,143 | — | 43,756 | — | (27,548 | ) | 13,162 | (50,386 | ) | — | — | 1,227 | 42 | 576,396 | — | ||||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals, and political subdivisions | 4,335 | — | — | — | — | — | (5 | ) | — | — | — | — | 4,330 | — | |||||||||||||||||||||||||||
Other government-related securities | 20,011 | — | 1 | — | (3 | ) | — | — | — | — | — | (9 | ) | 20,000 | — | ||||||||||||||||||||||||||
Corporate bonds | 167,892 | 116 | 1,011 | — | (10,046 | ) | 18,275 | (45,184 | ) | — | — | 62,330 | 501 | 194,895 | — | ||||||||||||||||||||||||||
Total fixed maturity securities - available-for-sale | 788,385 | 116 | 44,768 | — | (37,934 | ) | 45,786 | (95,575 | ) | — | — | 63,603 | 534 | 809,683 | — | ||||||||||||||||||||||||||
Fixed maturity securities - trading | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | — | — | — | — | 1,582 | — | — | — | — | — | 1,582 | — | ||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 70,535 | 4,797 | — | (2,869 | ) | — | 105,830 | (12,776 | ) | — | — | 2,210 | 1,124 | 168,851 | 3,779 | ||||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals and political subdivisions | — | — | — | — | — | 3,500 | — | — | — | — | — | 3,500 | — | ||||||||||||||||||||||||||||
Other government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Corporate bonds | 115 | 1 | — | (23 | ) | — | — | (17 | ) | — | — | 5,013 | 3 | 5,092 | 6 | ||||||||||||||||||||||||||
Total fixed maturity securities - trading | 70,650 | 4,798 | — | (2,892 | ) | — | 110,912 | (12,793 | ) | — | — | 7,223 | 1,127 | 179,025 | 3,785 | ||||||||||||||||||||||||||
Total fixed maturity securities | 859,035 | 4,914 | 44,768 | (2,892 | ) | (37,934 | ) | 156,698 | (108,368 | ) | — | — | 70,826 | 1,661 | 988,708 | 3,785 | |||||||||||||||||||||||||
Equity securities | 69,418 | — | — | — | — | — | — | — | — | — | — | 69,418 | — | ||||||||||||||||||||||||||||
Other long-term investments(1) | 31,591 | 68,852 | — | (371 | ) | — | — | — | — | — | — | — | 100,072 | 68,481 | |||||||||||||||||||||||||||
Short-term investments | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Total investments | 960,044 | 73,766 | 44,768 | (3,263 | ) | (37,934 | ) | 156,698 | (108,368 | ) | — | — | 70,826 | 1,661 | 1,158,198 | 72,266 | |||||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 960,044 | $ | 73,766 | $ | 44,768 | $ | (3,263 | ) | $ | (37,934 | ) | $ | 156,698 | $ | (108,368 | ) | $ | — | $ | — | $ | 70,826 | $ | 1,661 | $ | 1,158,198 | $ | 72,266 | ||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances(2) | $ | 129,468 | $ | — | $ | — | $ | (3,686 | ) | $ | — | $ | — | $ | — | $ | 201 | $ | 18,741 | $ | — | $ | — | $ | 114,614 | $ | — | ||||||||||||||
Other liabilities(1) | 611,437 | 304,493 | — | (28,637 | ) | — | — | — | — | — | — | — | 335,581 | 275,856 | |||||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 740,905 | $ | 304,493 | $ | — | $ | (32,323 | ) | $ | — | $ | — | $ | — | $ | 201 | $ | 18,741 | $ | — | $ | — | $ | 450,195 | $ | 275,856 | ||||||||||||||
(1)Represents certain freestanding and embedded derivatives. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2013, $70.8 million of securities were transferred into Level 3. This amount was transferred from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods, using no significant unobservable inputs, but were priced internally using significant unobservable inputs where market observable inputs were no longer available as of June 30, 2013. All transfers are recognized as of the end of the period. | |||||||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2013, there were no transfers out of Level 3. | |||||||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2013, there were no transfers from Level 2 to Level 1. | |||||||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2013, there were no transfers out of Level 1. | |||||||||||||||||||||||||||||||||||||||||
Total realized and unrealized gains (losses) on Level 3 assets and liabilities are primarily reported in either realized investment gains (losses) within the consolidated statements of income (loss) or other comprehensive income (loss) within shareowners’ 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 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 | |||||||||||||||||||||||||||||||||||||||||
June 30, 2014 | December 31, 2013 | ||||||||||||||||||||||||||||||||||||||||
Fair Value | Carrying | Carrying | |||||||||||||||||||||||||||||||||||||||
Level | Amounts | Fair Values | Amounts | Fair Values | |||||||||||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate | 3 | $ | 5,294,729 | $ | 5,821,043 | $ | 5,493,492 | $ | 5,956,133 | ||||||||||||||||||||||||||||||||
Policy loans | 3 | 1,778,379 | 1,778,379 | 1,815,744 | 1,815,744 | ||||||||||||||||||||||||||||||||||||
Fixed maturities, held-to-maturity(1) | 3 | 400,000 | 451,382 | 365,000 | 335,676 | ||||||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Stable value product account balances | 3 | $ | 2,435,995 | $ | 2,456,141 | $ | 2,559,552 | $ | 2,566,209 | ||||||||||||||||||||||||||||||||
Annuity account balances | 3 | 11,071,468 | 10,665,435 | 11,125,253 | 10,639,637 | ||||||||||||||||||||||||||||||||||||
Debt: | |||||||||||||||||||||||||||||||||||||||||
Bank borrowings | 3 | $ | 345,000 | $ | 345,000 | $ | 485,000 | $ | 485,000 | ||||||||||||||||||||||||||||||||
Senior Notes | 2 | 1,100,000 | 1,356,480 | 1,100,000 | 1,294,675 | ||||||||||||||||||||||||||||||||||||
Subordinated debt securities | 2 | 540,593 | 552,607 | 540,593 | 473,503 | ||||||||||||||||||||||||||||||||||||
Non-recourse funding obligations(2) | 3 | 579,078 | 578,392 | 562,448 | 470,709 | ||||||||||||||||||||||||||||||||||||
Except as noted below, fair values were estimated using quoted market prices. | |||||||||||||||||||||||||||||||||||||||||
(1) Security purchased from unconsolidated subsidiary, Red Mountain LLC. | |||||||||||||||||||||||||||||||||||||||||
(2) Of this carrying amount, $400.0 million, fair value of $427.1 million, as of June 30, 2014, and $365.0 million, fair value of $321.5 million, as of December 31, 2013, relates to non-recourse funding obligations issued by 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 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 value of policy loans approximates carrying 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 were based on a current market yield for similar financial instruments. | |||||||||||||||||||||||||||||||||||||||||
Stable value product and Annuity account balances | |||||||||||||||||||||||||||||||||||||||||
The Company estimates the fair value of stable value product account balances and annuity account balances using models based on discounted expected cash flows. The discount rates used in the models were 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 obligations | |||||||||||||||||||||||||||||||||||||||||
The Company estimates the fair value of its non-recourse funding obligations using internal discounted cash flow models. The discount rates used in the model were based on a current market yield for similar financial instruments. |
DERIVATIVE_FINANCIAL_INSTRUMEN
DERIVATIVE FINANCIAL INSTRUMENTS | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
DERIVATIVE FINANCIAL INSTRUMENTS | ' | |||||||||||||
DERIVATIVE FINANCIAL INSTRUMENTS | ' | |||||||||||||
17. 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, inflation 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. The Company’s inflation risk management strategy involves the use of swaps that requires the Company to pay a fixed rate and receive a floating rate that is based on changes in the Consumer Price Index (“CPI”). | ||||||||||||||
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 variable annuity contracts and fixed indexed annuities: | ||||||||||||||
· 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 condensed balance sheet in “other long-term investments” and “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. | ||||||||||||||
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 investment gains (losses)—Derivative financial instruments”. | ||||||||||||||
Derivative Instruments Designated and Qualifying as Hedging Instruments | ||||||||||||||
Cash-Flow Hedges | ||||||||||||||
· In connection with the issuance of inflation-adjusted funding agreements, the Company has entered into swaps to convert the floating CPI-linked interest rate on these agreements to a fixed rate. The Company pays a fixed rate on the swap and receives a floating rate primarily determined by the period’s change in the CPI. The amounts that are received on the swaps are equal to the amounts that are paid on the agreements. | ||||||||||||||
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, interest rate, currency, and volatility futures to mitigate the risk related to certain guaranteed minimum benefits, including GMWB, 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. No volatility future positions were held as of June 30, 2014. | ||||||||||||||
· The Company uses equity options, variance swaps, and volatility options to mitigate the risk related to certain guaranteed minimum benefits, including GMWB, within its VA products. In general, the cost of such benefits varies with the level of equity markets and overall volatility. No volatility option positions were held as of June 30, 2014. | ||||||||||||||
· The Company uses interest rate swaps and interest rate swaptions to mitigate the risk related to certain guaranteed minimum benefits, including GMWB, within its VA products. | ||||||||||||||
· The Company markets certain VA products with a GMWB rider. The GMWB 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 and volatility futures to mitigate the risk within its fixed indexed annuity products. In general, the cost of such benefits varies with the level of equity and overall volatility. | ||||||||||||||
· The Company used equity 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. | ||||||||||||||
· The Company markets certain fixed indexed annuity products. The FIA component is considered an embedded derivative, not considered to be clearly and closely related to the host contract. | ||||||||||||||
Other Derivatives | ||||||||||||||
· The Company uses certain interest rate swaps to mitigate the price volatility of fixed maturities. None of these positions were held as of June 30, 2014. | ||||||||||||||
· The Company purchased interest rate caps to mitigate its risk with respect to the Company’s LIBOR exposure and the potential impact of European financial market distress. None of these positions were held as of June 30, 2014. | ||||||||||||||
· The Company uses various swaps and other types of derivatives to manage risk related to other exposures. | ||||||||||||||
· The Company markets certain IUL products. The IUL component is considered an embedded derivative, not considered to be clearly and closely related to the host contract. | ||||||||||||||
· 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 | For The | |||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
(Dollars In Thousands) | ||||||||||||||
Derivatives related to variable annuity contracts: | ||||||||||||||
Interest rate futures - VA | $ | 6,548 | $ | (7,654 | ) | $ | 10,798 | $ | (24,138 | ) | ||||
Equity futures - VA | (7,259 | ) | (4,036 | ) | (9,910 | ) | (27,261 | ) | ||||||
Currency futures - VA | (2,887 | ) | (112 | ) | (4,165 | ) | 7,971 | |||||||
Variance swaps - VA | (823 | ) | 2,214 | (2,673 | ) | (8,219 | ) | |||||||
Equity options - VA | (20,949 | ) | (8,131 | ) | (33,290 | ) | (36,537 | ) | ||||||
Interest rate swaptions - VA | (4,998 | ) | 1,639 | (14,401 | ) | (2,463 | ) | |||||||
Interest rate swaps - VA | 45,169 | (89,722 | ) | 102,537 | (106,278 | ) | ||||||||
Embedded derivative - GMWB | (47,389 | ) | 103,315 | (129,676 | ) | 183,690 | ||||||||
Total derivatives related to variable annuity contracts | (32,588 | ) | (2,487 | ) | (80,780 | ) | (13,235 | ) | ||||||
Derivatives related to FIA contracts: | ||||||||||||||
Embedded derivative - FIA | (8,307 | ) | (41 | ) | (6,574 | ) | (41 | ) | ||||||
Equity futures - FIA | 605 | — | 950 | — | ||||||||||
Volatility futures - FIA | 8 | — | 8 | — | ||||||||||
Equity options - FIA | 2,984 | (19 | ) | 3,978 | (19 | ) | ||||||||
Total derivatives related to FIA contracts | (4,710 | ) | (60 | ) | (1,638 | ) | (60 | ) | ||||||
Embedded derivative - IUL | (285 | ) | — | (285 | ) | — | ||||||||
Embedded derivative - Modco reinsurance treaties | (52,202 | ) | 144,998 | (112,371 | ) | 161,773 | ||||||||
Interest rate swaps | — | 1,909 | — | 2,912 | ||||||||||
Other derivatives | (141 | ) | (479 | ) | (202 | ) | (124 | ) | ||||||
Total realized gains (losses) - derivatives | $ | (89,926 | ) | $ | 143,881 | $ | (195,276 | ) | $ | 151,266 | ||||
The following table sets forth realized investments gains and losses for Modco trading portfolio that is included in realized investment gains (losses) — all other investments. | ||||||||||||||
Realized investment gains (losses) - all other investments | ||||||||||||||
For The | For The | |||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
(Dollars In Thousands) | ||||||||||||||
Modco trading portfolio(1) | $ | 60,989 | $ | (126,694 | ) | $ | 127,292 | $ | (142,022 | ) | ||||
(1)The Company elected to include the use of alternate disclosures for trading activities. | ||||||||||||||
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 Relationship | ||||||||||||||
Amount and Location of | ||||||||||||||
Amount of Gains (Losses) | Gains (Losses) | |||||||||||||
Deferred in | Reclassified from | Amount and Location of | ||||||||||||
Accumulated Other | Accumulated Other | (Losses) Recognized in | ||||||||||||
Comprehensive Income | Comprehensive Income | Income (Loss) on | ||||||||||||
(Loss) on Derivatives | (Loss) into Income (Loss) | Derivatives | ||||||||||||
(Effective Portion) | (Effective Portion) | (Ineffective Portion) | ||||||||||||
Benefits and settlement | Realized investment | |||||||||||||
expenses | gains (losses) | |||||||||||||
(Dollars In Thousands) | ||||||||||||||
For The Three Months Ended June 30, 2014 | ||||||||||||||
Inflation | $ | (929 | ) | $ | (614 | ) | $ | (165 | ) | |||||
Total | $ | (929 | ) | $ | (614 | ) | $ | (165 | ) | |||||
For The Six Months Ended June 30, 2014 | ||||||||||||||
Inflation | $ | (26 | ) | $ | (1,284 | ) | $ | (126 | ) | |||||
Total | $ | (26 | ) | $ | (1,284 | ) | $ | (126 | ) | |||||
Gain (Loss) on Derivatives in Cash Flow Relationship | ||||||||||||||
Amount and Location of | ||||||||||||||
Amount of Gains (Losses) | Gains (Losses) | |||||||||||||
Deferred in | Reclassified from | Amount and Location of | ||||||||||||
Accumulated Other | Accumulated Other | (Losses) Recognized in | ||||||||||||
Comprehensive Income | Comprehensive Income | Income (Loss) on | ||||||||||||
(Loss) on Derivatives | (Loss) into Income (Loss) | Derivatives | ||||||||||||
(Effective Portion) | (Effective Portion) | (Ineffective Portion) | ||||||||||||
Benefits and settlement | Realized investment | |||||||||||||
expenses | gains (losses) | |||||||||||||
(Dollars In Thousands) | ||||||||||||||
For The Three Months Ended June 30, 2013 | ||||||||||||||
Inflation | $ | (4,589 | ) | $ | (580 | ) | $ | (558 | ) | |||||
Total | $ | (4,589 | ) | $ | (580 | ) | $ | (558 | ) | |||||
For The Six Months Ended June 30, 2013 | ||||||||||||||
Inflation | $ | (180 | ) | $ | (1,077 | ) | $ | (190 | ) | |||||
Total | $ | (180 | ) | $ | (1,077 | ) | $ | (190 | ) | |||||
The tables below present 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 June 30, 2014 | As of December 31, 2013 | |||||||||||||
Notional | Fair | Notional | Fair | |||||||||||
Amount | Value | Amount | Value | |||||||||||
(Dollars In Thousands) | ||||||||||||||
Other long-term investments | ||||||||||||||
Cash flow hedges: | ||||||||||||||
Inflation | $ | — | $ | — | $ | — | $ | — | ||||||
Derivatives not designated as hedging instruments: | ||||||||||||||
Interest rate swaps | 295,000 | 3,681 | 200,000 | 1,961 | ||||||||||
Embedded derivative - Modco reinsurance treaties | 30,105 | 1,226 | 80,376 | 1,517 | ||||||||||
Embedded derivative - GMWB | 5,161,813 | 122,075 | 6,113,017 | 194,616 | ||||||||||
Interest rate futures | 283,629 | 1,510 | — | — | ||||||||||
Equity futures | 46,915 | 379 | 3,387 | 111 | ||||||||||
Currency futures | — | — | 14,338 | 321 | ||||||||||
Equity options | 2,051,427 | 120,586 | 1,376,205 | 78,277 | ||||||||||
Interest rate swaptions | 625,000 | 15,890 | 625,000 | 30,291 | ||||||||||
Other | 592 | 420 | 425 | 473 | ||||||||||
$ | 8,494,481 | $ | 265,767 | $ | 8,412,748 | $ | 307,567 | |||||||
Other liabilities | ||||||||||||||
Cash flow hedges: | ||||||||||||||
Inflation | $ | 182,965 | $ | 624 | $ | 182,965 | $ | 1,865 | ||||||
Derivatives not designated as hedging instruments: | ||||||||||||||
Interest rate swaps | 1,180,000 | 59,968 | 1,230,000 | 153,322 | ||||||||||
Variance swaps | 1,100 | 3,782 | 1,500 | 1,744 | ||||||||||
Embedded derivative - Modco reinsurance treaties | 2,591,360 | 318,999 | 2,578,590 | 206,918 | ||||||||||
Embedded derivative - GMWB | 4,418,599 | 95,523 | 2,494,142 | 38,388 | ||||||||||
Embedded derivative - FIA | 527,698 | 69,615 | 244,424 | 25,324 | ||||||||||
Embedded derivative - IUL | 1,057 | 610 | — | — | ||||||||||
Interest rate futures | 71,714 | 37 | 322,902 | 5,221 | ||||||||||
Equity futures | 102,891 | 1,443 | 164,595 | 6,595 | ||||||||||
Currency futures | 138,916 | 2,364 | 118,008 | 840 | ||||||||||
Equity options | 475,155 | 32,726 | 257,065 | 17,558 | ||||||||||
Other | 358 | 38 | 230 | 27 | ||||||||||
$ | 9,691,813 | $ | 585,729 | $ | 7,594,421 | $ | 457,802 | |||||||
Based on the expected cash flows of the underlying hedged items, the Company expects to reclassify $0.5 million out of accumulated other comprehensive income (loss) into earnings during the next twelve months. |
OFFSETTING_OF_ASSETS_AND_LIABI
OFFSETTING OF ASSETS AND LIABILITIES | 6 Months Ended | ||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||
OFFSETTING OF ASSETS AND LIABILITIES | ' | ||||||||||||||||||||
OFFSETTING OF ASSETS AND LIABILITIES | ' | ||||||||||||||||||||
18. 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 9, Debt and Other Obligations for details of the Company’s repurchase agreement programs. | |||||||||||||||||||||
The tables below present the derivative instruments by assets and liabilities for the Company as of June 30, 2014: | |||||||||||||||||||||
Net Amounts | |||||||||||||||||||||
Gross | of Assets | Gross Amounts Not Offset | |||||||||||||||||||
Amounts | Presented in | in the Statement of | |||||||||||||||||||
Gross | Offset in the | the | Financial Position | ||||||||||||||||||
Amounts of | Statement of | Statement of | Cash | ||||||||||||||||||
Recognized | Financial | Financial | Financial | Collateral | |||||||||||||||||
Assets | Position | Position | Instruments | Received | Net Amount | ||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||
Offsetting of Derivative Assets | |||||||||||||||||||||
Derivatives: | |||||||||||||||||||||
Free-Standing derivatives | $ | 142,090 | $ | — | $ | 142,090 | $ | 54,682 | $ | 23,039 | $ | 64,369 | |||||||||
Embedded derivative - Modco reinsurance treaties | 1,226 | — | 1,226 | — | — | 1,226 | |||||||||||||||
Embedded derivative - GMWB | 122,075 | — | 122,075 | — | — | 122,075 | |||||||||||||||
Total derivatives, subject to a master netting arrangement or similar arrangement | 265,391 | — | 265,391 | 54,682 | 23,039 | 187,670 | |||||||||||||||
Total derivatives, not subject to a master netting arrangement or similar arrangement | 376 | — | 376 | — | — | 376 | |||||||||||||||
Total derivatives | 265,767 | — | 265,767 | 54,682 | 23,039 | 188,046 | |||||||||||||||
Total Assets | $ | 265,767 | $ | — | $ | 265,767 | $ | 54,682 | $ | 23,039 | $ | 188,046 | |||||||||
Net Amounts | |||||||||||||||||||||
Gross | of Liabilities | Gross Amounts Not Offset | |||||||||||||||||||
Amounts | Presented in | in the Statement of | |||||||||||||||||||
Gross | Offset in the | the | Financial Position | ||||||||||||||||||
Amounts of | Statement of | Statement of | Cash | ||||||||||||||||||
Recognized | Financial | Financial | Financial | Collateral | |||||||||||||||||
Liabilities | Position | Position | Instruments | Paid | Net Amount | ||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||
Offsetting of Derivative Liabilities | |||||||||||||||||||||
Derivatives: | |||||||||||||||||||||
Free-Standing derivatives | $ | 100,982 | $ | — | $ | 100,982 | $ | 54,682 | $ | 46,113 | $ | 187 | |||||||||
Embedded derivative - Modco reinsurance treaties | 318,999 | — | 318,999 | — | — | 318,999 | |||||||||||||||
Embedded derivative - GMWB | 95,523 | — | 95,523 | — | — | 95,523 | |||||||||||||||
Embedded derivative - FIA | 69,615 | — | 69,615 | — | — | 69,615 | |||||||||||||||
Embedded derivative - IUL | 610 | — | 610 | — | — | 610 | |||||||||||||||
Total derivatives, subject to a master netting arrangement or similar arrangement | 585,729 | — | 585,729 | 54,682 | 46,113 | 484,934 | |||||||||||||||
Total derivatives, not subject to a master netting arrangement or similar arrangement | — | — | — | — | — | — | |||||||||||||||
Total derivatives | 585,729 | — | 585,729 | 54,682 | 46,113 | 484,934 | |||||||||||||||
Repurchase agreements(1) | 420,490 | — | 420,490 | — | — | 420,490 | |||||||||||||||
Total Liabilities | $ | 1,006,219 | $ | — | $ | 1,006,219 | $ | 54,682 | $ | 46,113 | $ | 905,424 | |||||||||
(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, 2013: | |||||||||||||||||||||
Net Amounts | |||||||||||||||||||||
Gross | of Assets | Gross Amounts Not Offset | |||||||||||||||||||
Amounts | Presented in | in the Statement of | |||||||||||||||||||
Gross | Offset in the | the | Financial Position | ||||||||||||||||||
Amounts of | Statement of | Statement of | Cash | ||||||||||||||||||
Recognized | Financial | Financial | Financial | Collateral | |||||||||||||||||
Assets | Position | Position | Instruments | Received | Net Amount | ||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||
Offsetting of Derivative Assets | |||||||||||||||||||||
Derivatives: | |||||||||||||||||||||
Free-Standing derivatives | $ | 110,983 | $ | — | $ | 110,983 | $ | 52,487 | $ | 10,700 | $ | 47,796 | |||||||||
Embedded derivative - Modco reinsurance treaties | 1,517 | — | 1,517 | — | — | 1,517 | |||||||||||||||
Embedded derivative - GMWB | 194,616 | — | 194,616 | — | — | 194,616 | |||||||||||||||
Total derivatives, subject to a master netting arrangement or similar arrangement | 307,116 | — | 307,116 | 52,487 | 10,700 | 243,929 | |||||||||||||||
Total derivatives, not subject to a master netting arrangement or similar arrangement | 451 | — | 451 | — | — | 451 | |||||||||||||||
Total derivatives | 307,567 | — | 307,567 | 52,487 | 10,700 | 244,380 | |||||||||||||||
Total Assets | $ | 307,567 | $ | — | $ | 307,567 | $ | 52,487 | $ | 10,700 | $ | 244,380 | |||||||||
Net Amounts | |||||||||||||||||||||
Gross | of Liabilities | Gross Amounts Not Offset | |||||||||||||||||||
Amounts | Presented in | in the Statement of | |||||||||||||||||||
Gross | Offset in the | the | Financial Position | ||||||||||||||||||
Amounts of | Statement of | Statement of | Cash | ||||||||||||||||||
Recognized | Financial | Financial | Financial | Collateral | |||||||||||||||||
Liabilities | Position | Position | Instruments | Paid | Net Amount | ||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||
Offsetting of Derivative Liabilities | |||||||||||||||||||||
Derivatives: | |||||||||||||||||||||
Free-Standing derivatives | $ | 187,172 | $ | — | $ | 187,172 | $ | 52,487 | $ | 98,359 | $ | 36,326 | |||||||||
Embedded derivative - Modco reinsurance treaties | 206,918 | — | 206,918 | — | — | 206,918 | |||||||||||||||
Embedded derivative - GMWB | 38,388 | 38,388 | — | — | 38,388 | ||||||||||||||||
Embedded derivative - FIA | 25,324 | — | 25,324 | — | — | 25,324 | |||||||||||||||
Total derivatives, subject to a master netting arrangement or similar arrangement | 457,802 | — | 457,802 | 52,487 | 98,359 | 306,956 | |||||||||||||||
Total derivatives, not subject to a master netting arrangement or similar arrangement | — | — | — | — | — | — | |||||||||||||||
Total derivatives | 457,802 | — | 457,802 | 52,487 | 98,359 | 306,956 | |||||||||||||||
Repurchase agreements(1) | 350,000 | — | 350,000 | — | — | 350,000 | |||||||||||||||
Total Liabilities | $ | 807,802 | $ | — | $ | 807,802 | $ | 52,487 | $ | 98,359 | $ | 656,956 | |||||||||
(1) Borrowings under repurchase agreements are for a term less than 90 days. |
OPERATING_SEGMENTS
OPERATING SEGMENTS | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
OPERATING SEGMENTS | ' | |||||||||||||
OPERATING SEGMENTS | ' | |||||||||||||
19. OPERATINGSEGMENTS | ||||||||||||||
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, as prescribed in the ASC Segment Reporting Topic, 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”), 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, and independent marketing organizations. | ||||||||||||||
· The Acquisitions segment focuses on acquiring, converting, and servicing policies 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 variable annuity 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. The segment also issues funding agreements to the FHLB, and markets guaranteed investment contracts (“GICs”) to 401(k) and other qualified retirement savings plans. Additionally, the Company has contracts outstanding pursuant to a funding agreement-backed notes program registered with the United States Securities and Exchange Commission (the “SEC”) which offered notes to both institutional and retail investors. | ||||||||||||||
· The Asset Protection segment markets extended service contracts and credit life and disability insurance to protect consumers’ investments in automobiles, watercraft, and recreational vehicles. In addition, the segment markets a guaranteed asset protection (“GAP”) product. GAP coverage covers the difference between the loan pay-off amount and an asset’s actual cash value in the case of a total loss. | ||||||||||||||
· The Corporate and Other segment primarily consists of net investment income not assigned to the segments above (including the impact of carrying liquidity) and expenses not attributable to the segments above (including interest on certain corporate debt). This segment includes earnings from several non-strategic or runoff lines of business, various investment-related transactions, the operations of several small subsidiaries, and the repurchase of non-recourse funding obligations. | ||||||||||||||
The Company uses the same accounting policies and procedures to measure segment operating income (loss) and assets as it uses to measure consolidated net income and assets. Segment operating income (loss) is income before income tax, excluding realized gains and losses on investments and derivatives net of the amortization related to deferred acquisition costs (“DAC”), value of business acquired (“VOBA”), and benefits and settlement expenses. Operating earnings exclude changes in the GMWB embedded derivatives (excluding the portion attributed to economic cost), realized and unrealized gains (losses) on derivatives used to hedge the VA product, actual GMWB incurred claims and the related amortization of DAC attributed to each of these items. | ||||||||||||||
Segment operating income (loss) represents the basis on which the performance of the Company’s business is internally assessed by management. Premiums and policy fees, other income, benefits and settlement expenses, and amortization of DAC/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 or six months ended June 30, 2014 and 2013. | ||||||||||||||
The following tables summarize financial information for the Company’s segments: | ||||||||||||||
For The | For The | |||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
(Dollars In Thousands) | ||||||||||||||
Revenues | ||||||||||||||
Life Marketing | $ | 407,032 | $ | 347,021 | $ | 791,798 | $ | 714,647 | ||||||
Acquisitions | 438,244 | 261,693 | 865,192 | 512,180 | ||||||||||
Annuities | 155,417 | 186,025 | 300,074 | 350,954 | ||||||||||
Stable Value Products | 27,109 | 34,468 | 54,928 | 66,388 | ||||||||||
Asset Protection | 70,870 | 71,813 | 137,253 | 139,384 | ||||||||||
Corporate and Other | 56,671 | 55,336 | 96,656 | 105,617 | ||||||||||
Total revenues | $ | 1,155,343 | $ | 956,356 | $ | 2,245,901 | $ | 1,889,170 | ||||||
Segment Operating Income (Loss) | ||||||||||||||
Life Marketing | $ | 26,349 | $ | 24,673 | $ | 49,834 | $ | 48,380 | ||||||
Acquisitions | 64,882 | 29,435 | 125,878 | 63,812 | ||||||||||
Annuities | 55,258 | 36,382 | 106,901 | 79,780 | ||||||||||
Stable Value Products | 17,287 | 22,464 | 34,684 | 40,308 | ||||||||||
Asset Protection | 8,534 | 7,384 | 14,903 | 13,465 | ||||||||||
Corporate and Other | (12,555 | ) | (2,483 | ) | (27,410 | ) | (20,815 | ) | ||||||
Total segment operating income | 159,755 | 117,855 | 304,790 | 224,930 | ||||||||||
Realized investment (losses) gains - investments(1) | 74,920 | (119,311 | ) | 143,453 | (129,067 | ) | ||||||||
Realized investment (losses) gains - derivatives | (72,465 | ) | 158,469 | (160,828 | ) | 178,777 | ||||||||
Income tax expense | (54,233 | ) | (53,814 | ) | (95,799 | ) | (93,150 | ) | ||||||
Net income | $ | 107,977 | $ | 103,199 | $ | 191,616 | $ | 181,490 | ||||||
Investment gains (losses)(2) | $ | 78,688 | $ | (113,978 | ) | $ | 149,211 | $ | (122,707 | ) | ||||
Less: amortization related to DAC/VOBA and benefits settlements expenses | 3,768 | 5,333 | 5,758 | 6,360 | ||||||||||
Realized investment gains (losses) - investments | $ | 74,920 | $ | (119,311 | ) | $ | 143,453 | $ | (129,067 | ) | ||||
Derivative gains (losses)(3) | $ | (89,926 | ) | $ | 143,881 | $ | (195,276 | ) | $ | 151,266 | ||||
Less: VA GMWB economic cost | (17,461 | ) | (14,588 | ) | (34,448 | ) | (27,511 | ) | ||||||
Realized investment gains (losses) - derivatives | $ | (72,465 | ) | $ | 158,469 | $ | (160,828 | ) | $ | 178,777 | ||||
(1) Includes credit related other-than-temporary impairments of $1.5 million and $3.1 million for the three and six months ended June 30, 2014, respectively, as compared to $4.0 million and $8.6 million for the three and six months ended June 30, 2013, respectively. | ||||||||||||||
(2)Includes realized investment gains (losses) before related amortization. | ||||||||||||||
(3)Includes realized gains (losses) on derivatives before the VA GMWB economic cost. | ||||||||||||||
Operating Segment Assets | ||||||||||||||
As of June 30, 2014 | ||||||||||||||
(Dollars In Thousands) | ||||||||||||||
Life | Stable Value | |||||||||||||
Marketing | Acquisitions | Annuities | Products | |||||||||||
Investments and other assets | $ | 13,575,287 | $ | 20,179,754 | $ | 20,713,485 | $ | 2,435,193 | ||||||
Deferred policy acquisition costs and value of business acquired | 2,000,329 | 605,799 | 623,461 | 802 | ||||||||||
Goodwill | 10,192 | 30,968 | — | — | ||||||||||
Total assets | $ | 15,585,808 | $ | 20,816,521 | $ | 21,336,946 | $ | 2,435,995 | ||||||
Asset | Corporate | Total | ||||||||||||
Protection | and Other | Adjustments | Consolidated | |||||||||||
Investments and other assets | $ | 894,935 | $ | 9,966,477 | $ | 15,644 | $ | 67,780,775 | ||||||
Deferred policy acquisition costs and value of business acquired | 42,397 | 487 | — | 3,273,275 | ||||||||||
Goodwill | 62,671 | 83 | — | 103,914 | ||||||||||
Total assets | $ | 1,000,003 | $ | 9,967,047 | $ | 15,644 | $ | 71,157,964 | ||||||
Operating Segment Assets | ||||||||||||||
As of December 31, 2013 | ||||||||||||||
(Dollars In Thousands) | ||||||||||||||
Life | Stable Value | |||||||||||||
Marketing | Acquisitions | Annuities | Products | |||||||||||
Investments and other assets | $ | 13,135,914 | $ | 20,186,839 | $ | 19,974,246 | $ | 2,558,551 | ||||||
Deferred policy acquisition costs and value of business acquired | 2,071,470 | 799,255 | 647,485 | 1,001 | ||||||||||
Goodwill | 10,192 | 32,517 | — | — | ||||||||||
Total assets | $ | 15,217,576 | $ | 21,018,611 | $ | 20,621,731 | $ | 2,559,552 | ||||||
Asset | Corporate | Total | ||||||||||||
Protection | and Other | Adjustments | Consolidated | |||||||||||
Investments and other assets | $ | 852,273 | $ | 8,355,618 | $ | 16,762 | $ | 65,080,203 | ||||||
Deferred policy acquisition costs and value of business acquired | 50,358 | 646 | — | 3,570,215 | ||||||||||
Goodwill | 62,671 | 83 | — | 105,463 | ||||||||||
Total assets | $ | 965,302 | $ | 8,356,347 | $ | 16,762 | $ | 68,755,881 |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2014 | |
SUBSEQUENT EVENTS | ' |
SUBSEQUENT EVENTS | ' |
20. SUBSEQUENT EVENTS | |
The Company has evaluated the effects of events subsequent to June 30, 2014, 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. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2014 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
Accounting Pronouncements Not Yet Adopted | ' |
Accounting Pronouncements Not Yet Adopted | |
Accounting Standards Update (“ASU”) No. 2014-08 — Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity. This Update changes the requirements for reporting discontinued operations and related disclosures. The Update limits the definition of a discontinued operation to disposals that represent “strategic shifts” that will have a major effect on an entity’s operation and financial results. Additionally, the Update requires enhanced disclosures about the components of discontinued operations and the financial effects of the disposal. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2014. The Company is reviewing the additional disclosures required by the Update, and will apply the revised guidance to any disposals occurring after the effective date. | |
ASU No. 2014-09 — 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 is effective for annual and interim periods beginning after December 15, 2016. The Company is reviewing is reviewing its policies and processes to ensure compliance with the requirements in this Update. | |
ASU No. 2014-11 — Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. This Update changes the requirements for classification of certain repurchase agreements, and will expand the use of secured borrowing accounting for repurchase-to-maturity transactions. In addition, the Update requires additional disclosures for repurchase agreements accounted for both as sales and as secured borrowings. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2014. The Update will not impact the Company’s financial position or results of operations. The Company is reviewing its policies and processes to ensure compliance with the additional disclosure requirements in this Update. | |
SIGNIFICANT_ACQUISITIONS_Table
SIGNIFICANT ACQUISITIONS (Tables) | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
SIGNIFICANT ACQUISITIONS | ' | |||||||
Summary of consideration paid for acquisition and the determination of fair value of assets acquired and liabilities assumed at the acquisition date | ' | |||||||
Fair Value | ||||||||
As of | ||||||||
October 1, 2013 | ||||||||
(Dollars In Thousands) | ||||||||
Assets | ||||||||
Fixed maturities, at fair value | $ | 6,557,853 | ||||||
Equity securities, at fair value | 108,413 | |||||||
Mortgage loans | 830,415 | |||||||
Policy loans | 967,534 | |||||||
Short-term investments | 130,963 | |||||||
Total investments | 8,595,178 | |||||||
Cash | 216,164 | |||||||
Accrued investment income | 114,695 | |||||||
Accounts and premiums receivable, net of allowance for uncollectible amounts | 26,055 | |||||||
Reinsurance receivables | 422,692 | |||||||
Value of business acquired | 205,767 | |||||||
Other assets | 5,104 | |||||||
Income tax receivables | 21,197 | |||||||
Deferred income taxes | 188,142 | |||||||
Separate account assets | 195,452 | |||||||
Total assets | $ | 9,990,446 | ||||||
Liabilities | ||||||||
Future policy benefits and claims | $ | 7,645,969 | ||||||
Unearned premiums | 3,066 | |||||||
Total policy liabilities and accruals | 7,649,035 | |||||||
Annuity account balances | 752,163 | |||||||
Other policyholders’ funds | 636,448 | |||||||
Other liabilities | 66,124 | |||||||
Non-recourse funding obligation | 2,548 | |||||||
Separate account liabilities | 195,344 | |||||||
Total liabilities | 9,301,662 | |||||||
Net assets acquired | $ | 688,784 | ||||||
Schedule of (unaudited) pro forma condensed consolidated results of operations | ' | |||||||
Unaudited | ||||||||
For The | For The | |||||||
Three Months Ended | Six Months Ended | |||||||
June 30, 2013 | June 30, 2013 | |||||||
(Dollars In Thousands) | ||||||||
Revenue | $ | 1,162,748 | $ | 2,316,066 | ||||
Net income | $ | 120,589 | $ | 205,516 | ||||
EPS - basic | $ | 1.52 | $ | 2.59 | ||||
EPS - diluted | $ | 1.49 | $ | 2.54 |
MONY_CLOSED_BLOCK_OF_BUSINESS_
MONY CLOSED BLOCK OF BUSINESS (Tables) | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
MONY CLOSED BLOCK OF BUSINESS | ' | |||||||
Summary of financial information for the Closed Block | ' | |||||||
As of | ||||||||
June 30, 2014 | December 31, 2013 | |||||||
(Dollars In Thousands) | ||||||||
Closed block liabilities | ||||||||
Future policy benefits, policyholders’ account balances and other | $ | 6,195,402 | $ | 6,261,819 | ||||
Policyholder dividend obligation | 328,872 | 190,494 | ||||||
Other liabilities | 59,751 | 1,259 | ||||||
Total closed block liabilities | 6,584,025 | 6,453,572 | ||||||
Closed block assets | ||||||||
Fixed maturities, available-for-sale, at fair value | $ | 4,402,851 | $ | 4,109,142 | ||||
Equity securities, available-for-sale, at fair value | 5,369 | 5,223 | ||||||
Mortgage loans on real estate | 512,800 | 601,959 | ||||||
Policy loans | 787,348 | 802,013 | ||||||
Cash and other invested assets | 70,954 | 140,577 | ||||||
Other assets | 237,931 | 207,265 | ||||||
Total closed block assets | 6,017,253 | 5,866,179 | ||||||
Excess of reported closed block liabilities over closed block assets | 566,772 | 587,393 | ||||||
Portion of above representing accumulated other comprehensive income: | ||||||||
Net unrealized investment gains (losses) net of deferred tax benefit of $0 and $1,074 net of policyholder dividend obligation of $86,196 and $12,720 | — | (1,994 | ) | |||||
Future earnings to be recognized from closed block assets and closed block liabilities | $ | 566,772 | $ | 585,399 | ||||
Schedule of reconciliation of the policyholder dividend obligation | ' | |||||||
For The | ||||||||
Six Months Ended | ||||||||
June 30, 2014 | ||||||||
(Dollars In Thousands) | ||||||||
Policyholder dividend obligation, at December 31, 2013 | $ | 190,494 | ||||||
Applicable to net revenue (losses) | (6,951 | ) | ||||||
Change in net unrealized investment gains (losses) allocated to the policyholder dividend obligation | 145,329 | |||||||
Policyholder dividend obligation, end of period | $ | 328,872 | ||||||
Schedule of Closed Block revenues and expenses | ' | |||||||
For The | For The | |||||||
Three Months Ended | Six Months Ended | |||||||
June 30, 2014 | June 30, 2014 | |||||||
(Dollars In Thousands) | ||||||||
Revenues | ||||||||
Premiums and other income | $ | 53,073 | $ | 102,846 | ||||
Net investment income | 60,416 | 112,623 | ||||||
Net investment gains | 1,086 | 6,105 | ||||||
Total revenues | 114,575 | 221,574 | ||||||
Benefits and other deduction | ||||||||
Benefits and settlement expenses | 103,209 | 199,535 | ||||||
Other operating expenses | 383 | 90 | ||||||
Total benefits and other deductions | 103,592 | 199,625 | ||||||
Net revenues before income taxes | 10,983 | 21,949 | ||||||
Income tax expense | 3,844 | 7,682 | ||||||
Net revenues | $ | 7,139 | $ | 14,267 | ||||
INVESTMENT_OPERATIONS_Tables
INVESTMENT OPERATIONS (Tables) | 6 Months Ended | |||||||||||||||||||
Jun. 30, 2014 | ||||||||||||||||||||
INVESTMENT OPERATIONS | ' | |||||||||||||||||||
Summary of net realized investment gains (losses) for all other investments | ' | |||||||||||||||||||
For The | For The | |||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
Fixed maturities | $ | 20,198 | $ | 19,152 | $ | 27,568 | $ | 31,461 | ||||||||||||
Equity securities | — | 2,366 | — | 2,367 | ||||||||||||||||
Impairments on fixed maturity securities | (1,460 | ) | (2,910 | ) | (3,051 | ) | (6,497 | ) | ||||||||||||
Impairments on equity securities | — | (1,090 | ) | — | (2,087 | ) | ||||||||||||||
Modco trading portfolio | 60,989 | (126,694 | ) | 127,292 | (142,022 | ) | ||||||||||||||
Other investments | (1,039 | ) | (4,802 | ) | (2,598 | ) | (5,929 | ) | ||||||||||||
Total realized gains (losses) - investments | $ | 78,688 | $ | (113,978 | ) | $ | 149,211 | $ | (122,707 | ) | ||||||||||
Schedule of amortized cost and fair value of the Company's investments classified as available-for-sale | ' | |||||||||||||||||||
Gross | Gross | Total OTTI | ||||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | Recognized | ||||||||||||||||
Cost | Gains | Losses | Value | in OCI(1) | ||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
2014 | ||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||
Bonds | ||||||||||||||||||||
Residential mortgage-backed securities | $ | 1,398,009 | $ | 50,699 | $ | (13,971 | ) | $ | 1,434,737 | $ | 6,318 | |||||||||
Commercial mortgage-backed securities | 1,039,299 | 52,339 | (4,023 | ) | 1,087,615 | — | ||||||||||||||
Other asset-backed securities | 878,416 | 20,116 | (32,847 | ) | 865,685 | (82 | ) | |||||||||||||
U.S. government-related securities | 1,544,310 | 46,206 | (21,785 | ) | 1,568,731 | — | ||||||||||||||
Other government-related securities | 19,179 | 3,035 | — | 22,214 | — | |||||||||||||||
States, municipals, and political subdivisions | 1,372,418 | 234,104 | (3,673 | ) | 1,602,849 | — | ||||||||||||||
Corporate bonds | 25,137,768 | 2,669,336 | (79,197 | ) | 27,727,907 | — | ||||||||||||||
31,389,399 | 3,075,835 | (155,496 | ) | 34,309,738 | 6,236 | |||||||||||||||
Equity securities | 747,284 | 35,119 | (14,075 | ) | 768,328 | — | ||||||||||||||
Short-term investments | 117,511 | — | — | 117,511 | — | |||||||||||||||
$ | 32,254,194 | $ | 3,110,954 | $ | (169,571 | ) | $ | 35,195,577 | $ | 6,236 | ||||||||||
2013 | ||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||
Bonds | ||||||||||||||||||||
Residential mortgage-backed securities | $ | 1,435,477 | $ | 34,155 | $ | (24,564 | ) | $ | 1,445,068 | $ | 979 | |||||||||
Commercial mortgage-backed securities | 963,461 | 26,900 | (19,705 | ) | 970,656 | — | ||||||||||||||
Other asset-backed securities | 926,396 | 15,135 | (69,548 | ) | 871,983 | (51 | ) | |||||||||||||
U.S. government-related securities | 1,529,818 | 32,150 | (54,078 | ) | 1,507,890 | — | ||||||||||||||
Other government-related securities | 49,171 | 2,257 | (1 | ) | 51,427 | — | ||||||||||||||
States, municipals, and political subdivisions | 1,315,457 | 103,663 | (8,291 | ) | 1,410,829 | — | ||||||||||||||
Corporate bonds | 24,644,025 | 1,507,630 | (392,067 | ) | 25,759,588 | — | ||||||||||||||
30,863,805 | 1,721,890 | (568,254 | ) | 32,017,441 | 928 | |||||||||||||||
Equity securities | 654,579 | 6,631 | (36,362 | ) | 624,848 | — | ||||||||||||||
Short-term investments | 81,703 | — | — | 81,703 | — | |||||||||||||||
$ | 31,600,087 | $ | 1,728,521 | $ | (604,616 | ) | $ | 32,723,992 | $ | 928 | ||||||||||
(1)These amounts are included in the gross unrealized gains and gross unrealized losses columns above. | ||||||||||||||||||||
Schedule of amortized cost and fair value of the Company's investments classified as held-to-maturity | ' | |||||||||||||||||||
Gross | Gross | Total OTTI | ||||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | Recognized | ||||||||||||||||
Cost | Gains | Losses | Value | in OCI | ||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
2014 | ||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||
Other | $ | 400,000 | $ | 51,382 | $ | — | $ | 451,382 | $ | — | ||||||||||
$ | 400,000 | $ | 51,382 | $ | — | $ | 451,382 | $ | — | |||||||||||
2013 | ||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||
Other | $ | 365,000 | $ | — | $ | (29,324 | ) | $ | 335,676 | $ | — | |||||||||
$ | 365,000 | $ | — | $ | (29,324 | ) | $ | 335,676 | $ | — | ||||||||||
Schedule of amortized cost and fair value of available-for-sale and held-to-maturity fixed maturities, by expected maturity | ' | |||||||||||||||||||
The amortized cost and fair value of available-for-sale and held-to-maturity fixed maturities as of June 30, 2014, by expected maturity, are shown below. | ||||||||||||||||||||
Available-for-sale | Held-to-maturity | |||||||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||||||
Cost | Value | Cost | Value | |||||||||||||||||
(Dollars In Thousands) | (Dollars In Thousands) | |||||||||||||||||||
Due in one year or less | $ | 438,145 | $ | 448,757 | $ | — | $ | — | ||||||||||||
Due after one year through five years | 6,023,849 | 6,427,870 | — | — | ||||||||||||||||
Due after five years through ten years | 8,650,531 | 9,173,945 | — | — | ||||||||||||||||
Due after ten years | 16,276,874 | 18,259,166 | 400,000 | 451,382 | ||||||||||||||||
$ | 31,389,399 | $ | 34,309,738 | $ | 400,000 | $ | 451,382 | |||||||||||||
Schedule of available-for-sale credit losses on fixed maturities held by the Company for which a portion of other-than-temporary impairments were recognized in other comprehensive income (loss) | ' | |||||||||||||||||||
For The | For The | |||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
Beginning balance | $ | 20,839 | $ | 63,183 | $ | 41,692 | $ | 122,121 | ||||||||||||
Additions for newly impaired securities | — | 618 | — | 1,615 | ||||||||||||||||
Additions for previously impaired securities | 553 | 1,568 | 1,027 | 3,054 | ||||||||||||||||
Reductions for previously impaired securities due to a change in expected cash flows | (3,407 | ) | (6,049 | ) | (24,734 | ) | (67,470 | ) | ||||||||||||
Reductions for previously impaired securities that were sold in the current period | — | (7,488 | ) | — | (7,488 | ) | ||||||||||||||
Ending balance | $ | 17,985 | $ | 51,832 | $ | 17,985 | $ | 51,832 | ||||||||||||
Schedule of investments' 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 | ' | |||||||||||||||||||
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 June 30, 2014: | ||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||
Value | Loss | Value | Loss | Value | Loss | |||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
Residential mortgage-backed securities | $ | 145,373 | $ | (10,089 | ) | $ | 94,770 | $ | (3,882 | ) | $ | 240,143 | $ | (13,971 | ) | |||||
Commercial mortgage-backed securities | 37,107 | (353 | ) | 126,051 | (3,670 | ) | 163,158 | (4,023 | ) | |||||||||||
Other asset-backed securities | 121,233 | (6,982 | ) | 524,614 | (25,865 | ) | 645,847 | (32,847 | ) | |||||||||||
U.S. government-related securities | 344,815 | (7,321 | ) | 314,356 | (14,464 | ) | 659,171 | (21,785 | ) | |||||||||||
Other government-related securities | — | — | — | — | — | — | ||||||||||||||
States, municipalities, and political subdivisions | 20,152 | (1,641 | ) | 22,254 | (2,032 | ) | 42,406 | (3,673 | ) | |||||||||||
Corporate bonds | 815,310 | (24,098 | ) | 1,447,963 | (55,099 | ) | 2,263,273 | (79,197 | ) | |||||||||||
Equities | 105,413 | (3,741 | ) | 77,077 | (10,334 | ) | 182,490 | (14,075 | ) | |||||||||||
$ | 1,589,403 | $ | (54,225 | ) | $ | 2,607,085 | $ | (115,346 | ) | $ | 4,196,488 | $ | (169,571 | ) | ||||||
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 December 31, 2013: | ||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||
Value | Loss | Value | Loss | Value | Loss | |||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
Residential mortgage-backed securities | $ | 333,235 | $ | (14,051 | ) | $ | 210,486 | $ | (10,513 | ) | $ | 543,721 | $ | (24,564 | ) | |||||
Commercial mortgage-backed securities | 429,228 | (18,467 | ) | 13,840 | (1,238 | ) | 443,068 | (19,705 | ) | |||||||||||
Other asset-backed securities | 175,846 | (14,555 | ) | 497,512 | (54,993 | ) | 673,358 | (69,548 | ) | |||||||||||
U.S. government-related securities | 891,698 | (53,508 | ) | 6,038 | (570 | ) | 897,736 | (54,078 | ) | |||||||||||
Other government-related securities | 10,161 | (1 | ) | — | — | 10,161 | (1 | ) | ||||||||||||
States, municipalities, and political subdivisions | 172,157 | (8,113 | ) | 335 | (178 | ) | 172,492 | (8,291 | ) | |||||||||||
Corporate bonds | 7,484,010 | (353,211 | ) | 272,423 | (38,856 | ) | 7,756,433 | (392,067 | ) | |||||||||||
Equities | 376,776 | (27,861 | ) | 21,974 | (8,501 | ) | 398,750 | (36,362 | ) | |||||||||||
$ | 9,873,111 | $ | (489,767 | ) | $ | 1,022,608 | $ | (114,849 | ) | $ | 10,895,719 | $ | (604,616 | ) | ||||||
Summary of change in unrealized gains (losses), net of income tax, on fixed maturity and equity securities, classified as available-for-sale | ' | |||||||||||||||||||
For The | For The | |||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
Fixed maturities | $ | 519,745 | $ | (849,033 | ) | $ | 1,148,357 | $ | (1,018,822 | ) | ||||||||||
Equity securities | 14,591 | (8,392 | ) | 33,004 | (4,602 | ) | ||||||||||||||
MORTGAGE_LOANS_Tables
MORTGAGE LOANS (Tables) | 6 Months Ended | |||||||||||||||||||
Jun. 30, 2014 | ||||||||||||||||||||
MORTGAGE LOANS | ' | |||||||||||||||||||
Schedule of changes in the allowance for mortgage loan credit losses | ' | |||||||||||||||||||
As of | ||||||||||||||||||||
June 30, 2014 | December 31, 2013 | |||||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
Beginning balance | $ | 3,130 | $ | 2,875 | ||||||||||||||||
Charge offs | — | (6,838 | ) | |||||||||||||||||
Recoveries | (1,075 | ) | (1,016 | ) | ||||||||||||||||
Provision | 2,225 | 8,109 | ||||||||||||||||||
Ending balance | $ | 4,280 | $ | 3,130 | ||||||||||||||||
Schedule of an analysis of the delinquent loans | ' | |||||||||||||||||||
An analysis of the delinquent loans is shown in the following chart as of June 30, 2014. | ||||||||||||||||||||
Greater | ||||||||||||||||||||
30-59 Days | 60-89 Days | than 90 Days | Total | |||||||||||||||||
Delinquent | Delinquent | Delinquent | Delinquent | |||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
Commercial mortgage loans | $ | 24,562 | $ | — | $ | 5,908 | $ | 30,470 | ||||||||||||
Number of delinquent commercial mortgage loans | 9 | — | 4 | 13 | ||||||||||||||||
Schedule of information regarding impaired loans | ' | |||||||||||||||||||
Unpaid | Average | Interest | Cash Basis | |||||||||||||||||
Recorded | Principal | Related | Recorded | Income | Interest | |||||||||||||||
Investment | Balance | Allowance | Investment | Recognized | Income | |||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||
2014 | ||||||||||||||||||||
Commercial mortgage loans: | ||||||||||||||||||||
With no related allowance recorded | $ | 5,275 | $ | 5,254 | $ | — | $ | 1,758 | $ | 64 | $ | 43 | ||||||||
With an allowance recorded | 23,754 | 23,738 | 4,280 | 3,959 | 314 | 314 | ||||||||||||||
2013 | ||||||||||||||||||||
Commercial mortgage loans: | ||||||||||||||||||||
With no related allowance recorded | $ | 2,208 | $ | 2,208 | $ | — | $ | 2,208 | $ | 31 | $ | — | ||||||||
With an allowance recorded | 21,288 | 21,281 | 3,130 | 5,322 | 304 | 304 |
DEBT_AND_OTHER_OBLIGATIONS_Tab
DEBT AND OTHER OBLIGATIONS (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
DEBT AND OTHER OBLIGATIONS | ' | ||||||||
Non-recourse funding obligations outstanding | ' | ||||||||
Year-to-Date | |||||||||
Maturity | Weighted-Avg | ||||||||
Issuer | Balance | Year | Interest Rate | ||||||
(Dollars In Thousands) | |||||||||
Golden Gate II Captive Insurance Company | $ | 176,552 | 2052 | 1.12 | % | ||||
Golden Gate V Vermont Captive Insurance Company(1) | 400,000 | 2037 | 6.25 | % | |||||
MONY Life Insurance Company(1) | 2,526 | 2024 | 6.63 | % | |||||
Total | $ | 579,078 | |||||||
(1) Fixed rate obligations | |||||||||
STOCKBASED_COMPENSATION_Tables
STOCK-BASED COMPENSATION (Tables) | 6 Months Ended | ||||||
Jun. 30, 2014 | |||||||
STOCK-BASED COMPENSATION | ' | ||||||
Schedule of the SARs activity as well as weighted-average base price | ' | ||||||
Weighted-Average | |||||||
Base Price per share | No. of SARs | ||||||
Balance at December 31, 2013 | $ | 23.08 | 1,305,101 | ||||
SARs granted | — | — | |||||
SARs exercised / forfeited | 26.43 | (62,167 | ) | ||||
Balance at June 30, 2014 | $ | 22.91 | 1,242,934 |
EMPLOYEE_BENEFIT_PLANS_Tables
EMPLOYEE BENEFIT PLANS (Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
EMPLOYEE BENEFIT PLANS | ' | |||||||||||||
Components of the net periodic benefit cost of the Company's defined benefit pension plan and unfunded excess benefit plan | ' | |||||||||||||
For The | For The | |||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
(Dollars In Thousands) | ||||||||||||||
Service cost — benefits earned during the period | $ | 2,453 | $ | 2,708 | $ | 4,906 | $ | 5,416 | ||||||
Interest cost on projected benefit obligation | 2,993 | 2,553 | 5,986 | 5,106 | ||||||||||
Expected return on plan assets | (3,065 | ) | (2,759 | ) | (6,130 | ) | (5,518 | ) | ||||||
Amortization of prior service cost/(credit) | (95 | ) | (95 | ) | (190 | ) | (190 | ) | ||||||
Amortization of actuarial losses | 1,897 | 2,729 | 3,794 | 5,458 | ||||||||||
Total benefit cost | $ | 4,183 | $ | 5,136 | $ | 8,366 | $ | 10,272 |
ACCUMULATED_OTHER_COMPREHENSIV1
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ' | |||||||||||||
Summary of changes in the accumulated balances for each component of accumulated other comprehensive income (loss) | ' | |||||||||||||
Total | ||||||||||||||
Accumulated | ||||||||||||||
Unrealized | Accumulated | Postretirement | Other | |||||||||||
Gains and Losses | Gain and Loss | Benefits Liability | Comprehensive | |||||||||||
on Investments(2) | Derivatives | Adjustment | Income (Loss) | |||||||||||
(Dollars In Thousands, Net of Tax) | ||||||||||||||
Beginning Balance, December 31, 2013 | $ | 539,003 | $ | (1,235 | ) | $ | (43,702 | ) | $ | 494,066 | ||||
Other comprehensive income (loss) before reclassifications | 884,120 | (17 | ) | 884,103 | ||||||||||
Other comprehensive income (loss) relating to other- than-temporary impaired investments for which a portion has been recognized in earnings | 3,450 | — | — | 3,450 | ||||||||||
Amounts reclassified from accumulated other comprehensive income (loss)(1) | (15,936 | ) | 835 | 2,347 | (12,754 | ) | ||||||||
Net current-period other comprehensive income | 871,634 | 818 | 2,347 | 874,799 | ||||||||||
Ending Balance, June 30, 2014 | $ | 1,410,637 | $ | (417 | ) | $ | (41,355 | ) | $ | 1,368,865 | ||||
(1) See Reclassification table below for details. | ||||||||||||||
(2) These balances were offset by the impact of DAC and VOBA by $198.1 million and $413.4 million as of December 31, 2013 and | ||||||||||||||
June 30, 2014, respectively. | ||||||||||||||
Total | ||||||||||||||
Accumulated | ||||||||||||||
Unrealized | Accumulated | Postretirement | Other | |||||||||||
Gains and Losses | Gain and Loss | Benefits Liability | Comprehensive | |||||||||||
on Investments(2) | Derivatives | Adjustment | Income (Loss) | |||||||||||
(Dollars In Thousands, Net of Tax) | ||||||||||||||
Beginning Balance, December 31, 2012 | $ | 1,813,516 | $ | (3,496 | ) | $ | (73,298 | ) | $ | 1,736,722 | ||||
Other comprehensive income (loss) before reclassifications | (1,250,498 | ) | 734 | 29,596 | (1,220,168 | ) | ||||||||
Other comprehensive income (loss) relating to other- than-temporary impaired investments for which a portion has been recognized in earnings | 4,591 | — | — | 4,591 | ||||||||||
Amounts reclassified from accumulated other comprehensive income (loss)(1) | (28,606 | ) | 1,527 | — | (27,079 | ) | ||||||||
Net current-period other comprehensive income (loss) | (1,274,513 | ) | 2,261 | 29,596 | (1,242,656 | ) | ||||||||
Ending Balance, December 31, 2013 | $ | 539,003 | $ | (1,235 | ) | $ | (43,702 | ) | $ | 494,066 | ||||
(1) See Reclassification table below for details. | ||||||||||||||
(2) These balances were offset by the impact of DAC and VOBA by $204.9 million and $198.1 million as of December 31, 2012 and | ||||||||||||||
December 31, 2013, respectively. | ||||||||||||||
Schedule of reclassifications amounts out of AOCI | ' | |||||||||||||
Amount | ||||||||||||||
Reclassified | ||||||||||||||
from Accumulated | ||||||||||||||
Other Comprehensive | Affected Line Item in the | |||||||||||||
Income (Loss) | Consolidated Condensed Statements of Income | |||||||||||||
(Dollars In Thousands) | ||||||||||||||
For The Three Months Ended June 30, 2014 | ||||||||||||||
Gains and losses on derivative instruments | ||||||||||||||
Net settlement (expense)/benefit(1) | $ | (614 | ) | Benefits and settlement expenses, net of reinsurance ceded | ||||||||||
(614 | ) | Total before tax | ||||||||||||
215 | Tax (expense) or benefit | |||||||||||||
$ | (399 | ) | Net of tax | |||||||||||
Unrealized gains and losses on available-for-sale securities | ||||||||||||||
Net investment gains/losses | $ | 20,198 | Realized investment gains (losses): All other investments | |||||||||||
Impairments recognized in earnings | (1,460 | ) | Net impairment losses recognized in earnings | |||||||||||
18,738 | Total before tax | |||||||||||||
(6,558 | ) | Tax (expense) or benefit | ||||||||||||
$ | 12,180 | Net of tax | ||||||||||||
Postretirement benefits liability adjustment | ||||||||||||||
Amortization of net actuarial gain/(loss) | $ | (1,900 | ) | Other operating expenses | ||||||||||
Amortization of prior service credit/(cost) | 95 | Other operating expenses | ||||||||||||
(1,805 | ) | Total before tax | ||||||||||||
632 | Tax (expense) or benefit | |||||||||||||
$ | (1,173 | ) | Net of tax | |||||||||||
(1) See Note 17, Derivative Financial Instruments for additional information. | ||||||||||||||
Amount | ||||||||||||||
Reclassified | ||||||||||||||
from Accumulated | ||||||||||||||
Other Comprehensive | Affected Line Item in the | |||||||||||||
Income (Loss) | Consolidated Condensed Statements of Income | |||||||||||||
(Dollars In Thousands) | ||||||||||||||
For The Three Months Ended June 30, 2013 | ||||||||||||||
Gains and losses on derivative instruments | ||||||||||||||
Net settlement (expense)/benefit(1) | $ | (580 | ) | Benefits and settlement expenses, net of reinsurance ceded | ||||||||||
(580 | ) | Total before tax | ||||||||||||
203 | Tax (expense) or benefit | |||||||||||||
$ | (377 | ) | Net of tax | |||||||||||
Unrealized gains and losses on available-for-sale securities | ||||||||||||||
Net investment gains/losses | $ | 21,518 | Realized investment gains (losses): All other investments | |||||||||||
Impairments recognized in earnings | (4,000 | ) | Net impairment losses recognized in earnings | |||||||||||
17,518 | Total before tax | |||||||||||||
(6,131 | ) | Tax (expense) or benefit | ||||||||||||
$ | 11,387 | Net of tax | ||||||||||||
(1) See Note 17, Derivative Financial Instruments for additional information. | ||||||||||||||
Amount | ||||||||||||||
Reclassified | ||||||||||||||
from Accumulated | ||||||||||||||
Other Comprehensive | Affected Line Item in the | |||||||||||||
Income (Loss) | Consolidated Condensed Statements of Income | |||||||||||||
(Dollars In Thousands) | ||||||||||||||
For The Six Months Ended June 30, 2014 | ||||||||||||||
Gains and losses on derivative instruments | ||||||||||||||
Net settlement (expense)/benefit(1) | $ | (1,284 | ) | Benefits and settlement expenses, net of reinsurance ceded | ||||||||||
(1,284 | ) | Total before tax | ||||||||||||
449 | Tax (expense) or benefit | |||||||||||||
$ | (835 | ) | Net of tax | |||||||||||
Unrealized gains and losses on available-for-sale securities | ||||||||||||||
Net investment gains/losses | $ | 27,568 | Realized investment gains (losses): All other investments | |||||||||||
Impairments recognized in earnings | (3,051 | ) | Net impairment losses recognized in earnings | |||||||||||
24,517 | Total before tax | |||||||||||||
(8,581 | ) | Tax (expense) or benefit | ||||||||||||
$ | 15,936 | Net of tax | ||||||||||||
Postretirement benefits liability adjustment | ||||||||||||||
Amortization of net actuarial gain/(loss) | $ | (3,800 | ) | Other operating expenses | ||||||||||
Amortization of prior service credit/(cost) | 190 | Other operating expenses | ||||||||||||
(3,610 | ) | Total before tax | ||||||||||||
1,263 | Tax (expense) or benefit | |||||||||||||
$ | (2,347 | ) | Net of tax | |||||||||||
(1) See Note 17, Derivative Financial Instruments for additional information. | ||||||||||||||
Amount | ||||||||||||||
Reclassified | ||||||||||||||
from Accumulated | ||||||||||||||
Other Comprehensive | Affected Line Item in the | |||||||||||||
Income (Loss) | Consolidated Condensed Statements of Income | |||||||||||||
(Dollars In Thousands) | ||||||||||||||
For The Six Months Ended June 30, 2013 | ||||||||||||||
Gains and losses on derivative instruments | ||||||||||||||
Net settlement (expense)/benefit(1) | $ | (1,077 | ) | Benefits and settlement expenses, net of reinsurance ceded | ||||||||||
(1,077 | ) | Total before tax | ||||||||||||
377 | Tax (expense) or benefit | |||||||||||||
$ | (700 | ) | Net of tax | |||||||||||
Unrealized gains and losses on available-for-sale securities | ||||||||||||||
Net investment gains/losses | $ | 33,828 | Realized investment gains (losses): All other investments | |||||||||||
Impairments recognized in earnings | (8,584 | ) | Net impairment losses recognized in earnings | |||||||||||
25,244 | Total before tax | |||||||||||||
(8,835 | ) | Tax (expense) or benefit | ||||||||||||
$ | 16,409 | Net of tax | ||||||||||||
(1) See Note 17, Derivative Financial Instruments for additional information. |
EARNINGS_PER_SHARE_Tables
EARNINGS PER SHARE (Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
EARNINGS PER SHARE | ' | |||||||||||||
Schedule of reconciliation of the numerators and denominators of the basic and diluted earnings per share | ' | |||||||||||||
For The | For The | |||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
(Dollars In Thousands, Except Per Share Amounts) | ||||||||||||||
Calculation of basic earnings per share: | ||||||||||||||
Net income | $ | 107,977 | $ | 103,199 | $ | 191,616 | $ | 181,490 | ||||||
Average shares issued and outstanding | 78,852,583 | 78,456,663 | 78,740,416 | 78,332,481 | ||||||||||
Issuable under various deferred compensation plans | 1,126,570 | 948,107 | 1,054,415 | 940,333 | ||||||||||
Weighted shares outstanding - basic | 79,979,153 | 79,404,770 | 79,794,831 | 79,272,814 | ||||||||||
Per share: | ||||||||||||||
Net income - basic | $ | 1.35 | $ | 1.3 | $ | 2.4 | $ | 2.29 | ||||||
Calculation of diluted earnings per share: | ||||||||||||||
Net income | $ | 107,977 | $ | 103,199 | $ | 191,616 | $ | 181,490 | ||||||
Weighted shares outstanding - basic | 79,979,153 | 79,404,770 | 79,794,831 | 79,272,814 | ||||||||||
Stock appreciation rights (“SARs”)(1) | 492,463 | 449,726 | 479,430 | 444,971 | ||||||||||
Issuable under various other stock-based compensation plans | 716,327 | 874,019 | 641,411 | 843,554 | ||||||||||
Restricted stock units | 258,334 | 358,723 | 245,128 | 336,703 | ||||||||||
Weighted shares outstanding - diluted | 81,446,277 | 81,087,238 | 81,160,800 | 80,898,042 | ||||||||||
Per share: | ||||||||||||||
Net income - diluted | $ | 1.33 | $ | 1.27 | $ | 2.36 | $ | 2.24 | ||||||
(1)Excludes 629,800 SARs as of June 30, 2013 that are antidilutive. In the event the average market price exceeds the issue price of the SARs, such rights would be dilutive to the Company’s earnings per share and will be included in the Company’s calculation of the diluted average shares outstanding, for applicable periods. | ||||||||||||||
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
INCOME TAXES | ' | |||||||
Schedule of reconciliation of the beginning and ending amount of unrecognized tax benefits | ' | |||||||
As of | ||||||||
June 30, 2014 | December 31, 2013 | |||||||
(Dollars In Thousands) | ||||||||
Balance, beginning of period | $ | 105,881 | $ | 75,292 | ||||
Additions for tax positions of the current year | 948 | 7,465 | ||||||
Additions for tax positions of prior years | 41,246 | 26,386 | ||||||
Reductions of tax positions of prior years: | ||||||||
Changes in judgment | (10,548 | ) | (2,740 | ) | ||||
Settlements during the period | — | — | ||||||
Lapses of applicable statute of limitations | — | (522 | ) | |||||
Balance, end of period | $ | 137,527 | $ | 105,881 |
FAIR_VALUE_OF_FINANCIAL_INSTRU1
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | ' | ||||||||||||||||||||||||||||||||||||||||
Assets and liabilities measured at fair value on a recurring basis | ' | ||||||||||||||||||||||||||||||||||||||||
The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of June 30, 2014: | |||||||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Fixed maturity securities - available-for-sale | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | — | $ | 1,434,727 | $ | 10 | $ | 1,434,737 | |||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | 1,087,615 | — | 1,087,615 | |||||||||||||||||||||||||||||||||||||
Other asset-backed securities | — | 297,588 | 568,097 | 865,685 | |||||||||||||||||||||||||||||||||||||
U.S. government-related securities | 1,295,535 | 273,196 | — | 1,568,731 | |||||||||||||||||||||||||||||||||||||
State, municipalities, and political subdivisions | — | 1,599,174 | 3,675 | 1,602,849 | |||||||||||||||||||||||||||||||||||||
Other government-related securities | — | 22,214 | — | 22,214 | |||||||||||||||||||||||||||||||||||||
Corporate bonds | 132 | 26,203,478 | 1,524,297 | 27,727,907 | |||||||||||||||||||||||||||||||||||||
Total fixed maturity securities - available-for-sale | 1,295,667 | 30,917,992 | 2,096,079 | 34,309,738 | |||||||||||||||||||||||||||||||||||||
Fixed maturity securities - trading | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | 298,684 | 842 | 299,526 | |||||||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | 159,899 | — | 159,899 | |||||||||||||||||||||||||||||||||||||
Other asset-backed securities | — | 95,012 | 176,386 | 271,398 | |||||||||||||||||||||||||||||||||||||
U.S. government-related securities | 212,167 | 4,948 | — | 217,115 | |||||||||||||||||||||||||||||||||||||
State, municipalities, and political subdivisions | — | 281,182 | — | 281,182 | |||||||||||||||||||||||||||||||||||||
Other government-related securities | — | 56,142 | — | 56,142 | |||||||||||||||||||||||||||||||||||||
Corporate bonds | — | 1,537,907 | 31,520 | 1,569,427 | |||||||||||||||||||||||||||||||||||||
Total fixed maturity securities - trading | 212,167 | 2,433,774 | 208,748 | 2,854,689 | |||||||||||||||||||||||||||||||||||||
Total fixed maturity securities | 1,507,834 | 33,351,766 | 2,304,827 | 37,164,427 | |||||||||||||||||||||||||||||||||||||
Equity securities | 621,868 | 88,395 | 81,784 | 792,047 | |||||||||||||||||||||||||||||||||||||
Other long-term investments(1) | 78,391 | 64,075 | 123,301 | 265,767 | |||||||||||||||||||||||||||||||||||||
Short-term investments | 202,443 | 6,181 | — | 208,624 | |||||||||||||||||||||||||||||||||||||
Total investments | 2,410,536 | 33,510,417 | 2,509,912 | 38,430,865 | |||||||||||||||||||||||||||||||||||||
Cash | 361,088 | — | — | 361,088 | |||||||||||||||||||||||||||||||||||||
Other assets | 11,692 | — | — | 11,692 | |||||||||||||||||||||||||||||||||||||
Assets related to separate accounts | |||||||||||||||||||||||||||||||||||||||||
Variable annuity | 13,304,455 | — | — | 13,304,455 | |||||||||||||||||||||||||||||||||||||
Variable universal life | 823,747 | — | — | 823,747 | |||||||||||||||||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 16,911,518 | $ | 33,510,417 | $ | 2,509,912 | $ | 52,931,847 | |||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances(2) | $ | — | $ | — | $ | 102,456 | $ | 102,456 | |||||||||||||||||||||||||||||||||
Other liabilities (1) | 36,608 | 64,374 | 484,747 | 585,729 | |||||||||||||||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 36,608 | $ | 64,374 | $ | 587,203 | $ | 688,185 | |||||||||||||||||||||||||||||||||
(1)Includes certain freestanding and embedded derivatives. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
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, 2013: | |||||||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Fixed maturity securities - available-for-sale | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | — | $ | 1,445,040 | $ | 28 | $ | 1,445,068 | |||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | 970,656 | — | 970,656 | |||||||||||||||||||||||||||||||||||||
Other asset-backed securities | — | 326,175 | 545,808 | 871,983 | |||||||||||||||||||||||||||||||||||||
U.S. government-related securities | 1,211,141 | 296,749 | — | 1,507,890 | |||||||||||||||||||||||||||||||||||||
State, municipalities, and political subdivisions | — | 1,407,154 | 3,675 | 1,410,829 | |||||||||||||||||||||||||||||||||||||
Other government-related securities | — | 51,427 | — | 51,427 | |||||||||||||||||||||||||||||||||||||
Corporate bonds | 107 | 24,209,541 | 1,549,940 | 25,759,588 | |||||||||||||||||||||||||||||||||||||
Total fixed maturity securities - available-for-sale | 1,211,248 | 28,706,742 | 2,099,451 | 32,017,441 | |||||||||||||||||||||||||||||||||||||
Fixed maturity securities - trading | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | 310,877 | — | 310,877 | |||||||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | 158,570 | — | 158,570 | |||||||||||||||||||||||||||||||||||||
Other asset-backed securities | — | 93,278 | 194,977 | 288,255 | |||||||||||||||||||||||||||||||||||||
U.S. government-related securities | 191,332 | 4,906 | — | 196,238 | |||||||||||||||||||||||||||||||||||||
State, municipalities, and political subdivisions | — | 260,892 | — | 260,892 | |||||||||||||||||||||||||||||||||||||
Other government-related securities | — | 57,097 | — | 57,097 | |||||||||||||||||||||||||||||||||||||
Corporate bonds | — | 1,497,362 | 29,199 | 1,526,561 | |||||||||||||||||||||||||||||||||||||
Total fixed maturity securities - trading | 191,332 | 2,382,982 | 224,176 | 2,798,490 | |||||||||||||||||||||||||||||||||||||
Total fixed maturity securities | 1,402,580 | 31,089,724 | 2,323,627 | 34,815,931 | |||||||||||||||||||||||||||||||||||||
Equity securities | 523,219 | 50,927 | 71,881 | 646,027 | |||||||||||||||||||||||||||||||||||||
Other long-term investments (1) | 56,469 | 54,965 | 196,133 | 307,567 | |||||||||||||||||||||||||||||||||||||
Short-term investments | 132,543 | 1,603 | — | 134,146 | |||||||||||||||||||||||||||||||||||||
Total investments | 2,114,811 | 31,197,219 | 2,591,641 | 35,903,671 | |||||||||||||||||||||||||||||||||||||
Cash | 466,542 | — | — | 466,542 | |||||||||||||||||||||||||||||||||||||
Other assets | 10,979 | — | — | 10,979 | |||||||||||||||||||||||||||||||||||||
Assets related to separate accounts | |||||||||||||||||||||||||||||||||||||||||
Variable annuity | 12,791,438 | — | — | 12,791,438 | |||||||||||||||||||||||||||||||||||||
Variable universal life | 783,618 | — | — | 783,618 | |||||||||||||||||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 16,167,388 | $ | 31,197,219 | $ | 2,591,641 | $ | 49,956,248 | |||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances (2) | $ | — | $ | — | $ | 107,000 | $ | 107,000 | |||||||||||||||||||||||||||||||||
Other liabilities (1) | 30,241 | 156,931 | 270,630 | 457,802 | |||||||||||||||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 30,241 | $ | 156,931 | $ | 377,630 | $ | 564,802 | |||||||||||||||||||||||||||||||||
(1)Includes certain freestanding and embedded derivatives. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
Schedule of the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of the financial instruments | ' | ||||||||||||||||||||||||||||||||||||||||
Fair Value | |||||||||||||||||||||||||||||||||||||||||
As of | Valuation | Unobservable | Range | ||||||||||||||||||||||||||||||||||||||
June 30, 2014 | Technique | Input | (Weighted Average) | ||||||||||||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Other asset-backed securities | $ | 567,480 | Discounted cash flow | Liquidity premium Paydown rate | 0.15% - 1.49% (0.57%) | ||||||||||||||||||||||||||||||||||||
9.04% - 20.69% (12.44%) | |||||||||||||||||||||||||||||||||||||||||
Corporate bonds | 1,461,997 | Discounted cash flow | Spread over treasury | 0.06% - 6.90% (1.88%) | |||||||||||||||||||||||||||||||||||||
Embedded derivatives - GMWB(1) | 26,579 | Actuarial cash flow model | Mortality | 49% to 80% of 1994 MGDB | |||||||||||||||||||||||||||||||||||||
table | |||||||||||||||||||||||||||||||||||||||||
Lapse | 0% - 24%, depending on | ||||||||||||||||||||||||||||||||||||||||
product/duration/funded status of | |||||||||||||||||||||||||||||||||||||||||
guarantee | |||||||||||||||||||||||||||||||||||||||||
97% - 103% | |||||||||||||||||||||||||||||||||||||||||
Utilization Nonperformance risk | 0.11% - 0.90% | ||||||||||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances(2) | $ | 102,456 | Actuarial cash flow model | Asset earned rate Expenses Withdrawal rate Mortality | 5.37% | ||||||||||||||||||||||||||||||||||||
$88 - $102 per policy | |||||||||||||||||||||||||||||||||||||||||
Lapse | 2.20% | ||||||||||||||||||||||||||||||||||||||||
49% to 80% of 1994 MGDB | |||||||||||||||||||||||||||||||||||||||||
table | |||||||||||||||||||||||||||||||||||||||||
Return on assets | 2.2% - 33.0%, depending on | ||||||||||||||||||||||||||||||||||||||||
duration/surrender charge period | |||||||||||||||||||||||||||||||||||||||||
Nonperformance risk | 1.50% - 1.85% depending on | ||||||||||||||||||||||||||||||||||||||||
surrender charge period | |||||||||||||||||||||||||||||||||||||||||
0.11% - 0.90% | |||||||||||||||||||||||||||||||||||||||||
Embedded derivative - FIA | 69,615 | Actuarial cash flow model | Expenses Withdrawal rate | $83 - $97 per policy | |||||||||||||||||||||||||||||||||||||
1.1% - 4.5% depending on | |||||||||||||||||||||||||||||||||||||||||
duration | |||||||||||||||||||||||||||||||||||||||||
Mortality | and tax qualification | ||||||||||||||||||||||||||||||||||||||||
49% — 80% of 1994 MGDB table | |||||||||||||||||||||||||||||||||||||||||
Lapse | 2.5% - 40.0%, depending on | ||||||||||||||||||||||||||||||||||||||||
duration/surrender charge period | |||||||||||||||||||||||||||||||||||||||||
0.11% - 0.90% | |||||||||||||||||||||||||||||||||||||||||
Nonperformance risk | |||||||||||||||||||||||||||||||||||||||||
Embedded derivative - IUL | 610 | Actuarial cash flow model | Mortality | 37% — 74% of 2008 | |||||||||||||||||||||||||||||||||||||
VBT Primary Tables | |||||||||||||||||||||||||||||||||||||||||
Lapse | 0.5% - 10.0%, depending on | ||||||||||||||||||||||||||||||||||||||||
duration/distribution channel | |||||||||||||||||||||||||||||||||||||||||
and smoking class | |||||||||||||||||||||||||||||||||||||||||
Nonperformance risk | 0.11% - 0.90% | ||||||||||||||||||||||||||||||||||||||||
(1)The fair value for the GMWB embedded derivative is presented as a net asset for the purposes of this chart. Excludes modified coinsurance arrangements. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
Fair Value | |||||||||||||||||||||||||||||||||||||||||
As of | Valuation | Unobservable | Range | ||||||||||||||||||||||||||||||||||||||
December 31, 2013 | Technique | Input | (Weighted Average) | ||||||||||||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Other asset-backed securities | $ | 545,808 | Discounted cash flow | Liquidity premium Paydown rate | 1.00% - 1.68% (1.08%) | ||||||||||||||||||||||||||||||||||||
8.57% - 16.87% (12.05%) | |||||||||||||||||||||||||||||||||||||||||
Corporate bonds | 1,555,898 | Discounted cash flow | Spread over treasury | 0.11% - 6.75% (2.06%) | |||||||||||||||||||||||||||||||||||||
Embedded derivatives - GMWB(1) | 156,287 | Actuarial cash flow model | Mortality | 49% to 80% of 1994 MGDB | |||||||||||||||||||||||||||||||||||||
table | |||||||||||||||||||||||||||||||||||||||||
Lapse | 0% - 24%, depending on | ||||||||||||||||||||||||||||||||||||||||
product/duration/funded status of | |||||||||||||||||||||||||||||||||||||||||
guarantee | |||||||||||||||||||||||||||||||||||||||||
Utilization Nonperformance risk | 97% - 103% | ||||||||||||||||||||||||||||||||||||||||
0.15% - 1.06% | |||||||||||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances(2) | $ | 107,000 | Actuarial cash flow model | Asset earned rate Expenses Withdrawal rate Mortality | 5.37% | ||||||||||||||||||||||||||||||||||||
$88 - $102 per policy | |||||||||||||||||||||||||||||||||||||||||
Lapse | 2.20% | ||||||||||||||||||||||||||||||||||||||||
49% to 80% of 1994 MGDB | |||||||||||||||||||||||||||||||||||||||||
table | |||||||||||||||||||||||||||||||||||||||||
Return on assets | 2.2% - 33.0%, depending on | ||||||||||||||||||||||||||||||||||||||||
duration/surrender charge period | |||||||||||||||||||||||||||||||||||||||||
Nonperformance risk | 1.50% - 1.85% depending on | ||||||||||||||||||||||||||||||||||||||||
surrender charge period | |||||||||||||||||||||||||||||||||||||||||
0.15% - 1.06% | |||||||||||||||||||||||||||||||||||||||||
Embedded derivative - FIA | 25,324 | Actuarial cash flow model | Expenses Withdrawal rate | $83 - $97 per policy | |||||||||||||||||||||||||||||||||||||
1.1% - 4.5% depending on | |||||||||||||||||||||||||||||||||||||||||
Mortality | duration and tax qualification | ||||||||||||||||||||||||||||||||||||||||
49% to 80% of 1994 MGDB | |||||||||||||||||||||||||||||||||||||||||
Lapse | table | ||||||||||||||||||||||||||||||||||||||||
2.5% - 40.0%, depending on | |||||||||||||||||||||||||||||||||||||||||
duration/surrender charge period | |||||||||||||||||||||||||||||||||||||||||
Nonperformance risk | 0.15% - 1.06% | ||||||||||||||||||||||||||||||||||||||||
(1)The fair value for the GMWB embedded derivative is presented as a net asset for the purposes of this chart. Excludes modified coinsurance arrangements. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation of the beginning and ending balances for fair value measurements, for which the Company has used significant unobservable inputs (Level 3) | ' | ||||||||||||||||||||||||||||||||||||||||
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended June 30, 2014, for which the Company has used significant unobservable inputs (Level 3): | |||||||||||||||||||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||||||||||||||||
Gains (losses) | |||||||||||||||||||||||||||||||||||||||||
Total | Total | included in | |||||||||||||||||||||||||||||||||||||||
Realized and Unrealized | Realized and Unrealized | Earnings | |||||||||||||||||||||||||||||||||||||||
Gains | Losses | related to | |||||||||||||||||||||||||||||||||||||||
Included in | Included in | Instruments | |||||||||||||||||||||||||||||||||||||||
Other | Other | Transfers | still held at | ||||||||||||||||||||||||||||||||||||||
Beginning | Included in | Comprehensive | Included in | Comprehensive | in/out of | Ending | the Reporting | ||||||||||||||||||||||||||||||||||
Balance | Earnings | Income | Earnings | Income | Purchases | Sales | Issuances | Settlements | Level 3 | Other | Balance | Date | |||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Fixed maturity securities available-for-sale | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | 17 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (7 | ) | $ | — | $ | — | $ | — | $ | — | $ | 10 | $ | — | ||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 548,805 | — | 29,929 | — | (104 | ) | — | (9,534 | ) | — | — | — | (999 | ) | 568,097 | — | |||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals, and political subdivisions | 3,675 | — | — | — | — | — | — | — | — | — | — | 3,675 | — | ||||||||||||||||||||||||||||
Other government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Corporate bonds | 1,573,710 | 74 | 27,271 | — | (2,250 | ) | 60,845 | (65,172 | ) | — | — | (67,478 | ) | (2,703 | ) | 1,524,297 | — | ||||||||||||||||||||||||
Total fixed maturity securities - available-for-sale | 2,126,207 | 74 | 57,200 | — | (2,354 | ) | 60,845 | (74,713 | ) | — | — | (67,478 | ) | (3,702 | ) | 2,096,079 | — | ||||||||||||||||||||||||
Fixed maturity securities - trading | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | — | — | — | — | 842 | — | — | — | — | — | 842 | — | ||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 194,664 | 6,124 | — | (2,686 | ) | — | — | (21,883 | ) | — | — | — | 167 | 176,386 | 522 | ||||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals and politicalsubdivisions | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Corporate bonds | 30,946 | 340 | — | (40 | ) | — | 4,059 | (5,047 | ) | — | — | 1,250 | 12 | 31,520 | 280 | ||||||||||||||||||||||||||
Total fixed maturity securities - trading | 225,610 | 6,464 | — | (2,726 | ) | — | 4,901 | (26,930 | ) | — | — | 1,250 | 179 | 208,748 | 802 | ||||||||||||||||||||||||||
Total fixed maturity securities | 2,351,817 | 6,538 | 57,200 | (2,726 | ) | (2,354 | ) | 65,746 | (101,643 | ) | — | — | (66,228 | ) | (3,523 | ) | 2,304,827 | 802 | |||||||||||||||||||||||
Equity securities | 81,493 | — | 965 | — | — | — | (674 | ) | — | — | — | — | 81,784 | — | |||||||||||||||||||||||||||
Other long-term investments(1) | 143,808 | 240 | — | (20,747 | ) | — | — | — | — | — | — | — | 123,301 | (20,507 | ) | ||||||||||||||||||||||||||
Short-term investments | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Total investments | 2,577,118 | 6,778 | 58,165 | (23,473 | ) | (2,354 | ) | 65,746 | (102,317 | ) | — | — | (66,228 | ) | (3,523 | ) | 2,509,912 | (19,705 | ) | ||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 2,577,118 | $ | 6,778 | $ | 58,165 | $ | (23,473 | ) | $ | (2,354 | ) | $ | 65,746 | $ | (102,317 | ) | $ | — | $ | — | $ | (66,228 | ) | $ | (3,523 | ) | $ | 2,509,912 | $ | (19,705 | ) | |||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances(2) | $ | 105,593 | $ | — | $ | — | $ | (1,714 | ) | $ | — | $ | — | $ | — | $ | 63 | $ | 4,914 | $ | — | $ | — | $ | 102,456 | $ | — | ||||||||||||||
Other liabilities(1) | 371,365 | 13 | — | (113,395 | ) | — | — | — | — | — | — | — | 484,747 | (113,382 | ) | ||||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 476,958 | $ | 13 | $ | — | $ | (115,109 | ) | $ | — | $ | — | $ | — | $ | 63 | $ | 4,914 | $ | — | $ | — | $ | 587,203 | $ | (113,382 | ) | |||||||||||||
(1)Represents certain freestanding and embedded derivatives. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended June 30, 2013, for which the Company has used significant unobservable inputs (Level 3): | |||||||||||||||||||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||||||||||||||||
Gains (losses) | |||||||||||||||||||||||||||||||||||||||||
Total | Total | included in | |||||||||||||||||||||||||||||||||||||||
Realized and Unrealized | Realized and Unrealized | Earnings | |||||||||||||||||||||||||||||||||||||||
Gains | Losses | related to | |||||||||||||||||||||||||||||||||||||||
Included in | Included in | Instruments | |||||||||||||||||||||||||||||||||||||||
Other | Other | Transfers | still held at | ||||||||||||||||||||||||||||||||||||||
Beginning | Included in | Comprehensive | Included in | Comprehensive | in/out of | Ending | the Reporting | ||||||||||||||||||||||||||||||||||
Balance | Earnings | Income | Earnings | Income | Purchases | Sales | Issuances | Settlements | Level 3 | Other | Balance | Date | |||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Fixed maturity securities available-for-sale | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | 4 | $ | — | $ | — | $ | — | $ | (337 | ) | $ | 14,349 | $ | — | $ | — | $ | — | $ | 46 | $ | — | $ | 14,062 | $ | — | ||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 560,668 | — | 43,744 | — | — | 13,162 | (41,377 | ) | — | — | — | 199 | 576,396 | — | |||||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals, and political subdivisions | 4,335 | — | — | — | — | — | (5 | ) | — | — | — | — | 4,330 | — | |||||||||||||||||||||||||||
Other government-related securities | 20,003 | — | 1 | — | — | — | — | — | — | — | (4 | ) | 20,000 | — | |||||||||||||||||||||||||||
Corporate bonds | 124,555 | 116 | 81 | — | (7,682 | ) | 18,275 | (3,113 | ) | — | — | 62,330 | 333 | 194,895 | — | ||||||||||||||||||||||||||
Total fixed maturity securities - available-for-sale | 709,565 | 116 | 43,826 | — | (8,019 | ) | 45,786 | (44,495 | ) | — | — | 62,376 | 528 | 809,683 | — | ||||||||||||||||||||||||||
Fixed maturity securities - trading | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | — | — | — | — | 1,582 | — | — | — | — | — | 1,582 | — | ||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 71,383 | 1,389 | — | (2,610 | ) | — | 105,830 | (9,953 | ) | — | — | 2,210 | 602 | 168,851 | 511 | ||||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals and political subdivisions | — | — | — | — | — | 3,500 | — | — | — | — | — | 3,500 | — | ||||||||||||||||||||||||||||
Other government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Corporate bonds | 5,112 | — | — | (23 | ) | — | — | — | — | — | — | 3 | 5,092 | (23 | ) | ||||||||||||||||||||||||||
Total fixed maturity securities - trading | 76,495 | 1,389 | — | (2,633 | ) | — | 110,912 | (9,953 | ) | — | — | 2,210 | 605 | 179,025 | 488 | ||||||||||||||||||||||||||
Total fixed maturity securities | 786,060 | 1,505 | 43,826 | (2,633 | ) | (8,019 | ) | 156,698 | (54,448 | ) | — | — | 64,586 | 1,133 | 988,708 | 488 | |||||||||||||||||||||||||
Equity securities | 69,418 | — | — | — | — | — | — | — | — | — | — | 69,418 | — | ||||||||||||||||||||||||||||
Other long-term investments(1) | 57,117 | 43,317 | — | (362 | ) | — | — | — | — | — | — | — | 100,072 | 42,955 | |||||||||||||||||||||||||||
Short-term investments | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Total investments | 912,595 | 44,822 | 43,826 | (2,995 | ) | (8,019 | ) | 156,698 | (54,448 | ) | — | — | 64,586 | 1,133 | 1,158,198 | 43,443 | |||||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 912,595 | $ | 44,822 | $ | 43,826 | $ | (2,995 | ) | $ | (8,019 | ) | $ | 156,698 | $ | (54,448 | ) | $ | — | $ | — | $ | 64,586 | $ | 1,133 | $ | 1,158,198 | $ | 43,443 | ||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances(2) | $ | 123,681 | $ | — | $ | — | $ | (1,686 | ) | $ | — | $ | — | $ | — | $ | 65 | $ | 10,818 | $ | — | $ | — | $ | 114,614 | $ | — | ||||||||||||||
Other liabilities(1) | 539,814 | 219,947 | — | (15,714 | ) | — | — | — | — | — | — | — | 335,581 | 204,233 | |||||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 663,495 | $ | 219,947 | $ | — | $ | (17,400 | ) | $ | — | $ | — | $ | — | $ | 65 | $ | 10,818 | $ | — | $ | — | $ | 450,195 | $ | 204,233 | ||||||||||||||
(1)Represents certain freestanding and embedded derivatives. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the six months ended June 30, 2014, for which the Company has used significant unobservable inputs (Level 3): | |||||||||||||||||||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||||||||||||||||
Gains (losses) | |||||||||||||||||||||||||||||||||||||||||
Total | Total | included in | |||||||||||||||||||||||||||||||||||||||
Realized and Unrealized | Realized and Unrealized | Earnings | |||||||||||||||||||||||||||||||||||||||
Gains | Losses | related to | |||||||||||||||||||||||||||||||||||||||
Included in | Included in | Instruments | |||||||||||||||||||||||||||||||||||||||
Other | Other | Transfers | still held at | ||||||||||||||||||||||||||||||||||||||
Beginning | Included in | Comprehensive | Included in | Comprehensive | in/out of | Ending | the Reporting | ||||||||||||||||||||||||||||||||||
Balance | Earnings | Income | Earnings | Income | Purchases | Sales | Issuances | Settlements | Level 3 | Other | Balance | Date | |||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Fixed maturity securities available-for-sale | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | 28 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (18 | ) | $ | — | $ | — | $ | — | $ | — | $ | 10 | $ | — | ||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 545,808 | — | 34,066 | — | (1,233 | ) | — | (9,794 | ) | — | — | — | (750 | ) | 568,097 | — | |||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals, and political subdivisions | 3,675 | — | — | — | — | — | — | — | — | — | — | 3,675 | — | ||||||||||||||||||||||||||||
Other government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Corporate bonds | 1,549,940 | 969 | 54,288 | — | (7,265 | ) | 90,232 | (103,039 | ) | — | — | (55,293 | ) | (5,535 | ) | 1,524,297 | — | ||||||||||||||||||||||||
Total fixed maturity securities - available-for-sale | 2,099,451 | 969 | 88,354 | — | (8,498 | ) | 90,232 | (112,851 | ) | — | — | (55,293 | ) | (6,285 | ) | 2,096,079 | — | ||||||||||||||||||||||||
Fixed maturity securities - trading | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | — | — | — | — | 842 | — | — | — | — | — | 842 | — | ||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 194,977 | 6,851 | — | (3,114 | ) | — | — | (22,695 | ) | — | — | — | 367 | 176,386 | 654 | ||||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals and political subdivisions | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Corporate bonds | 29,199 | 878 | — | (53 | ) | — | 4,059 | (5,110 | ) | — | — | 2,522 | 25 | 31,520 | — | ||||||||||||||||||||||||||
Total fixed maturity securities - trading | 224,176 | 7,729 | — | (3,167 | ) | — | 4,901 | (27,805 | ) | — | — | 2,522 | 392 | 208,748 | 654 | ||||||||||||||||||||||||||
Total fixed maturity securities | 2,323,627 | 8,698 | 88,354 | (3,167 | ) | (8,498 | ) | 95,133 | (140,656 | ) | — | — | (52,771 | ) | (5,893 | ) | 2,304,827 | 654 | |||||||||||||||||||||||
Equity securities | 71,881 | — | 1,192 | — | (166 | ) | 9,551 | (674 | ) | — | — | — | — | 81,784 | — | ||||||||||||||||||||||||||
Other long-term investments(1) | 196,133 | 245 | — | (73,077 | ) | — | — | — | — | — | — | — | 123,301 | (72,832 | ) | ||||||||||||||||||||||||||
Short-term investments | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Total investments | 2,591,641 | 8,943 | 89,546 | (76,244 | ) | (8,664 | ) | 104,684 | (141,330 | ) | — | — | (52,771 | ) | (5,893 | ) | 2,509,912 | (72,178 | ) | ||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 2,591,641 | $ | 8,943 | $ | 89,546 | $ | (76,244 | ) | $ | (8,664 | ) | $ | 104,684 | $ | (141,330 | ) | $ | — | $ | — | $ | (52,771 | ) | $ | (5,893 | ) | $ | 2,509,912 | $ | (72,178 | ) | |||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances(2) | $ | 107,000 | $ | — | $ | — | $ | (3,123 | ) | $ | — | $ | — | $ | — | $ | 175 | $ | 7,842 | $ | — | $ | — | $ | 102,456 | $ | — | ||||||||||||||
Other liabilities(1) | 270,630 | 25 | — | (214,142 | ) | — | — | — | — | — | — | — | 484,747 | (214,117 | ) | ||||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 377,630 | $ | 25 | $ | — | $ | (217,265 | ) | $ | — | $ | — | $ | — | $ | 175 | $ | 7,842 | $ | — | $ | — | $ | 587,203 | $ | (214,117 | ) | |||||||||||||
(1)Represents certain freestanding and embedded derivatives. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the six months ended June 30, 2013, for which the Company has used significant unobservable inputs (Level 3): | |||||||||||||||||||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||||||||||||||||
Gains (losses) | |||||||||||||||||||||||||||||||||||||||||
Total | Total | included in | |||||||||||||||||||||||||||||||||||||||
Realized and Unrealized | Realized and Unrealized | Earnings | |||||||||||||||||||||||||||||||||||||||
Gains | Losses | related to | |||||||||||||||||||||||||||||||||||||||
Included in | Included in | Instruments | |||||||||||||||||||||||||||||||||||||||
Other | Other | Transfers | still held at | ||||||||||||||||||||||||||||||||||||||
Beginning | Included in | Comprehensive | Included in | Comprehensive | in/out of | Ending | the Reporting | ||||||||||||||||||||||||||||||||||
Balance | Earnings | Income | Earnings | Income | Purchases | Sales | Issuances | Settlements | Level 3 | Other | Balance | Date | |||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Fixed maturity securities available-for-sale | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | 4 | $ | — | $ | — | $ | — | $ | (337 | ) | $ | 14,349 | $ | — | $ | — | $ | — | $ | 46 | $ | — | $ | 14,062 | $ | — | ||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 596,143 | — | 43,756 | — | (27,548 | ) | 13,162 | (50,386 | ) | — | — | 1,227 | 42 | 576,396 | — | ||||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals, and political subdivisions | 4,335 | — | — | — | — | — | (5 | ) | — | — | — | — | 4,330 | — | |||||||||||||||||||||||||||
Other government-related securities | 20,011 | — | 1 | — | (3 | ) | — | — | — | — | — | (9 | ) | 20,000 | — | ||||||||||||||||||||||||||
Corporate bonds | 167,892 | 116 | 1,011 | — | (10,046 | ) | 18,275 | (45,184 | ) | — | — | 62,330 | 501 | 194,895 | — | ||||||||||||||||||||||||||
Total fixed maturity securities - available-for-sale | 788,385 | 116 | 44,768 | — | (37,934 | ) | 45,786 | (95,575 | ) | — | — | 63,603 | 534 | 809,683 | — | ||||||||||||||||||||||||||
Fixed maturity securities - trading | |||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | — | — | — | — | 1,582 | — | — | — | — | — | 1,582 | — | ||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Other asset-backed securities | 70,535 | 4,797 | — | (2,869 | ) | — | 105,830 | (12,776 | ) | — | — | 2,210 | 1,124 | 168,851 | 3,779 | ||||||||||||||||||||||||||
U.S. government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
States, municipals and political subdivisions | — | — | — | — | — | 3,500 | — | — | — | — | — | 3,500 | — | ||||||||||||||||||||||||||||
Other government-related securities | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Corporate bonds | 115 | 1 | — | (23 | ) | — | — | (17 | ) | — | — | 5,013 | 3 | 5,092 | 6 | ||||||||||||||||||||||||||
Total fixed maturity securities - trading | 70,650 | 4,798 | — | (2,892 | ) | — | 110,912 | (12,793 | ) | — | — | 7,223 | 1,127 | 179,025 | 3,785 | ||||||||||||||||||||||||||
Total fixed maturity securities | 859,035 | 4,914 | 44,768 | (2,892 | ) | (37,934 | ) | 156,698 | (108,368 | ) | — | — | 70,826 | 1,661 | 988,708 | 3,785 | |||||||||||||||||||||||||
Equity securities | 69,418 | — | — | — | — | — | — | — | — | — | — | 69,418 | — | ||||||||||||||||||||||||||||
Other long-term investments(1) | 31,591 | 68,852 | — | (371 | ) | — | — | — | — | — | — | — | 100,072 | 68,481 | |||||||||||||||||||||||||||
Short-term investments | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Total investments | 960,044 | 73,766 | 44,768 | (3,263 | ) | (37,934 | ) | 156,698 | (108,368 | ) | — | — | 70,826 | 1,661 | 1,158,198 | 72,266 | |||||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | 960,044 | $ | 73,766 | $ | 44,768 | $ | (3,263 | ) | $ | (37,934 | ) | $ | 156,698 | $ | (108,368 | ) | $ | — | $ | — | $ | 70,826 | $ | 1,661 | $ | 1,158,198 | $ | 72,266 | ||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Annuity account balances(2) | $ | 129,468 | $ | — | $ | — | $ | (3,686 | ) | $ | — | $ | — | $ | — | $ | 201 | $ | 18,741 | $ | — | $ | — | $ | 114,614 | $ | — | ||||||||||||||
Other liabilities(1) | 611,437 | 304,493 | — | (28,637 | ) | — | — | — | — | — | — | — | 335,581 | 275,856 | |||||||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 740,905 | $ | 304,493 | $ | — | $ | (32,323 | ) | $ | — | $ | — | $ | — | $ | 201 | $ | 18,741 | $ | — | $ | — | $ | 450,195 | $ | 275,856 | ||||||||||||||
(1)Represents certain freestanding and embedded derivatives. | |||||||||||||||||||||||||||||||||||||||||
(2)Represents liabilities related to fixed indexed annuities. | |||||||||||||||||||||||||||||||||||||||||
Schedule of the carrying amounts and estimated fair value of the Company's financial instruments | ' | ||||||||||||||||||||||||||||||||||||||||
As of | |||||||||||||||||||||||||||||||||||||||||
June 30, 2014 | December 31, 2013 | ||||||||||||||||||||||||||||||||||||||||
Fair Value | Carrying | Carrying | |||||||||||||||||||||||||||||||||||||||
Level | Amounts | Fair Values | Amounts | Fair Values | |||||||||||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate | 3 | $ | 5,294,729 | $ | 5,821,043 | $ | 5,493,492 | $ | 5,956,133 | ||||||||||||||||||||||||||||||||
Policy loans | 3 | 1,778,379 | 1,778,379 | 1,815,744 | 1,815,744 | ||||||||||||||||||||||||||||||||||||
Fixed maturities, held-to-maturity(1) | 3 | 400,000 | 451,382 | 365,000 | 335,676 | ||||||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||
Stable value product account balances | 3 | $ | 2,435,995 | $ | 2,456,141 | $ | 2,559,552 | $ | 2,566,209 | ||||||||||||||||||||||||||||||||
Annuity account balances | 3 | 11,071,468 | 10,665,435 | 11,125,253 | 10,639,637 | ||||||||||||||||||||||||||||||||||||
Debt: | |||||||||||||||||||||||||||||||||||||||||
Bank borrowings | 3 | $ | 345,000 | $ | 345,000 | $ | 485,000 | $ | 485,000 | ||||||||||||||||||||||||||||||||
Senior Notes | 2 | 1,100,000 | 1,356,480 | 1,100,000 | 1,294,675 | ||||||||||||||||||||||||||||||||||||
Subordinated debt securities | 2 | 540,593 | 552,607 | 540,593 | 473,503 | ||||||||||||||||||||||||||||||||||||
Non-recourse funding obligations(2) | 3 | 579,078 | 578,392 | 562,448 | 470,709 | ||||||||||||||||||||||||||||||||||||
Except as noted below, fair values were estimated using quoted market prices. | |||||||||||||||||||||||||||||||||||||||||
(1) Security purchased from unconsolidated subsidiary, Red Mountain LLC. | |||||||||||||||||||||||||||||||||||||||||
(2) Of this carrying amount, $400.0 million, fair value of $427.1 million, as of June 30, 2014, and $365.0 million, fair value of $321.5 million, as of December 31, 2013, relates to non-recourse funding obligations issued by Golden Gate V. | |||||||||||||||||||||||||||||||||||||||||
DERIVATIVE_FINANCIAL_INSTRUMEN1
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
DERIVATIVE FINANCIAL INSTRUMENTS | ' | |||||||||||||
Schedule of realized investments gains and losses | ' | |||||||||||||
For The | For The | |||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
(Dollars In Thousands) | ||||||||||||||
Derivatives related to variable annuity contracts: | ||||||||||||||
Interest rate futures - VA | $ | 6,548 | $ | (7,654 | ) | $ | 10,798 | $ | (24,138 | ) | ||||
Equity futures - VA | (7,259 | ) | (4,036 | ) | (9,910 | ) | (27,261 | ) | ||||||
Currency futures - VA | (2,887 | ) | (112 | ) | (4,165 | ) | 7,971 | |||||||
Variance swaps - VA | (823 | ) | 2,214 | (2,673 | ) | (8,219 | ) | |||||||
Equity options - VA | (20,949 | ) | (8,131 | ) | (33,290 | ) | (36,537 | ) | ||||||
Interest rate swaptions - VA | (4,998 | ) | 1,639 | (14,401 | ) | (2,463 | ) | |||||||
Interest rate swaps - VA | 45,169 | (89,722 | ) | 102,537 | (106,278 | ) | ||||||||
Embedded derivative - GMWB | (47,389 | ) | 103,315 | (129,676 | ) | 183,690 | ||||||||
Total derivatives related to variable annuity contracts | (32,588 | ) | (2,487 | ) | (80,780 | ) | (13,235 | ) | ||||||
Derivatives related to FIA contracts: | ||||||||||||||
Embedded derivative - FIA | (8,307 | ) | (41 | ) | (6,574 | ) | (41 | ) | ||||||
Equity futures - FIA | 605 | — | 950 | — | ||||||||||
Volatility futures - FIA | 8 | — | 8 | — | ||||||||||
Equity options - FIA | 2,984 | (19 | ) | 3,978 | (19 | ) | ||||||||
Total derivatives related to FIA contracts | (4,710 | ) | (60 | ) | (1,638 | ) | (60 | ) | ||||||
Embedded derivative - IUL | (285 | ) | — | (285 | ) | — | ||||||||
Embedded derivative - Modco reinsurance treaties | (52,202 | ) | 144,998 | (112,371 | ) | 161,773 | ||||||||
Interest rate swaps | — | 1,909 | — | 2,912 | ||||||||||
Other derivatives | (141 | ) | (479 | ) | (202 | ) | (124 | ) | ||||||
Total realized gains (losses) - derivatives | $ | (89,926 | ) | $ | 143,881 | $ | (195,276 | ) | $ | 151,266 | ||||
Schedule of realized investments gains and losses for Modco trading portfolio that is included in realized investment gains (losses) - all other investments | ' | |||||||||||||
For The | For The | |||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
(Dollars In Thousands) | ||||||||||||||
Modco trading portfolio(1) | $ | 60,989 | $ | (126,694 | ) | $ | 127,292 | $ | (142,022 | ) | ||||
(1)The Company elected to include the use of alternate disclosures for trading activities. | ||||||||||||||
Schedule of components of the gain or loss on derivatives that qualify as a cash flow hedging relationship | ' | |||||||||||||
Amount and Location of | ||||||||||||||
Amount of Gains (Losses) | Gains (Losses) | |||||||||||||
Deferred in | Reclassified from | Amount and Location of | ||||||||||||
Accumulated Other | Accumulated Other | (Losses) Recognized in | ||||||||||||
Comprehensive Income | Comprehensive Income | Income (Loss) on | ||||||||||||
(Loss) on Derivatives | (Loss) into Income (Loss) | Derivatives | ||||||||||||
(Effective Portion) | (Effective Portion) | (Ineffective Portion) | ||||||||||||
Benefits and settlement | Realized investment | |||||||||||||
expenses | gains (losses) | |||||||||||||
(Dollars In Thousands) | ||||||||||||||
For The Three Months Ended June 30, 2014 | ||||||||||||||
Inflation | $ | (929 | ) | $ | (614 | ) | $ | (165 | ) | |||||
Total | $ | (929 | ) | $ | (614 | ) | $ | (165 | ) | |||||
For The Six Months Ended June 30, 2014 | ||||||||||||||
Inflation | $ | (26 | ) | $ | (1,284 | ) | $ | (126 | ) | |||||
Total | $ | (26 | ) | $ | (1,284 | ) | $ | (126 | ) | |||||
Amount and Location of | ||||||||||||||
Amount of Gains (Losses) | Gains (Losses) | |||||||||||||
Deferred in | Reclassified from | Amount and Location of | ||||||||||||
Accumulated Other | Accumulated Other | (Losses) Recognized in | ||||||||||||
Comprehensive Income | Comprehensive Income | Income (Loss) on | ||||||||||||
(Loss) on Derivatives | (Loss) into Income (Loss) | Derivatives | ||||||||||||
(Effective Portion) | (Effective Portion) | (Ineffective Portion) | ||||||||||||
Benefits and settlement | Realized investment | |||||||||||||
expenses | gains (losses) | |||||||||||||
(Dollars In Thousands) | ||||||||||||||
For The Three Months Ended June 30, 2013 | ||||||||||||||
Inflation | $ | (4,589 | ) | $ | (580 | ) | $ | (558 | ) | |||||
Total | $ | (4,589 | ) | $ | (580 | ) | $ | (558 | ) | |||||
For The Six Months Ended June 30, 2013 | ||||||||||||||
Inflation | $ | (180 | ) | $ | (1,077 | ) | $ | (190 | ) | |||||
Total | $ | (180 | ) | $ | (1,077 | ) | $ | (190 | ) | |||||
Schedule of information about the nature and accounting treatment of the Company's primary derivative financial instruments and the location in and effect on the consolidated financial statements | ' | |||||||||||||
As of June 30, 2014 | As of December 31, 2013 | |||||||||||||
Notional | Fair | Notional | Fair | |||||||||||
Amount | Value | Amount | Value | |||||||||||
(Dollars In Thousands) | ||||||||||||||
Other long-term investments | ||||||||||||||
Cash flow hedges: | ||||||||||||||
Inflation | $ | — | $ | — | $ | — | $ | — | ||||||
Derivatives not designated as hedging instruments: | ||||||||||||||
Interest rate swaps | 295,000 | 3,681 | 200,000 | 1,961 | ||||||||||
Embedded derivative - Modco reinsurance treaties | 30,105 | 1,226 | 80,376 | 1,517 | ||||||||||
Embedded derivative - GMWB | 5,161,813 | 122,075 | 6,113,017 | 194,616 | ||||||||||
Interest rate futures | 283,629 | 1,510 | — | — | ||||||||||
Equity futures | 46,915 | 379 | 3,387 | 111 | ||||||||||
Currency futures | — | — | 14,338 | 321 | ||||||||||
Equity options | 2,051,427 | 120,586 | 1,376,205 | 78,277 | ||||||||||
Interest rate swaptions | 625,000 | 15,890 | 625,000 | 30,291 | ||||||||||
Other | 592 | 420 | 425 | 473 | ||||||||||
$ | 8,494,481 | $ | 265,767 | $ | 8,412,748 | $ | 307,567 | |||||||
Other liabilities | ||||||||||||||
Cash flow hedges: | ||||||||||||||
Inflation | $ | 182,965 | $ | 624 | $ | 182,965 | $ | 1,865 | ||||||
Derivatives not designated as hedging instruments: | ||||||||||||||
Interest rate swaps | 1,180,000 | 59,968 | 1,230,000 | 153,322 | ||||||||||
Variance swaps | 1,100 | 3,782 | 1,500 | 1,744 | ||||||||||
Embedded derivative - Modco reinsurance treaties | 2,591,360 | 318,999 | 2,578,590 | 206,918 | ||||||||||
Embedded derivative - GMWB | 4,418,599 | 95,523 | 2,494,142 | 38,388 | ||||||||||
Embedded derivative - FIA | 527,698 | 69,615 | 244,424 | 25,324 | ||||||||||
Embedded derivative - IUL | 1,057 | 610 | — | — | ||||||||||
Interest rate futures | 71,714 | 37 | 322,902 | 5,221 | ||||||||||
Equity futures | 102,891 | 1,443 | 164,595 | 6,595 | ||||||||||
Currency futures | 138,916 | 2,364 | 118,008 | 840 | ||||||||||
Equity options | 475,155 | 32,726 | 257,065 | 17,558 | ||||||||||
Other | 358 | 38 | 230 | 27 | ||||||||||
$ | 9,691,813 | $ | 585,729 | $ | 7,594,421 | $ | 457,802 |
OFFSETTING_OF_ASSETS_AND_LIABI1
OFFSETTING OF ASSETS AND LIABILITIES (Tables) | 6 Months Ended | ||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||
OFFSETTING OF ASSETS AND LIABILITIES | ' | ||||||||||||||||||||
Schedule of derivative instruments by assets | ' | ||||||||||||||||||||
The tables below present the derivative instruments by assets and liabilities for the Company as of June 30, 2014: | |||||||||||||||||||||
Net Amounts | |||||||||||||||||||||
Gross | of Assets | Gross Amounts Not Offset | |||||||||||||||||||
Amounts | Presented in | in the Statement of | |||||||||||||||||||
Gross | Offset in the | the | Financial Position | ||||||||||||||||||
Amounts of | Statement of | Statement of | Cash | ||||||||||||||||||
Recognized | Financial | Financial | Financial | Collateral | |||||||||||||||||
Assets | Position | Position | Instruments | Received | Net Amount | ||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||
Offsetting of Derivative Assets | |||||||||||||||||||||
Derivatives: | |||||||||||||||||||||
Free-Standing derivatives | $ | 142,090 | $ | — | $ | 142,090 | $ | 54,682 | $ | 23,039 | $ | 64,369 | |||||||||
Embedded derivative - Modco reinsurance treaties | 1,226 | — | 1,226 | — | — | 1,226 | |||||||||||||||
Embedded derivative - GMWB | 122,075 | — | 122,075 | — | — | 122,075 | |||||||||||||||
Total derivatives, subject to a master netting arrangement or similar arrangement | 265,391 | — | 265,391 | 54,682 | 23,039 | 187,670 | |||||||||||||||
Total derivatives, not subject to a master netting arrangement or similar arrangement | 376 | — | 376 | — | — | 376 | |||||||||||||||
Total derivatives | 265,767 | — | 265,767 | 54,682 | 23,039 | 188,046 | |||||||||||||||
Total Assets | $ | 265,767 | $ | — | $ | 265,767 | $ | 54,682 | $ | 23,039 | $ | 188,046 | |||||||||
The tables below present the derivative instruments by assets and liabilities for the Company as of December 31, 2013: | |||||||||||||||||||||
Net Amounts | |||||||||||||||||||||
Gross | of Assets | Gross Amounts Not Offset | |||||||||||||||||||
Amounts | Presented in | in the Statement of | |||||||||||||||||||
Gross | Offset in the | the | Financial Position | ||||||||||||||||||
Amounts of | Statement of | Statement of | Cash | ||||||||||||||||||
Recognized | Financial | Financial | Financial | Collateral | |||||||||||||||||
Assets | Position | Position | Instruments | Received | Net Amount | ||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||
Offsetting of Derivative Assets | |||||||||||||||||||||
Derivatives: | |||||||||||||||||||||
Free-Standing derivatives | $ | 110,983 | $ | — | $ | 110,983 | $ | 52,487 | $ | 10,700 | $ | 47,796 | |||||||||
Embedded derivative - Modco reinsurance treaties | 1,517 | — | 1,517 | — | — | 1,517 | |||||||||||||||
Embedded derivative - GMWB | 194,616 | — | 194,616 | — | — | 194,616 | |||||||||||||||
Total derivatives, subject to a master netting arrangement or similar arrangement | 307,116 | — | 307,116 | 52,487 | 10,700 | 243,929 | |||||||||||||||
Total derivatives, not subject to a master netting arrangement or similar arrangement | 451 | — | 451 | — | — | 451 | |||||||||||||||
Total derivatives | 307,567 | — | 307,567 | 52,487 | 10,700 | 244,380 | |||||||||||||||
Total Assets | $ | 307,567 | $ | — | $ | 307,567 | $ | 52,487 | $ | 10,700 | $ | 244,380 | |||||||||
Schedule of derivative instruments by liabilities | ' | ||||||||||||||||||||
The tables below present the derivative instruments by assets and liabilities for the Company as of June 30, 2014: | |||||||||||||||||||||
Net Amounts | |||||||||||||||||||||
Gross | of Liabilities | Gross Amounts Not Offset | |||||||||||||||||||
Amounts | Presented in | in the Statement of | |||||||||||||||||||
Gross | Offset in the | the | Financial Position | ||||||||||||||||||
Amounts of | Statement of | Statement of | Cash | ||||||||||||||||||
Recognized | Financial | Financial | Financial | Collateral | |||||||||||||||||
Liabilities | Position | Position | Instruments | Paid | Net Amount | ||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||
Offsetting of Derivative Liabilities | |||||||||||||||||||||
Derivatives: | |||||||||||||||||||||
Free-Standing derivatives | $ | 100,982 | $ | — | $ | 100,982 | $ | 54,682 | $ | 46,113 | $ | 187 | |||||||||
Embedded derivative - Modco reinsurance treaties | 318,999 | — | 318,999 | — | — | 318,999 | |||||||||||||||
Embedded derivative - GMWB | 95,523 | — | 95,523 | — | — | 95,523 | |||||||||||||||
Embedded derivative - FIA | 69,615 | — | 69,615 | — | — | 69,615 | |||||||||||||||
Embedded derivative - IUL | 610 | — | 610 | — | — | 610 | |||||||||||||||
Total derivatives, subject to a master netting arrangement or similar arrangement | 585,729 | — | 585,729 | 54,682 | 46,113 | 484,934 | |||||||||||||||
Total derivatives, not subject to a master netting arrangement or similar arrangement | — | — | — | — | — | — | |||||||||||||||
Total derivatives | 585,729 | — | 585,729 | 54,682 | 46,113 | 484,934 | |||||||||||||||
Repurchase agreements(1) | 420,490 | — | 420,490 | — | — | 420,490 | |||||||||||||||
Total Liabilities | $ | 1,006,219 | $ | — | $ | 1,006,219 | $ | 54,682 | $ | 46,113 | $ | 905,424 | |||||||||
(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, 2013: | |||||||||||||||||||||
Net Amounts | |||||||||||||||||||||
Gross | of Liabilities | Gross Amounts Not Offset | |||||||||||||||||||
Amounts | Presented in | in the Statement of | |||||||||||||||||||
Gross | Offset in the | the | Financial Position | ||||||||||||||||||
Amounts of | Statement of | Statement of | Cash | ||||||||||||||||||
Recognized | Financial | Financial | Financial | Collateral | |||||||||||||||||
Liabilities | Position | Position | Instruments | Paid | Net Amount | ||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||
Offsetting of Derivative Liabilities | |||||||||||||||||||||
Derivatives: | |||||||||||||||||||||
Free-Standing derivatives | $ | 187,172 | $ | — | $ | 187,172 | $ | 52,487 | $ | 98,359 | $ | 36,326 | |||||||||
Embedded derivative - Modco reinsurance treaties | 206,918 | — | 206,918 | — | — | 206,918 | |||||||||||||||
Embedded derivative - GMWB | 38,388 | 38,388 | — | — | 38,388 | ||||||||||||||||
Embedded derivative - FIA | 25,324 | — | 25,324 | — | — | 25,324 | |||||||||||||||
Total derivatives, subject to a master netting arrangement or similar arrangement | 457,802 | — | 457,802 | 52,487 | 98,359 | 306,956 | |||||||||||||||
Total derivatives, not subject to a master netting arrangement or similar arrangement | — | — | — | — | — | — | |||||||||||||||
Total derivatives | 457,802 | — | 457,802 | 52,487 | 98,359 | 306,956 | |||||||||||||||
Repurchase agreements(1) | 350,000 | — | 350,000 | — | — | 350,000 | |||||||||||||||
Total Liabilities | $ | 807,802 | $ | — | $ | 807,802 | $ | 52,487 | $ | 98,359 | $ | 656,956 | |||||||||
(1) Borrowings under repurchase agreements are for a term less than 90 days. |
OPERATING_SEGMENTS_Tables
OPERATING SEGMENTS (Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
OPERATING SEGMENTS | ' | |||||||||||||
Summary of financial information for the Company's segments | ' | |||||||||||||
For The | For The | |||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
(Dollars In Thousands) | ||||||||||||||
Revenues | ||||||||||||||
Life Marketing | $ | 407,032 | $ | 347,021 | $ | 791,798 | $ | 714,647 | ||||||
Acquisitions | 438,244 | 261,693 | 865,192 | 512,180 | ||||||||||
Annuities | 155,417 | 186,025 | 300,074 | 350,954 | ||||||||||
Stable Value Products | 27,109 | 34,468 | 54,928 | 66,388 | ||||||||||
Asset Protection | 70,870 | 71,813 | 137,253 | 139,384 | ||||||||||
Corporate and Other | 56,671 | 55,336 | 96,656 | 105,617 | ||||||||||
Total revenues | $ | 1,155,343 | $ | 956,356 | $ | 2,245,901 | $ | 1,889,170 | ||||||
Segment Operating Income (Loss) | ||||||||||||||
Life Marketing | $ | 26,349 | $ | 24,673 | $ | 49,834 | $ | 48,380 | ||||||
Acquisitions | 64,882 | 29,435 | 125,878 | 63,812 | ||||||||||
Annuities | 55,258 | 36,382 | 106,901 | 79,780 | ||||||||||
Stable Value Products | 17,287 | 22,464 | 34,684 | 40,308 | ||||||||||
Asset Protection | 8,534 | 7,384 | 14,903 | 13,465 | ||||||||||
Corporate and Other | (12,555 | ) | (2,483 | ) | (27,410 | ) | (20,815 | ) | ||||||
Total segment operating income | 159,755 | 117,855 | 304,790 | 224,930 | ||||||||||
Realized investment (losses) gains - investments(1) | 74,920 | (119,311 | ) | 143,453 | (129,067 | ) | ||||||||
Realized investment (losses) gains - derivatives | (72,465 | ) | 158,469 | (160,828 | ) | 178,777 | ||||||||
Income tax expense | (54,233 | ) | (53,814 | ) | (95,799 | ) | (93,150 | ) | ||||||
Net income | $ | 107,977 | $ | 103,199 | $ | 191,616 | $ | 181,490 | ||||||
Investment gains (losses)(2) | $ | 78,688 | $ | (113,978 | ) | $ | 149,211 | $ | (122,707 | ) | ||||
Less: amortization related to DAC/VOBA and benefits settlements expenses | 3,768 | 5,333 | 5,758 | 6,360 | ||||||||||
Realized investment gains (losses) - investments | $ | 74,920 | $ | (119,311 | ) | $ | 143,453 | $ | (129,067 | ) | ||||
Derivative gains (losses)(3) | $ | (89,926 | ) | $ | 143,881 | $ | (195,276 | ) | $ | 151,266 | ||||
Less: VA GMWB economic cost | (17,461 | ) | (14,588 | ) | (34,448 | ) | (27,511 | ) | ||||||
Realized investment gains (losses) - derivatives | $ | (72,465 | ) | $ | 158,469 | $ | (160,828 | ) | $ | 178,777 | ||||
(1) Includes credit related other-than-temporary impairments of $1.5 million and $3.1 million for the three and six months ended June 30, 2014, respectively, as compared to $4.0 million and $8.6 million for the three and six months ended June 30, 2013, respectively. | ||||||||||||||
(2)Includes realized investment gains (losses) before related amortization. | ||||||||||||||
(3)Includes realized gains (losses) on derivatives before the VA GMWB economic cost. | ||||||||||||||
Operating Segment Assets | ||||||||||||||
As of June 30, 2014 | ||||||||||||||
(Dollars In Thousands) | ||||||||||||||
Life | Stable Value | |||||||||||||
Marketing | Acquisitions | Annuities | Products | |||||||||||
Investments and other assets | $ | 13,575,287 | $ | 20,179,754 | $ | 20,713,485 | $ | 2,435,193 | ||||||
Deferred policy acquisition costs and value of business acquired | 2,000,329 | 605,799 | 623,461 | 802 | ||||||||||
Goodwill | 10,192 | 30,968 | — | — | ||||||||||
Total assets | $ | 15,585,808 | $ | 20,816,521 | $ | 21,336,946 | $ | 2,435,995 | ||||||
Asset | Corporate | Total | ||||||||||||
Protection | and Other | Adjustments | Consolidated | |||||||||||
Investments and other assets | $ | 894,935 | $ | 9,966,477 | $ | 15,644 | $ | 67,780,775 | ||||||
Deferred policy acquisition costs and value of business acquired | 42,397 | 487 | — | 3,273,275 | ||||||||||
Goodwill | 62,671 | 83 | — | 103,914 | ||||||||||
Total assets | $ | 1,000,003 | $ | 9,967,047 | $ | 15,644 | $ | 71,157,964 | ||||||
Operating Segment Assets | ||||||||||||||
As of December 31, 2013 | ||||||||||||||
(Dollars In Thousands) | ||||||||||||||
Life | Stable Value | |||||||||||||
Marketing | Acquisitions | Annuities | Products | |||||||||||
Investments and other assets | $ | 13,135,914 | $ | 20,186,839 | $ | 19,974,246 | $ | 2,558,551 | ||||||
Deferred policy acquisition costs and value of business acquired | 2,071,470 | 799,255 | 647,485 | 1,001 | ||||||||||
Goodwill | 10,192 | 32,517 | — | — | ||||||||||
Total assets | $ | 15,217,576 | $ | 21,018,611 | $ | 20,621,731 | $ | 2,559,552 | ||||||
Asset | Corporate | Total | ||||||||||||
Protection | and Other | Adjustments | Consolidated | |||||||||||
Investments and other assets | $ | 852,273 | $ | 8,355,618 | $ | 16,762 | $ | 65,080,203 | ||||||
Deferred policy acquisition costs and value of business acquired | 50,358 | 646 | — | 3,570,215 | ||||||||||
Goodwill | 62,671 | 83 | — | 105,463 | ||||||||||
Total assets | $ | 965,302 | $ | 8,356,347 | $ | 16,762 | $ | 68,755,881 |
SIGNIFICANT_ACQUISITIONS_Detai
SIGNIFICANT ACQUISITIONS (Details) (USD $) | 3 Months Ended | 6 Months Ended | 0 Months Ended | |
Jun. 30, 2013 | Jun. 30, 2013 | Oct. 01, 2013 | Oct. 02, 2013 | |
Acquisition | Acquisition | Acquisition | MONY | |
PLICO | ||||
Significant acquisitions | ' | ' | ' | ' |
Percentage of indemnity reinsurance | ' | ' | ' | 100.00% |
Purchase price | ' | ' | ' | $689,000,000 |
Ceding commission on reinsurance | ' | ' | ' | 370,000,000 |
Decrease in VOBA due to certain measurement period adjustments | ' | ' | ' | 14,000,000 |
Assets | ' | ' | ' | ' |
Fixed maturities, at fair value | ' | ' | 6,557,853,000 | ' |
Equity securities, at fair value | ' | ' | 108,413,000 | ' |
Mortgage loans | ' | ' | 830,415,000 | ' |
Policy loans | ' | ' | 967,534,000 | ' |
Short-term investments | ' | ' | 130,963,000 | ' |
Total investments | ' | ' | 8,595,178,000 | ' |
Cash | ' | ' | 216,164,000 | ' |
Accrued investment income | ' | ' | 114,695,000 | ' |
Accounts and premiums receivable, net of allowance for uncollectible amounts | ' | ' | 26,055,000 | ' |
Reinsurance receivables | ' | ' | 422,692,000 | ' |
Value of business acquired | ' | ' | 205,767,000 | ' |
Other assets | ' | ' | 5,104,000 | ' |
Income tax receivables | ' | ' | 21,197,000 | ' |
Deferred income taxes | ' | ' | 188,142,000 | ' |
Separate account assets | ' | ' | 195,452,000 | ' |
Total assets | ' | ' | 9,990,446,000 | ' |
Liabilities | ' | ' | ' | ' |
Future policy benefits and claims | ' | ' | 7,645,969,000 | ' |
Unearned premiums | ' | ' | 3,066,000 | ' |
Total policy liabilities and accruals | ' | ' | 7,649,035,000 | ' |
Annuity account balances | ' | ' | 752,163,000 | ' |
Other policyholders' funds | ' | ' | 636,448,000 | ' |
Other liabilities | ' | ' | 66,124,000 | ' |
Non-recourse funding obligation | ' | ' | 2,548,000 | ' |
Separate account liabilities | ' | ' | 195,344,000 | ' |
Total liabilities | ' | ' | 9,301,662,000 | ' |
Net assets acquired | ' | ' | 688,784,000 | ' |
Pro forma condensed consolidated results of operations | ' | ' | ' | ' |
Revenue | 1,162,748,000 | 2,316,066,000 | ' | ' |
Net income | $120,589,000 | $205,516,000 | ' | ' |
EPS - basic (in dollars per share) | $1.52 | $2.59 | ' | ' |
EPS - diluted (in dollars per share) | $1.49 | $2.54 | ' | ' |
MONY_CLOSED_BLOCK_OF_BUSINESS_1
MONY CLOSED BLOCK OF BUSINESS (Details) (USD $) | 3 Months Ended | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2014 | Dec. 31, 2013 |
Closed block liabilities | ' | ' | ' |
Future policy benefits, policyholders' account balances and other | $6,195,402 | $6,195,402 | $6,261,819 |
Policyholder dividend obligation | 328,872 | 328,872 | ' |
Other liabilities | 59,751 | 59,751 | 1,259 |
Total closed block liabilities | 6,584,025 | 6,584,025 | 6,453,572 |
Closed block assets | ' | ' | ' |
Fixed maturities, available-for-sale, at fair value | 4,402,851 | 4,402,851 | 4,109,142 |
Equity securities, available-for-sale, at fair value | 5,369 | 5,369 | 5,223 |
Mortgage loans on real estate | 512,800 | 512,800 | 601,959 |
Policy loans | 787,348 | 787,348 | 802,013 |
Cash and other invested assets | 70,954 | 70,954 | 140,577 |
Other assets | 237,931 | 237,931 | 207,265 |
Total closed block assets | 6,017,253 | 6,017,253 | 5,866,179 |
Excess of reported closed block liabilities over closed block assets | 566,772 | 566,772 | 587,393 |
Portion of above representing accumulated other comprehensive income: | ' | ' | ' |
Net unrealized investments gains (losses) net of deferred tax benefit and net of policyholder dividend obligation | ' | ' | -1,994 |
Future earnings to be recognized from closed block assets and closed block liabilities | 566,772 | 566,772 | 585,399 |
Deferred tax benefit | 0 | 0 | 1,074 |
Policyholder dividend obligation | 86,196 | 86,196 | 12,720 |
Reconciliation of the policyholder dividend obligation | ' | ' | ' |
Policyholder dividend obligation, beginning of period | ' | 190,494 | ' |
Applicable to net revenue (losses) | ' | -6,951 | ' |
Change in net unrealized investment gains (losses) allocated to policyholder dividend obligation | ' | 145,329 | ' |
Policyholder dividend obligation, end of period | 328,872 | 328,872 | ' |
Revenues | ' | ' | ' |
Premiums and other income | 53,073 | 102,846 | ' |
Net investment income | 60,416 | 112,623 | ' |
Net investment gains | 1,086 | 6,105 | ' |
Total revenues | 114,575 | 221,574 | ' |
Benefits and other deductions | ' | ' | ' |
Benefits and settlement expenses | 103,209 | 199,535 | ' |
Other operating expenses | 383 | 90 | ' |
Total benefits and other deductions | 103,592 | 199,625 | ' |
Net revenues before income taxes | 10,983 | 21,949 | ' |
Income tax expense | 3,844 | 7,682 | ' |
Net revenues | $7,139 | $14,267 | ' |
PROPOSED_DAIICHI_MERGER_Detail
PROPOSED DAI-ICHI MERGER (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 03, 2014 |
DL Investment (Delaware), Inc. | |||
Proposed merger | ' | ' | ' |
Par value of common stock at effective time if proposed merger is completed (in dollars per share) | $0.50 | $0.50 | $0.50 |
Amount of right granted for each share if proposed merger is completed at effective time | ' | ' | $70 |
INVESTMENT_OPERATIONS_Details
INVESTMENT OPERATIONS (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Net realized investment gains (losses) for all other investments | ' | ' | ' | ' |
Fixed maturities | $20,198,000 | $19,152,000 | $27,568,000 | $31,461,000 |
Equity securities | ' | 2,366,000 | ' | 2,367,000 |
Impairments on fixed maturity securities | -1,460,000 | -2,910,000 | -3,051,000 | -6,497,000 |
Impairments on equity securities | ' | -1,090,000 | ' | -2,087,000 |
Modco trading portfolio | 60,989,000 | -126,694,000 | 127,292,000 | -142,022,000 |
Other investments | -1,039,000 | -4,802,000 | -2,598,000 | -5,929,000 |
Total realized gains (losses) - investments | 78,688,000 | -113,978,000 | 149,211,000 | -122,707,000 |
Gross realized gains on investments available-for-sale (fixed maturities, equity securities, and short-term investments) | 20,400,000 | 23,900,000 | 28,100,000 | 36,800,000 |
Gross realized losses | 1,600,000 | 6,200,000 | 3,400,000 | 11,100,000 |
Impairment losses on investments available-for-sale | 1,400,000 | 3,800,000 | 2,900,000 | 8,200,000 |
Fair value (proceeds) of securities in an unrealized gain position sold | 306,300,000 | 409,900,000 | 571,000,000 | 798,500,000 |
Gain realized on the sale of securities in an unrealized gain position | 20,400,000 | 23,900,000 | 28,100,000 | 36,800,000 |
Fair value (proceeds) of securities in an unrealized loss position sold | 1,600,000 | 53,200,000 | 4,400,000 | 57,200,000 |
Loss realized on the sale of securities in an unrealized loss position | $200,000 | $2,400,000 | $500,000 | $3,000,000 |
INVESTMENT_OPERATIONS_Details_
INVESTMENT OPERATIONS (Details 2) (USD $) | 6 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Dec. 31, 2013 |
Investments classified as available-for-sale | ' | ' |
Amortized Cost | $32,254,194 | $31,600,087 |
Gross Unrealized Gains | 3,110,954 | 1,728,521 |
Gross Unrealized Losses | -169,571 | -604,616 |
Fair Value | 35,195,577 | 32,723,992 |
Total OTTI Recognized in OCI | 6,236 | 928 |
Investments classified as held-to-maturity | ' | ' |
Fair Value | 451,382 | 335,676 |
Fair Value | ' | ' |
Fair Value | 451,382 | 335,676 |
Fixed maturities | ' | ' |
Investments classified as available-for-sale | ' | ' |
Amortized Cost | 31,389,399 | 30,863,805 |
Gross Unrealized Gains | 3,075,835 | 1,721,890 |
Gross Unrealized Losses | -155,496 | -568,254 |
Fair Value | 34,309,738 | 32,017,441 |
Total OTTI Recognized in OCI | 6,236 | 928 |
Investments classified as held-to-maturity | ' | ' |
Amortized Cost | 400,000 | 365,000 |
Gross Unrealized Gains | 51,382 | ' |
Gross Unrealized Losses | ' | -29,324 |
Fair Value | 451,382 | 335,676 |
Trading securities | 2,900,000 | 2,800,000 |
Amortized Cost | ' | ' |
Due in one year or less | 438,145 | ' |
Due after one year through five years | 6,023,849 | ' |
Due after five years through ten years | 8,650,531 | ' |
Due after ten years | 16,276,874 | ' |
Total | 31,389,399 | ' |
Fair Value | ' | ' |
Due in one year or less | 448,757 | ' |
Due after one year through five years | 6,427,870 | ' |
Due after five years through ten years | 9,173,945 | ' |
Due after ten years | 18,259,166 | ' |
Total | 34,309,738 | ' |
Amortized Cost | ' | ' |
Due after ten years | 400,000 | ' |
Total | 400,000 | 365,000 |
Fair Value | ' | ' |
Due after ten years | 451,382 | ' |
Fair Value | 451,382 | 335,676 |
Residential mortgage-backed securities | ' | ' |
Investments classified as available-for-sale | ' | ' |
Amortized Cost | 1,398,009 | 1,435,477 |
Gross Unrealized Gains | 50,699 | 34,155 |
Gross Unrealized Losses | -13,971 | -24,564 |
Fair Value | 1,434,737 | 1,445,068 |
Total OTTI Recognized in OCI | 6,318 | 979 |
Commercial mortgage-backed securities | ' | ' |
Investments classified as available-for-sale | ' | ' |
Amortized Cost | 1,039,299 | 963,461 |
Gross Unrealized Gains | 52,339 | 26,900 |
Gross Unrealized Losses | -4,023 | -19,705 |
Fair Value | 1,087,615 | 970,656 |
Other asset-backed securities | ' | ' |
Investments classified as available-for-sale | ' | ' |
Amortized Cost | 878,416 | 926,396 |
Gross Unrealized Gains | 20,116 | 15,135 |
Gross Unrealized Losses | -32,847 | -69,548 |
Fair Value | 865,685 | 871,983 |
Total OTTI Recognized in OCI | -82 | -51 |
U.S. government-related securities | ' | ' |
Investments classified as available-for-sale | ' | ' |
Amortized Cost | 1,544,310 | 1,529,818 |
Gross Unrealized Gains | 46,206 | 32,150 |
Gross Unrealized Losses | -21,785 | -54,078 |
Fair Value | 1,568,731 | 1,507,890 |
Other government-related securities | ' | ' |
Investments classified as available-for-sale | ' | ' |
Amortized Cost | 19,179 | 49,171 |
Gross Unrealized Gains | 3,035 | 2,257 |
Gross Unrealized Losses | ' | -1 |
Fair Value | 22,214 | 51,427 |
States, municipals, and political subdivisions | ' | ' |
Investments classified as available-for-sale | ' | ' |
Amortized Cost | 1,372,418 | 1,315,457 |
Gross Unrealized Gains | 234,104 | 103,663 |
Gross Unrealized Losses | -3,673 | -8,291 |
Fair Value | 1,602,849 | 1,410,829 |
Corporate bonds | ' | ' |
Investments classified as available-for-sale | ' | ' |
Amortized Cost | 25,137,768 | 24,644,025 |
Gross Unrealized Gains | 2,669,336 | 1,507,630 |
Gross Unrealized Losses | -79,197 | -392,067 |
Fair Value | 27,727,907 | 25,759,588 |
Other | ' | ' |
Investments classified as held-to-maturity | ' | ' |
Amortized Cost | 400,000 | 365,000 |
Gross Unrealized Gains | 51,382 | ' |
Gross Unrealized Losses | ' | -29,324 |
Fair Value | 451,382 | 335,676 |
Amortized Cost | ' | ' |
Total | 400,000 | 365,000 |
Fair Value | ' | ' |
Fair Value | 451,382 | 335,676 |
Equity securities | ' | ' |
Investments classified as available-for-sale | ' | ' |
Amortized Cost | 747,284 | 654,579 |
Gross Unrealized Gains | 35,119 | 6,631 |
Gross Unrealized Losses | -14,075 | -36,362 |
Fair Value | 768,328 | 624,848 |
Investments classified as held-to-maturity | ' | ' |
Trading securities | 23,700 | 21,200 |
Short-term investments | ' | ' |
Investments classified as available-for-sale | ' | ' |
Amortized Cost | 117,511 | 81,703 |
Fair Value | 117,511 | 81,703 |
Investments classified as held-to-maturity | ' | ' |
Trading securities | $91,100 | $52,400 |
INVESTMENT_OPERATIONS_Details_1
INVESTMENT OPERATIONS (Details 3) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Investment operations | ' | ' | ' | ' |
Other-than-temporary impairments of investments recorded | $461,000 | $1,789,000 | $884,000 | $3,129,000 |
Other-than-temporary impairments of investments recorded in earnings | 1,460,000 | 4,000,000 | 3,051,000 | 8,584,000 |
Other-than-temporary impairments of investments recorded in other comprehensive income (loss) | -999,000 | -2,211,000 | -2,167,000 | -5,455,000 |
Fixed income securities | ' | ' | ' | ' |
Investment operations | ' | ' | ' | ' |
Other-than-temporary impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell | 0 | 0 | 0 | 0 |
Other-than-temporary impairments of investments recorded | 500,000 | 700,000 | 900,000 | 1,000,000 |
Credit losses on fixed maturities | ' | ' | ' | ' |
Beginning balance | 20,839,000 | 63,183,000 | 41,692,000 | 122,121,000 |
Additions for newly impaired securities | ' | 618,000 | ' | 1,615,000 |
Additions for previously impaired securities | 553,000 | 1,568,000 | 1,027,000 | 3,054,000 |
Reductions for previously impaired securities due to a change in expected cash flows | -3,407,000 | -6,049,000 | -24,734,000 | -67,470,000 |
Reductions for previously impaired securities that were sold in the current period | ' | -7,488,000 | ' | -7,488,000 |
Ending balance | 17,985,000 | 51,832,000 | 17,985,000 | 51,832,000 |
Equity securities | ' | ' | ' | ' |
Investment operations | ' | ' | ' | ' |
Other-than-temporary impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell | 0 | 0 | 0 | 0 |
Other-than-temporary impairments of investments recorded | ' | $1,100,000 | ' | $2,100,000 |
INVESTMENT_OPERATIONS_Details_2
INVESTMENT OPERATIONS (Details 4) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 |
Below investment grade | Fixed maturities | Fixed maturities | Fixed maturities | Fixed maturities | Fixed maturities | Residential mortgage-backed securities | Residential mortgage-backed securities | Commercial mortgage-backed securities | Commercial mortgage-backed securities | Other asset-backed securities | Other asset-backed securities | U.S. government-related securities | U.S. government-related securities | Other government-related securities | Other government-related securities | State, municipalities, and political subdivisions | State, municipalities, and political subdivisions | Corporate bonds | Corporate bonds | Equities | Equities | Equities | Equities | Equities | |||
Fair Value | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Less Than 12 Months | $1,589,403,000 | $9,873,111,000 | ' | ' | ' | ' | ' | ' | $145,373,000 | $333,235,000 | $37,107,000 | $429,228,000 | $121,233,000 | $175,846,000 | $344,815,000 | $891,698,000 | ' | $10,161,000 | $20,152,000 | $172,157,000 | $815,310,000 | $7,484,010,000 | $105,413,000 | ' | $105,413,000 | ' | $376,776,000 |
12 Months or More | 2,607,085,000 | 1,022,608,000 | ' | ' | ' | ' | ' | ' | 94,770,000 | 210,486,000 | 126,051,000 | 13,840,000 | 524,614,000 | 497,512,000 | 314,356,000 | 6,038,000 | ' | ' | 22,254,000 | 335,000 | 1,447,963,000 | 272,423,000 | 77,077,000 | ' | 77,077,000 | ' | 21,974,000 |
Total | 4,196,488,000 | 10,895,719,000 | ' | ' | ' | ' | ' | ' | 240,143,000 | 543,721,000 | 163,158,000 | 443,068,000 | 645,847,000 | 673,358,000 | 659,171,000 | 897,736,000 | ' | 10,161,000 | 42,406,000 | 172,492,000 | 2,263,273,000 | 7,756,433,000 | 182,490,000 | ' | 182,490,000 | ' | 398,750,000 |
Unrealized Loss | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Less Than 12 Months | -54,225,000 | -489,767,000 | ' | ' | ' | ' | ' | ' | -10,089,000 | -14,051,000 | -353,000 | -18,467,000 | -6,982,000 | -14,555,000 | -7,321,000 | -53,508,000 | ' | -1,000 | -1,641,000 | -8,113,000 | -24,098,000 | -353,211,000 | -3,741,000 | ' | -3,741,000 | ' | -27,861,000 |
12 Months or More | -115,346,000 | -114,849,000 | ' | ' | ' | ' | ' | ' | -3,882,000 | -10,513,000 | -3,670,000 | -1,238,000 | -25,865,000 | -54,993,000 | -14,464,000 | -570,000 | ' | ' | -2,032,000 | -178,000 | -55,099,000 | -38,856,000 | -10,334,000 | ' | -10,334,000 | ' | -8,501,000 |
Total | -169,571,000 | -604,616,000 | ' | ' | ' | ' | ' | ' | -13,971,000 | -24,564,000 | -4,023,000 | -19,705,000 | -32,847,000 | -69,548,000 | -21,785,000 | -54,078,000 | ' | -1,000 | -3,673,000 | -8,291,000 | -79,197,000 | -392,067,000 | -14,075,000 | ' | -14,075,000 | ' | -36,362,000 |
Percentage of underlying collateral of student-loan backed auction rate securities guaranteed by the Federal Family Education Loan Program ("FFELP"), minimum | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 97.00% | 97.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Available-for-sale securities, fair value | 35,195,577,000 | 32,723,992,000 | 1,700,000,000 | 34,309,738,000 | ' | 34,309,738,000 | ' | 32,017,441,000 | 1,434,737,000 | 1,445,068,000 | 1,087,615,000 | 970,656,000 | 865,685,000 | 871,983,000 | 1,568,731,000 | 1,507,890,000 | 22,214,000 | 51,427,000 | 1,602,849,000 | 1,410,829,000 | 27,727,907,000 | 25,759,588,000 | 768,328,000 | ' | 768,328,000 | ' | 624,848,000 |
Available-for-sale securities, amortized cost | 32,254,194,000 | 31,600,087,000 | 1,700,000,000 | 31,389,399,000 | ' | 31,389,399,000 | ' | 30,863,805,000 | 1,398,009,000 | 1,435,477,000 | 1,039,299,000 | 963,461,000 | 878,416,000 | 926,396,000 | 1,544,310,000 | 1,529,818,000 | 19,179,000 | 49,171,000 | 1,372,418,000 | 1,315,457,000 | 25,137,768,000 | 24,644,025,000 | 747,284,000 | ' | 747,284,000 | ' | 654,579,000 |
Securities in trading portfolio | ' | ' | 334,500,000 | 2,900,000,000 | ' | 2,900,000,000 | ' | 2,800,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 23,700,000 | ' | 23,700,000 | ' | 21,200,000 |
Securities Not publicly traded | ' | ' | 817,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Change in unrealized gains (losses), net of income tax | ' | ' | ' | $519,745,000 | ($849,033,000) | $1,148,357,000 | ($1,018,822,000) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $14,591,000 | ($8,392,000) | $33,004,000 | ($4,602,000) | ' |
INVESTMENT_OPERATIONS_Details_3
INVESTMENT OPERATIONS (Details 5) (Red Mountain, USD $) | 6 Months Ended | |
Jun. 30, 2014 | Dec. 31, 2013 | |
item | item | |
Red Mountain | ' | ' |
Variable Interest Entities | ' | ' |
Number of wholly owned subsidiaries that were determined to be VIEs | 1 | 1 |
Ownership through an affiliate (as a percent) | 100.00% | ' |
Risk of loss related to the VIE limited to the entity's investment | $10,000 | ' |
Payments made | $0 | ' |
MORTGAGE_LOANS_Details
MORTGAGE LOANS (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Jun. 30, 2014 |
Minimum | Maximum | |||
MORTGAGE LOANS | ' | ' | ' | ' |
Mortgage loans holdings | $5,294,729,000 | $5,493,492,000 | ' | ' |
Mortgage loans | ' | ' | ' | ' |
Period for exercise of call options or interest rate reset options | ' | ' | '3 years | '10 years |
Loan-to-value ratio with participating interest (as a percent) | ' | ' | ' | 85.00% |
Amount that would become due in 2014, if loans are called at their next call dates | 43,700,000 | ' | ' | ' |
Amount that would become due in 2015 through 2019, if loans are called at their next call dates | 1,100,000,000 | ' | ' | ' |
Amount that would become due in 2020 through 2024, if loans are called at their next call dates | 501,400,000 | ' | ' | ' |
Amount that would become due after 2024, if loans are called at their next call dates | $130,500,000 | ' | ' | ' |
MORTGAGE_LOANS_Details_2
MORTGAGE LOANS (Details 2) (Commercial mortgage loans, USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | |
item | item | ||||
Commercial mortgage loans | ' | ' | ' | ' | ' |
Mortgage loans | ' | ' | ' | ' | ' |
Mortgage loans having participation feature | $613,800,000 | ' | $613,800,000 | ' | $666,600,000 |
Income recognized on participating mortgage loans | 2,800,000 | 5,800,000 | 5,800,000 | 9,200,000 | ' |
Nonperforming mortgage loans, foreclosed properties and restructured loans to invested assets (as a percent) | 0.01% | ' | 0.01% | ' | ' |
Nonperforming mortgage loans, foreclosed properties and restructured loans pursuant to pooling and servicing agreements | 5,900,000 | ' | 5,900,000 | ' | ' |
Mortgage loans accounted for as troubled debt restructurings | 15,100,000 | ' | 15,100,000 | ' | ' |
Principle amount accounted for as troubled debt restructurings | 16,000,000 | ' | 16,000,000 | ' | ' |
Reduction in the entity's investment in mortgage loans, net of existing allowances for mortgage loan losses | 900,000 | ' | 900,000 | ' | ' |
Number of troubled debt restructuring loans remaining on the balance sheet | 0 | ' | 0 | ' | ' |
Number of loan categories | ' | ' | 2 | ' | ' |
Loans not subject to a pooling and servicing agreement which are either nonperforming or restructured | 3,700,000 | ' | 3,700,000 | ' | ' |
Loans subject to a pooling and servicing agreement which are either nonperforming or restructured | 2,200,000 | ' | 2,200,000 | ' | ' |
Number of nonperforming loans subject to a pooling and servicing agreement which have been restructured | ' | ' | 0 | ' | ' |
Change in the allowance for credit losses | ' | ' | ' | ' | ' |
Beginning balance | ' | ' | 3,130,000 | 2,875,000 | 2,875,000 |
Charge offs | ' | ' | ' | ' | -6,838,000 |
Recoveries | ' | ' | -1,075,000 | ' | -1,016,000 |
Provision | ' | ' | 2,225,000 | ' | 8,109,000 |
Ending balance | $4,280,000 | ' | $4,280,000 | ' | $3,130,000 |
MORTGAGE_LOANS_Details_3
MORTGAGE LOANS (Details 3) (Commercial mortgage loans, USD $) | 6 Months Ended |
In Thousands, unless otherwise specified | Jun. 30, 2014 |
item | |
Commercial mortgage loans | ' |
Delinquent loans | ' |
Past due period at which to cease carrying accrued interest on delinquent loans | '90 days |
Past due period at which to initiate foreclosure proceedings | '90 days |
30-59 Delinquent | $24,562 |
Greater than 90 Delinquent | 5,908 |
Total Delinquent | $30,470 |
Number of loans, 30-59 Delinquent | 9 |
Number of loans, Greater than 90 Delinquent | 4 |
Number of loans, Total Delinquent | 13 |
MORTGAGE_LOANS_Details_4
MORTGAGE LOANS (Details 4) (Commercial mortgage loans, USD $) | 6 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Dec. 31, 2013 |
Commercial mortgage loans | ' | ' |
Recorded Investment | ' | ' |
With no related allowance recorded | $5,275 | $2,208 |
With an allowance recorded | 23,754 | 21,288 |
Unpaid Principal Balance | ' | ' |
With no related allowance recorded | 5,254 | 2,208 |
With an allowance recorded | 23,738 | 21,281 |
Related Allowance | ' | ' |
With an allowance recorded | 4,280 | 3,130 |
Average Recorded Investment | ' | ' |
With no related allowance recorded | 1,758 | 2,208 |
With an allowance recorded | 3,959 | 5,322 |
Interest Income Recognized | ' | ' |
With no related allowance recorded | 64 | 31 |
With an allowance recorded | 314 | 304 |
Cash Basis Interest Income | ' | ' |
With no related allowance recorded | 43 | ' |
With an allowance recorded | $314 | $304 |
GOODWILL_Details
GOODWILL (Details) (USD $) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Dec. 31, 2013 | |
GOODWILL | ' | ' |
Decrease in goodwill balance | $1,500,000 | ' |
Aggregate goodwill balance | 103,914,000 | 105,463,000 |
Goodwill impairment | ' | $0 |
DEBT_AND_OTHER_OBLIGATIONS_Det
DEBT AND OTHER OBLIGATIONS (Details) (USD $) | 6 Months Ended | 6 Months Ended | 6 Months Ended | 6 Months Ended | 6 Months Ended | 0 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Oct. 10, 2012 | Jun. 30, 2014 | Jun. 25, 2014 | Aug. 07, 2013 | Apr. 23, 2010 | Jun. 30, 2014 | Dec. 10, 2010 | Jun. 30, 2014 | Oct. 10, 2012 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | |
Golden Gate II Captive Insurance Company | Golden Gate V Vermont Captive Insurance Company | Red Mountain | Red Mountain | Golden Gate III Vermont Captive Insurance Company (Golden Gate III) | Golden Gate III Vermont Captive Insurance Company (Golden Gate III) | Golden Gate III Vermont Captive Insurance Company (Golden Gate III) | Golden Gate III Vermont Captive Insurance Company (Golden Gate III) | Golden Gate IV Vermont Captive Insurance Company (Golden Gate IV) | Golden Gate IV Vermont Captive Insurance Company (Golden Gate IV) | MONY Life Insurance Company | Golden Gate V and Red Mountain | Repurchase Program Borrowings | Repurchase Program Borrowings | Repurchase Program Borrowings | Credit Facility | Credit Facility | Credit Facility | Credit Facility | ||||
item | Maximum | Federal Funds Rate | Prime Rate | LIBOR One-Month Rate | ||||||||||||||||||
Debt and other obligations | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Line of credit, maximum borrowing capacity | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $750,000,000 | ' | ' | ' |
Line of credit, maximum borrowing capacity to be granted upon entity's request | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,000,000,000 | ' | ' | ' |
Base of floating rate interest rate payments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 'LIBOR | 'Federal Funds rate | 'Prime rate | 'one-month LIBOR |
Interest rate added to the base rate (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1.20% | 0.50% | ' | 1.00% |
Line of credit, amount outstanding | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 345,000,000 | ' | ' | ' |
Outstanding non-recourse funding obligations of Golden Gate II Captive Insurance Company | ' | ' | ' | 575,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Term of transaction | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '20 years | ' | ' | ' | ' | ' | ' | ' |
Maximum financing capacity under transaction | ' | ' | ' | ' | 945,000,000 | ' | 945,000,000 | ' | ' | ' | ' | ' | ' | ' | 945,000,000 | ' | ' | ' | ' | ' | ' | ' |
Principal amount of note issued | ' | ' | ' | ' | ' | 400,000,000 | 275,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Non-recourse funding obligations | 579,078,000 | ' | 562,448,000 | 176,552,000 | 400,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | 2,526,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Non-recourse funding obligations held by affiliates | 398,400,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Expected payments under support agreement obligation | ' | ' | ' | 0 | 0 | ' | ' | 0 | ' | ' | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Future scheduled capital contributions | ' | ' | ' | ' | 144,300,000 | ' | ' | 122,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Year-to-date weighted-average interest rate of non-recourse funding obligations (as a percent) | ' | ' | ' | 1.12% | 6.25% | ' | ' | ' | ' | ' | ' | ' | ' | 6.63% | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding nonrecourse funding obligations repurchased at discount | 18,300,000 | 16,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gain from repurchase of outstanding nonrecourse funding obligations | 4,600,000 | 3,400,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Maximum borrowing capacity under letter of credit | ' | ' | ' | ' | ' | ' | ' | ' | 915,000,000 | 710,000,000 | 505,000,000 | 730,000,000 | 270,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Maximum amount up to which LOC will be periodically increased | ' | ' | ' | ' | ' | ' | ' | 935,000,000 | 720,000,000 | ' | 610,000,000 | 790,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding letters of credit (LOC) | ' | ' | ' | ' | ' | ' | ' | 915,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Letter of credit term | ' | ' | ' | ' | ' | ' | ' | '15 years | ' | ' | ' | '12 years | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of installments in which future scheduled capital contributions payable | ' | ' | ' | ' | ' | ' | ' | 3 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fair value of securities pledged under the repurchase program | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 476,300,000 | ' | ' | ' | ' | ' | ' |
Repurchase program borrowings | 420,490,000 | ' | 350,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 420,500,000 | ' | ' | ' | ' | ' | ' |
Average borrowing rate (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.11% | ' | ' | ' | ' | ' | ' |
Maximum balance outstanding | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 633,700,000 | 815,000,000 | ' | ' | ' | ' | ' |
Average daily balance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 510,200,000 | 496,900,000 | ' | ' | ' | ' | ' |
Average borrowing rate (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.10% | 0.11% | ' | ' | ' | ' | ' |
Outstanding balance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $350,000,000 | ' | ' | ' | ' | ' |
Term of debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '90 days | ' | ' | ' | ' |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 03, 2014 |
In Millions, unless otherwise specified | Indemnification Agreement | IRS proposed adjustment | Merger Agreement |
item | |||
Commitments and contingencies | ' | ' | ' |
Indemnification agreement with certain officers, maximum | $10 | ' | ' |
Additional income tax cash payments if IRS prevails on every issue | ' | $26.60 | ' |
Number of lawsuits filed | ' | ' | 4 |
Number of putative class action lawsuits filed | ' | ' | 3 |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES (Details 2) (USD $) | 6 Months Ended |
In Millions, unless otherwise specified | Jun. 30, 2014 |
item | |
COMMITMENTS AND CONTINGENCIES | ' |
Number of auditors from whom notice has been received | 2 |
Targeted multi-state examination with respect to claims paying practices | ' |
Commitments and contingencies | ' |
Administrative and/or examination fees which the insurance regulators could demand, minimum | 0 |
Administrative and/or examination fees which the insurance regulators could demand, maximum | 3.5 |
STOCKBASED_COMPENSATION_Detail
STOCK-BASED COMPENSATION (Details) (USD $) | 6 Months Ended |
In Millions, except Share data, unless otherwise specified | Jun. 30, 2014 |
item | |
Performance Shares | ' |
Stock-based compensation | ' |
Awards issued (in shares) | 203,295 |
Estimated fair value of performance shares awarded | $10.50 |
Period over which average return on average equity is calculated | '3 years |
Minimum percentage of Company's ROE to earn awards under performance awards | 10.50% |
Number of awards earned when ROE is below 10.5% | 0 |
Minimum percentage of Company's ROE to earn maximum awards under performance awards | 12.00% |
Restricted Stock Units | ' |
Stock-based compensation | ' |
Awards issued (in shares) | 98,700 |
Estimated fair value of performance shares awarded | $5.10 |
Vesting percentage | 50.00% |
Restricted Stock Units | Vesting after three years from grant date | ' |
Stock-based compensation | ' |
Vesting period | '3 years |
Restricted Stock Units | Vesting after four years from grant date | ' |
Stock-based compensation | ' |
Vesting period | '4 years |
Stock Appreciation Rights | ' |
Stock-based compensation | ' |
Awards issued (in shares) | 0 |
Vesting period | '5 years |
Beginning of annual installments from date of grant | '1 year |
Expiration period from date of grant | '10 years |
Weighted-Average Base Price per share | ' |
Balance at the beginning of the period (in dollars per share) | $23.08 |
SARs exercised / forfeited (in dollars per share) | $26.43 |
Balance at the end of the period (in dollars per share) | $22.91 |
No. of SARs | ' |
Balance at the beginning of the period (in shares) | 1,305,101 |
SARs exercised / forfeited (in shares) | -62,167 |
Balance at the end of the period (in shares) | 1,242,934 |
Stock Appreciation Rights | Minimum | ' |
Stock-based compensation | ' |
Number of annual installments to exercise stock appreciation rights | 3 |
Stock Appreciation Rights | Maximum | ' |
Stock-based compensation | ' |
Number of annual installments to exercise stock appreciation rights | 4 |
EMPLOYEE_BENEFIT_PLANS_Details
EMPLOYEE BENEFIT PLANS (Details) (USD $) | 3 Months Ended | 6 Months Ended | 1 Months Ended | 6 Months Ended | ||||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jul. 31, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | |
Defined Benefit Pension Plan | Defined Benefit Pension Plan | Defined Benefit Pension Plan | Retiree medical plan | |||||
Minimum | Minimum | |||||||
EMPLOYEE BENEFIT PLANS | ' | ' | ' | ' | ' | ' | ' | ' |
Service cost - benefits earned during the period | $2,453,000 | $2,708,000 | $4,906,000 | $5,416,000 | ' | ' | ' | ' |
Interest cost on projected benefit obligation | 2,993,000 | 2,553,000 | 5,986,000 | 5,106,000 | ' | ' | ' | ' |
Expected return on plan assets | -3,065,000 | -2,759,000 | -6,130,000 | -5,518,000 | ' | ' | ' | ' |
Amortization of prior service cost/(credit) | -95,000 | -95,000 | -190,000 | -190,000 | ' | ' | ' | ' |
Amortization of actuarial losses | 1,897,000 | 2,729,000 | 3,794,000 | 5,458,000 | ' | ' | ' | ' |
Total benefit cost | 4,183,000 | 5,136,000 | 8,366,000 | 10,272,000 | ' | ' | ' | ' |
EMPLOYEE BENEFIT PLANS | ' | ' | ' | ' | ' | ' | ' | ' |
Contribution made by the company to its defined benefit pension plan for the plan year 2013 | ' | ' | ' | ' | ' | 2,300,000 | ' | ' |
Contribution made by the Company to its defined benefit pension plan for the plan year 2014 | ' | ' | ' | ' | $3,100,000 | $3,100,000 | ' | ' |
Adjusted funding target percentage to be maintained | ' | ' | ' | ' | ' | ' | 80.00% | ' |
Age of eligibility for prescription drug benefit | ' | ' | ' | ' | ' | ' | ' | '65 years |
ACCUMULATED_OTHER_COMPREHENSIV2
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | |||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | |
Unrealized Gains and Losses on Investments | Unrealized Gains and Losses on Investments | Unrealized Gains and Losses on Investments | Accumulated Gain and Loss Derivatives | Accumulated Gain and Loss Derivatives | Postretirement Benefits Liability Adjustment | Postretirement Benefits Liability Adjustment | ||||||
Changes in Accumulated Other Comprehensive Income (Loss) by Component | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Beginning Balance | ' | ' | $494,066,000 | $1,736,722,000 | $1,736,722,000 | $539,003,000 | $1,813,516,000 | ' | ($1,235,000) | ($3,496,000) | ($43,702,000) | ($73,298,000) |
Other comprehensive income (loss) before reclassifications | ' | ' | 884,103,000 | ' | -1,220,168,000 | 884,120,000 | -1,250,498,000 | ' | -17,000 | 734,000 | ' | 29,596,000 |
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings | -1,061,000 | -2,402,000 | 3,450,000 | 5,435,000 | 4,591,000 | 3,450,000 | 4,591,000 | ' | ' | ' | ' | ' |
Amounts reclassified from accumulated other comprehensive income (loss) | ' | ' | -12,754,000 | ' | -27,079,000 | -15,936,000 | -28,606,000 | ' | 835,000 | 1,527,000 | 2,347,000 | ' |
Total other comprehensive income (loss) | ' | ' | 874,799,000 | ' | -1,242,656,000 | 871,634,000 | -1,274,513,000 | ' | 818,000 | 2,261,000 | 2,347,000 | 29,596,000 |
Ending Balance | 1,368,865,000 | ' | 1,368,865,000 | ' | 494,066,000 | 1,410,637,000 | 539,003,000 | ' | -417,000 | -1,235,000 | -41,355,000 | -43,702,000 |
Impact of DAC and VOBA | ' | ' | ' | ' | ' | $413,400,000 | $198,100,000 | $204,900,000 | ' | ' | ' | ' |
ACCUMULATED_OTHER_COMPREHENSIV3
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details 2) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Reclassifications out of accumulated other comprehensive income (loss) | ' | ' | ' | ' |
Benefits and settlement expenses, net of reinsurance ceded | ($747,816) | ($557,866) | ($1,476,335) | ($1,139,746) |
Realized investment gains (losses): All other investments | 80,148 | -109,978 | 152,262 | -114,123 |
Net impairment losses recognized in earnings | -1,460 | -4,000 | -3,051 | -8,584 |
Income before income tax | 162,210 | 157,013 | 287,415 | 274,640 |
Tax (expense) or benefit | -54,233 | -53,814 | -95,799 | -93,150 |
Gains and losses on derivative instruments | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | ' | ' | ' | ' |
Reclassifications out of accumulated other comprehensive income (loss) | ' | ' | ' | ' |
Benefits and settlement expenses, net of reinsurance ceded | -614 | -580 | -1,284 | -1,077 |
Income before income tax | -614 | -580 | -1,284 | -1,077 |
Tax (expense) or benefit | 215 | 203 | 449 | 377 |
Net income | -399 | -377 | -835 | -700 |
Unrealized gains and losses on available-for-sale securities | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | ' | ' | ' | ' |
Reclassifications out of accumulated other comprehensive income (loss) | ' | ' | ' | ' |
Realized investment gains (losses): All other investments | 20,198 | 21,518 | 27,568 | 33,828 |
Net impairment losses recognized in earnings | -1,460 | -4,000 | -3,051 | -8,584 |
Income before income tax | 18,738 | 17,518 | 24,517 | 25,244 |
Tax (expense) or benefit | -6,558 | -6,131 | -8,581 | 8,835 |
Net income | 12,180 | 11,387 | 15,936 | -16,409 |
Postretirement Benefits Liability Adjustment | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | ' | ' | ' | ' |
Reclassifications out of accumulated other comprehensive income (loss) | ' | ' | ' | ' |
Amortization of net actuarial gain/(loss) | -1,900 | ' | -3,800 | ' |
Amortization of prior service credit/(cost) | 95 | ' | 190 | ' |
Income before income tax | -1,805 | ' | -3,610 | ' |
Tax (expense) or benefit | 632 | ' | 1,263 | ' |
Net income | ($1,173) | ' | ($2,347) | ' |
EARNINGS_PER_SHARE_Details
EARNINGS PER SHARE (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Calculation of basic earnings per share: | ' | ' | ' | ' |
Net income | $107,977 | $103,199 | $191,616 | $181,490 |
Average shares issued and outstanding | 78,852,583 | 78,456,663 | 78,740,416 | 78,332,481 |
Issuable under various deferred compensation plans (in shares) | 1,126,570 | 948,107 | 1,054,415 | 940,333 |
Weighted shares outstanding - basic | 79,979,153 | 79,404,770 | 79,794,831 | 79,272,814 |
Per share: | ' | ' | ' | ' |
Net income - basic (in dollars per share) | $1.35 | $1.30 | $2.40 | $2.29 |
Calculation of diluted earnings per share: | ' | ' | ' | ' |
Net income | $107,977 | $103,199 | $191,616 | $181,490 |
Weighted shares outstanding - basic | 79,979,153 | 79,404,770 | 79,794,831 | 79,272,814 |
Stock appreciation rights ("SARs") (in shares) | 492,463 | 449,726 | 479,430 | 444,971 |
Issuable under various other stock-based compensation plans (in shares) | 716,327 | 874,019 | 641,411 | 843,554 |
Restricted stock units (in shares) | 258,334 | 358,723 | 245,128 | 336,703 |
Weighted shares outstanding - diluted | 81,446,277 | 81,087,238 | 81,160,800 | 80,898,042 |
Per share: | ' | ' | ' | ' |
Net income - diluted (in dollars per share) | $1.33 | $1.27 | $2.36 | $2.24 |
Antidilutive securities (in shares) | ' | ' | ' | 629,800 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Dec. 31, 2013 | |
Reconciliation of the beginning and ending amount of unrecognized tax benefits | ' | ' |
Balance, beginning of period | $105,881,000 | $75,292,000 |
Additions for tax positions of the current year | 948,000 | 7,465,000 |
Additions for tax positions of prior years | 41,246,000 | 26,386,000 |
Reductions of tax positions of prior years: | ' | ' |
Changes in judgment | -10,548,000 | -2,740,000 |
Lapses of applicable statute of limitations | ' | -522,000 |
Balance, end of period | 137,527,000 | 105,881,000 |
Possible reduction in unrecognized tax benefits due to expected closure of Appeals process | $18,500,000 | ' |
INCOME_TAXES_Details_2
INCOME TAXES (Details 2) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
INCOME TAXES | ' | ' | ' | ' |
Effective tax rate (as a percent) | 33.40% | 34.30% | 33.30% | 33.90% |
FAIR_VALUE_OF_FINANCIAL_INSTRU2
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Assets: | ' | ' |
Available-for-sale securities | $35,195,577 | $32,723,992 |
Total fixed maturity securities | 37,164,427 | 34,815,931 |
Equity securities | 792,047 | 646,027 |
Other long-term investments | 265,767 | 307,567 |
Short-term investments | 208,624 | 134,146 |
Assets related to separate accounts | ' | ' |
Variable annuity | 13,304,455 | 12,791,438 |
Variable universal life | 823,747 | 783,618 |
Liabilities: | ' | ' |
Other liabilities | 585,729 | 457,802 |
Fixed maturities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 34,309,738 | 32,017,441 |
Trading securities | 2,900,000 | 2,800,000 |
Residential mortgage-backed securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 1,434,737 | 1,445,068 |
Commercial mortgage-backed securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 1,087,615 | 970,656 |
Other asset-backed securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 865,685 | 871,983 |
State, municipalities, and political subdivisions | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 1,602,849 | 1,410,829 |
Other government-related securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 22,214 | 51,427 |
Corporate bonds | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 27,727,907 | 25,759,588 |
Level 3 | Other asset-backed securities | ' | ' |
Assets: | ' | ' |
Total investments | 567,480 | 545,808 |
Level 3 | Corporate bonds | ' | ' |
Assets: | ' | ' |
Total investments | 1,461,997 | 1,555,898 |
Measured at fair value on a recurring basis | Level 1 | ' | ' |
Assets: | ' | ' |
Total fixed maturity securities | 1,507,834 | 1,402,580 |
Equity securities | 621,868 | 523,219 |
Other long-term investments | 78,391 | 56,469 |
Short-term investments | 202,443 | 132,543 |
Total investments | 2,410,536 | 2,114,811 |
Cash | 361,088 | 466,542 |
Other assets | 11,692 | 10,979 |
Assets related to separate accounts | ' | ' |
Variable annuity | 13,304,455 | 12,791,438 |
Variable universal life | 823,747 | 783,618 |
Total assets | 16,911,518 | 16,167,388 |
Liabilities: | ' | ' |
Other liabilities | 36,608 | 30,241 |
Total liabilities | 36,608 | 30,241 |
Measured at fair value on a recurring basis | Level 1 | Fixed maturities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 1,295,667 | 1,211,248 |
Trading securities | 212,167 | 191,332 |
Measured at fair value on a recurring basis | Level 1 | U.S. government-related securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 1,295,535 | 1,211,141 |
Trading securities | 212,167 | 191,332 |
Measured at fair value on a recurring basis | Level 1 | Corporate bonds | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 132 | 107 |
Measured at fair value on a recurring basis | Level 2 | ' | ' |
Assets: | ' | ' |
Total fixed maturity securities | 33,351,766 | 31,089,724 |
Equity securities | 88,395 | 50,927 |
Other long-term investments | 64,075 | 54,965 |
Short-term investments | 6,181 | 1,603 |
Total investments | 33,510,417 | 31,197,219 |
Assets related to separate accounts | ' | ' |
Total assets | 33,510,417 | 31,197,219 |
Liabilities: | ' | ' |
Other liabilities | 64,374 | 156,931 |
Total liabilities | 64,374 | 156,931 |
Measured at fair value on a recurring basis | Level 2 | Fixed maturities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 30,917,992 | 28,706,742 |
Trading securities | 2,433,774 | 2,382,982 |
Measured at fair value on a recurring basis | Level 2 | Residential mortgage-backed securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 1,434,727 | 1,445,040 |
Trading securities | 298,684 | 310,877 |
Measured at fair value on a recurring basis | Level 2 | Commercial mortgage-backed securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 1,087,615 | 970,656 |
Trading securities | 159,899 | 158,570 |
Measured at fair value on a recurring basis | Level 2 | Other asset-backed securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 297,588 | 326,175 |
Trading securities | 95,012 | 93,278 |
Measured at fair value on a recurring basis | Level 2 | U.S. government-related securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 273,196 | 296,749 |
Trading securities | 4,948 | 4,906 |
Measured at fair value on a recurring basis | Level 2 | State, municipalities, and political subdivisions | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 1,599,174 | 1,407,154 |
Trading securities | 281,182 | 260,892 |
Measured at fair value on a recurring basis | Level 2 | Other government-related securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 22,214 | 51,427 |
Trading securities | 56,142 | 57,097 |
Measured at fair value on a recurring basis | Level 2 | Corporate bonds | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 26,203,478 | 24,209,541 |
Trading securities | 1,537,907 | 1,497,362 |
Measured at fair value on a recurring basis | Level 3 | ' | ' |
Assets: | ' | ' |
Total fixed maturity securities | 2,304,827 | 2,323,627 |
Equity securities | 81,784 | 71,881 |
Other long-term investments | 123,301 | 196,133 |
Total investments | 2,509,912 | 2,591,641 |
Assets related to separate accounts | ' | ' |
Total assets | 2,509,912 | 2,591,641 |
Liabilities: | ' | ' |
Annuity account balances | 102,456 | 107,000 |
Other liabilities | 484,747 | 270,630 |
Total liabilities | 587,203 | 377,630 |
Measured at fair value on a recurring basis | Level 3 | Fixed maturities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 2,096,079 | 2,099,451 |
Trading securities | 208,748 | 224,176 |
Measured at fair value on a recurring basis | Level 3 | Residential mortgage-backed securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 10 | 28 |
Trading securities | 842 | ' |
Measured at fair value on a recurring basis | Level 3 | Other asset-backed securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 568,097 | 545,808 |
Trading securities | 176,386 | 194,977 |
Measured at fair value on a recurring basis | Level 3 | State, municipalities, and political subdivisions | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 3,675 | 3,675 |
Measured at fair value on a recurring basis | Level 3 | Corporate bonds | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 1,524,297 | 1,549,940 |
Trading securities | 31,520 | 29,199 |
Measured at fair value on a recurring basis | Fair Values | ' | ' |
Assets: | ' | ' |
Total fixed maturity securities | 37,164,427 | 34,815,931 |
Equity securities | 792,047 | 646,027 |
Other long-term investments | 265,767 | 307,567 |
Short-term investments | 208,624 | 134,146 |
Total investments | 38,430,865 | 35,903,671 |
Cash | 361,088 | 466,542 |
Other assets | 11,692 | 10,979 |
Assets related to separate accounts | ' | ' |
Variable annuity | 13,304,455 | 12,791,438 |
Variable universal life | 823,747 | 783,618 |
Total assets | 52,931,847 | 49,956,248 |
Liabilities: | ' | ' |
Annuity account balances | 102,456 | 107,000 |
Other liabilities | 585,729 | 457,802 |
Total liabilities | 688,185 | 564,802 |
Measured at fair value on a recurring basis | Fair Values | Fixed maturities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 34,309,738 | 32,017,441 |
Trading securities | 2,854,689 | 2,798,490 |
Measured at fair value on a recurring basis | Fair Values | Residential mortgage-backed securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 1,434,737 | 1,445,068 |
Trading securities | 299,526 | 310,877 |
Measured at fair value on a recurring basis | Fair Values | Commercial mortgage-backed securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 1,087,615 | 970,656 |
Trading securities | 159,899 | 158,570 |
Measured at fair value on a recurring basis | Fair Values | Other asset-backed securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 865,685 | 871,983 |
Trading securities | 271,398 | 288,255 |
Measured at fair value on a recurring basis | Fair Values | U.S. government-related securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 1,568,731 | 1,507,890 |
Trading securities | 217,115 | 196,238 |
Measured at fair value on a recurring basis | Fair Values | State, municipalities, and political subdivisions | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 1,602,849 | 1,410,829 |
Trading securities | 281,182 | 260,892 |
Measured at fair value on a recurring basis | Fair Values | Other government-related securities | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 22,214 | 51,427 |
Trading securities | 56,142 | 57,097 |
Measured at fair value on a recurring basis | Fair Values | Corporate bonds | ' | ' |
Assets: | ' | ' |
Available-for-sale securities | 27,727,907 | 25,759,588 |
Trading securities | $1,569,427 | $1,526,561 |
FAIR_VALUE_OF_FINANCIAL_INSTRU3
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 2) (USD $) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Dec. 31, 2013 | |
Determination of fair values | ' | ' |
Number of primary sources of information used for determining fair value | 1 | ' |
Total number of primary sources of information available for determining fair value | 3 | ' |
Minimum percentage of the Company's fixed maturity securities priced by third party pricing services | 90.00% | ' |
Number of independent non-binding broker quotes obtained per security | 1 | ' |
Fair value | 265,767,000 | 307,567,000 |
Percentage of derivatives excluding embedded derivatives that were priced using exchange prices or independent broker quotations | 96.60% | ' |
Liabilities: | ' | ' |
Fair value | 585,729,000 | 457,802,000 |
Annuity account balances | ' | ' |
Annuity account balances | ' | ' |
Discount rate curve, base rate | 'LIBOR | ' |
Equity indexed annuities, discount rate for one month (as a percent) | 0.26% | ' |
Equity indexed annuities, discount rate for five years (as a percent) | 2.24% | ' |
Equity indexed annuities, discount rate for thirty years (as a percent) | 4.24% | ' |
Level 3 | ' | ' |
Annuity account balances | ' | ' |
Financial instruments that are valued using broker quotes | 263,000,000 | 216,600,000 |
Financial instruments with book value approximating fair value | 94,100,000 | 77,200,000 |
Level 3 | Annuity account balances | ' | ' |
Liabilities: | ' | ' |
Annuity account balances | 102,456,000 | 107,000,000 |
Level 3 | Annuity account balances | Actuarial cash flow model | ' | ' |
Unobservable input | ' | ' |
Asset earned rate (as a percent) | 5.37% | 5.37% |
Withdrawal rate (as a percent) | 2.20% | 2.20% |
Level 3 | Annuity account balances | Actuarial cash flow model | Minimum | ' | ' |
Unobservable input | ' | ' |
Mortality (as a percent) | 49.00% | 49.00% |
Lapse (as a percent) | 2.20% | 2.20% |
Nonperformance risk (as a percent) | 0.11% | 0.15% |
Expenses per Policy | 88 | 88 |
Return on assets (as a percent) | 1.50% | 1.50% |
Level 3 | Annuity account balances | Actuarial cash flow model | Maximum | ' | ' |
Unobservable input | ' | ' |
Mortality (as a percent) | 80.00% | 80.00% |
Lapse (as a percent) | 33.00% | 33.00% |
Nonperformance risk (as a percent) | 0.90% | 1.06% |
Expenses per Policy | 102 | 102 |
Return on assets (as a percent) | 1.85% | 1.85% |
Asset-Backed Securities | Level 2 | ' | ' |
Determination of fair values | ' | ' |
Carrying amount | 3,400,000,000 | ' |
Asset-Backed Securities | Level 3 | ' | ' |
Determination of fair values | ' | ' |
Carrying amount | 745,300,000 | ' |
Other Asset-Backed Securities | ' | ' |
Determination of fair values | ' | ' |
Percentage of underlying collateral of student-loan backed auction rate securities guaranteed by the Federal Family Education Loan Program ("FFELP"), minimum | 97.00% | 97.00% |
Other Asset-Backed Securities | Level 3 | ' | ' |
Determination of fair values | ' | ' |
Carrying amount | 567,480,000 | 545,808,000 |
Annuity account balances | ' | ' |
Financial instruments that are valued using broker quotes | 177,800,000 | 195,000,000 |
Other Asset-Backed Securities | Level 3 | Discounted cash flow | Minimum | ' | ' |
Unobservable input | ' | ' |
Liquidity premium (as a percent) | 0.15% | 1.00% |
Paydown rate (as a percent) | 9.04% | 8.57% |
Other Asset-Backed Securities | Level 3 | Discounted cash flow | Maximum | ' | ' |
Unobservable input | ' | ' |
Liquidity premium (as a percent) | 1.49% | 1.68% |
Paydown rate (as a percent) | 20.69% | 16.87% |
Other Asset-Backed Securities | Level 3 | Discounted cash flow | Weighted average | ' | ' |
Unobservable input | ' | ' |
Liquidity premium (as a percent) | 0.57% | 1.08% |
Paydown rate (as a percent) | 12.44% | 12.05% |
Other Asset-Backed Securities | Level 3 | Available-for-sale securities | ' | ' |
Determination of fair values | ' | ' |
Carrying amount | 568,100,000 | ' |
Other Asset-Backed Securities | Level 3 | Trading securities | ' | ' |
Determination of fair values | ' | ' |
Carrying amount | 177,200,000 | ' |
Corporate Bonds, U.S. Government-Related Securities, and other Government Related Securities | Level 2 | ' | ' |
Determination of fair values | ' | ' |
Carrying amount | 30,000,000,000 | ' |
Corporate Bonds, U.S. Government-Related Securities, and other Government Related Securities | Level 3 | ' | ' |
Determination of fair values | ' | ' |
Carrying amount | 1,600,000,000 | ' |
Embedded derivative - GMWB | ' | ' |
Liabilities: | ' | ' |
Fair value | 2,600,000,000 | ' |
Annuity account balances | ' | ' |
Discount rate curve, base rate | 'LIBOR | ' |
Embedded derivative - GMWB | Minimum | ' | ' |
Unobservable input | ' | ' |
Mortality (as a percent) | 49.00% | ' |
Embedded derivative - GMWB | Maximum | ' | ' |
Unobservable input | ' | ' |
Mortality (as a percent) | 80.00% | ' |
Embedded derivative - GMWB | Trading securities | ' | ' |
Determination of fair values | ' | ' |
Carrying amount | 2,900,000,000 | ' |
Embedded derivative - GMWB | Level 3 | ' | ' |
Determination of fair values | ' | ' |
Fair value | 26,579,000 | 156,287,000 |
Embedded derivative - GMWB | Level 3 | Actuarial cash flow model | Minimum | ' | ' |
Unobservable input | ' | ' |
Mortality (as a percent) | 49.00% | 49.00% |
Lapse (as a percent) | 0.00% | 0.00% |
Utilization (as a percent) | 97.00% | 97.00% |
Nonperformance risk (as a percent) | 0.11% | 0.15% |
Embedded derivative - GMWB | Level 3 | Actuarial cash flow model | Maximum | ' | ' |
Unobservable input | ' | ' |
Mortality (as a percent) | 80.00% | 80.00% |
Lapse (as a percent) | 24.00% | 24.00% |
Utilization (as a percent) | 103.00% | 103.00% |
Nonperformance risk (as a percent) | 0.90% | 1.06% |
Equity securities | Level 3 | ' | ' |
Annuity account balances | ' | ' |
Financial instruments that are valued using broker quotes | 11,300,000 | 600,000 |
Financial instruments with book value approximating fair value | 70,500,000 | 71,300,000 |
Equity securities | Level 2 and Level 3 | ' | ' |
Determination of fair values | ' | ' |
Carrying amount | 170,200,000 | ' |
Federal Home Loan Bank Stock | 66,400,000 | ' |
Corporate Bonds | Level 3 | ' | ' |
Determination of fair values | ' | ' |
Carrying amount | 1,461,997,000 | 1,555,898,000 |
Annuity account balances | ' | ' |
Financial instruments that are valued using broker quotes | 73,900,000 | 21,000,000 |
Financial instruments with book value approximating fair value | 19,900,000 | 2,200,000 |
Corporate Bonds | Level 3 | Discounted cash flow | Minimum | ' | ' |
Unobservable input | ' | ' |
Spread over treasury (as a percent) | 0.06% | 0.11% |
Corporate Bonds | Level 3 | Discounted cash flow | Maximum | ' | ' |
Unobservable input | ' | ' |
Spread over treasury (as a percent) | 6.90% | 6.75% |
Corporate Bonds | Level 3 | Discounted cash flow | Weighted average | ' | ' |
Unobservable input | ' | ' |
Spread over treasury (as a percent) | 1.88% | 2.06% |
Fixed maturity securities | Level 3 | ' | ' |
Annuity account balances | ' | ' |
Financial instruments with book value approximating fair value | 3,700,000 | 3,700,000 |
Embedded derivative - FIA | ' | ' |
Annuity account balances | ' | ' |
Discount rate curve, base rate | 'LIBOR | ' |
Embedded derivative - FIA | Minimum | ' | ' |
Unobservable input | ' | ' |
Mortality (as a percent) | 49.00% | ' |
Embedded derivative - FIA | Maximum | ' | ' |
Annuity account balances | ' | ' |
Discount rate curve, base rate | 'One Year LIBOR | ' |
Unobservable input | ' | ' |
Mortality (as a percent) | 80.00% | ' |
Embedded derivative - FIA | Level 3 | ' | ' |
Liabilities: | ' | ' |
Fair value | 69,615,000 | 25,324,000 |
Embedded derivative - FIA | Level 3 | Actuarial cash flow model | Minimum | ' | ' |
Unobservable input | ' | ' |
Mortality (as a percent) | 49.00% | 49.00% |
Lapse (as a percent) | 2.50% | 2.50% |
Nonperformance risk (as a percent) | 0.11% | 0.15% |
Expenses per Policy | 83 | 83 |
Withdrawal rate (as a percent) | 1.10% | 1.10% |
Embedded derivative - FIA | Level 3 | Actuarial cash flow model | Maximum | ' | ' |
Unobservable input | ' | ' |
Mortality (as a percent) | 80.00% | 80.00% |
Lapse (as a percent) | 40.00% | 40.00% |
Nonperformance risk (as a percent) | 0.90% | 1.06% |
Expenses per Policy | 97 | 97 |
Withdrawal rate (as a percent) | 4.50% | 4.50% |
Embedded derivative - IUL | Minimum | ' | ' |
Unobservable input | ' | ' |
Mortality (as a percent) | 37.00% | ' |
Embedded derivative - IUL | Maximum | ' | ' |
Annuity account balances | ' | ' |
Discount rate curve, base rate | 'One Year LIBOR | ' |
Unobservable input | ' | ' |
Mortality (as a percent) | 74.00% | ' |
Embedded derivative - IUL | Level 3 | ' | ' |
Liabilities: | ' | ' |
Fair value | 610,000 | ' |
Embedded derivative - IUL | Level 3 | Actuarial cash flow model | Minimum | ' | ' |
Unobservable input | ' | ' |
Mortality (as a percent) | 37.00% | ' |
Lapse (as a percent) | 0.50% | ' |
Nonperformance risk (as a percent) | 0.11% | ' |
Embedded derivative - IUL | Level 3 | Actuarial cash flow model | Maximum | ' | ' |
Unobservable input | ' | ' |
Mortality (as a percent) | 74.00% | ' |
Lapse (as a percent) | 10.00% | ' |
Nonperformance risk (as a percent) | 0.90% | ' |
FAIR_VALUE_OF_FINANCIAL_INSTRU4
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 3) (USD $) | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | ||||||||||||||||||||||||||||||||||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Annuity account balances | Annuity account balances | Annuity account balances | Annuity account balances | Other liabilities. | Other liabilities. | Other liabilities. | Other liabilities. | Total investments | Total investments | Total investments | Total investments | Fixed maturities | Fixed maturities | Fixed maturities | Fixed maturities | Fixed maturities | Fixed maturities | Fixed maturities | Fixed maturities | Fixed maturities | Fixed maturities | Fixed maturities | Fixed maturities | Residential mortgage-backed securities | Residential mortgage-backed securities | Residential mortgage-backed securities | Residential mortgage-backed securities | Residential mortgage-backed securities | Residential mortgage-backed securities | Residential mortgage-backed securities | Residential mortgage-backed securities | Other asset-backed securities | Other asset-backed securities | Other asset-backed securities | Other asset-backed securities | Other asset-backed securities | Other asset-backed securities | Other asset-backed securities | Other asset-backed securities | States, municipals, and political subdivisions | States, municipals, and political subdivisions | States, municipals, and political subdivisions | States, municipals, and political subdivisions | States, municipals, and political subdivisions | States, municipals, and political subdivisions | States, municipals, and political subdivisions | Other government-related securities | Other government-related securities | Corporate bonds | Corporate bonds | Corporate bonds | Corporate bonds | Corporate bonds | Corporate bonds | Corporate bonds | Corporate bonds | Equity securities | Equity securities | Equity securities | Equity securities | Equity securities | Other long-term investments | Other long-term investments | Other long-term investments | Other long-term investments | |||||
Available-for-sale securities | Available-for-sale securities | Available-for-sale securities | Available-for-sale securities | Trading securities | Trading securities | Trading securities | Trading securities | Available-for-sale securities | Available-for-sale securities | Available-for-sale securities | Available-for-sale securities | Trading securities | Trading securities | Trading securities | Trading securities | Available-for-sale securities | Available-for-sale securities | Available-for-sale securities | Available-for-sale securities | Trading securities | Trading securities | Trading securities | Trading securities | Available-for-sale securities | Available-for-sale securities | Available-for-sale securities | Available-for-sale securities | Available-for-sale securities | Trading securities | Trading securities | Available-for-sale securities | Available-for-sale securities | Available-for-sale securities | Available-for-sale securities | Available-for-sale securities | Available-for-sale securities | Trading securities | Trading securities | Trading securities | Trading securities | ||||||||||||||||||||||||||||||
Assets: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Beginning Balance | $2,577,118,000 | $912,595,000 | $2,591,641,000 | $960,044,000 | ' | ' | ' | ' | ' | ' | ' | ' | $2,577,118,000 | $912,595,000 | $2,591,641,000 | $960,044,000 | $2,351,817,000 | $786,060,000 | $2,323,627,000 | $859,035,000 | $2,126,207,000 | $709,565,000 | $2,099,451,000 | $788,385,000 | $225,610,000 | $76,495,000 | $224,176,000 | $70,650,000 | $17,000 | $4,000 | $28,000 | $4,000 | ' | ' | ' | ' | $548,805,000 | $560,668,000 | $545,808,000 | $596,143,000 | $194,664,000 | $71,383,000 | $194,977,000 | $70,535,000 | $4,335,000 | $4,335,000 | $3,675,000 | $3,675,000 | $3,675,000 | ' | ' | $20,003,000 | $20,011,000 | $1,573,710,000 | $124,555,000 | $1,549,940,000 | $167,892,000 | $30,946,000 | $5,112,000 | $29,199,000 | $115,000 | $81,493,000 | $71,881,000 | $69,418,000 | $69,418,000 | $69,418,000 | $143,808,000 | $57,117,000 | $196,133,000 | $31,591,000 |
Total Realized and Unrealized Gains Included in Earnings | 6,778,000 | 44,822,000 | 8,943,000 | 73,766,000 | ' | ' | ' | ' | ' | ' | ' | ' | 6,778,000 | 44,822,000 | 8,943,000 | 73,766,000 | 6,538,000 | 1,505,000 | 8,698,000 | 4,914,000 | 74,000 | 116,000 | 969,000 | 116,000 | 6,464,000 | 1,389,000 | 7,729,000 | 4,798,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 6,124,000 | 1,389,000 | 6,851,000 | 4,797,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | 74,000 | 116,000 | 969,000 | 116,000 | 340,000 | ' | 878,000 | 1,000 | ' | ' | ' | ' | ' | 240,000 | 43,317,000 | 245,000 | 68,852,000 |
Total Realized and Unrealized Gains Included in Other Comprehensive Income | 58,165,000 | 43,826,000 | 89,546,000 | 44,768,000 | ' | ' | ' | ' | ' | ' | ' | ' | 58,165,000 | 43,826,000 | 89,546,000 | 44,768,000 | 57,200,000 | 43,826,000 | 88,354,000 | 44,768,000 | 57,200,000 | 43,826,000 | 88,354,000 | 44,768,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 29,929,000 | 43,744,000 | 34,066,000 | 43,756,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,000 | 1,000 | 27,271,000 | 81,000 | 54,288,000 | 1,011,000 | ' | ' | ' | ' | 965,000 | 1,192,000 | ' | ' | ' | ' | ' | ' | ' |
Total Realized and Unrealized Losses Included in Earnings | -23,473,000 | -2,995,000 | -76,244,000 | -3,263,000 | ' | ' | ' | ' | ' | ' | ' | ' | -23,473,000 | -2,995,000 | -76,244,000 | -3,263,000 | -2,726,000 | -2,633,000 | -3,167,000 | -2,892,000 | ' | ' | ' | ' | -2,726,000 | -2,633,000 | -3,167,000 | -2,892,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -2,686,000 | -2,610,000 | -3,114,000 | -2,869,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -40,000 | -23,000 | -53,000 | -23,000 | ' | ' | ' | ' | ' | -20,747,000 | -362,000 | -73,077,000 | -371,000 |
Total Realized and Unrealized Losses Included in Other Comprehensive Income | -2,354,000 | -8,019,000 | -8,664,000 | -37,934,000 | ' | ' | ' | ' | ' | ' | ' | ' | -2,354,000 | -8,019,000 | -8,664,000 | -37,934,000 | -2,354,000 | -8,019,000 | -8,498,000 | -37,934,000 | -2,354,000 | -8,019,000 | -8,498,000 | -37,934,000 | ' | ' | ' | ' | ' | -337,000 | ' | -337,000 | ' | ' | ' | ' | -104,000 | ' | -1,233,000 | -27,548,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -3,000 | -2,250,000 | -7,682,000 | -7,265,000 | -10,046,000 | ' | ' | ' | ' | ' | -166,000 | ' | ' | ' | ' | ' | ' | ' |
Purchases | 65,746,000 | 156,698,000 | 104,684,000 | 156,698,000 | ' | ' | ' | ' | ' | ' | ' | ' | 65,746,000 | 156,698,000 | 104,684,000 | 156,698,000 | 65,746,000 | 156,698,000 | 95,133,000 | 156,698,000 | 60,845,000 | 45,786,000 | 90,232,000 | 45,786,000 | 4,901,000 | 110,912,000 | 4,901,000 | 110,912,000 | ' | 14,349,000 | ' | 14,349,000 | 842,000 | 1,582,000 | 842,000 | 1,582,000 | ' | 13,162,000 | ' | 13,162,000 | ' | 105,830,000 | ' | 105,830,000 | ' | ' | ' | ' | ' | 3,500,000 | 3,500,000 | ' | ' | 60,845,000 | 18,275,000 | 90,232,000 | 18,275,000 | 4,059,000 | ' | 4,059,000 | ' | ' | 9,551,000 | ' | ' | ' | ' | ' | ' | ' |
Sales | -102,317,000 | -54,448,000 | -141,330,000 | -108,368,000 | ' | ' | ' | ' | ' | ' | ' | ' | -102,317,000 | -54,448,000 | -141,330,000 | -108,368,000 | -101,643,000 | -54,448,000 | -140,656,000 | -108,368,000 | -74,713,000 | -44,495,000 | -112,851,000 | -95,575,000 | -26,930,000 | -9,953,000 | -27,805,000 | -12,793,000 | -7,000 | ' | -18,000 | ' | ' | ' | ' | ' | -9,534,000 | -41,377,000 | -9,794,000 | -50,386,000 | -21,883,000 | -9,953,000 | -22,695,000 | -12,776,000 | -5,000 | -5,000 | ' | ' | ' | ' | ' | ' | ' | -65,172,000 | -3,113,000 | -103,039,000 | -45,184,000 | -5,047,000 | ' | -5,110,000 | -17,000 | -674,000 | -674,000 | ' | ' | ' | ' | ' | ' | ' |
Transfers in/or out of Level 3 | -66,228,000 | 64,586,000 | -52,771,000 | 70,826,000 | ' | ' | ' | ' | ' | ' | ' | ' | -66,228,000 | 64,586,000 | -52,771,000 | 70,826,000 | -66,228,000 | 64,586,000 | -52,771,000 | 70,826,000 | -67,478,000 | 62,376,000 | -55,293,000 | 63,603,000 | 1,250,000 | 2,210,000 | 2,522,000 | 7,223,000 | ' | 46,000 | ' | 46,000 | ' | ' | ' | ' | ' | ' | ' | 1,227,000 | ' | 2,210,000 | ' | 2,210,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | -67,478,000 | 62,330,000 | -55,293,000 | 62,330,000 | 1,250,000 | ' | 2,522,000 | 5,013,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Other | -3,523,000 | 1,133,000 | -5,893,000 | 1,661,000 | ' | ' | ' | ' | ' | ' | ' | ' | -3,523,000 | 1,133,000 | -5,893,000 | 1,661,000 | -3,523,000 | 1,133,000 | -5,893,000 | 1,661,000 | -3,702,000 | 528,000 | -6,285,000 | 534,000 | 179,000 | 605,000 | 392,000 | 1,127,000 | ' | ' | ' | ' | ' | ' | ' | ' | -999,000 | 199,000 | -750,000 | 42,000 | 167,000 | 602,000 | 367,000 | 1,124,000 | ' | ' | ' | ' | ' | ' | ' | -4,000 | -9,000 | -2,703,000 | 333,000 | -5,535,000 | 501,000 | 12,000 | 3,000 | 25,000 | 3,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Ending Balance | 2,509,912,000 | 1,158,198,000 | 2,509,912,000 | 1,158,198,000 | ' | ' | ' | ' | ' | ' | ' | ' | 2,509,912,000 | 1,158,198,000 | 2,509,912,000 | 1,158,198,000 | 2,304,827,000 | 988,708,000 | 2,304,827,000 | 988,708,000 | 2,096,079,000 | 809,683,000 | 2,096,079,000 | 809,683,000 | 208,748,000 | 179,025,000 | 208,748,000 | 179,025,000 | 10,000 | 14,062,000 | 10,000 | 14,062,000 | 842,000 | 1,582,000 | 842,000 | 1,582,000 | 568,097,000 | 576,396,000 | 568,097,000 | 576,396,000 | 176,386,000 | 168,851,000 | 176,386,000 | 168,851,000 | 4,330,000 | 4,330,000 | 3,675,000 | 3,675,000 | 3,675,000 | 3,500,000 | 3,500,000 | 20,000,000 | 20,000,000 | 1,524,297,000 | 194,895,000 | 1,524,297,000 | 194,895,000 | 31,520,000 | 5,092,000 | 31,520,000 | 5,092,000 | 81,784,000 | 81,784,000 | 69,418,000 | 69,418,000 | 69,418,000 | 123,301,000 | 100,072,000 | 123,301,000 | 100,072,000 |
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date | -19,705,000 | 43,443,000 | -72,178,000 | 72,266,000 | ' | ' | ' | ' | ' | ' | ' | ' | -19,705,000 | 43,443,000 | -72,178,000 | 72,266,000 | 802,000 | 488,000 | 654,000 | 3,785,000 | ' | ' | ' | ' | 802,000 | 488,000 | 654,000 | 3,785,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 522,000 | 511,000 | 654,000 | 3,779,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 280,000 | -23,000 | ' | 6,000 | ' | ' | ' | ' | ' | -20,507,000 | 42,955,000 | -72,832,000 | 68,481,000 |
Liabilities: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Beginning Balance | 476,958,000 | 663,495,000 | 377,630,000 | 740,905,000 | 105,593,000 | 123,681,000 | 107,000,000 | 129,468,000 | 371,365,000 | 539,814,000 | 270,630,000 | 611,437,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total Realized and Unrealized Gains Included in Earnings | 13,000 | 219,947,000 | 25,000 | 304,493,000 | ' | ' | ' | ' | 13,000 | 219,947,000 | 25,000 | 304,493,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total Realized and Unrealized Losses Included in Earnings | -115,109,000 | -17,400,000 | -217,265,000 | -32,323,000 | -1,714,000 | -1,686,000 | -3,123,000 | -3,686,000 | -113,395,000 | -15,714,000 | -214,142,000 | -28,637,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Issuances | 63,000 | 65,000 | 175,000 | 201,000 | 63,000 | 65,000 | 175,000 | 201,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Settlements | 4,914,000 | 10,818,000 | 7,842,000 | 18,741,000 | 4,914,000 | 10,818,000 | 7,842,000 | 18,741,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Ending Balance | 587,203,000 | 450,195,000 | 587,203,000 | 450,195,000 | 102,456,000 | 114,614,000 | 102,456,000 | 114,614,000 | 484,747,000 | 335,581,000 | 484,747,000 | 335,581,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date | -113,382,000 | 204,233,000 | -214,117,000 | 275,856,000 | ' | ' | ' | ' | -113,382,000 | 204,233,000 | -214,117,000 | 275,856,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Transfers | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Securities transferred into Level 3 from Level 2 | 1,300,000 | 64,600,000 | 31,000,000 | 70,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Securities transferred into Level 2 from Level 3 | 67,500,000 | ' | 83,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Transferred out of Level 3 | ' | 0 | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Transfers from Level 2 to Level 1 | 0 | 0 | 0 | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Transfers from Level 1 | $0 | $0 | $0 | $0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
FAIR_VALUE_OF_FINANCIAL_INSTRU5
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 4) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Assets: | ' | ' |
Mortgage loans on real estate | $5,294,729 | $5,493,492 |
Policy loans | 1,778,379 | 1,815,744 |
Fixed maturities, held-to-maturity | 400,000 | 365,000 |
Liabilities: | ' | ' |
Stable value product account balances | 2,435,995 | 2,559,552 |
Annuity account balances | 11,071,468 | 11,125,253 |
Debt: | ' | ' |
Subordinated debt securities | 540,593 | 540,593 |
Non-recourse funding obligations | 579,078 | 562,448 |
Golden Gate V | ' | ' |
Debt: | ' | ' |
Non-recourse funding obligations | 400,000 | ' |
Carrying Amounts | ' | ' |
Assets: | ' | ' |
Mortgage loans on real estate | 5,294,729 | 5,493,492 |
Policy loans | 1,778,379 | 1,815,744 |
Fixed maturities, held-to-maturity | 400,000 | 365,000 |
Liabilities: | ' | ' |
Stable value product account balances | 2,435,995 | 2,559,552 |
Annuity account balances | 11,071,468 | 11,125,253 |
Debt: | ' | ' |
Bank borrowings | 345,000 | 485,000 |
Senior Notes | 1,100,000 | 1,100,000 |
Subordinated debt securities | 540,593 | 540,593 |
Non-recourse funding obligations | 579,078 | 562,448 |
Carrying Amounts | Golden Gate V | ' | ' |
Debt: | ' | ' |
Non-recourse funding obligations | 400,000 | 365,000 |
Fair Values | Level 3 | ' | ' |
Assets: | ' | ' |
Mortgage loans on real estate | 5,821,043 | 5,956,133 |
Policy loans | 1,778,379 | 1,815,744 |
Fixed maturities, held-to-maturity | 451,382 | 335,676 |
Liabilities: | ' | ' |
Stable value product account balances | 2,456,141 | 2,566,209 |
Annuity account balances | 10,665,435 | 10,639,637 |
Debt: | ' | ' |
Bank borrowings | 345,000 | 485,000 |
Non-recourse funding obligations | 578,392 | 470,709 |
Fair Values | Level 2 | ' | ' |
Debt: | ' | ' |
Senior Notes | 1,356,480 | 1,294,675 |
Subordinated debt securities | 552,607 | 473,503 |
Fair Values | Golden Gate V | Level 3 | ' | ' |
Debt: | ' | ' |
Non-recourse funding obligations | $427,100 | $321,500 |
DERIVATIVE_FINANCIAL_INSTRUMEN2
DERIVATIVE FINANCIAL INSTRUMENTS (Details) (USD $) | 3 Months Ended | 6 Months Ended | |||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives related to variable annuity contracts, gross | ($32,588) | ($2,487) | ($80,780) | ($13,235) | ' |
Realized investment gains (losses) - derivatives related to FIA contracts, gross | -4,710 | -60 | -1,638 | -60 | ' |
Realized investment gains (losses) - derivatives, gross | -89,926 | 143,881 | -195,276 | 151,266 | ' |
Notional Amount, Other long-term investments | 8,494,481 | ' | 8,494,481 | ' | 8,412,748 |
Fair Value, Other long-term investments | 265,767 | ' | 265,767 | ' | 307,567 |
Notional Amount, Other liabilities | 9,691,813 | ' | 9,691,813 | ' | 7,594,421 |
Fair Value, Other liabilities | 585,729 | ' | 585,729 | ' | 457,802 |
Cash flow hedges | Inflation | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Notional Amount, Other liabilities | 182,965 | ' | 182,965 | ' | 182,965 |
Fair Value, Other liabilities | 624 | ' | 624 | ' | 1,865 |
Derivatives not designated as hedging instruments | Interest rate futures | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives related to variable annuity contracts, gross | 6,548 | -7,654 | 10,798 | -24,138 | ' |
Derivatives not designated as hedging instruments | Equity futures | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives related to variable annuity contracts, gross | -7,259 | -4,036 | -9,910 | -27,261 | ' |
Realized investment gains (losses) - derivatives related to FIA contracts, gross | 605 | ' | 950 | ' | ' |
Notional Amount, Other long-term investments | 46,915 | ' | 46,915 | ' | 3,387 |
Fair Value, Other long-term investments | 379 | ' | 379 | ' | 111 |
Notional Amount, Other liabilities | 102,891 | ' | 102,891 | ' | 164,595 |
Fair Value, Other liabilities | 1,443 | ' | 1,443 | ' | 6,595 |
Derivatives not designated as hedging instruments | Currency future | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives related to variable annuity contracts, gross | -2,887 | -112 | -4,165 | 7,971 | ' |
Notional Amount, Other long-term investments | ' | ' | ' | ' | 14,338 |
Fair Value, Other long-term investments | ' | ' | ' | ' | 321 |
Notional Amount, Other liabilities | 138,916 | ' | 138,916 | ' | 118,008 |
Fair Value, Other liabilities | 2,364 | ' | 2,364 | ' | 840 |
Derivatives not designated as hedging instruments | Variance swaps | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives related to variable annuity contracts, gross | -823 | 2,214 | -2,673 | -8,219 | ' |
Notional Amount, Other liabilities | 1,100 | ' | 1,100 | ' | 1,500 |
Fair Value, Other liabilities | 3,782 | ' | 3,782 | ' | 1,744 |
Derivatives not designated as hedging instruments | Equity options | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives related to variable annuity contracts, gross | -20,949 | -8,131 | -33,290 | -36,537 | ' |
Realized investment gains (losses) - derivatives related to FIA contracts, gross | 2,984 | -19 | 3,978 | -19 | ' |
Notional Amount, Other long-term investments | 2,051,427 | ' | 2,051,427 | ' | 1,376,205 |
Fair Value, Other long-term investments | 120,586 | ' | 120,586 | ' | 78,277 |
Notional Amount, Other liabilities | 475,155 | ' | 475,155 | ' | 257,065 |
Fair Value, Other liabilities | 32,726 | ' | 32,726 | ' | 17,558 |
Derivatives not designated as hedging instruments | Interest rate swaptions | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives related to variable annuity contracts, gross | -4,998 | 1,639 | -14,401 | -2,463 | ' |
Notional Amount, Other long-term investments | 625,000 | ' | 625,000 | ' | 625,000 |
Fair Value, Other long-term investments | 15,890 | ' | 15,890 | ' | 30,291 |
Derivatives not designated as hedging instruments | Interest rate swaps | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives related to variable annuity contracts, gross | 45,169 | -89,722 | 102,537 | -106,278 | ' |
Realized investment gains (losses) - derivatives, gross | ' | 1,909 | ' | 2,912 | ' |
Notional Amount, Other long-term investments | 295,000 | ' | 295,000 | ' | 200,000 |
Fair Value, Other long-term investments | 3,681 | ' | 3,681 | ' | 1,961 |
Notional Amount, Other liabilities | 1,180,000 | ' | 1,180,000 | ' | 1,230,000 |
Fair Value, Other liabilities | 59,968 | ' | 59,968 | ' | 153,322 |
Positions held | 0 | ' | 0 | ' | ' |
Derivatives not designated as hedging instruments | Embedded derivative - GMWB | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives related to variable annuity contracts, gross | -47,389 | 103,315 | -129,676 | 183,690 | ' |
Notional Amount, Other long-term investments | 5,161,813 | ' | 5,161,813 | ' | 6,113,017 |
Fair Value, Other long-term investments | 122,075 | ' | 122,075 | ' | 194,616 |
Notional Amount, Other liabilities | 4,418,599 | ' | 4,418,599 | ' | 2,494,142 |
Fair Value, Other liabilities | 95,523 | ' | 95,523 | ' | 38,388 |
Derivatives not designated as hedging instruments | Embedded derivative - IUL | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives, gross | -285 | ' | -285 | ' | ' |
Notional Amount, Other liabilities | 1,057 | ' | 1,057 | ' | ' |
Fair Value, Other liabilities | 610 | ' | 610 | ' | ' |
Derivatives not designated as hedging instruments | Embedded derivative - Modco reinsurance treaties | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives, gross | -52,202 | 144,998 | -112,371 | 161,773 | ' |
Notional Amount, Other long-term investments | 30,105 | ' | 30,105 | ' | 80,376 |
Fair Value, Other long-term investments | 1,226 | ' | 1,226 | ' | 1,517 |
Notional Amount, Other liabilities | 2,591,360 | ' | 2,591,360 | ' | 2,578,590 |
Fair Value, Other liabilities | 318,999 | ' | 318,999 | ' | 206,918 |
Derivatives not designated as hedging instruments | Interest rate futures | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Notional Amount, Other long-term investments | 283,629 | ' | 283,629 | ' | ' |
Fair Value, Other long-term investments | 1,510 | ' | 1,510 | ' | ' |
Notional Amount, Other liabilities | 71,714 | ' | 71,714 | ' | 322,902 |
Fair Value, Other liabilities | 37 | ' | 37 | ' | 5,221 |
Derivatives not designated as hedging instruments | Embedded derivative - FIA | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives related to FIA contracts, gross | -8,307 | -41 | -6,574 | -41 | ' |
Notional Amount, Other liabilities | 527,698 | ' | 527,698 | ' | 244,424 |
Fair Value, Other liabilities | 69,615 | ' | 69,615 | ' | 25,324 |
Derivatives not designated as hedging instruments | Volatility futures - FIA | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives related to FIA contracts, gross | 8 | ' | 8 | ' | ' |
Positions held | 0 | ' | 0 | ' | ' |
Derivatives not designated as hedging instruments | Interest rate caps | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Positions held | 0 | ' | 0 | ' | ' |
Derivatives not designated as hedging instruments | Other. | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives, gross | -141 | -479 | -202 | -124 | ' |
Notional Amount, Other long-term investments | 592 | ' | 592 | ' | 425 |
Fair Value, Other long-term investments | 420 | ' | 420 | ' | 473 |
Notional Amount, Other liabilities | 358 | ' | 358 | ' | 230 |
Fair Value, Other liabilities | $38 | ' | $38 | ' | $27 |
Derivatives not designated as hedging instruments | Volatility options | ' | ' | ' | ' | ' |
Notional amount and fair value of the entity's derivative financial instruments | ' | ' | ' | ' | ' |
Positions held | 0 | ' | 0 | ' | ' |
DERIVATIVE_FINANCIAL_INSTRUMEN3
DERIVATIVE FINANCIAL INSTRUMENTS (Details 2) (Cash flow hedges, USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Gain (Loss) on Derivatives in Cash Flow Relationship | ' | ' | ' | ' |
Amount of Gains (Losses) Deferred in Accumulated Other Comprehensive Income (Loss) on Derivatives (Effective Portion) | ($929,000) | ($4,589,000) | ($26,000) | ($180,000) |
Amount and Location of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss) (Effective Portion) | -614,000 | -580,000 | -1,284,000 | -1,077,000 |
Amount and Location of (Losses) Recognized in Income (Loss) on Derivatives (Ineffective Portion) | -165,000 | -558,000 | -126,000 | -190,000 |
Expected reclassification out of accumulated other comprehensive income (loss) into earnings during the next twelve months | ' | ' | 500,000 | ' |
Inflation | ' | ' | ' | ' |
Gain (Loss) on Derivatives in Cash Flow Relationship | ' | ' | ' | ' |
Amount of Gains (Losses) Deferred in Accumulated Other Comprehensive Income (Loss) on Derivatives (Effective Portion) | -929,000 | -4,589,000 | -26,000 | -180,000 |
Amount and Location of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss) (Effective Portion) | -614,000 | -580,000 | -1,284,000 | -1,077,000 |
Amount and Location of (Losses) Recognized in Income (Loss) on Derivatives (Ineffective Portion) | ($165,000) | ($558,000) | ($126,000) | ($190,000) |
DERIVATIVE_FINANCIAL_INSTRUMEN4
DERIVATIVE FINANCIAL INSTRUMENTS (Details 3) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Realized investment gains (losses) - all other investments | ' | ' | ' | ' |
Modco trading portfolio | $60,989 | ($126,694) | $127,292 | ($142,022) |
OFFSETTING_OF_ASSETS_AND_LIABI2
OFFSETTING OF ASSETS AND LIABILITIES (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Total derivatives, subject to a master netting arrangement or similar arrangement | ' | ' |
Gross Amounts of Recognized Assets | $265,391 | $307,116 |
Net Amounts of Assets Presented in the Statement of Financial Position | 265,391 | 307,116 |
Gross Amounts Not Offset in the Statement of Financial Position, Financial Instruments | 54,682 | 52,487 |
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Received | 23,039 | 10,700 |
Total derivatives, subject to a master netting arrangement or similar arrangement, Net Amount | 187,670 | 243,929 |
Total derivatives, not subject to a master netting arrangement or similar arrangement | ' | ' |
Total derivatives, not subject to a master netting arrangement or similar arrangement | 376 | 451 |
Total derivatives | ' | ' |
Gross Amounts of Recognized Assets | 265,767 | 307,567 |
Net Amounts of Assets Presented in the Statement of Financial Position | 265,767 | 307,567 |
Gross Amounts Not Offset in the Statement of Financial Position, Financial Instruments | 54,682 | 52,487 |
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Received | 23,039 | 10,700 |
Total derivatives, Net Amount | 188,046 | 244,380 |
Free-Standing derivatives | ' | ' |
Total derivatives, subject to a master netting arrangement or similar arrangement | ' | ' |
Gross Amounts of Recognized Assets | 142,090 | 110,983 |
Net Amounts of Assets Presented in the Statement of Financial Position | 142,090 | 110,983 |
Gross Amounts Not Offset in the Statement of Financial Position, Financial Instruments | 54,682 | 52,487 |
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Received | 23,039 | 10,700 |
Total derivatives, subject to a master netting arrangement or similar arrangement, Net Amount | 64,369 | 47,796 |
Embedded derivative - Modco reinsurance treaties | ' | ' |
Total derivatives, subject to a master netting arrangement or similar arrangement | ' | ' |
Gross Amounts of Recognized Assets | 1,226 | 1,517 |
Net Amounts of Assets Presented in the Statement of Financial Position | 1,226 | 1,517 |
Total derivatives, subject to a master netting arrangement or similar arrangement, Net Amount | 1,226 | 1,517 |
Embedded derivative - GMWB | ' | ' |
Total derivatives, subject to a master netting arrangement or similar arrangement | ' | ' |
Gross Amounts of Recognized Assets | 122,075 | 194,616 |
Net Amounts of Assets Presented in the Statement of Financial Position | 122,075 | 194,616 |
Total derivatives, subject to a master netting arrangement or similar arrangement, Net Amount | $122,075 | $194,616 |
OFFSETTING_OF_ASSETS_AND_LIABI3
OFFSETTING OF ASSETS AND LIABILITIES (Details 2) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Total derivatives, subject to a master netting arrangement or similar arrangement | ' | ' |
Gross Amounts of Recognized Liabilities | $585,729 | $457,802 |
Net Amounts of Liabilities Presented in the Statement of Financial Position | 585,729 | 457,802 |
Gross Amounts Not Offset in the Statement of Financial Position, Financial Instruments | 54,682 | 52,487 |
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid | 46,113 | 98,359 |
Total derivatives, subject to a master netting arrangement or similar arrangement, Net Amount | 484,934 | 306,956 |
Total derivatives | ' | ' |
Gross Amounts of Recognized Liabilities | 585,729 | 457,802 |
Net Amounts of Liabilities Presented in the Statement of Financial Position | 585,729 | 457,802 |
Gross Amounts Not Offset in the Statement of Financial Position, Financial Instruments | 54,682 | 52,487 |
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid | 46,113 | 98,359 |
Total derivatives, Net Amount | 484,934 | 306,956 |
Repurchase agreements | ' | ' |
Repurchase agreements | 420,490 | 350,000 |
Total Liabilities | ' | ' |
Gross Amounts of Recognized Liabilities | 1,006,219 | 807,802 |
Net Amounts of Liabilities Presented in the Statement of Financial Position | 1,006,219 | 807,802 |
Gross Amounts Not Offset in the Statement of Financial Position, Financial Instruments | 54,682 | 52,487 |
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid | 46,113 | 98,359 |
Net Amount | 905,424 | 656,956 |
Free-Standing derivatives | ' | ' |
Total derivatives, subject to a master netting arrangement or similar arrangement | ' | ' |
Gross Amounts of Recognized Liabilities | 100,982 | 187,172 |
Net Amounts of Liabilities Presented in the Statement of Financial Position | 100,982 | 187,172 |
Gross Amounts Not Offset in the Statement of Financial Position, Financial Instruments | 54,682 | 52,487 |
Gross Amounts Not Offset in the Statement of Financial Position, Cash Collateral Paid | 46,113 | 98,359 |
Total derivatives, subject to a master netting arrangement or similar arrangement, Net Amount | 187 | 36,326 |
Embedded derivative - Modco reinsurance treaties | ' | ' |
Total derivatives, subject to a master netting arrangement or similar arrangement | ' | ' |
Gross Amounts of Recognized Liabilities | 318,999 | 206,918 |
Net Amounts of Liabilities Presented in the Statement of Financial Position | 318,999 | 206,918 |
Total derivatives, subject to a master netting arrangement or similar arrangement, Net Amount | 318,999 | 206,918 |
Embedded derivative - GMWB | ' | ' |
Total derivatives, subject to a master netting arrangement or similar arrangement | ' | ' |
Gross Amounts of Recognized Liabilities | 95,523 | 38,388 |
Net Amounts of Liabilities Presented in the Statement of Financial Position | 95,523 | 38,388 |
Total derivatives, subject to a master netting arrangement or similar arrangement, Net Amount | 95,523 | 38,388 |
Embedded derivative - FIA | ' | ' |
Total derivatives, subject to a master netting arrangement or similar arrangement | ' | ' |
Gross Amounts of Recognized Liabilities | 69,615 | 25,324 |
Net Amounts of Liabilities Presented in the Statement of Financial Position | 69,615 | 25,324 |
Total derivatives, subject to a master netting arrangement or similar arrangement, Net Amount | 69,615 | 25,324 |
Embedded derivative - IUL | ' | ' |
Total derivatives, subject to a master netting arrangement or similar arrangement | ' | ' |
Gross Amounts of Recognized Liabilities | 610 | ' |
Net Amounts of Liabilities Presented in the Statement of Financial Position | 610 | ' |
Total derivatives, subject to a master netting arrangement or similar arrangement, Net Amount | $610 | ' |
OPERATING_SEGMENTS_Details
OPERATING SEGMENTS (Details) (USD $) | 3 Months Ended | 6 Months Ended | |||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 |
Summarized financial information for the company's segments | ' | ' | ' | ' | ' |
Revenues | $1,155,343 | $956,356 | $2,245,901 | $1,889,170 | ' |
Segment Operating Income (Loss) | 159,755 | 117,855 | 304,790 | 224,930 | ' |
Realized investment (losses) gains - investments | 74,920 | -119,311 | 143,453 | -129,067 | ' |
Realized investment (losses) gains - derivatives | -72,465 | 158,469 | -160,828 | 178,777 | ' |
Income tax expense | -54,233 | -53,814 | -95,799 | -93,150 | ' |
Net income | 107,977 | 103,199 | 191,616 | 181,490 | ' |
Realized gain (losses) on investments | ' | ' | ' | ' | ' |
Investment gains (losses) - gross | 78,688 | -113,978 | 149,211 | -122,707 | ' |
Less: amortization related to DAC/VOBA and benefits and settlement expenses | 3,768 | 5,333 | 5,758 | 6,360 | ' |
Realized investment gains (losses) - investments | 74,920 | -119,311 | 143,453 | -129,067 | ' |
Realized gain (losses) on derivatives | ' | ' | ' | ' | ' |
Realized investment gains (losses) - derivatives, gross | -89,926 | 143,881 | -195,276 | 151,266 | ' |
Less: VA GMWB economic cost | -17,461 | -14,588 | -34,448 | -27,511 | ' |
Realized investment gains (losses) - derivatives | -72,465 | 158,469 | -160,828 | 178,777 | ' |
Other-than-temporary impairments | 1,460 | 4,000 | 3,051 | 8,584 | ' |
Operating Segment Assets | ' | ' | ' | ' | ' |
Investments and other assets | 67,780,775 | ' | 67,780,775 | ' | 65,080,203 |
Deferred policy acquisition costs and value of business acquired | 3,273,275 | ' | 3,273,275 | ' | 3,570,215 |
Goodwill | 103,914 | ' | 103,914 | ' | 105,463 |
Total assets | 71,157,964 | ' | 71,157,964 | ' | 68,755,881 |
Life Marketing | ' | ' | ' | ' | ' |
Summarized financial information for the company's segments | ' | ' | ' | ' | ' |
Revenues | 407,032 | 347,021 | 791,798 | 714,647 | ' |
Segment Operating Income (Loss) | 26,349 | 24,673 | 49,834 | 48,380 | ' |
Acquisitions | ' | ' | ' | ' | ' |
Summarized financial information for the company's segments | ' | ' | ' | ' | ' |
Revenues | 438,244 | 261,693 | 865,192 | 512,180 | ' |
Segment Operating Income (Loss) | 64,882 | 29,435 | 125,878 | 63,812 | ' |
Annuities | ' | ' | ' | ' | ' |
Summarized financial information for the company's segments | ' | ' | ' | ' | ' |
Revenues | 155,417 | 186,025 | 300,074 | 350,954 | ' |
Segment Operating Income (Loss) | 55,258 | 36,382 | 106,901 | 79,780 | ' |
Stable Value Products | ' | ' | ' | ' | ' |
Summarized financial information for the company's segments | ' | ' | ' | ' | ' |
Revenues | 27,109 | 34,468 | 54,928 | 66,388 | ' |
Segment Operating Income (Loss) | 17,287 | 22,464 | 34,684 | 40,308 | ' |
Asset Protection | ' | ' | ' | ' | ' |
Summarized financial information for the company's segments | ' | ' | ' | ' | ' |
Revenues | 70,870 | 71,813 | 137,253 | 139,384 | ' |
Segment Operating Income (Loss) | 8,534 | 7,384 | 14,903 | 13,465 | ' |
Corporate and Other | ' | ' | ' | ' | ' |
Summarized financial information for the company's segments | ' | ' | ' | ' | ' |
Revenues | 56,671 | 55,336 | 96,656 | 105,617 | ' |
Segment Operating Income (Loss) | -12,555 | -2,483 | -27,410 | -20,815 | ' |
Operating | Life Marketing | ' | ' | ' | ' | ' |
Operating Segment Assets | ' | ' | ' | ' | ' |
Investments and other assets | 13,575,287 | ' | 13,575,287 | ' | 13,135,914 |
Deferred policy acquisition costs and value of business acquired | 2,000,329 | ' | 2,000,329 | ' | 2,071,470 |
Goodwill | 10,192 | ' | 10,192 | ' | 10,192 |
Total assets | 15,585,808 | ' | 15,585,808 | ' | 15,217,576 |
Operating | Acquisitions | ' | ' | ' | ' | ' |
Operating Segment Assets | ' | ' | ' | ' | ' |
Investments and other assets | 20,179,754 | ' | 20,179,754 | ' | 20,186,839 |
Deferred policy acquisition costs and value of business acquired | 605,799 | ' | 605,799 | ' | 799,255 |
Goodwill | 30,968 | ' | 30,968 | ' | 32,517 |
Total assets | 20,816,521 | ' | 20,816,521 | ' | 21,018,611 |
Operating | Annuities | ' | ' | ' | ' | ' |
Operating Segment Assets | ' | ' | ' | ' | ' |
Investments and other assets | 20,713,485 | ' | 20,713,485 | ' | 19,974,246 |
Deferred policy acquisition costs and value of business acquired | 623,461 | ' | 623,461 | ' | 647,485 |
Total assets | 21,336,946 | ' | 21,336,946 | ' | 20,621,731 |
Operating | Stable Value Products | ' | ' | ' | ' | ' |
Operating Segment Assets | ' | ' | ' | ' | ' |
Investments and other assets | 2,435,193 | ' | 2,435,193 | ' | 2,558,551 |
Deferred policy acquisition costs and value of business acquired | 802 | ' | 802 | ' | 1,001 |
Total assets | 2,435,995 | ' | 2,435,995 | ' | 2,559,552 |
Operating | Asset Protection | ' | ' | ' | ' | ' |
Operating Segment Assets | ' | ' | ' | ' | ' |
Investments and other assets | 894,935 | ' | 894,935 | ' | 852,273 |
Deferred policy acquisition costs and value of business acquired | 42,397 | ' | 42,397 | ' | 50,358 |
Goodwill | 62,671 | ' | 62,671 | ' | 62,671 |
Total assets | 1,000,003 | ' | 1,000,003 | ' | 965,302 |
Operating | Corporate and Other | ' | ' | ' | ' | ' |
Operating Segment Assets | ' | ' | ' | ' | ' |
Investments and other assets | 9,966,477 | ' | 9,966,477 | ' | 8,355,618 |
Deferred policy acquisition costs and value of business acquired | 487 | ' | 487 | ' | 646 |
Goodwill | 83 | ' | 83 | ' | 83 |
Total assets | 9,967,047 | ' | 9,967,047 | ' | 8,356,347 |
Adjustments | ' | ' | ' | ' | ' |
Operating Segment Assets | ' | ' | ' | ' | ' |
Investments and other assets | 15,644 | ' | 15,644 | ' | 16,762 |
Total assets | $15,644 | ' | $15,644 | ' | $16,762 |