QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
Emerging growth company |
Page | |
June 30, 2019 | December 31, 2018 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Investments: | |||||||
Fixed maturity securities, available for sale, at fair value (amortized cost: 2019 - $47,477,956; 2018 - $46,131,190) | $ | $ | |||||
Mortgage loans on real estate | |||||||
Derivative instruments | |||||||
Other investments | |||||||
Total investments | |||||||
Cash and cash equivalents | |||||||
Coinsurance deposits | |||||||
Accrued investment income | |||||||
Deferred policy acquisition costs | |||||||
Deferred sales inducements | |||||||
Deferred income taxes | |||||||
Income taxes recoverable | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
Liabilities and Stockholders' Equity | |||||||
Liabilities: | |||||||
Policy benefit reserves | $ | $ | |||||
Other policy funds and contract claims | |||||||
Notes payable | |||||||
Subordinated debentures | |||||||
Amounts due under repurchase agreements | |||||||
Other liabilities | |||||||
Total liabilities | |||||||
Stockholders' equity: | |||||||
Preferred stock, par value $1 per share, 2,000,000 shares authorized, 2019 and 2018 - no shares issued and outstanding | |||||||
Common stock, par value $1 per share, 200,000,000 shares authorized; issued and outstanding: 2019 - 90,936,324 shares (excluding 1,443,973 treasury shares); 2018 - 90,369,229 shares (excluding 1,535,960 treasury shares) | |||||||
Additional paid-in capital | |||||||
Accumulated other comprehensive income (loss) | ( | ) | |||||
Retained earnings | |||||||
Total stockholders' equity | |||||||
Total liabilities and stockholders' equity | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Premiums and other considerations | $ | $ | $ | $ | |||||||||||
Annuity product charges | |||||||||||||||
Net investment income | |||||||||||||||
Change in fair value of derivatives | ( | ) | |||||||||||||
Net realized losses on investments, excluding other than temporary impairment ("OTTI") losses | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
OTTI losses on investments: | |||||||||||||||
Total OTTI losses | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Portion of OTTI losses recognized from other comprehensive income | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net OTTI losses recognized in operations | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total revenues | |||||||||||||||
Benefits and expenses: | |||||||||||||||
Insurance policy benefits and change in future policy benefits | |||||||||||||||
Interest sensitive and index product benefits | |||||||||||||||
Amortization of deferred sales inducements | |||||||||||||||
Change in fair value of embedded derivatives | ( | ) | ( | ) | |||||||||||
Interest expense on notes payable | |||||||||||||||
Interest expense on subordinated debentures | |||||||||||||||
Amortization of deferred policy acquisition costs | |||||||||||||||
Other operating costs and expenses | |||||||||||||||
Total benefits and expenses | |||||||||||||||
Income (loss) before income taxes | ( | ) | |||||||||||||
Income tax expense (benefit) | ( | ) | |||||||||||||
Net income (loss) | $ | $ | $ | ( | ) | $ | |||||||||
Earnings (loss) per common share | $ | $ | $ | ( | ) | $ | |||||||||
Earnings (loss) per common share - assuming dilution | $ | $ | $ | ( | ) | $ | |||||||||
Weighted average common shares outstanding (in thousands): | |||||||||||||||
Earnings (loss) per common share | |||||||||||||||
Earnings (loss) per common share - assuming dilution |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income (loss) | $ | $ | $ | ( | ) | $ | |||||||||
Other comprehensive income (loss): | |||||||||||||||
Change in net unrealized investment gains/losses (1) | ( | ) | ( | ) | |||||||||||
Noncredit component of OTTI losses (1) | |||||||||||||||
Reclassification of unrealized investment gains/losses to net income (loss) (1) | ( | ) | ( | ) | |||||||||||
Other comprehensive income (loss) before income tax | ( | ) | ( | ) | |||||||||||
Income tax effect related to other comprehensive income (loss) | ( | ) | ( | ) | |||||||||||
Other comprehensive income (loss) | ( | ) | ( | ) | |||||||||||
Comprehensive income (loss) | $ | $ | ( | ) | $ | $ | ( | ) |
(1) | Net of related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs. |
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Stockholders' Equity | |||||||||||||||
For the six months ended June 30, 2019 | |||||||||||||||||||
Balance at December 31, 2018 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Net loss for period | — | — | — | ( | ) | ( | ) | ||||||||||||
Other comprehensive income | — | — | — | ||||||||||||||||
Share-based compensation | — | — | — | ||||||||||||||||
Issuance of 567,095 shares of common stock under compensation plans | ( | ) | — | — | |||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | $ | $ | ||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Retained Earnings | Total Stockholders' Equity | |||||||||||||||
For the three months ended June 30, 2019 | |||||||||||||||||||
Balance at March 31, 2019 | $ | $ | $ | $ | $ | ||||||||||||||
Net income for period | — | — | — | ||||||||||||||||
Other comprehensive income | — | — | — | ||||||||||||||||
Share-based compensation | — | — | — | ||||||||||||||||
Issuance of 152,201 shares of common stock under compensation plans | ( | ) | — | — | ( | ) | |||||||||||||
Balance at June 30, 2019 | $ | $ | $ | $ | $ | ||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Retained Earnings | Total Stockholders' Equity | |||||||||||||||
For the six months ended June 30, 2018 | |||||||||||||||||||
Balance at December 31, 2017 | $ | $ | $ | $ | $ | ||||||||||||||
Net income for period | — | — | — | ||||||||||||||||
Other comprehensive loss | — | — | ( | ) | — | ( | ) | ||||||||||||
Implementation of accounting standard related to the reclassification of certain tax effects | — | — | ( | ) | — | ||||||||||||||
Share-based compensation | — | — | — | ||||||||||||||||
Issuance of 902,259 shares of common stock under compensation plans | — | — | |||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | $ | $ | ||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Retained Earnings | Total Stockholders' Equity | |||||||||||||||
For the three months ended June 30, 2018 | |||||||||||||||||||
Balance at March 31, 2018 | $ | $ | $ | $ | $ | ||||||||||||||
Net income for period | — | — | — | ||||||||||||||||
Other comprehensive loss | — | — | ( | ) | — | ( | ) | ||||||||||||
Share-based compensation | — | — | — | ||||||||||||||||
Issuance of 249,523 shares of common stock under compensation plans | — | — | |||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | $ | $ |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Operating activities | |||||||
Net income (loss) | $ | ( | ) | $ | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
Interest sensitive and index product benefits | |||||||
Amortization of deferred sales inducements | |||||||
Annuity product charges | ( | ) | ( | ) | |||
Change in fair value of embedded derivatives | ( | ) | |||||
Change in traditional life and accident and health insurance reserves | ( | ) | |||||
Policy acquisition costs deferred | ( | ) | ( | ) | |||
Amortization of deferred policy acquisition costs | |||||||
Provision for depreciation and other amortization | |||||||
Amortization of discounts and premiums on investments | |||||||
Realized gains (losses) on investments and net OTTI losses recognized in operations | |||||||
Distributions from equity method investments | |||||||
Change in fair value of derivatives | ( | ) | |||||
Deferred income taxes | ( | ) | ( | ) | |||
Share-based compensation | |||||||
Change in accrued investment income | ( | ) | ( | ) | |||
Change in income taxes recoverable/payable | ( | ) | ( | ) | |||
Change in other assets | ( | ) | ( | ) | |||
Change in other policy funds and contract claims | ( | ) | ( | ) | |||
Change in collateral held for derivatives | ( | ) | |||||
Change in collateral held for securities lending | |||||||
Change in other liabilities | ( | ) | |||||
Other | ( | ) | ( | ) | |||
Net cash provided by (used in) operating activities | ( | ) | |||||
Investing activities | |||||||
Sales, maturities, or repayments of investments: | |||||||
Fixed maturity securities, available for sale | |||||||
Mortgage loans on real estate | |||||||
Derivative instruments | |||||||
Other investments | |||||||
Acquisitions of investments: | |||||||
Fixed maturity securities, available for sale | ( | ) | ( | ) | |||
Mortgage loans on real estate | ( | ) | ( | ) | |||
Derivative instruments | ( | ) | ( | ) | |||
Other investments | ( | ) | ( | ) | |||
Purchases of property, furniture and equipment | ( | ) | ( | ) | |||
Net cash used in investing activities | ( | ) | ( | ) |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Financing activities | |||||||
Receipts credited to annuity and single premium universal life policyholder account balances | $ | $ | |||||
Coinsurance deposits | ( | ) | |||||
Return of annuity policyholder account balances | ( | ) | ( | ) | |||
Repayment of amounts due under repurchase agreements | ( | ) | |||||
Proceeds from issuance of common stock | |||||||
Change in checks in excess of cash balance | ( | ) | ( | ) | |||
Net cash provided by financing activities | |||||||
Increase (decrease) in cash and cash equivalents | ( | ) | |||||
Cash and cash equivalents at beginning of period | |||||||
Cash and cash equivalents at end of period | $ | $ | |||||
Supplemental disclosures of cash flow information | |||||||
Cash paid during period for: | |||||||
Interest expense | $ | $ | |||||
Income taxes | |||||||
Non-cash operating activity: | |||||||
Deferral of sales inducements |
June 30, 2019 | December 31, 2018 | ||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Assets | |||||||||||||||
Fixed maturity securities, available for sale | $ | $ | $ | $ | |||||||||||
Mortgage loans on real estate | |||||||||||||||
Derivative instruments | |||||||||||||||
Other investments | |||||||||||||||
Cash and cash equivalents | |||||||||||||||
Coinsurance deposits | |||||||||||||||
Interest rate caps | |||||||||||||||
Interest rate swap | |||||||||||||||
Counterparty collateral | |||||||||||||||
Liabilities | |||||||||||||||
Policy benefit reserves | |||||||||||||||
Single premium immediate annuity (SPIA) benefit reserves | |||||||||||||||
Notes payable | |||||||||||||||
Subordinated debentures | |||||||||||||||
Amounts due under repurchase agreements | |||||||||||||||
Interest rate swap |
Level 1— | Quoted prices are available in active markets for identical financial instruments as of the reporting date. We do not adjust the quoted price for these financial instruments, even in situations where we hold a large position and a sale could reasonably impact the quoted price. |
Level 2— | Quoted prices in active markets for similar financial instruments, quoted prices for identical or similar financial instruments in markets that are not active; and models and other valuation methodologies using inputs other than quoted prices that are observable. |
Level 3— | Models and other valuation methodologies using significant inputs that are unobservable for financial instruments and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in Level 3 are securities for which no market activity or data exists and for which we used discounted expected future cash flows with our own assumptions about what a market participant would use in determining fair value. |
Total Fair Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
(Dollars in thousands) | |||||||||||||||
June 30, 2019 | |||||||||||||||
Assets | |||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||
United States Government full faith and credit | $ | $ | $ | $ | |||||||||||
United States Government sponsored agencies | |||||||||||||||
United States municipalities, states and territories | |||||||||||||||
Foreign government obligations | |||||||||||||||
Corporate securities | |||||||||||||||
Residential mortgage backed securities | |||||||||||||||
Commercial mortgage backed securities | |||||||||||||||
Other asset backed securities | |||||||||||||||
Other investments: equity securities, available for sale | |||||||||||||||
Derivative instruments | |||||||||||||||
Cash and cash equivalents | |||||||||||||||
Interest rate caps | |||||||||||||||
$ | $ | $ | $ | ||||||||||||
Liabilities | |||||||||||||||
Interest rate swap | $ | $ | $ | $ | |||||||||||
Fixed index annuities - embedded derivatives | |||||||||||||||
$ | $ | $ | $ | ||||||||||||
December 31, 2018 | |||||||||||||||
Assets | |||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||
United States Government full faith and credit | $ | $ | $ | $ | |||||||||||
United States Government sponsored agencies | |||||||||||||||
United States municipalities, states and territories | |||||||||||||||
Foreign government obligations | |||||||||||||||
Corporate securities | |||||||||||||||
Residential mortgage backed securities | |||||||||||||||
Commercial mortgage backed securities | |||||||||||||||
Other asset backed securities | |||||||||||||||
Other investments: equity securities, available for sale | |||||||||||||||
Derivative instruments | |||||||||||||||
Cash and cash equivalents | |||||||||||||||
Interest rate caps | |||||||||||||||
Interest rate swap | |||||||||||||||
Counterparty collateral | |||||||||||||||
$ | $ | $ | $ | ||||||||||||
Liabilities | |||||||||||||||
Fixed index annuities - embedded derivatives | $ | $ | $ | $ |
• | reported trading prices, |
• | benchmark yields, |
• | broker-dealer quotes, |
• | benchmark securities, |
• | bids and offers, |
• | credit ratings, |
• | relative credit information, and |
• | other reference data. |
Average Lapse Rates | Average Partial Withdrawal Rates | |||||||
Contract Duration (Years) | June 30, 2019 | December 31, 2018 | June 30, 2019 | December 31, 2018 | ||||
1 - 5 | ||||||||
6 - 10 | ||||||||
11 - 15 | ||||||||
16 - 20 | ||||||||
20+ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Fixed index annuities - embedded derivatives | |||||||||||||||
Beginning balance | $ | $ | $ | $ | |||||||||||
Premiums less benefits | |||||||||||||||
Change in fair value, net | ( | ) | ( | ) | |||||||||||
Ending balance | $ | $ | $ | $ |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
(Dollars in thousands) | |||||||||||||||
June 30, 2019 | |||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||
United States Government full faith and credit | $ | $ | $ | ( | ) | $ | |||||||||
United States Government sponsored agencies | ( | ) | |||||||||||||
United States municipalities, states and territories | ( | ) | |||||||||||||
Foreign government obligations | ( | ) | |||||||||||||
Corporate securities | ( | ) | |||||||||||||
Residential mortgage backed securities | ( | ) | |||||||||||||
Commercial mortgage backed securities | ( | ) | |||||||||||||
Other asset backed securities | ( | ) | |||||||||||||
$ | $ | $ | ( | ) | $ | ||||||||||
December 31, 2018 | |||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||
United States Government full faith and credit | $ | $ | $ | ( | ) | $ | |||||||||
United States Government sponsored agencies | ( | ) | |||||||||||||
United States municipalities, states and territories | ( | ) | |||||||||||||
Foreign government obligations | ( | ) | |||||||||||||
Corporate securities | ( | ) | |||||||||||||
Residential mortgage backed securities | ( | ) | |||||||||||||
Commercial mortgage backed securities | ( | ) | |||||||||||||
Other asset backed securities | ( | ) | |||||||||||||
$ | $ | $ | ( | ) | $ |
Available for sale | |||||||
Amortized Cost | Fair Value | ||||||
(Dollars in thousands) | |||||||
Due in one year or less | $ | $ | |||||
Due after one year through five years | |||||||
Due after five years through ten years | |||||||
Due after ten years through twenty years | |||||||
Due after twenty years | |||||||
Residential mortgage backed securities | |||||||
Commercial mortgage backed securities | |||||||
Other asset backed securities | |||||||
$ | $ |
June 30, 2019 | December 31, 2018 | ||||||
(Dollars in thousands) | |||||||
Net unrealized gains (losses) on available for sale fixed maturity securities | $ | $ | ( | ) | |||
Adjustments for assumed changes in amortization of deferred policy acquisition costs and deferred sales inducements | ( | ) | |||||
Deferred income tax valuation allowance reversal | |||||||
Deferred income tax benefit (expense) | ( | ) | |||||
Net unrealized gains (losses) reported as accumulated other comprehensive income (loss) | $ | $ | ( | ) |
June 30, 2019 | December 31, 2018 | |||||||||||||||
NAIC Designation | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
1 | $ | $ | $ | $ | ||||||||||||
2 | ||||||||||||||||
3 | ||||||||||||||||
4 | ||||||||||||||||
5 | ||||||||||||||||
6 | ||||||||||||||||
$ | $ | $ | $ |
Less than 12 months | 12 months or more | Total | |||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
June 30, 2019 | |||||||||||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||||||||||
United States Government full faith and credit | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||
United States Government sponsored agencies | ( | ) | ( | ) | |||||||||||||||||||
United States municipalities, states and territories | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Foreign government obligations | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Corporate securities: | |||||||||||||||||||||||
Finance, insurance and real estate | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Manufacturing, construction and mining | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Utilities and related sectors | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Wholesale/retail trade | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Services, media and other | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Residential mortgage backed securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Commercial mortgage backed securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Other asset backed securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
$ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
December 31, 2018 | |||||||||||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||||||||||
United States Government full faith and credit | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||
United States Government sponsored agencies | ( | ) | ( | ) | ( | ) | |||||||||||||||||
United States municipalities, states and territories | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Foreign government obligations | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Corporate securities: | |||||||||||||||||||||||
Finance, insurance and real estate | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Manufacturing, construction and mining | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Utilities and related sectors | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Wholesale/retail trade | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Services, media and other | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Residential mortgage backed securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Commercial mortgage backed securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Other asset backed securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
$ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Fixed maturity securities held for investment carried at amortized cost | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Investments carried at fair value: | |||||||||||||||
Fixed maturity securities, available for sale | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
( | ) | ( | ) | ||||||||||||
Adjustment for effect on other balance sheet accounts: | |||||||||||||||
Deferred policy acquisition costs and deferred sales inducements | ( | ) | ( | ) | |||||||||||
Deferred income tax asset/liability | ( | ) | ( | ) | |||||||||||
( | ) | ( | ) | ||||||||||||
Change in net unrealized gains/losses on investments carried at fair value | $ | $ | ( | ) | $ | $ | ( | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Available for sale fixed maturity securities: | |||||||||||||||
Gross realized gains | $ | $ | $ | $ | |||||||||||
Gross realized losses | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
( | ) | ( | ) | ||||||||||||
Other investments: | |||||||||||||||
Gross realized gains | |||||||||||||||
Gross realized losses | ( | ) | ( | ) | |||||||||||
( | ) | ( | ) | ||||||||||||
Mortgage loans on real estate: | |||||||||||||||
Decrease in allowance for credit losses | |||||||||||||||
Recovery of specific allowance | |||||||||||||||
Gain on sale of mortgage loans | |||||||||||||||
$ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
• | the length of time and the extent to which the fair value has been less than amortized cost or cost; |
• | whether the issuer is current on all payments and all contractual payments have been made as agreed; |
• | the remaining payment terms and the financial condition and near-term prospects of the issuer; |
• | the lack of ability to refinance due to liquidity problems in the credit market; |
• | the fair value of any underlying collateral; |
• | the existence of any credit protection available; |
• | our intent to sell and whether it is more likely than not we would be required to sell prior to recovery for debt securities; |
• | consideration of rating agency actions; and |
• | changes in estimated cash flows of mortgage and asset backed securities. |
Number of Securities | Total OTTI Losses | Portion of OTTI Losses Recognized in (from) Other Comprehensive Income | Net OTTI Losses Recognized in Operations | |||||||||||
(Dollars in thousands) | ||||||||||||||
Three months ended June 30, 2019 | ||||||||||||||
Fixed maturity securities, available for sale: | ||||||||||||||
Residential mortgage backed securities | $ | $ | ( | ) | $ | ( | ) | |||||||
Commercial mortgage backed securities | ( | ) | ( | ) | ||||||||||
Other asset backed securities | ( | ) | ( | ) | ||||||||||
$ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Three months ended June 30, 2018 | ||||||||||||||
Fixed maturity securities, available for sale: | ||||||||||||||
Residential mortgage backed securities | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
Other asset backed securities | ( | ) | ( | ) | ( | ) | ||||||||
$ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Six months ended June 30, 2019 | ||||||||||||||
Fixed maturity securities, available for sale: | ||||||||||||||
Residential mortgage backed securities | $ | $ | ( | ) | $ | ( | ) | |||||||
Commercial mortgage backed securities | ( | ) | ( | ) | ||||||||||
Other asset backed securities | ( | ) | ( | ) | ||||||||||
$ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Six months ended June 30, 2018 | ||||||||||||||
Fixed maturity securities, available for sale: | ||||||||||||||
Corporate securities: | ||||||||||||||
Consumer discretionary | $ | ( | ) | $ | $ | ( | ) | |||||||
Residential mortgage backed securities | ( | ) | ( | ) | ( | ) | ||||||||
Other asset backed securities | ( | ) | ( | ) | ( | ) | ||||||||
$ | ( | ) | $ | ( | ) | $ | ( | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Cumulative credit loss at beginning of period | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Additions for the amount related to credit losses for which OTTI has not previously been recognized | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Additional credit losses on securities for which OTTI has previously been recognized | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Accumulated losses on securities that were disposed of during the period | |||||||||||||||
Cumulative credit loss at end of period | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Amortized Cost | OTTI Recognized in Other Comprehensive Income (Loss) | Change in Fair Value Since OTTI was Recognized | Fair Value | ||||||||||||
(Dollars in thousands) | |||||||||||||||
June 30, 2019 | |||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||
Corporate securities | $ | $ | ( | ) | $ | $ | |||||||||
Residential mortgage backed securities | ( | ) | |||||||||||||
Commercial mortgage backed securities | |||||||||||||||
Other asset backed securities | |||||||||||||||
$ | $ | ( | ) | $ | $ | ||||||||||
December 31, 2018 | |||||||||||||||
Fixed maturity securities, available for sale: | |||||||||||||||
Corporate securities | $ | $ | ( | ) | $ | $ | |||||||||
Residential mortgage backed securities | ( | ) | |||||||||||||
Commercial mortgage backed securities | |||||||||||||||
Other asset backed securities | |||||||||||||||
$ | $ | ( | ) | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||
(Dollars in thousands) | |||||||
Principal outstanding | $ | $ | |||||
Loan loss allowance | ( | ) | ( | ) | |||
Deferred prepayment fees | ( | ) | ( | ) | |||
Carrying value | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||||||||
Principal | Percent | Principal | Percent | ||||||||||
(Dollars in thousands) | |||||||||||||
Geographic distribution | |||||||||||||
East | $ | % | $ | % | |||||||||
Middle Atlantic | % | % | |||||||||||
Mountain | % | % | |||||||||||
New England | % | % | |||||||||||
Pacific | % | % | |||||||||||
South Atlantic | % | % | |||||||||||
West North Central | % | % | |||||||||||
West South Central | % | % | |||||||||||
$ | % | $ | % | ||||||||||
Property type distribution | |||||||||||||
Office | $ | % | $ | % | |||||||||
Medical Office | % | % | |||||||||||
Retail | % | % | |||||||||||
Industrial/Warehouse | % | % | |||||||||||
Apartment | % | % | |||||||||||
Agricultural | % | % | |||||||||||
Mixed use/other | % | % | |||||||||||
$ | % | $ | % |
Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | ||||||||||||||
Specific Allowance | General Allowance | Specific Allowance | General Allowance | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Beginning allowance balance | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Charge-offs | |||||||||||||||
Recoveries | |||||||||||||||
Change in provision for credit losses | |||||||||||||||
Ending allowance balance | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | ||||||||||||||
Specific Allowance | General Allowance | Specific Allowance | General Allowance | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Beginning allowance balance | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Charge-offs | |||||||||||||||
Recoveries | |||||||||||||||
Change in provision for credit losses | |||||||||||||||
Ending allowance balance | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
June 30, 2019 | December 31, 2018 | ||||||
(Dollars in thousands) | |||||||
Individually evaluated for impairment | $ | $ | |||||
Collectively evaluated for impairment | |||||||
Total loans evaluated for impairment | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||
(Dollars in thousands) | |||||||
Credit Exposure - By Payment Activity | |||||||
Performing | $ | $ | |||||
In workout | |||||||
Collateral dependent | |||||||
$ | $ |
30 - 59 Days | 60 - 89 Days | 90 Days and Over | Total Past Due | Current | Collateral Dependent Receivables | Total Financing Receivables | |||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||
Commercial Mortgage Loans | |||||||||||||||||||||||||||
June 30, 2019 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
December 31, 2018 | $ | $ | $ | $ | $ | $ | $ |
Recorded Investment | Unpaid Principal Balance | Related Allowance | |||||||||
(Dollars in thousands) | |||||||||||
June 30, 2019 | |||||||||||
Mortgage loans with an allowance | $ | $ | $ | ( | ) | ||||||
Mortgage loans with no related allowance | — | ||||||||||
$ | $ | $ | ( | ) | |||||||
December 31, 2018 | |||||||||||
Mortgage loans with an allowance | $ | $ | $ | ( | ) | ||||||
Mortgage loans with no related allowance | — | ||||||||||
$ | $ | $ | ( | ) |
Average Recorded Investment | Interest Income Recognized | ||||||
(Dollars in thousands) | |||||||
Three months ended June 30, 2019 | |||||||
Mortgage loans with an allowance | $ | $ | |||||
Mortgage loans with no related allowance | |||||||
$ | $ | ||||||
Three months ended June 30, 2018 | |||||||
Mortgage loans with an allowance | $ | $ | |||||
Mortgage loans with no related allowance | |||||||
$ | $ | ||||||
Six months ended June 30, 2019 | |||||||
Mortgage loans with an allowance | $ | $ | |||||
Mortgage loans with no related allowance | |||||||
$ | $ | ||||||
Six months ended June 30, 2018 | |||||||
Mortgage loans with an allowance | $ | $ | |||||
Mortgage loans with no related allowance | |||||||
$ | $ |
• | borrower is in default, |
• | borrower has declared bankruptcy, |
• | there is growing concern about the borrower's ability to continue as a going concern, |
• | borrower has insufficient cash flows to service debt, |
• | borrower's inability to obtain funds from other sources, and |
• | there is a breach of financial covenants by the borrower. |
• | assets used to satisfy debt are less than our recorded investment, |
• | interest rate is modified, |
• | maturity date extension at an interest rate less than market rate, |
• | capitalization of interest, |
• | delaying principal and/or interest for a period of |
• | partial forgiveness of the balance or charge-off. |
June 30, 2019 | December 31, 2018 | ||||||
(Dollars in thousands) | |||||||
Assets | |||||||
Derivative instruments | |||||||
Call options | $ | $ | |||||
Other assets | |||||||
Interest rate caps | |||||||
Interest rate swap | |||||||
$ | $ | ||||||
Liabilities | |||||||
Policy benefit reserves - annuity products | |||||||
Fixed index annuities - embedded derivatives, net | $ | $ | |||||
Other liabilities | |||||||
Interest rate swap | |||||||
$ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Change in fair value of derivatives: | |||||||||||||||
Call options | $ | $ | $ | $ | ( | ) | |||||||||
Interest rate swap | ( | ) | ( | ) | |||||||||||
Interest rate caps | ( | ) | ( | ) | |||||||||||
$ | $ | $ | $ | ( | ) | ||||||||||
Change in fair value of embedded derivatives: | |||||||||||||||
Fixed index annuities - embedded derivatives | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Other changes in difference between policy benefit reserves computed using derivative accounting vs. long-duration contracts accounting | |||||||||||||||
$ | $ | ( | ) | $ | $ | ( | ) |
June 30, 2019 | December 31, 2018 | |||||||||||||||||||
Counterparty | Credit Rating (S&P) | Credit Rating (Moody's) | Notional Amount | Fair Value | Notional Amount | Fair Value | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Bank of America | A+ | Aa2 | $ | $ | $ | $ | ||||||||||||||
Barclays | A | A2 | ||||||||||||||||||
Canadian Imperial Bank of Commerce | A+ | Aa2 | ||||||||||||||||||
Citibank, N.A. | A+ | Aa3 | ||||||||||||||||||
Credit Suisse | A+ | A1 | ||||||||||||||||||
J.P. Morgan | A+ | Aa2 | ||||||||||||||||||
Morgan Stanley | A+ | A1 | ||||||||||||||||||
Royal Bank of Canada | AA- | A2 | ||||||||||||||||||
Societe Generale | A | A1 | ||||||||||||||||||
SunTrust | A- | Baa1 | ||||||||||||||||||
Wells Fargo | A+ | Aa2 | ||||||||||||||||||
Exchange traded | ||||||||||||||||||||
$ | $ | $ | $ |
Notional | Pay | June 30, 2019 | December 31, 2018 | ||||||||||||||||
Maturity Date | Amount | Receive Rate | Rate | Counterparty | Fair Value | ||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
March 15, 2021 | $ | LIBOR | % | SunTrust | $ | ( | ) | $ |
Notional | Cap | June 30, 2019 | December 31, 2018 | ||||||||||||||||
Maturity Date | Amount | Floating Rate | Rate | Counterparty | Fair Value | ||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
July 7, 2021 | $ | LIBOR | % | SunTrust | $ | $ | |||||||||||||
July 8, 2021 | LIBOR | % | SunTrust | ||||||||||||||||
July 29, 2021 | LIBOR | % | SunTrust | ||||||||||||||||
$ | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||
(Dollars in thousands) | |||||||
Senior notes due 2027 | |||||||
Principal | $ | $ | |||||
Unamortized debt issue costs | ( | ) | ( | ) | |||
Unamortized discount | ( | ) | ( | ) | |||
$ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||
Numerator: | |||||||||||||||
Net income (loss) - numerator for earnings (loss) per common share | $ | $ | $ | ( | ) | $ | |||||||||
Denominator: | |||||||||||||||
Weighted average common shares outstanding | |||||||||||||||
Effect of dilutive securities: | |||||||||||||||
Stock options and deferred compensation agreements | |||||||||||||||
Restricted stock and restricted stock units | |||||||||||||||
Denominator for earnings (loss) per common share - assuming dilution | |||||||||||||||
Earnings (loss) per common share | $ | $ | $ | ( | ) | $ | |||||||||
Earnings (loss) per common share - assuming dilution | $ | $ | $ | ( | ) | $ |
• | general economic conditions and other factors, including prevailing interest rate levels and stock and credit market performance which may affect (among other things) our ability to sell our products, our ability to access capital resources and the costs associated therewith, the fair value of our investments, which could result in impairments and other than temporary impairments, and certain liabilities, and the lapse rate and profitability of policies; |
• | customer response to new products and marketing initiatives; |
• | changes in Federal income tax laws and regulations which may affect the relative income tax advantages of our products; |
• | increasing competition in the sale of annuities; |
• | regulatory changes or actions, including those relating to regulation of financial services affecting (among other things) bank sales and underwriting of insurance products and regulation of the sale, underwriting and pricing of products; and |
• | the risk factors or uncertainties listed from time to time in our filings with the SEC. |
• | the amount of assets under our management, |
• | investment spreads we earn on our policyholder account balances, |
• | our ability to manage our investment portfolio to maximize returns and minimize risks such as interest rate changes and defaults or impairment of investments, |
• | our ability to appropriately price for lifetime income benefit riders offered on certain of our fixed rate and fixed index annuity policies, |
• | our ability to manage interest rates credited to policyholders and costs of the options purchased to fund the annual index credits on our fixed index annuities, |
• | our ability to manage the costs of acquiring new business (principally commissions paid to agents and distribution partners and bonuses credited to policyholders), |
• | our ability to manage our operating expenses, and |
• | income taxes. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2019 | 2018 | 2019 | 2018 | ||||
Average yield on invested assets | 4.51% | 4.47% | 4.49% | 4.42% | |||
Aggregate cost of money | 1.88% | 1.83% | 1.89% | 1.82% | |||
Aggregate investment spread | 2.63% | 2.64% | 2.60% | 2.60% | |||
Impact of: | |||||||
Investment yield - additional prepayment income | 0.04% | 0.07% | 0.03% | 0.06% | |||
Cost of money benefit from over hedging | 0.04% | 0.06% | 0.03% | 0.04% |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
American Equity Investment Life Insurance Company: | |||||||||||||||
Fixed index annuities | $ | 1,211,004 | $ | 952,675 | $ | 2,238,662 | $ | 1,786,025 | |||||||
Annual reset fixed rate annuities | 3,614 | 15,455 | 7,062 | 31,672 | |||||||||||
Multi-year fixed rate annuities | 566 | 888 | 714 | 2,889 | |||||||||||
Single premium immediate annuities | 1,747 | 5,313 | 3,815 | 15,943 | |||||||||||
1,216,931 | 974,331 | 2,250,253 | 1,836,529 | ||||||||||||
Eagle Life Insurance Company: | |||||||||||||||
Fixed index annuities | 235,558 | 173,119 | 413,038 | 333,683 | |||||||||||
Annual reset fixed rate annuities | 66 | 348 | 193 | 621 | |||||||||||
Multi-year fixed rate annuities | 47,004 | 53,419 | 72,572 | 61,443 | |||||||||||
282,628 | 226,886 | 485,803 | 395,747 | ||||||||||||
Consolidated: | |||||||||||||||
Fixed index annuities | 1,446,562 | 1,125,794 | 2,651,700 | 2,119,708 | |||||||||||
Annual reset fixed rate annuities | 3,680 | 15,803 | 7,255 | 32,293 | |||||||||||
Multi-year fixed rate annuities | 47,570 | 54,307 | 73,286 | 64,332 | |||||||||||
Single premium immediate annuities | 1,747 | 5,313 | 3,815 | 15,943 | |||||||||||
Total before coinsurance ceded | 1,499,559 | 1,201,217 | 2,736,056 | 2,232,276 | |||||||||||
Coinsurance ceded | 72,487 | 129,047 | 126,551 | 218,742 | |||||||||||
Net after coinsurance ceded | $ | 1,427,072 | $ | 1,072,170 | $ | 2,609,505 | $ | 2,013,534 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Reconciliation from net income (loss) to non-GAAP operating income: | |||||||||||||||
Net income (loss) | $ | 18,590 | $ | 93,903 | $ | (11,420 | ) | $ | 234,865 | ||||||
Adjustments to arrive at non-GAAP operating income: | |||||||||||||||
Net realized investment losses, including OTTI | 2,625 | 25,624 | 2,930 | 25,647 | |||||||||||
Change in fair value of derivatives and embedded derivatives - fixed index annuities | 99,868 | (30,094 | ) | 250,812 | (108,912 | ) | |||||||||
Change in fair value of derivatives - debt | 854 | (739 | ) | 1,490 | (2,571 | ) | |||||||||
Income taxes | (22,346 | ) | (2,046 | ) | (54,819 | ) | 15,313 | ||||||||
Non-GAAP operating income | $ | 99,591 | $ | 86,648 | $ | 188,993 | $ | 164,342 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Surrender charges | $ | 19,480 | $ | 16,520 | $ | 35,936 | $ | 32,802 | |||||||
Lifetime income benefit riders (LIBR) fees | 41,220 | 38,486 | 77,730 | 72,927 | |||||||||||
$ | 60,700 | $ | 55,006 | $ | 113,666 | $ | 105,729 | ||||||||
Withdrawals from annuity policies subject to surrender charges | $ | 167,744 | $ | 136,599 | $ | 309,844 | $ | 266,595 | |||||||
Average surrender charge collected on withdrawals subject to surrender charges | 11.6 | % | 12.1 | % | 11.6 | % | 12.3 | % | |||||||
Fund values on policies subject to LIBR fees | $ | 5,720,854 | $ | 5,485,450 | $ | 10,690,568 | $ | 10,267,249 | |||||||
Weighted average per policy LIBR fee | 0.72 | % | 0.70 | % | 0.73 | % | 0.71 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Call options: | |||||||||||||||
Gain (loss) on option expiration | $ | (42,483 | ) | $ | 178,530 | $ | (166,163 | ) | $ | 470,506 | |||||
Change in unrealized gains/losses | 119,425 | (46,858 | ) | 628,271 | (791,432 | ) | |||||||||
Interest rate swap | (688 | ) | 360 | (1,056 | ) | 1,400 | |||||||||
Interest rate caps | (209 | ) | 173 | (538 | ) | 648 | |||||||||
$ | 76,045 | $ | 132,205 | $ | 460,514 | $ | (318,878 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
2019 | 2018 | 2019 | 2018 | ||||
S&P 500 Index | |||||||
Point-to-point strategy | 0.0% - 7.0% | 1.0% - 7.8% | 0.0% - 7.0% | 1.0% - 12.6% | |||
Monthly average strategy | 0.0% - 6.9% | 0.8% - 8.0% | 0.0% - 6.9% | 0.6% - 8.0% | |||
Monthly point-to-point strategy | 0.0% - 4.3% | 0.0% - 10.3% | 0.0% - 4.3% | 0.0% - 17.5% | |||
Fixed income (bond index) strategies | 0.0% - 10.0% | 0.0% - 5.1% | 0.0% - 10.0% | 0.0% - 5.1% |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Index credits on index policies | $ | 161,752 | $ | 334,605 | $ | 217,677 | $ | 758,545 | |||||||
Interest credited (including changes in minimum guaranteed interest for fixed index annuities) | 52,186 | 54,508 | 101,404 | 111,278 | |||||||||||
Lifetime income benefit riders | 37,165 | 38,838 | 68,696 | 72,223 | |||||||||||
$ | 251,103 | $ | 427,951 | $ | 387,777 | $ | 942,046 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Amortization of deferred sales inducements before gross profit adjustments | $ | 68,886 | $ | 68,224 | $ | 137,689 | $ | 135,435 | |||||||
Gross profit adjustments: | |||||||||||||||
Fair value accounting for derivatives and embedded derivatives | (48,034 | ) | 16,395 | (83,421 | ) | 49,851 | |||||||||
Net realized gains (losses) on investments and net OTTI losses recognized in operations | (1,067 | ) | (6,507 | ) | (1,174 | ) | (6,751 | ) | |||||||
Amortization of deferred sales inducements after gross profit adjustments | $ | 19,785 | $ | 78,112 | $ | 53,094 | $ | 178,535 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Fixed index annuities - embedded derivatives | $ | 204,590 | $ | (288,900 | ) | $ | 857,232 | $ | (1,394,923 | ) | |||||
Other changes in difference between policy benefit reserves computed using derivative accounting vs. long-duration contracts accounting | 122,972 | 186,951 | 236,653 | 425,742 | |||||||||||
$ | 327,562 | $ | (101,949 | ) | $ | 1,093,885 | $ | (969,181 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Amortization of deferred policy acquisition costs before gross profit adjustments | $ | 101,444 | $ | 97,715 | $ | 201,515 | $ | 193,155 | |||||||
Gross profit adjustments: | |||||||||||||||
Fair value accounting for derivatives and embedded derivatives | (70,144 | ) | 25,980 | (124,933 | ) | 71,517 | |||||||||
Net realized gains (losses) on investments and net OTTI losses recognized in operations | (1,354 | ) | (8,646 | ) | (1,504 | ) | (8,984 | ) | |||||||
Amortization of deferred policy acquisition costs after gross profit adjustments | $ | 29,946 | $ | 115,049 | $ | 75,078 | $ | 255,688 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Salary and benefits | $ | 20,874 | $ | 17,547 | $ | 41,093 | $ | 33,934 | |||||||
Risk charges | 9,322 | 7,857 | 18,031 | 15,536 | |||||||||||
Other | 7,230 | 7,136 | 17,281 | 14,310 | |||||||||||
Total other operating costs and expenses | $ | 37,426 | $ | 32,540 | $ | 76,405 | $ | 63,780 |
June 30, 2019 | December 31, 2018 | ||||||||||||
Carrying Amount | Percent | Carrying Amount | Percent | ||||||||||
(Dollars in thousands) | |||||||||||||
Fixed maturity securities: | |||||||||||||
United States Government full faith and credit | $ | 12,023 | 0.1 | % | $ | 11,652 | — | % | |||||
United States Government sponsored agencies | 1,214,609 | 2.2 | % | 1,138,529 | 2.3 | % | |||||||
United States municipalities, states and territories | 4,299,962 | 7.8 | % | 4,126,267 | 8.3 | % | |||||||
Foreign government obligations | 233,095 | 0.4 | % | 230,274 | 0.5 | % | |||||||
Corporate securities | 31,312,263 | 57.2 | % | 28,371,514 | 57.4 | % | |||||||
Residential mortgage backed securities | 1,338,946 | 2.4 | % | 1,202,159 | 2.4 | % | |||||||
Commercial mortgage backed securities | 5,673,990 | 10.4 | % | 5,379,003 | 10.9 | % | |||||||
Other asset backed securities | 6,086,415 | 11.1 | % | 5,464,329 | 11.1 | % | |||||||
Total fixed maturity securities | 50,171,303 | 91.6 | % | 45,923,727 | 92.9 | % | |||||||
Mortgage loans on real estate | 3,083,675 | 5.6 | % | 2,943,091 | 6.0 | % | |||||||
Derivative instruments | 888,208 | 1.6 | % | 205,149 | 0.4 | % | |||||||
Other investments | 642,219 | 1.2 | % | 355,531 | 0.7 | % | |||||||
$ | 54,785,405 | 100.0 | % | $ | 49,427,498 | 100.0 | % |
June 30, 2019 | December 31, 2018 | |||||||||||||
Rating Agency Rating | Carrying Amount | Percent of Fixed Maturity Securities | Carrying Amount | Percent of Fixed Maturity Securities | ||||||||||
(Dollars in thousands) | ||||||||||||||
Aaa/Aa/A | $ | 29,650,285 | 59.1 | % | $ | 27,052,481 | 58.9 | % | ||||||
Baa | 19,089,841 | 38.0 | % | 17,265,590 | 37.6 | % | ||||||||
Total investment grade | 48,740,126 | 97.1 | % | 44,318,071 | 96.5 | % | ||||||||
Ba | 1,089,291 | 2.2 | % | 1,191,772 | 2.6 | % | ||||||||
B | 140,148 | 0.3 | % | 139,313 | 0.3 | % | ||||||||
Caa | 99,000 | 0.2 | % | 122,717 | 0.3 | % | ||||||||
Ca and lower | 102,738 | 0.2 | % | 151,854 | 0.3 | % | ||||||||
Total below investment grade | 1,431,177 | 2.9 | % | 1,605,656 | 3.5 | % | ||||||||
$ | 50,171,303 | 100.0 | % | $ | 45,923,727 | 100.0 | % |
NAIC Designation | NRSRO Equivalent Rating | |
1 | Aaa/Aa/A | |
2 | Baa | |
3 | Ba | |
4 | B | |
5 | Caa | |
6 | Ca and lower |
June 30, 2019 | December 31, 2018 | |||||||||||||||||||||||||||||
NAIC Designation | Amortized Cost | Fair Value | Carrying Amount | Percent of Total Carrying Amount | Amortized Cost | Fair Value | Carrying Amount | Percent of Total Carrying Amount | ||||||||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||||||
1 | $ | 27,355,251 | $ | 29,363,924 | $ | 29,363,924 | 58.5 | % | $ | 26,588,352 | $ | 26,921,843 | $ | 26,921,843 | 58.6 | % | ||||||||||||||
2 | 18,674,100 | 19,421,029 | 19,421,029 | 38.7 | % | 17,901,161 | 17,528,072 | 17,528,072 | 38.2 | % | ||||||||||||||||||||
3 | 1,250,071 | 1,213,115 | 1,213,115 | 2.4 | % | 1,396,650 | 1,269,242 | 1,269,242 | 2.8 | % | ||||||||||||||||||||
4 | 193,004 | 166,568 | 166,568 | 0.4 | % | 173,987 | 137,991 | 137,991 | 0.3 | % | ||||||||||||||||||||
5 | — | — | — | — | % | 23,836 | 19,453 | 19,453 | — | % | ||||||||||||||||||||
6 | 5,530 | 6,667 | 6,667 | — | % | 47,204 | 47,126 | 47,126 | 0.1 | % | ||||||||||||||||||||
$ | 47,477,956 | $ | 50,171,303 | $ | 50,171,303 | 100.0 | % | $ | 46,131,190 | $ | 45,923,727 | $ | 45,923,727 | 100.0 | % |
Number of Securities | Amortized Cost | Unrealized Losses | Fair Value | |||||||||||
(Dollars in thousands) | ||||||||||||||
June 30, 2019 | ||||||||||||||
Fixed maturity securities, available for sale: | ||||||||||||||
United States Government full faith and credit | 1 | $ | 507 | $ | (1 | ) | $ | 506 | ||||||
United States Government sponsored agencies | 15 | 990,541 | (16,335 | ) | 974,206 | |||||||||
United States municipalities, states and territories | 6 | 48,235 | (552 | ) | 47,683 | |||||||||
Foreign government obligations | 2 | 24,222 | (747 | ) | 23,475 | |||||||||
Corporate securities: | ||||||||||||||
Finance, insurance and real estate | 36 | 513,559 | (13,652 | ) | 499,907 | |||||||||
Manufacturing, construction and mining | 49 | 429,357 | (13,427 | ) | 415,930 | |||||||||
Utilities and related sectors | 45 | 480,032 | (14,288 | ) | 465,744 | |||||||||
Wholesale/retail trade | 21 | 213,099 | (16,183 | ) | 196,916 | |||||||||
Services, media and other | 116 | 1,246,767 | (80,615 | ) | 1,166,152 | |||||||||
Residential mortgage backed securities | 19 | 85,977 | (1,482 | ) | 84,495 | |||||||||
Commercial mortgage backed securities | 94 | 716,212 | (12,324 | ) | 703,888 | |||||||||
Other asset backed securities | 609 | 4,089,629 | (133,047 | ) | 3,956,582 | |||||||||
1,013 | $ | 8,838,137 | $ | (302,653 | ) | $ | 8,535,484 | |||||||
December 31, 2018 | ||||||||||||||
Fixed maturity securities, available for sale: | ||||||||||||||
United States Government full faith and credit | 4 | $ | 8,650 | $ | (322 | ) | $ | 8,328 | ||||||
United States Government sponsored agencies | 23 | 1,066,544 | (83,034 | ) | 983,510 | |||||||||
United States municipalities, states and territories | 136 | 518,758 | (15,658 | ) | 503,100 | |||||||||
Foreign government obligations | 6 | 114,529 | (4,159 | ) | 110,370 | |||||||||
Corporate securities: | ||||||||||||||
Finance, insurance and real estate | 286 | 3,551,237 | (164,727 | ) | 3,386,510 | |||||||||
Manufacturing, construction and mining | 231 | 2,515,204 | (119,607 | ) | 2,395,597 | |||||||||
Utilities and related sectors | 273 | 3,032,710 | (127,957 | ) | 2,904,753 | |||||||||
Wholesale/retail trade | 103 | 1,308,962 | (77,554 | ) | 1,231,408 | |||||||||
Services, media and other | 529 | 6,040,083 | (348,884 | ) | 5,691,199 | |||||||||
Residential mortgage backed securities | 33 | 172,427 | (4,125 | ) | 168,302 | |||||||||
Commercial mortgage backed securities | 487 | 4,367,221 | (134,826 | ) | 4,232,395 | |||||||||
Other asset backed securities | 604 | 4,615,477 | (270,234 | ) | 4,345,243 | |||||||||
2,715 | $ | 27,311,802 | $ | (1,351,087 | ) | $ | 25,960,715 |
NAIC Designation | Carrying Value of Securities with Gross Unrealized Losses | Percent of Total | Gross Unrealized Losses | Percent of Total | ||||||||||
(Dollars in thousands) | ||||||||||||||
June 30, 2019 | ||||||||||||||
1 | $ | 3,908,327 | 45.8 | % | $ | (73,087 | ) | 24.1 | % | |||||
2 | 3,729,821 | 43.7 | % | (147,295 | ) | 48.7 | % | |||||||
3 | 757,561 | 8.9 | % | (48,879 | ) | 16.1 | % | |||||||
4 | 138,484 | 1.6 | % | (33,142 | ) | 11.0 | % | |||||||
5 | — | — | % | — | — | % | ||||||||
6 | 1,291 | — | % | (250 | ) | 0.1 | % | |||||||
$ | 8,535,484 | 100.0 | % | $ | (302,653 | ) | 100.0 | % | ||||||
December 31, 2018 | ||||||||||||||
1 | $ | 13,302,253 | 51.2 | % | $ | (552,455 | ) | 40.9 | % | |||||
2 | 11,301,715 | 43.5 | % | (622,053 | ) | 46.0 | % | |||||||
3 | 1,170,941 | 4.5 | % | (129,441 | ) | 9.6 | % | |||||||
4 | 127,222 | 0.5 | % | (40,927 | ) | 3.0 | % | |||||||
5 | 19,453 | 0.1 | % | (4,383 | ) | 0.3 | % | |||||||
6 | 39,131 | 0.2 | % | (1,828 | ) | 0.2 | % | |||||||
$ | 25,960,715 | 100.0 | % | $ | (1,351,087 | ) | 100.0 | % |
Number of Securities | Amortized Cost | Fair Value | Gross Unrealized Losses | |||||||||||
(Dollars in thousands) | ||||||||||||||
June 30, 2019 | ||||||||||||||
Fixed maturity securities, available for sale: | ||||||||||||||
Investment grade: | ||||||||||||||
Less than six months | 112 | $ | 809,962 | $ | 795,702 | $ | (14,260 | ) | ||||||
Six months or more and less than twelve months | 261 | 1,866,146 | 1,817,036 | (49,110 | ) | |||||||||
Twelve months or greater | 493 | 5,210,046 | 5,052,805 | (157,241 | ) | |||||||||
Total investment grade | 866 | 7,886,154 | 7,665,543 | (220,611 | ) | |||||||||
Below investment grade: | ||||||||||||||
Less than six months | 21 | 70,516 | 68,516 | (2,000 | ) | |||||||||
Six months or more and less than twelve months | 51 | 258,999 | 243,735 | (15,264 | ) | |||||||||
Twelve months or greater | 75 | 622,468 | 557,690 | (64,778 | ) | |||||||||
Total below investment grade | 147 | 951,983 | 869,941 | (82,042 | ) | |||||||||
1,013 | $ | 8,838,137 | $ | 8,535,484 | $ | (302,653 | ) | |||||||
December 31, 2018 | ||||||||||||||
Fixed maturity securities, available for sale: | ||||||||||||||
Investment grade: | ||||||||||||||
Less than six months | 770 | $ | 6,986,778 | $ | 6,777,338 | $ | (209,440 | ) | ||||||
Six months or more and less than twelve months | 1,184 | 12,208,435 | 11,692,145 | (516,290 | ) | |||||||||
Twelve months or greater | 606 | 6,639,807 | 6,186,550 | (453,257 | ) | |||||||||
Total investment grade | 2,560 | 25,835,020 | 24,656,033 | (1,178,987 | ) | |||||||||
Below investment grade: | ||||||||||||||
Less than six months | 59 | 578,858 | 533,979 | (44,879 | ) | |||||||||
Six months or more and less than twelve months | 44 | 371,075 | 338,056 | (33,019 | ) | |||||||||
Twelve months or greater | 52 | 526,849 | 432,647 | (94,202 | ) | |||||||||
Total below investment grade | 155 | 1,476,782 | 1,304,682 | (172,100 | ) | |||||||||
2,715 | $ | 27,311,802 | $ | 25,960,715 | $ | (1,351,087 | ) |
Number of Securities | Amortized Cost | Fair Value | Gross Unrealized Losses | |||||||||||
(Dollars in thousands) | ||||||||||||||
June 30, 2019 | ||||||||||||||
Investment grade: | ||||||||||||||
Less than six months | — | $ | — | $ | — | $ | — | |||||||
Six months or more and less than twelve months | 1 | 39,667 | 32,245 | (7,422 | ) | |||||||||
Twelve months or greater | — | — | — | — | ||||||||||
Total investment grade | 1 | 39,667 | 32,245 | (7,422 | ) | |||||||||
Below investment grade: | ||||||||||||||
Less than six months | 2 | 25,211 | 19,410 | (5,801 | ) | |||||||||
Six months or more and less than twelve months | 2 | 25,170 | 18,021 | (7,149 | ) | |||||||||
Twelve months or greater | 3 | 45,565 | 27,648 | (17,917 | ) | |||||||||
Total below investment grade | 7 | 95,946 | 65,079 | (30,867 | ) | |||||||||
8 | $ | 135,613 | $ | 97,324 | $ | (38,289 | ) | |||||||
December 31, 2018 | ||||||||||||||
Investment grade: | ||||||||||||||
Less than six months | 5 | $ | 103,637 | $ | 78,378 | $ | (25,259 | ) | ||||||
Six months or more and less than twelve months | 1 | 20,189 | 15,225 | (4,964 | ) | |||||||||
Twelve months or greater | — | — | — | — | ||||||||||
Total investment grade | 6 | 123,826 | 93,603 | (30,223 | ) | |||||||||
Below investment grade: | ||||||||||||||
Less than six months | 13 | 146,474 | 108,465 | (38,009 | ) | |||||||||
Six months or more and less than twelve months | — | — | — | — | ||||||||||
Twelve months or greater | 3 | 45,594 | 26,665 | (18,929 | ) | |||||||||
Total below investment grade | 16 | 192,068 | 135,130 | (56,938 | ) | |||||||||
22 | $ | 315,894 | $ | 228,733 | $ | (87,161 | ) |
Available for sale | |||||||
Amortized Cost | Fair Value | ||||||
(Dollars in thousands) | |||||||
June 30, 2019 | |||||||
Due in one year or less | $ | — | $ | — | |||
Due after one year through five years | 281,924 | 272,395 | |||||
Due after five years through ten years | 975,381 | 950,556 | |||||
Due after ten years through twenty years | 1,386,495 | 1,349,203 | |||||
Due after twenty years | 1,302,519 | 1,218,365 | |||||
3,946,319 | 3,790,519 | ||||||
Residential mortgage backed securities | 85,977 | 84,495 | |||||
Commercial mortgage backed securities | 716,212 | 703,888 | |||||
Other asset backed securities | 4,089,629 | 3,956,582 | |||||
$ | 8,838,137 | $ | 8,535,484 | ||||
December 31, 2018 | |||||||
Due in one year or less | $ | 31,590 | $ | 30,780 | |||
Due after one year through five years | 2,596,616 | 2,534,891 | |||||
Due after five years through ten years | 7,196,565 | 6,907,961 | |||||
Due after ten years through twenty years | 3,247,923 | 3,056,474 | |||||
Due after twenty years | 5,083,983 | 4,684,669 | |||||
18,156,677 | 17,214,775 | ||||||
Residential mortgage backed securities | 172,427 | 168,302 | |||||
Commercial mortgage backed securities | 4,367,221 | 4,232,395 | |||||
Other asset backed securities | 4,615,477 | 4,345,243 | |||||
$ | 27,311,802 | $ | 25,960,715 |
June 30, 2019 | ||||||||||
Amortized Cost | Carrying Amount/ Fair Value | Percent of Total Carrying Amount | ||||||||
(Dollars in thousands) | ||||||||||
GIIPS (1) | $ | 251,147 | $ | 271,502 | 0.5 | % | ||||
Asia/Pacific | 461,296 | 494,397 | 1.0 | % | ||||||
Non-GIIPS Europe | 3,177,438 | 3,366,362 | 6.7 | % | ||||||
Latin America | 296,728 | 315,683 | 0.6 | % | ||||||
Non-U.S. North America | 1,452,706 | 1,549,212 | 3.1 | % | ||||||
Australia & New Zealand | 1,044,835 | 1,086,130 | 2.2 | % | ||||||
Other | 5,636,391 | 5,555,221 | 11.1 | % | ||||||
$ | 12,320,541 | $ | 12,638,507 | 25.2 | % |
(1) | Greece, Ireland, Italy, Portugal and Spain ("GIIPS"). All of our exposure in GIIPS are corporate securities with issuers domiciled in these countries. None of our foreign government obligations were held in any of these countries. |
June 30, 2019 | |||||||
Amortized Cost | Carrying Amount/ Fair Value | ||||||
(Dollars in thousands) | |||||||
GIIPS | $ | 14,530 | $ | 15,087 | |||
Asia/Pacific | 11,000 | 10,350 | |||||
Non-GIIPS Europe | 108,239 | 105,791 | |||||
Latin America | 59,956 | 61,725 | |||||
Non-U.S. North America | 50,622 | 49,895 | |||||
Other | 452,056 | 420,549 | |||||
$ | 696,403 | $ | 663,397 |
General Description | Number of Securities | Amortized Cost | Unrealized Gains (Losses) | Fair Value | Months in Continuous Unrealized Loss Position | Months Unrealized Losses Greater Than 20% | ||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Below investment grade | ||||||||||||||||||
Corporate securities: | ||||||||||||||||||
Consumer discretionary | 5 | $ | 52,561 | $ | (6,178 | ) | $ | 46,383 | 0 - 53 | 0 - 16 | ||||||||
Energy | 5 | 66,817 | (15,523 | ) | 51,294 | 0 - 58 | 0 - 49 | |||||||||||
Industrials | 1 | 563 | (250 | ) | 313 | 1 | 1 | |||||||||||
Materials | 1 | 3,990 | 1,382 | 5,372 | — | — | ||||||||||||
Other asset backed securities: | ||||||||||||||||||
Financials | 1 | 977 | — | 977 | — | — | ||||||||||||
Industrials | 1 | 8,742 | (2,648 | ) | 6,094 | 44 | 7 | |||||||||||
14 | $ | 133,650 | $ | (23,217 | ) | $ | 110,433 |
June 30, 2019 | December 31, 2018 | ||||||||||||
Principal Outstanding | Percent of Total Principal Outstanding | Principal Outstanding | Percent of Total Principal Outstanding | ||||||||||
(Dollars in thousands) | |||||||||||||
Debt Service Coverage Ratio: | |||||||||||||
Greater than or equal to 1.5 | $ | 2,268,928 | 73.4 | % | $ | 2,121,785 | 71.9 | % | |||||
Greater than or equal to 1.2 and less than 1.5 | 648,958 | 21.0 | % | 645,470 | 21.8 | % | |||||||
Greater than or equal to 1.0 and less than 1.2 | 131,502 | 4.2 | % | 127,083 | 4.3 | % | |||||||
Less than 1.0 | 43,170 | 1.4 | % | 58,126 | 2.0 | % | |||||||
$ | 3,092,558 | 100.0 | % | $ | 2,952,464 | 100.0 | % |
June 30, 2019 | December 31, 2018 | ||||||
(Dollars in thousands) | |||||||
Impaired mortgage loans with an allowance | $ | 1,241 | $ | 1,253 | |||
Impaired mortgage loans with no related allowance | — | — | |||||
Allowance for probable loan losses | (229 | ) | (229 | ) | |||
Net carrying value of impaired mortgage loans | $ | 1,012 | $ | 1,024 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Proceeds received at expiration of options related to such credits | $ | 166,430 | $ | 341,616 | $ | 224,890 | $ | 767,173 | |||||||
Annual index credits to policyholders on their anniversaries | 161,752 | 334,605 | 217,677 | 758,545 |
Period | Total Number of Shares Purchased (a) | Average Price Paid Per Share | |||||
January 1, 2019 - January 31, 2019 | — | $ | — | ||||
February 1, 2019 - February 28, 2019 | — | $ | — | ||||
March 1, 2019 - March 31, 2019 | — | $ | — | ||||
April 1, 2019 - April 30, 2019 | — | $ | — | ||||
May 1, 2019 - May 31, 2019 | — | $ | — | ||||
June 1, 2019 - June 30, 2019 | 28,989 | $ | 27.44 | ||||
Total | 28,989 |
(a) | Includes the number of shares of common stock utilized to execute certain stock incentive awards. |
Exhibit Number | Description | |
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101 | The following materials from American Equity Investment Life Holding Company's Quarterly Report on Form 10-Q for the period ended June 30, 2019 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Stockholders' Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Unaudited Consolidated Financial Statements. |
Date: | August 8, 2019 | AMERICAN EQUITY INVESTMENT LIFE | |||
HOLDING COMPANY | |||||
By: | /s/ John M. Matovina | ||||
John M. Matovina, Chief Executive Officer and President | |||||
(Principal Executive Officer) | |||||
By: | /s/ Ted M. Johnson | ||||
Ted M. Johnson, Chief Financial Officer and Treasurer | |||||
(Principal Financial Officer) | |||||
By: | /s/ Scott A. Samuelson | ||||
Scott A. Samuelson, Vice President and Chief Accounting Officer | |||||
(Principal Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of American Equity Investment Life Holding Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | August 8, 2019 | By: | /s/ JOHN M. MATOVINA | |
John M. Matovina, Chief Executive Officer and President (Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of American Equity Investment Life Holding Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | August 8, 2019 | By: | /s/ TED M. JOHNSON | |
Ted M. Johnson, Chief Financial Officer and Treasurer (Principal Financial Officer) |
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | August 8, 2019 | By: | /s/ JOHN M. MATOVINA | |
John M. Matovina, Chief Executive Officer and President (Principal Executive Officer) |
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | August 8, 2019 | By: | /s/ TED M. JOHNSON | |
Ted M. Johnson, Chief Financial Officer and Treasurer (Principal Financial Officer) |
Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Fixed maturity securities, available for sale, amortized cost | $ 47,477,956 | $ 46,131,190 |
Stockholders' equity: | ||
Preferred stock, par value (dollars per share) | $ 1 | $ 1 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (dollars per share) | $ 1 | $ 1 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 90,936,324 | 90,369,229 |
Common stock, shares outstanding | 90,936,324 | 90,369,229 |
Common stock, shares held in treasury | 1,443,973 | 1,535,960 |
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
||||
Net income (loss) | $ 18,590 | $ 93,903 | $ (11,420) | $ 234,865 | |||
Other comprehensive income (loss): | |||||||
Change in net unrealized investment gains/losses (1) | [1] | 677,320 | (260,555) | 1,394,233 | (832,588) | ||
Noncredit component of OTTI losses (1) | [1] | 103 | 775 | 103 | 775 | ||
Reclassification of unrealized investment gains/losses to net income (loss) (1) | [1] | 1,422 | (18,162) | 1,128 | (18,501) | ||
Other comprehensive income (loss) before income tax | 678,845 | (277,942) | 1,395,464 | (850,314) | |||
Income tax effect related to other comprehensive income (loss) | (142,558) | 58,366 | (293,048) | 178,567 | |||
Other comprehensive income (loss) | 536,287 | (219,576) | 1,102,416 | (671,747) | |||
Comprehensive income (loss) | $ 554,877 | $ (125,673) | $ 1,090,996 | $ (436,882) | |||
|
Consolidated Statements of Changes in Stockholders' Equity (Parentheticals) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Statement of Stockholders' Equity [Abstract] | ||||
Shares of common stock issued under compensation plans | 152,201 | 249,523 | 567,095 | 902,259 |
Significant Accounting Policies |
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Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Consolidation and Basis of Presentation The accompanying consolidated financial statements of American Equity Investment Life Holding Company ("we", "us" or "our") have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements. The consolidated financial statements reflect all adjustments, consisting only of normal recurring items, which are necessary to present fairly our financial position and results of operations on a basis consistent with the prior audited consolidated financial statements. Operating results for the three and six month periods ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ended December 31, 2019. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements requires the use of management estimates. For further information related to a description of areas of judgment and estimates and other information necessary to understand our financial position and results of operations, refer to the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2018. Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) that requires recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU affects accounting and disclosure more dramatically for lessees as accounting and disclosure for lessors is mainly unchanged. We adopted this ASU on January 1, 2019. The adoption of this ASU resulted in the recognition of a lease asset and lease liability of $3.9 million, respectively, on our consolidated balance sheet at June 30, 2019. In March 2017, the FASB issued an ASU that applies to certain callable debt securities where the amortized cost basis is at a premium to the price repayable by the issuer at the earliest call date. Under this guidance, the premium is amortized to the first call date. We adopted this ASU on January 1, 2019. The adoption of this ASU did not have a material impact on our consolidated financial statements. In June 2018, the FASB issued an ASU that expands the scope of Accounting Standards Codification 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services to nonemployees and eliminates the existing accounting model for nonemployee share-based payment awards. We adopted this ASU on January 1, 2019. While this ASU results in an earlier measurement date for our nonemployee restricted stock units that have not vested as of January 1, 2019, there was no impact to our consolidated financial statements upon adoption. New Accounting Pronouncements In June 2016, the FASB issued an ASU that significantly changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model that requires these assets be presented at the net amount expected to be collected. In addition, credit losses on available for sale debt securities will be recorded through an allowance account. This ASU will be effective for us on January 1, 2020, with early adoption permitted. While we are still in the process of evaluating the full impact this guidance will have on our consolidated financial statements, we believe the new impairment model will lead to earlier recognition of credit losses for our commercial mortgage loans. In August 2018, the FASB issued an ASU that revises certain aspects of the measurement models and disclosure requirements for long duration insurance and investment contracts. The FASB’s objective in issuing this ASU is to improve, simplify, and enhance the accounting for long-duration contracts. The revisions include updating cash flow assumptions in the calculation of the liability for traditional life products, introducing the term ‘market risk benefit’ ("MRB") and requiring all contract features meeting the definition of an MRB to be measured at fair value, simplifying the method used to amortize deferred policy acquisition costs and deferred sales inducements to a constant basis over the expected term of the related contracts rather than based on gross profits and enhancing disclosure requirements. While this ASU is effective for us on January 1, 2022, the transition date (the remeasurement date) is January 1, 2020. Early adoption of this ASU is permitted. We are in the process of evaluating the impact this guidance will have on our consolidated financial statements.
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Fair Values of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Values of Financial Instruments | Fair Values of Financial Instruments The following sets forth a comparison of the carrying amounts and fair values of our financial instruments:
Fair value is the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. The objective of a fair value measurement is to determine that price for each financial instrument at each measurement date. We meet this objective using various methods of valuation that include market, income and cost approaches. We categorize our financial instruments into three levels of fair value hierarchy based on the priority of inputs used in determining fair value. The hierarchy defines the highest priority inputs (Level 1) as quoted prices in active markets for identical assets or liabilities. The lowest priority inputs (Level 3) are our own assumptions about what a market participant would use in determining fair value such as estimated future cash flows. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. We categorize financial assets and liabilities recorded at fair value in the consolidated balance sheets as follows:
Transfers of securities among the levels occur at times and depend on the type of inputs used to determine fair value of each security. There were no transfers between levels during any period presented. Our assets and liabilities which are measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018 are presented below based on the fair value hierarchy levels:
The following methods and assumptions were used in estimating the fair values of financial instruments during the periods presented in these consolidated financial statements. Fixed maturity securities The fair values of fixed maturity securities in an active and orderly market are determined by utilizing independent pricing services. The independent pricing services incorporate a variety of observable market data in their valuation techniques, including:
The independent pricing services also take into account perceived market movements and sector news, as well as a security's terms and conditions, including any features specific to that issue that may influence risk and marketability. Depending on the security, the priority of the use of observable market inputs may change as some observable market inputs may not be relevant or additional inputs may be necessary. The independent pricing services provide quoted market prices when available. Quoted prices are not always available due to market inactivity. When quoted market prices are not available, the third parties use yield data and other factors relating to instruments or securities with similar characteristics to determine fair value for securities that are not actively traded. We generally obtain one value from our primary external pricing service. In situations where a price is not available from this service, we may obtain quotes or prices from additional parties as needed. Market indices of similar rated asset class spreads are considered for valuations and broker indications of similar securities are compared. Inputs used by the broker include market information, such as yield data and other factors relating to instruments or securities with similar characteristics. Valuations and quotes obtained from third party commercial pricing services are non-binding and do not represent quotes on which one may execute the disposition of the assets. We validate external valuations at least quarterly through a combination of procedures that include the evaluation of methodologies used by the pricing services, comparison of the prices to a secondary pricing source, analytical reviews and performance analysis of the prices against trends, and maintenance of a securities watch list. Additionally, as needed we utilize discounted cash flow models or perform independent valuations on a case-by-case basis using inputs and assumptions similar to those used by the pricing services. Although we do identify differences from time to time as a result of these validation procedures, we did not make any significant adjustments as of June 30, 2019 and December 31, 2018. Mortgage loans on real estate Mortgage loans on real estate are not measured at fair value on a recurring basis. The fair values of mortgage loans on real estate are calculated using discounted expected cash flows using competitive market interest rates currently being offered for similar loans. The fair values of impaired mortgage loans on real estate that we have considered to be collateral dependent are based on the fair value of the real estate collateral (based on appraised values) less estimated costs to sell. The inputs utilized to determine fair value of all mortgage loans are unobservable market data (competitive market interest rates); therefore, fair value of mortgage loans falls into Level 3 in the fair value hierarchy. Derivative instruments The fair values of derivative instruments, primarily call options, are based upon the amount of cash that we will receive to settle each derivative instrument on the reporting date. These amounts are determined by our investment team using industry accepted valuation models and are adjusted for the nonperformance risk of each counterparty net of any collateral held. Inputs include market volatility and risk free interest rates and are used in income valuation techniques in arriving at a fair value for each option contract. The nonperformance risk for each counterparty is based upon its credit default swap rate. We have no performance obligations related to the call options purchased to fund our fixed index annuity policy liabilities. Other investments Equity securities are the only financial instruments included in other investments that are measured at fair value on a recurring basis (see determination of fair value above). Financial instruments included in other investments that are not measured at fair value on a recurring basis are policy loans, equity method investments and company owned life insurance ("COLI"). We have not attempted to determine the fair values associated with our policy loans, as we believe any differences between carrying values and the fair values afforded these instruments are immaterial to our consolidated financial position and, accordingly, the cost to provide such disclosure does not justify the benefit to be derived. The fair values of our equity method investments are obtained from third parties and determined by calculating the present value of future cash flows discounted by a risk free rate, a risk spread and a liquidity discount. As the risk spread and liquidity discount are unobservable market inputs, the fair value of our equity method investments falls within Level 3 of the fair value hierarchy. The fair value of our COLI approximates the cash surrender value of the policies and falls within Level 2 of the fair value hierarchy. Cash and cash equivalents Amounts reported in the consolidated balance sheets for these instruments are reported at their historical cost which approximates fair value due to the nature of the assets assigned to this category. Interest rate swap and caps The fair values of our pay fixed/receive variable interest rate swap and our interest rate caps are obtained from third parties and are determined by discounting expected future cash flows using a projected London Interbank Offered Rate ("LIBOR") for the term of the swap and caps. Counterparty collateral Amounts reported in other assets in the consolidated balance sheets for these instruments are reported at their historical cost which approximates fair value due to the nature of the assets assigned to this category. Policy benefit reserves, coinsurance deposits and SPIA benefit reserves The fair values of the liabilities under contracts not involving significant mortality or morbidity risks (principally deferred annuities), are stated at the cost we would incur to extinguish the liability (i.e., the cash surrender value) as these contracts are generally issued without an annuitization date. The coinsurance deposits related to the annuity benefit reserves have fair values determined in a similar fashion. For period-certain annuity benefit contracts, the fair value is determined by discounting the benefits at the interest rates currently in effect for newly issued immediate annuity contracts. We are not required to and have not estimated the fair value of the liabilities under contracts that involve significant mortality or morbidity risks, as these liabilities fall within the definition of insurance contracts that are exceptions from financial instruments that require disclosures of fair value. Policy benefit reserves, coinsurance deposits and SPIA benefit reserves are not measured at fair value on a recurring basis. All of the fair values presented within these categories fall within Level 3 of the fair value hierarchy as most of the inputs are unobservable market data. Notes payable The fair values of our senior unsecured notes are based upon pricing matrices developed by a third party pricing service when quoted market prices are not available and are categorized as Level 2 within the fair value hierarchy. Notes payable are not remeasured at fair value on a recurring basis. Subordinated debentures Fair values for subordinated debentures are estimated using discounted cash flow calculations based principally on observable inputs including our incremental borrowing rates, which reflect our credit rating, for similar types of borrowings with maturities consistent with those remaining for the debt being valued. These fair values are categorized as Level 2 within the fair value hierarchy. Subordinated debentures are not measured at fair value on a recurring basis. Amounts due under repurchase agreements The amounts reported in the consolidated balance sheets for short term indebtedness under repurchase agreements with variable interest rates approximate their fair values. Fixed index annuities - embedded derivatives We estimate the fair value of the embedded derivative component of our fixed index annuity policy benefit reserves at each valuation date by (i) projecting policy contract values and minimum guaranteed contract values over the expected lives of the contracts and (ii) discounting the excess of the projected contract value amounts at the applicable risk free interest rates adjusted for our nonperformance risk related to those liabilities. The projections of policy contract values are based on our best estimate assumptions for future policy growth and future policy decrements. Our best estimate assumptions for future policy growth include assumptions for the expected index credit on the next policy anniversary date which are derived from the fair values of the underlying call options purchased to fund such index credits and the expected costs of annual call options we will purchase in the future to fund index credits beyond the next policy anniversary. The projections of minimum guaranteed contract values include the same best estimate assumptions for policy decrements as were used to project policy contract values. Within this determination we have the following significant unobservable inputs: 1) the expected cost of annual call options we will purchase in the future to fund index credits beyond the next policy anniversary and 2) our best estimates for future policy decrements, primarily lapse, partial withdrawal and mortality rates. As of June 30, 2019 and December 31, 2018, we utilized an estimate of 3.10% for the expected cost of annual call options, which are based on estimated long-term account value growth and a historical review of our actual option costs. Our best estimate assumptions for lapse, partial withdrawal and mortality rates are based on our actual experience and our outlook as to future expectations for such assumptions. These assumptions, which are consistent with the assumptions used in calculating deferred policy acquisition costs and deferred sales inducements, are reviewed on a quarterly basis and are revised as our experience develops and/or as future expectations change. Our mortality rate assumptions are based on 65% of the 1983 Basic Annuity Mortality Tables. The following table presents average lapse rate and partial withdrawal rate assumptions, by contract duration, used in estimating the fair value of the embedded derivative component of our fixed index annuity policy benefit reserves at each reporting date:
Lapse rates are generally expected to increase as surrender charge percentages decrease. Lapse expectations reflect a significant increase in the year in which the surrender charge period on a contract ends. The following table provides a reconciliation of the beginning and ending balances for our Level 3 liabilities, which are measured at fair value on a recurring basis using significant unobservable inputs for the three and six months ended June 30, 2019 and 2018:
The fair value of our fixed index annuities embedded derivatives is net of coinsurance ceded of $617.8 million and $538.8 million as of June 30, 2019 and December 31, 2018, respectively. Change in fair value, net for each period in our embedded derivatives is included in change in fair value of embedded derivatives in the unaudited consolidated statements of operations. Certain derivatives embedded in our fixed index annuity contracts are our most significant financial instrument measured at fair value that are categorized as Level 3 in the fair value hierarchy. The contractual obligations for future annual index credits within our fixed index annuity contracts are treated as a "series of embedded derivatives" over the expected life of the applicable contracts. We estimate the fair value of these embedded derivatives at each valuation date by the method described above under fixed index annuities - embedded derivatives. The projections of minimum guaranteed contract values include the same best estimate assumptions for policy decrements as were used to project policy contract values. The most sensitive assumption in determining policy liabilities for fixed index annuities is the rates used to discount the excess projected contract values. As indicated above, the discount rate reflects our nonperformance risk. If the discount rates used to discount the excess projected contract values at June 30, 2019, were to increase by 100 basis points, the fair value of the embedded derivatives would decrease by $572.7 million recorded through operations as a decrease in the change in fair value of embedded derivatives and there would be a corresponding decrease of $323.0 million to our combined balance for deferred policy acquisition costs and deferred sales inducements recorded through operations as an increase in amortization of deferred policy acquisition costs and deferred sales inducements. A decrease by 100 basis points in the discount rate used to discount the excess projected contract values would increase the fair value of the embedded derivatives by $635.9 million recorded through operations as an increase in the change in fair value of embedded derivatives and there would be a corresponding increase of $355.8 million to our combined balance for deferred policy acquisition costs and deferred sales inducements recorded through operations as a decrease in amortization of deferred policy acquisition costs and deferred sales inducements.
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Investments At June 30, 2019 and December 31, 2018, the amortized cost and fair value of fixed maturity securities were as follows:
The amortized cost and fair value of fixed maturity securities at June 30, 2019, by contractual maturity, are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. All of our mortgage and other asset backed securities provide for periodic payments throughout their lives and are shown below as separate lines.
Net unrealized gains (losses) on available for sale fixed maturity securities reported as a separate component of stockholders' equity were comprised of the following:
The National Association of Insurance Commissioners ("NAIC") assigns designations to fixed maturity securities. These designations range from Class 1 (highest quality) to Class 6 (lowest quality). In general, securities are assigned a designation based upon the ratings they are given by the Nationally Recognized Statistical Rating Organizations ("NRSRO’s"). The NAIC designations are utilized by insurers in preparing their annual statutory statements. NAIC Class 1 and 2 designations are considered "investment grade" while NAIC Class 3 through 6 designations are considered "non-investment grade." Based on the NAIC designations, we had 97% of our fixed maturity portfolio rated investment grade at both June 30, 2019 and December 31, 2018, respectively. The following table summarizes the credit quality, as determined by NAIC designation, of our fixed maturity portfolio as of the dates indicated:
The following table shows our investments' gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities (consisting of 1,013 and 2,715 securities, respectively) have been in a continuous unrealized loss position, at June 30, 2019 and December 31, 2018:
The unrealized losses at June 30, 2019 are principally related to timing of the purchases of these securities, which carry less yield than those available at June 30, 2019. Approximately 73% and 87% of the unrealized losses on fixed maturity securities shown in the above table for June 30, 2019 and December 31, 2018, respectively, are on securities that are rated investment grade, defined as being the highest two NAIC designations. Because we did not have the intent to sell fixed maturity securities with unrealized losses and it was not more likely than not that we would be required to sell these securities prior to recovery of the amortized cost, which may be maturity, we did not consider these investments to be other than temporarily impaired as of June 30, 2019 and December 31, 2018. Changes in net unrealized gains/losses on investments for the three and six months ended June 30, 2019 and 2018 are as follows:
Proceeds from sales of available for sale securities for the six months ended June 30, 2019 and 2018 were $359.3 million and $1.7 billion, respectively. Scheduled principal repayments, calls and tenders for available for sale fixed maturity securities for the six months ended June 30, 2019 and 2018 were $500.5 million and $635.2 million, respectively. Realized gains and losses on sales are determined on the basis of specific identification of investments based on the trade date. Net realized losses on investments, excluding net OTTI losses for the three and six months ended June 30, 2019 and 2018, are as follows:
Losses on available for sale fixed maturity securities in 2019 and 2018 were realized primarily due to strategies to reposition the fixed maturity security portfolio that result in improved net investment income, credit risk or duration profiles as they pertain to our asset liability management. We review and analyze all investments on an ongoing basis for changes in market interest rates and credit deterioration. This review process includes analyzing our ability to recover the amortized cost basis of each investment that has a fair value that is materially lower than its amortized cost and requires a high degree of management judgment and involves uncertainty. The evaluation of securities for other than temporary impairments is a quantitative and qualitative process, which is subject to risks and uncertainties. We have a policy and process to identify securities that could potentially have impairments that are other than temporary. This process involves monitoring market events and other items that could impact issuers. The evaluation includes but is not limited to such factors as:
We determine whether other than temporary impairment losses should be recognized for debt securities by assessing all facts and circumstances surrounding each security. Where the decline in fair value of debt securities is attributable to changes in market interest rates or to factors such as market volatility, liquidity and spread widening, and we anticipate recovery of all contractual or expected cash flows, we do not consider these investments to be other than temporarily impaired because we do not intend to sell these investments and it is not more likely than not we will be required to sell these investments before a recovery of amortized cost, which may be maturity. If we intend to sell a debt security or if it is more likely than not that we will be required to sell a debt security before recovery of its amortized cost basis, other than temporary impairment has occurred and the difference between amortized cost and fair value will be recognized as a loss in operations. If we do not intend to sell and it is not more likely than not we will be required to sell the debt security but also do not expect to recover the entire amortized cost basis of the security, an impairment loss would be recognized in operations in the amount of the expected credit loss. We determine the amount of expected credit loss by calculating the present value of the cash flows expected to be collected discounted at each security's acquisition yield based on our consideration of whether the security was of high credit quality at the time of acquisition. The difference between the present value of expected future cash flows and the amortized cost basis of the security is the amount of credit loss recognized in operations. The remaining amount of the other than temporary impairment is recognized in other comprehensive income (loss). The determination of the credit loss component of a mortgage backed security is based on a number of factors. The primary consideration in this evaluation process is the issuer's ability to meet current and future interest and principal payments as contractually stated at time of purchase. Our review of these securities includes an analysis of the cash flow modeling under various default scenarios considering independent third party benchmarks, the seniority of the specific tranche within the structure of the security, the composition of the collateral and the actual default, loss severity and prepayment experience exhibited. With the input of third party assumptions for default projections, loss severity and prepayment expectations, we evaluate the cash flow projections to determine whether the security is performing in accordance with its contractual obligation. We utilize the models from a leading structured product software specialist serving institutional investors. These models incorporate each security's seniority and cash flow structure. In circumstances where the analysis implies a potential for principal loss at some point in the future, we use the "best estimate" cash flow projection discounted at the security's effective yield at acquisition to determine the amount of our potential credit loss associated with this security. The discounted expected future cash flows equates to our expected recovery value. Any shortfall of the expected recovery when compared to the amortized cost of the security will be recorded as the credit loss component of other than temporary impairment. The cash flow modeling is performed on a security-by-security basis and incorporates actual cash flows on the residential mortgage backed securities through the current period, as well as the projection of remaining cash flows using a number of assumptions including default rates, prepayment rates and loss severity rates. The default curves we use are tailored to the Prime or Alt-A residential mortgage backed securities that we own, which assume lower default rates and loss severity for Prime securities versus Alt-A securities. These default curves are scaled higher or lower depending on factors such as current underlying mortgage loan performance, rating agency loss projections, loan to value ratios, geographic diversity, as well as other appropriate considerations. The determination of the credit loss component of a corporate bond is based on the underlying financial performance of the issuer and their ability to meet their contractual obligations. Considerations in our evaluation include, but are not limited to, credit rating changes, financial statement and ratio analysis, changes in management, significant changes in credit spreads, breaches of financial covenants and a review of the economic outlook for the industry and markets in which they trade. In circumstances where an issuer appears unlikely to meet its future obligation, or the security's price decline is deemed other than temporary, an estimate of credit loss is determined. Credit loss is calculated using default probabilities as derived from the credit default swaps markets in conjunction with recovery rates derived from independent third party analysis or a best estimate of credit loss. This credit loss rate is then incorporated into a present value calculation based on an expected principal loss in the future discounted at the yield at the date of purchase and compared to amortized cost to determine the amount of credit loss associated with the security. In addition, for debt securities which we do not intend to sell and it is not more likely than not we will be required to sell, but our intent changes due to changes or events that could not have been reasonably anticipated, an other than temporary impairment charge is recognized. Once an impairment charge has been recorded, we then continue to review the other than temporarily impaired securities for appropriate valuation on an ongoing basis. Unrealized losses may be recognized in future periods through a charge to earnings should we later conclude that the decline in fair value below amortized cost is other than temporary pursuant to our accounting policy described above. The use of different methodologies and assumptions to determine the fair value of investments and the timing and amount of impairments may have a material effect on the amounts presented in our consolidated financial statements. The following table summarizes other than temporary impairments for the three and six months ended June 30, 2019 and 2018, by asset type:
The cumulative portion of other than temporary impairments determined to be credit losses which have been recognized in operations for debt securities are summarized as follows:
The following table summarizes the cumulative noncredit portion of OTTI and the change in fair value since recognition of OTTI, both of which were recognized in other comprehensive income, by major type of security, for securities that are part of our investment portfolio at June 30, 2019 and December 31, 2018:
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Mortgage Loans on Real Estate |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Loans on Real Estate | Mortgage Loans on Real Estate Our mortgage loan portfolio is summarized in the following table. There were commitments outstanding of $90.1 million at June 30, 2019.
The portfolio consists of commercial mortgage loans collateralized by the related properties and diversified as to property type, location and loan size. Our mortgage lending policies establish limits on the amount that can be loaned to one borrower and other criteria to attempt to reduce the risk of default. The mortgage loan portfolio is summarized by geographic region and property type as follows:
Our financing receivables currently consist of one portfolio segment which is our commercial mortgage loan portfolio. These are mortgage loans with collateral consisting of commercial real estate and borrowers consisting mostly of limited liability partnerships or limited liability corporations. We evaluate our mortgage loan portfolio for the establishment of a loan loss allowance by specific identification of impaired loans and the measurement of an estimated loss for each individual loan identified. A mortgage loan is impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. If we determine that the value of any specific mortgage loan is impaired, the carrying amount of the mortgage loan will be reduced to its fair value, based upon the present value of expected future cash flows from the loan discounted at the loan's effective interest rate, or the fair value of the underlying collateral less estimated costs to sell. In addition, we analyze the mortgage loan portfolio for the need of a general loan allowance for probable losses on all other loans on a quantitative and qualitative basis. The amount of the general loan allowance is based upon management's evaluation of the collectability of the loan portfolio, historical loss experience, delinquencies, credit concentrations, underwriting standards and national and local economic conditions. We rate each of the mortgage loans in our portfolio based on factors such as historical operating performance, loan to value ratio and economic outlook, among others. We calculate a loss factor to apply to each rating based on historical losses we have recognized in our mortgage loan portfolio. We apply the loss factors to the total principal outstanding within each rating category to determine an appropriate estimate of the general loan loss allowance. We also assess the portfolio qualitatively and apply a loss rate to all loans without a specific allowance based on management's assessment of economic conditions, and we apply an additional amount of loss allowance to a group of loans that we have identified as having higher risk of loss. The following table presents a rollforward of our specific and general valuation allowances for mortgage loans on real estate:
The specific allowance represents the total credit loss allowances on loans which are individually evaluated for impairment. The general allowance is for the group of loans discussed above which are collectively evaluated for impairment. The following table presents the total outstanding principal of loans evaluated for impairment by basis of impairment method:
Charge-offs include allowances that have been established on loans that were satisfied either by taking ownership of the collateral or by some other means such as discounted pay-off or loan sale. When ownership of the property is taken it is recorded at the lower of the mortgage loan's carrying value or the property's fair value (based on appraised values) less estimated costs to sell. The real estate owned is recorded as a component of Other investments and the mortgage loan is recorded as fully paid, with any allowance for credit loss that has been established charged off. Fair value of the real estate is determined by third party appraisal. Recoveries are situations where we have received a payment from the borrower in an amount greater than the carrying value of the loan (principal outstanding less specific allowance). We did not own any real estate during the three and six months ended June 30, 2019 and 2018. We analyze credit risk of our mortgage loans by analyzing all available evidence on loans that are delinquent and loans that are in a workout period.
Loans that are categorized as "in workout" consist of loans that we have agreed to lower or no mortgage payments for a period of time while the borrowers address cash flow and/or operational issues. The key features of these workouts have been determined on a loan-by-loan basis. Most of these loans are in a period of low cash flow due to tenants vacating their space or tenants requesting rent relief during difficult economic periods. Generally, we have allowed the borrower a six month interest only period and in some cases a twelve month period of interest only. Interest only workout loans are expected to return to their regular debt service payments after the interest only period. Interest only loans that are not fully amortizing will have a larger balance at their balloon date than originally contracted. Fully amortizing loans that are in interest only periods will have larger debt service payments for their remaining term due to lost principal payments during the interest only period. In limited circumstances we have allowed borrowers to pay the principal portion of their loan payment into an escrow account that can be used for capital and tenant improvements for a period of not more than twelve months. In these situations new loan amortization schedules are calculated based on the principal not collected during this twelve month workout period and larger payments are collected for the remaining term of each loan. In all cases, the original interest rate and maturity date have not been modified, and we have not forgiven any principal amounts. Mortgage loans are considered delinquent when they become 60 days or more past due. In general, when loans become 90 days past due, become collateral dependent or enter a period with no debt service payments required we place them on non-accrual status and discontinue recognizing interest income. If payments are received on a delinquent loan, interest income is recognized to the extent it would have been recognized if normal principal and interest would have been received timely. If payments are received to bring a delinquent loan back to current we will resume accruing interest income on that loan. There were no loans in non-accrual status at June 30, 2019 and December 31, 2018, respectively. We define collateral dependent loans as those mortgage loans for which we will depend on the value of the collateral real estate to satisfy the outstanding principal of the loan. All of our commercial mortgage loans depend on the cash flow of the borrower to be at a sufficient level to service the principal and interest payments as they come due. In general, cash inflows of the borrowers are generated by collecting monthly rent from tenants occupying space within the borrowers' properties. Our borrowers face collateral risks such as tenants going out of business, tenants struggling to make rent payments as they become due, and tenants canceling leases and moving to other locations. We have a number of loans where the real estate is occupied by a single tenant. Our borrowers sometimes face both a reduction in cash flow on their mortgage property as well as a reduction in the fair value of the real estate collateral. If borrowers are unable to replace lost rent revenue and increases in the fair value of their property do not materialize, we could potentially incur more losses than what we have allowed for in our specific and general loan loss allowances. Aging of financing receivables is summarized in the following table, with loans in a "workout" period as of the reporting date considered current if payments are current in accordance with agreed upon terms:
Financing receivables summarized in the following two tables represent all loans that we are either not currently collecting, or those we feel it is probable we will not collect all amounts due according to the contractual terms of the loan agreements (all loans that we have worked with the borrower to alleviate short-term cash flow issues, loans delinquent for 60 days or more at the reporting date, loans we have determined to be collateral dependent and loans that we have recorded specific impairments on that we feel may continue to have performance issues).
A Troubled Debt Restructuring ("TDR") is a situation where we have granted a concession to a borrower for economic or legal reasons related to the borrower's financial difficulties that we would not otherwise consider. A mortgage loan that has been granted new terms, including workout terms as described previously, would be considered a TDR if it meets conditions that would indicate a borrower is experiencing financial difficulty and the new terms constitute a concession on our part. We analyze all loans where we have agreed to workout terms and all loans that we have refinanced to determine if they meet the definition of a TDR. We consider the following factors in determining whether or not a borrower is experiencing financial difficulty:
If the borrower is determined to be in financial difficulty, we consider the following conditions to determine if the borrower is granted a concession:
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Derivative Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments | Derivative Instruments None of our derivatives qualify for hedge accounting, thus, any change in the fair value of the derivatives is recognized immediately in the consolidated statements of operations. The fair value of our derivative instruments, including derivative instruments embedded in fixed index annuity contracts, presented in the consolidated balance sheets are as follows:
The changes in fair value of derivatives included in the unaudited consolidated statements of operations are as follows:
The amounts presented as "Other changes in difference between policy benefit reserves computed using derivative accounting vs. long-duration contracts accounting" represents the total change in the difference between policy benefit reserves for fixed index annuities computed under the derivative accounting standard and the long-duration contracts accounting standard at each balance sheet date, less the change in fair value of our fixed index annuities embedded derivatives that is presented as Level 3 liabilities in Note 2. We have fixed index annuity products that guarantee the return of principal to the policyholder and credit interest based on a percentage of the gain in a specified market index. When fixed index annuity deposits are received, a portion of the deposit is used to purchase derivatives consisting of call options on the applicable market indices to fund the index credits due to fixed index annuity policyholders. Substantially all such call options are one year options purchased to match the funding requirements of the underlying policies. The call options are marked to fair value with the change in fair value included as a component of revenues. The change in fair value of derivatives includes the gains or losses recognized at the expiration of the option term and the changes in fair value for open positions. On the respective anniversary dates of the index policies, the index used to compute the index credit is reset and we purchase new call options to fund the next index credit. We manage the cost of these purchases through the terms of our fixed index annuities, which permit us to change caps, participation rates, and/or asset fees, subject to guaranteed minimums on each policy's anniversary date. By adjusting caps, participation rates, or asset fees, we can generally manage option costs except in cases where the contractual features would prevent further modifications. Our strategy attempts to mitigate any potential risk of loss due to the nonperformance of the counterparties to these call options through a regular monitoring process which evaluates the program's effectiveness. We do not purchase call options that would require payment or collateral to another institution and our call options do not contain counterparty credit-risk-related contingent features. We are exposed to risk of loss in the event of nonperformance by the counterparties and, accordingly, we purchase our option contracts from multiple counterparties and evaluate the creditworthiness of all counterparties prior to purchase of the contracts. All of these options have been purchased from nationally recognized financial institutions with a Standard and Poor's credit rating of A- or higher at the time of purchase and the maximum credit exposure to any single counterparty is subject to concentration limits. We also have credit support agreements that allow us to request the counterparty to provide collateral to us when the fair value of our exposure to the counterparty exceeds specified amounts. The notional amount and fair value of our call options by counterparty and each counterparty's current credit rating are as follows:
As of June 30, 2019 and December 31, 2018, we held $0.8 billion and $0.2 billion, respectively, of cash and cash equivalents and other investments from counterparties for derivative collateral, which is included in Other liabilities on our consolidated balance sheets. This derivative collateral limits the maximum amount of economic loss due to credit risk that we would incur if parties to the call options failed completely to perform according to the terms of the contracts to $51.3 million and $16.1 million at June 30, 2019 and December 31, 2018, respectively. The future index credits on our fixed index annuities are treated as a "series of embedded derivatives" over the expected life of the applicable contract. We do not purchase call options to fund the index liabilities which may arise after the next policy anniversary date. We must value both the call options and the related forward embedded options in the policies at fair value. We entered into an interest rate swap and interest rate caps to manage interest rate risk associated with the floating rate component on certain of our subordinated debentures. See Note 10 in our Annual Report on Form 10-K for the year ended December 31, 2018 for more information on our subordinated debentures. The terms of the interest rate swap provide that we pay a fixed rate of interest and receive a floating rate of interest. The terms of the interest rate caps limit the three month LIBOR to 2.50%. The interest rate swap and caps are not effective hedges under accounting guidance for derivative instruments and hedging activities. Therefore, we record the interest rate swap and caps at fair value and any net cash payments received or paid are included in the change in fair value of derivatives in the unaudited consolidated statements of operations. Details regarding the interest rate swap are as follows:
Details regarding the interest rate caps are as follows:
The interest rate swap converts floating rates to fixed rates until March 2021. The interest rate caps cap our interest rates until July 2021. As of June 30, 2019, we deposited $0.7 million of collateral with the counterparty to the swap.
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Notes Payable and Amounts Due Under Repurchase Agreements |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable and Amounts Due Under Repurchase Agreements | Notes Payable and Amounts Due Under Repurchase Agreements Notes payable includes the following:
On June 16, 2017, we issued $500 million aggregate principal amount of senior unsecured notes due 2027 which bear interest at 5.0% per year and will mature on June 15, 2027 (the "2027 Notes"). The 2027 Notes were issued at a $0.3 million discount, which is being amortized over the term of the 2027 Notes using the effective interest method. Contractual interest is payable semi-annually in arrears each June 15th and December 15th. The initial transaction fees and costs totaling $5.8 million were capitalized as deferred financing costs and are being amortized over the term of the 2027 Notes using the effective interest method. As part of our investment strategy, we enter into securities repurchase agreements (short-term collateralized borrowings). When we do borrow cash on these repurchase agreements, we pledge collateral in the form of debt securities with fair values approximately equal to the amount due and we use the cash to purchase debt securities ahead of the time we collect the cash from selling annuity policies to avoid a lag between the investment of funds and the obligation to credit interest to policyholders. We earn investment income on the securities purchased with these borrowings at a rate in excess of the cost of these borrowings. Such borrowings averaged $20.4 million and $54.6 million during the three and six months ended June 30, 2019, respectively, compared to $111.4 million and $59.8 million for the same periods in 2018. The maximum amount borrowed was $243.6 million and $544.1 million during the six months ended June 30, 2019 and June 30, 2018, respectively. The weighted average interest rate on amounts due under repurchase agreements was 4.62% and 3.04% for the three and six months ended June 30, 2019, respectively, compared to 1.74% for both the same periods in 2018.
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Commitments and Contingencies |
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Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies We are occasionally involved in litigation, both as a defendant and as a plaintiff. In addition, state regulatory bodies, such as state insurance departments, the Securities and Exchange Commission ("SEC"), the Department of Labor, and other regulatory bodies regularly make inquiries and conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, and the Employee Retirement Income Security Act of 1974, as amended. In accordance with applicable accounting guidelines, we establish an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. As a litigation or regulatory matter is developing we, in conjunction with outside counsel, evaluate on an ongoing basis whether the matter presents a loss contingency that meets conditions indicating the need for accrual and/or disclosure, and if not the matter will continue to be monitored for further developments. If and when the loss contingency related to litigation or regulatory matters is deemed to be both probable and estimable, we will establish an accrued liability with respect to that matter and will continue to monitor the matter for further developments that may affect the amount of the accrued liability. There can be no assurance that any pending or future litigation will not have a material adverse effect on our business, financial condition, or results of operations. In addition to our commitments to fund mortgage loans, we have unfunded commitments at June 30, 2019 to limited partnerships of $33.0 million and to fixed maturity securities of $122.5 million.
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Earnings (Loss) Per Share |
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Earnings (Loss) Per Share | Earnings (Loss) Per Share The following table sets forth the computation of earnings (loss) per common share and earnings (loss) per common share - assuming dilution:
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Significant Accounting Policies (Policies) |
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Adopted and New Accounting Pronouncements, Policy | Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) that requires recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU affects accounting and disclosure more dramatically for lessees as accounting and disclosure for lessors is mainly unchanged. We adopted this ASU on January 1, 2019. The adoption of this ASU resulted in the recognition of a lease asset and lease liability of $3.9 million, respectively, on our consolidated balance sheet at June 30, 2019. In March 2017, the FASB issued an ASU that applies to certain callable debt securities where the amortized cost basis is at a premium to the price repayable by the issuer at the earliest call date. Under this guidance, the premium is amortized to the first call date. We adopted this ASU on January 1, 2019. The adoption of this ASU did not have a material impact on our consolidated financial statements. In June 2018, the FASB issued an ASU that expands the scope of Accounting Standards Codification 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services to nonemployees and eliminates the existing accounting model for nonemployee share-based payment awards. We adopted this ASU on January 1, 2019. While this ASU results in an earlier measurement date for our nonemployee restricted stock units that have not vested as of January 1, 2019, there was no impact to our consolidated financial statements upon adoption. New Accounting Pronouncements In June 2016, the FASB issued an ASU that significantly changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model that requires these assets be presented at the net amount expected to be collected. In addition, credit losses on available for sale debt securities will be recorded through an allowance account. This ASU will be effective for us on January 1, 2020, with early adoption permitted. While we are still in the process of evaluating the full impact this guidance will have on our consolidated financial statements, we believe the new impairment model will lead to earlier recognition of credit losses for our commercial mortgage loans. In August 2018, the FASB issued an ASU that revises certain aspects of the measurement models and disclosure requirements for long duration insurance and investment contracts. The FASB’s objective in issuing this ASU is to improve, simplify, and enhance the accounting for long-duration contracts. The revisions include updating cash flow assumptions in the calculation of the liability for traditional life products, introducing the term ‘market risk benefit’ ("MRB") and requiring all contract features meeting the definition of an MRB to be measured at fair value, simplifying the method used to amortize deferred policy acquisition costs and deferred sales inducements to a constant basis over the expected term of the related contracts rather than based on gross profits and enhancing disclosure requirements. While this ASU is effective for us on January 1, 2022, the transition date (the remeasurement date) is January 1, 2020. Early adoption of this ASU is permitted. We are in the process of evaluating the impact this guidance will have on our consolidated financial statements.
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Fair Values of Financial Instruments, Policy | Fair value is the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. The objective of a fair value measurement is to determine that price for each financial instrument at each measurement date. We meet this objective using various methods of valuation that include market, income and cost approaches. We categorize our financial instruments into three levels of fair value hierarchy based on the priority of inputs used in determining fair value. The hierarchy defines the highest priority inputs (Level 1) as quoted prices in active markets for identical assets or liabilities. The lowest priority inputs (Level 3) are our own assumptions about what a market participant would use in determining fair value such as estimated future cash flows. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. We categorize financial assets and liabilities recorded at fair value in the consolidated balance sheets as follows:
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Investments, Policy | We review and analyze all investments on an ongoing basis for changes in market interest rates and credit deterioration. This review process includes analyzing our ability to recover the amortized cost basis of each investment that has a fair value that is materially lower than its amortized cost and requires a high degree of management judgment and involves uncertainty. The evaluation of securities for other than temporary impairments is a quantitative and qualitative process, which is subject to risks and uncertainties. We have a policy and process to identify securities that could potentially have impairments that are other than temporary. This process involves monitoring market events and other items that could impact issuers. The evaluation includes but is not limited to such factors as:
We determine whether other than temporary impairment losses should be recognized for debt securities by assessing all facts and circumstances surrounding each security. Where the decline in fair value of debt securities is attributable to changes in market interest rates or to factors such as market volatility, liquidity and spread widening, and we anticipate recovery of all contractual or expected cash flows, we do not consider these investments to be other than temporarily impaired because we do not intend to sell these investments and it is not more likely than not we will be required to sell these investments before a recovery of amortized cost, which may be maturity. If we intend to sell a debt security or if it is more likely than not that we will be required to sell a debt security before recovery of its amortized cost basis, other than temporary impairment has occurred and the difference between amortized cost and fair value will be recognized as a loss in operations. If we do not intend to sell and it is not more likely than not we will be required to sell the debt security but also do not expect to recover the entire amortized cost basis of the security, an impairment loss would be recognized in operations in the amount of the expected credit loss. We determine the amount of expected credit loss by calculating the present value of the cash flows expected to be collected discounted at each security's acquisition yield based on our consideration of whether the security was of high credit quality at the time of acquisition. The difference between the present value of expected future cash flows and the amortized cost basis of the security is the amount of credit loss recognized in operations. The remaining amount of the other than temporary impairment is recognized in other comprehensive income (loss). The determination of the credit loss component of a mortgage backed security is based on a number of factors. The primary consideration in this evaluation process is the issuer's ability to meet current and future interest and principal payments as contractually stated at time of purchase. Our review of these securities includes an analysis of the cash flow modeling under various default scenarios considering independent third party benchmarks, the seniority of the specific tranche within the structure of the security, the composition of the collateral and the actual default, loss severity and prepayment experience exhibited. With the input of third party assumptions for default projections, loss severity and prepayment expectations, we evaluate the cash flow projections to determine whether the security is performing in accordance with its contractual obligation. We utilize the models from a leading structured product software specialist serving institutional investors. These models incorporate each security's seniority and cash flow structure. In circumstances where the analysis implies a potential for principal loss at some point in the future, we use the "best estimate" cash flow projection discounted at the security's effective yield at acquisition to determine the amount of our potential credit loss associated with this security. The discounted expected future cash flows equates to our expected recovery value. Any shortfall of the expected recovery when compared to the amortized cost of the security will be recorded as the credit loss component of other than temporary impairment. The cash flow modeling is performed on a security-by-security basis and incorporates actual cash flows on the residential mortgage backed securities through the current period, as well as the projection of remaining cash flows using a number of assumptions including default rates, prepayment rates and loss severity rates. The default curves we use are tailored to the Prime or Alt-A residential mortgage backed securities that we own, which assume lower default rates and loss severity for Prime securities versus Alt-A securities. These default curves are scaled higher or lower depending on factors such as current underlying mortgage loan performance, rating agency loss projections, loan to value ratios, geographic diversity, as well as other appropriate considerations. The determination of the credit loss component of a corporate bond is based on the underlying financial performance of the issuer and their ability to meet their contractual obligations. Considerations in our evaluation include, but are not limited to, credit rating changes, financial statement and ratio analysis, changes in management, significant changes in credit spreads, breaches of financial covenants and a review of the economic outlook for the industry and markets in which they trade. In circumstances where an issuer appears unlikely to meet its future obligation, or the security's price decline is deemed other than temporary, an estimate of credit loss is determined. Credit loss is calculated using default probabilities as derived from the credit default swaps markets in conjunction with recovery rates derived from independent third party analysis or a best estimate of credit loss. This credit loss rate is then incorporated into a present value calculation based on an expected principal loss in the future discounted at the yield at the date of purchase and compared to amortized cost to determine the amount of credit loss associated with the security. In addition, for debt securities which we do not intend to sell and it is not more likely than not we will be required to sell, but our intent changes due to changes or events that could not have been reasonably anticipated, an other than temporary impairment charge is recognized. Once an impairment charge has been recorded, we then continue to review the other than temporarily impaired securities for appropriate valuation on an ongoing basis. Unrealized losses may be recognized in future periods through a charge to earnings should we later conclude that the decline in fair value below amortized cost is other than temporary pursuant to our accounting policy described above. The use of different methodologies and assumptions to determine the fair value of investments and the timing and amount of impairments may have a material effect on the amounts presented in our consolidated financial statements.
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Mortgage Loans on Real Estate, Allowance for Loan Losses, Policy | We evaluate our mortgage loan portfolio for the establishment of a loan loss allowance by specific identification of impaired loans and the measurement of an estimated loss for each individual loan identified. A mortgage loan is impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. If we determine that the value of any specific mortgage loan is impaired, the carrying amount of the mortgage loan will be reduced to its fair value, based upon the present value of expected future cash flows from the loan discounted at the loan's effective interest rate, or the fair value of the underlying collateral less estimated costs to sell. In addition, we analyze the mortgage loan portfolio for the need of a general loan allowance for probable losses on all other loans on a quantitative and qualitative basis. The amount of the general loan allowance is based upon management's evaluation of the collectability of the loan portfolio, historical loss experience, delinquencies, credit concentrations, underwriting standards and national and local economic conditions. We rate each of the mortgage loans in our portfolio based on factors such as historical operating performance, loan to value ratio and economic outlook, among others. We calculate a loss factor to apply to each rating based on historical losses we have recognized in our mortgage loan portfolio. We apply the loss factors to the total principal outstanding within each rating category to determine an appropriate estimate of the general loan loss allowance. We also assess the portfolio qualitatively and apply a loss rate to all loans without a specific allowance based on management's assessment of economic conditions, and we apply an additional amount of loss allowance to a group of loans that we have identified as having higher risk of loss.
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Mortgage Loans on Real Estate, Real Estate Acquired Through Foreclosure, Policy | Charge-offs include allowances that have been established on loans that were satisfied either by taking ownership of the collateral or by some other means such as discounted pay-off or loan sale. When ownership of the property is taken it is recorded at the lower of the mortgage loan's carrying value or the property's fair value (based on appraised values) less estimated costs to sell. The real estate owned is recorded as a component of Other investments and the mortgage loan is recorded as fully paid, with any allowance for credit loss that has been established charged off. Fair value of the real estate is determined by third party appraisal. Recoveries are situations where we have received a payment from the borrower in an amount greater than the carrying value of the loan (principal outstanding less specific allowance). | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Loans on Real Estate, Non-Accrual Loan Status, Policy | Loans that are categorized as "in workout" consist of loans that we have agreed to lower or no mortgage payments for a period of time while the borrowers address cash flow and/or operational issues. The key features of these workouts have been determined on a loan-by-loan basis. Most of these loans are in a period of low cash flow due to tenants vacating their space or tenants requesting rent relief during difficult economic periods. Generally, we have allowed the borrower a six month interest only period and in some cases a twelve month period of interest only. Interest only workout loans are expected to return to their regular debt service payments after the interest only period. Interest only loans that are not fully amortizing will have a larger balance at their balloon date than originally contracted. Fully amortizing loans that are in interest only periods will have larger debt service payments for their remaining term due to lost principal payments during the interest only period. In limited circumstances we have allowed borrowers to pay the principal portion of their loan payment into an escrow account that can be used for capital and tenant improvements for a period of not more than twelve months. In these situations new loan amortization schedules are calculated based on the principal not collected during this twelve month workout period and larger payments are collected for the remaining term of each loan. In all cases, the original interest rate and maturity date have not been modified, and we have not forgiven any principal amounts. Mortgage loans are considered delinquent when they become 60 days or more past due. In general, when loans become 90 days past due, become collateral dependent or enter a period with no debt service payments required we place them on non-accrual status and discontinue recognizing interest income. If payments are received on a delinquent loan, interest income is recognized to the extent it would have been recognized if normal principal and interest would have been received timely. If payments are received to bring a delinquent loan back to current we will resume accruing interest income on that loan.
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Mortgage Loans on Real Estate, Troubled Debt Restructuring, Policy | A Troubled Debt Restructuring ("TDR") is a situation where we have granted a concession to a borrower for economic or legal reasons related to the borrower's financial difficulties that we would not otherwise consider. A mortgage loan that has been granted new terms, including workout terms as described previously, would be considered a TDR if it meets conditions that would indicate a borrower is experiencing financial difficulty and the new terms constitute a concession on our part. We analyze all loans where we have agreed to workout terms and all loans that we have refinanced to determine if they meet the definition of a TDR. We consider the following factors in determining whether or not a borrower is experiencing financial difficulty:
If the borrower is determined to be in financial difficulty, we consider the following conditions to determine if the borrower is granted a concession:
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Commitments and Contingencies, Policy | In accordance with applicable accounting guidelines, we establish an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. As a litigation or regulatory matter is developing we, in conjunction with outside counsel, evaluate on an ongoing basis whether the matter presents a loss contingency that meets conditions indicating the need for accrual and/or disclosure, and if not the matter will continue to be monitored for further developments. If and when the loss contingency related to litigation or regulatory matters is deemed to be both probable and estimable, we will establish an accrued liability with respect to that matter and will continue to monitor the matter for further developments that may affect the amount of the accrued liability. |
Fair Values of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Amounts and Fair Values of Financial Instruments | The following sets forth a comparison of the carrying amounts and fair values of our financial instruments:
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Assets and Liabilities Measured at Fair Value on a Recurring Basis, By Fair Value Hierarchy Level | Our assets and liabilities which are measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018 are presented below based on the fair value hierarchy levels:
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Schedule of Assumptions Used in Estimating Fair Value | The following table presents average lapse rate and partial withdrawal rate assumptions, by contract duration, used in estimating the fair value of the embedded derivative component of our fixed index annuity policy benefit reserves at each reporting date:
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Liabilities Measured at Fair Value on Recurring Basis, Level 3 Reconciliation | The following table provides a reconciliation of the beginning and ending balances for our Level 3 liabilities, which are measured at fair value on a recurring basis using significant unobservable inputs for the three and six months ended June 30, 2019 and 2018:
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Investments (Tables) |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fixed Maturity Securities | At June 30, 2019 and December 31, 2018, the amortized cost and fair value of fixed maturity securities were as follows:
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Schedule of Fixed Maturity Securities by Contractual Maturity Date | The amortized cost and fair value of fixed maturity securities at June 30, 2019, by contractual maturity, are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. All of our mortgage and other asset backed securities provide for periodic payments throughout their lives and are shown below as separate lines.
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Schedule of Components of Net Unrealized Gains (Losses) on Available for Sale Fixed Maturity Securities Reported as Separate Component of Stockholders' Equity | Net unrealized gains (losses) on available for sale fixed maturity securities reported as a separate component of stockholders' equity were comprised of the following:
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Schedule of Credit Quality of Fixed Maturity Security Portfolio by NAIC Designation | The following table summarizes the credit quality, as determined by NAIC designation, of our fixed maturity portfolio as of the dates indicated:
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Schedule of Gross Unrealized Losses on Investments, By Category and Length of Time | The following table shows our investments' gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities (consisting of 1,013 and 2,715 securities, respectively) have been in a continuous unrealized loss position, at June 30, 2019 and December 31, 2018:
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Schedule of Changes in Net Unrealized Gains/Losses on Investments | Changes in net unrealized gains/losses on investments for the three and six months ended June 30, 2019 and 2018 are as follows:
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Net Realized Gains (Losses) on Investments, Excluding Net OTTI Losses | Net realized losses on investments, excluding net OTTI losses for the three and six months ended June 30, 2019 and 2018, are as follows:
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Other Than Temporary Impairment by Asset Type | he following table summarizes other than temporary impairments for the three and six months ended June 30, 2019 and 2018, by asset type:
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Other Than Temporary Impairment, Credit Losses Recognized in Earnings | The cumulative portion of other than temporary impairments determined to be credit losses which have been recognized in operations for debt securities are summarized as follows:
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Schedule of Other Than Temporary Impairment Losses, Investments | The following table summarizes the cumulative noncredit portion of OTTI and the change in fair value since recognition of OTTI, both of which were recognized in other comprehensive income, by major type of security, for securities that are part of our investment portfolio at June 30, 2019 and December 31, 2018:
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Mortgage Loans on Real Estate (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Mortgage Loan Portfolio | Our mortgage loan portfolio is summarized in the following table. There were commitments outstanding of $90.1 million at June 30, 2019.
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Mortgage Loan Portfolio Summarized By Geographic Region and Property Type | The mortgage loan portfolio is summarized by geographic region and property type as follows:
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Rollforward of Allowance for Credit Losses | The following table presents a rollforward of our specific and general valuation allowances for mortgage loans on real estate:
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Impaired Mortgage Loans By Basis of Impairment | The following table presents the total outstanding principal of loans evaluated for impairment by basis of impairment method:
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Mortgage Loans By Credit Quality Indicator | We analyze credit risk of our mortgage loans by analyzing all available evidence on loans that are delinquent and loans that are in a workout period.
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Aging of Financing Receivables | Aging of financing receivables is summarized in the following table, with loans in a "workout" period as of the reporting date considered current if payments are current in accordance with agreed upon terms:
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Impaired Financing Receivables | Financing receivables summarized in the following two tables represent all loans that we are either not currently collecting, or those we feel it is probable we will not collect all amounts due according to the contractual terms of the loan agreements (all loans that we have worked with the borrower to alleviate short-term cash flow issues, loans delinquent for 60 days or more at the reporting date, loans we have determined to be collateral dependent and loans that we have recorded specific impairments on that we feel may continue to have performance issues).
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Derivative Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Derivative Instruments as Presented in the Consolidated Balance Sheets | The fair value of our derivative instruments, including derivative instruments embedded in fixed index annuity contracts, presented in the consolidated balance sheets are as follows:
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Schedule of Changes in Fair Value of Derivative Instruments | The changes in fair value of derivatives included in the unaudited consolidated statements of operations are as follows:
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Schedule of Call Options by Counterparty | The notional amount and fair value of our call options by counterparty and each counterparty's current credit rating are as follows:
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Schedule of Interest Rate Derivatives | Details regarding the interest rate swap are as follows:
Details regarding the interest rate caps are as follows:
|
Notes Payable and Amounts Due Under Repurchase Agreements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Notes Payable | Notes payable includes the following:
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Earnings (Loss) Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings (Loss) Per Share, Basic and Diluted | The following table sets forth the computation of earnings (loss) per common share and earnings (loss) per common share - assuming dilution:
|
Significant Accounting Policies (Narrative) (Details) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
| |
Accounting Standards Update 2016-02 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
New accounting pronouncement, effect of adoption, quantification | $ 3.9 |
Fair Values of Financial Instruments (Reconciliation of Beginning and Ending Balances of Level 3 Liabilities) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||||
Beginning balance | $ 8,876,055 | $ 8,233,557 | $ 8,165,405 | $ 8,790,427 | |
Premiums less benefits | 200,472 | 406,494 | 258,480 | 955,647 | |
Change in fair value, net | 204,590 | (288,900) | 857,232 | (1,394,923) | |
Ending balance | 9,281,117 | $ 8,351,151 | 9,281,117 | $ 8,351,151 | |
Coinsurance ceded, fixed index annuities embedded derivatives | 5,029,374 | 5,029,374 | $ 4,954,068 | ||
Fixed Index Annuities - Embedded Derivatives | |||||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||||
Coinsurance ceded, fixed index annuities embedded derivatives | $ 617,800 | $ 617,800 | $ 538,800 |
Investments (Narrative) (Details) $ in Millions |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2019
USD ($)
Securities
|
Jun. 30, 2018
USD ($)
|
Dec. 31, 2018
Securities
|
|
Investments [Abstract] | |||
Percentage of fixed maturity portfolio rated investment grade based on NAIC designations | 97.00% | 97.00% | |
Number of securities in unrealized loss position | Securities | 1,013 | 2,715 | |
Percentage of unrealized losses on fixed maturity securities where securities are rated investment grade | 73.00% | 87.00% | |
Proceeds from sales of available for sale securities | $ 359.3 | $ 1,700.0 | |
Principal repayments, calls and tenders of available for sale securities | $ 500.5 | $ 635.2 |
Investments (Net Unrealized Gains (Losses) on Available for Sale Fixed Maturity Securities Reported as a Separate Component of Stockholders' Equity) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Investments [Abstract] | ||
Net unrealized gains (losses) on available for sale fixed maturity securities | $ 2,693,347 | $ (207,463) |
Adjustments for assumed changes in amortization of deferred policy acquisition costs and deferred sales inducements | (1,392,780) | 112,571 |
Deferred income tax valuation allowance reversal | 22,534 | 22,534 |
Deferred income tax benefit (expense) | (273,117) | 19,926 |
Net unrealized gains (losses) reported as accumulated other comprehensive income (loss) | $ 1,049,984 | $ (52,432) |
Investments (Cumulative Credit Loss Portion of Other Than Temporary Impairment Recognized in Operations) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Investments [Abstract] | ||||
Cumulative credit loss at beginning of period | $ (175,398) | $ (154,073) | $ (175,398) | $ (157,066) |
Additions for the amount related to credit losses for which OTTI has not previously been recognized | (998) | (745) | (998) | (1,652) |
Additional credit losses on securities for which OTTI has previously been recognized | (215) | (1,651) | (215) | (1,651) |
Accumulated losses on securities that were disposed of during the period | 10,960 | 0 | 10,960 | 3,900 |
Cumulative credit loss at end of period | $ (165,651) | $ (156,469) | $ (165,651) | $ (156,469) |
Mortgage Loans on Real Estate (Summary of Mortgage Loan Portfolio) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Receivables [Abstract] | ||
Principal outstanding | $ 3,092,558 | $ 2,952,464 |
Loan loss allowance | (7,829) | (8,239) |
Deferred prepayment fees | (1,054) | (1,134) |
Mortgage loans on real estate | $ 3,083,675 | $ 2,943,091 |
Mortgage Loans on Real Estate (Allowance for Loan Losses Rollforward) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Financing Receivable, Allowance for Credit Losses [Roll Forward] | ||||
Beginning allowance balance | $ (8,239) | |||
Ending allowance balance | $ (7,829) | (7,829) | ||
Specific Allowance | ||||
Financing Receivable, Allowance for Credit Losses [Roll Forward] | ||||
Beginning allowance balance | (229) | $ (696) | (229) | $ (1,418) |
Charge-offs | 0 | 0 | 0 | 0 |
Recoveries | 0 | 0 | 0 | 722 |
Change in provision for credit losses | 0 | 0 | 0 | 0 |
Ending allowance balance | (229) | (696) | (229) | (696) |
General Allowance | ||||
Financing Receivable, Allowance for Credit Losses [Roll Forward] | ||||
Beginning allowance balance | (7,950) | (5,800) | (8,010) | (6,100) |
Charge-offs | 0 | 0 | 0 | 0 |
Recoveries | 0 | 0 | 0 | 0 |
Change in provision for credit losses | 350 | 170 | 410 | 470 |
Ending allowance balance | $ (7,600) | $ (5,630) | $ (7,600) | $ (5,630) |
Mortgage Loans on Real Estate (Impaired Mortgage Loans on Real Estate By Basis of Impairment) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Receivables [Abstract] | ||
Individually evaluated for impairment | $ 1,241 | $ 1,253 |
Collectively evaluated for impairment | 3,091,317 | 2,951,211 |
Principal outstanding | $ 3,092,558 | $ 2,952,464 |
Mortgage Loans on Real Estate (Mortgage Loans by Credit Quality Indicator) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Receivables [Abstract] | ||
Performing | $ 3,092,558 | $ 2,952,464 |
In workout | 0 | 0 |
Collateral dependent | 0 | 0 |
Principal outstanding | $ 3,092,558 | $ 2,952,464 |
Mortgage Loans on Real Estate (Schedule of Financing Receivables Past Due) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||
Commercial mortgage loans, past due | $ 0 | $ 0 |
Commercial mortgage loans, current | 3,092,558 | 2,952,464 |
Commercial mortgage loans, collateral dependent receivables | 0 | 0 |
Principal outstanding | 3,092,558 | 2,952,464 |
30 to 59 Days | ||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||
Commercial mortgage loans, past due | 0 | 0 |
60 to 89 Days | ||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||
Commercial mortgage loans, past due | 0 | 0 |
90 Days and Over | ||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||
Commercial mortgage loans, past due | $ 0 | $ 0 |
Derivative Instruments (Narrative) (Details) - USD ($) $ in Millions |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Derivative collateral | $ 800.0 | $ 200.0 |
Credit risk, maximum exposure | 51.3 | $ 16.1 |
Collateral on deposit | $ 0.7 | |
London Interbank Offered Rate (LIBOR) | Interest Rate Caps | ||
Derivative [Line Items] | ||
Cap rate | 2.50% |
Derivative Instruments (Fair Value of Derivative Instruments as Presented in the Consolidated Balance Sheets) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Derivative assets | $ 888,208 | $ 205,149 |
Not Designated as Hedging Instrument | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 888,267 | 206,100 |
Derivative liabilities | 9,281,998 | 8,165,405 |
Not Designated as Hedging Instrument | Call Options | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 888,208 | 205,149 |
Not Designated as Hedging Instrument | Interest Rate Caps | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 59 | 597 |
Not Designated as Hedging Instrument | Interest Rate Swap | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 0 | 354 |
Derivative liabilities | 881 | 0 |
Not Designated as Hedging Instrument | Fixed Index Annuities - Embedded Derivatives | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liabilities | $ 9,281,117 | $ 8,165,405 |
Derivative Instruments (Interest Rate Swap) (Details) - Interest Rate Swap, Maturity Date, March 15, 2021, 2.415% - Interest Rate Swap - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Derivative [Line Items] | ||
Notional amount | $ 85,500 | |
Pay rate | 2.415% | |
Derivative liabilities | $ (881) | |
Derivative assets | $ 354 |
Derivative Instruments (Interest Rate Caps) (Details) - Interest Rate Caps - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Derivative [Line Items] | ||
Notional amount | $ 79,000 | |
Derivative assets | 59 | $ 597 |
Interest Rate Caps, Maturity Date, July 7, 2021, 2.50% | ||
Derivative [Line Items] | ||
Notional amount | $ 40,000 | |
Cap rate | 2.50% | |
Derivative assets | $ 29 | 302 |
Interest Rate Caps, Maturity Date, July 8, 2021, 2.50% | ||
Derivative [Line Items] | ||
Notional amount | $ 12,000 | |
Cap rate | 2.50% | |
Derivative assets | $ 9 | 91 |
Interest Rate Caps, Maturity Date, July 29, 2021, 2.50% | ||
Derivative [Line Items] | ||
Notional amount | $ 27,000 | |
Cap rate | 2.50% | |
Derivative assets | $ 21 | $ 204 |
Notes Payable and Amounts Due Under Repurchase Agreements (Schedule of Notes Payable) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
Jun. 16, 2017 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Notes payable | $ 494,850 | $ 494,591 | |
June 2027 Notes | |||
Debt Instrument [Line Items] | |||
Debt instrument, face amount | 500,000 | 500,000 | $ 500,000 |
Unamortized debt issue costs | (4,858) | (5,102) | |
Unamortized discount | $ (292) | $ (307) | $ (300) |
Notes Payable and Amounts Due Under Repurchase Agreements (2027 Notes Narrative) (Details) - June 2027 Notes - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
Jun. 16, 2017 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Debt instrument, face amount | $ 500,000 | $ 500,000 | $ 500,000 |
Interest rate | 5.00% | ||
Unamortized discount | $ 292 | $ 307 | $ 300 |
Debt financing costs | $ 5,800 |
Notes Payable and Amounts Due Under Repurchase Agreements (Repurchase Agreements Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Debt Disclosure [Abstract] | ||||
Repurchase agreement, average borrowings | $ 20.4 | $ 111.4 | $ 54.6 | $ 59.8 |
Repurchase agreement, maximum amount borrowed | $ 243.6 | $ 544.1 | ||
Repurchase agreement, weighted average interest rate | 4.62% | 1.74% | 3.04% | 1.74% |
Commitments and Contingencies (Narrative) (Details) $ in Millions |
Jun. 30, 2019
USD ($)
|
---|---|
Limited Partnerships | |
Other Commitments [Line Items] | |
Unfunded commitments | $ 33.0 |
Fixed Maturity Securities | |
Other Commitments [Line Items] | |
Unfunded commitments | $ 122.5 |
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