Fair Values of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2020

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:


	September 30, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in thousands)
Assets
Fixed maturity securities, available for sale	$	51,700,743	$	51,700,743	$	51,580,490	$	51,580,490
Mortgage loans on real estate	3,926,699		4,070,821		3,448,793		3,536,446
Derivative instruments	874,741		874,741		1,355,989		1,355,989
Other investments	495,740		495,740		492,301		492,301
Cash and cash equivalents	2,656,632		2,656,632		2,293,392		2,293,392
Coinsurance deposits	4,886,705		4,480,027		5,115,013		4,635,926
Interest rate caps	—		—		6		6



Liabilities
Policy benefit reserves	59,750,209		51,872,229		61,540,992		51,800,247
Single premium immediate annuity (SPIA) benefit reserves	241,782		249,341		255,698		263,773
Notes payable	495,528		544,640		495,116		541,520
Subordinated debentures	78,037		81,451		157,265		168,357

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 September 30, 2020 and December 31, 2019 are presented below based on the fair value hierarchy levels:


	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
September 30, 2020
Assets
Fixed maturity securities, available for sale:
United States Government full faith and credit	$	38,739	$	32,906	$	5,833	$	—
United States Government sponsored agencies	1,074,978		—		1,074,978		—
United States municipalities, states and territories	3,805,086		—		3,805,086		—
Foreign government obligations	209,233		—		209,233		—
Corporate securities	33,457,290		10		33,457,280		—
Residential mortgage backed securities	1,623,073		—		1,623,073		—
Commercial mortgage backed securities	5,478,783		—		5,478,783		—
Other asset backed securities	6,013,561		—		6,013,561		—
Derivative instruments	874,741		—		874,741		—
Cash and cash equivalents	2,656,632		2,656,632		—		—



	$	55,232,116	$	2,689,548	$	52,542,568	$	—
Liabilities

Fixed index annuities - embedded derivatives	$	7,475,216	$	—	$	—	$	7,475,216


December 31, 2019
Assets
Fixed maturity securities, available for sale:
United States Government full faith and credit	$	161,765	$	155,945	$	5,820	$	—
United States Government sponsored agencies	625,020		—		625,020		—
United States municipalities, states and territories	4,527,671		—		4,527,671		—
Foreign government obligations	205,096		—		205,096		—
Corporate securities	32,536,839		4		32,536,835		—
Residential mortgage backed securities	1,575,664		—		1,575,664		—
Commercial mortgage backed securities	5,786,279		—		5,786,279		—
Other asset backed securities	6,162,156		—		6,162,156		—
Derivative instruments	1,355,989		—		1,355,989		—
Cash and cash equivalents	2,293,392		2,293,392		—		—
Interest rate caps	6		—		6		—


	$	55,229,877	$	2,449,341	$	52,780,536	$	—
Liabilities

Fixed index annuities - embedded derivatives	$	9,624,395	$	—	$	—	$	9,624,395

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:


	Average Lapse Rates		Average Partial Withdrawal Rates
Contract Duration (Years)	September 30, 2020	December 31, 2019	September 30, 2020	December 31, 2019
1 - 5	1.19%	0.90%	2.62%	3.33%
6 - 10	1.38%	1.29%	3.14%	3.84%
11 - 15	5.57%	3.31%	3.57%	4.12%
16 - 20	7.30%	8.52%	3.77%	4.18%
20+	7.35%	7.10%	3.54%	4.12%

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 nine months ended September 30, 2020 and 2019:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(Dollars in thousands)
Fixed index annuities - embedded derivatives
Beginning balance	$	9,418,485	$	9,281,117	$	9,624,395	$	8,165,405
Premiums less benefits	78,244		74,979		243,421		333,459
Change in fair value, net	(2,021,513)		24,998		(2,392,600)		882,230
Ending balance	$	7,475,216	$	9,381,094	$	7,475,216	$	9,381,094