Available-for-sale Securities. The period-end amortized cost, gross unrealized gains and losses, and fair value of available-for-sale securities were as follows:

	June 30, 2020
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	(In thousands)
Securities available-for-sale, carried at fair value:
Fixed-maturity securities:
U.S. government and agencies	$	9,635	$	516	$	-		$	10,151
Foreign government		157,685		12,402		(19	)		170,068
States and political subdivisions		119,584		7,251		(81	)		126,754
Corporates		1,432,856		92,812		(9,781	)		1,515,887
Residential mortgage-backed securities		305,131		12,561		(335	)		317,357
Commercial mortgage-backed securities		117,355		5,516		(827	)		122,044
Other asset-backed securities		95,228		1,237		(1,572	)		94,893
Total fixed-maturity securities		2,237,474		132,295		(12,615	)		2,357,154

	December 31, 2019
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	(In thousands)
Securities available-for-sale, carried at fair value:
Fixed-maturity securities:
U.S. government and agencies	$	10,197	$	287	$	-		$	10,484
Foreign government		154,945		6,362		(235	)		161,072
States and political subdivisions		120,000		3,288		(695	)		122,593
Corporates		1,436,877		63,892		(1,118	)		1,499,651
Residential mortgage-backed securities		305,897		6,848		(222	)		312,523
Commercial mortgage-backed securities		128,913		3,191		(99	)		132,005
Other asset-backed securities		117,941		970		(243	)		118,668
Total fixed-maturity securities		2,274,770		84,838		(2,612	)		2,356,996

All of our available-for-sale mortgage- and asset-backed securities represent variable interests in variable interest entities (“VIEs”). We are not the primary beneficiary of these VIEs because we do not have the power to direct the activities that most significantly impact the entities’ economic performance. The maximum exposure to loss as a result of our involvement in these VIEs equals the carrying value of the securities.

The scheduled maturity distribution of the available-for-sale fixed-maturity portfolio as of June 30, 2020 was as follows:

	Amortized cost		Fair value
	(In thousands)
Due in one year or less	$	161,768	$	163,796
Due after one year through five years		853,995		901,122
Due after five years through 10 years		498,631		535,477
Due after 10 years		205,366		222,465
		1,719,760		1,822,860
Mortgage- and asset-backed securities		517,714		534,294
Total AFS fixed-maturity securities	$	2,237,474	$	2,357,154

Expected maturities may differ from scheduled contractual maturities because issuers of securities may have the right to call or prepay obligations with or without call or prepayment penalties.

Trading Securities. The cost and fair value of the securities classified as trading securities were as follows:

Held-to-maturity Security. Concurrent with the execution of the Vidalia Re Coinsurance Agreement, Vidalia Re entered into a Surplus Note Purchase Agreement (the “Surplus Note Purchase Agreement”) with Hannover Life Reassurance Company of America and certain of its affiliates (collectively, “Hannover Re”) and a newly formed limited liability company (the “LLC”) owned by a third- party service provider. Under the Surplus Note Purchase Agreement, Vidalia Re issued a surplus note (the “Surplus Note”) to the LLC in exchange for a credit enhanced note from the LLC with an equal principal amount (the “LLC Note”). The principal amount of both the LLC Note and the Surplus Note will fluctuate over time to coincide with the amount of reserves contractually supported under the Vidalia Re Coinsurance Agreement. Both the LLC Note and the Surplus Note mature on December 31, 2030 and bear interest at an annual interest rate of 4.50%. The LLC Note is guaranteed by Hannover Re through a credit enhancement feature in exchange for a fee, which is reflected in interest expense on our unaudited condensed consolidated statements of income.

The LLC is a VIE as its owner does not have an equity investment at risk that is sufficient to permit the LLC to finance its activities without Vidalia Re or Hannover Re. The Parent Company, Primerica Life, and Vidalia Re share the power to direct the activities of the LLC with Hannover Re, but do not have the obligation to absorb losses or the right to receive any residual returns related to the LLC’s primary risks or sources of variability. Through the credit enhancement feature, Hannover Re is the ultimate risk taker in this transaction and bears the obligation to absorb the LLC’s losses in the event of a Surplus Note default in exchange for the fee. Accordingly, the Company is not the primary beneficiary of the LLC and does not consolidate the LLC within its condensed consolidated financial statements.

The LLC Note is classified as a fixed-maturity held-to-maturity security in the Company’s invested asset portfolio as we have the positive intent and ability to hold the security until maturity. As of June 30, 2020, the LLC Note had an estimated unrealized holding gain of $217.0 million based on its amortized cost and estimated fair value. The estimated fair value of the LLC Note is expected to be at least equal to the estimated fair value of the offsetting Surplus Note. See Note 4 (Fair Value of Financial Instruments) for information on the fair value of our financial instruments and see Note 12 (Debt) for more information on the Surplus Note.

As of June 30, 2020, no credit losses have been recognized on the LLC Note held-to-maturity security.

Investments on Deposit with Governmental Authorities. As required by law, we have investments on deposit with governmental authorities and banks for the protection of policyholders. The fair values of investments on deposit were $7.7 million and $7.5 million as of June 30, 2020 and December 31, 2019, respectively.

Securities Lending Transactions. We participate in securities lending transactions with broker-dealers and other financial institutions to increase investment income with minimal risk. We require minimum collateral on securities loaned equal to 102% of the fair value of the loaned securities. We accept collateral in the form of securities, which we are not able to sell or encumber, and to the extent the collateral declines in value below 100%, we require additional collateral from the borrower. Any securities collateral received is not reflected on our unaudited condensed consolidated balance sheets. We also accept collateral in the form of cash, all of which we reinvest. For loans involving unrestricted cash collateral, the collateral is reported as an asset with a corresponding liability representing our obligation to return the collateral. We continue to carry the loaned securities as invested assets on our unaudited condensed consolidated balance sheets during the terms of the loans, and we do not report them as sales. Cash collateral received and reinvested was $30.0 million and $28.7 million as of June 30, 2020 and December 31, 2019, respectively.

	Three months ended June 30,						Six months ended June 30,
	2020			2019			2020			2019
	(In thousands)
Fixed-maturity securities (available-for-sale)	$	20,213		$	20,345		$	40,997		$	40,679
Fixed-maturity security (held-to-maturity)		14,074			11,769			27,546			22,444
Equity securities		461			446			912			933
Policy loans and other invested assets		541			300			730			618
Cash and cash equivalents		143			1,414			986			2,617
Total return on deposit asset underlying 10% coinsurance agreement⁽¹⁾		3,653			4,588			(896	)		8,491
Gross investment income		39,085			38,862			70,275			75,782
Investment expenses		(2,301	)		(2,225	)		(4,599	)		(4,358	)
Investment income net of investment expenses		36,784			36,637			65,676			71,424
Interest expense on surplus note		(14,074	)		(11,769	)		(27,546	)		(22,444	)
Net investment income	$	22,710		$	24,868		$	38,130		$	48,980

The components of net realized investment gains (losses) recognized in net income as well as details on gross realized investment gains and losses were as follows:

	Three months ended June 30,						Six months ended June 30,
	2020			2019			2020			2019
	(In thousands)
Net realized investment gains (losses):
Gross gains from sales of available-for-sale securities	$	827		$	293		$	1,183		$	471
Gross losses from sales of available-for-sale securities		(51	)		(42	)		(116	)		(285	)
Credit losses on available-for-sale securities		(545	)		(161	)		(4,246	)		(161	)
Net gains (losses) recognized in net income during the period on equity securities		1,547			977			(5,125	)		3,878
Gains (losses) from bifurcated options		(36	)		-			16			-
Gains (losses) on trading securities		-			-			-			11
Net realized investment gains (losses)	$	1,742		$	1,067		$	(8,288	)	$	3,914

The proceeds from sales or other redemptions of available-for-sale securities were as follows:

The components of net gains (losses) recognized in net income on equity securities still held as of period-end were as follows:

	Three months ended June 30,					Six months ended June 30,
	2020			2019		2020			2019
	(In thousands)
Net gains (losses) recognized in net income during the period on equity securities	$	1,547		$	977	$	(5,125	)	$	3,878
Less: Net gains (losses) recognized on equity securities sold		(191	)		-		(191	)		(254	)
Net gains (losses) recognized in net income on equity securities still held as of period-end	$	1,738		$	977	$	(4,934	)	$	4,132

Accrued Interest. Accrued interest is recorded in accordance with the original interest schedule of the underlying security. In the event of default, the Company’s policy is to no longer accrue interest on these securities and any remaining accrued interest will be written off. As a result, the Company has made the policy election to not record an allowance for credit losses on accrued interest.

Credit Losses for Available-for-sale Fixed-maturity Securities. The Company adopted ASC 326 as of January 1, 2020, which maintains the fundamental incurred probable loss approach for measuring losses in the condensed consolidated statement of income. For an available-for-sale security with an amortized cost that exceeds its fair value, we first determine if we intend to sell or will more-likely-than-not be required to sell the security before the expected recovery of its amortized cost. If we intend to sell or will more-likely-than-not be required to sell the security, then we recognize the impairment as a credit loss in our condensed consolidated statements of income by writing down the security’s amortized cost to its fair value. If we do not intend to sell or it is not more-likely-than-not that we will be required to sell the security before the expected recovery of its amortized cost, we recognize the portion of the impairment that is due to a credit loss, if any, in our condensed consolidated statement of income through an allowance. The portion of the impairment that is due to factors other than a credit loss is recognized in other comprehensive income in the condensed consolidated statement of comprehensive income as an unrealized loss. Credit losses recognized in the allowance for credit losses are reversed in situations where the estimate of credit losses on those securities has declined. When determining whether an impairment is due to a credit loss or other factors, we determine the extent to which we do not expect to recover the security’s amortized cost and record such amount, if any, as a credit loss. Factors we consider in determining whether the security’s decline in fair value is below amortized cost due to a credit loss include the magnitude of the security’s decline in fair value below its amortized cost, the financial condition, long and near-term prospects for the issuer, industry conditions and trends, rating agency actions, the payment structure of the security, likelihood of the recoverability of principal and interest, and our ability and intent to hold the security for a period of time sufficient to allow for the anticipated recovery of its amortized cost. In assessing our ability and intent to hold the security for a period of time to allow for the anticipated recovery of its amortized cost, we also consider our anticipated sources of cash to fund operating activities and share repurchases. If we do not anticipate recovering a security’s amortized cost basis, we estimate the present value of the security’s expected cash flows and recognize the difference from amortized cost (using fair value as a floor) as a credit loss.

The following table summarize all AFS securities in an unrealized loss position for which an allowance for credit losses has not been recorded as of June 30, 2020, aggregated by major security type and length of time such securities have continuously been in an unrealized loss position:

	June 30, 2020
	Less than 12 months					12 months or longer
	Fair value		Unrealized losses			Fair value		Unrealized losses
	(Dollars in thousands)
Fixed-maturity securities:
U.S. government and agencies	$	-	$	-		$	-	$	-
Foreign government		2,078		(19	)		-		-
States and political subdivisions		4,635		(81	)		-		-
Corporates		144,453		(7,563	)		9,770		(2,218	)
Residential mortgage-backed securities		34,080		(305	)		988		(30	)
Commercial mortgage-backed securities		19,231		(773	)		2,256		(54	)
Other asset-backed securities		33,707		(1,422	)		3,702		(150	)
Total fixed-maturity securities	$	238,184	$	(10,163	)	$	16,716	$	(2,452	)

The amortized cost of available-for-sale fixed-maturity securities with a cost basis in excess of their fair values were $267.5 million as of June 30, 2020

As of June 30, 2020, we did not recognize credit losses in the condensed consolidated statement of income on available-for-sale securities with unrealized losses that were due to interest rate sensitivity and changes in credit spreads. We believe that fluctuations caused by movement in interest rates and credit spreads generally have little bearing on the recoverability of our investments. For those that remain in an unrealized loss position we have the ability to hold these investments until maturity or a market price recovery, and we have no present intention to dispose them.

For the three and six months ended June 30, 2020, we recorded a total of $0.5 million and $4.2 million, respectively, for credit losses in the condensed consolidated statement of income on available-for-sale securities. Approximately $0.1 million and $3.8 million of the credit losses recorded for the three and six months ended June 30, 2020, respectively, were recorded as an adjustment to amortized cost due to our intent to sell securities of specific issuers that operate in distressed industry sectors. We recognize credit losses on securities due to: our intent to sell them; adverse credit events, such as news of an impending filing for bankruptcy; analyses of the issuer’s most recent financial statements or other information in which liquidity deficiencies, significant losses and large declines in capitalization were evident; and analyses of rating agency information for issuances with severe ratings downgrades that indicated a significant increase in the possibility of default. The remaining portion of credit losses was recognized in the allowance for credit losses.

The rollforward of the allowance for credit losses on available-for-sale securities for the three and six months ended June 30, 2020 was as follows:

	Three months ended June 30, 2020			Six months ended June 30, 2020
	(In thousands)
Allowance for credit losses, beginning of period	$	37		$	-
Additions to the allowance for credit losses on securities for which credit losses were not previously recorded		465			502
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period		(37	)		(37	)
Allowance for credit losses, end of period	$	465		$	465

Other-than-temporary Impairments (“OTTI”). For the three and six months ended June 30, 2019, which preceded the adoption of ASC 326, we reviewed available-for-sale securities in an unrealized loss position for OTTI. Credit risk, interest rate risk, the amount of time the security has been in an unrealized loss position, actions taken by ratings agencies, and other factors were considered in determining whether an unrealized loss is other-than-temporary. We recognized OTTI in the condensed consolidated statement of income for the impairment on available-for-sale securities that we intended to sell or would more-likely-than-not be required to sell before the expected recovery of the amortized cost basis. For available-for-sale securities that we had no intent to sell and believed that it was not more-likely-than-not we would be required to sell prior to recovery, only the credit loss component of OTTI was recognized in our condensed consolidated statement of income, while the remainder was recognized in other comprehensive income in the condensed consolidated statement of comprehensive income as an unrealized loss. The credit loss component of OTTI recognized in net income was identified as the amount of principal cash flows not expected to be received over the remaining term of the security. Any subsequent changes (if not an other-than-temporary impairment) in the fair value of available-for-sale securities were recognized in other comprehensive income in the accompanying condensed consolidated statements of comprehensive income. Factors considered in determining whether an impairment was temporary include: the length of time and extent to which fair value had been below cost; the financial condition and near-term prospects for the issuer; the payment structure of the security, and our ability and intent to hold the security for a period of time sufficient to allow for any anticipated recovery of its amortized cost. We also considered our anticipated sources of cash to fund operating activities and share repurchases when assessing our ability and intent to hold a security to allow for the recovery of its amortized cost basis in determining whether to recognize OTTI.

The following table summarizes all available-for-sale securities as of December 31, 2019 (prior to adoption of ASC 326), in an unrealized loss position, the aggregate fair value and the gross unrealized loss by length of time such securities have continuously been in an unrealized loss position:

	December 31, 2019
	Less than 12 months							12 months or longer
	Fair value		Unrealized losses			Number of securities		Fair value		Unrealized losses			Number of securities
	(Dollars in thousands)
Fixed-maturity securities:
U.S. government and agencies	$	-	$	-			-	$	-	$	-			-
Foreign government		11,824		(144	)		14		8,578		(91	)		7
States and political subdivisions		39,379		(690	)		21		4,000		(5	)		4
Corporates		52,474		(453	)		40		21,739		(665	)		19
Residential mortgage-backed securities		40,690		(207	)		20		2,071		(15	)		3
Commercial mortgage-backed securities		11,526		(28	)		13		12,835		(71	)		16
Other asset-backed securities		22,501		(190	)		17		4,613		(53	)		20
Total fixed-maturity securities	$	178,394	$	(1,712	)			$	53,836	$	(900	)

The amortized cost of available-for-sale fixed-maturity securities with a cost basis in excess of their fair values was $234.8 million as of December 31, 2019.

As of December 31, 2019, the unrealized losses on our available-for-sale security portfolio were largely caused by interest rate sensitivity and, to a lesser extent, changes in credit spreads. We believe that fluctuations caused by movement in interest rates and credit spreads have little bearing on the recoverability of our investments. We do not consider these investments to be other-than-temporarily impaired because we have the ability to hold these investments until maturity or a market price recovery, and we have no present intention to dispose of them.

OTTI recognized in earnings for available-for-sale securities for the three and six months ended June 30, 2019 were as follows:

	Three months ended June 30, 2019		Six months ended June 30, 2019
	(In thousands)
Total OTTI related to securities which the Company does not intend to sell or more-likely-than-not will not be required to sell:
Total OTTI losses recognized	$	3	$	3
Less portion of OTTI recognized in accumulated other comprehensive income (loss)		-		-
OTTI recognized in earnings for securities which the Company does not intend to sell or more-likely than-not will not be required to sell before recovery		3		3
OTTI recognized in earnings for securities which the Company intends to sell or more-likely-than-not will be required to sell before recovery		158		158
OTTI recognized in earnings	$	161	$	161

The rollforward of the OTTI recognized in net income for all fixed-maturity securities still held for the three and six months ended June 30, 2019 was as follows:

	Three months ended June 30, 2019			Six months ended June 30, 2019
	(In thousands)
Cumulative OTTI recognized in net income for securities still held, beginning of period	$	2,467		$	2,511
Additions for securities where no OTTI were recognized prior to the beginning of the period		158			158
Additions for securities where OTTI have been recognized prior to the beginning of the period		3			3
Reductions due to sales, maturities, calls, amortization or increases in cash flows expected to be collected over the remaining life of credit-impaired securities		(221	)		(265	)
Reductions for exchanges of securities previously impaired		-			-
Cumulative OTTI recognized in net income for securities still held, end of period	$	2,407		$	2,407

As of December 31, 2019, no cumulative impairment losses have been recognized on the LLC Note held-to-maturity security.

Derivatives. We have a deferred loss related to closed forward contracts, which were settled several years ago, that were used to mitigate our exposure to foreign currency exchange rates that resulted from the net investment in our Canadian operations. The amount of deferred loss included in accumulated other comprehensive income was $26.4 million as of June 30, 2020 and December 31, 2019. These deferred losses will not be recognized until such time as we sell or substantially liquidate our Canadian operations; although we have no such intention.