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Investments
 9 Months Ended
Sep. 30, 2019
Investments, Debt and Equity Securities [Abstract]  
Investments Note 4—Investments
Portfolio Composition: Summaries of fixed maturities available for sale by cost or amortized cost and estimated fair value at September 30, 2019 and December 31, 2018 are as follows. Redeemable preferred stock is included within the corporates by sector.
 
At September 30, 2019
 
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
 Value(1)
 
% of Total
Fixed
Maturities(2)
Fixed maturities available for sale:
 
 
 
 
 
 
 
 
 
U.S. Government direct, guaranteed, and government-sponsored enterprises
$
393,186

 
$
55,730

 
$
(291
)
 
$
448,625

 
2
States, municipalities, and political subdivisions
1,459,986

 
174,070

 
(242
)
 
1,633,814

 
9
Foreign governments
24,428

 
2,442

 
(98
)
 
26,772

 
—
Corporates, by sector:
 
 
 
 
 
 


 
 
Financial
4,031,919

 
721,475

 
(27,772
)
 
4,725,622

 
25
Utilities
1,939,618

 
454,518

 
(1,640
)
 
2,392,496

 
13
Energy
1,658,861

 
269,339

 
(35,836
)
 
1,892,364

 
10
Other corporate sectors
6,500,351

 
970,984

 
(21,765
)
 
7,449,570

 
40
Total corporates
14,130,749

 
2,416,316

 
(87,013
)
 
16,460,052

 
88
Collateralized debt obligations
56,815

 
28,275

 
(6,929
)
 
78,161

 
—
Other asset-backed securities
144,559

 
5,967

 
(276
)
 
150,250

 
1
Total fixed maturities
$
16,209,723

 
$
2,682,800

 
$
(94,849
)
 
$
18,797,674

 
100
(1)
Amount reported in the balance sheet.
(2)
At fair value.
 
At December 31, 2018
 
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
 Value(1)
 
% of Total
Fixed
Maturities(2)
Fixed maturities available for sale:
 
 
 
 
 
 
 
 
 
U.S. Government direct, guaranteed, and government-sponsored enterprises
$
390,351

 
$
5,104

 
$
(2,787
)
 
$
392,668

 
2
States, municipalities, and political subdivisions
1,354,810

 
83,600

 
(1,750
)
 
1,436,660

 
9
Foreign governments
19,006

 
1,810

 
—

 
20,816

 
—
Corporates, by sector:
 
 
 
 
 
 
 
 
 
Financial
3,759,768

 
262,875

 
(87,515
)
 
3,935,128

 
24
Utilities
1,989,506

 
217,846

 
(24,399
)
 
2,182,953

 
13
Energy
1,652,700

 
93,880

 
(62,371
)
 
1,684,209

 
10
Other corporate sectors
6,382,707

 
283,524

 
(242,509
)
 
6,423,722

 
40
Total corporates
13,784,681

 
858,125

 
(416,794
)
 
14,226,012

 
87
Collateralized debt obligations
57,769

 
22,014

 
(6,414
)
 
73,369

 
1
Other asset-backed securities
146,854

 
2,187

 
(634
)
 
148,407

 
1
Total fixed maturities
$
15,753,471

 
$
972,840

 
$
(428,379
)
 
$
16,297,932

 
100
(1)
Amount reported in the balance sheet.
(2)
At fair value.

A schedule of fixed maturities available for sale by contractual maturity date at September 30, 2019 is shown below on an amortized cost basis and on a fair value basis. Actual disposition dates could differ from contractual maturities due to call or prepayment provisions.
 
At September 30, 2019
 
Amortized
Cost
 
Fair
Value
Fixed maturities available for sale:
 
 
 
Due in one year or less
$
100,626

 
$
102,237

Due after one year through five years
643,842

 
691,898

Due after five years through ten years
1,670,278

 
1,924,341

Due after ten years through twenty years
5,246,650

 
6,314,401

Due after twenty years
8,346,465

 
9,535,865

Mortgage-backed and asset-backed securities
201,862

 
228,932


$
16,209,723

 
$
18,797,674


Analysis of investment operations: Net investment income for the three and nine month periods ended September 30, 2019 and 2018 is summarized as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Fixed maturities available for sale
$
216,154

 
$
210,929

 
$
647,784

 
$
629,242

Policy loans
10,959

 
10,490

 
32,416

 
30,889

Other long-term investments
5,105

 
3,682

 
12,484

 
8,656

Short-term investments
514

 
489

 
2,096

 
1,313

 
232,732

 
225,590

 
694,780

 
670,100

Less investment expense
(3,827
)
 
(3,963
)
 
(11,777
)
 
(11,821
)
Net investment income
$
228,905

 
$
221,627

 
$
683,003

 
$
658,279



Selected information about sales of fixed maturities available for sale is as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Fixed maturities available for sale:
 
 
 
 
 
 
 
Proceeds from sales(1)
$
27,154

 
$
12,162

 
$
62,151

 
$
12,162

Gross realized gains
1,031

 
66

 
1,077

 
66

Gross realized losses
(604
)
 
—

 
(3,631
)
 
—

(1)
There were no unsettled sales in the periods ended September 30, 2019 and 2018.

An analysis of realized gains (losses) is as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Realized investment gains (losses):
 
 
 
 
 
 
 
Fixed maturities available for sale:
 
 
 
 
 
 
 
Sales and other(1)
$
12,430

 
$
1,510

 
$
18,337

 
$
12,327

Fair value option—change in fair value
(487
)
 
(456
)
 
197

 
2,405

Other investments
—

 
(22
)
 
(108
)
 
64

Realized gains (losses) from investments
11,943

 
1,032

 
18,426

 
14,796

Applicable tax
(2,508
)
 
(217
)
 
(3,869
)
 
(3,107
)
Realized gains (losses), net of tax
$
9,435

 
$
815

 
$
14,557

 
$
11,689

(1)
During the three months ended September 30, 2019, the Company recorded $43.7 million of exchanges of fixed maturities (noncash transactions) that resulted in $11.8 million in realized gains (losses). During the same period of 2018, there were no exchanges. During the nine months ended September 30, 2019 and 2018, the Company recorded $161.0 million and $128.9 million of exchanges of fixed maturities (noncash transactions) that resulted in $20.1 million and $10.4 million, respectively in realized gains.
Fair value measurements: The following tables represent the fair value of fixed maturities measured on a recurring basis at September 30, 2019 and December 31, 2018:
 
Fair Value Measurement at September 30, 2019 Using:
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs (Level 3)
 
Total Fair
Value
Fixed maturities available for sale
 
 
 
 
 
 
 
U.S. Government direct, guaranteed, and government-sponsored enterprises
$
—

 
$
448,625

 
$
—

 
$
448,625

States, municipalities, and political subdivisions
—

 
1,633,814

 
—

 
1,633,814

Foreign governments
—

 
26,772

 
—

 
26,772

Corporates, by sector:
 
 
 
 
 
 

Financial
—

 
4,680,315

 
45,307

 
4,725,622

Utilities
—

 
2,234,140

 
158,356

 
2,392,496

Energy
—

 
1,850,580

 
41,784

 
1,892,364

Other corporate sectors
25

 
7,117,250

 
332,295

 
7,449,570

Total corporates
25

 
15,882,285

 
577,742

 
16,460,052

Collateralized debt obligations
—

 
—

 
78,161

 
78,161

Other asset-backed securities
—

 
136,568

 
13,682

 
150,250

Total fixed maturities
$
25

 
$
18,128,064

 
$
669,585

 
$
18,797,674

Percentage of total
—
%
 
96
%
 
4
%
 
100
%

 
Fair Value Measurement at December 31, 2018 Using:
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs (Level 3)
 
Total Fair
Value
Fixed maturities available for sale
 
 
 
 
 
 
 
U.S. Government direct, guaranteed, and government-sponsored enterprises
$
—

 
$
392,668

 
$
—

 
$
392,668

States, municipalities, and political subdivisions
—

 
1,436,660

 
—

 
1,436,660

Foreign governments
—

 
20,816

 
—

 
20,816

Corporates, by sector:
 
 
 
 
 
 

Financial
—

 
3,891,728

 
43,400

 
3,935,128

Utilities
—

 
2,032,127

 
150,826

 
2,182,953

Energy
—

 
1,645,077

 
39,132

 
1,684,209

Other corporate sectors
—

 
6,103,609

 
320,113

 
6,423,722

Total corporates
—

 
13,672,541

 
553,471

 
14,226,012

Collateralized debt obligations
—

 
—

 
73,369

 
73,369

Other asset-backed securities
—

 
135,425

 
12,982

 
148,407

Total fixed maturities
$
—

 
$
15,658,110

 
$
639,822

 
$
16,297,932

Percentage of total
—
%
 
96
%
 
4
%
 
100
%


The following tables represent changes in fixed maturities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
 
Analysis of Changes in Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
Asset-
backed Securities
 
Collateralized
Debt
Obligations
 
Corporates(1)
 
Total
Balance at January 1, 2019
$
12,982

 
$
73,369

 
$
553,471

 
$
639,822

Total gains or losses:
 
 
 
 
 
 
 
Included in realized gains / losses
—

 
—

 
—

 
—

Included in other comprehensive income
1,043

 
5,745

 
34,971

 
41,759

Acquisitions
—

 
—

 
—

 
—

Sales
—

 
—

 
—

 
—

Amortization
—

 
3,459

 
10

 
3,469

Other(2)
(343
)
 
(4,412
)
 
(10,710
)
 
(15,465
)
Transfers into (out of) Level 3(3)
—

 
—

 
—

 
—

Balance at September 30, 2019
$
13,682

 
$
78,161

 
$
577,742

 
$
669,585

Percent of total fixed maturities
—
%
 
1
%
 
3
%
 
4
%
(1)
Includes redeemable preferred stocks.
(2)
Includes capitalized interest, foreign exchange adjustments, and principal repayments. 
(3)
Considered to be transferred at the end of the period. Transfers into Level 3 occur when observable inputs are no longer available. Transfers out of Level 3 occur when observable inputs become available.

 
Analysis of Changes in Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
Asset-
backed Securities
 
Collateralized
Debt
Obligations
 
Corporates(1)
 
Total
Balance at January 1, 2018
$
14,049

 
$
71,581

 
$
582,810

 
$
668,440

Total gains or losses:
 
 
 
 
 
 
 
Included in realized gains / losses
—

 
—

 
698

 
698

Included in other comprehensive income
(950
)
 
8,691

 
(21,854
)
 
(14,113
)
Acquisitions
—

 
—

 
27,453

 
27,453

Sales
—

 
—

 
—

 
—

Amortization
—

 
3,572

 
13

 
3,585

Other(2)
(315
)
 
(4,928
)
 
(37,619
)
 
(42,862
)
Transfers into (out of) Level 3(3)
—

 
—

 
4,533

 
4,533

Balance at September 30, 2018
$
12,784

 
$
78,916

 
$
556,034

 
$
647,734

Percent of total fixed maturities
—
%
 
1
%
 
3
%
 
4
%
(1)
Includes redeemable preferred stocks.
(2)
Includes capitalized interest, foreign exchange adjustments, and principal repayments. 
(3)
Considered to be transferred at the end of the period. Transfers into Level 3 occur when observable inputs are no longer available. Transfers out of Level 3 occur when observable inputs become available.

The following table presents transfers in and out of each of the valuation levels of fair values:
 
Nine Months Ended September 30,
 
2019
 
2018
 
In
 
Out
 
Net
 
In
 
Out
 
Net
Level 1
$
14,597

 
$
—

 
$
14,597

 
$
—

 
$
—

 
$
—

Level 2
—

 
(14,597
)
 
(14,597
)
 
—

 
(4,533
)
 
(4,533
)
Level 3
—

 
—

 
—

 
4,533

 
—

 
4,533


Other investment information: Other long-term investments consist of the following:
 
September 30, 2019
 
December 31, 2018
Investment in limited partnerships(1)
$
184,466

 
$
108,241

Commercial mortgage loan participations(2)
127,953

 
96,266

Other
3,116

 
2,751

Total
$
315,535

 
$
207,258

(1)
See the following section for more information regarding the fair value method used to account for these investments.
(2)
Globe Life invests in a portfolio of commercial mortgage loan participations. As of September 30, 2019 and December 31, 2018, the Company evaluated the portfolio on a loan-by-loan basis to determine any allowance for loan loss. Factors considered include, but are not limited to, collateral value, loan-to-value ratio, debt service coverage ratio, local market conditions, credit quality of the borrower and tenants, and loan performance. There were no material changes to these factors during the period. As of September 30, 2019 and December 31, 2018, there were no allowances for loan loss.
Fair Value Option: The following table represents the fair value of certain limited partnership investments elected for the fair value option method measured on a recurring basis at September 30, 2019, and the changes in fair value for the nine months ended September 30, 2019. All changes in fair value are recognized in "Realized Investment Gains (Losses)" in the Condensed Consolidated Statements of Operations. Distributions received on a periodic basis are recorded in Net Investment Income.
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Total Fair Value
Fair Value Measurements at:
 
 
 
 
 
 
 
September 30, 2019
$
—

 
$
184,466

 
$
—

 
$
184,466

December 31, 2018
—

 
108,241

 
—

 
108,241

 
Changes in Fair Values for the Period for Items Measured at Fair Value Pursuant to Election of the Fair Value Option
 
Net Gains and Losses Recognized During the Period
 
Less Net Gains and Losses Recognized due to Sales
 
Total Changes in Fair Values Included in Current-Period Earnings
Nine Months Ended September 30,
 
 
 
 
 
2019
$
197

 
$
—

 
$
197

2018
2,405

 
—

 
2,405


Other-than-temporary impairments (OTTI): In accordance with the other-than-temporary impairment (OTTI) policy, the Company evaluated its fixed maturities available for sale in an unrealized loss position to determine if there was any impairment for the quarter. Gross unrealized losses may fluctuate quarter over quarter due to adverse factors in the market that affect our holdings, such as changes in the interest rates or credit spreads. While the Company holds securities that may be in an unrealized loss position from time to time, Globe Life has the ability and intent to hold these investments to recovery. Additionally, the Company does not expect to be required to sell any of its securities due to the strong cash flows generated by its insurance operations.

For the nine months ended September 30, 2019 and 2018, the Company concluded that there were no other-than-temporary impairments.

Unrealized Loss Analysis: The following table discloses information about fixed maturities available for sale in an unrealized loss position.
 
Less than Twelve Months
 
Twelve Months or Longer
 
Total
Number of issues (CUSIP numbers) held:
 
 
 
 
 
As of September 30, 2019
46

 
59

 
105

As of December 31, 2018
495

 
234

 
729

 
Globe Life's entire fixed maturity portfolio consisted of 1,585 issues at September 30, 2019 and 1,548 issues at December 31, 2018. The weighted-average quality rating of all unrealized loss positions at amortized cost as of September 30, 2019 was BB+ compared with BBB+ as of December 31, 2018. The drop in quality rating is attributed to the overall decreasing interest rate that has caused certain securities to move from an unrealized loss position to an unrealized gain position.
The following tables disclose unrealized investment losses by class and major sector of fixed maturities available for sale at September 30, 2019 and December 31, 2018, respectively. Globe Life considers these investments to be only temporarily impaired.

Analysis of Gross Unrealized Investment Losses
 
At September 30, 2019
 
Less than Twelve Months
 
Twelve Months or Longer
 
Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Fixed maturities available for sale:
 
 
 
 
 
 
 
 
 
 
 
Investment grade securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government direct, guaranteed, and government-sponsored enterprises
$
1,158

 
$
(1
)
 
$
21,089

 
$
(290
)
 
$
22,247

 
$
(291
)
States, municipalities and political subdivisions
19,654

 
(242
)
 
—

 
—

 
19,654

 
(242
)
Foreign governments
6,400

 
(98
)
 
—

 
—

 
6,400

 
(98
)
Corporates, by sector:
 
 
 
 
 
 
 
 
 
 
 
Financial
157,535

 
(2,335
)
 
6,763

 
(1,737
)
 
164,298

 
(4,072
)
Utilities
3,706

 
(8
)
 
—

 
—

 
3,706

 
(8
)
Energy
71,563

 
(2,439
)
 
29,469

 
(5,975
)
 
101,032

 
(8,414
)
Other corporate sectors
125,509

 
(1,711
)
 
99,645

 
(4,376
)
 
225,154

 
(6,087
)
Total corporates
358,313

 
(6,493
)
 
135,877

 
(12,088
)
 
494,190

 
(18,581
)
Other asset-backed securities
—

 
—

 
—

 
—

 
—

 
—

Total investment grade securities
385,525

 
(6,834
)
 
156,966

 
(12,378
)
 
542,491

 
(19,212
)
 
 
 
 
 
 
 
 
 
 
 
 
Below investment grade securities:
 
 
 
 
 
 
 
 
 
 
 
States, municipalities and political subdivisions
—

 
—

 
—

 
—

 
—

 
—

Corporates, by sector:
 
 
 
 
 
 
 
 
 
 
 
Financial
—

 
—

 
109,052

 
(23,700
)
 
109,052

 
(23,700
)
Utilities
7,651

 
(14
)
 
14,631

 
(1,618
)
 
22,282

 
(1,632
)
Energy
6,328

 
(582
)
 
38,839

 
(26,840
)
 
45,167

 
(27,422
)
Other corporate sectors
—

 
—

 
63,797

 
(15,678
)
 
63,797

 
(15,678
)
Total corporates
13,979

 
(596
)
 
226,319

 
(67,836
)
 
240,298

 
(68,432
)
Collateralized debt obligations
—

 
—

 
13,070

 
(6,929
)
 
13,070

 
(6,929
)
Other asset-backed securities
—

 
—

 
14,049

 
(276
)
 
14,049

 
(276
)
Total below investment grade securities
13,979

 
(596
)
 
253,438

 
(75,041
)
 
267,417

 
(75,637
)
Total fixed maturities
$
399,504

 
$
(7,430
)
 
$
410,404

 
$
(87,419
)
 
$
809,908

 
$
(94,849
)
 
Analysis of Gross Unrealized Investment Losses
 
At December 31, 2018
 
Less than Twelve Months
 
Twelve Months or Longer
 
Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Fixed maturities available for sale:
 
 
 
 
 
 
 
 
 
 
 
Investment grade securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government direct, guaranteed, and government-sponsored enterprises
$
37,182

 
$
(212
)
 
$
89,664

 
$
(2,575
)
 
$
126,846

 
$
(2,787
)
States, municipalities and political subdivisions
124,907

 
(1,648
)
 
7,981

 
(102
)
 
132,888

 
(1,750
)
Corporates, by sector:
 
 
 
 
 
 
 
 
 
 
 
Financial
931,161

 
(36,337
)
 
241,442

 
(21,572
)
 
1,172,603

 
(57,909
)
Utilities
329,753

 
(11,680
)
 
121,308

 
(9,442
)
 
451,061

 
(21,122
)
Energy
475,736

 
(29,426
)
 
54,937

 
(9,382
)
 
530,673

 
(38,808
)
Other corporate sectors
2,515,541

 
(149,168
)
 
575,796

 
(62,994
)
 
3,091,337

 
(212,162
)
Total corporates
4,252,191

 
(226,611
)
 
993,483

 
(103,390
)
 
5,245,674

 
(330,001
)
Other asset-backed securities
44,603

 
(634
)
 
—

 
—

 
44,603

 
(634
)
Total investment grade securities
4,458,883

 
(229,105
)
 
1,091,128

 
(106,067
)
 
5,550,011

 
(335,172
)
 
 
 
 
 
 
 
 
 
 
 
 
Below investment grade securities:
 
 
 
 
 
 
 
 

 

Corporates, by sector:
 
 
 
 
 
 
 
 

 

Financial
22,087

 
(8,674
)
 
81,101

 
(20,932
)
 
103,188

 
(29,606
)
Utilities
28,613

 
(3,277
)
 
—

 
—

 
28,613

 
(3,277
)
Energy
42,874

 
(3,901
)
 
36,122

 
(19,662
)
 
78,996

 
(23,563
)
Other corporate sectors
146,373

 
(7,235
)
 
69,053

 
(23,112
)
 
215,426

 
(30,347
)
Total corporates
239,947

 
(23,087
)
 
186,276

 
(63,706
)
 
426,223

 
(86,793
)
Collateralized debt obligations
—

 
—

 
13,586

 
(6,414
)
 
13,586

 
(6,414
)
Total below investment grade securities
239,947

 
(23,087
)
 
199,862

 
(70,120
)
 
439,809

 
(93,207
)
Total fixed maturities
$
4,698,830

 
$
(252,192
)
 
$
1,290,990

 
$
(176,187
)
 
$
5,989,820

 
$
(428,379
)