FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2017

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of June 30, 2017:



	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	1,989,275	$	11,862	$	2,001,137
Commercial mortgage-backed securities	—		1,832,129		—		1,832,129
Other asset-backed securities	—		629,040		552,963		1,182,003
U.S. government-related securities	1,010,562		285,546		—		1,296,108
State, municipalities, and political subdivisions	—		1,689,321		—		1,689,321
Other government-related securities	—		251,504		—		251,504
Corporate securities	—		27,673,900		662,654		28,336,554
Preferred stock	74,134		18,934		—		93,068
Total fixed maturity securities - available-for-sale	1,084,696		34,369,649		1,227,479		36,681,824
Fixed maturity securities - trading
Residential mortgage-backed securities	—		264,109		—		264,109
Commercial mortgage-backed securities	—		152,522		—		152,522
Other asset-backed securities	—		110,852		54,923		165,775
U.S. government-related securities	21,609		4,492		—		26,101
State, municipalities, and political subdivisions	—		323,720		—		323,720
Other government-related securities	—		63,763		—		63,763
Corporate securities	—		1,688,476		5,520		1,693,996
Preferred stock	3,113		—		—		3,113
Total fixed maturity securities - trading	24,722		2,607,934		60,443		2,693,099
Total fixed maturity securities	1,109,418		36,977,583		1,287,922		39,374,923
Equity securities	720,981		36		66,300		787,317
Other long-term investments⁽¹⁾	68,323		361,195		120,023		549,541
Short-term investments	336,860		30,098		—		366,958
Total investments	2,235,582		37,368,912		1,474,245		41,078,739
Cash	404,871		—		—		404,871
Other assets	28,667		—		—		28,667
Assets related to separate accounts
Variable annuity	13,616,259		—		—		13,616,259
Variable universal life	959,638		—		—		959,638
Total assets measured at fair value on a recurring basis	$	17,245,017	$	37,368,912	$	1,474,245	$	56,088,174
Liabilities:
Annuity account balances ⁽²⁾	$	—	$	—	$	86,094	$	86,094
Other liabilities⁽¹⁾	6,586		196,416		702,218		905,220
Total liabilities measured at fair value on a recurring basis	$	6,586	$	196,416	$	788,312	$	991,314

(1) Includes certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2016:



	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	1,898,480	$	3	$	1,898,483
Commercial mortgage-backed securities	—		1,811,470		—		1,811,470
Other asset-backed securities	—		648,929		562,604		1,211,533
U.S. government-related securities	1,002,020		266,139		—		1,268,159
State, municipalities, and political subdivisions	—		1,656,503		—		1,656,503
Other government-related securities	—		239,921		—		239,921
Corporate securities	—		26,707,519		664,046		27,371,565
Preferred stock	66,781		19,062		—		85,843
Total fixed maturity securities - available-for-sale	1,068,801		33,248,023		1,226,653		35,543,477
Fixed maturity securities - trading
Residential mortgage-backed securities	—		255,027		—		255,027
Commercial mortgage-backed securities	—		149,683		—		149,683
Other asset-backed securities	—		115,521		84,563		200,084
U.S. government-related securities	22,424		4,537		—		26,961
State, municipalities, and political subdivisions	—		316,519		—		316,519
Other government-related securities	—		63,012		—		63,012
Corporate securities	—		1,619,097		5,492		1,624,589
Preferred stock	3,985		—		—		3,985
Total fixed maturity securities - trading	26,409		2,523,396		90,055		2,639,860
Total fixed maturity securities	1,095,210		35,771,419		1,316,708		38,183,337
Equity securities	685,443		36		69,010		754,489
Other long-term investments⁽¹⁾⁽³⁾	82,420		335,498		124,325		542,243
Short-term investments	328,829		3,602		—		332,431
Total investments	2,191,902		36,110,555		1,510,043		39,812,500
Cash	348,182		—		—		348,182
Other assets	23,830		—		—		23,830
Assets related to separate accounts
Variable annuity	13,244,252		—		—		13,244,252
Variable universal life	895,925		—		—		895,925
Total assets measured at fair value on a recurring basis	$	16,704,091	$	36,110,555	$	1,510,043	$	54,324,689
Liabilities:
Annuity account balances⁽²⁾	$	—	$	—	$	87,616	$	87,616
Other liabilities⁽¹⁾	13,004		163,974		571,843		748,821
Total liabilities measured at fair value on a recurring basis	$	13,004	$	163,974	$	659,459	$	836,437

(1) Includes certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

Schedule of the Valuation Method for Material Financial Instruments Included in Level 3, as well as the Unobservable Inputs Used in the Valuation of the Financial Instruments

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:



	Fair Value As of June 30, 2017		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	552,816	Liquidation	Liquidation value	$90 - $97 ($95.05)
			Discounted cash flow	Liquidity premium	0.51% - 1.30% (0.94%)
				Paydown rate	10.82% - 12.15% (11.28%)
Corporate securities	634,340		Discounted cash flow	Spread over treasury	0.74% - 4.75% (1.72%)
Liabilities:⁽¹⁾
Embedded derivatives - GLWB⁽²⁾	$	132,016	Actuarial cash flow model	Mortality	91.1% to 106.6%
					Ruark 2015 ALB table
				Lapse	0.3% - 15%, depending on product/duration/funded status of guarantee
					product/duration/funded
					status of guarantee
				Utilization	99%. 10% of policies have a one-
					time over-utilization of 400%
				Nonperformance risk	0.10% - 0.86%
Embedded derivative - FIA	191,226		Actuarial cash flow model	Expenses	$126 per policy
				Asset Earned Rate	4.08% - 4.66%
				Withdrawal rate	1% prior to age 70, 100% of the
					RMD for ages 70+
				Mortality	1994 MGDB table with company
					experience
				Lapse	2.0% - 40%, depending
					on duration/surrender
					charge period
				Nonperformance risk	0.10% - 0.86%
Embedded derivative - IUL	62,747		Actuarial cash flow model	Mortality	38% - 153% of 2015
					VBT Primary Tables
				Lapse	0.5% - 10%, depending
					on duration/distribution
					channel and smoking class
				Nonperformance risk	0.10% - 0.86%

(1) Excludes modified coinsurance arrangements.
(2) The fair value for the GLWB embedded derivative is presented as a net liability.

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:



	Fair Value As of December 31, 2016		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	553,308	Liquidation	Liquidation value	$88 - $97.25 ($95.04)
Corporate securities	638,279		Discounted cash flow	Spread over treasury	0.31% - 4.50% (2.04%)
Liabilities:⁽¹⁾
Embedded derivatives - GLWB⁽²⁾	$	115,370	Actuarial cash flow model	Mortality	91.1% to 106.6% of
					Ruark 2015 ALB table
				Lapse	0.3% - 15%, depending on
					product/duration/funded
					status of guarantee
				Utilization	99%. 10% of policies have a one-
					time over-utilization of 400%
				Nonperformance risk	0.18% - 1.09%
Embedded derivative - FIA	147,368		Actuarial cash flow model	Expenses	$126 per policy
				Asset Earned Rate	4.08% - 4.66%
				Withdrawal rate	1% prior to age 70, 100% of the
					RMD for ages 70+
				Mortality	1994 MGDB table with company
					experience
				Lapse	2.0% - 40.0%, depending
					on duration/surrender
					charge period
				Nonperformance risk	0.18% - 1.09%
Embedded derivative - IUL	46,051		Actuarial cash flow model	Mortality	38% - 153% of 2015
					VBT Primary Tables
				Lapse	0.5% - 10.0%, depending
					on duration/distribution
					channel and smoking class
				Nonperformance risk	0.18% - 1.09%

(1) Excludes modified coinsurance arrangements.
(2) The fair value for the GLWB embedded derivative is presented as a net liability.

Schedule of Reconciliation of the Beginning and Ending Balances for Fair Value Measurements, for which the Company has Used Significant Unobservable Inputs (Level 3)

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the six months ended June 30, 2017, for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																								Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3				Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	3	$	—	$	—	$	—		$	—		$	11,862	$	(3	)	$	—	$	—	$	—			$	—		$	11,862	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—				—			—		—
Other asset-backed securities	562,604		—		3,530		—			(5,088		)	—		(2,027		)	—		—		(6,643		)		587			552,963		—
Corporate securities	664,046		—		17,798		—			(542		)	80,751		(92,950		)	—		—		(4,867		)		(1,582		)	662,654		—
Total fixed maturity securities - available-for-sale	1,226,653		—		21,328		—			(5,630		)	92,613		(94,980		)	—		—		(11,510		)		(995		)	1,227,479		—
Fixed maturity securities - trading
Other asset-backed securities	84,563		3,679		—		(801		)	—			—		(33,328		)	—		—		—				810			54,923		3,598
Corporate securities	5,492		74		—		—			—			—		—			—		—		—				(46		)	5,520		74
Total fixed maturity securities - trading	90,055		3,753		—		(801		)	—			—		(33,328		)	—		—		—				764			60,443		3,672
Total fixed maturity securities	1,316,708		3,753		21,328		(801		)	(5,630		)	92,613		(128,308		)	—		—		(11,510		)		(231		)	1,287,922		3,672
Equity securities	69,010		—		21		(2,630		)	—			—		(104		)	—		—		3			—	—			66,300		1
Other long-term investments⁽¹⁾	124,325		11,121		—		(15,423		)	—			—		—			—		—		—				—			120,023		(4,302		)
Total investments	1,510,043		14,874		21,349		(18,854		)	(5,630		)	92,613		(128,412		)	—		—		(11,507		)		(231		)	1,474,245		(629		)
Total assets measured at fair value on a recurring basis	$	1,510,043	$	14,874	$	21,349	$	(18,854	)	$	(5,630	)	$	92,613	$	(128,412	)	$	—	$	—	$	(11,507	)		$	(231	)	$	1,474,245	$	(629	)
Liabilities:
Annuity account balances⁽²⁾	$	87,616	$	—	$	—	$	1,997		$	—		$	—	$	—		$	392	$	3,911	$	—			$	—		$	86,094	$	—
Other liabilities⁽¹⁾	571,843		44,263		—		(174,638		)	—			—		—			—		—		—				—			702,218		(130,375		)
Total liabilities measured at fair value on a recurring basis	$	659,459	$	44,263	$	—	$	(172,641	)	$	—		$	—	$	—		$	392	$	3,911	$	—			$	—		$	788,312	$	(130,375	)

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended June 30, 2017, for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																							Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	—	$	—	$	—	$	—		$	—		$	11,862	$	—		$	—	$	—	$	—		$	—		$	11,862	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	556,936		—		—		—			(4,257		)	—		(12		)	—		—		—			296			552,963		—
Corporate securities	666,705		—		10,027		—			(260		)	43,492		(54,066		)	—		—		(2,220		)	(1,024		)	662,654		—
Total fixed maturity securities - available-for-sale	1,223,641		—		10,027		—			(4,517		)	55,354		(54,078		)	—		—		(2,220		)	(728		)	1,227,479		—
Fixed maturity securities - trading
Other asset-backed securities	68,752		205		—		(215		)	—			—		(14,020		)	—		—		—			201			54,923		196
Corporate securities	5,504		40		—		—			—			—		—			—		—		—			(24		)	5,520		40
Total fixed maturity securities - trading	74,256		245		—		(215		)	—			—		(14,020		)	—		—		—			177			60,443		236
Total fixed maturity securities	1,297,897		245		10,027		(215		)	(4,517		)	55,354		(68,098		)	—		—		(2,220		)	(551		)	1,287,922		236
Equity securities	66,384		—		19		—			—			—		(104		)	—		—		—			1			66,300		—
Other long-term investments⁽¹⁾	133,428		60		—		(13,465		)	—			—		—			—		—		—			—			120,023		(13,405		)
Total investments	1,497,709		305		10,046		(13,680		)	(4,517		)	55,354		(68,202		)	—		—		(2,220		)	(550		)	1,474,245		(13,169		)
Total assets measured at fair value on a recurring basis	$	1,497,709	$	305	$	10,046	$	(13,680	)	$	(4,517	)	$	55,354	$	(68,202	)	$	—	$	—	$	(2,220	)	$	(550	)	$	1,474,245	$	(13,169	)
Liabilities:
Annuity account balances⁽²⁾	$	86,415	$	—	$	—	$	1,110		$	—		$	—	$	—		$	212	$	1,643	$	—		$	—		$	86,094	$	—
Other liabilities⁽¹⁾	587,074		—		—		(115,144		)	—			—		—			—		—		—			—			702,218		(115,144		)
Total liabilities measured at fair value on a recurring basis	$	673,489	$	—	$	—	$	(114,034	)	$	—		$	—	$	—		$	212	$	1,643	$	—		$	—		$	788,312	$	(115,144	)

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the six months ended June 30, 2016, for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																							Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale	0
Residential mortgage-backed securities	$	3	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—		$	—		$	3	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	587,031		6,859		769		—			(21,407		)	9,597		(58,449		)	—		—		7,457			1,284			533,141		—
Corporate securities	902,119		925		31,111		(4,135		)	(6,981		)	25,558		(81,865		)	—		—		(77,952		)	(5,637		)	783,143		—
Total fixed maturity securities - available-for-sale	1,489,153		7,784		31,880		(4,135		)	(28,388		)	35,155		(140,314		)	—		—		(70,495		)	(4,353		)	1,316,287		—
Fixed maturity securities - trading
Other asset-backed securities	152,912		2,050		—		(942		)	—			—		(2,212		)	—		—		172			(16		)	151,964		1,105
Corporate securities	18,225		332		—		(259		)	—			10,908		(4,071		)	—		—		(8,479		)	(69		)	16,587		241
Total fixed maturity securities - trading	171,137		2,382		—		(1,201		)	—			10,908		(6,283		)	—		—		(8,307		)	(85		)	168,551		1,346
Total fixed maturity securities	1,660,290		10,166		31,880		(5,336		)	(28,388		)	46,063		(146,597		)	—		—		(78,802		)	(4,438		)	1,484,838		1,346
Equity securities	69,763		—		—		—			—			22		—			—		—		(36		)	1			69,750		—
Other long-term investments⁽¹⁾	96,830		1,568		—		(49,399		)	—			—		—			—		—		—			—			48,999		(47,831		)
Total investments	1,826,883		11,734		31,880		(54,735		)	(28,388		)	46,085		(146,597		)	—		—		(78,838		)	(4,437		)	1,603,587		(46,485		)
Total assets measured at fair value on a recurring basis	$	1,826,883	$	11,734	$	31,880	$	(54,735	)	$	(28,388	)	$	46,085	$	(146,597	)	$	—	$	—	$	(78,838	)	$	(4,437	)	$	1,603,587	$	(46,485	)
Liabilities:
Annuity account balances⁽²⁾	$	92,512	$	—	$	—	$	(1,096	)	$	—		$	—	$	—		$	250	$	5,038	$	—		$	—		$	88,820	$	—
Other liabilities⁽¹⁾	585,556		15,585		—		(402,113		)	—			—		—			—		—		—			—			972,084		(386,528		)
Total liabilities measured at fair value on a recurring basis	$	678,068	$	15,585	$	—	$	(403,209	)	$	—		$	—	$	—		$	250	$	5,038	$	—		$	—		$	1,060,904	$	(386,528	)

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended June 30, 2016, for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																							Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	3	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—		$	—		$	3	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	537,831		—		769		—			(8,350		)	9,597		(7,629		)	—		—		—			923			533,141		—
Corporate securities	833,737		925		16,189		—			(694		)	9,558		(57,123		)	—		—		(16,773		)	(2,676		)	783,143		—
Total fixed maturity securities - available-for-sale	1,371,571		925		16,958		—			(9,044		)	19,155		(64,752		)	—		—		(16,773		)	(1,753		)	1,316,287		—
Fixed maturity securities - trading
Other asset-backed securities	150,683		1,822		—		(8		)	—			—		(609		)	—		—		—			76			151,964		1,814
Corporate securities	5,677		24		—		—			—			10,908		1			—		—		—			(23		)	16,587		25
Total fixed maturity securities - trading	156,360		1,846		—		(8		)	—			10,908		(608		)	—		—		—			53			168,551		1,839
Total fixed maturity securities	1,527,931		2,771		16,958		(8		)	(9,044		)	30,063		(65,360		)	—		—		(16,773		)	(1,700		)	1,484,838		1,839
Equity securities	69,728		—		—		—			—			22		—			—		—		—			—			69,750		—
Other long-term investments⁽¹⁾	66,696		1,568		—		(19,265		)	—			—		—			—		—		—			—			48,999		(17,697		)
Total investments	1,664,355		4,339		16,958		(19,273		)	(9,044		)	30,085		(65,360		)	—		—		(16,773		)	(1,700		)	1,603,587		(15,858		)
Total assets measured at fair value on a recurring basis	$	1,664,355	$	4,339	$	16,958	$	(19,273	)	$	(9,044	)	$	30,085	$	(65,360	)	$	—	$	—	$	(16,773	)	$	(1,700	)	$	1,603,587	$	(15,858	)
Liabilities:
Annuity account balances⁽²⁾	$	90,123	$	—	$	—	$	(530	)	$	—		$	—	$	—		$	63	$	1,896	$	—		$	—		$	88,820	$	—
Other liabilities⁽¹⁾	801,781		15,217		—		(185,520		)	—			—		—			—		—		—			—			972,084		(170,303		)
Total liabilities measured at fair value on a recurring basis	$	891,904	$	15,217	$	—	$	(186,050	)	$	—		$	—	$	—		$	63	$	1,896	$	—		$	—		$	1,060,904	$	(170,303	)

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

Schedule of the Carrying Amounts and Estimated Fair Value of the Company's Financial Instruments

The carrying amounts and estimated fair values of the Company’s financial instruments as of the periods shown below are as follows:



		As of
		June 30, 2017				December 31, 2016
	Fair Value Level	Carrying Amounts		Fair Values		Carrying Amounts		Fair Values
		(Dollars In Thousands)
Assets:
Mortgage loans on real estate	3	$	6,472,861	$	6,424,394	$	6,132,125	$	5,930,992
Policy loans	3	1,634,809		1,634,809		1,650,240		1,650,240
Fixed maturities, held-to-maturity⁽¹⁾	3	2,747,077		2,805,107		2,770,177		2,733,340
Liabilities:
Stable value product account balances	3	$	4,023,790	$	4,022,120	$	3,501,636	$	3,488,877
Future policy benefits and claims⁽²⁾	3	220,616		220,616		221,634		221,658
Other policyholders' funds⁽³⁾	3	133,878		134,633		135,367		136,127
Debt:⁽⁴⁾
Bank borrowings	3	$	205,000	$	205,000	$	170,000	$	170,000
Senior Notes	2	957,594		944,253		993,285		937,074
Subordinated debt securities	2	437,804		445,122		441,202		443,355
Non-recourse funding obligations⁽⁵⁾	3	2,774,744		2,833,271		2,796,474		2,765,558

Except as noted below, fair values were estimated using quoted market prices.
(1) Securities purchased from unconsolidated affiliates, Red Mountain LLC and Steel City LLC.
(2) Single premium immediate annuity without life contingencies.
(3) Supplementary contracts without life contingencies.
(4) Excludes capital lease obligations of $0.9 million.
(5) As of June 30, 2017, $2.7 billion in carrying amount and $2.8 billion in fair value relates to non-recourse funding obligations issued by Golden Gate and Golden Gate V. As of December 31, 2016, $2.7 billion in carrying amount and fair value relates to non-recourse funding obligations issued by Golden Gate and Golden Gate V.