Summary of Investments

The following tables summarize fixed maturity investments classified as available-for-sale and the non-credit-related component of other-than-temporary impairments (“OTTI”) in accumulated other comprehensive income (loss) (“AOCI”):



	September 30, 2014
	Amortized		Gross unrealized		Gross unrealized		Estimated fair value		OTTI (gain) loss
Fixed maturities:	cost		gains		losses		and carrying value		included in AOCI ⁽¹⁾
U.S. government direct obligations and U.S. agencies	$	845,069	$	59,509	$	3,309	$	901,269	—
Obligations of U.S. states and their subdivisions	1,902,663		264,962		2,746		2,164,879		—
Foreign government securities	2,496		—		2		2,494		—
Corporate debt securities ⁽²⁾	11,013,781		729,468		82,954		11,660,295		(2,299		)
Asset-backed securities	1,334,543		134,218		14,465		1,454,296		(90,795		)
Residential mortgage-backed securities	186,087		8,277		2,796		191,568		(283		)
Commercial mortgage-backed securities	886,633		25,111		4,136		907,608		—
Collateralized debt obligations	10,925		—		268		10,657		—
Total fixed maturities	$	16,182,197	$	1,221,545	$	110,676	$	17,293,066	$	(93,377	)

⁽¹⁾ Indicates the amount of any OTTI (gain) loss included in AOCI that is included in gross unrealized gains and losses. OTTI (gain) loss included in AOCI, as presented above, includes both the initial recognition of non-credit losses and the effects of subsequent increases and decreases in estimated fair value for those fixed maturity securities with previous non-credit impairment. The non-credit loss component of OTTI (gain) loss was in an unrealized gain position due to increases in estimated fair value subsequent to initial recognition of non-credit losses on such securities.

⁽²⁾ Includes perpetual debt investments with amortized cost of $157,742 and estimated fair value of $136,356.



	December 31, 2013
	Amortized		Gross unrealized		Gross unrealized		Estimated fair value		OTTI (gain) loss
Fixed maturities:	cost		gains		losses		and carrying value		included in AOCI ⁽¹⁾
U.S. government direct obligations and U.S. agencies	$	3,044,185	$	43,827	$	23,373	$	3,064,639	—
Obligations of U.S. states and their subdivisions	1,763,797		196,742		16,952		1,943,587		—
Foreign government securities	2,617		—		14		2,603		—
Corporate debt securities ⁽²⁾	10,454,252		568,261		223,532		10,798,981		(2,553		)
Asset-backed securities	1,553,510		131,277		29,150		1,655,637		(98,502		)
Residential mortgage-backed securities	244,723		8,335		3,473		249,585		(129		)
Commercial mortgage-backed securities	731,688		21,951		11,515		742,124		—
Collateralized debt obligations	12,587		14		213		12,388		—
Total fixed maturities	$	17,807,359	$	970,407	$	308,222	$	18,469,544	$	(101,184	)

⁽²⁾ Includes perpetual debt investments with amortized cost of $172,054 and estimated fair value of $143,644.

See Note 10 for additional discussion regarding fair value measurements.

The amortized cost and estimated fair value of fixed maturity investments classified as available-for-sale, based on estimated cash flows, are shown in the table below. Actual maturities will likely differ from these projections because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	September 30, 2014
	Amortized cost		Estimated fair value
Maturing in one year or less	$	548,021	$	578,347
Maturing after one year through five years	3,643,813		3,968,142
Maturing after five years through ten years	3,852,033		4,085,469
Maturing after ten years	5,110,752		5,453,109
Mortgage-backed and asset-backed securities	3,027,578		3,207,999
	$	16,182,197	$	17,293,066

Mortgage-backed (commercial and residential) and asset-backed securities include those issued by the U.S. government and U.S. agencies.

The following table summarizes information regarding the sales of securities classified as available-for-sale:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Proceeds from sales	$	118,810	$	2,661,364	$	2,418,114	$	8,022,277
Gross realized gains from sales	7,196		11,061		29,434		62,465
Gross realized losses from sales	—		2		1,090		26,914

Mortgage loans on real estate — The following table summarizes the carrying value of the mortgage loan portfolio by component:



	September 30, 2014			December 31, 2013
Principal	$	3,167,935		$	3,124,626
Unamortized premium (discount) and fees, net	10,638			12,519
Mortgage provision allowance	(2,890		)	(2,890		)
Total mortgage loans	$	3,175,683		$	3,134,255

The recorded investment of the mortgage loan portfolio categorized as performing was $3,178,573 and $3,137,145 as of September 30, 2014 and December 31, 2013, respectively.

The following table summarizes activity in the mortgage provision allowance:



	Nine Months Ended September 30, 2014		Year Ended December 31, 2013
	Commercial mortgages		Commercial mortgages
Beginning balance	$	2,890	$	2,890
Provision increases	—		273
Charge-off	—		(273		)
Ending balance	$	2,890	$	2,890

Allowance ending balance by basis of impairment method:
Collectively evaluated for impairment	$	2,890	$	2,890

Recorded investment balance in the mortgage loan portfolio, gross of allowance, by basis of impairment method:	$	3,178,573	$	3,137,145
Individually evaluated for impairment	13,082		13,906
Collectively evaluated for impairment	3,165,491		3,123,239

Limited partnership and other corporation interests — At September 30, 2014 and December 31, 2013, the Company had $55,011 and $79,236, respectively, invested in limited partnership and other corporation interests. Included in limited partnership interests are investments in low-income housing limited partnerships (“LIHLP”) that qualify for federal and state tax credits and ownership interests in pooled investment funds.

The Company has determined each investment in LIHLPs to be considered a variable interest entity (“VIE”). Although the Company is involved with the VIE, it determined that consolidation was not required because it has no power to direct the activities that most significantly impact the entities’ economic performance.

As a 99% limited partner in various upper-tier LIHLPs, the Company has few or no voting rights, but expects to receive the tax credits allocated to the partnership and operating losses from depreciation and interest expense. The Company is only an equity investor and views the LIHLP as a single investment. The general partner of the LIHLPs is most closely involved in the development and management of the LIHLP project. The general partner has a small ownership of the partnership, which requires a de minimus capital contribution. This equity investment is reduced based on fees paid at inception by the limited partner; therefore, the general partner does not qualify as having an equity investment at risk in the LIHLP project. However, the limited partner does not have the direct or indirect ability through voting rights or similar rights to make decisions about the general partner’s activities that have a significant effect on the success of the partnership.

The carrying value and maximum exposure to loss in relation to the activities of the VIEs was $13,103 and $31,563 at September 30, 2014 and December 31, 2013, respectively.

Special deposits and securities lending — The Company had securities on deposit with government authorities as required by certain insurance laws with fair values of $14,421 and $14,072 at September 30, 2014 and December 31, 2013, respectively.

The Company participates in a securities lending program whereby securities are loaned to third parties. Securities with a cost or amortized cost of $93,796 and $28,178 and estimated fair values of $94,099 and $27,166 were on loan under the program at September 30, 2014 and December 31, 2013, respectively. The Company received cash of $62,887 and $18,534 and securities with a fair value of $34,511 and $9,424 as collateral at September 30, 2014 and December 31, 2013, respectively.

Unrealized losses on fixed maturity investments classified as available-for-sale — The following tables summarize unrealized investment losses, including the non-credit-related portion of OTTI losses reported in AOCI, by class of investment:



	September 30, 2014
	Less than twelve months				Twelve months or longer				Total
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
Fixed maturities:	fair value		loss and OTTI		fair value		loss and OTTI		fair value		loss and OTTI
U.S. government direct obligations and U.S. agencies	$	37,264	$	115	$	126,905	$	3,194	$	164,169	$	3,309
Obligations of U.S. states and their subdivisions	53,528		600		53,547		2,146		107,075		2,746
Foreign government securities	2,493		2		—		—		2,493		2
Corporate debt securities	1,168,237		14,295		852,422		68,659		2,020,659		82,954
Asset-backed securities	150,583		2,352		220,335		12,113		370,918		14,465
Residential mortgage-backed securities	5,333		11		24,667		2,785		30,000		2,796
Commercial mortgage-backed securities	108,115		729		98,207		3,407		206,322		4,136
Collateralized debt obligations	10,657		268		—		—		10,657		268
Total fixed maturities	$	1,536,210	$	18,372	$	1,376,083	$	92,304	$	2,912,293	$	110,676

Total number of securities in an unrealized loss position			154				177				331



	December 31, 2013
	Less than twelve months				Twelve months or longer				Total
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
Fixed maturities:	fair value		loss and OTTI		fair value		loss and OTTI		fair value		loss and OTTI
U.S. government direct obligations and U.S. agencies	$	2,399,373	$	23,156	$	5,192	$	217	$	2,404,565	$	23,373
Obligations of U.S. states and their subdivisions	214,979		16,713		837		239		215,816		16,952
Foreign government securities	2,603		14		—		—		2,603		14
Corporate debt securities	2,632,093		144,367		511,376		79,165		3,143,469		223,532
Asset-backed securities	305,377		12,763		305,740		16,387		611,117		29,150
Residential mortgage-backed securities	32,131		3,454		1,011		19		33,142		3,473
Commercial mortgage-backed securities	177,395		6,703		48,825		4,812		226,220		11,515
Collateralized debt obligations	—		—		12,356		213		12,356		213
Total fixed maturities	$	5,763,951	$	207,170	$	885,337	$	101,052	$	6,649,288	$	308,222

Total number of securities in an unrealized loss position			458				109				567

Fixed maturity investments — Total unrealized losses and OTTI decreased by $197,546, or 64%, from December 31, 2013 to September 30, 2014. The majority, or $188,798, of the decrease was in the less than twelve months category. The decrease in unrealized losses was across most asset classes and reflects lower interest rates and tightening of credit spreads, although economic uncertainty in certain asset classes still remains.

Total unrealized losses greater than twelve months decreased by $8,748 from December 31, 2013 to September 30, 2014. Corporate debt securities account for 74%, or $68,659, of the unrealized losses and OTTI greater than twelve months at September 30, 2014. Non-investment grade corporate debt securities account for $9,202 of the unrealized losses and OTTI greater than twelve months and $8,146 of the losses are on perpetual debt investments issued by banks in the United Kingdom, all of which have investment grade ratings. The Company determined the majority of the unrealized losses on perpetual securities were due to widening credit spreads and low London Interbank Offered Rate (“LIBOR”) based coupon rates on the securities, which are not expected to compromise the issuers’ ability to service the investments. Management does not have the intent to sell these assets; therefore, an OTTI was not recognized in earnings.

Asset-backed securities account for 13% of the unrealized losses and OTTI greater than twelve months at September 30, 2014. The present value of the cash flows expected to be collected is not less than amortized cost and management does not have the intent to sell these assets; therefore, an OTTI was not recognized in earnings.

Other-than-temporary impairment recognition — The OTTI on fixed maturity securities where the loss portion is bifurcated and the credit related component is recognized in realized investment gains (losses) is summarized as follows:



	Three Months Ended September 30,					Nine Months Ended September 30,
	2014			2013		2014			2013
Beginning balance	$	167,961		$	167,961	$	167,961		$	167,788
Additional credit loss recognized on securities previously impaired	—			—		—			173
Reductions:
Due to sales, maturities or payoffs during the period	(646		)	—		(646		)	—
Due to increases in cash flows expected to be collected that are recognized over the remaining life of the security	(41,192		)	—		(41,192		)	—
Ending balance	$	126,123		$	167,961	$	126,123		$	167,961