Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

Schedule of financial assets and liabilities carried at fair value on a recurring basis

The following tables present the Company’s financial assets and liabilities carried at fair value on a recurring basis by fair value hierarchy category:



	Assets and liabilities measured at fair value on a recurring basis
	September 30, 2014
	Quoted prices		Significant
	in active markets for identical assets (Level 1)		other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Assets
Fixed maturities available-for-sale:
U.S. government direct obligations and U.S. agencies	$	—	$	901,269	$	—	$	901,269
Obligations of U.S. states and their subdivisions	—		2,164,879		—		2,164,879
Foreign government securities	—		2,494		—		2,494
Corporate debt securities	—		11,654,190		6,105		11,660,295
Asset-backed securities	—		1,244,369		209,927		1,454,296
Residential mortgage-backed securities	—		191,568		—		191,568
Commercial mortgage-backed securities	—		907,608		—		907,608
Collateralized debt obligations	—		10,657		—		10,657
Total fixed maturities available-for-sale	—		17,077,034		216,032		17,293,066
Fixed maturities held for trading:
U.S. government direct obligations and U.S. agencies	—		160,390		—		160,390
Corporate debt securities	—		58,103		—		58,103
Commercial mortgage-backed securities	—		1,065		—		1,065
Total fixed maturities held for trading	—		219,558		—		219,558
Short-term investments	434,732		2,636,401		—		3,071,133
Collateral under securities lending agreements	62,887		—		—		62,887
Collateral under derivative counterparty collateral agreements	131,303		—		—		131,303
Derivative instruments designated as hedges:
Interest rate swaps	—		18,330		—		18,330
Cross-currency swaps	—		1,301		—		1,301
Derivative instruments not designated as hedges:
Interest rate swaps	—		1,840		—		1,840
Interest rate swaptions	—		424		—		424
Other forward contracts	—		2,347		—		2,347
Cross-currency swaps	—		2,055		—		2,055
Total derivative instruments	—		26,297		—		26,297
Separate account assets	15,583,106		11,898,760		—		27,481,866
Total assets	$	16,212,028	$	31,858,050	$	216,032	$	48,286,110

Liabilities
Payable under securities lending agreements	$	62,887	$	—	$	—	$	62,887
Derivative instruments designated as hedges:
Interest rate swaps	—		100		—		100
Cross-currency swaps	—		4,762		—		4,762
Derivative instruments not designated as hedges:
Interest rate swaps	—		1,411		—		1,411
Other forward contracts	—		4,434		—		4,434
Cross-currency swaps	—		143,588		—		143,588
Total derivative instruments	—		154,295		—		154,295
Separate account liabilities ⁽¹⁾	—		80,567		—		80,567
Total liabilities	$	62,887	$	234,862	$	—	$	297,749

⁽¹⁾Includes only separate account instruments which are carried at the fair value of the underlying liabilities owned by the separate accounts.



	Assets and liabilities measured at fair value on a recurring basis
	December 31, 2013
	Quoted prices		Significant
	in active markets for identical assets (Level 1)		other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Assets
Fixed maturities available-for-sale:
U.S. government direct obligations and U.S. agencies	$	—	$	3,064,639	$	—	$	3,064,639
Obligations of U.S. states and their subdivisions	—		1,943,587		—		1,943,587
Foreign government securities	—		2,603		—		2,603
Corporate debt securities	—		10,792,329		6,652		10,798,981
Asset-backed securities	—		1,402,679		252,958		1,655,637
Residential mortgage-backed securities	—		249,585		—		249,585
Commercial mortgage-backed securities	—		742,124		—		742,124
Collateralized debt obligations	—		12,356		32		12,388
Total fixed maturities available-for-sale	—		18,209,902		259,642		18,469,544
Fixed maturities held for trading:
U.S. government direct obligations and U.S. agencies	—		236,000		—		236,000
Corporate debt securities	—		58,171		—		58,171
Asset-backed securities	—		40,858		—		40,858
Commercial mortgage-backed securities	—		1,026		—		1,026
Total fixed maturities held for trading	—		336,055		—		336,055
Short-term investments	254,378		39,909		—		294,287
Collateral under securities lending agreements	18,534		—		—		18,534
Collateral under derivative counterparty collateral agreements	143,710		—		—		143,710
Derivative instruments designated as hedges:
Interest rate swaps	—		18,927		—		18,927
Derivative instruments not designated as hedges:
Interest rate swaps	—		1,454		—		1,454
Interest rate swaptions	—		1,176		—		1,176
Cross-currency swaps	—		1,921		—		1,921
Total derivative instruments	—		23,478		—		23,478
Separate account assets	14,861,680		11,769,224		—		26,630,904
Total assets	$	15,278,302	$	30,378,568	$	259,642	$	45,916,512

Liabilities
Payable under securities lending agreements	$	18,534	$	—	$	—	$	18,534
Derivative instruments designated as hedges:
Interest rate swaps	—		147		—		147
Cross-currency swaps	—		7,843		—		7,843
Derivative instruments not designated as hedges:
Interest rate swaps	—		3,492		—		3,492
Cross-currency swaps	—		156,261		—		156,261
Total derivative instruments	—		167,743		—		167,743
Separate account liabilities ⁽¹⁾	2		166,325		—		166,327
Total liabilities	$	18,536	$	334,068	$	—	$	352,604

⁽¹⁾ Includes only separate account instruments which are carried at the fair value of the underlying liabilities owned by the separate accounts.

Schedule of assets and liabilities measured at fair value on a recurring basis, for which Level 3 inputs are utilized to determine fair value

The following tables present additional information about assets and liabilities measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value:



	Recurring Level 3 financial assets and liabilities
	Three Months Ended September 30, 2014
	Fixed maturities available-for-sale
	Corporate			Asset-backed			Collateralized
	debt securities			securities			debt obligations			Total
Balance, July 1, 2014	$	6,371		$	220,134		$	29		$	226,534
Realized and unrealized gains (losses) included in:
Net income (loss)	—			—			(17		)	(17		)
Other comprehensive income (loss)	(111		)	(3,957		)	(12		)	(4,080		)
Settlements	(155		)	(6,250		)	—			(6,405		)
Balances, September 30, 2014	$	6,105		$	209,927		$	—		$	216,032
Total gains (losses) for the period included in net income attributable to the change in unrealized gains and losses relating to assets held at September 30, 2014	$	—		$	—		$	—		$	—



	Recurring Level 3 financial assets and liabilities
	Three Months Ended September 30, 2013
	Fixed maturities available-for-sale
	Corporate			Asset-backed			Collateralized
	debt securities			securities			debt obligations		Total
Balance, July 1, 2013	$	1,796		$	260,768		$	32	$	262,596
Realized and unrealized gains (losses) included in:
Other comprehensive income (loss)	(5		)	6,667			—		6,662
Settlements	1			(12,086		)	—		(12,085		)
Balances, September 30, 2013	$	1,792		$	255,349		$	32	$	257,173
Total gains (losses) for the period included in net income attributable to the change in unrealized gains and losses relating to assets held at September 30, 2013	$	—		$	—		$	—	$	—



	Recurring Level 3 financial assets and liabilities
	Nine Months Ended September 30, 2014
	Fixed maturities available-for-sale
	Corporate			Asset-backed			Collateralized
	debt securities			securities			debt obligations			Total
Balance, January 1, 2014	$	6,652		$	252,958		$	32		$	259,642
Realized and unrealized gains (losses) included in:
Net income (loss)	—			—			(17		)	(17		)
Other comprehensive income (loss)	(36		)	(9,551		)	(15		)	(9,602		)
Settlements	(511		)	(33,480		)	—			(33,991		)
Balances, September 30, 2014	$	6,105		$	209,927		$	—		$	216,032
Total gains (losses) for the period included in net income attributable to the change in unrealized gains and losses relating to assets held at September 30, 2014	$	—		$	—		$	—		$	—



	Recurring Level 3 financial assets and liabilities
	Nine Months Ended September 30, 2013
	Fixed maturities available-for-sale
	Corporate			Asset-backed			Collateralized
	debt securities			securities			debt obligations		Total
Balance, January 1, 2013	$	1,822		$	265,538		$	32	$	267,392
Realized and unrealized gains (losses) included in:
Other comprehensive income (loss)	(28		)	25,261			—		25,233
Settlements	(2		)	(35,450		)	—		(35,452		)
Balance at September 30, 2013	$	1,792		$	255,349		$	32	$	257,173
Total gains (losses) for the period included in net income attributable to the change in unrealized gains and losses relating to assets held at September 30, 2013	$	—		$	—		$	—	$	—

Schedule of significant unobservable inputs used during the valuation of assets categorized within Level 3 of the recurring fair value measurements table

The following tables present significant unobservable inputs used during the valuation of certain assets categorized within Level 3 of the recurring fair value measurements table:



	September 30, 2014
	Fair Value		Valuation Technique	Unobservable Input	Weighted Average
Fixed maturities available-for-sale:
Asset-backed securities ⁽¹⁾	$	209,888	Internal model pricing	Prepayment speed assumption	8
				Constant default rate assumption	5
				Adjusted ABX Index spread assumption ⁽²⁾	505

⁽¹⁾ Includes home improvement loans only.

⁽²⁾ Includes an internally calculated liquidity premium adjustment of 217.

At September 30, 2014, after adjusting the Asset Backed Securities Index (“ABX Index”) spread assumption by the liquidity premium, the overall discount rate ranged from 293 to 613 basis points. The constant default rate assumption ranged from 2.0 to 12.7.



	December 31, 2013
	Fair Value		Valuation Technique	Unobservable Input	Weighted Average
Fixed maturities available-for-sale:
Asset-backed securities ⁽¹⁾	$	252,902	Internal model pricing	Prepayment speed assumption	9
				Constant default rate assumption	5
				Adjusted ABX Index spread assumption ⁽²⁾	455

⁽¹⁾ Includes home improvement loans only.

⁽²⁾ Includes an internally calculated liquidity premium adjustment of 217.

At December 31, 2013, after adjusting the ABX Index spread assumption by the liquidity premium, the overall discount rate ranged from 327 to 647 basis points. The constant default rate assumption ranged from 2.0 to 12.9.

The significant unobservable inputs used in the fair value measurement of asset-backed securities are prepayment speed assumptions, constant default rate assumptions and the ABX Index spread adjusted by an internally calculated liquidity premium with the primary inputs being the constant default rate assumption and the adjusted ABX Index spread assumption. As the constant default rate assumption or the adjusted ABX Index spread assumption increases, the price and therefore, the fair value, of the securities decreases.

Summary of the carrying amounts and estimated fair values of financial instruments not carried at fair value on a recurring basis

The following tables summarize the carrying amounts and estimated fair values of the Company’s financial instruments not carried at fair value on a recurring basis:



	September 30, 2014				December 31, 2013
	Carrying		Estimated		Carrying		Estimated
	amount		fair value		amount		fair value
Assets
Mortgage loans on real estate	$	3,175,683	$	3,338,668	$	3,134,255	$	3,197,292
Policy loans	4,179,059		4,179,059		4,185,472		4,185,472
Limited partnership interests	38,772		43,754		44,551		42,433
Other investments	15,790		42,809		16,643		42,814

Liabilities
Annuity contract benefits without life contingencies	$	10,499,021	$	10,390,024	$	10,263,043	$	9,986,464
Policyholders’ funds	306,293		306,293		345,689		345,689
Commercial paper	99,989		99,989		98,990		98,990
Notes payable	541,798		574,260		532,519		541,918

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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