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, 2015
	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	$	1,024,373	$	62,312	$	855	$	1,085,830	$	—
Obligations of U.S. states and their subdivisions	2,041,014		261,202		13,915		2,288,301		—
Foreign government securities	2,332		—		—		2,332		—
Corporate debt securities ⁽²⁾	12,245,679		579,837		199,040		12,626,476		(1,915		)
Asset-backed securities	1,216,655		143,264		10,150		1,349,769		(90,867		)
Residential mortgage-backed securities	132,881		5,445		1,416		136,910		(125		)
Commercial mortgage-backed securities	967,885		32,540		5,054		995,371		—
Collateralized debt obligations	9,316		49		—		9,365		—
Total fixed maturities	$	17,640,135	$	1,084,649	$	230,430	$	18,494,354	$	(92,907	)

⁽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 $149,062 and estimated fair value of $119,151.



	December 31, 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	$	3,478,153	$	70,597	$	1,494	$	3,547,256	$	—
Obligations of U.S. states and their subdivisions	1,885,715		287,668		899		2,172,484		—
Foreign government securities	2,455		—		4		2,451		—
Corporate debt securities ⁽²⁾	11,258,517		763,036		82,104		11,939,449		(2,228		)
Asset-backed securities	1,263,089		149,152		13,702		1,398,539		(96,603		)
Residential mortgage-backed securities	167,793		7,368		1,932		173,229		(185		)
Commercial mortgage-backed securities	886,748		32,556		1,099		918,205		—
Collateralized debt obligations	10,674		—		209		10,465		—
Total fixed maturities	$	18,953,144	$	1,310,377	$	101,443	$	20,162,078	$	(99,016	)

⁽²⁾ Includes perpetual debt investments with amortized cost of $157,742 and estimated fair value of $131,799.

See Note 8 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, 2015
	Amortized cost		Estimated fair value
Maturing in one year or less	$	591,644	$	617,273
Maturing after one year through five years	3,654,433		3,917,068
Maturing after five years through ten years	5,053,440		5,204,264
Maturing after ten years	5,337,099		5,558,660
Mortgage-backed and asset-backed securities	3,003,519		3,197,089
Total fixed maturities	$	17,640,135	$	18,494,354

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,
	2015		2014		2015		2014
Proceeds from sales	$	192,100	$	118,810	$	3,187,977	$	2,418,114
Gross realized gains from sales	6,632		7,196		38,567		29,434
Gross realized losses from sales	478		—		802		1,090

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



	September 30, 2015			December 31, 2014
Principal	$	3,318,976		$	3,356,374
Unamortized premium (discount) and fees, net	8,511			10,086
Mortgage provision allowance	(2,890		)	(2,890		)
Total mortgage loans	$	3,324,597		$	3,363,570

The recorded investment of the mortgage loan portfolio categorized as performing was $3,327,487 and $3,366,460 as of September 30, 2015, and December 31, 2014, respectively.



	Nine Months Ended September 30, 2015		Year Ended December 31, 2014
	Commercial mortgages		Commercial mortgages
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:	$	3,327,487	$	3,366,460
Individually evaluated for impairment	12,667		12,986
Collectively evaluated for impairment	3,314,820		3,353,474

Limited partnership and other corporation interests — At September 30, 2015, and December 31, 2014, the Company had $43,829 and $49,421, 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 LIHLP to be considered a variable interest entity (“VIE”) but consolidation was not required because the Company has no power through voting rights or similar rights to direct the activities that most significantly impact the entities’ economic performance. As a 99% limited partner in various upper-tier LIHLPs, the Company expects to receive the tax credits allocated to the partnership and operating losses from depreciation and interest expense. The general partner is most closely involved in the development and management of the LIHLP project and has a small ownership percentage of the partnership.

The carrying value and maximum exposure to loss in relation to the activities of the VIEs was $3,996 and $7,464 at September 30, 2015, and December 31, 2014, respectively.

Special deposits — The Company had securities on deposit with government authorities as required by certain insurance laws with fair values of $14,353 and $14,612 at September 30, 2015, and December 31, 2014, respectively.

Securities lending — The Company participates in a securities lending program in which the Company lends securities that are held as part of its general account investment portfolio to third parties through an unaffiliated agent. The Company does not enter into these transactions for liquidity purposes, but rather for yield enhancement on its investment portfolio.

The securities lending agreement requires initial collateral in an amount greater than or equal to 102% of the fair value of domestic securities loaned and 105% of foreign securities loaned. Cash collateral related to the securities lending program is generally invested in U.S. government or U.S. government agency securities. The Company bears the risk of any deficiency in the amount of collateral available for return to a borrower due to a loss in an approved investment. In addition, the securities lending agent indemnifies the Company against borrower risk, meaning that the lending agent agrees contractually to replace securities not returned due to a borrower default.

Securities with a cost or amortized cost of $188,328 and $15,252 and estimated fair values of $176,916 and $15,423 were on loan under the program at September 30, 2015, and December 31, 2014, respectively. The Company received cash of $45,726 and $13,741 and securities with a fair value of $138,288 and $2,131 as collateral at September 30, 2015, and December 31, 2014, respectively.

The following table summarizes the collateral pledged by the Company under the securities lending program, by class of investment. Under the securities lending program the collateral pledged is, by definition, the securities loaned against the assets borrowed.



	September 30, 2015		December 31, 2014
Securities lending transactions
U.S. government direct obligations and U.S. agencies	$	—	$	11,148
Corporate debt securities	176,916		4,275
Total secured borrowings	$	176,916	$	15,423

The Company’s securities lending agreements are open agreements, meaning the borrower can return and the Company can recall the loaned securities at any time. The assets and liabilities associated with securities lending program are not subject to master netting arrangements and are not offset in the condensed consolidated balance sheets.

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, 2015
	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	$	87,145	$	444	$	24,509	$	411	$	111,654	$	855
Obligations of U.S. states and their subdivisions	241,124		13,915		—		—		241,124		13,915
Corporate debt securities	2,981,555		116,739		496,123		82,301		3,477,678		199,040
Asset-backed securities	70,278		1,295		187,358		8,855		257,636		10,150
Residential mortgage-backed securities	—		—		19,729		1,416		19,729		1,416
Commercial mortgage-backed securities	199,669		4,858		24,746		196		224,415		5,054
Total fixed maturities	$	3,579,771	$	137,251	$	752,465	$	93,179	$	4,332,236	$	230,430

Total number of securities in an unrealized loss position			355				99				454



	December 31, 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	$	566,335	$	503	$	74,322	$	991	$	640,657	$	1,494
Obligations of U.S. states and their subdivisions	18,280		218		41,064		681		59,344		899
Foreign government securities	2,451		4		—		—		2,451		4
Corporate debt securities	836,263		16,775		764,528		65,329		1,600,791		82,104
Asset-backed securities	88,312		849		200,072		12,853		288,384		13,702
Residential mortgage-backed securities	4,663		11		24,052		1,921		28,715		1,932
Commercial mortgage-backed securities	35,015		127		57,333		972		92,348		1,099
Collateralized debt obligations	10,465		209		—		—		10,465		209
Total fixed maturities	$	1,561,784	$	18,696	$	1,161,371	$	82,747	$	2,723,155	$	101,443

Total number of securities in an unrealized loss position			134				153				287

Fixed maturity investments — Total unrealized losses and OTTI increased by $128,987, or 127%, from December 31, 2014, to September 30, 2015. The increase in unrealized losses was primarily due to corporate debt securities which have been influenced by market conditions with widening credit spreads resulting in generally lower valuations of these fixed maturity securities.

Total unrealized losses greater than twelve months increased by $10,432 from December 31, 2014, to September 30, 2015. Corporate debt securities account for 88%, or $82,301, of the unrealized losses and OTTI greater than twelve months at September 30, 2015. Non-investment grade corporate debt securities account for $12,764 of the unrealized losses and OTTI greater than twelve months and $9,940 of the losses are on perpetual debt investments issued by investment grade rated banks in the United Kingdom. Management does not have the intent to sell these assets; therefore, an OTTI was not recognized in earnings.

Asset-backed securities account for 10% of the unrealized losses and OTTI greater than twelve months at September 30, 2015. 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,
	2015			2014			2015			2014
Beginning balance	$	106,913		$	167,961		$	119,532		$	167,961
Initial impairments - credit loss on securities not previously impaired	—			—			450			—
Reductions:
Due to sales, maturities or payoffs during the period	(521		)	(646		)	(521		)	(646		)
Due to increases in cash flows expected to be collected that are recognized over the remaining life of the security	(13,057		)	(41,192		)	(26,126		)	(41,192		)
Ending balance	$	93,335		$	126,123		$	93,335		$	126,123