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Fair Value of Assets and Liabilities (Tables)
 9 Months Ended
Sep. 30, 2016
Fair Value Disclosures [Abstract]  
Fair Value, Assets and Liabilities Measured on Recurring Basis
The tables below present the balances of assets and liabilities reported at fair value on a recurring basis, as of the dates indicated.
 
September 30, 2016
 
Level 1
 
Level 2
 
Level 3
 
Netting(1)
 
Total
 
(in thousands)
Fixed maturities, available-for-sale:
 
 
 
 
 
 
 
 
 
U.S. Treasury securities and obligations of U.S. government authorities and agencies
$
0

 
$
146,376

 
$
0

 
$
0

 
$
146,376

Obligations of U.S. states and their political subdivisions
0

 
598,405

 
0

 
0

 
598,405

Foreign government bonds
0

 
111,480

 
0

 
0

 
111,480

U.S. corporate public securities
0

 
2,379,123

 
57,610

 
0

 
2,436,733

U.S. corporate private securities
0

 
843,949

 
33,595

 
0

 
877,544

Foreign corporate public securities
0

 
217,003

 
0

 
0

 
217,003

Foreign corporate private securities
0

 
608,025

 
16,255

 
0

 
624,280

Asset-backed securities
0

 
156,000

 
38,047

 
0

 
194,047

Commercial mortgage-backed securities
0

 
338,105

 
0

 
0

 
338,105

Residential mortgage-backed securities
0

 
87,443

 
0

 
0

 
87,443

Subtotal
0

 
5,485,909

 
145,507

 
0

 
5,631,416

Trading account assets:
 
 
 
 
 
 
 
 
 
Corporate securities
0

 
20,142

 
0

 
0

 
20,142

Asset-backed securities
0

 
302

 
0

 
0

 
302

Equity securities
0

 
0

 
17,966

 
0

 
17,966

Subtotal
0

 
20,444

 
17,966

 
0

 
38,410

Equity securities, available-for-sale
37

 
19,944

 
121

 
0

 
20,102

Short-term investments
36,658

 
5,000

 
0

 
0

 
41,658

Cash equivalents
8,836

 
11,998

 
0

 
0

 
20,834

Other long-term investments
0

 
82,860

 
2,479

 
(14,711
)
 
70,628

Reinsurance recoverables
0

 
0

 
9,011,140

 
0

 
9,011,140

Receivables from parent and affiliates
0

 
147,707

 
560

 
0

 
148,267

Subtotal excluding separate account assets
45,531

 
5,773,862

 
9,177,773

 
(14,711
)
 
14,982,455

Separate account assets(2)
0

 
116,334,339

 
0

 
0

 
116,334,339

Total assets
$
45,531

 
$
122,108,201

 
$
9,177,773

 
$
(14,711
)
 
$
131,316,794

Future policy benefits(3)
$
0

 
$
0

 
$
8,480,030

 
$
0

 
$
8,480,030

Policyholders' account balances
0

 
0

 
17,159

 
0

 
17,159

Payables to parent and affiliates
0

 
14,847

 
0

 
(14,847
)
 
0

Total liabilities
$
0

 
$
14,847

 
$
8,497,189

 
$
(14,847
)
 
$
8,497,189


 
 
 
 
December 31, 2015
 
Level 1
 
Level 2
 
Level 3
 
Netting(1)
 
Total
 
(in thousands)
Fixed maturities, available-for-sale:
 
 
 
 
 
 
 
 
 
U.S. Treasury securities and obligations of U.S. government authorities and agencies
$
0

 
$
94,049

 
$
0

 
$
0

 
$
94,049

Obligations of U.S. states and their political subdivisions
0

 
624,769

 
0

 
0

 
624,769

Foreign government bonds
0

 
70,410

 
0

 
0

 
70,410

U.S. corporate public securities
0

 
2,635,551

 
55,003

 
0

 
2,690,554

U.S. corporate private securities
0

 
1,322,213

 
22,716

 
0

 
1,344,929

Foreign corporate public securities
0

 
275,349

 
0

 
0

 
275,349

Foreign corporate private securities
0

 
760,869

 
17,773

 
0

 
778,642

Asset-backed securities
0

 
261,784

 
173,347

 
0

 
435,131

Commercial mortgage-backed securities
0

 
404,345

 
0

 
0

 
404,345

Residential mortgage-backed securities
0

 
122,754

 
0

 
0

 
122,754

Subtotal
0

 
6,572,093

 
268,839

 
0

 
6,840,932

Trading account assets:
 
 
 
 
 
 
 
 
 
Corporate securities
0

 
44,374

 
0

 
0

 
44,374

Asset-backed securities
0

 
1,990

 
0

 
0

 
1,990

Equity securities
0

 
0

 
18,248

 
0

 
18,248

Subtotal
0

 
46,364

 
18,248

 
0

 
64,612

Equity securities, available-for-sale
39

 
51,769

 
165

 
0

 
51,973

Short-term investments
18,713

 
36,093

 
0

 
0

 
54,806

Cash equivalents
50,998

 
143,927

 
0

 
0

 
194,925

Other long-term investments(4)
0

 
297,394

 
5,704

 
(230,554
)
 
72,544

Reinsurance recoverables
0

 
0

 
4,940,011

 
0

 
4,940,011

Receivables from parent and affiliates
0

 
157,625

 
5,000

 
0

 
162,625

Subtotal excluding separate account assets
69,750

 
7,305,265

 
5,237,967

 
(230,554
)
 
12,382,428

Separate account assets(2)(4)
0

 
108,967,162

 
0

 
0

 
108,967,162

Total assets
$
69,750

 
$
116,272,427

 
$
5,237,967

 
$
(230,554
)
 
$
121,349,590

Future policy benefits(3)
$
0

 
$
0

 
$
5,205,434

 
$
0

 
$
5,205,434

Payables to parent and affiliates
0

 
32,849

 
0

 
(32,849
)
 
0

Total liabilities
$
0

 
$
32,849

 
$
5,205,434

 
$
(32,849
)
 
$
5,205,434


(1)
“Netting” amounts represent cash collateral of $(0.1) million and $198 million as of September 30, 2016 and December 31, 2015, respectively, and the impact of offsetting asset and liability positions held with the same counterparty, subject to master netting arrangements.
(2)
Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract value and not fair value in the Company’s Unaudited Interim Consolidated Statements of Financial Position.
(3)
As of September 30, 2016, the net embedded derivative liability position of $8,480 million includes $996 million of embedded derivatives in an asset position and $9,476 million of embedded derivatives in a liability position. As of December 31, 2015, the net embedded derivative liability position of $5,205 million includes $655 million of embedded derivatives in an asset position and $5,860 million of embedded derivatives in a liability position.
(4)
Prior period amounts are presented on a basis consistent with the current period presentation, reflecting the adoption of ASU 2015-07
Fair Value Level Three Amounts By Pricing Source
The tables below present the balances of Level 3 assets and liabilities measured at fair value with their corresponding pricing sources.
 
September 30, 2016
 
Internal(1)
 
External(2)    
 
Total
 
(in thousands)
Corporate securities(3)
$
48,147

 
$
59,313

 
$
107,460

Asset-backed securities(4)
73

 
37,974

 
38,047

Equity securities
5,047

 
13,040

 
18,087

Other long-term investments
0

 
2,479

 
2,479

Reinsurance recoverables
9,011,140

 
0

 
9,011,140

Receivables from parent and affiliates
0

 
560

 
560

Total assets
$
9,064,407

 
$
113,366

 
$
9,177,773

Future policy benefits
$
8,480,030

 
$
0

 
$
8,480,030

Policyholders' account balances
17,159

 
0

 
17,159

Total liabilities
$
8,497,189

 
$
0

 
$
8,497,189


 
December 31, 2015
 
Internal(1)
 
External(2)    
 
Total
 
(in thousands)
Corporate securities(3)
$
40,492

 
$
55,000

 
$
95,492

Asset-backed securities(4)
158

 
173,189

 
173,347

Equity securities
165

 
18,248

 
18,413

Other long-term investments(5)
3,260

 
2,444

 
5,704

Reinsurance recoverables
4,940,011

 
0

 
4,940,011

Receivables from parent and affiliates
0

 
5,000

 
5,000

Total assets
$
4,984,086

 
$
253,881

 
$
5,237,967

Future policy benefits
$
5,205,434

 
$
0

 
$
5,205,434

Total liabilities
$
5,205,434

 
$
0

 
$
5,205,434


(1)
Represents valuations reflecting both internally-derived and market inputs, as well as third-party pricing information or quotes. See below for additional information related to internally-developed valuation for significant items in the above table.
(2)
Represents unadjusted prices from independent pricing services and independent indicative broker quotes where pricing inputs are not readily available.
(3)
Includes assets classified as fixed maturities available-for-sale.
(4)
Includes credit-tranched securities collateralized by sub-prime mortgages, auto loans, credit cards, education loans and other asset types.
(5)
Prior period amounts are presented on a basis consistent with the current period presentation, reflecting the adoption of ASU 2015-07.
Fair Value Inputs, Assets, Quantitative Information
The tables below present quantitative information on significant internally-priced Level 3 assets and liabilities (see narrative below for quantitative information for separate account assets).
 
September 30, 2016
 
Fair Value  
  Valuation  
Techniques
 
Unobservable Inputs  
 
Minimum  
 
Maximum  
 
  Weighted  
Average
 
  Impact of 
Increase in 
Input on 
Fair Value(1)
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities(12)
$
48,147

Discounted cash flow
 
Discount rate
 
2.16
%
 
 
12.91
%
 
 
6.67
%
 
 
Decrease
 
 
Market comparables
 
EBITDA multiples(2)
 
5.0

X
 
5.0

X
 
5.0

X
 
Increase
 
 
Liquidation
 
Liquidation value
 
95.48
%
 
 
95.48
%
 
 
95.48
%
 
 
Increase
Reinsurance recoverables - Living Benefits
$
8,478,986

Fair values are determined in the same manner as future policy benefits
Reinsurance recoverables - No Lapse Guarantee
$
532,154

Discounted cash flow
 
Lapse rate(3)
 
0
%
 
 
12
%
 
 
 
 
 
Decrease
 
 
 
 
NPR spread(4)
 
0.36
%
 
 
1.74
%
 
 
 
 
 
Decrease
 
 
 
 
Mortality rate(5)
 
0
%
 
 
31
%
 
 
 
 
 
Decrease
 
 
 
 
Premium payment(6)
 
0.65

X
 
0.95

X
 
 
 
 
Decrease
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future policy benefits(7)
$
8,480,030

Discounted cash flow
 
Lapse rate(8)
 
0
%
 
 
13
%
 
 
 
 
 
Decrease
 
 
 
 
NPR spread(4)
 
0.36
%
 
 
1.74
%
 
 
 
 
 
Decrease
 
 
 
 
Utilization rate(9)
 
52
%
 
 
96
%
 
 
 
 
 
Increase
 
 
 
 
Withdrawal rate
 
 
 
 
 
See table footnote (10) below
 
 
 
 
Mortality rate(11)
 
0
%
 
 
14
%
 
 
 
 
 
Decrease
 
 
 
 
Equity volatility curve
 
17
%
 
 
25
%
 
 
 
 
 
Increase
 
 


 
December 31, 2015
 
Fair Value  
  Valuation  
Techniques
 
  Unobservable
Inputs  
 
Minimum  
 
Maximum  
 
  Weighted  
Average
 
  Impact of 
Increase in 
Input on 
Fair Value(1)
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities(12)
$
40,492

Discounted cash flow
 
Discount rate
 
5.76
%
 
 
17.95
%
 
 
8.35
%
 
 
Decrease
 
 
Market comparables
 
EBITDA multiples(2)
 
5.0

X
 
5.0

X
 
5.0

X
 
Increase
Reinsurance recoverables - Living Benefits
$
4,600,193

Fair values are determined in the same manner as future policy benefits
Reinsurance recoverables - No Lapse Guarantee
$
339,818

Discounted cash flow
 
Lapse rate(3)
 
0
%
 
 
12
%
 
 
 
 
 
Decrease
 
 
 
 
NPR spread(4)
 
0.06
%
 
 
1.76
%
 
 
 
 
 
Decrease
 
 
 
 
Mortality rate(5)
 
0
%
 
 
20
%
 
 
 
 
 
Decrease
 
 
 
 
Premium payment(13)
 
1.00

X
 
3.75

X
 
 
 
 
Decrease
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future policy benefits(7)
$
5,205,434

Discounted cash flow
 
Lapse rate(8)
 
0
%
 
 
14
%
 
 
 
 
 
Decrease
 
 
 
 
NPR spread(4)
 
0.06
%
 
 
1.76
%
 
 
 
 
 
Decrease
 
 
 
 
Utilization rate(9)
 
56
%
 
 
96
%
 
 
 
 
 
Increase
 
 
 
 
Withdrawal rate(10)
 
74
%
 
 
100
%
 
 
 
 
 
Increase
 
 
 
 
Mortality rate(11)
 
0
%
 
 
14
%
 
 
 
 
 
Decrease
 
 
 
 
Equity volatility curve
 
17
%
 
 
28
%
 
 
 
 
 
Increase

(1)
Conversely, the impact of a decrease in input would have the opposite impact for the fair value as that presented in the table.
(2)
EBITDA multiples represent multiples of earnings before interest, taxes, depreciation and amortization, and are amounts used when the reporting entity has determined that market participants would use such multiples when pricing the investments.
(3)
For universal life, lapse rates vary based on funding level and other factors. Rates are set to zero when the no lapse guarantee is fully funded and the cash value is zero.
(4)
To reflect NPR, the Company incorporates an additional spread over LIBOR into the discount rate used in the valuation of contracts in a liability position and generally not to those in a contra-liability position. The NPR spread reflects the financial strength ratings of the Company and its affiliates, as these are insurance liabilities and senior to debt. The additional spread over LIBOR is determined by utilizing the credit spreads associated with issuing funding agreements, adjusted for any illiquidity risk premium.
(5)
Universal life mortality rates are adjusted based on underwriting information. A mortality improvement assumption is also incorporated into the projection.
(6)
For universal life, policyholders are assumed to pay a multiple of commissionable target premium levels (shown above and indicated as “X”). The multiples vary by funding level and policy duration. If the resulting premium in any duration is smaller than the minimum annual premium required to maintain the no-lapse guarantee, policyholders are assumed to pay the minimum annual premium. Policyholders are assumed to stop premium payments once the no-lapse guarantee is fully funded. The range shown as of September 30, 2016 excludes multiples for the first duration since all contracts are beyond the first duration. Assumption ranges for prior periods included first duration multiples.
(7)
Future policy benefits primarily represent general account liabilities for the living benefit features of the Company’s variable annuity contracts which are accounted for as embedded derivatives. Since the valuation methodology for these liabilities uses a range of inputs that vary at the contract level over the cash flow projection period, presenting a range, rather than weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.
(8)
Lapse rates are adjusted at the contract level based on the in-the-moneyness of the living benefit and reflect other factors, such as the applicability of any surrender charges. Lapse rates are reduced when contracts are more in-the-money. Lapse rates are also generally assumed to be lower for the period where surrender charges apply.
(9)
The utilization rate assumption estimates the percentage of contracts that will utilize the benefit during the contract duration, and begin lifetime withdrawals at various time intervals from contract inception. The remaining contractholders are assumed to either begin lifetime withdrawals immediately or never utilize the benefit. Utilization assumptions may vary by product type, tax status and age. The impact of changes in these assumptions is highly dependent on the product type, the age of the contractholder at the time of the sale, and the timing of the first lifetime income withdrawal. Range reflects the utilization rate for the vast majority of business with living benefits.
(10)
The withdrawal rate assumption estimates the magnitude of annual contractholder withdrawals relative to the maximum allowable amount under the contract. These assumptions may vary based on the age of the contractholder, the tax status of the contract and the duration since the contractholder began lifetime withdrawals. As of September 30, 2016, the minimum withdrawal assumption rate is 78% and the maximum withdrawal assumption rate may be greater than 100%. The fair value of the liability will generally increase the closer the withdrawal rate is to 100% and decrease as the withdrawal rate moves further away from 100%.
(11)
Range reflects the mortality rate for the vast majority of business with living benefits, with policyholders ranging from 35 to 90 years old. While the majority of living benefits have a minimum age requirement, certain benefits do not have an age restriction. This results in contractholders for certain benefits with mortality rates approaching 0%. Based on historical experience, the Company applies a set of age and duration specific mortality rate adjustments compared to standard industry tables. A mortality improvement assumption is also incorporated into the overall mortality table.
(12)
Includes assets classified as fixed maturities available-for-sale and other trading account assets.
(13)
For universal life, premium payment assumptions vary by funding level. Some policies are assumed to pay the minimum premium required to maintain the no lapse guarantee. Other policies are assumed to pay a multiple of commissionable target premium levels (shown above and indicated as “X”). Policyholders are assumed to stop premium payments once the no lapse guarantee is fully funded.
Fair Value Inputs, Liabilities, Quantitative Information
The tables below present quantitative information on significant internally-priced Level 3 assets and liabilities (see narrative below for quantitative information for separate account assets).
 
September 30, 2016
 
Fair Value  
  Valuation  
Techniques
 
Unobservable Inputs  
 
Minimum  
 
Maximum  
 
  Weighted  
Average
 
  Impact of 
Increase in 
Input on 
Fair Value(1)
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities(12)
$
48,147

Discounted cash flow
 
Discount rate
 
2.16
%
 
 
12.91
%
 
 
6.67
%
 
 
Decrease
 
 
Market comparables
 
EBITDA multiples(2)
 
5.0

X
 
5.0

X
 
5.0

X
 
Increase
 
 
Liquidation
 
Liquidation value
 
95.48
%
 
 
95.48
%
 
 
95.48
%
 
 
Increase
Reinsurance recoverables - Living Benefits
$
8,478,986

Fair values are determined in the same manner as future policy benefits
Reinsurance recoverables - No Lapse Guarantee
$
532,154

Discounted cash flow
 
Lapse rate(3)
 
0
%
 
 
12
%
 
 
 
 
 
Decrease
 
 
 
 
NPR spread(4)
 
0.36
%
 
 
1.74
%
 
 
 
 
 
Decrease
 
 
 
 
Mortality rate(5)
 
0
%
 
 
31
%
 
 
 
 
 
Decrease
 
 
 
 
Premium payment(6)
 
0.65

X
 
0.95

X
 
 
 
 
Decrease
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future policy benefits(7)
$
8,480,030

Discounted cash flow
 
Lapse rate(8)
 
0
%
 
 
13
%
 
 
 
 
 
Decrease
 
 
 
 
NPR spread(4)
 
0.36
%
 
 
1.74
%
 
 
 
 
 
Decrease
 
 
 
 
Utilization rate(9)
 
52
%
 
 
96
%
 
 
 
 
 
Increase
 
 
 
 
Withdrawal rate
 
 
 
 
 
See table footnote (10) below
 
 
 
 
Mortality rate(11)
 
0
%
 
 
14
%
 
 
 
 
 
Decrease
 
 
 
 
Equity volatility curve
 
17
%
 
 
25
%
 
 
 
 
 
Increase
 
 


 
December 31, 2015
 
Fair Value  
  Valuation  
Techniques
 
  Unobservable
Inputs  
 
Minimum  
 
Maximum  
 
  Weighted  
Average
 
  Impact of 
Increase in 
Input on 
Fair Value(1)
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate securities(12)
$
40,492

Discounted cash flow
 
Discount rate
 
5.76
%
 
 
17.95
%
 
 
8.35
%
 
 
Decrease
 
 
Market comparables
 
EBITDA multiples(2)
 
5.0

X
 
5.0

X
 
5.0

X
 
Increase
Reinsurance recoverables - Living Benefits
$
4,600,193

Fair values are determined in the same manner as future policy benefits
Reinsurance recoverables - No Lapse Guarantee
$
339,818

Discounted cash flow
 
Lapse rate(3)
 
0
%
 
 
12
%
 
 
 
 
 
Decrease
 
 
 
 
NPR spread(4)
 
0.06
%
 
 
1.76
%
 
 
 
 
 
Decrease
 
 
 
 
Mortality rate(5)
 
0
%
 
 
20
%
 
 
 
 
 
Decrease
 
 
 
 
Premium payment(13)
 
1.00

X
 
3.75

X
 
 
 
 
Decrease
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future policy benefits(7)
$
5,205,434

Discounted cash flow
 
Lapse rate(8)
 
0
%
 
 
14
%
 
 
 
 
 
Decrease
 
 
 
 
NPR spread(4)
 
0.06
%
 
 
1.76
%
 
 
 
 
 
Decrease
 
 
 
 
Utilization rate(9)
 
56
%
 
 
96
%
 
 
 
 
 
Increase
 
 
 
 
Withdrawal rate(10)
 
74
%
 
 
100
%
 
 
 
 
 
Increase
 
 
 
 
Mortality rate(11)
 
0
%
 
 
14
%
 
 
 
 
 
Decrease
 
 
 
 
Equity volatility curve
 
17
%
 
 
28
%
 
 
 
 
 
Increase

(1)
Conversely, the impact of a decrease in input would have the opposite impact for the fair value as that presented in the table.
(2)
EBITDA multiples represent multiples of earnings before interest, taxes, depreciation and amortization, and are amounts used when the reporting entity has determined that market participants would use such multiples when pricing the investments.
(3)
For universal life, lapse rates vary based on funding level and other factors. Rates are set to zero when the no lapse guarantee is fully funded and the cash value is zero.
(4)
To reflect NPR, the Company incorporates an additional spread over LIBOR into the discount rate used in the valuation of contracts in a liability position and generally not to those in a contra-liability position. The NPR spread reflects the financial strength ratings of the Company and its affiliates, as these are insurance liabilities and senior to debt. The additional spread over LIBOR is determined by utilizing the credit spreads associated with issuing funding agreements, adjusted for any illiquidity risk premium.
(5)
Universal life mortality rates are adjusted based on underwriting information. A mortality improvement assumption is also incorporated into the projection.
(6)
For universal life, policyholders are assumed to pay a multiple of commissionable target premium levels (shown above and indicated as “X”). The multiples vary by funding level and policy duration. If the resulting premium in any duration is smaller than the minimum annual premium required to maintain the no-lapse guarantee, policyholders are assumed to pay the minimum annual premium. Policyholders are assumed to stop premium payments once the no-lapse guarantee is fully funded. The range shown as of September 30, 2016 excludes multiples for the first duration since all contracts are beyond the first duration. Assumption ranges for prior periods included first duration multiples.
(7)
Future policy benefits primarily represent general account liabilities for the living benefit features of the Company’s variable annuity contracts which are accounted for as embedded derivatives. Since the valuation methodology for these liabilities uses a range of inputs that vary at the contract level over the cash flow projection period, presenting a range, rather than weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.
(8)
Lapse rates are adjusted at the contract level based on the in-the-moneyness of the living benefit and reflect other factors, such as the applicability of any surrender charges. Lapse rates are reduced when contracts are more in-the-money. Lapse rates are also generally assumed to be lower for the period where surrender charges apply.
(9)
The utilization rate assumption estimates the percentage of contracts that will utilize the benefit during the contract duration, and begin lifetime withdrawals at various time intervals from contract inception. The remaining contractholders are assumed to either begin lifetime withdrawals immediately or never utilize the benefit. Utilization assumptions may vary by product type, tax status and age. The impact of changes in these assumptions is highly dependent on the product type, the age of the contractholder at the time of the sale, and the timing of the first lifetime income withdrawal. Range reflects the utilization rate for the vast majority of business with living benefits.
(10)
The withdrawal rate assumption estimates the magnitude of annual contractholder withdrawals relative to the maximum allowable amount under the contract. These assumptions may vary based on the age of the contractholder, the tax status of the contract and the duration since the contractholder began lifetime withdrawals. As of September 30, 2016, the minimum withdrawal assumption rate is 78% and the maximum withdrawal assumption rate may be greater than 100%. The fair value of the liability will generally increase the closer the withdrawal rate is to 100% and decrease as the withdrawal rate moves further away from 100%.
(11)
Range reflects the mortality rate for the vast majority of business with living benefits, with policyholders ranging from 35 to 90 years old. While the majority of living benefits have a minimum age requirement, certain benefits do not have an age restriction. This results in contractholders for certain benefits with mortality rates approaching 0%. Based on historical experience, the Company applies a set of age and duration specific mortality rate adjustments compared to standard industry tables. A mortality improvement assumption is also incorporated into the overall mortality table.
(12)
Includes assets classified as fixed maturities available-for-sale and other trading account assets.
(13)
For universal life, premium payment assumptions vary by funding level. Some policies are assumed to pay the minimum premium required to maintain the no lapse guarantee. Other policies are assumed to pay a multiple of commissionable target premium levels (shown above and indicated as “X”). Policyholders are assumed to stop premium payments once the no lapse guarantee is fully funded.
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation
The following tables provide summaries of the changes in fair values of Level 3 assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods:  
 
Three Months Ended September 30, 2016
 
Fixed Maturities Available-for-Sale
 
 
U.S. Corporate Public Securities
 
U.S. Corporate Private Securities
 
Foreign Corporate Private Securities
 
Asset-Backed Securities
 
Trading Account 
Assets- Equity Securities
 
(in thousands)
Fair value, beginning of period
$
55,003

 
$
32,900

 
$
10,369

 
$
40,827

 
$
16,882

Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
0

 
60

 
(1
)
 
(1
)
 
0

Asset management fees and other income
0

 
0

 
0

 
0

 
1,084

Included in other comprehensive income (loss)
88

 
513

 
(440
)
 
160

 
0

Net investment income
1

 
22

 
(18
)
 
27

 
0

Purchases
0

 
1,372

 
48

 
11,239

 
0

Sales
0

 
0

 
1

 
(5,347
)
 
0

Issuances
0

 
0

 
0

 
0

 
0

Settlements
0

 
(1,272
)
 
(249
)
 
(276
)
 
0

Transfers into Level 3(1)
2,518

 
0

 
6,618

 
11,063

 
0

Transfers out of Level 3(1)
0

 
0

 
(73
)
 
(19,645
)
 
0

Fair value, end of period
$
57,610

 
$
33,595

 
$
16,255

 
$
38,047

 
$
17,966

Unrealized gains (losses) for assets still held(2):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
0

 
$
0

 
$
0

 
$
0

Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
1,084

 
Three Months Ended September 30, 2016
 
Equity Securities,
Available-for-Sale
 
Other 
Long-term
Investments
 
Reinsurance
Recoverables
 
Receivables 
from Parent and
Affiliates
 
Future Policy
Benefits
 
Policyholders' Account Balances
 
(in thousands)
Fair value, beginning of period
$
191

 
$
2,479

 
$
9,141,712

 
$
556

 
$
(8,657,255
)
 
$
(5,902
)
Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net(6)
0

 
0

 
(369,456
)
 
(8,313
)
 
385,422

 
(5,777
)
Asset management fees and other income
0

 
0

 
0

 
0

 
0

 
0

Included in other comprehensive income (loss)
(70
)
 
0

 
0

 
4

 
0

 
0

Net investment income
0

 
0

 
0

 
0

 
0

 
0

Purchases
0

 
0

 
238,884

 
8,313

 
0

 
0

Sales
0

 
0

 
0

 
0

 
0

 
0

Issuances
0

 
0

 
0

 
0

 
(208,197
)
 
0

Settlements
0

 
0

 
0

 
0

 
0

 
(5,480
)
Transfers into Level 3(1)
0

 
0

 
0

 
0

 
0

 
0

Transfers out of Level 3(1)
0

 
0

 
0

 
0

 
0

 
0

Other(3)
0

 
0

 
0

 
0

 
0

 
0

Fair value, end of period
$
121

 
$
2,479

 
$
9,011,140

 
$
560

 
$
(8,480,030
)
 
$
(17,159
)
Unrealized gains (losses) for assets/liabilities still held(2):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
0

 
$
451,689

 
$
0

 
$
698,863

 
$
(4,240
)
Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
0


 
Nine Months Ended September 30, 2016
 
Fixed Maturities Available-for-Sale
 
 
U.S. Corporate Public Securities
 
U.S. Corporate Private Securities
 
Foreign Corporate Private Securities
 
Asset-Backed Securities
 
Trading Account Assets- Equity Securities
 
(in thousands)
Fair value, beginning of period
$
55,003

 
$
22,716

 
$
17,773

 
$
173,347

 
$
18,248

Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
0

 
35

 
(160
)
 
(17
)
 
0

Asset management fees and other income
0

 
0

 
0

 
0

 
1,320

Included in other comprehensive income (loss)
87

 
337

 
(910
)
 
(581
)
 
0

Net investment income
1

 
52

 
(4
)
 
153

 
0

Purchases
0

 
1,779

 
167

 
18,424

 
0

Sales
0

 
(7,943
)
 
(1,949
)
 
(44,486
)
 
(4,862
)
Issuances
0

 
0

 
0

 
0

 
0

Settlements
0

 
(2,415
)
 
(6,794
)
 
(880
)
 
0

Transfers into Level 3(1)
2,519

 
19,034

 
8,205

 
46,706

 
0

Transfers out of Level 3(1)
0

 
0

 
(73
)
 
(154,619
)
 
0

Other(5)
0

 
0

 
0

 
0

 
3,260

Fair value, end of period
$
57,610

 
$
33,595

 
$
16,255

 
$
38,047

 
$
17,966

Unrealized gains (losses) for assets still held(2):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
(508
)
 
$
0

 
$
(6
)
 
$
0

Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
242

 
 
Nine Months Ended September 30, 2016
 
Equity Securities,
Available-for-Sale
 
Other 
Long-term
Investments
 
Reinsurance
Recoverables
 
Receivables 
from Parent and
Affiliates
 
Future Policy
Benefits
 
Policyholders' Account Balances
 
(in thousands)
Fair value, beginning of period
$
165

 
$
5,704

 
$
4,940,011

 
$
5,000

 
$
(5,205,434
)
 
$
(5,902
)
Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net(6)
0

 
0

 
3,447,245

 
(8,326
)
 
(2,675,399
)
 
(5,777
)
Asset management fees and other income
0

 
0

 
0

 
0

 
0

 
0

Included in other comprehensive income (loss)
(44
)
 
0

 
0

 
24

 
0

 
0

Net investment income
0

 
(67
)
 
0

 
0

 
0

 
0

Purchases
0

 
102

 
623,884

 
8,313

 
0

 
0

Sales
0

 
0

 
0

 
(1,987
)
 
0

 
0

Issuances
0

 
0

 
0

 
0

 
(599,197
)
 
0

Settlements
0

 
0

 
0

 
0

 
0

 
(5,480
)
Transfers into Level 3(1)
0

 
0

 
0

 
0

 
0

 
0

Transfers out of Level 3(1)
0

 
0

 
0

 
(2,464
)
 
0

 
0

Other(5)
0

 
(3,260
)
 
0

 
0

 
0

 
0

Fair value, end of period
$
121

 
$
2,479

 
$
9,011,140

 
$
560

 
$
(8,480,030
)
 
$
(17,159
)
Unrealized gains (losses) for assets/liabilities still held(2):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
0

 
$
8,646,173

 
$
0

 
$
(2,752,958
)
 
$
(5,777
)
Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
Three Months Ended September 30, 2015(4)
 
 
 
Fixed Maturities Available-for-Sale
 
 
 
U.S. Corporate Public Securities
 
U.S. Corporate Private Securities
 
Foreign Corporate Public Securities
 
Foreign Corporate Private Securities
 
Asset-Backed
Securities
 
Trading Account Assets- Equity Securities
 
(in thousands)
Fair value, beginning of period
$
55,688

 
$
14,333

 
$
0

 
$
10,461

 
$
172,200

 
$
18,369

Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
0

 
(90
)
 
0

 
(1,155
)
 
24

 
0

Asset management fees and other income
0

 
0

 
0

 
0

 
0

 
(121
)
Included in other comprehensive income (loss)
6

 
(338
)
 
14

 
317

 
(529
)
 
0

Net investment income
(1
)
 
5

 
0

 
(17
)
 
141

 
0

Purchases
54,803

 
12,585

 
972

 
3,983

 
1

 
0

Sales
(54,802
)
 
(1
)
 
0

 
(38
)
 
(2,500
)
 
0

Issuances
0

 
0

 
0

 
0

 
0

 
0

Settlements
(1
)
 
(6,906
)
 
0

 
(1,472
)
 
(1,949
)
 
0

Transfers into Level 3(1)
0

 
0

 
0

 
0

 
11,502

 
0

Transfers out of Level 3(1)
1

 
0

 
0

 
0

 
(23,609
)
 
0

Fair value, end of period
$
55,694

 
$
19,588

 
$
986

 
$
12,079

 
$
155,281

 
$
18,248

Unrealized gains (losses) for assets still held(2):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
0

 
$
0

 
$
(1,035
)
 
$
0

 
$
0

Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
(122
)
 
Three Months Ended September 30, 2015(4)
 
Equity
Securities,
Available-for-Sale
 
Other Long-
term
Investments
 
Reinsurance
Recoverables
 
Receivables from Parent and Affiliates
 
Future Policy
Benefits
 
(in thousands)
Fair value, beginning of period
$
853

 
$
797

 
$
3,023,119

 
$
2,550

 
$
(3,117,171
)
Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
337

 
(630
)
 
2,194,352

 
0

 
(2,365,205
)
Asset management fees and other income
0

 
20

 
0

 
0

 
0

Included in other comprehensive income (loss)
(339
)
 
0

 
0

 
4

 
0

Net investment income
0

 
0

 
0

 
0

 
0

Purchases
0

 
566

 
171,329

 
0

 
0

Sales
0

 
0

 
0

 
0

 
0

Issuances
0

 
0

 
0

 
0

 
(178,889
)
Settlements
(677
)
 
0

 
0

 
0

 
0

Transfers into Level 3(1)
0

 
0

 
0

 
2,468

 
0

Transfers out of Level 3(1)
0

 
0

 
0

 
(1,992
)
 
0

Fair value, end of period
$
174

 
$
753

 
$
5,388,800

 
$
3,030

 
$
(5,661,265
)
Unrealized gains (losses) for assets/liabilities still held(2):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
(631
)
 
$
2,215,567

 
$
0

 
$
(2,388,177
)
Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
0


 
 
Nine Months Ended September 30, 2015(4)
 
Fixed Maturities Available-for-Sale
 
 
 
U.S. Corporate Public Securities
 
U.S. Corporate Private Securities
 
Foreign Corporate Public Securities
 
Foreign Corporate Private Securities
 
Asset-Backed
Securities
 
Trading
Account Assets-
Equity
Securities
 
(in thousands)
Fair value, beginning of period
$
61,092

 
$
14,539

 
$
0

 
$
9,170

 
$
100,217

 
$
5,540

Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
0

 
(448
)
 
0

 
(1,093
)
 
23

 
0

Asset management fees and other income
0

 
0

 
0

 
0

 
0

 
2,207

Included in other comprehensive income (loss)
(46
)
 
(278
)
 
14

 
591

 
180

 
0

Net investment income
(3
)
 
(2
)
 
0

 
(2
)
 
125

 
0

Purchases
166,705

 
13,043

 
972

 
5,632

 
111,760

 
0

Sales
(164,802
)
 
(5
)
 
0

 
(69
)
 
(39,631
)
 
0

Issuances
0

 
0

 
0

 
0

 
0

 
0

Settlements
(161
)
 
(7,671
)
 
0

 
(2,150
)
 
(2,075
)
 
(1,500
)
Transfers into Level 3(1)
704

 
826

 
0

 
0

 
59,010

 
0

Transfers out of Level 3(1)
(7,795
)
 
(416
)
 
0

 
0

 
(74,328
)
 
0

Other(3)
0

 
0

 
0

 
0

 
0

 
12,001

Fair value, end of period
$
55,694

 
$
19,588

 
$
986

 
$
12,079

 
$
155,281

 
$
18,248

Unrealized gains (losses) for assets still held(2):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
(357
)
 
$
0

 
$
(1,035
)
 
$
0

 
$
0

Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
2,162

 
Nine Months Ended September 30, 2015(4)
 
Equity
Securities,
Available-for-Sale
 
Other Long-
term
Investments
 
Reinsurance
Recoverables
 
Receivables from Parent and Affiliates
 
Future Policy
Benefits
 
(in thousands)
Fair value, beginning of period
$
750

 
$
596

 
$
4,897,545

 
$
19,203

 
$
(4,993,611
)
Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
337

 
(785
)
 
(12,541
)
 
0

 
(135,978
)
Asset management fees and other income
0

 
20

 
0

 
0

 
0

Included in other comprehensive income (loss)
(236
)
 
0

 
0

 
6

 
0

Net investment income
0

 
0

 
0

 
0

 
0

Purchases
0

 
952

 
503,796

 
0

 
0

Sales
0

 
0

 
0

 
0

 
0

Issuances
0

 
0

 
0

 
0

 
(531,676
)
Settlements
(677
)
 
0

 
0

 
0

 
0

Transfers into Level 3(1)
0

 
0

 
0

 
4,454

 
0

Transfers out of Level 3(1)
0

 
(30
)
 
0

 
(20,633
)
 
0

Fair value, end of period
$
174

 
$
753

 
$
5,388,800

 
$
3,030

 
$
(5,661,265
)
Unrealized gains (losses) for assets/liabilities still held(2):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
(785
)
 
$
105,211

 
$
0

 
$
(235,170
)
Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
0


(1)
Transfers into or out of any level are generally reported as the value as of the beginning of the quarter in which the transfer occurs for any such assets still held at the end of the quarter.
(2)
Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts.
(3)
Other primarily represents reclassifications of certain assets between reporting categories.
(4)
Prior period amounts have been reclassified to conform to current period presentation, including the adoption of ASU 2015-07.
(5)
Primarily related to private warrants reclassified from derivatives to trading securities.
(6)
Realized investment gains (losses) on Future Policy Benefits and Reinsurance Recoverables primarily represents the change in the fair value of the Company's living benefit guarantees on certain of its variable annuity contracts. Refer to Note 1 for impacts to Realized investment gains (losses) related to the Variable Annuities Recapture.
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation
The following tables provide summaries of the changes in fair values of Level 3 assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods:  
 
Three Months Ended September 30, 2016
 
Fixed Maturities Available-for-Sale
 
 
U.S. Corporate Public Securities
 
U.S. Corporate Private Securities
 
Foreign Corporate Private Securities
 
Asset-Backed Securities
 
Trading Account 
Assets- Equity Securities
 
(in thousands)
Fair value, beginning of period
$
55,003

 
$
32,900

 
$
10,369

 
$
40,827

 
$
16,882

Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
0

 
60

 
(1
)
 
(1
)
 
0

Asset management fees and other income
0

 
0

 
0

 
0

 
1,084

Included in other comprehensive income (loss)
88

 
513

 
(440
)
 
160

 
0

Net investment income
1

 
22

 
(18
)
 
27

 
0

Purchases
0

 
1,372

 
48

 
11,239

 
0

Sales
0

 
0

 
1

 
(5,347
)
 
0

Issuances
0

 
0

 
0

 
0

 
0

Settlements
0

 
(1,272
)
 
(249
)
 
(276
)
 
0

Transfers into Level 3(1)
2,518

 
0

 
6,618

 
11,063

 
0

Transfers out of Level 3(1)
0

 
0

 
(73
)
 
(19,645
)
 
0

Fair value, end of period
$
57,610

 
$
33,595

 
$
16,255

 
$
38,047

 
$
17,966

Unrealized gains (losses) for assets still held(2):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
0

 
$
0

 
$
0

 
$
0

Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
1,084

 
Three Months Ended September 30, 2016
 
Equity Securities,
Available-for-Sale
 
Other 
Long-term
Investments
 
Reinsurance
Recoverables
 
Receivables 
from Parent and
Affiliates
 
Future Policy
Benefits
 
Policyholders' Account Balances
 
(in thousands)
Fair value, beginning of period
$
191

 
$
2,479

 
$
9,141,712

 
$
556

 
$
(8,657,255
)
 
$
(5,902
)
Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net(6)
0

 
0

 
(369,456
)
 
(8,313
)
 
385,422

 
(5,777
)
Asset management fees and other income
0

 
0

 
0

 
0

 
0

 
0

Included in other comprehensive income (loss)
(70
)
 
0

 
0

 
4

 
0

 
0

Net investment income
0

 
0

 
0

 
0

 
0

 
0

Purchases
0

 
0

 
238,884

 
8,313

 
0

 
0

Sales
0

 
0

 
0

 
0

 
0

 
0

Issuances
0

 
0

 
0

 
0

 
(208,197
)
 
0

Settlements
0

 
0

 
0

 
0

 
0

 
(5,480
)
Transfers into Level 3(1)
0

 
0

 
0

 
0

 
0

 
0

Transfers out of Level 3(1)
0

 
0

 
0

 
0

 
0

 
0

Other(3)
0

 
0

 
0

 
0

 
0

 
0

Fair value, end of period
$
121

 
$
2,479

 
$
9,011,140

 
$
560

 
$
(8,480,030
)
 
$
(17,159
)
Unrealized gains (losses) for assets/liabilities still held(2):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
0

 
$
451,689

 
$
0

 
$
698,863

 
$
(4,240
)
Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
0


 
Nine Months Ended September 30, 2016
 
Fixed Maturities Available-for-Sale
 
 
U.S. Corporate Public Securities
 
U.S. Corporate Private Securities
 
Foreign Corporate Private Securities
 
Asset-Backed Securities
 
Trading Account Assets- Equity Securities
 
(in thousands)
Fair value, beginning of period
$
55,003

 
$
22,716

 
$
17,773

 
$
173,347

 
$
18,248

Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
0

 
35

 
(160
)
 
(17
)
 
0

Asset management fees and other income
0

 
0

 
0

 
0

 
1,320

Included in other comprehensive income (loss)
87

 
337

 
(910
)
 
(581
)
 
0

Net investment income
1

 
52

 
(4
)
 
153

 
0

Purchases
0

 
1,779

 
167

 
18,424

 
0

Sales
0

 
(7,943
)
 
(1,949
)
 
(44,486
)
 
(4,862
)
Issuances
0

 
0

 
0

 
0

 
0

Settlements
0

 
(2,415
)
 
(6,794
)
 
(880
)
 
0

Transfers into Level 3(1)
2,519

 
19,034

 
8,205

 
46,706

 
0

Transfers out of Level 3(1)
0

 
0

 
(73
)
 
(154,619
)
 
0

Other(5)
0

 
0

 
0

 
0

 
3,260

Fair value, end of period
$
57,610

 
$
33,595

 
$
16,255

 
$
38,047

 
$
17,966

Unrealized gains (losses) for assets still held(2):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
(508
)
 
$
0

 
$
(6
)
 
$
0

Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
242

 
 
Nine Months Ended September 30, 2016
 
Equity Securities,
Available-for-Sale
 
Other 
Long-term
Investments
 
Reinsurance
Recoverables
 
Receivables 
from Parent and
Affiliates
 
Future Policy
Benefits
 
Policyholders' Account Balances
 
(in thousands)
Fair value, beginning of period
$
165

 
$
5,704

 
$
4,940,011

 
$
5,000

 
$
(5,205,434
)
 
$
(5,902
)
Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net(6)
0

 
0

 
3,447,245

 
(8,326
)
 
(2,675,399
)
 
(5,777
)
Asset management fees and other income
0

 
0

 
0

 
0

 
0

 
0

Included in other comprehensive income (loss)
(44
)
 
0

 
0

 
24

 
0

 
0

Net investment income
0

 
(67
)
 
0

 
0

 
0

 
0

Purchases
0

 
102

 
623,884

 
8,313

 
0

 
0

Sales
0

 
0

 
0

 
(1,987
)
 
0

 
0

Issuances
0

 
0

 
0

 
0

 
(599,197
)
 
0

Settlements
0

 
0

 
0

 
0

 
0

 
(5,480
)
Transfers into Level 3(1)
0

 
0

 
0

 
0

 
0

 
0

Transfers out of Level 3(1)
0

 
0

 
0

 
(2,464
)
 
0

 
0

Other(5)
0

 
(3,260
)
 
0

 
0

 
0

 
0

Fair value, end of period
$
121

 
$
2,479

 
$
9,011,140

 
$
560

 
$
(8,480,030
)
 
$
(17,159
)
Unrealized gains (losses) for assets/liabilities still held(2):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
0

 
$
8,646,173

 
$
0

 
$
(2,752,958
)
 
$
(5,777
)
Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
Three Months Ended September 30, 2015(4)
 
 
 
Fixed Maturities Available-for-Sale
 
 
 
U.S. Corporate Public Securities
 
U.S. Corporate Private Securities
 
Foreign Corporate Public Securities
 
Foreign Corporate Private Securities
 
Asset-Backed
Securities
 
Trading Account Assets- Equity Securities
 
(in thousands)
Fair value, beginning of period
$
55,688

 
$
14,333

 
$
0

 
$
10,461

 
$
172,200

 
$
18,369

Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
0

 
(90
)
 
0

 
(1,155
)
 
24

 
0

Asset management fees and other income
0

 
0

 
0

 
0

 
0

 
(121
)
Included in other comprehensive income (loss)
6

 
(338
)
 
14

 
317

 
(529
)
 
0

Net investment income
(1
)
 
5

 
0

 
(17
)
 
141

 
0

Purchases
54,803

 
12,585

 
972

 
3,983

 
1

 
0

Sales
(54,802
)
 
(1
)
 
0

 
(38
)
 
(2,500
)
 
0

Issuances
0

 
0

 
0

 
0

 
0

 
0

Settlements
(1
)
 
(6,906
)
 
0

 
(1,472
)
 
(1,949
)
 
0

Transfers into Level 3(1)
0

 
0

 
0

 
0

 
11,502

 
0

Transfers out of Level 3(1)
1

 
0

 
0

 
0

 
(23,609
)
 
0

Fair value, end of period
$
55,694

 
$
19,588

 
$
986

 
$
12,079

 
$
155,281

 
$
18,248

Unrealized gains (losses) for assets still held(2):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
0

 
$
0

 
$
(1,035
)
 
$
0

 
$
0

Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
(122
)
 
Three Months Ended September 30, 2015(4)
 
Equity
Securities,
Available-for-Sale
 
Other Long-
term
Investments
 
Reinsurance
Recoverables
 
Receivables from Parent and Affiliates
 
Future Policy
Benefits
 
(in thousands)
Fair value, beginning of period
$
853

 
$
797

 
$
3,023,119

 
$
2,550

 
$
(3,117,171
)
Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
337

 
(630
)
 
2,194,352

 
0

 
(2,365,205
)
Asset management fees and other income
0

 
20

 
0

 
0

 
0

Included in other comprehensive income (loss)
(339
)
 
0

 
0

 
4

 
0

Net investment income
0

 
0

 
0

 
0

 
0

Purchases
0

 
566

 
171,329

 
0

 
0

Sales
0

 
0

 
0

 
0

 
0

Issuances
0

 
0

 
0

 
0

 
(178,889
)
Settlements
(677
)
 
0

 
0

 
0

 
0

Transfers into Level 3(1)
0

 
0

 
0

 
2,468

 
0

Transfers out of Level 3(1)
0

 
0

 
0

 
(1,992
)
 
0

Fair value, end of period
$
174

 
$
753

 
$
5,388,800

 
$
3,030

 
$
(5,661,265
)
Unrealized gains (losses) for assets/liabilities still held(2):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
(631
)
 
$
2,215,567

 
$
0

 
$
(2,388,177
)
Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
0


 
 
Nine Months Ended September 30, 2015(4)
 
Fixed Maturities Available-for-Sale
 
 
 
U.S. Corporate Public Securities
 
U.S. Corporate Private Securities
 
Foreign Corporate Public Securities
 
Foreign Corporate Private Securities
 
Asset-Backed
Securities
 
Trading
Account Assets-
Equity
Securities
 
(in thousands)
Fair value, beginning of period
$
61,092

 
$
14,539

 
$
0

 
$
9,170

 
$
100,217

 
$
5,540

Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
0

 
(448
)
 
0

 
(1,093
)
 
23

 
0

Asset management fees and other income
0

 
0

 
0

 
0

 
0

 
2,207

Included in other comprehensive income (loss)
(46
)
 
(278
)
 
14

 
591

 
180

 
0

Net investment income
(3
)
 
(2
)
 
0

 
(2
)
 
125

 
0

Purchases
166,705

 
13,043

 
972

 
5,632

 
111,760

 
0

Sales
(164,802
)
 
(5
)
 
0

 
(69
)
 
(39,631
)
 
0

Issuances
0

 
0

 
0

 
0

 
0

 
0

Settlements
(161
)
 
(7,671
)
 
0

 
(2,150
)
 
(2,075
)
 
(1,500
)
Transfers into Level 3(1)
704

 
826

 
0

 
0

 
59,010

 
0

Transfers out of Level 3(1)
(7,795
)
 
(416
)
 
0

 
0

 
(74,328
)
 
0

Other(3)
0

 
0

 
0

 
0

 
0

 
12,001

Fair value, end of period
$
55,694

 
$
19,588

 
$
986

 
$
12,079

 
$
155,281

 
$
18,248

Unrealized gains (losses) for assets still held(2):
 
 
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
(357
)
 
$
0

 
$
(1,035
)
 
$
0

 
$
0

Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
2,162

 
Nine Months Ended September 30, 2015(4)
 
Equity
Securities,
Available-for-Sale
 
Other Long-
term
Investments
 
Reinsurance
Recoverables
 
Receivables from Parent and Affiliates
 
Future Policy
Benefits
 
(in thousands)
Fair value, beginning of period
$
750

 
$
596

 
$
4,897,545

 
$
19,203

 
$
(4,993,611
)
Total gains (losses) (realized/unrealized):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
337

 
(785
)
 
(12,541
)
 
0

 
(135,978
)
Asset management fees and other income
0

 
20

 
0

 
0

 
0

Included in other comprehensive income (loss)
(236
)
 
0

 
0

 
6

 
0

Net investment income
0

 
0

 
0

 
0

 
0

Purchases
0

 
952

 
503,796

 
0

 
0

Sales
0

 
0

 
0

 
0

 
0

Issuances
0

 
0

 
0

 
0

 
(531,676
)
Settlements
(677
)
 
0

 
0

 
0

 
0

Transfers into Level 3(1)
0

 
0

 
0

 
4,454

 
0

Transfers out of Level 3(1)
0

 
(30
)
 
0

 
(20,633
)
 
0

Fair value, end of period
$
174

 
$
753

 
$
5,388,800

 
$
3,030

 
$
(5,661,265
)
Unrealized gains (losses) for assets/liabilities still held(2):
 
 
 
 
 
 
 
 
 
Included in earnings:
 
 
 
 
 
 
 
 
 
Realized investment gains (losses), net
$
0

 
$
(785
)
 
$
105,211

 
$
0

 
$
(235,170
)
Asset management fees and other income
$
0

 
$
0

 
$
0

 
$
0

 
$
0


(1)
Transfers into or out of any level are generally reported as the value as of the beginning of the quarter in which the transfer occurs for any such assets still held at the end of the quarter.
(2)
Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts.
(3)
Other primarily represents reclassifications of certain assets between reporting categories.
(4)
Prior period amounts have been reclassified to conform to current period presentation, including the adoption of ASU 2015-07.
(5)
Primarily related to private warrants reclassified from derivatives to trading securities.
(6)
Realized investment gains (losses) on Future Policy Benefits and Reinsurance Recoverables primarily represents the change in the fair value of the Company's living benefit guarantees on certain of its variable annuity contracts. Refer to Note 1 for impacts to Realized investment gains (losses) related to the Variable Annuities Recapture.
Fair Value Disclosure Financial Instruments Not Carried at Fair Value
The table below presents the carrying amount and fair value by fair value hierarchy level of certain financial instruments that are not reported at fair value. The financial instruments presented below are reported at carrying value on the Company’s Unaudited Interim Consolidated Statements of Financial Position; however, in some cases, as described below, the carrying amount equals or approximates fair value.
 
September 30, 2016(1)
 
Fair Value
 
Carrying
Amount(2)
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Total
 
(in thousands)
Assets:
 
 
 
 
 
 
 
 
 
Commercial mortgage and other loans
$
0

 
$
0

 
$
1,144,103

 
$
1,144,103

 
$
1,079,639

Policy loans
0

 
0

 
1,156,620

 
1,156,620

 
1,156,620

Cash and cash equivalents
34,337

 
23,606

 
0

 
57,943

 
57,943

Accrued investment income
0

 
84,430

 
0

 
84,430

 
84,430

Receivables from parent and affiliates
0

 
98,544

 
0

 
98,544

 
98,544

Other assets
0

 
32,009

 
0

 
32,009

 
32,009

Total assets
$
34,337

 
$
238,589

 
$
2,300,723

 
$
2,573,649

 
$
2,509,185

Liabilities:
 
 
 
 
 
 
 
 
 
Policyholders’ account balances - investment contracts
$
0

 
$
1,029,760

 
$
253,800

 
$
1,283,560

 
$
1,284,705

Cash collateral for loaned securities
0

 
133,500

 
0

 
133,500

 
133,500

Payables to parent and affiliates
0

 
64,532

 
0

 
64,532

 
64,532

Other liabilities
0

 
286,728

 
0

 
286,728

 
286,728

Total liabilities
$
0

 
$
1,514,520

 
$
253,800

 
$
1,768,320

 
$
1,769,465


 
December 31, 2015(1)
 
Fair Value
 
Carrying
Amount(2)
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Total
 
(in thousands)
Assets:
 
 
 
 
 
 
 
 
 
Commercial mortgage and other loans
$
0

 
$
8,540

 
$
1,701,951

 
$
1,710,491

 
$
1,658,235

Policy loans
0

 
0

 
1,143,303

 
1,143,303

 
1,143,303

Cash and cash equivalents
19,297

 
156,064

 
0

 
175,361

 
175,361

Accrued investment income
0

 
100,031

 
0

 
100,031

 
100,031

Receivables from parent and affiliates
0

 
65,628

 
0

 
65,628

 
65,628

Other assets
0

 
6,162

 
0

 
6,162

 
6,162

Total assets
$
19,297

 
$
336,425

 
$
2,845,254

 
$
3,200,976

 
$
3,148,720

Liabilities:
 
 
 
 
 
 
 
 
 
Policyholders’ account balances - investment contracts
$
0

 
$
947,853

 
$
236,891

 
$
1,184,744

 
$
1,190,596

Cash collateral for loaned securities
0

 
40,416

 
0

 
40,416

 
40,416

Short-term debt
0

 
180,105

 
0

 
180,105

 
180,000

Long-term debt
0

 
1,227,110

 
0

 
1,227,110

 
1,204,000

Payables to parent and affiliates
0

 
72,791

 
0

 
72,791

 
72,791

Other liabilities
0

 
343,089

 
0

 
343,089

 
343,089

Total liabilities
$
0

 
$
2,811,364

 
$
236,891

 
$
3,048,255

 
$
3,030,892


(1)
As discussed in Note 2, the Company adopted ASU 2015-07, effective January 1, 2016, which resulted in the exclusion of certain other long-term investments from the fair value hierarchy. The guidance was required to be applied retrospectively, and therefore, prior period amounts have been revised to conform to the current period presentation. At September 30, 2016 and December 31, 2015, the fair values of these cost method investments were $33 million and $27 million, respectively, which had been previously classified in Level 3 at December 31, 2015. The carrying values of these investments were $31 million and $26 million as of September 30, 2016 and December 31, 2015, respectively.
(2)
Carrying values presented herein differ from those in the Company’s Unaudited Interim Consolidated Statements of Financial Position because certain items within the respective financial statement captions are not considered financial instruments or out of scope under authoritative guidance relating to disclosures of the fair value of financial instruments. Financial statement captions excluded from the above table are not considered financial instruments.