INVESTMENTS

Fixed Maturity Securities

The following tables set forth information relating to fixed maturity securities (excluding investments classified as trading), as of the dates indicated:



	June 30, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCI(3)
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	71,833	$	2,510	$	14	$	74,329	$	0
Obligations of U.S. states and their political subdivisions	596,503		19,469		1,230		614,742		0
Foreign government bonds	188,004		1,942		8,386		181,560		0
Public utilities	711,017		29,051		10,013		730,055		0
Redeemable preferred stock	4,096		657		18		4,735		0
All other U.S. public corporate securities	1,358,029		42,455		33,675		1,366,809		0
All other U.S. private corporate securities	685,544		6,312		12,448		679,408		0
All other foreign public corporate securities	243,884		4,597		8,778		239,703		0
All other foreign private corporate securities	775,375		16,922		21,808		770,489		0
Asset-backed securities(1)	171,018		2,004		195		172,827		(99		)
Commercial mortgage-backed securities	282,300		1,644		5,836		278,108		0
Residential mortgage-backed securities(2)	101,391		1,706		1,318		101,779		(195		)
Total fixed maturities, available-for-sale	$	5,188,994	$	129,269	$	103,719	$	5,214,544	$	(294	)


(1)	Includes credit-tranched securities collateralized by loan obligations, sub-prime mortgages, auto loans, education loans and other asset types.


(2)	Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.


(3)	Represents the amount of unrealized losses remaining in AOCI, from the impairment measurement date. Amount excludes $0.4 million of net unrealized gains on impaired available-for-sale securities relating to changes in the value of such securities subsequent to the impairment measurement date.



	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		OTTI in AOCI(3)
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	95,851	$	3,964	$	0	$	99,815	$	0
Obligations of U.S. states and their political subdivisions	597,254		38,204		0		635,458		0
Foreign government bonds	128,058		7,536		496		135,098		0
Public utilities	677,702		61,588		1,058		738,232		0
Redeemable preferred stock	4,053		957		0		5,010		0
All other U.S. public corporate securities	1,254,140		105,524		2,580		1,357,084		(215		)
All other U.S. private corporate securities	710,424		18,306		1,644		727,086		0
All other foreign public corporate securities	168,399		12,522		732		180,189		0
All other foreign private corporate securities	737,037		41,405		9,598		768,844		0
Asset-backed securities(1)	179,935		2,519		26		182,428		(138		)
Commercial mortgage-backed securities	320,223		5,148		2,539		322,832		0
Residential mortgage-backed securities(2)	68,868		2,527		169		71,226		(220		)
Total fixed maturities, available-for-sale	$	4,941,944	$	300,200	$	18,842	$	5,223,302	$	(573	)


(1)	Includes credit-tranched securities collateralized by loan obligations, sub-prime mortgages, auto loans, education loans and other asset types.


(2)	Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.


(3)	Represents the amount of unrealized losses remaining in AOCI, from the impairment measurement date. Amount excludes $2.2 million of net unrealized gains on impaired available-for-sale securities relating to changes in the value of such securities subsequent to the impairment measurement date.

The following tables set forth the fair value and gross unrealized losses aggregated by investment category and length of time that individual fixed maturity securities had been in a continuous unrealized loss position, as of the dates indicated:



	June 30, 2018
	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	621	$	14	$	0	$	0	$	621	$	14
Obligations of U.S. states and their political subdivisions	102,109		1,230		0		0		102,109		1,230
Foreign government bonds	143,401		7,096		11,721		1,290		155,122		8,386
Public utilities	283,552		8,082		17,233		1,931		300,785		10,013
Redeemable preferred stock	1,791		18		0		0		1,791		18
All other U.S. public corporate securities	600,364		25,564		89,649		8,111		690,013		33,675
All other U.S. private corporate securities	389,065		9,928		41,258		2,520		430,323		12,448
All other foreign public corporate securities	151,899		7,925		6,656		853		158,555		8,778
All other foreign private corporate securities	300,641		10,470		58,167		11,338		358,808		21,808
Asset-backed securities	47,033		190		332		5		47,365		195
Commercial mortgage-backed securities	126,345		2,968		42,853		2,868		169,198		5,836
Residential mortgage-backed securities	65,326		1,026		5,529		292		70,855		1,318
Total fixed maturities, available-for-sale	$	2,212,147	$	74,511	$	273,398	$	29,208	$	2,485,545	$	103,719



	December 31, 2017
	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	0	$	0	$	0	$	0	$	0
Obligations of U.S. states and their political subdivisions	0		0		0		0		0		0
Foreign government bonds	16,522		210		11,959		286		28,481		496
Public utilities	26,466		380		27,354		678		53,820		1,058
Redeemable preferred stock	0		0		0		0		0		0
All other U.S. public corporate securities	36,100		304		102,490		2,276		138,590		2,580
All other U.S. private corporate securities	79,495		781		36,642		863		116,137		1,644
All other foreign public corporate securities	27,078		190		8,390		542		35,468		732
All other foreign private corporate securities	48,109		472		133,055		9,126		181,164		9,598
Asset-backed securities	6,351		22		317		4		6,668		26
Commercial mortgage-backed securities	49,823		285		93,403		2,254		143,226		2,539
Residential mortgage-backed securities	8,030		28		6,160		141		14,190		169
Total fixed maturities, available-for-sale	$	297,974	$	2,672	$	419,770	$	16,170	$	717,744	$	18,842

As of June 30, 2018 and December 31, 2017, the gross unrealized losses on fixed maturity securities were composed of $91.4 million and $13.9 million, respectively, related to "1" highest quality or "2" high quality securities based on the National Association of Insurance Commissioners (“NAIC”) or equivalent rating and $12.3 million and $4.9 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of June 30, 2018, the $29.2 million of gross unrealized losses on fixed maturity securities of twelve months or more were concentrated in the Company's corporate securities within the energy, finance and consumer non-cyclical sectors and in commercial mortgage-backed securities. As of December 31, 2017, the $16.2 million of gross unrealized losses on fixed maturity securities of twelve months or more were concentrated in commercial mortgage backed securities and in the Company's corporate securities within the energy and finance sectors. In accordance with its policy described in Note 2 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, the Company concluded that an adjustment to earnings for OTTI for these fixed maturity securities was not warranted at either June 30, 2018 or December 31, 2017. These conclusions were based on a detailed analysis of the underlying credit and cash flows on each security. Gross unrealized losses are primarily attributable to general credit spread widening, increases in interest rates and foreign currency exchange rate movements. As of June 30, 2018, the Company did not intend to sell these securities, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the remaining amortized cost basis.

The following table sets forth the amortized cost and fair value of fixed maturities by contractual maturities, as of the date indicated:



	June 30, 2018
	Amortized Cost		Fair Value
	(in thousands)
Fixed maturities, available-for-sale:
Due in one year or less	$	138,874	$	140,388
Due after one year through five years	729,234		725,360
Due after five years through ten years	1,008,886		1,004,600
Due after ten years	2,757,291		2,791,482
Asset-backed securities	171,018		172,827
Commercial mortgage-backed securities	282,300		278,108
Residential mortgage-backed securities	101,391		101,779
Total fixed maturities, available-for-sale	$	5,188,994	$	5,214,544

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Asset-backed, commercial mortgage-backed and residential mortgage-backed securities are shown separately in the table above, as they do not have a single maturity date.

The following table sets forth the sources of fixed maturity proceeds and related investment gains (losses), as well as losses on impairments of fixed maturities, for the periods indicated:



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(in thousands)
Fixed maturities, available-for-sale:
Proceeds from sales(1)	$	117,235		$	139,131		$	134,087		$	426,839
Proceeds from maturities/prepayments	85,808			152,346			140,118			267,192
Gross investment gains from sales and maturities	(30		)	5,823			114			9,020
Gross investment losses from sales and maturities	(3,231		)	(472		)	(3,590		)	(3,295		)
OTTI recognized in earnings(2)	(57		)	(1,121		)	(651		)	(5,525		)


(1)	Includes $26.2 million and $6.8 million of non-cash related proceeds due to the timing of trade settlements for the six months ended June 30, 2018 and 2017, respectively.


(2)	Excludes the portion of OTTI amounts remaining in “Other comprehensive income (loss)” ("OCI"), representing any difference between the fair value of the impaired debt security and the net present value of its projected future cash flows at the time of the impairment.

The following table sets forth a rollforward of pre-tax amounts remaining in OCI related to fixed maturity securities with credit loss impairments recognized in earnings, for the periods indicated:



	Three Months Ended June 30, 2018			Six Months Ended June 30, 2018			Three Months Ended June 30, 2017			Six Months Ended June 30, 2017
	(in thousands)
Credit loss impairments:
Balance, beginning of period	$	4,344		$	4,374		$	5,357		$	5,520
New credit loss impairments	0			0			424			424
Additional credit loss impairments on securities previously impaired	0			0			0			0
Increases due to the passage of time on previously recorded credit losses	10			47			36			63
Reductions for securities which matured, paid down, prepaid or were sold during the period	(1,918		)	(1,960		)	(1,752		)	(1,870		)
Reductions for securities impaired to fair value during the period(1)	0			0			(327		)	(327		)
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected	(454		)	(479		)	(14		)	(86		)
Assets transferred to parent and affiliates	0			0			0			0
Balance, end of period	$	1,982		$	1,982		$	3,724		$	3,724


(1)	Represents circumstances where the Company determined in the current period that it intends to sell the security or it is more likely than not that it will be required to sell the security before recovery of the security's amortized cost.

Equity Securities

The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Other income,” was $(0.7) million and $0.1 million during the three months ended June 30, 2018 and 2017, respectively.

The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Other income,” was $(1.9) million and $1.5 million during the six months ended June 30, 2018 and 2017, respectively.

Commercial Mortgage and Other Loans

The following table sets forth the composition of "Commercial mortgage and other loans," as of the dates indicated:



	June 30, 2018					December 31, 2017
	Amount (in thousands)			% of Total		Amount (in thousands)			% of Total
Commercial mortgage and agricultural property loans by property type:
Apartments/Multi-Family	$	360,812		32.0	%	$	356,694		32.9	%
Hospitality	16,308			1.5		16,529			1.5
Industrial	226,192			20.2		180,619			16.7
Office	173,648			15.5		159,646			14.7
Other	92,895			8.3		99,119			9.1
Retail	186,064			16.6		205,367			18.9
Total commercial mortgage loans	1,055,919			94.1		1,017,974			93.8
Agricultural property loans	66,511			5.9		67,239			6.2
Total commercial mortgage and agricultural property loans by property type	1,122,430			100.0	%	1,085,213			100.0	%
Valuation allowance	(1,788		)			(1,794		)
Total commercial mortgage and other loans	$	1,120,642				$	1,083,419

As of June 30, 2018, the commercial mortgage and agricultural property loans were secured by properties geographically dispersed throughout the United States (with the largest concentrations in California (23%), Texas (14%) and New York (6%)) and included loans secured by properties in Europe (6%), Australia (4%) and Mexico (2%).

The following tables set forth the activity in the allowance for credit losses for commercial mortgage and other loans, as of the dates indicated:



	June 30, 2018
	Commercial Mortgage Loans			Agricultural Property Loans		Total
	(in thousands)
Allowance for credit losses:
Balance, beginning of year	$	1,728		$	66	$	1,794
Addition to (release of) allowance for losses	(6		)	0		(6		)
Charge-offs, net of recoveries	0			0		0
Total ending balance	$	1,722		$	66	$	1,788



	December 31, 2017
	Commercial Mortgage Loans		Agricultural Property Loans		Total
	(in thousands)
Allowance for credit losses:
Balance, beginning of year	$	1,513	$	45	$	1,558
Addition to (release of) allowance for losses	215		21		236
Charge-offs, net of recoveries	0		0		0
Total ending balance	$	1,728	$	66	$	1,794

The following tables set forth the allowance for credit losses and the recorded investment in commercial mortgage and other loans, as of the dates indicated:



	June 30, 2018
	Commercial Mortgage Loans		Agricultural Property Loans		Total
	(in thousands)
Allowance for credit losses:
Individually evaluated for impairment	$	0	$	0	$	0
Collectively evaluated for impairment	1,722		66		1,788
Total ending balance(1)	$	1,722	$	66	$	1,788
Recorded investment(2):
Individually evaluated for impairment	$	0	$	815	$	815
Collectively evaluated for impairment	1,055,919		65,696		1,121,615
Total ending balance(1)	$	1,055,919	$	66,511	$	1,122,430


(1)	As of June 30, 2018, there were no loans acquired with deteriorated credit quality.


(2)	Recorded investment reflects the carrying value gross of related allowance.



	December 31, 2017
	Commercial Mortgage Loans		Agricultural Property Loans		Total
	(in thousands)
Allowance for credit losses:
Individually evaluated for impairment	$	0	$	0	$	0
Collectively evaluated for impairment	1,728		66		1,794
Total ending balance(1)	$	1,728	$	66	$	1,794
Recorded investment(2):
Individually evaluated for impairment	$	2,316	$	1,153	$	3,469
Collectively evaluated for impairment	1,015,658		66,086		1,081,744
Total ending balance(1)	$	1,017,974	$	67,239	$	1,085,213


(1)	As of December 31, 2017, there were no loans acquired with deteriorated credit quality.


(2)	Recorded investment reflects the carrying value gross of related allowance.

The following tables set forth certain key credit quality indicators for commercial mortgage and agricultural property loans based upon the recorded investment gross of allowance for credit losses, as of the dates indicated:



	June 30, 2018
	Debt Service Coverage Ratio
	≥ 1.2X		1.0X to < 1.2X		< 1.0X		Total Loans
	(in thousands)
Loan-to-Value Ratio:
0%-59.99%	$	576,447	$	21,980	$	0	$	598,427
60%-69.99%	358,204		19,862		1,976		380,042
70%-79.99%	126,612		17,118		0		143,730
80% or greater	0		231		0		231
Total loans	$	1,061,263	$	59,191	$	1,976	$	1,122,430



	December 31, 2017
	Debt Service Coverage Ratio
	≥ 1.2X		1.0X to < 1.2X		< 1.0X		Total Loans
	(in thousands)
Loan-to-Value Ratio:
0%-59.99%	$	606,846	$	21,709	$	705	$	629,260
60%-69.99%	333,185		9,594		2,010		344,789
70%-79.99%	84,492		26,439		0		110,931
80% or greater	0		0		233		233
Total loans	$	1,024,523	$	57,742	$	2,948	$	1,085,213

The following tables set forth an aging of past due commercial mortgage and other loans, based upon the recorded investment gross of allowance for credit losses, as well as the amount of commercial mortgage and other loans on non-accrual status, as of the dates indicated:



	June 30, 2018
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due(1)		Total Loans		Non-Accrual Status(2)
	(in thousands)
Commercial mortgage loans	$	1,055,919	$	0	$	0	$	0	$	1,055,919	$	0
Agricultural property loans	66,511		0		0		0		66,511		0
Total	$	1,122,430	$	0	$	0	$	0	$	1,122,430	$	0


(1)	As of June 30, 2018, there were no loans in this category accruing interest.


(2)	For additional information regarding the Company's policies for accruing interest on loans, see Note 2 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.



	December 31, 2017
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due(1)		Total Loans		Non-Accrual Status(2)
	(in thousands)
Commercial mortgage loans	$	1,017,974	$	0	$	0	$	0	$	1,017,974	$	0
Agricultural property loans	67,239		0		0		0		67,239		0
Total	$	1,085,213	$	0	$	0	$	0	$	1,085,213	$	0


(1)	As of December 31, 2017, there were no loans in this category accruing interest.


(2)	For additional information regarding the Company's policies for accruing interest on loans, see Note 2 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

For the three and six months ended June 30, 2018, there were no commercial mortgage and other loans acquired, other than those through direct origination, and there were no commercial mortgage and other loans sold. For both the three and six months ended June 30, 2017, there were no commercial mortgage and other loans acquired, other than those through direct origination, and there were $42 million of commercial mortgage and other loans sold.

Other Invested Assets

The following table sets forth the composition of “Other invested assets,” as of the dates indicated:



	June 30, 2018		December 31, 2017
	(in thousands)
Company's investment in separate accounts	$	40,967	$	37,404
LPs/LLCs:
Equity method:
Private equity	141,165		123,957
Hedge funds	56,830		53,066
Real estate-related	8,798		7,040
Subtotal equity method	206,793		184,063
Fair value:
Private equity	58,133		35,686
Hedge funds	774		726
Real estate-related	7,248		5,186
Subtotal fair value(1)	66,155		41,598
Total LPs/LLCs	272,948		225,661
Derivative instruments	5		9
Total other invested assets(2)	$	313,920	$	263,074


(1)	As of December 31, 2017, $40.9 million was accounted for under the cost method.


(2)	Prior period amounts have been reclassified to conform to current period presentation. For additional information, see Note 2.

Net Investment Income

The following table sets forth "Net investment income" by investment type, for the periods indicated:



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(in thousands)
Fixed maturities, available-for-sale	$	55,195		$	59,181		$	108,455		$	118,248
Fixed maturities, trading	272			181			538			360
Equity securities, at fair value	221			221			442			442
Commercial mortgage and other loans	12,303			13,150			24,708			26,266
Policy loans	16,329			15,834			32,233			31,462
Short-term investments and cash equivalents	114			205			437			392
Other invested assets	1,743			7,270			1,858			13,649
Gross investment income	86,177			96,042			168,671			190,819
Less: investment expenses	(4,528		)	(5,001		)	(9,107		)	(10,163		)
Net investment income(1)	$	81,649		$	91,041		$	159,564		$	180,656


(1)	Prior period amounts have been reclassified to conform to current period presentation.

Realized Investment Gains (Losses), Net

The following table sets forth "Realized investment gains (losses), net," by investment type, for the periods indicated:



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(in thousands)
Fixed maturities(1)	$	(3,318	)	$	4,230		$	(4,127	)	$	200
Equity securities(2)	0			(11		)	0			(125		)
Commercial mortgage and other loans	(125		)	(349		)	6			(488		)
LPs/LLCs	2			(28		)	849			(101		)
Derivatives(3)	(33,448		)	272,748			(82,641		)	244,531
Short-term investments and cash equivalents	(1		)	0			(19		)	(6		)
Realized investment gains (losses), net	$	(36,890	)	$	276,590		$	(85,932	)	$	244,011


(1)	Includes fixed maturity securities classified as available-for-sale and excludes fixed maturity securities classified as trading.


(2)	Effective January 1, 2018, realized gains (losses) on equity securities are recorded within "Other income".


(3)	Includes the hedged items offset in qualifying fair value hedge accounting relationships.

Net Unrealized Gains (Losses) on Investments within AOCI

The following table sets forth net unrealized gains (losses) on investments, as of the dates indicated:



	June 30, 2018			December 31, 2017
	(in thousands)
Fixed maturity securities, available-for-sale—with OTTI	$	97		$	1,609
Fixed maturity securities, available-for-sale—all other	25,453			279,749
Equity securities, available-for-sale(1)	0			2,368
Derivatives designated as cash flow hedges(2)	(9,021		)	(17,678		)
Affiliated notes	1,204			4,782
Other investments	4,823			3,588
Net unrealized gains (losses) on investments	$	22,556		$	274,418


(1)	Effective January 1, 2018, unrealized gains (losses) on equity securities are recorded within "Other income."


(2)	For more information on cash flow hedges, see Note 4.

Repurchase Agreements and Securities Lending

In the normal course of business, the Company sells securities under agreements to repurchase and enters into securities lending transactions. As of June 30, 2018 and December 31, 2017, the Company had no repurchase agreements.

The following table sets forth the composition of "Cash collateral for loaned securities," which represents the liability to return cash collateral received for the following types of securities loaned, as of the dates indicated:



	June 30, 2018						December 31, 2017
	Remaining Contractual Maturities of the Agreements						Remaining Contractual Maturities of the Agreements
	Overnight & Continuous		Up to 30 Days		Total		Overnight & Continuous		Up to 30 Days		Total
	(in thousands)
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	8,200	$	0	$	8,200	$	0	$	22,460	$	22,460
Foreign government bonds	484		0		484		6,157		0		6,157
U.S. public corporate securities	4,454		0		4,454		4,074		0		4,074
Foreign public corporate securities	0		0		0		478		0		478
Total cash collateral for loaned securities(1)	$	13,138	$	0	$	13,138	$	10,709	$	22,460	$	33,169


(1)	The Company did not have any agreements with remaining contractual maturities of thirty days or greater, as of the dates indicated.