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Investments
 9 Months Ended
Sep. 30, 2019
Investments [Abstract]  
Investments
3.    INVESTMENTS

Fixed Maturity Securities

The following tables set forth the composition of fixed maturity securities (excluding investments classified as trading), as of the dates indicated:
 
September 30, 2019
 
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
$
81,262

 
$
3,184

 
$
0

 
$
84,446

 
$
0

Obligations of U.S. states and their political subdivisions
532,585

 
51,406

 
0

 
583,991

 
0

Foreign government bonds
197,207

 
27,558

 
1

 
224,764

 
0

U.S. public corporate securities
1,952,622

 
259,065

 
3,144

 
2,208,543

 
0

U.S. private corporate securities
894,674

 
47,961

 
2,868

 
939,767

 
0

Foreign public corporate securities
259,536

 
24,419

 
939

 
283,016

 
0

Foreign private corporate securities
919,260

 
32,440

 
30,095

 
921,605

 
0

Asset-backed securities(1)
124,717

 
1,090

 
346

 
125,461

 
(34
)
Commercial mortgage-backed securities
391,828

 
24,168

 
4

 
415,992

 
0

Residential mortgage-backed securities(2)
65,297

 
3,155

 
15

 
68,437

 
(141
)
Total fixed maturities, available-for-sale
$
5,418,988

 
$
474,446

 
$
37,412

 
$
5,856,022

 
$
(175
)

(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 $1.5 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, 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
$
75,049

 
$
2,427

 
$
6

 
$
77,470

 
$
0

Obligations of U.S. states and their political subdivisions
609,955

 
15,154

 
2,351

 
622,758

 
0

Foreign government bonds
208,009

 
2,137

 
8,199

 
201,947

 
0

U.S. public corporate securities
1,739,860

 
46,166

 
54,401

 
1,731,625

 
0

U.S. private corporate securities
890,748

 
11,181

 
18,591

 
883,338

 
0

Foreign public corporate securities
270,428

 
3,746

 
12,151

 
262,023

 
0

Foreign private corporate securities
857,604

 
9,797

 
40,022

 
827,379

 
0

Asset-backed securities(1)
156,818

 
1,528

 
750

 
157,596

 
(122
)
Commercial mortgage-backed securities
347,570

 
3,353

 
4,527

 
346,396

 
0

Residential mortgage-backed securities(2)
88,862

 
1,268

 
1,067

 
89,063

 
(177
)
Total fixed maturities, available-for-sale
$
5,244,903

 
$
96,757

 
$
142,065

 
$
5,199,595

 
$
(299
)

(1)
Includes credit-tranched securities collateralized by loan obligations, sub-prime mortgages, auto loans, credit cards, 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 losses 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:
 
September 30, 2019
 
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
554

 
0

 
652

 
1

 
1,206

 
1

U.S. public corporate securities
33,258

 
297

 
42,115

 
2,847

 
75,373

 
3,144

U.S. private corporate securities
28,929

 
2,123

 
35,908

 
745

 
64,837

 
2,868

Foreign public corporate securities
13,759

 
55

 
9,846

 
884

 
23,605

 
939

Foreign private corporate securities
101,087

 
3,108

 
197,638

 
26,987

 
298,725

 
30,095

Asset-backed securities
74,051

 
234

 
21,475

 
112

 
95,526

 
346

Commercial mortgage-backed securities
6,763

 
4

 
0

 
0

 
6,763

 
4

Residential mortgage-backed securities
2,996

 
6

 
723

 
9

 
3,719

 
15

Total fixed maturities, available-for-sale
$
261,397

 
$
5,827

 
$
308,357

 
$
31,585

 
$
569,754

 
$
37,412

 
December 31, 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
$
0

 
$
0

 
$
630

 
$
6

 
$
630

 
$
6

Obligations of U.S. states and their political subdivisions
124,776

 
1,571

 
31,215

 
780

 
155,991

 
2,351

Foreign government bonds
77,055

 
3,184

 
59,700

 
5,015

 
136,755

 
8,199

U.S. public corporate securities
784,916

 
37,635

 
213,147

 
16,766

 
998,063

 
54,401

U.S. private corporate securities
263,934

 
9,159

 
287,031

 
9,432

 
550,965

 
18,591

Foreign public corporate securities
124,764

 
6,286

 
72,725

 
5,865

 
197,489

 
12,151

Foreign private corporate securities
424,921

 
22,605

 
127,201

 
17,417

 
552,122

 
40,022

Asset-backed securities
112,527

 
650

 
6,523

 
100

 
119,050

 
750

Commercial mortgage-backed securities
49,616

 
434

 
116,786

 
4,093

 
166,402

 
4,527

Residential mortgage-backed securities
34,249

 
240

 
32,432

 
827

 
66,681

 
1,067

Total fixed maturities, available-for-sale
$
1,996,758

 
$
81,764

 
$
947,390

 
$
60,301

 
$
2,944,148

 
$
142,065



As of September 30, 2019 and December 31, 2018, the gross unrealized losses on fixed maturity securities were composed of $24.6 million and $121.3 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 $12.8 million and $20.8 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of September 30, 2019, the $31.6 million of gross unrealized losses of twelve months or more were concentrated in the Company’s corporate securities within the finance, energy and consumer non-cyclical sectors. As of December 31, 2018, the $60.3 million of gross unrealized losses of twelve months or more were concentrated in the Company's corporate securities within the finance, energy and consumer non-cyclical 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, 2018, the Company concluded that an adjustment to earnings for OTTI for these fixed maturity securities was not warranted at either September 30, 2019 or December 31, 2018. 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 September 30, 2019, 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:
 
September 30, 2019
 
Amortized Cost
 
Fair Value
 
(in thousands)
Fixed maturities, available-for-sale:
 
 
 
Due in one year or less
$
149,506

 
$
150,990

Due after one year through five years
710,210

 
713,547

Due after five years through ten years
1,053,548

 
1,089,987

Due after ten years
2,923,882

 
3,291,608

Asset-backed securities
124,717

 
125,461

Commercial mortgage-backed securities
391,828

 
415,992

Residential mortgage-backed securities
65,297

 
68,437

Total fixed maturities, available-for-sale
$
5,418,988

 
$
5,856,022



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 September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Fixed maturities, available-for-sale:
 
 
 
 
 
 
 
Proceeds from sales(1)
$
360,476

 
$
4,478

 
$
413,494

 
$
138,565

Proceeds from maturities/prepayments
65,915

 
90,432

 
194,344

 
230,550

Gross investment gains from sales and maturities
29,978

 
394

 
29,543

 
508

Gross investment losses from sales and maturities
(264
)
 
(216
)
 
(3,339
)
 
(3,806
)
OTTI recognized in earnings(2)
(2,296
)
 
(1,226
)
 
(5,459
)
 
(1,877
)

(1)
Includes $3.6 million and $0.2 million of non-cash related proceeds due to the timing of trade settlements for the nine months ended September 30, 2019 and 2018, respectively.
(2)
Excludes the portion of OTTI amounts remaining in 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 September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Credit loss impairments:
 
 
 
 
 
 
 
Balance in OCI, beginning of period
$
3,586

 
$
1,982

 
$
1,291

 
$
4,374

New credit loss impairments
0

 
0

 
3,022

 
0

Increases due to the passage of time on previously recorded credit losses
1

 
463

 
31

 
510

Reductions for securities which matured, paid down, prepaid or were sold during the period
(26
)
 
(15
)
 
(652
)
 
(1,975
)
Reductions for securities impaired to fair value during the period(1)
(3,040
)
 
0

 
(3,040
)
 
0

Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected
(6
)
 
(6
)
 
(137
)
 
(485
)
Balance in OCI, end of period
$
515

 
$
2,424

 
$
515

 
$
2,424



(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 $0.3 million and $(0.2) million during the three months ended September 30, 2019 and 2018, respectively, and $0.5 million and $(2.1) million during the nine months ended September 30, 2019 and 2018, respectively.

Commercial Mortgage and Other Loans

The following table sets forth the composition of “Commercial mortgage and other loans,” as of the dates indicated:
 
September 30, 2019
 
December 31, 2018
 
Amount
(in thousands)
 
% of
Total
 
Amount
(in thousands)
 
% of
Total
Commercial mortgage and agricultural property loans by property type:
 
 
 
 
 
 
 
Apartments/Multi-Family
$
376,650

 
30.5
%
 
$
362,811

 
29.9
%
Hospitality
19,162

 
1.6

 
16,083

 
1.3

Industrial
298,108

 
24.2

 
263,999

 
21.8

Office
194,300

 
15.8

 
187,450

 
15.5

Other
127,687

 
10.4

 
131,961

 
10.9

Retail
193,474

 
15.7

 
193,473

 
16.0

Total commercial mortgage loans
1,209,381

 
98.2

 
1,155,777

 
95.4

Agricultural property loans
22,583

 
1.8

 
55,438

 
4.6

Total commercial mortgage and agricultural property loans by property type
1,231,964

 
100.0
%
 
1,211,215

 
100.0
%
Allowance for credit losses
(1,905
)
 
 
 
(2,065
)
 
 
Total commercial mortgage and other loans
$
1,230,059

 
 
 
$
1,209,150

 
 


As of September 30, 2019, the commercial mortgage and agricultural property loans were secured by properties geographically dispersed throughout the United States (with the largest concentrations in California (19%), Texas (14%) and New York (7%)) and included loans secured by properties in Europe (6%), Australia (4%) and Mexico (2%).

The following table sets forth the activity in the allowance for credit losses for commercial mortgage and other loans, as of the dates indicated:
 
Commercial Mortgage Loans
 
Agricultural Property Loans
 
Total
 
(in thousands)
Balance at December 31, 2017
$
1,728

 
$
66

 
$
1,794

Addition to (release of) allowance for credit losses
298

 
(27
)
 
271

Charge-offs, net of recoveries
0

 
0

 
0

Balance at December 31, 2018
2,026

 
39

 
2,065

Addition to (release of) allowance for credit losses
(146
)
 
(14
)
 
(160
)
Charge-offs, net of recoveries
0

 
0

 
0

Balance at September 30, 2019
$
1,880

 
$
25

 
$
1,905


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:
 
September 30, 2019
 
Commercial Mortgage Loans
 
Agricultural Property Loans
 
Total
 
(in thousands)
Allowance for credit losses:
 
 
 
 
 
Individually evaluated for impairment
$
0

 
$
0

 
$
0

Collectively evaluated for impairment
1,880

 
25

 
1,905

Total ending balance(1)
$
1,880

 
$
25

 
$
1,905

Recorded investment(2):
 
 
 
 
 
Individually evaluated for impairment
$
0

 
$
0

 
$
0

Collectively evaluated for impairment
1,209,381

 
22,583

 
1,231,964

Total ending balance(1)
$
1,209,381

 
$
22,583

 
$
1,231,964


(1)
As of September 30, 2019, there were no loans acquired with deteriorated credit quality.
(2)
Recorded investment reflects the carrying value gross of related allowance.
 
December 31, 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
2,026

 
39

 
2,065

Total ending balance(1)
$
2,026

 
$
39

 
$
2,065

Recorded investment(2):
 
 
 
 
 
Individually evaluated for impairment
$
0

 
$
816

 
$
816

Collectively evaluated for impairment
1,155,777

 
54,622

 
1,210,399

Total ending balance(1)
$
1,155,777

 
$
55,438

 
$
1,211,215


(1)
As of December 31, 2018, 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:
 
September 30, 2019
 
Debt Service Coverage Ratio
 
 
 
≥ 1.2X
 
1.0X to < 1.2X
 
< 1.0X
 
Total
 
(in thousands)
Loan-to-Value Ratio:
 
 
 
 
 
 
 
0%-59.99%
$
671,121

 
$
20,619

 
$
815

 
$
692,555

60%-69.99%
348,053

 
10,844

 
0

 
358,897

70%-79.99%
152,603

 
27,683

 
0

 
180,286

80% or greater
0

 
226

 
0

 
226

Total commercial mortgage and agricultural property loans
$
1,171,777

 
$
59,372

 
$
815

 
$
1,231,964

 
December 31, 2018
 
Debt Service Coverage Ratio
 
 
 
≥ 1.2X
 
1.0X to < 1.2X
 
< 1.0X
 
Total
 
(in thousands)
Loan-to-Value Ratio:
 
 
 
 
 
 
 
0%-59.99%
$
696,507

 
$
12,771

 
$
80

 
$
709,358

60%-69.99%
321,586

 
18,525

 
0

 
340,111

70%-79.99%
105,727

 
27,790

 
0

 
133,517

80% or greater
28,000

 
229

 
0

 
28,229

Total commercial mortgage and agricultural property loans
$
1,151,820

 
$
59,315

 
$
80

 
$
1,211,215


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:
 
September 30, 2019
 
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
$
1,209,381

 
$
0

 
$
0

 
$
0

 
$
1,209,381

 
$
0

Agricultural property loans
22,583

 
0

 
0

 
0

 
22,583

 
0

Total
$
1,231,964

 
$
0

 
$
0

 
$
0

 
$
1,231,964

 
$
0


(1)
As of September 30, 2019, 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, 2018.
 
December 31, 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
$
1,155,777

 
$
0

 
$
0

 
$
0

 
$
1,155,777

 
$
0

Agricultural property loans
55,438

 
0

 
0

 
0

 
55,438

 
0

Total
$
1,211,215

 
$
0

 
$
0

 
$
0

 
$
1,211,215

 
$
0



(1)
As of December 31, 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, 2018.

For the three and nine months ended September 30, 2019 and 2018, there were no commercial mortgage and other loans acquired, other than those through direct origination. For the three months ended September 30, 2019, there were no commercial mortgage loans sold, and for the nine months ended September 30, 2019, there were $5 million of commercial mortgage and other loans sold. For the three and nine months ended September 30, 2018, there were no 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:
 
September 30, 2019
 
December 31, 2018
 
(in thousands)
Company’s investment in separate accounts
$
45,038

 
$
40,126

LPs/LLCs:
 
 
 
Equity method:
 
 
 
Private equity
186,657

 
149,164

Hedge funds
61,061

 
57,171

Real estate-related
20,354

 
10,251

Subtotal equity method
268,072

 
216,586

Fair value:
 
 
 
Private equity
62,353

 
60,118

Hedge funds
690

 
762

Real estate-related
12,881

 
9,024

Subtotal fair value
75,924

 
69,904

Total LPs/LLCs
343,996

 
286,490

Derivative instruments
31,770

 
50,813

Total other invested assets
$
420,804

 
$
377,429



Net Investment Income

The following table sets forth “Net investment income” by investment type, for the periods indicated:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Fixed maturities, available-for-sale
$
61,889

 
$
55,109

 
$
177,525

 
$
163,564

Fixed maturities, trading
345

 
271

 
979

 
809

Equity securities, at fair value
222

 
222

 
664

 
664

Commercial mortgage and other loans
13,296

 
12,462

 
39,222

 
37,170

Policy loans
17,863

 
16,628

 
50,828

 
48,861

Short-term investments and cash equivalents
2,440

 
952

 
6,590

 
1,389

Other invested assets
3,772

 
5,169

 
31,743

 
7,027

Gross investment income
99,827

 
90,813

 
307,551

 
259,484

Less: investment expenses
(4,571
)
 
(4,627
)
 
(13,483
)
 
(13,734
)
Net investment income
$
95,256

 
$
86,186

 
$
294,068

 
$
245,750


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 September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Fixed maturities(1)
$
27,418

 
$
(1,048
)
 
$
20,745

 
$
(5,175
)
Commercial mortgage and other loans
54

 
16

 
160

 
22

LPs/LLCs
0

 
0

 
12

 
849

Derivatives
12,129

 
(48,393
)
 
(82,194
)
 
(131,034
)
Short-term investments and cash equivalents
(17
)
 
2

 
(24
)
 
(17
)
Realized investment gains (losses), net
$
39,584

 
$
(49,423
)
 
$
(61,301
)
 
$
(135,355
)

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

Net Unrealized Gains (Losses) on Investments within AOCI

The following table sets forth net unrealized gains (losses) on investments, as of the dates indicated:
 
September 30, 2019
 
December 31, 2018
 
(in thousands)
Fixed maturity securities, available-for-sale—with OTTI
$
1,349

 
$
(689
)
Fixed maturity securities, available-for-sale—all other
435,685

 
(44,619
)
Derivatives designated as cash flow hedges(1)
54,238

 
22,122

Affiliated notes
4,074

 
810

Other investments
(222
)
 
5,055

Net unrealized gains (losses) on investments
$
495,124

 
$
(17,321
)

(1)
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 September 30, 2019 and December 31, 2018, 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:
 
September 30, 2019
 
December 31, 2018
 
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
$
0

 
$
0

 
$
0

 
$
8,169

 
$
0

 
$
8,169

U.S. public corporate securities
5,231

 
0

 
5,231

 
628

 
0

 
628

Foreign public corporate securities
2,528

 
0

 
2,528

 
2,266

 
0

 
2,266

Total cash collateral for loaned securities(1)
$
7,759

 
$
0

 
$
7,759

 
$
11,063

 
$
0

 
$
11,063



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