XML 35 R24.htm IDEA: XBRL DOCUMENT v3.7.0.1
Investments (Tables)
 6 Months Ended
Jun. 30, 2017
Amortized Cost/Cost, Gross Unrealized Gains and Losses, Estimated Fair Values and ("OTTI") Reflected in ("AOCI") of Investments in Fixed Maturity and Equity Available-for-Sale Securities

The amortized cost/cost, gross unrealized gains and losses, estimated fair values and other-than-temporary impairments (“OTTI”) reflected in accumulated other comprehensive income (“AOCI”) of investments in fixed maturity and equity AFS securities at June 30, 2017 and December 31, 2016 were: 

 

 

 

June 30, 2017

 

 

 

 

 

 

 

 

 

Gross Unrealized

 

 

 

Estimated

 

 

 

 

 

 

 

 

 

Amortized

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair

 

 

 

OTTI

 

 

 

 

Cost/Cost

 

 

 

Gains

 

 

 

Losses

 

 

 

Value

 

 

 

in AOCI (a)

 

Fixed maturity AFS securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

 

$

 

822,600

 

 

$

 

62,851

 

 

$

 

(1,492

)

 

$

 

883,959

 

 

$

 

-

 

Asset-backed securities

 

 

 

67,950

 

 

 

 

224

 

 

 

 

(255

)

 

 

 

67,919

 

 

 

 

-

 

Commercial mortgage-backed securities

 

 

 

72,989

 

 

 

 

1,865

 

 

 

 

(247

)

 

 

 

74,607

 

 

 

 

-

 

Residential mortgage-backed securities

 

 

 

61,834

 

 

 

 

5,922

 

 

 

 

(44

)

 

 

 

67,712

 

 

 

 

-

 

Municipals

 

 

 

907

 

 

 

 

-

 

 

 

 

(33

)

 

 

 

874

 

 

 

 

-

 

Government and government agencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

297,444

 

 

 

 

56,453

 

 

 

 

(30

)

 

 

 

353,867

 

 

 

 

-

 

Foreign

 

 

 

24,194

 

 

 

 

1,716

 

 

 

 

(22

)

 

 

 

25,888

 

 

 

 

-

 

Total fixed maturity AFS securities

 

$

 

1,347,918

 

 

$

 

129,031

 

 

$

 

(2,123

)

 

$

 

1,474,826

 

 

$

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity AFS securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking securities

 

$

 

25,473

 

 

$

 

2,670

 

 

$

 

-

 

 

$

 

28,143

 

 

$

 

-

 

Industrial securities

 

 

 

5,791

 

 

 

 

-

 

 

 

 

(5

)

 

 

 

5,786

 

 

 

 

-

 

Total equity AFS securities

 

$

 

31,264

 

 

$

 

2,670

 

 

$

 

(5

)

 

$

 

33,929

 

 

$

 

-

 

 

 

 

December 31, 2016

 

 

 

 

 

 

 

 

 

Gross Unrealized

 

 

 

Estimated

 

 

 

 

 

 

 

 

 

Amortized

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair

 

 

 

OTTI

 

 

 

 

Cost/Cost

 

 

 

Gains

 

 

 

Losses

 

 

 

Value

 

 

 

in AOCI (a)

 

Fixed maturity AFS securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

 

$

 

859,028

 

 

$

 

56,387

 

 

$

 

(3,564

)

 

$

 

911,851

 

 

$

 

-

 

Asset-backed securities

 

 

 

53,421

 

 

 

 

15

 

 

 

 

(849

)

 

 

 

52,587

 

 

 

 

-

 

Commercial mortgage-backed securities

 

 

 

75,396

 

 

 

 

1,706

 

 

 

 

(589

)

 

 

 

76,513

 

 

 

 

-

 

Residential mortgage-backed securities

 

 

 

92,943

 

 

 

 

4,004

 

 

 

 

(770

)

 

 

 

96,177

 

 

 

 

(5

)

Municipals

 

 

 

909

 

 

 

 

-

 

 

 

 

(53

)

 

 

 

856

 

 

 

 

-

 

Government and government agencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

295,581

 

 

 

 

45,798

 

 

 

 

-

 

 

 

 

341,379

 

 

 

 

-

 

Foreign

 

 

 

6,509

 

 

 

 

1,165

 

 

 

 

-

 

 

 

 

7,674

 

 

 

 

-

 

Total fixed maturity AFS securities

 

$

 

1,383,787

 

 

$

 

109,075

 

 

$

 

(5,825

)

 

$

 

1,487,037

 

 

$

 

(5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity AFS securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking securities

 

$

 

25,473

 

 

$

 

1,721

 

 

$

 

(468

)

 

$

 

26,726

 

 

$

 

-

 

Industrial securities

 

 

 

5,791

 

 

 

 

34

 

 

 

 

-

 

 

 

 

5,825

 

 

 

 

-

 

Total equity AFS securities

 

$

 

31,264

 

 

$

 

1,755

 

 

$

 

(468

)

 

$

 

32,551

 

 

$

 

-

 

 

(a)

Represents OTTI in AOCI, which were not included in earnings. Amount excludes $3,110 and $2,446 of unrealized gains at June 30, 2017 and December 31, 2016, respectively.
Amortized Cost and Estimated Fair Value of Fixed Maturity Available-for-Sale Securities by Investment Grade

The amortized cost and estimated fair value of fixed maturity AFS securities by investment grade at June 30, 2017 and December 31, 2016 were: 

 

 

 

June 30, 2017

 

 

December 31, 2016

 

 

 

 

 

 

Estimated

 

 

 

 

 

Estimated

 

 

 

Amortized

 

 

Fair

 

 

Amortized

 

 

Fair

 

 

 

Cost

 

 

Value

 

 

Cost

 

 

Value

 

Investment grade

 

$

 

1,268,702

 

 

$

 

1,386,926

 

 

$

 

1,294,978

 

 

$

 

1,393,503

 

Below investment grade

 

 

 

79,216

 

 

 

 

87,900

 

 

 

 

88,809

 

 

 

 

93,534

 

Total fixed maturity AFS securities

 

$

 

1,347,918

 

 

$

 

1,474,826

 

 

$

 

1,383,787

 

 

$

 

1,487,037

 

 
Amortized Cost and Estimated Fair Value of Fixed Maturity Available-for-Sale Securities by Contractual Maturities

The amortized cost and estimated fair value of fixed maturity AFS securities at June 30, 2017 and December 31, 2016 by contractual maturities were: 

 

 

 

 

June 30, 2017

 

 

 

December 31, 2016

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

 

 

 

 

 

Estimated

 

 

 

 

Amortized

 

 

 

Fair

 

 

 

Amortized

 

 

 

Fair

 

 

 

 

Cost

 

 

 

Value

 

 

 

Cost

 

 

 

Value

 

Fixed maturity AFS securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due in one year or less

 

$

 

78,733

 

 

$

 

80,116

 

 

$

 

56,748

 

 

$

 

57,489

 

Due after one year through five years

 

 

 

450,657

 

 

 

 

477,698

 

 

 

 

523,815

 

 

 

 

555,221

 

Due after five years through ten years

 

 

 

118,259

 

 

 

 

124,484

 

 

 

 

95,744

 

 

 

 

99,697

 

Due after ten years

 

 

 

497,496

 

 

 

 

582,290

 

 

 

 

485,720

 

 

 

 

549,354

 

 

 

$

 

1,145,145

 

 

$

 

1,264,588

 

 

$

 

1,162,027

 

 

$

 

1,261,761

 

Mortgage-backed securities and other

   asset-backed securities

 

$

 

202,773

 

 

$

 

210,238

 

 

$

 

221,760

 

 

$

 

225,276

 

Total fixed maturity AFS securities

 

$

 

1,347,918

 

 

$

 

1,474,826

 

 

$

 

1,383,787

 

 

$

 

1,487,037

 

 
Estimated Fair Value and Gross Unrealized Losses and Other-Than-Temporary Impairments of Fixed Maturity and Equity Available-for-Sale Securities in Continuous Unrealized Loss Position

The estimated fair value and gross unrealized losses and OTTI related to fixed maturity and equity AFS securities aggregated by length of time that individual securities have been in a continuous unrealized loss position at June 30, 2017 and December 31, 2016 were as follows: 

 

 

 

June 30, 2017

 

 

 

 

 

 

 

 

 

 

 

Gross

 

 

 

Estimated

 

 

 

 

 

Unrealized

 

 

 

Fair

 

 

Amortized

 

 

Losses and

 

 

 

Value

 

 

Cost/Cost

 

 

OTTI (a)

 

Less than or equal to six months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

 

$

 

3,212

 

 

$

 

3,288

 

 

$

 

(76

)

Asset-backed securities

 

 

 

21,820

 

 

 

 

21,842

 

 

 

 

(22

)

Commercial mortgage-backed securities

 

 

 

10,578

 

 

 

 

10,678

 

 

 

 

(100

)

Residential mortgage-backed securities

 

 

 

2,880

 

 

 

 

2,924

 

 

 

 

(44

)

Government and government agencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

6,593

 

 

 

 

6,623

 

 

 

 

(30

)

Foreign

 

 

 

3,789

 

 

 

 

3,811

 

 

 

 

(22

)

Equity securities

 

 

 

5,786

 

 

 

 

5,791

 

 

 

 

(5

)

Total fixed maturity and equity AFS securities

 

$

 

54,658

 

 

$

 

54,957

 

 

$

 

(299

)

Greater than six months but less than or equal to one year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

 

$

 

19,522

 

 

$

 

19,832

 

 

$

 

(310

)

Asset-backed securities

 

 

 

6,948

 

 

 

 

7,051

 

 

 

 

(103

)

Commercial mortgage-backed securities

 

 

 

13,169

 

 

 

 

13,316

 

 

 

 

(147

)

Total fixed maturity and equity AFS securities

 

$

 

39,639

 

 

$

 

40,199

 

 

$

 

(560

)

Greater than one year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

 

$

 

9,383

 

 

$

 

10,489

 

 

$

 

(1,106

)

Asset-backed securities

 

 

 

8,997

 

 

 

 

9,127

 

 

 

 

(130

)

Residential mortgage-backed securities

 

 

 

9

 

 

 

 

9

 

 

 

 

-

 

Municipals

 

 

 

874

 

 

 

 

907

 

 

 

 

(33

)

Total fixed maturity and equity AFS securities

 

$

 

19,263

 

 

$

 

20,532

 

 

$

 

(1,269

)

Total fixed maturity and equity AFS securities

 

$

 

113,560

 

 

$

 

115,688

 

 

$

 

(2,128

)

 

 

 

December 31, 2016

 

 

 

 

 

 

 

 

 

Gross

 

 

 

Estimated

 

 

 

 

 

Unrealized

 

 

 

Fair

 

 

Amortized

 

 

Losses and

 

 

 

Value

 

 

Cost/Cost

 

 

OTTI (a)

 

Less than or equal to six months

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

 

$

 

64,992

 

 

$

 

66,625

 

 

$

 

(1,633

)

Asset-backed securities

 

 

 

30,729

 

 

 

 

31,253

 

 

 

 

(524

)

Commercial mortgage-backed securities

 

 

 

30,698

 

 

 

 

31,285

 

 

 

 

(587

)

Residential mortgage-backed securities

 

 

 

54,987

 

 

 

 

55,690

 

 

 

 

(703

)

Equity securities - banking securities

 

 

 

8,213

 

 

 

 

8,500

 

 

 

 

(287

)

Total fixed maturity and equity AFS securities

 

$

 

189,619

 

 

$

 

193,353

 

 

$

 

(3,734

)

Greater than six months but less than or equal to one year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

 

$

 

4,522

 

 

$

 

4,863

 

 

$

 

(341

)

Asset-backed securities

 

 

 

879

 

 

 

 

1,000

 

 

 

 

(121

)

Commercial mortgage-backed securities

 

 

 

1,010

 

 

 

 

1,012

 

 

 

 

(2

)

Residential mortgage-backed securities

 

 

 

212

 

 

 

 

229

 

 

 

 

(17

)

Total fixed maturity and equity AFS securities

 

$

 

6,623

 

 

$

 

7,104

 

 

$

 

(481

)

Greater than one year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

 

$

 

19,541

 

 

$

 

21,131

 

 

$

 

(1,590

)

Asset-backed securities

 

 

 

7,978

 

 

 

 

8,182

 

 

 

 

(204

)

Residential mortgage-backed securities

 

 

 

2,122

 

 

 

 

2,172

 

 

 

 

(50

)

Municipals

 

 

 

856

 

 

 

 

909

 

 

 

 

(53

)

Equity AFS securities - banking securities

 

 

 

1,615

 

 

 

 

1,796

 

 

 

 

(181

)

Total fixed maturity and equity AFS securities

 

$

 

32,112

 

 

$

 

34,190

 

 

$

 

(2,078

)

Total fixed maturity and equity AFS securities

 

$

 

228,354

 

 

$

 

234,647

 

 

$

 

(6,293

)

(a)

Subsequent unrealized gains (losses) on OTTI securities are included in Net unrealized OTTI on securities in the Statements of Comprehensive Income (Loss).
Fair Value, Gross Unrealized Losses, Other-Than-Temporary Impairments Recognized in Other Comprehensive Income and Number of Securities with Fair Value Declining Amortized Cost

The fair value, gross unrealized losses/the portion of OTTI recognized in OCI and the number of securities with fair value declining below amortized cost by greater than 20% and 40% by length of time that securities have been in a continuous unrealized loss position were as follows at June 30, 2017 and December 31, 2016: 

 

 

June 30, 2017

 

 

December 31, 2016

 

 

 

Estimated

 

 

Gross Unrealized

 

 

Number of

 

 

Estimated

 

 

 

Gross Unrealized

 

 

Number of

 

 

 

Fair Value

 

 

Losses/OTTI (a)

 

 

Securities

 

 

Fair Value

 

 

 

Losses/OTTI (a)

 

 

Securities

 

Decline 20% - 40%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held greater than one year

 

$

 

1,195

 

 

$

 

(794

)

 

 

 

1

 

 

$

 

1,375

 

 

$

 

(614

)

 

 

 

1

 

Total

 

$

 

1,195

 

 

$

 

(794

)

 

 

 

1

 

 

$

 

1,375

 

 

$

 

(614

)

 

 

 

1

 

(a)    Subsequent unrealized gains (losses) on OTTI securities are included in Net unrealized OTTI on securities in the Statements of    Comprehensive Income (Loss).
Components of Net Unrealized Gains (Losses) and Other-Than-Temporary Impairments Included in Accumulated Other Comprehensive Income, Net of Taxes

The components of net unrealized gains (losses) and OTTI included in AOCI, net of taxes, at June 30, 2017 and December 31, 2016 were as follows: 

 

 

June 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Assets

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities

 

$

 

126,908

 

 

$

 

103,250

 

Equity AFS securities

 

 

 

2,665

 

 

 

 

1,287

 

Cash flow hedges

 

 

 

2,088

 

 

 

 

(1,224

)

Value of business acquired

 

 

 

(30,589

)

 

 

 

(26,630

)

 

 

$

 

101,072

 

 

$

 

76,683

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Income taxes - deferred

 

$

 

(21,333

)

 

$

 

(21,333

)

Stockholder's Equity

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income, net of taxes

 

$

 

79,739

 

 

$

 

55,350

 

 
Credit Quality of Commercial Mortgage Loans

The credit quality of commercial mortgage loans at June 30, 2017 and December 31, 2016, was as follows:

 

 

 

June 30,

 

 

December 31,

 

Commercial

 

2017

 

 

2016

 

AAA - AA

 

$

 

43,289

 

 

$

 

43,047

 

A

 

 

 

58,022

 

 

 

 

55,269

 

BBB

 

 

 

22,599

 

 

 

 

17,970

 

Total mortgage loans on real estate

 

$

 

123,910

 

 

$

 

116,286

 

Less: allowance for credit losses

 

 

 

(90

)

 

 

 

(78

)

 

 

 

 

 

 

 

 

 

 

 

Total mortgage loans on real estate, net

 

$

 

123,820

 

 

$

 

116,208

 

 
Maturities of Collateral Underlying Reverse Repurchase Agreements and Securities Lending Transactions

The following tables provide a summary of maturities of collateral underlying reverse repurchase agreements and securities lending transactions at June 30, 2017 and December 31, 2016: 

 

 

June 30, 2017

 

 

 

Overnight and

Continuous

 

 

Up to 30 days

 

 

Total

 

Reverse repurchase agreements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage-backed securities

 

$

 

-

 

 

$

 

20,043

 

 

$

 

20,043

 

Total

 

$

 

-

 

 

$

 

20,043

 

 

$

 

20,043

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities lending transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and agency securities

 

$

 

147,480

 

 

$

 

-

 

 

$

 

147,480

 

Corporate securities

 

 

 

47,588

 

 

 

 

-

 

 

 

 

47,588

 

Equity securities-banking

 

 

 

6,617

 

 

 

 

-

 

 

 

 

6,617

 

Total

 

$

 

201,685

 

 

$

 

-

 

 

$

 

201,685

 

Total Borrowings

 

$

 

201,685

 

 

$

 

20,043

 

 

$

 

221,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross amount of recognized liabilities for reverse repurchase agreements and securities

   lending included on the Balance Sheets

$

 

228,615

 

 

 

 

December 31, 2016

 

 

 

Overnight and

Continuous

 

 

Up to 30 days

 

 

Total

 

Reverse repurchase agreements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage-backed securities

 

 

 

-

 

 

$

 

46,401

 

 

$

 

46,401

 

Total

 

$

 

-

 

 

$

 

46,401

 

 

$

 

46,401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities lending transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and agency securities

 

$

 

144,705

 

 

$

 

-

 

 

$

 

144,705

 

Corporate securities

 

 

 

40,774

 

 

 

 

-

 

 

 

 

40,774

 

Equity securities-banking

 

 

 

9,517

 

 

 

 

-

 

 

 

 

9,517

 

Total

 

$

 

194,996

 

 

$

 

-

 

 

$

 

194,996

 

Total Borrowings

 

$

 

194,996

 

 

$

 

46,401

 

 

$

 

241,397

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross amount of recognized liabilities for reverse repurchase agreements and securities

   lending included on the Balance Sheets

$

 

246,049

 

 
Notional and Fair Value of Non-Qualifying Hedging Instruments and Cash Flow Hedges

The following table presents the notional and fair value amounts of non-qualifying hedging instruments and cash flow hedges at June 30, 2017 and December 31, 2016:

 

 

Notional

 

 

Fair Value

 

 

 

 

June 30,

 

 

 

December 31,

 

 

 

June 30,

 

 

 

December 31,

 

Derivative Type

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Non-qualifying hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short futures

 

$

 

10,972

 

 

$

 

25,157

 

 

$

 

-

 

 

$

 

-

 

Long futures

 

 

 

51,422

 

 

 

 

55,071

 

 

 

 

-

 

 

 

 

-

 

Interest rate swaps

 

 

 

251,000

 

 

 

 

251,000

 

 

 

 

(1,591

)

 

 

 

(2,799

)

Variance swaps

 

 

 

575

 

 

 

 

540

 

 

 

 

(3,087

)

 

 

 

(1,835

)

Total return swaps

 

 

 

247,183

 

 

 

 

1,405,253

 

 

 

 

(3,596

)

 

 

 

(16,487

)

Options

 

 

 

962,636

 

 

 

 

2,002,850

 

 

 

 

6,476

 

 

 

 

24,525

 

Credit default swaps

 

 

 

185,000

 

 

 

 

210,000

 

 

 

 

6,525

 

 

 

 

1,311

 

Total non-qualifying hedges

 

$

 

1,708,788

 

 

$

 

3,949,871

 

 

$

 

4,727

 

 

$

 

4,715

 

Cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

 

49,884

 

 

$

 

49,883

 

 

$

 

(311

)

 

$

 

(3,002

)

Total cash flow hedges

 

$

 

49,884

 

 

$

 

49,883

 

 

$

 

(311

)

 

$

 

(3,002

)

Derivative Total

 

$

 

1,758,672

 

 

$

 

3,999,754

 

 

$

 

4,416

 

 

$

 

1,713

 

 
Net Derivative Gains (Losses) Recognized in Statements of Income (Loss)

The following table presents the net derivative gains (losses) recognized in the Statements of Income (Loss) for the three and six months ended June 30, 2017 and 2016:

 

 

Net Derivative Gains (Losses) Recognized In Income

 

 

 

Three Months Ended

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

June 30,

 

Derivative Type

 

2017

 

 

 

2016

 

 

 

2017

 

 

 

2016

 

Short futures

 

$

 

(3

)

 

$

 

(1,154

)

 

$

 

(727

)

 

$

 

(2,459

)

Long futures

 

 

 

1,497

 

 

 

 

3,138

 

 

 

 

1,752

 

 

 

 

6,991

 

Variance swaps

 

 

 

(711

)

 

 

 

(1,033

)

 

 

 

(2,340

)

 

 

 

(1,670

)

Total return swaps

 

 

 

(3,487

)

 

 

 

(10,996

)

 

 

 

(8,389

)

 

 

 

(17,039

)

Options

 

 

 

(6,879

)

 

 

 

(1,784

)

 

 

 

(23,788

)

 

 

 

(3,235

)

Interest rate swaps

 

 

 

1,840

 

 

 

 

5,079

 

 

 

 

1,211

 

 

 

 

13,771

 

Credit default swaps

 

 

 

1,203

 

 

 

 

85

 

 

 

 

1,513

 

 

 

 

347

 

Total

 

$

 

(6,540

)

 

$

 

(6,665

)

 

$

 

(30,768

)

 

$

 

(3,294

)

 
Maximum Potential Amount of Future Payments, Credit Rating and Maturity Dates for Credit Default Swaps

 

The following tables present the maximum potential amount of future payments, credit rating, and maturity dates for the credit default swaps at June 30, 2017 and December 31, 2016:

 

 

 

Maximum Potential Amount

 

 

 

 

 

 

 

 

 

of Future Payments

 

 

Credit Rating

 

Maturity Date Range

Derivative Type

 

June 30, 2017

Credit default swaps

 

 

 

 

 

 

 

 

 

 

 

Corporate debt

 

$

 

95,000

 

 

 

AA-A

 

 

March 2020-December 2021

Sovereign debt

 

 

 

90,000

 

 

 

AA-A

 

 

March 2018-June 2022

Credit default swaps total

 

$

 

185,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maximum Potential Amount

 

 

 

 

 

 

 

 

 

of Future Payments

 

 

Credit Rating

 

Maturity Date Range

Derivative Type

 

December 31, 2016

Credit default swaps

 

 

 

 

 

 

 

 

 

 

 

Corporate debt

 

$

 

120,000

 

 

 

A

 

June 2017-December 2020

Sovereign debt

 

 

 

90,000

 

 

 

AA-A

 

June 2017-December 2021

Credit default swaps total

 

$

 

210,000

 

 

 

 

 

 

 

 
Components of Gains or Losses on Derivatives that Qualify as Cash Flow Hedges

The following tables present the components of the gains (losses) on derivatives that qualify as cash flow hedges for the three and six months ended June 30, 2017 and 2016:

 

 

Gains (Losses) Recognized in

 

 

Gains (Losses) Recognized in

 

 

 

OCI on Derivatives (Effective Portion)

 

 

OCI on Derivatives (Effective Portion)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Interest rate swaps

 

$

 

2,903

 

 

$

 

1,803

 

 

$

 

3,311

 

 

$

 

456

 

Total

 

$

 

2,903

 

 

$

 

1,803

 

 

$

 

3,311

 

 

$

 

456

 

 

 

 

Net Realized Gains (Losses)

 

 

Net Realized Gains (Losses)

 

 

 

Recognized in Income on Derivatives

(Ineffective Portion)

 

 

Recognized in Income on Derivatives

(Ineffective Portion)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

2016

 

Interest rate swaps

 

$

 

1

 

 

$

 

1

 

 

$

 

3

 

$

 

3

 

Total

 

$

 

1

 

 

$

 

1

 

 

$

 

3

 

$

 

3

 

 

 

 

Gains (Losses) Reclassified from

 

 

Gains (Losses) Reclassified from

 

 

 

AOCI into Net Investment Income (Effective Portion)

 

 

AOCI into Net Investment Income (Effective Portion)

 

 

 

Three Months Ended

 

 

Six  Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Interest rate swaps

 

$

 

(373

)

 

$

 

(513

)

 

$

 

(620

)

 

$

 

(316

)

Total

 

$

 

(373

)

 

$

 

(513

)

 

$

 

(620

)

 

$

 

(316

)

 
Offsetting of Derivative Assets and Liabilities

The following table presents the offsetting of derivative assets and liabilities at June 30, 2017 and December 31, 2016:

 

 

 

June 30, 2017

 

 

December 31, 2016

 

Derivatives Subject to a Master Netting Arrangement or a Similar Right to Offset

 

Assets

 

 

Liabilities

 

 

Assets

 

 

Liabilities

 

Gross estimated fair value of derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTC - Bilateral

 

$

14,046

 

 

$

8,040

 

 

$

37,344

 

 

$

32,832

 

OTC - Cleared

 

 

1,446

 

 

 

3,036

 

 

 

1,678

 

 

 

4,477

 

Total gross estimated fair value of derivatives

 

$

15,492

 

 

$

11,076

 

 

$

39,022

 

 

$

37,309

 

Amounts offset on the Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross estimated fair value of derivatives: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTC - Bilateral

 

$

(5,797

)

 

$

(5,797

)

 

$

(18,014

)

 

$

(18,014

)

OTC - Cleared

 

 

(1,446

)

 

 

(1,446

)

 

 

(1,678

)

 

 

(1,678

)

Cash collateral: (2), (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTC - Bilateral

 

 

(1,805

)

 

 

-

 

 

 

(2,804

)

 

 

-

 

OTC - Cleared

 

 

-

 

 

 

(130

)

 

 

-

 

 

 

(2,452

)

Estimated fair value of derivatives presented on the Balance Sheets

 

$

6,444

 

 

$

3,703

 

 

$

16,526

 

 

$

15,165

 

Gross amounts not offset on the Balance Sheets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities collateral: (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTC - Bilateral

 

$

(5,913

)

 

$

(1,336

)

 

$

(15,222

)

 

$

(14,249

)

Net amount after application of master netting agreements and collateral

 

$

531

 

 

$

2,367

 

 

$

1,304

 

 

$

916

 

 

(1)

Estimated fair value of derivatives is limited to the amount that is subject to set-off.

(2)

The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. Cash collateral received for over-the-counter ("OTC") OTC-Bilateral and OTC-Cleared derivatives is included in cash and cash equivalents, short-term investments, or fixed maturity securities, and the obligation to return it, beyond what is already being setoff, is included in payables for collateral under securities loaned, reverse repurchase agreements and derivatives. At June 30, 2017, the Company received $9 of excess cash collateral. The Company had no excess cash collateral received from counterparties at December 31, 2016

(3)

The receivable for the return of cash collateral provided to the counterparty, beyond what is being setoff, is included in other assets. The amount reported in the table above does not include initial margin on exchange-traded and OTC-Cleared derivatives. At June 30, 2017 and December 31, 2016, the Company had no excess cash collateral provided to counterparties that was excluded from the table due to the foregoing limitation.

(4)

Securities collateral received or pledged by the Company is held in separate custodial accounts and is not recorded on the Balance Sheets. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At June 30, 2017 and December 31, 2016, the Company received excess securities collateral with an estimated fair value of $5,041 and $395, respectively, for its OTC-Bilateral derivatives, which are not included in the table above due to the foregoing limitation. At June 30, 2017 and December 31, 2016, the Company provided excess securities collateral with an estimated fair value of $1,956 and $1,878, respectively, for its OTC-Bilateral derivatives, which are not included in the table above due to the foregoing limitation. At June 30, 2017 and December 31, 2016, the Company also provided securities initial margin with an estimated fair value of $11,405 and $11,291, respectively, for its OTC-Cleared derivatives, which are not included in the table above.
Net Investment Income (Loss) by Source

Net investment income (loss) by source for the three and six months ended June 30, 2017 and 2016 was as follows:

 

 

 

Three Months Ended

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

Net investment income (loss)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Fixed maturity AFS securities

 

$

 

15,204

 

 

$

 

16,863

 

 

$

 

30,668

 

 

$

 

34,230

 

Equity AFS securities

 

 

 

422

 

 

 

 

538

 

 

 

 

840

 

 

 

 

1,003

 

Limited partnerships

 

 

 

279

 

 

 

 

(90

)

 

 

 

1,943

 

 

 

 

(2,631

)

Mortgage loans on real estate

 

 

 

1,400

 

 

 

 

1,264

 

 

 

 

2,863

 

 

 

 

2,467

 

Policy loans on insurance contracts

 

 

 

8,234

 

 

 

 

8,382

 

 

 

 

16,454

 

 

 

 

16,991

 

Derivatives

 

 

 

1,684

 

 

 

 

1,857

 

 

 

 

3,274

 

 

 

 

3,769

 

Cash and cash equivalents

 

 

 

633

 

 

 

 

564

 

 

 

 

907

 

 

 

 

1,015

 

Other

 

 

 

70

 

 

 

 

106

 

 

 

 

143

 

 

 

 

213

 

Gross investment income

 

$

 

27,926

 

 

$

 

29,484

 

 

$

 

57,092

 

 

$

 

57,057

 

Less investment expenses

 

 

 

(1,509

)

 

 

 

(1,870

)

 

 

 

(2,731

)

 

 

 

(2,991

)

Net investment income (loss)

 

$

 

26,417

 

 

$

 

27,614

 

 

$

 

54,361

 

 

$

 

54,066

 

 
Proceeds and Gross Realized Investment Gains (Losses) from Sale of Available-for-Sale Securities

The Company considers fair value at the date of sale to be equal to the proceeds received. Proceeds and gross realized investment gains (losses) from the sale of AFS securities for the three and six months ended June 30, 2017 and 2016 were as follows:

 

 

 

Three Months Ended

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

 

2016

 

Proceeds

 

$

 

12,264

 

 

$

 

97,888

 

 

$

 

65,967

 

 

 

$

 

199,431

 

Gross realized investment gains

 

 

 

1,241

 

 

 

 

1,064

 

 

 

 

1,834

 

 

 

 

 

4,943

 

Gross realized investment losses

 

 

 

(41

)

 

 

 

(1

)

 

 

 

(557

)

 

 

 

 

(277

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds on AFS securities sold at a realized loss

 

 

 

768

 

 

 

 

16,830

 

 

 

 

27,458

 

 

 

 

 

24,745

 

 
Net Realized Investment Gains (Losses)

Net realized investment gains (losses) for the three and six months ended June 30, 2017 and 2016 were as follows:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

 

2016

 

Fixed maturity AFS securities

 

$

 

1,200

 

 

$

 

(481

)

 

$

 

1,277

 

 

 

$

 

(754

)

Equity AFS securities

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

 

207

 

Mortgage loans on real estate

 

 

 

1,113

 

 

 

 

12

 

 

 

 

1,171

 

 

 

 

 

3

 

Adjustment related to value of business acquired

 

 

 

(129

)

 

 

 

526

 

 

 

 

(233

)

 

 

 

 

467

 

Net realized investment gains (losses)

 

$

 

2,184

 

 

$

 

57

 

 

$

 

2,215

 

 

 

$

 

(77

)

 
Credit Loss Impairments on Fixed Maturity Securities, Non-Credit Portion of Other-Than-Temporary Impairment Loss Recognized in Other Comprehensive Income, and Corresponding Changes

The following table sets forth the amount of credit loss impairments on fixed maturity securities held by the Company, for which the non-credit portion of the OTTI loss was recognized in OCI, and the corresponding changes in such amounts at June 30, 2017 and December 31, 2016:

 

 

June 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Balance at beginning of period

 

$

 

(2,040

)

 

$

 

(935

)

 

 

 

 

 

 

 

 

 

 

 

Additional credit loss impairments recognized in the

   current period on securities previously impaired through OCI

 

 

 

-

 

 

 

 

121

 

Accretion of credit loss impairments previously recognized

 

 

 

(564

)

 

 

 

(1,226

)

Balance at end of period

 

$

 

(2,604

)

 

$

 

(2,040

)

 
Components of Other-Than-Temporary Impairments Reflected in Statements of Income (Loss)

The components of OTTI reflected in the Statements of Income (Loss) for the three and six months ended June 30, 2017 and 2016 were as follows:

 

 

 

Three Months Ended June 30, 2017

 

 

Six Months Ended June 30, 2017

 

 

 

 

 

 

Net

 

 

Net OTTI

 

 

 

 

 

Net

 

 

Net OTTI

 

 

 

OTTI

 

 

OTTI Losses

 

 

Losses

 

 

OTTI

 

 

OTTI Losses

 

 

Losses

 

 

 

Losses on

 

 

Recognized

 

 

Recognized

 

 

Losses on

 

 

Recognized

 

 

Recognized

 

 

 

Securities

 

 

in OCI

 

 

in Income

 

 

Securities

 

 

in OCI

 

 

in Income

 

Gross OTTI losses

 

$

 

-

 

 

$

 

-

 

 

$

 

-

 

 

$

 

-

 

 

$

 

-

 

 

$

 

-

 

Value of business acquired amortization

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

Net OTTI losses

 

$

 

-

 

 

$

 

-

 

 

$

 

-

 

 

$

 

-

 

 

$

 

-

 

 

$

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2016

 

 

Six Months Ended June 30, 2016

 

 

 

 

 

 

Net

 

 

Net OTTI

 

 

 

 

 

Net

 

 

Net OTTI

 

 

 

OTTI

 

 

OTTI Losses

 

 

Losses

 

 

OTTI

 

 

OTTI Losses

 

 

Losses

 

 

 

Losses on

 

 

Recognized

 

 

Recognized

 

 

Losses on

 

 

Recognized

 

 

Recognized

 

 

 

Securities

 

 

in OCI

 

 

in Income

 

 

Securities

 

 

in OCI

 

 

in Income

 

Gross OTTI losses

 

$

 

1,544

 

 

$

 

-

 

 

$

 

1,544

 

 

$

 

5,213

 

 

$

 

-

 

 

$

 

5,213

 

Value of business acquired amortization

 

 

 

(529

)

 

 

 

-

 

 

 

 

(529

)

 

 

 

(529

)

 

 

 

-

 

 

 

 

(529

)

Net OTTI losses

 

$

 

1,015

 

 

$

 

-

 

 

$

 

1,015

 

 

$

 

4,684

 

 

$

 

-

 

 

$

 

4,684

 

 
Securities lending agreements  
Summary of Securities

The following table provides a summary of the securities lending program at June 30, 2017 and December 31, 2016: 

 

 

 

June 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Payables for collateral under securities loaned

 

$

 

208,377

 

 

$

 

199,412

 

Amortized cost of securities out on loan

 

 

 

171,800

 

 

 

 

166,942

 

Estimated fair value of securities out on loan

 

 

 

201,685

 

 

 

 

194,996

 

 
Reverse repurchase agreements  
Summary of Securities

The following table provides a summary of the dollar roll reverse repurchase agreements at June 30, 2017 and December 31, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Payables for reverse repurchase agreements

 

$

 

20,238

 

 

$

 

46,637

 

Amortized cost of securities pledged

 

 

 

20,009

 

 

 

 

47,021

 

Estimated fair value of securities pledged

 

 

 

20,043

 

 

 

 

46,401