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Investments (Tables)
 9 Months Ended
Sep. 30, 2019
Investments, Debt and Equity Securities [Abstract]  
Unrealized gains and losses on fixed maturities and equity securities Amortized cost, net unrealized investment gains (losses) and fair values of all fixed maturity securities in the portfolio were as follows:
($ in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
September 30, 2019
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
U.S. Government and federally
sponsored agency obligations: (1)
 
 
 
 
 
 
 
 
Mortgage-backed securities
 
$
698,794

 
$
55,868

 
$
307

 
$
754,355

Other, including U.S. Treasury securities
 
430,149

 
28,161

 
135

 
458,175

Municipal bonds
 
1,511,967

 
164,811

 
356

 
1,676,422

Foreign government bonds
 
45,301

 
2,616

 
2

 
47,915

Corporate bonds
 
1,465,217

 
121,861

 
1,970

 
1,585,108

Other mortgage-backed securities
 
1,302,005

 
23,465

 
7,885

 
1,317,585

Totals
 
$
5,453,433

 
$
396,782

 
$
10,655

 
$
5,839,560

 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
U.S. Government and federally
sponsored agency obligations: (1)
 
 
 
 
 
 
 
 
Mortgage-backed securities
 
$
778,038

 
$
22,724

 
$
13,321

 
$
787,441

Other, including U.S. Treasury securities
 
835,096

 
16,127

 
17,681

 
833,542

Municipal bonds
 
1,884,313

 
133,150

 
13,494

 
2,003,969

Foreign government bonds
 
83,343

 
2,321

 
760

 
84,904

Corporate bonds
 
2,054,105

 
64,296

 
38,891

 
2,079,510

Other mortgage-backed securities
 
1,739,016

 
10,467

 
23,531

 
1,725,952

Totals
 
$
7,373,911

 
$
249,085

 
$
107,678

 
$
7,515,318

______________
(1) 
Fair value includes securities issued by Federal National Mortgage Association (FNMA) of $429,676 thousand and $441,308 thousand; Federal Home Loan Mortgage Corporation (FHLMC) of $290,964 thousand and $417,308 thousand; and Government National Mortgage Association (GNMA) of $154,226 thousand and $96,466 thousand as of September 30, 2019 and December 31, 2018, respectively.
Summary of fair value and gross unrealized losses of fixed maturity securities and equity securities in an unrealized loss position
The following table presents the fair value and gross unrealized losses of securities in an unrealized loss position at September 30, 2019 and December 31, 2018, respectively. The Company views the decrease in fair value of all of the securities with unrealized losses at September 30, 2019 -- which was driven largely by increasing interest rates, spread widening, financial market illiquidity and/or market volatility from the date of acquisition -- as temporary. As of September 30, 2019, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell fixed maturity securities with unrealized losses before recovery of the amortized cost basis. Therefore, it was determined that the unrealized losses on the securities presented in the table below were not other-than-temporarily impaired as of September 30, 2019.
($ in thousands)
 
12 Months or Less
 
More than 12 Months
 
Total
 
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and federally
sponsored agency obligations:
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
 
$
21,323

 
$
204

 
$
2,795

 
$
103

 
$
24,118

 
$
307

Other
 
12,712

 
128

 
2,024

 
7

 
14,736

 
135

Municipal bonds
 
11,707

 
74

 
13,185

 
282

 
24,892

 
356

Foreign government bonds
 
2,500

 
2

 
—

 
—

 
2,500

 
2

Corporate bonds
 
57,329

 
1,145

 
16,371

 
825

 
73,700

 
1,970

Other mortgage-backed securities
 
320,293

 
3,498

 
293,852

 
4,387

 
614,145

 
7,885

Total
 
$
425,864

 
$
5,051

 
$
328,227

 
$
5,604

 
$
754,091

 
$
10,655

 
 
 
 
 
 
 
 
 
 
 
 
 
Number of positions with a
gross unrealized loss
 
214

 
 
 
102

 
 
 
316

 
 
Fair value as a percentage of total fixed
maturity securities fair value
 
7.3
%
 
 
 
5.6
%
 
 
 
12.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and federally
sponsored agency obligations:
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
 
$
193,447

 
$
5,026

 
$
157,295

 
$
8,295

 
$
350,742

 
$
13,321

Other
 
263,497

 
6,746

 
246,213

 
10,935

 
509,710

 
17,681

Municipal bonds
 
291,869

 
7,603

 
95,297

 
5,891

 
387,166

 
13,494

Foreign government bonds
 
16,250

 
760

 
—

 
—

 
16,250

 
760

Corporate bonds
 
818,519

 
27,429

 
99,171

 
11,462

 
917,690

 
38,891

Other mortgage-backed securities
 
913,858

 
16,076

 
291,442

 
7,455

 
1,205,300

 
23,531

Total
 
$
2,497,440

 
$
63,640

 
$
889,418

 
$
44,038

 
$
3,386,858

 
$
107,678

 
 
 
 
 
 
 
 
 
 
 
 
 
Number of positions with a
gross unrealized loss
 
1,052

 
 
 
359

 
 
 
1,411

 
 
Fair value as a percentage of total fixed
maturity securities fair value
 
33.2
%
 
 
 
11.8
%
 
 
 
45.0
%
 
 
Summary of cumulative credit losses
The following table summarizes the cumulative amounts related to the Company's credit loss component of other-than-temporary impairment (OTTI) losses on fixed maturity securities held as of September 30, 2019 and 2018 that the Company did not intend to sell as of those dates, and it was not more likely than not that the Company would be required to sell the securities before the anticipated recovery of the amortized cost basis, for which the non-credit portions of OTTI losses were recognized in other comprehensive income (loss) (OCI):
($ in thousands)
 
Nine Months Ended
September 30,
 
 
2019
 
2018
Cumulative credit loss (1)
 
 
 
 
Beginning of period
 
$
1,529

 
$
3,825

New credit losses
 
—

 
—

Increases to previously recognized credit losses
 
—

 
246

Losses related to securities sold or paid down during the period
 
—

 
(2,542
)
End of period
 
$
1,529

 
$
1,529

_____________
(1) 
The cumulative credit loss amounts exclude OTTI losses on securities held as of the periods indicated that the Company intended to sell or it was more likely than not that the Company would be required to sell the security before the recovery of the amortized cost basis.
Distribution of the Company's fixed maturity portfolio by estimated expected maturity
The following table presents the distribution of the Company’s fixed maturity securities portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers' utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, including mortgage-backed securities and other asset-backed securities, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.
($ in thousands)
 
Percent of Total Fair Value
 
September 30, 2019
 
 
September 30, 2019
 
December 31, 2018
 
Fair
Value
 
Amortized
Cost
Estimated expected maturity:
 
 
 
 
 
 
 
 
Due in 1 year or less
 
4.0
%
 
4.8
%
 
$
234,818

 
$
228,604

Due after 1 year through 5 years
 
26.5
%
 
22.8
%
 
1,546,779

 
1,499,348

Due after 5 years through 10 years
 
29.3
%
 
32.8
%
 
1,709,053

 
1,601,491

Due after 10 years through 20 years
 
24.9
%
 
26.5
%
 
1,454,033

 
1,318,362

Due after 20 years
 
15.3
%
 
13.1
%
 
894,877

 
805,628

Total
 
100.0
%
 
100.0
%
 
$
5,839,560

 
$
5,453,433

 
 
 
 
 
 
 
 
 
Average option-adjusted duration, in years
 
6.0

 
5.9

 
 
 
 
Proceeds received from sales of fixed maturities and equity securities
Proceeds received from sales of fixed maturity and equity securities, each determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each period were:
($ in thousands)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019 (1)
 
2018
Fixed maturity securities
 
 
 
 
 
 
 
 
Proceeds received
 
$
149,319

 
$
170,223

 
$
651,058

 
$
360,246

Gross gains realized
 
1,258

 
3,980

 
149,574

 
8,002

Gross losses realized
 
(1,047
)
 
(5,893
)
 
(7,128
)
 
(7,530
)
 
 
 
 
 
 
 
 
 
Equity securities
 
 
 
 
 
 
 
 
Proceeds received
 
$
1,367

 
$
2,710

 
$
18,489

 
$
8,493

Gross gains realized
 
428

 
885

 
5,562

 
2,478

Gross losses realized
 
(32
)
 
(321
)
 
(542
)
 
(502
)

_____________
(1) 
Gross gains realized presented above include a $135.3 million realized investment gain associated with a transfer of investments to a reinsurer as consideration paid during the second quarter of 2019 in connection with the reinsurance of a $2.9 billion block of in force fixed and variable annuity business. See Notes 6 and 13 for further information.
Schedule of net investment gains (losses)
The following table reconciles net investment gains (losses) pretax by transaction type:
($ in thousands)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
Impairment write-downs
 
$
—

 
$
—

 
$
—

 
$
—

Change in intent write-downs
 
(5
)
 
(70
)
 
(276
)
 
(1,357
)
Net OTTI losses recognized in earnings
 
(5
)
 
(70
)
 
(276
)
 
(1,357
)
Sales and other, net
 
608

 
(1,331
)
 
147,513

 
2,661

Change in fair value - equity securities
 
1,081

 
2,000

 
8,029

 
(4,342
)
Change in fair value and gains (losses) realized
on settlements - derivatives
 
(3,840
)
 
2,204

 
(3,672
)
 
4,922

Net investment gains (losses)
 
$
(2,156
)
 
$
2,803

 
$
151,594

 
$
1,884
Reconciliation of net unrealized investment gains (losses) on fixed maturity securities and equity securities
The following table reconciles net unrealized investment gains (losses) on fixed maturity securities, net of tax, included in AOCI, before the impact of DAC:
($ in thousands)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
Net unrealized investment gains (losses)
on fixed maturity securities, net of tax
 
 
 
 
 
 
 
 
Beginning of period
 
$
231,087

 
$
144,998

 
$
111,712

 
$
286,176

Change in net unrealized investment gains
(losses) on fixed maturity securities
 
75,283

 
(57,903
)
 
315,988

 
(186,912
)
Reclassification of net investment (gains) losses
on securities to net income
 
(1,330
)
 
(473
)
 
(122,660
)
 
2,399

Cumulative effect of change in accounting principle (1)
 
—

 
—

 
—

 
(15,041
)
End of period
 
$
305,040

 
$
86,622

 
$
305,040

 
$
86,622


_____________
(1) 
Effective January 1, 2018, with the adoption of new accounting guidance for recognition and measurement of financial instruments, available for sale equity securities were reclassified to equity securities at fair value and the related net unrealized gains were reclassified from AOCI to Retained earnings.
Offsetting assets and liability
The following table presents instruments that were subject to a master netting arrangement for the Company.
($ in thousands)
 
 
 
Gross
Amounts
Offset in the
 
Net Amounts
of Assets/
Liabilities
Presented
in the
 
Gross Amounts Not Offset
in the Consolidated
Balance Sheets
 
 
 
 
Gross
Amounts
 
Consolidated
Balance
Sheets
 
Consolidated
Balance
Sheets
 
Financial
Instruments
 
Cash
Collateral
Received
 
Net
Amount
September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Asset derivatives:
 
 
 
 
 
 
 
 
 
 
 
 
Free-standing derivatives
 
$
10,685

 
$
—

 
$
10,685

 
$
—

 
$
10,338

 
$
347

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Asset derivatives:
 
 
 
 
 
 
 
 
 
 
 
 
Free-standing derivatives
 
$
2,647

 
$
—

 
$
2,647

 
$
—

 
$
1,868

 
$
779