Investments

6 Months Ended

Jun. 30, 2014

Investments [Abstract]

Investments

Investments

Fixed Maturity and Equity Securities Available-for-Sale

The following tables provide information relating to investments in fixed maturity and equity securities by sector as of June 30, 2014 and December 31, 2013 (dollars in thousands):

June 30, 2014:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate securities	$	13,280,721	$	932,793	$	62,103	$	14,151,411	57.8	%	$	—
Canadian and Canadian provincial governments	2,786,873		964,710		3,945		3,747,638		15.3		—
Residential mortgage-backed securities	946,431		49,676		9,968		986,139		4.1		(300		)
Asset-backed securities	993,116		24,314		9,055		1,008,375		4.1		354
Commercial mortgage-backed securities	1,380,622		103,032		9,034		1,474,620		6.0		(1,609		)
U.S. government and agencies	429,215		20,987		1,696		448,506		1.8		—
State and political subdivisions	369,515		42,553		4,581		407,487		1.7		—
Other foreign government, supranational and foreign government-sponsored enterprises	2,186,853		78,730		9,363		2,256,220		9.2		—
Total fixed maturity securities	$	22,373,346	$	2,216,795	$	109,745	$	24,480,396	100.0	%	$	(1,555	)
Non-redeemable preferred stock	$	81,240	$	7,165	$	1,567	$	86,838	61.7	%
Other equity securities	53,833		1,063		990		53,906		38.3
Total equity securities	$	135,073	$	8,228	$	2,557	$	140,744	100.0	%

December 31, 2013:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate securities	$	11,697,394	$	616,147	$	202,786	$	12,110,755	56.4	%	$	—
Canadian and Canadian provincial governments	2,728,111		669,762		16,848		3,381,025		15.7		—
Residential mortgage-backed securities	970,434		38,126		18,917		989,643		4.6		(300		)
Asset-backed securities	891,751		18,893		15,812		894,832		4.2		(2,259		)
Commercial mortgage-backed securities	1,314,782		91,651		17,487		1,388,946		6.5		(1,609		)
U.S. government and agencies	489,631		16,468		4,748		501,351		2.3		—
State and political subdivisions	313,252		21,907		14,339		320,820		1.5		—
Other foreign government, supranational and foreign government-sponsored enterprises	1,865,379		45,347		23,962		1,886,764		8.8		—
Total fixed maturity securities	$	20,270,734	$	1,518,301	$	314,899	$	21,474,136	100.0	%	$	(4,168	)
Non-redeemable preferred stock	$	81,993	$	5,342	$	5,481	$	81,854	20.2	%
Other equity securities	327,479		618		4,220		323,877		79.8
Total equity securities	$	409,472	$	5,960	$	9,701	$	405,731	100.0	%

The Company enters into various collateral arrangements that require both the pledging and acceptance of fixed maturity securities as collateral. The Company pledged fixed maturity securities as collateral to derivative and reinsurance counterparties with an amortized cost of $70.0 million and $57.2 million, and an estimated fair value of $71.8 million and $58.0 million, as of June 30, 2014 and December 31, 2013 respectively. The pledged fixed maturity securities are included in fixed maturity securities, available-for-sale in the condensed consolidated balance sheets. Securities with an amortized cost of $9,600.7 million and $7,842.9 million, and an estimated fair value of $10,188.1 million and $8,125.4 million, as of June 30, 2014 and December 31, 2013, respectively, were held in trust to satisfy collateral requirements under certain third-party reinsurance treaties.

The Company received fixed maturity securities as collateral from derivative and reinsurance counterparties with an estimated fair value of $111.8 million and $94.1 million, as of June 30, 2014 and December 31, 2013, respectively. The collateral is held in separate custodial accounts and is not recorded on the Company’s condensed consolidated balance sheets. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral; however, as of June 30, 2014 and December 31, 2013, none of the collateral had been sold or re-pledged.

As of June 30, 2014, the Company held securities with a fair value of $1,336.5 million that were guaranteed or issued by the Canadian province of Ontario and $1,553.8 million that were guaranteed or issued by the Canadian province of Quebec, both of which exceeded 10% of total stockholders’ equity. As of December 31, 2013, the Company held securities with a fair value of $1,222.3 million that were guaranteed or issued by the Canadian province of Ontario and $1,389.1 million that were guaranteed or issued by the Canadian province of Quebec, both of which exceeded 10% of total stockholders’ equity.

The amortized cost and estimated fair value of fixed maturity securities available-for-sale at June 30, 2014 are shown by contractual maturity in the table below (dollars in thousands). Actual maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Asset and mortgage-backed securities are shown separately in the table below, as they are not due at a single maturity date.

	Amortized Cost		Fair Value
Available-for-sale:
Due in one year or less	$	637,052	$	644,928
Due after one year through five years	4,116,731		4,358,370
Due after five years through ten years	7,415,405		7,871,893
Due after ten years	6,883,989		8,136,071
Asset and mortgage-backed securities	3,320,169		3,469,134
Total	$	22,373,346	$	24,480,396

Corporate Fixed Maturity Securities

The tables below show the major industry types of the Company’s corporate fixed maturity holdings as of June 30, 2014 and December 31, 2013 (dollars in thousands):

June 30, 2014:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	4,512,831	$	4,788,259	33.8	%
Industrial	7,240,086		7,729,309		54.6
Utility	1,516,641		1,622,357		11.5
Other	11,163		11,486		0.1
Total	$	13,280,721	$	14,151,411	100.0	%
December 31, 2013:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	3,838,716	$	3,983,623	32.9	%
Industrial	6,607,100		6,824,063		56.3
Utility	1,240,353		1,292,305		10.7
Other	11,225		10,764		0.1
Total	$	11,697,394	$	12,110,755	100.0	%

Other-Than-Temporary Impairments - Fixed Maturity and Equity Securities

As discussed in Note 2 – “Summary of Significant Accounting Policies” of the 2013 Annual Report, a portion of certain other-than-temporary impairment (“OTTI”) losses on fixed maturity securities are recognized in AOCI. For these securities the net amount recognized in the condensed consolidated statements of income (“credit loss impairments”) represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. Any remaining difference between the fair value and amortized cost is recognized in AOCI. The following table sets forth the amount of pre-tax credit loss impairments on fixed maturity securities held by the Company as of the dates indicated, for which a portion of the OTTI loss was recognized in AOCI, and the corresponding changes in such amounts (dollars in thousands):

	Three months ended June 30,
	2014			2013
Balance, beginning of period	$	11,696		$	14,773
Credit loss OTTI previously recognized on securities impaired to fair value during the period	—			(1,449		)
Credit loss OTTI previously recognized on securities which matured, paid down, prepaid or were sold during the period	(4,412		)	—
Balance, end of period	$	7,284		$	13,324
	Six months ended June 30,
	2014			2013
Balance, beginning of period	$	11,696		$	16,675
Credit loss OTTI previously recognized on securities impaired to fair value during the period	—			(1,449		)
Credit loss OTTI previously recognized on securities which matured, paid down, prepaid or were sold during the period	(4,412		)	(1,902		)
Balance, end of period	$	7,284		$	13,324

Purchased Credit Impaired Fixed Maturity Securities Available-for-Sale

Securities acquired with evidence of credit quality deterioration since origination and for which it is probable at the acquisition date that the Company will be unable to collect all contractually required payments are classified as purchased credit impaired securities. For each security, the excess of the cash flows expected to be collected as of the acquisition date over its acquisition date fair value is referred to as the accretable yield and is recognized as net investment income on an effective yield basis. At the date of acquisition, the timing and amount of the cash flows expected to be collected was determined based on a best estimate using key assumptions, such as interest rates, default rates and prepayment speeds. If subsequently, based on current information and events, it is probable that there is a significant increase in cash flows previously expected to be collected or if actual cash flows are significantly greater than cash flows previously expected to be collected, the accretable yield is adjusted prospectively. The excess of the contractually required payments (including interest) as of the acquisition date over the cash flows expected to be collected as of the acquisition date is referred to as the nonaccretable difference, and this amount is not expected to be realized as net investment income. Decreases in cash flows expected to be collected can result in OTTI.

The following tables present information on the Company’s purchased credit impaired securities, which are included in fixed maturity securities available-for-sale (dollars in thousands):

	June 30, 2014		December 31, 2013
Outstanding principal and interest balance(1)	$	213,901	$	192,644
Carrying value, including accrued interest(2)	175,604		148,822

(1) Represents the contractually required payments which is the sum of contractual principal, whether or not currently due, and accrued interest.

(2) Estimated fair value plus accrued interest.

The following table presents information about purchased credit impaired investments acquired during the periods, as of the acquisition dates (dollars in thousands):

	Six months ended June 30,
	2014		2013
Contractually required payments (including interest)	$	55,671	$	109,931
Cash flows expected to be collected(1)	44,799		88,422
Fair value of investments acquired	31,544		58,471

(1) Represents undiscounted principal and interest cash flow expectations at the date of acquisition.

The following table presents activity for the accretable yield on purchased credit impaired securities for the three and six months ended June 30, 2014 and 2013 (dollars in thousands):

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Balance, beginning of period	$	73,367		$	59,915		$	69,469		$	39,239
Investments purchased	5,684			7,885			13,255			29,951
Accretion	(2,357		)	(1,879		)	(4,496		)	(3,822		)
Disposals	—			(832		)	(379		)	(832		)
Reclassification from nonaccretable difference	(13,477		)	1,180			(14,632		)	1,733
Balance, end of period	$	63,217		$	66,269		$	63,217		$	66,269

Unrealized Losses for Fixed Maturity and Equity Securities Available-for-Sale

The following table presents the total gross unrealized losses for the 939 and 1,396 fixed maturity and equity securities as of June 30, 2014 and December 31, 2013, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):

	June 30, 2014				December 31, 2013
	Gross Unrealized Losses		% of Total		Gross Unrealized Losses		% of Total
Less than 20%	$	98,885	88.1	%	$	296,731	91.4	%
20% or more for less than six months	2,479		2.2		6,444		2.0
20% or more for six months or greater	10,938		9.7		21,425		6.6
Total	$	112,302	100.0	%	$	324,600	100.0	%

The Company’s determination of whether a decline in value is other-than-temporary includes analysis of the underlying credit and the extent and duration of a decline in value. The Company’s credit analysis of an investment includes determining whether the issuer is current on its contractual payments, evaluating whether it is probable that the Company will be able to collect all amounts due according to the contractual terms of the security and analyzing the overall ability of the Company to recover the amortized cost of the investment. In the Company’s impairment review process, the duration and severity of an unrealized loss position for equity securities are given greater weight and consideration given the lack of contractual cash flows or deferability features.

The following tables present the estimated fair values and gross unrealized losses, including other-than-temporary impairment losses reported in AOCI, for 939 and 1,396 fixed maturity and equity securities that have estimated fair values below amortized cost as of June 30, 2014 and December 31, 2013, respectively (dollars in thousands). These investments are presented by class and grade of security, as well as the length of time the related fair value has remained below amortized cost.

	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
June 30, 2014:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate securities	$	1,624,031	$	21,638	$	1,062,513	$	36,925	$	2,686,544	$	58,563
Canadian and Canadian provincial governments	20,728		413		74,864		3,532		95,592		3,945
Residential mortgage-backed securities	74,009		2,365		122,444		7,337		196,453		9,702
Asset-backed securities	133,606		1,137		130,015		5,083		263,621		6,220
Commercial mortgage-backed securities	28,099		206		39,222		4,191		67,321		4,397
U.S. government and agencies	10,819		9		75,730		1,687		86,549		1,696
State and political subdivisions	13,426		600		45,879		3,981		59,305		4,581
Other foreign government, supranational and foreign government-sponsored enterprises	367,176		2,339		187,073		7,023		554,249		9,362
Total investment grade securities	2,271,894		28,707		1,737,740		69,759		4,009,634		98,466
Non-investment grade securities:
Corporate securities	165,552		2,181		19,206		1,359		184,758		3,540
Residential mortgage-backed securities	16,411		137		3,576		129		19,987		266
Asset-backed securities	11,334		183		10,747		2,652		22,081		2,835
Commercial mortgage-backed securities	—		—		6,406		4,637		6,406		4,637
Other foreign government, supranational and foreign government-sponsored enterprises	2,261		1		—		—		2,261		1
Total non-investment grade securities	195,558		2,502		39,935		8,777		235,493		11,279
Total fixed maturity securities	$	2,467,452	$	31,209	$	1,777,675	$	78,536	$	4,245,127	$	109,745
Non-redeemable preferred stock	$	6,705	$	487	$	14,902	$	1,080	$	21,607	$	1,567
Other equity securities	—		—		32,463		990		32,463		990
Total equity securities	$	6,705	$	487	$	47,365	$	2,070	$	54,070	$	2,557

	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
December 31, 2013:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate securities	$	3,141,179	$	148,895	$	301,303	$	40,548	$	3,442,482	$	189,443
Canadian and Canadian provincial governments	188,491		14,419		12,029		2,429		200,520		16,848
Residential mortgage-backed securities	283,967		15,900		23,068		1,688		307,035		17,588
Asset-backed securities	255,656		4,916		56,668		4,983		312,324		9,899
Commercial mortgage-backed securities	219,110		3,725		20,068		5,745		239,178		9,470
U.S. government and agencies	133,697		4,469		4,406		279		138,103		4,748
State and political subdivisions	120,193		9,723		15,202		4,616		135,395		14,339
Other foreign government, supranational and foreign government-sponsored enterprises	665,313		21,075		36,212		2,847		701,525		23,922
Total investment grade securities	5,007,606		223,122		468,956		63,135		5,476,562		286,257
Non-investment grade securities:
Corporate securities	283,603		9,451		38,256		3,892		321,859		13,343
Residential mortgage-backed securities	62,146		1,075		3,945		254		66,091		1,329
Asset-backed securities	28,670		415		32,392		5,498		61,062		5,913
Commercial mortgage-backed securities	15,762		81		10,980		7,936		26,742		8,017
Other foreign government, supranational and foreign government-sponsored enterprises	9,403		40		—		—		9,403		40
Total non-investment grade securities	399,584		11,062		85,573		17,580		485,157		28,642
Total fixed maturity securities	$	5,407,190	$	234,184	$	554,529	$	80,715	$	5,961,719	$	314,899
Non-redeemable preferred stock	$	51,386	$	5,479	$	1	$	2	$	51,387	$	5,481
Other equity securities	218,834		1,748		32,550		2,472		251,384		4,220
Total equity securities	$	270,220	$	7,227	$	32,551	$	2,474	$	302,771	$	9,701

As of June 30, 2014, the Company does not intend to sell these fixed maturity securities and does not believe it is more likely than not that it will be required to sell these fixed maturity securities before the recovery of the fair value up to the current amortized cost of the investment, which may be maturity. As of June 30, 2014, the Company has the ability and intent to hold the equity securities until the recovery of the fair value up to the current cost of the investment. However, unforeseen facts and circumstances may cause the Company to sell fixed maturity and equity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality, asset-liability management and liquidity guidelines.

Unrealized losses on non-investment grade securities as of June 30, 2014 are primarily related to high-yield corporate securities and commercial mortgage-backed securities. Unrealized losses decreased across all security types as interest rates decreased during the first six months of 2014.

Investment Income, Net of Related Expenses

Major categories of investment income, net of related expenses, consist of the following (dollars in thousands):

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Fixed maturity securities available-for-sale	$	253,456		$	240,590		$	497,418		$	479,834
Mortgage loans on real estate	30,373			28,362			63,465			56,605
Policy loans	13,751			15,450			27,189			33,360
Funds withheld at interest	108,059			159,212			220,798			296,471
Short-term investments	80			422			1,045			1,235
Other invested assets	19,021			13,379			33,522			27,301
Investment income	424,740			457,415			843,437			894,806
Investment expense	(14,133		)	(13,181		)	(28,455		)	(25,441		)
Investment income, net of related expenses	$	410,607		$	444,234		$	814,982		$	869,365

Investment Related Gains (Losses), Net

Investment related gains (losses), net consist of the following (dollars in thousands):

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Fixed maturities and equity securities available for sale:
Other-than-temporary impairment losses on fixed maturities	$	(870	)	$	(9,803	)	$	(1,173	)	$	(10,005	)
Portion of loss recognized in accumulated other comprehensive income (before taxes)	—			(306		)	—			(306		)
Net other-than-temporary impairment losses on fixed maturity securities recognized in earnings	(870		)	(10,109		)	(1,173		)	(10,311		)
Impairment losses on equity securities	—			—			—			—
Gain on investment activity	34,887			26,845			42,954			48,525
Loss on investment activity	(6,877		)	(6,760		)	(13,460		)	(17,972		)
Other impairment losses and change in mortgage loan provision	(5,309		)	125			(3,645		)	(1,501		)
Derivatives and other, net	96,696			38,142			178,422			123,873
Total investment related gains (losses), net	$	118,527		$	48,243		$	203,098		$	142,614

During the three months ended June 30, 2014 and 2013, the Company sold fixed maturity and equity securities with fair values of $222.8 million and $257.6 million at losses of $6.9 million and $6.8 million, respectively. During the six months ended June 30, 2014 and 2013, the Company sold fixed maturity and equity securities with fair values of $457.9 million and $461.9 million at losses of $13.5 million and $18.0 million, respectively. The Company generally does not engage in short-term buying and selling of securities.

Securities Borrowing and Other

The Company participates in a securities borrowing program whereby securities, which are not reflected on the Company’s condensed consolidated balance sheets, are borrowed from a third party. The Company is required to maintain a minimum of 100% of the fair value of the borrowed securities as collateral, which consists of rights to reinsurance treaty cash flows. The Company had borrowed securities with an amortized cost of $187.7 million and $93.0 million, and an estimated fair value of $191.1 million and $93.0 million, as of June 30, 2014 and December 31, 2013, respectively. The borrowed securities are used to provide collateral under an affiliated reinsurance transaction.

The Company also participates in a repurchase/reverse repurchase program in which securities, reflected as investments on the Company’s condensed consolidated balance sheets, are pledged to a third party. In return, the Company receives securities from the third party with an estimated fair value equal to a minimum of 100% of the securities pledged. The securities received are not reflected on the Company’s condensed consolidated balance sheets. As of June 30, 2014 the Company had pledged securities with an amortized cost of $300.7 million and an estimated fair value of $315.2 million, in return the Company received securities with an estimated fair value of $354.9 million. As of December 31, 2013 the Company had pledged securities with an amortized cost of $300.3 million and an estimated fair value of $310.8 million, in return the Company received securities with an estimated fair value of $344.2 million.

Mortgage Loans on Real Estate

Mortgage loans represented approximately 7.2% and 7.7% of the Company’s total investments as of June 30, 2014 and December 31, 2013. The Company makes mortgage loans on income producing properties, such as apartments, retail and office buildings, light warehouses and light industrial facilities. Loan-to-value ratios at the time of loan approval are 75% or less. The distribution of mortgage loans, gross of valuation allowances, by property type is as follows as of June 30, 2014 and December 31, 2013 (dollars in thousands):

	June 30, 2014				December 31, 2013
	Recorded Investment		% of Total		Recorded Investment		% of Total
Apartment	$	358,152	14.0	%	$	289,394	11.6	%
Retail	740,374		28.9		748,731		30.0
Office building	910,375		35.5		917,284		36.7
Industrial	437,605		17.0		439,890		17.6
Other commercial	118,986		4.6		101,487		4.1
Total	$	2,565,492	100.0	%	$	2,496,786	100.0	%

As of June 30, 2014 and December 31, 2013, the Company’s mortgage loans, gross of valuation allowances, were distributed throughout the United States as follows (dollars in thousands):

	June 30, 2014				December 31, 2013
	Recorded Investment		% of Total		Recorded Investment		% of Total
Pacific	$	700,541	27.3	%	$	671,822	26.9	%
South Atlantic	504,450		19.7		543,658		21.8
Mountain	420,661		16.4		334,446		13.4
Middle Atlantic	245,746		9.6		266,802		10.7
West North Central	171,018		6.7		138,442		5.5
East North Central	232,235		9.0		236,766		9.5
West South Central	159,300		6.2		168,246		6.7
East South Central	58,986		2.3		59,625		2.4
New England	72,555		2.8		76,979		3.1
Total	$	2,565,492	100.0	%	$	2,496,786	100.0	%

The maturities of the mortgage loans, gross of valuation allowances, as of June 30, 2014 and December 31, 2013 are as follows (dollars in thousands):

	June 30, 2014				December 31, 2013
	Recorded Investment		% of Total		Recorded Investment		% of Total
Due within five years	$	899,909	35.1	%	$	987,109	39.5	%
Due after five years through ten years	1,088,987		42.4		984,289		39.4
Due after ten years	576,596		22.5		525,388		21.1
Total	$	2,565,492	100.0	%	$	2,496,786	100.0	%

Information regarding the Company’s credit quality indicators, as determined by the Company's internal evaluation methodology for its recorded investment in mortgage loans, gross of valuation allowances, as of June 30, 2014 and December 31, 2013 is as follows (dollars in thousands):

	June 30, 2014				December 31, 2013
Internal credit quality grade:	Recorded Investment		% of Total		Recorded Investment		% of Total
High investment grade	$	1,349,486	52.6	%	$	1,437,244	57.5	%
Investment grade	1,026,129		40.0		827,993		33.2
Average	134,736		5.3		155,914		6.2
Watch list	26,597		1.0		49,404		2.0
In or near default	28,544		1.1		26,231		1.1
Total	$	2,565,492	100.0	%	$	2,496,786	100.0	%

The age analysis of the Company’s past due recorded investment in mortgage loans, gross of valuation allowances, as of June 30, 2014 and December 31, 2013 is as follows (dollars in thousands):

	June 30, 2014		December 31, 2013
31-60 days past due	$	—	$	—
61-90 days past due	—		—
Greater than 90 days	7,087		—
Total past due	7,087		—
Current	2,558,405		2,496,786
Total	$	2,565,492	$	2,496,786

The following table presents the recorded investment in mortgage loans, by method of measuring impairment, and the related valuation allowances as of June 30, 2014 and December 31, 2013 (dollars in thousands):

	June 30, 2014		December 31, 2013
Mortgage loans:
Individually measured for impairment	$	28,544	$	37,841
Collectively measured for impairment	2,536,948		2,458,945
Mortgage loans, gross of valuation allowances	2,565,492		2,496,786
Valuation allowances:
Individually measured for impairment	3,714		3,211
Collectively measured for impairment	5,978		6,895
Total valuation allowances	9,692		10,106
Mortgage loans, net of valuation allowances	$	2,555,800	$	2,486,680

Information regarding the Company’s loan valuation allowances for mortgage loans for the three months ended June 30, 2014 and 2013 is as follows (dollars in thousands):

	Three months ended June 30,
	2014			2013
Balance, beginning of period	$	8,466		$	9,924
Charge-offs	—			(1,296		)
Provision (release)	1,226			(725		)
Balance, end of period	$	9,692		$	7,903
	Six months ended June 30,
	2014			2013
Balance, beginning of period	$	10,106		$	11,580
Recoveries	24			—
Charge-offs	—			(2,148		)
Provision (release)	(438		)	(1,529		)
Balance, end of period	$	9,692		$	7,903

Information regarding the portion of the Company’s mortgage loans that were impaired as of June 30, 2014 and December 31, 2013 is as follows (dollars in thousands):

	Unpaid Principal Balance		Recorded Investment		Related Allowance		Carrying Value
June 30, 2014:
Impaired mortgage loans with no valuation allowance recorded	$	9,773	$	9,170	$	—	$	9,170
Impaired mortgage loans with valuation allowance recorded	19,346		19,374		3,714		15,660
Total impaired mortgage loans	$	29,119	$	28,544	$	3,714	$	24,830
December 31, 2013:
Impaired mortgage loans with no valuation allowance recorded	$	21,698	$	21,100	$	—	$	21,100
Impaired mortgage loans with valuation allowance recorded	16,772		16,741		3,211		13,530
Total impaired mortgage loans	$	38,470	$	37,841	$	3,211	$	34,630
The Company’s average investment in impaired mortgage loans and the related interest income are reflected in the table below for the periods indicated (dollars in thousands):
	Three months ended June 30,
	2014				2013
	Average Recorded Investment(1)		Interest Income		Average Recorded   Investment(1)		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	14,589	$	71	$	15,181	$	49
Impaired mortgage loans with valuation allowance recorded	15,855		259		24,211		294
Total	$	30,444	$	330	$	39,392	$	343
	Six months ended June 30,
	2014				2013
	Average Recorded Investment(1)		Interest Income		Average Recorded Investment(1)		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	16,759	$	389	$	14,286	$	184
Impaired mortgage loans with valuation allowance recorded	16,151		452		25,294		534
Total	$	32,910	$	841	$	39,580	$	718

(1) Average recorded investment represents the average loan balances as of the beginning of period and all subsequent quarterly end of period balances.

The Company did not acquire any impaired mortgage loans during the six months ended June 30, 2014 and 2013. The Company had $7.1 million of mortgage loans, gross of valuation allowances, that were on nonaccrual status at June 30, 2014. The Company had no mortgage loans that were on a nonaccrual status at December 31, 2013.

Policy Loans

Policy loans comprised approximately 3.5% and 3.8% of the Company’s total investments as of June 30, 2014 and December 31, 2013, respectively, substantially all of which are associated with one client. These policy loans present no credit risk because the amount of the loan cannot exceed the obligation due to the ceding company upon the death of the insured or surrender of the underlying policy. The provisions of the treaties in force and the underlying policies determine the policy loan interest rates. As policy loans represent premature distributions of policy liabilities, they have the effect of reducing future disintermediation risk. In addition, the Company earns a spread between the interest rate earned on policy loans and the interest rate credited to corresponding liabilities.

Funds Withheld at Interest

Funds withheld at interest comprised approximately 16.8% and 17.8% of the Company’s total investments as of June 30, 2014 and December 31, 2013, respectively. Of the $5.9 billion funds withheld at interest balance, net of embedded derivatives, as of June 30, 2014, $4.2 billion of the balance is associated with one client. For reinsurance agreements written on a modified coinsurance basis and certain agreements written on a coinsurance funds withheld basis, assets equal to the net statutory reserves are withheld and legally owned and managed by the ceding company and are reflected as funds withheld at interest on the Company’s condensed consolidated balance sheets. In the event of a ceding company’s insolvency, the Company would need to assert a claim on the assets supporting its reserve liabilities. However, the risk of loss to the Company is mitigated by its ability to offset amounts it owes the ceding company for claims or allowances with amounts owed to the Company from the ceding company. The Company is subject to the investment performance on the withheld assets, although it does not directly control them. These assets are primarily fixed maturity investment securities and pose risks similar to the fixed maturity securities the Company owns. To mitigate this risk, the Company helps set the investment guidelines followed by the ceding company and monitors compliance.

Other Invested Assets

Other invested assets include equity securities, limited partnership interests, real estate joint ventures, structured loans, derivative contracts, fair value option ("FVO") contractholder-directed unit-linked investments, Federal Home Loan Bank of Des Moines ("FHLB") common stock (included in other), and real estate held-for-investment (included in other). The fair value option was elected for contractholder-directed investments supporting unit-linked variable annuity type liabilities which do not qualify for presentation and reporting as separate accounts. Other invested assets represented approximately 3.2% and 4.1% of the Company’s total investments as of June 30, 2014 and December 31, 2013, respectively. Carrying values of these assets as of June 30, 2014 and December 31, 2013 are as follows (dollars in thousands):

	June 30, 2014		December 31, 2013
Equity securities	$	140,744	$	405,731
Limited partnerships and real estate joint ventures	425,100		411,456
Structured loans	193,462		223,549
Derivatives	135,771		75,227
FVO contractholder-directed unit-linked investments	151,726		138,892
Other	81,572		70,105
Total other invested assets	$	1,128,375	$	1,324,960

Investments Transferred to the Company

During the six months ended June 30, 2014 the Company executed reinsurance transactions that resulted in the transfer of securities with an estimated fair value of $1,580.1 million at the date of transfer. The securities transferred to the Company are considered non-cash transactions in the condensed consolidated statement of cash flows.