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Derivative Instruments (Tables)
 6 Months Ended
Jun. 30, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule Of Derivative Instruments In Statement Of Financial Position Fair Value
The following table presents the notional amounts and gross fair value of derivative instruments prior to taking into account the netting effects of master netting agreements as of June 30, 2014 and December 31, 2013 (dollars in thousands):
 
 
 
June 30, 2014
 
December 31, 2013
 
 
Notional
 
Carrying Value/Fair Value
 
Notional
 
Carrying Value/Fair Value
 
 
Amount
 
Assets
 
Liabilities
 
Amount
 
Assets
 
Liabilities
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
1,314,868

 
$
62,348

 
$
7,413

 
$
1,592,943

 
$
32,555

 
$
21,873

Interest rate options
 
240,000

 
5,840

 
—

 
240,000

 
2,554

 
—

Financial futures
 
231,297

 
—

 
—

 
123,780

 
—

 
—

Foreign currency forwards
 
94,003

 
313

 
7,992

 
79,618

 
—

 
12,772

Consumer price index swaps
 
63,390

 
69

 
—

 
59,922

 
—

 
309

Credit default swaps
 
723,700

 
12,390

 
1,624

 
682,700

 
10,438

 
2,156

Equity options
 
598,564

 
39,948

 
—

 
757,352

 
33,902

 
—

Synthetic guaranteed investment contracts
 
5,192,798

 
—

 
—

 
4,629,859

 
—

 
—

Embedded derivatives in:
 
 
 
 
 
 
 
 
 
 
 
 
Modified coinsurance or funds withheld arrangements
 
—

 
—

 
20,194

 
—

 
—

 
176,270

Indexed annuity products
 
—

 
—

 
881,337

 
—

 
—

 
838,670

Variable annuity products
 
—

 
—

 
58,899

 
—

 
—

 
30,055

Total non-hedging derivatives
 
8,458,620

 
120,908

 
977,459

 
8,166,174

 
79,449

 
1,082,105

Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
109,918

 
1,537

 
1,108

 
49,131

 
—

 
4,606

Foreign currency swaps
 
682,206

 
23,059

 
—

 
728,674

 
21,903

 
620

Total hedging derivatives
 
792,124

 
24,596

 
1,108

 
777,805

 
21,903

 
5,226

Total derivatives
 
$
9,250,744

 
$
145,504

 
$
978,567

 
$
8,943,979

 
$
101,352

 
$
1,087,331
Offsetting Assets And Liabilities
The following table provides information relating to the Company’s derivative instruments as of June 30, 2014 and December 31, 2013 (dollars in thousands):
 
 
 
 
 
 
 
 
Gross Amounts Not
Offset in the Balance Sheet
 
 
 
 
Gross Amounts   
Recognized
 
Gross Amounts
Offset in the
Balance Sheet   
 
Net Amounts
Presented in the
Balance Sheet   
 
Financial
Instruments     
 
Cash Collateral   
Pledged/
Received
 
Net Amount   
June 30, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets
 
$
145,504

 
$
(9,733
)
 
$
135,771

 
$
(19,532
)
 
$
(103,981
)
 
$
12,258

Derivative liabilities
 
18,137

 
(9,733
)
 
8,404

 
(23,004
)
 
—

 
(14,600
)
December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets
 
$
101,352

 
$
(26,125
)
 
$
75,227

 
$
(11,095
)
 
$
(51,006
)
 
$
13,126

Derivative liabilities
 
42,336

 
(26,125
)
 
16,211

 
(18,081
)
 
(8,033
)
 
(9,903
)
Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) [Table Text Block]
The following table presents the components of AOCI, before income tax, and the condensed consolidated income statement classification where the gain or loss is recognized related to cash flow hedges for the three and six months ended June 30, 2014 and 2013 (dollars in thousands):
 
 
Three months ended June 30,
 
 
2014
 
2013
Accumulated other comprehensive income (loss), balance beginning of period
 
$
(4,020
)
 
$
1,961

Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges
 
4,798

 
(6,797
)
Amounts reclassified to investment income
 
(321
)
 
(201
)
Accumulated other comprehensive income (loss), balance end of period
 
$
457

 
$
(5,037
)
 
 
 
 
 
 
 
Six months ended June 30,
 
 
2014
 
2013
Accumulated other comprehensive income (loss), balance beginning of period
 
$
(4,578
)
 
$
403

Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges
 
5,574

 
(4,934
)
Amounts reclassified to investment income
 
(539
)
 
(506
)
Accumulated other comprehensive income (loss), balance end of period
 
$
457

 
$
(5,037
)
Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location [Table Text Block]
The following table presents the effects of derivatives in cash flow hedging relationships on the condensed consolidated statements of income and AOCI for the three and six months ended June 30, 2014 and 2013 (dollars in thousands):
 
Derivatives in Cash Flow
Hedging Relationships
 
Amount of Gains
(Losses) Deferred in
AOCI on Derivatives
 
Amount and Location of Gains (Losses)
Reclassified from AOCI into Income (Loss)
 
Amount and Location of Gains (Losses)
Recognized in Income (Loss) on Derivatives
 
 
(Effective Portion)   
 
(Effective Portion)
 
(Ineffective Portion and Amounts Excluded
from Effectiveness Testing)
 
 
 
 
   Investment Related   
Gains (Losses)
 
Investment Income   
 
   Investment Related   
Gains (Losses)
 
Investment Income   
For the three months ended June 30, 2014:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
4,798

 
$
—

 
$
321

 
$
7

 
$
—

For the three months ended June 30, 2013:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(6,797
)
 
$
—

 
$
201

 
$
31

 
$
—

For the six months ended June 30, 2014:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
5,574

 
$
—

 
$
539

 
$
1

 
$
—

For the six months ended June 30, 2013:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(4,934
)
 
$
—

 
$
506

 
$
14

 
$
—
Derivatives Hedging Instruments In Net Investment Hedging Relationships
The following table illustrates the Company’s net investments in foreign operations (“NIFO”) hedges for the three and six months ended June 30, 2014 and 2013 (dollars in thousands):
 
 
Derivative Gains (Losses) Deferred in AOCI     
 
For the three months ended June 30,
 
For the six months ended June 30,
Type of NIFO Hedge (1) (2)
2014
 
2013
 
2014
 
2013
Foreign currency swaps
$
(22,335
)
 
$
23,913

 
$
744

 
$
34,835

 
(1)
There were no sales or substantial liquidations of net investments in foreign operations that would have required the reclassification of gains or losses from accumulated other comprehensive income (loss) into investment income during the periods presented.
(2)
There was no ineffectiveness recognized for the Company’s hedges of net investments in foreign operations.
Derivative Instruments Gain Loss By Income Statement Location
A summary of the effect of non-hedging derivatives, including embedded derivatives, on the Company’s income statement for the three and six months ended June 30, 2014 and 2013 is as follows (dollars in thousands):
 
 
 
 
 
Gain (Loss) for the three months ended        
June 30,
Type of Non-hedging Derivative
 
Income Statement Location of Gain (Loss)
 
2014
 
2013
Interest rate swaps
 
Investment related gains (losses), net
 
$
22,251

 
$
(38,415
)
Interest rate options
 
Investment related gains (losses), net
 
2,004

 
(7,981
)
Financial futures
 
Investment related gains (losses), net
 
(7,684
)
 
714

Foreign currency forwards
 
Investment related gains (losses), net
 
1,178

 
(2,958
)
CPI swaps
 
Investment related gains (losses), net
 
114

 
(1,117
)
Credit default swaps
 
Investment related gains (losses), net
 
4,783

 
2,427

Equity options
 
Investment related gains (losses), net
 
(8,800
)
 
(5,049
)
Embedded derivatives in:
 
 
 
 
 
 
Modified coinsurance or funds withheld arrangements
 
Investment related gains (losses), net
 
78,835

 
47,717

Indexed annuity products
 
Interest credited
 
(27,285
)
 
(28,019
)
Variable annuity products
 
Investment related gains (losses), net
 
(5,183
)
 
35,809

Total non-hedging derivatives
 
 
 
$
60,213

 
$
3,128

 
 
 
 
 
 
 
 
 
 
 
Gain (Loss) for the six months ended        
June 30,
Type of Non-hedging Derivative
 
Income Statement Location of Gain (Loss)
 
2014
 
2013
Interest rate swaps
 
Investment related gains (losses), net
 
$
51,904

 
$
(60,679
)
Interest rate options
 
Investment related gains (losses), net
 
3,286

 
(5,998
)
Financial futures
 
Investment related gains (losses), net
 
(9,268
)
 
(6,167
)
Foreign currency forwards
 
Investment related gains (losses), net
 
2,332

 
(8,617
)
CPI swaps
 
Investment related gains (losses), net
 
467

 
(1,988
)
Credit default swaps
 
Investment related gains (losses), net
 
2,669

 
6,332

Equity options
 
Investment related gains (losses), net
 
(17,765
)
 
(35,672
)
Embedded derivatives in:
 
 
 
 
 
 
Modified coinsurance or funds withheld arrangements
 
Investment related gains (losses), net
 
156,076

 
137,974

Indexed annuity products
 
Interest credited
 
(51,125
)
 
(61,015
)
Variable annuity products
 
Investment related gains (losses), net
 
(28,844
)
 
87,123

Total non-hedging derivatives
 
 
 
$
109,732

 
$
51,293
Disclosure Of Credit Derivatives
The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of credit default swaps sold by the Company at June 30, 2014 and December 31, 2013 (dollars in thousands):
 
 
June 30, 2014
 
December 31, 2013
Rating Agency Designation of Referenced Credit Obligations(1)
 
Estimated Fair
Value of Credit  
Default Swaps
 
Maximum
Amount of Future
Payments under
Credit Default
Swaps(2)
 
Weighted
Average
Years to
Maturity(3)
 
Estimated Fair
Value of Credit  
Default Swaps
 
Maximum
Amount of Future
Payments under
Credit Default
Swaps(2)
 
Weighted
Average
Years to
Maturity(3)  
AAA/AA-/A+/A/A-
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps
 
$
1,995

 
$
132,500

 
4.9

 
$
614

 
$
117,500

 
5.1

Credit default swaps referencing indices
 
—

 
—

 
—

 
—

 
—

 
—

Subtotal
 
1,995

 
132,500

 
4.9

 
614

 
117,500

 
5.1

BBB+/BBB/BBB-
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps
 
1,218

 
195,200

 
5.4

 
656

 
142,200

 
4.9

Credit default swaps referencing indices
 
7,717

 
391,000

 
5.0

 
7,295

 
405,000

 
5.0

Subtotal
 
8,935

 
586,200

 
5.1

 
7,951

 
547,200

 
5.0

BB+
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps
 
(163
)
 
5,000

 
5.0

 
—

 
—

 
—

Credit default swaps referencing indices
 
—

 
—

 
—

 
—

 
—

 
—

Subtotal
 
(163
)
 
5,000

 
5.0

 
—

 
—

 
—

Total
 
$
10,767

 
$
723,700

 
5.1

 
$
8,565

 
$
664,700

 
4.4

 
(1)
The rating agency designations are based on ratings from Standard and Poor’s (“S&P”).
(2)
Assumes the value of the referenced credit obligations is zero.
(3)
The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts.
Changes In Estimated Fair Value Related To Embedded Derivatives
The related gains (losses) and the effect on net income after amortization of deferred acquisition costs (“DAC”) and income taxes for the three and six months ended June 30, 2014 and 2013 are reflected in the following table (dollars in thousands):
 
Three months ended June 30,
 
Six months ended June 30,
 
2014
 
2013
 
2014
 
2013
Embedded derivatives in modco or funds withheld arrangements included in investment related gains
$
78,835

 
$
47,717

 
$
156,076

 
$
137,974

After the associated amortization of DAC and taxes, the related amounts included in net income
17,962

 
13,911

 
36,042

 
35,535

Embedded derivatives in variable annuity contracts included in investment related gains
(5,183
)
 
35,809

 
(28,844
)
 
87,123

After the associated amortization of DAC and taxes, the related amounts included in net income
(6,486
)
 
29,082

 
(20,154
)
 
41,274

Amounts related to embedded derivatives in equity-indexed annuities included in benefits and expenses
(27,285
)
 
(28,019
)
 
(51,125
)
 
(61,015
)
After the associated amortization of DAC and taxes, the related amounts included in net income
(15,600
)
 
(30,845
)
 
(33,976
)
 
(60,395
)
Credit Risk
Information regarding the Company’s credit exposure related to its over-the-counter derivative contracts, centrally cleared derivative contracts and margin account for exchange-traded futures at June 30, 2014 and December 31, 2013 are reflected in the following table (dollars in thousands):
 
 
 
June 30, 2014
 
December 31, 2013
Estimated fair value of derivatives in net asset position
 
$
127,367

 
$
59,016

Cash provided as collateral(1)
 
—

 
8,033

Securities pledged to counterparties as collateral(2)
 
23,004

 
18,081

Cash pledged from counterparties as collateral(3)
 
(103,981
)
 
(51,006
)
Securities pledged from counterparties as collateral(4)
 
(19,532
)
 
(11,095
)
Initial margin for cleared derivatives
 
(13,854
)
 
(13,350
)
Net credit exposure
 
$
13,004

 
$
9,679

Margin account related to exchange-traded futures(5)
 
$
6,524

 
$
2,566

 
(1)
Consists of receivable from counterparty, included in other assets.
(2)
Included in other invested assets, primarily consists of U.S. Treasury securities.
(3)
Included in cash and cash equivalents, with obligation to return cash collateral recorded in other liabilities.
(4)
Consists of U.S. Treasury securities.
(5)
Included in cash and cash equivalents.