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, 2015 and December 31, 2014 (dollars in thousands):



June 30, 2015:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate securities	$	16,000,887	$	730,409	$	241,890	$	16,489,406	58.8	%	$	—
Canadian and Canadian provincial governments	2,655,763		1,140,904		2,860		3,793,807		13.5		—
Residential mortgage-backed securities	1,154,732		47,241		11,094		1,190,879		4.2		(300		)
Asset-backed securities	1,051,093		19,915		8,384		1,062,624		3.8		354
Commercial mortgage-backed securities	1,471,419		63,699		9,649		1,525,469		5.4		(1,609		)
U.S. government and agencies	1,332,518		18,149		86,669		1,263,998		4.5		—
State and political subdivisions	478,262		38,891		10,981		506,172		1.8		—
Other foreign government, supranational and foreign government-sponsored enterprises	2,160,658		88,674		17,712		2,231,620		8.0		—
Total fixed maturity securities	$	26,305,332	$	2,147,882	$	389,239	$	28,063,975	100.0	%	$	(1,555	)
Non-redeemable preferred stock	$	91,717	$	2,477	$	3,620	$	90,574	70.9	%
Other equity securities	37,642		434		982		37,094		29.1
Total equity securities	$	129,359	$	2,911	$	4,602	$	127,668	100.0	%



December 31, 2014:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate securities	$	14,010,604	$	965,523	$	90,544	$	14,885,583	58.4	%	$	—
Canadian and Canadian provincial governments	2,668,852		1,196,420		7		3,865,265		15.2		—
Residential mortgage-backed securities	991,867		52,640		6,611		1,037,896		4.1		(300		)
Asset-backed securities	1,059,660		20,301		10,375		1,069,586		4.2		354
Commercial mortgage-backed securities	1,453,657		87,593		8,659		1,532,591		6.0		(1,609		)
U.S. government and agencies	501,352		25,014		515		525,851		2.0		—
State and political subdivisions	378,457		51,117		3,498		426,076		1.7		—
Other foreign government, supranational and foreign government-sponsored enterprises	2,041,148		110,065		13,089		2,138,124		8.4		—
Total fixed maturity securities	$	23,105,597	$	2,508,673	$	133,298	$	25,480,972	100.0	%	$	(1,555	)
Non-redeemable preferred stock	$	93,540	$	7,350	$	1,527	$	99,363	78.3	%
Other equity securities	26,994		597		94		27,497		21.7
Total equity securities	$	120,534	$	7,947	$	1,621	$	126,860	100.0	%

The Company enters into various collateral arrangements that require both the pledging and acceptance of fixed maturity securities as collateral with derivative, repurchase agreement and reinsurance counterparties. Pledged fixed maturity securities are included in fixed maturity securities, available-for-sale in the condensed consolidated balance sheets. Fixed maturity securities received as collateral are held in separate custodial accounts and are 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 collateral it receives; however, as of June 30, 2015 and December 31, 2014, none of the collateral received had been sold or re-pledged. The Company also holds securities in trust to satisfy collateral requirements under certain third-party reinsurance treaties. The following table includes fixed maturity securities pledged and received as collateral, and assets in trust held to satisfy collateral requirements under certain third-party reinsurance treaties as of June 30, 2015 and December 31, 2014 (dollars in thousands):



	June 30, 2015				December 31, 2014
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities pledged as collateral	$	181,681	$	190,298	$	127,229	$	134,863
Fixed maturity securities received as collateral	n/a		126,422		n/a		117,227
Securities held in trust	9,948,045		10,501,206		10,197,489		10,922,947

The Company monitors its concentrations of financial instruments on an ongoing basis, and mitigates credit risk by maintaining a diversified investment portfolio which limits exposure to any one issuer. The Company’s exposure to concentrations of credit risk of single issuers greater than 10% of the Company’s stockholders’ equity included securities of the U.S. government and its agencies as of June 30, 2015, as well as the securities disclosed below as of June 30, 2015 and December 31, 2014 (dollars in thousands).



	June 30, 2015				December 31, 2014
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities guaranteed or issued by:
Canadian province of Ontario	$	921,150	$	1,295,793	$	979,908	$	1,359,339
Canadian province of Quebec	1,012,835		1,560,409		1,006,315		1,599,673

The amortized cost and estimated fair value of fixed maturity securities available-for-sale at June 30, 2015 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		Estimated Fair Value
Available-for-sale:
Due in one year or less	$	686,582	$	696,191
Due after one year through five years	4,882,381		5,118,186
Due after five years through ten years	7,920,478		8,213,365
Due after ten years	9,138,647		10,257,261
Asset and mortgage-backed securities	3,677,244		3,778,972
Total	$	26,305,332	$	28,063,975

Corporate Fixed Maturity Securities

The tables below show the major industry types of the Company’s corporate fixed maturity holdings as of June 30, 2015 and December 31, 2014 (dollars in thousands):



June 30, 2015:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	5,238,400	$	5,419,421	32.9	%
Industrial	9,057,282		9,281,262		56.2
Utility	1,705,205		1,788,723		10.9
Total	$	16,000,887	$	16,489,406	100.0	%

December 31, 2014:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	4,789,568	$	5,066,408	34.0	%
Industrial	7,639,330		8,086,067		54.3
Utility	1,581,706		1,733,108		11.7
Total	$	14,010,604	$	14,885,583	100.0	%

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

As discussed in Note 2 – “Summary of Significant Accounting Policies” of the 2014 Annual Report, a portion of certain other-than-temporary impairment (“OTTI”) losses on fixed maturity securities is 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,					Six months ended June 30,
	2015		2014			2015		2014
Balance, beginning of period	$	7,284	$	11,696		$	7,284	$	11,696
Credit loss OTTI previously recognized on securities which matured, paid down, prepaid or were sold during the period	—		(4,412		)	—		(4,412		)
Balance, end of period	$	7,284	$	7,284		$	7,284	$	7,284

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

The following table presents the total gross unrealized losses for the 1,566 and 932 fixed maturity and equity securities as of June 30, 2015 and December 31, 2014, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):



	June 30, 2015				December 31, 2014
	Gross Unrealized Losses		% of Total		Gross Unrealized Losses		% of Total
Less than 20%	$	373,312	94.8	%	$	111,965	83.0	%
20% or more for less than six months	10,201		2.6		13,698		10.1
20% or more for six months or greater	10,328		2.6		9,256		6.9
Total	$	393,841	100.0	%	$	134,919	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 1,566 and 932 fixed maturity and equity securities that have estimated fair values below amortized cost as of June 30, 2015 and December 31, 2014, 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, 2015:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate securities	$	4,719,168	$	194,881	$	299,379	$	17,451	$	5,018,547	$	212,332
Canadian and Canadian provincial governments	117,996		2,860		—		—		117,996		2,860
Residential mortgage-backed securities	309,772		6,659		64,855		3,772		374,627		10,431
Asset-backed securities	294,220		3,101		126,602		3,504		420,822		6,605
Commercial mortgage-backed securities	220,262		4,376		22,831		1,392		243,093		5,768
U.S. government and agencies	862,953		86,669		—		—		862,953		86,669
State and political subdivisions	157,210		7,399		13,180		3,582		170,390		10,981
Other foreign government, supranational and foreign government-sponsored enterprises	402,345		13,050		33,829		1,988		436,174		15,038
Total investment grade securities	7,083,926		318,995		560,676		31,689		7,644,602		350,684
Below investment grade securities:
Corporate securities	553,615		23,667		58,910		5,891		612,525		29,558
Residential mortgage-backed securities	31,443		268		11,779		395		43,222		663
Asset-backed securities	5,305		84		12,102		1,695		17,407		1,779
Commercial mortgage-backed securities	6,523		534		7,544		3,347		14,067		3,881
Other foreign government, supranational and foreign government-sponsored enterprises	62,974		2,502		3,921		172		66,895		2,674
Total below investment grade securities	659,860		27,055		94,256		11,500		754,116		38,555
Total fixed maturity securities	$	7,743,786	$	346,050	$	654,932	$	43,189	$	8,398,718	$	389,239
Non-redeemable preferred stock	$	39,466	$	2,178	$	6,225	$	1,442	$	45,691	$	3,620
Other equity securities	26,791		982		—		—		26,791		982
Total equity securities	$	66,257	$	3,160	$	6,225	$	1,442	$	72,482	$	4,602



	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
December 31, 2014:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate securities	$	1,225,767	$	27,784	$	614,294	$	30,040	$	1,840,061	$	57,824
Canadian and Canadian provincial governments	—		—		1,235		7		1,235		7
Residential mortgage-backed securities	78,864		846		135,414		5,247		214,278		6,093
Asset-backed securities	332,785		4,021		109,411		4,289		442,196		8,310
Commercial mortgage-backed securities	78,632		564		28,375		2,461		107,007		3,025
U.S. government and agencies	81,317		89		32,959		426		114,276		515
State and political subdivisions	13,780		17		18,998		3,438		32,778		3,455
Other foreign government, supranational and foreign government-sponsored enterprises	156,725		7,007		76,111		2,946		232,836		9,953
Total investment grade securities	1,967,870		40,328		1,016,797		48,854		2,984,667		89,182
Below investment grade securities:
Corporate securities	415,886		29,316		32,567		3,404		448,453		32,720
Residential mortgage-backed securities	22,836		293		6,284		225		29,120		518
Asset-backed securities	12,448		274		7,108		1,791		19,556		2,065
Commercial mortgage-backed securities	3,288		249		5,580		5,385		8,868		5,634
State and political subdivisions	964		43		—		—		964		43
Other foreign government, supranational and foreign government-sponsored enterprises	13,986		3,136		—		—		13,986		3,136
Total below investment grade securities	469,408		33,311		51,539		10,805		520,947		44,116
Total fixed maturity securities	$	2,437,278	$	73,639	$	1,068,336	$	59,659	$	3,505,614	$	133,298
Non-redeemable preferred stock	$	11,619	$	235	$	19,100	$	1,292	$	30,719	$	1,527
Other equity securities	—		—		3,545		94		3,545		94
Total equity securities	$	11,619	$	235	$	22,645	$	1,386	$	34,264	$	1,621

The Company has no intention to sell nor does it expect to be required to sell the securities outlined in the table above, as of the dates indicated. 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 and liquidity guidelines.

Unrealized losses on below investment grade securities as of June 30, 2015 are primarily related to high-yield corporate securities and commercial mortgage-backed securities. Unrealized losses increased across most security types as interest rates increased during the first six months of 2015.

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,
	2015			2014			2015			2014
Fixed maturity securities available-for-sale	$	303,792		$	253,456		$	573,560		$	497,418
Mortgage loans on real estate	37,121			30,373			71,893			63,465
Policy loans	16,248			13,751			30,288			27,189
Funds withheld at interest	87,325			108,059			199,585			220,798
Short-term investments	814			80			1,509			1,045
Other invested assets	22,418			19,021			34,445			33,522
Investment income	467,718			424,740			911,280			843,437
Investment expense	(17,179		)	(14,133		)	(33,850		)	(28,455		)
Investment income, net of related expenses	$	450,539		$	410,607		$	877,430		$	814,982

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,
	2015			2014			2015			2014
Fixed maturity and equity securities available for sale:
Other-than-temporary impairment losses on fixed maturity securities recognized in earnings	$	(4,137	)	$	(870	)	$	(6,664	)	$	(1,173	)
Gain on investment activity	20,009			34,887			39,210			42,954
Loss on investment activity	(14,475		)	(6,877		)	(28,071		)	(13,460		)
Other impairment losses and change in mortgage loan provision	143			(5,309		)	(4,025		)	(3,645		)
Derivatives and other, net	(17,718		)	96,696			(9,045		)	178,422
Total investment related gains (losses), net	$	(16,178	)	$	118,527		$	(8,595	)	$	203,098

The fluctuations in investment related gains (losses) for derivatives and other for the three and six months ended June 30, 2015, compared to the same periods in 2014, are primarily due to changes in the fair value of interest rate swaps and the embedded derivatives related to modified coinsurance and funds withheld treaties, as a result of changes in interest rates.

During the three months ended June 30, 2015 and 2014, the Company sold fixed maturity and equity securities with fair values of $651.3 million and $222.8 million at losses of $14.5 million and $6.9 million, respectively. During the six months ended June 30, 2015 and 2014, the Company sold fixed maturity and equity securities with fair values of $850.9 million and $457.9 million at losses of $28.1 million and $13.5 million, respectively. The Company generally does not engage in short-term buying and selling of securities.

Securities Borrowing and Other

The Company participates in securities borrowing programs whereby securities, which are not reflected on the Company’s condensed consolidated balance sheets, are borrowed from third parties. The borrowed securities are used to provide collateral under affiliated reinsurance transactions. The Company is required to maintain a minimum of 100% of the fair value, or par value under certain programs, of the borrowed securities as collateral. The collateral consists of rights to reinsurance treaty cash flows. If cash flows from the reinsurance treaties are insufficient to maintain the minimum collateral requirement, the Company may substitute cash or securities to meet the requirement. No cash or securities have been pledged by the Company for this purpose.

During the year, the Company participated in a repurchase program in which securities, reflected as investments on the Company’s condensed consolidated balance sheets, were pledged to a third party. In return, the Company received cash from the third party, reflected as a payable to the third party, included in other liabilities on the condensed consolidated balance sheets. The Company was required to maintain a minimum collateral balance with a fair value of 105% of the cash received. The Company terminated the program and all cash was returned prior to June 30, 2015. The gross balance of the repurchase agreement payable was $101.4 million as of December 31, 2014. This was fully collateralized by securities with a fair value of $107.2 million as of December 31, 2014.

Additionally, the Company 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.

The following table includes the amount of borrowed securities, repurchased securities pledged and repurchased/reverse repurchased securities pledged and received as of June 30, 2015 and December 31, 2014 (dollars in thousands).



	June 30, 2015				December 31, 2014
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Borrowed securities	$	275,060	$	284,602	$	201,050	$	212,946
Repurchase program securities pledged	—		—		92,446		107,158
Repurchase program/reverse repurchase program:
Securities pledged	298,900		313,771		298,466		314,160
Securities received	n/a		340,201		n/a		338,929

The following table presents information on the securities pledged as collateral by the Company related to its repurchase/reverse repurchase program as of June 30, 2015 (dollars in thousands). Collateral associated with certain borrowed securities is not included within the table as the collateral pledged to each counterparty is the right to reinsurance treaty cash flows.



	June 30, 2015
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
Collateral on repurchase program
U.S. treasury and agency securities	$	—	$	—	$	23,237	$	177,294	$	200,531
Residential mortgage-backed securities	—		—		—		104,144		104,144
Other debt instruments	9,096		—		—		—		9,096
Total borrowings	$	9,096	$	—	$	23,237	$	281,438	$	313,771

Gross amount of recognized liabilities for repurchase agreement in preceding table									$	340,201
Amounts related to agreements not included in offsetting disclosure									$	26,430

Mortgage Loans on Real Estate

Mortgage loans represented approximately 7.8% and 7.4% of the Company’s total investments as of June 30, 2015 and December 31, 2014. The Company makes mortgage loans on income producing properties that are geographically diversified throughout the U.S., with the largest concentration being in California, which represented 20.6% and 18.7% of mortgage loans on real estate as of June 30, 2015 and December 31, 2014, respectively. 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, 2015 and December 31, 2014 (dollars in thousands):



	June 30, 2015				December 31, 2014
Property type:	Recorded Investment		% of Total		Recorded Investment		% of Total
Office building	$	957,724	31.1	%	$	851,749	31.3	%
Retail	964,540		31.4		802,466		29.6
Industrial	535,856		17.4		466,583		17.2
Apartment	410,213		13.3		376,430		13.8
Other commercial	210,922		6.8		221,481		8.1
Total	$	3,079,255	100.0	%	$	2,718,709	100.0	%

The maturities of the mortgage loans, gross of valuation allowances, as of June 30, 2015 and December 31, 2014 are as follows (dollars in thousands):



	June 30, 2015				December 31, 2014
	Recorded Investment		% of Total		Recorded Investment		% of Total
Due within five years	$	877,270	28.5	%	$	860,362	31.6	%
Due after five years through ten years	1,459,108		47.4		1,165,530		42.9
Due after ten years	742,877		24.1		692,817		25.5
Total	$	3,079,255	100.0	%	$	2,718,709	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, 2015 and December 31, 2014 is as follows (dollars in thousands):



	June 30, 2015				December 31, 2014
Internal credit quality grade:	Recorded Investment		% of Total		Recorded Investment		% of Total
High investment grade	$	1,553,149	50.5	%	$	1,326,199	48.8	%
Investment grade	1,405,901		45.7		1,235,046		45.4
Average	81,284		2.6		118,152		4.4
Watch list	22,036		0.7		22,285		0.8
In or near default	16,885		0.5		17,027		0.6
Total	$	3,079,255	100.0	%	$	2,718,709	100.0	%

None of the payments due to the Company on its recorded investment in mortgage loans were delinquent as of June 30, 2015 and December 31, 2014.

The following table presents the recorded investment in mortgage loans, by method of measuring impairment, and the related valuation allowances as of June 30, 2015 and December 31, 2014 (dollars in thousands):



	June 30, 2015		December 31, 2014
Mortgage loans:
Individually measured for impairment	$	16,885	$	17,027
Collectively measured for impairment	3,062,370		2,701,682
Mortgage loans, gross of valuation allowances	3,079,255		2,718,709
Valuation allowances:
Individually measured for impairment	671		816
Collectively measured for impairment	5,271		5,655
Total valuation allowances	5,942		6,471
Mortgage loans, net of valuation allowances	$	3,073,313	$	2,712,238

Information regarding the Company’s loan valuation allowances for mortgage loans for the three and six months ended June 30, 2015 and 2014 is as follows (dollars in thousands):



	Three months ended June 30,					Six months ended June 30,
	2015			2014		2015			2014
Balance, beginning of period	$	6,130		$	8,466	$	6,471		$	10,106
Charge-offs, net of recoveries	—			—		—			24
Provision (release)	(188		)	1,226		(529		)	(438		)
Balance, end of period	$	5,942		$	9,692	$	5,942		$	9,692

Information regarding the portion of the Company’s mortgage loans that were impaired as of June 30, 2015 and December 31, 2014 is as follows (dollars in thousands):



	Unpaid Principal Balance		Recorded Investment		Related Allowance		Carrying Value
June 30, 2015:
Impaired mortgage loans with no valuation allowance recorded	$	4,414	$	4,354	$	—	$	4,354
Impaired mortgage loans with valuation allowance recorded	13,039		12,531		671		11,860
Total impaired mortgage loans	$	17,453	$	16,885	$	671	$	16,214
December 31, 2014:
Impaired mortgage loans with no valuation allowance recorded	$	7,314	$	6,711	$	—	$	6,711
Impaired mortgage loans with valuation allowance recorded	10,279		10,316		816		9,500
Total impaired mortgage loans	$	17,593	$	17,027	$	816	$	16,211

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,
	2015				2014
	Average Recorded Investment⁽¹⁾		Interest Income		Average Recorded Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	5,524	$	35	$	14,589	$	71
Impaired mortgage loans with valuation allowance recorded	11,397		229		15,855		259
Total impaired mortgage loans	$	16,921	$	264	$	30,444	$	330

	Six months ended June 30,
	2015				2014
	Average Recorded Investment⁽¹⁾		Interest Income		Average Recorded Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	5,920	$	141	$	16,759	$	389
Impaired mortgage loans with valuation allowance recorded	11,036		384		16,151		452
Total impaired mortgage loans	$	16,956	$	525	$	32,910	$	841

(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, 2015 and 2014. The Company had no mortgage loans that were on a nonaccrual status at June 30, 2015 and December 31, 2014.

Policy Loans

Policy loans comprised approximately 3.6% and 3.5% of the Company’s total investments as of June 30, 2015 and December 31, 2014, respectively, the majority 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 14.7% and 16.1% of the Company’s total investments as of June 30, 2015 and December 31, 2014, respectively. Of the $5.8 billion funds withheld at interest balance, net of embedded derivatives, as of June 30, 2015, $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 against amounts owed to the Company from the ceding company.

Other Invested Assets

Other invested assets include equity securities, limited partnership interests, joint ventures (other than operating 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 in the table below), real estate held-for-investment (included in other in the table below), and equity release mortgages (included in other in the table below). 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 2.8% and 3.3% of the Company’s total investments as of June 30, 2015 and December 31, 2014, respectively. Carrying values of these assets as of June 30, 2015 and December 31, 2014 are as follows (dollars in thousands):



	June 30, 2015		December 31, 2014
Equity securities	$	127,668	$	126,860
Limited partnerships and real estate joint ventures	492,465		446,604
Structured loans	52,185		164,309
Derivatives	194,276		216,966
FVO contractholder-directed unit-linked investments	137,529		140,344
Other	105,984		103,236
Total other invested assets	$	1,110,107	$	1,198,319