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, 2016 and December 31, 2015 (dollars in thousands):



June 30, 2016:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate securities	$	18,417,375	$	1,260,330	$	134,468	$	19,543,237	58.9	%	$	—
Canadian and Canadian provincial governments	2,607,276		1,497,998		—		4,105,274		12.4		—
Residential mortgage-backed securities	1,225,718		72,733		5,673		1,292,778		3.9		(300		)
Asset-backed securities	1,377,736		11,054		32,113		1,356,677		4.1		275
Commercial mortgage-backed securities	1,441,091		67,727		1,125		1,507,693		4.5		(1,609		)
U.S. government and agencies	1,907,648		99,690		—		2,007,338		6.1		—
State and political subdivisions	538,037		74,042		6,137		605,942		1.8		—
Other foreign government, supranational and foreign government-sponsored enterprises	2,562,003		190,688		10,654		2,742,037		8.3		—
Total fixed maturity securities	$	30,076,884	$	3,274,262	$	190,170	$	33,160,976	100.0	%	$	(1,634	)
Non-redeemable preferred stock	$	66,464	$	2,575	$	7,936	$	61,103	14.6	%
Other equity securities	349,577		7,952		446		357,083		85.4
Total equity securities	$	416,041	$	10,527	$	8,382	$	418,186	100.0	%



December 31, 2015:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate securities	$	17,575,507	$	599,718	$	467,069	$	17,708,156	59.7	%	$	—
Canadian and Canadian provincial governments	2,469,009		1,110,282		2,532		3,576,759		12.1		—
Residential mortgage-backed securities	1,277,998		45,152		11,673		1,311,477		4.4		(300		)
Asset-backed securities	1,219,000		12,052		18,376		1,212,676		4.1		354
Commercial mortgage-backed securities	1,456,848		37,407		11,168		1,483,087		5.0		(1,609		)
U.S. government and agencies	1,423,791		15,586		57,718		1,381,659		4.7		—
State and political subdivisions	480,067		40,014		9,067		511,014		1.7		—
Other foreign government, supranational and foreign government-sponsored enterprises	2,420,757		78,964		41,644		2,458,077		8.3		—
Total fixed maturity securities	$	28,322,977	$	1,939,175	$	619,247	$	29,642,905	100.0	%	$	(1,555	)
Non-redeemable preferred stock	$	85,645	$	7,837	$	5,962	$	87,520	69.5	%
Other equity securities	40,584		—		2,242		38,342		30.5
Total equity securities	$	126,229	$	7,837	$	8,204	$	125,862	100.0	%

The Company enters into various collateral arrangements with counterparties that require both the pledging and acceptance of fixed maturity securities as collateral. 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 repledge collateral it receives; however, as of June 30, 2016 and December 31, 2015, none of the collateral received had been sold or repledged. The Company also holds assets 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, 2016 and December 31, 2015 (dollars in thousands):



	June 30, 2016				December 31, 2015
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities pledged as collateral	$	189,370	$	202,763	$	169,678	$	176,782
Fixed maturity securities received as collateral	n/a		261,461		n/a		242,914
Assets in trust held to satisfy collateral requirements	12,318,432		13,375,925		10,535,729		10,928,393

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 from single issuers greater than 10% of the Company’s stockholders’ equity included securities of the U.S. government and its agencies as well as the securities disclosed below as of June 30, 2016 and December 31, 2015 (dollars in thousands).



	June 30, 2016				December 31, 2015
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities guaranteed or issued by:
Canadian province of Ontario	$	853,014	$	1,257,954	$	864,444	$	1,199,080
Canadian province of Quebec	1,026,507		1,854,422		943,484		1,525,903

The amortized cost and estimated fair value of fixed maturity securities classified as available-for-sale at June 30, 2016 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	$	776,005	$	783,582
Due after one year through five years	6,682,598		7,007,050
Due after five years through ten years	8,706,784		9,309,939
Due after ten years	9,866,952		11,903,257
Asset and mortgage-backed securities	4,044,545		4,157,148
Total	$	30,076,884	$	33,160,976

Corporate Fixed Maturity Securities

The tables below show the major industry types of the Company’s corporate fixed maturity holdings as of June 30, 2016 and December 31, 2015 (dollars in thousands):



June 30, 2016:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	6,268,530	$	6,577,989	33.8	%
Industrial	10,192,465		10,811,758		55.2
Utility	1,956,380		2,153,490		11.0
Total	$	18,417,375	$	19,543,237	100.0	%

December 31, 2015:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	5,408,791	$	5,555,044	31.4	%
Industrial	10,211,426		10,129,917		57.2
Utility	1,955,290		2,023,195		11.4
Total	$	17,575,507	$	17,708,156	100.0	%

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

As discussed in Note 2 – “Summary of Significant Accounting Policies” of the 2015 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,
	2016			2015		2016			2015
Balance, beginning of period	$	7,284		$	7,284	$	7,284		$	7,284
Credit loss OTTI previously recognized on securities which matured, paid down, prepaid or were sold during the period	(310		)	—		(310		)	—
Balance, end of period	$	6,974		$	7,284	$	6,974		$	7,284

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

The following table presents the total gross unrealized losses for the 908 and 2,080 fixed maturity and equity securities as of June 30, 2016 and December 31, 2015, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):



	June 30, 2016				December 31, 2015
	Gross Unrealized Losses		% of Total		Gross Unrealized Losses		% of Total
Less than 20%	$	150,638	75.8	%	$	463,109	73.8	%
20% or more for less than six months	8,933		4.5		142,495		22.7
20% or more for six months or greater	38,981		19.7		21,847		3.5
Total	$	198,552	100.0	%	$	627,451	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 908 and 2,080 fixed maturity and equity securities that have estimated fair values below amortized cost as of June 30, 2016 and December 31, 2015, 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, 2016:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate securities	$	649,275	$	15,424	$	1,208,939	$	59,206	$	1,858,214	$	74,630
Residential mortgage-backed securities	67,472		1,672		120,431		3,990		187,903		5,662
Asset-backed securities	534,180		18,943		258,828		10,507		793,008		29,450
Commercial mortgage-backed securities	78,002		423		41,399		702		119,401		1,125
State and political subdivisions	9,697		443		56,930		5,694		66,627		6,137
Other foreign government, supranational and foreign government-sponsored enterprises	99,330		1,135		79,592		3,677		178,922		4,812
Total investment grade securities	1,437,956		38,040		1,766,119		83,776		3,204,075		121,816
Below investment grade securities:
Corporate securities	282,830		14,077		335,351		45,761		618,181		59,838
Residential mortgage-backed securities	—		—		379		11		379		11
Asset-backed securities	5,858		1,118		8,623		1,545		14,481		2,663
Other foreign government, supranational and foreign government-sponsored enterprises	2,328		23		59,437		5,819		61,765		5,842
Total below investment grade securities	291,016		15,218		403,790		53,136		694,806		68,354
Total fixed maturity securities	$	1,728,972	$	53,258	$	2,169,909	$	136,912	$	3,898,881	$	190,170
Non-redeemable preferred stock	$	3,248	$	261	$	24,247	$	7,675	$	27,495	$	7,936
Other equity securities	—		—		6,606		446		6,606		446
Total equity securities	$	3,248	$	261	$	30,853	$	8,121	$	34,101	$	8,382



	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
December 31, 2015:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate securities	$	6,388,148	$	323,961	$	294,755	$	40,861	$	6,682,903	$	364,822
Canadian and Canadian provincial governments	122,746		2,532		—		—		122,746		2,532
Residential mortgage-backed securities	452,297		7,036		82,314		4,057		534,611		11,093
Asset-backed securities	581,701		9,825		199,298		7,100		780,999		16,925
Commercial mortgage-backed securities	514,877		9,806		31,177		997		546,054		10,803
U.S. government and agencies	1,010,387		57,718		—		—		1,010,387		57,718
State and political subdivisions	157,837		5,349		13,016		3,718		170,853		9,067
Other foreign government, supranational and foreign government-sponsored enterprises	702,962		18,279		38,379		4,206		741,341		22,485
Total investment grade securities	9,930,955		434,506		658,939		60,939		10,589,894		495,445
Below investment grade securities:
Corporate securities	554,688		71,171		114,427		31,076		669,115		102,247
Residential mortgage-backed securities	22,646		282		7,679		298		30,325		580
Asset-backed securities	6,772		201		9,335		1,250		16,107		1,451
Commercial mortgage-backed securities	3,253		248		767		117		4,020		365
Other foreign government, supranational and foreign government-sponsored enterprises	60,668		7,356		31,693		11,803		92,361		19,159
Total below investment grade securities	648,027		79,258		163,901		44,544		811,928		123,802
Total fixed maturity securities	$	10,578,982	$	513,764	$	822,840	$	105,483	$	11,401,822	$	619,247
Non-redeemable preferred stock	$	12,331	$	2,175	$	12,191	$	3,787	$	24,522	$	5,962
Other equity securities	38,327		2,242		—		—		38,327		2,242
Total equity securities	$	50,658	$	4,417	$	12,191	$	3,787	$	62,849	$	8,204

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, 2016 are primarily related to high-yield corporate and other foreign government, supranational and foreign government-sponsored enterprise securities. Unrealized losses decreased across most security types as treasury rates decreased during the first six months of 2016.

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,
	2016			2015			2016			2015
Fixed maturity securities available-for-sale	$	323,592		$	303,792		$	636,007		$	573,560
Mortgage loans on real estate	41,900			37,121			81,692			71,893
Policy loans	16,372			16,248			32,506			30,288
Funds withheld at interest	112,893			87,325			168,873			199,585
Short-term investments	985			814			1,960			1,509
Other invested assets	29,487			22,418			39,311			34,445
Investment income	525,229			467,718			960,349			911,280
Investment expense	(17,563		)	(17,179		)	(35,417		)	(33,850		)
Investment income, net of related expenses	$	507,666		$	450,539		$	924,932		$	877,430

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,
	2016			2015			2016			2015
Fixed maturity and equity securities available for sale:
Other-than-temporary impairment losses on fixed maturity securities recognized in earnings	$	(846	)	$	(4,137	)	$	(34,663	)	$	(6,664	)
Gain on investment activity	53,615			20,009			80,807			39,210
Loss on investment activity	(22,556		)	(14,475		)	(34,343		)	(28,071		)
Other impairment losses and change in mortgage loan provision	211			143			(1,849		)	(4,025		)
Derivatives and other, net	87,840			(17,718		)	(12,574		)	(9,045		)
Total investment related gains (losses), net	$	118,264		$	(16,178	)	$	(2,622	)	$	(8,595	)

The fixed maturity impairments for the three and six months ended June 30, 2016 and 2015 were largely related to high-yield energy and emerging market corporate securities. The fluctuations in investment related gains (losses) for derivatives and other for the six months ended June 30, 2016, compared to the same period in 2015, are primarily due to changes in the fair value of interest rate swaps.

During the three months ended June 30, 2016 and 2015, the Company sold fixed maturity and equity securities with fair values of $343.3 million and $651.3 million at losses of $22.6 million and $14.5 million, respectively. During the six months ended June 30, 2016 and 2015, the Company sold fixed maturity and equity securities with fair values of $585.8 million and $850.9 million at losses of $34.3 million and $28.1 million, respectively. The Company generally does not buy and sell securities on a short-term basis.

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.

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.

The following table includes the amount of borrowed securities, repurchased securities pledged and repurchased/reverse repurchased securities pledged and received as of June 30, 2016 and December 31, 2015 (dollars in thousands).



	June 30, 2016				December 31, 2015
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Borrowed securities	$	269,740	$	289,454	$	259,540	$	266,297
Repurchase program/reverse repurchase program:
Securities pledged	448,615		480,618		443,435		465,889
Securities received	n/a		485,826		n/a		481,197

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, 2016 and December 31, 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, 2016
	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:
Corporate securities	$	—	$	5,329	$	4,031	$	137,505	$	146,865
Residential mortgage-backed securities	—		—		—		101,715		101,715
U.S. government and agencies	—		—		—		212,918		212,918
Foreign government	—		—		—		14,524		14,524
Other	4,596		—		—		—		4,596
Total borrowings	$	4,596	$	5,329	$	4,031	$	466,662	$	480,618

Gross amount of recognized liabilities for repurchase agreement in preceding table									$	485,826
Amounts related to agreements not included in offsetting disclosure									$	5,208



	December 31, 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:
Corporate securities	$	—	$	2,951	$	—	$	147,324	$	150,275
Residential mortgage-backed securities	—		—		—		97,639		97,639
U.S. government and agencies	—		—		—		199,431		199,431
Foreign government	—		—		—		3,358		3,358
Other	15,186		—		—		—		15,186
Total borrowings	$	15,186	$	2,951	$	—	$	447,752	$	465,889

Gross amount of recognized liabilities for repurchase agreement in preceding table									$	481,197
Amounts related to agreements not included in offsetting disclosure									$	15,308

Mortgage Loans on Real Estate

Mortgage loans represented approximately 7.4% and 7.5% of the Company’s total investments as of June 30, 2016 and December 31, 2015. The Company makes mortgage loans on income producing properties that are geographically diversified, with the largest concentration being in the state of California, which represented 24.1% and 22.3% of mortgage loans on real estate as of June 30, 2016 and December 31, 2015, respectively. Loan-to-value ratios at the time of loan approval are 75% or less. The distribution of mortgage loans by property type, gross of valuation allowances, is as follows as of June 30, 2016 and December 31, 2015 (dollars in thousands):



	June 30, 2016				December 31, 2015
Property type:	Recorded Investment		% of Total		Recorded Investment		% of Total
Office building	$	1,057,245	31.3	%	$	980,858	31.3	%
Retail	1,033,538		30.5		1,026,018		32.7
Industrial	708,764		20.9		527,485		16.8
Apartment	397,719		11.8		420,014		13.4
Other commercial	186,272		5.5		182,389		5.8
Total	$	3,383,538	100.0	%	$	3,136,764	100.0	%

The maturities of the mortgage loans, gross of valuation allowances, as of June 30, 2016 and December 31, 2015 are as follows (dollars in thousands):



	June 30, 2016				December 31, 2015
	Recorded Investment		% of Total		Recorded Investment		% of Total
Due within five years	$	768,747	22.7	%	$	873,280	27.8	%
Due after five years through ten years	1,800,601		53.2		1,561,535		49.8
Due after ten years	814,190		24.1		701,949		22.4
Total	$	3,383,538	100.0	%	$	3,136,764	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, 2016 and December 31, 2015 is as follows (dollars in thousands):



	June 30, 2016				December 31, 2015
Internal credit quality grade:	Recorded Investment		% of Total		Recorded Investment		% of Total
High investment grade	$	1,904,494	56.3	%	$	1,621,601	51.7	%
Investment grade	1,396,572		41.3		1,397,996		44.6
Average	39,444		1.2		87,196		2.8
Watch list	36,035		1.0		13,550		0.4
In or near default	6,993		0.2		16,421		0.5
Total	$	3,383,538	100.0	%	$	3,136,764	100.0	%

None of the payments due to the Company on its recorded investment in mortgage loans were delinquent as of June 30, 2016 and December 31, 2015.

The following table presents the recorded investment in mortgage loans, by method of measuring impairment, and the related valuation allowances as of June 30, 2016 and December 31, 2015 (dollars in thousands):



	June 30, 2016		December 31, 2015
Mortgage loans:
Individually measured for impairment	$	6,993	$	16,421
Collectively measured for impairment	3,376,545		3,120,343
Mortgage loans, gross of valuation allowances	3,383,538		3,136,764
Valuation allowances:
Individually measured for impairment	—		588
Collectively measured for impairment	6,499		6,225
Total valuation allowances	6,499		6,813
Mortgage loans, net of valuation allowances	$	3,377,039	$	3,129,951

Information regarding the Company’s loan valuation allowances for mortgage loans for the six months ended June 30, 2016 and 2015 is as follows (dollars in thousands):



	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Balance, beginning of period	$	6,824		$	6,130		$	6,813		$	6,471
Provision (release)	(325		)	(188		)	(314		)	(529		)
Balance, end of period	$	6,499		$	5,942		$	6,499		$	5,942

Information regarding the portion of the Company’s mortgage loans that were impaired as of June 30, 2016 and December 31, 2015 is as follows (dollars in thousands):



	Unpaid Principal Balance		Recorded Investment		Related Allowance		Carrying Value
June 30, 2016:
Impaired mortgage loans with no valuation allowance recorded	$	7,495	$	6,993	$	—	$	6,993
Impaired mortgage loans with valuation allowance recorded	—		—		—		—
Total impaired mortgage loans	$	7,495	$	6,993	$	—	$	6,993
December 31, 2015:
Impaired mortgage loans with no valuation allowance recorded	$	4,033	$	4,033	$	—	$	4,033
Impaired mortgage loans with valuation allowance recorded	12,898		12,388		588		11,800
Total impaired mortgage loans	$	16,931	$	16,421	$	588	$	15,833

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,
	2016				2015
	Average Recorded Investment⁽¹⁾		Interest Income		Average Recorded Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	3,901	$	107	$	5,524	$	35
Impaired mortgage loans with valuation allowance recorded	4,724		—		11,397		229
Total impaired mortgage loans	$	8,625	$	107	$	16,921	$	264

	Six months ended June 30,
	2016				2015
	Average Recorded Investment⁽¹⁾		Interest Income		Average Recorded Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	3,945	$	216	$	5,920	$	141
Impaired mortgage loans with valuation allowance recorded	7,279		—		11,036		384
Total impaired mortgage loans	$	11,224	$	216	$	16,956	$	525

(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, 2016 and 2015. The Company had no mortgage loans that were on a nonaccrual status at June 30, 2016 and December 31, 2015.

Policy Loans

Policy loans comprised approximately 3.2% and 3.5% of the Company’s total investments as of June 30, 2016 and December 31, 2015, 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. 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 12.9% and 14.0% of the Company’s total investments as of June 30, 2016 and December 31, 2015, respectively. Of the $5.9 billion funds withheld at interest balance, net of embedded derivatives, as of June 30, 2016, $4.0 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), derivative contracts and fair value option ("FVO") contractholder-directed unit-linked investments. Other invested assets also include Federal Home Loan Bank of Des Moines ("FHLB") common stock, real estate held-for-investment, equity release mortgages and structured loans, all of which are 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 3.7% and 3.1% of the Company’s total investments as of June 30, 2016 and December 31, 2015, respectively. Carrying values of these assets as of June 30, 2016 and December 31, 2015 are as follows (dollars in thousands):



	June 30, 2016		December 31, 2015
Equity securities	$	418,186	$	125,862
Limited partnership interests and real estate joint ventures	635,574		567,697
Derivatives	310,796		256,178
FVO contractholder-directed unit-linked investments	195,842		197,547
Other	121,745		150,836
Total other invested assets	$	1,682,143	$	1,298,120