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 September 30, 2016 and December 31, 2015 (dollars in thousands):



September 30, 2016:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate securities	$	18,762,648	$	1,498,816	$	96,616	$	20,164,848	60.2	%	$	—
Canadian and Canadian provincial governments	2,598,625		1,541,754		—		4,140,379		12.3		—
Residential mortgage-backed securities	1,247,677		67,854		3,839		1,311,692		3.9		(300		)
Asset-backed securities	1,388,263		13,706		19,395		1,382,574		4.1		275
Commercial mortgage-backed securities	1,402,249		73,402		618		1,475,033		4.4		(1,609		)
U.S. government and agencies	1,479,295		80,402		161		1,559,536		4.7		—
State and political subdivisions	549,669		72,598		4,418		617,849		1.8		—
Other foreign government, supranational and foreign government-sponsored enterprises	2,669,470		220,274		5,236		2,884,508		8.6		—
Total fixed maturity securities	$	30,097,896	$	3,568,806	$	130,283	$	33,536,419	100.0	%	$	(1,634	)
Non-redeemable preferred stock	$	56,944	$	2,512	$	6,604	$	52,852	12.6	%
Other equity securities	360,839		7,013		456		367,396		87.4
Total equity securities	$	417,783	$	9,525	$	7,060	$	420,248	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 September 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 September 30, 2016 and December 31, 2015 (dollars in thousands):



	September 30, 2016				December 31, 2015
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities pledged as collateral	$	191,791	$	201,124	$	169,678	$	176,782
Fixed maturity securities received as collateral	n/a		320,838		n/a		242,914
Assets in trust held to satisfy collateral requirements	12,258,854		13,525,565		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 September 30, 2016 and December 31, 2015 (dollars in thousands).



	September 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	$	843,239	$	1,254,701	$	864,444	$	1,199,080
Canadian province of Quebec	1,021,325		1,877,335		943,484		1,525,903

The amortized cost and estimated fair value of fixed maturity securities classified as available-for-sale at September 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	$	728,318	$	733,750
Due after one year through five years	6,519,471		6,847,608
Due after five years through ten years	8,991,047		9,689,531
Due after ten years	9,820,871		12,096,231
Asset and mortgage-backed securities	4,038,189		4,169,299
Total	$	30,097,896	$	33,536,419

Corporate Fixed Maturity Securities

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



September 30, 2016:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	6,530,758	$	6,916,195	34.4	%
Industrial	10,241,489		11,028,232		54.6
Utility	1,990,401		2,220,421		11.0
Total	$	18,762,648	$	20,164,848	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 September 30,				Nine months ended September 30,
	2016		2015		2016			2015
Balance, beginning of period	$	6,974	$	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		)	—
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 755 and 2,080 fixed maturity and equity securities as of September 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):



	September 30, 2016				December 31, 2015
	Gross Unrealized Losses		% of Total		Gross Unrealized Losses		% of Total
Less than 20%	$	88,034	64.1	%	$	463,109	73.8	%
20% or more for less than six months	12,551		9.1		142,495		22.7
20% or more for six months or greater	36,758		26.8		21,847		3.5
Total	$	137,343	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 755 and 2,080 fixed maturity and equity securities that have estimated fair values below amortized cost as of September 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
September 30, 2016:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate securities	$	775,973	$	11,522	$	567,398	$	29,794	$	1,343,371	$	41,316
Residential mortgage-backed securities	85,970		593		107,240		3,236		193,210		3,829
Asset-backed securities	341,260		4,816		314,518		11,488		655,778		16,304
Commercial mortgage-backed securities	51,965		193		22,415		425		74,380		618
U.S. government and agencies	86,499		161		—		—		86,499		161
State and political subdivisions	53,229		841		13,141		3,577		66,370		4,418
Other foreign government, supranational and foreign government-sponsored enterprises	131,702		1,077		51,862		2,340		183,564		3,417
Total investment grade securities	1,526,598		19,203		1,076,574		50,860		2,603,172		70,063
Below investment grade securities:
Corporate securities	314,962		9,132		168,865		46,168		483,827		55,300
Residential mortgage-backed securities	—		—		369		10		369		10
Asset-backed securities	5,858		731		14,707		2,360		20,565		3,091
Other foreign government, supranational and foreign government-sponsored enterprises	6,194		22		42,501		1,797		48,695		1,819
Total below investment grade securities	327,014		9,885		226,442		50,335		553,456		60,220
Total fixed maturity securities	$	1,853,612	$	29,088	$	1,303,016	$	101,195	$	3,156,628	$	130,283
Non-redeemable preferred stock	$	3,413	$	96	$	23,786	$	6,508	$	27,199	$	6,604
Other equity securities	96,635		210		6,806		246		103,441		456
Total equity securities	$	100,048	$	306	$	30,592	$	6,754	$	130,640	$	7,060



	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 September 30, 2016 are primarily related to high-yield corporate securities. Unrealized losses decreased across most security types as treasury rates decreased during the first nine 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 September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Fixed maturity securities available-for-sale	$	325,089		$	298,376		$	961,096		$	871,936
Mortgage loans on real estate	39,802			36,547			121,494			108,440
Policy loans	15,391			16,475			47,897			46,763
Funds withheld at interest	104,609			40,382			273,482			239,967
Short-term investments	952			576			2,912			2,085
Other invested assets	21,938			13,696			61,249			48,141
Investment income	507,781			406,052			1,468,130			1,317,332
Investment expense	(18,054		)	(16,455		)	(53,471		)	(50,305		)
Investment income, net of related expenses	$	489,727		$	389,597		$	1,414,659		$	1,267,027

Investment Related Gains (Losses), Net

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



	Three months ended September 30,						Nine months ended September 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	$	—		$	(23,111	)	$	(34,663	)	$	(29,775	)
Gain on investment activity	46,346			13,792			127,153			53,002
Loss on investment activity	(9,054		)	(22,186		)	(43,397		)	(50,257		)
Other impairment losses and change in mortgage loan provision	(262		)	(636		)	(2,111		)	(4,661		)
Derivatives and other, net	49,594			(79,205		)	37,020			(88,250		)
Total investment related gains (losses), net	$	86,624		$	(111,346	)	$	84,002		$	(119,941	)

The fixed maturity impairments for the nine months ended September 30, 2016 were largely related to high-yield energy and emerging market corporate securities. The fixed maturity impairments for the three and nine months ended September 30, 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 three and nine months ended September 30, 2016, compared to the same periods in 2015, are primarily due to changes in the fair value of embedded derivatives and interest rate swaps.

During the three months ended September 30, 2016 and 2015, the Company sold fixed maturity and equity securities with fair values of $317.3 million and $404.1 million at losses of $9.1 million and $22.2 million, respectively. During the nine months ended September 30, 2016 and 2015, the Company sold fixed maturity and equity securities with fair values of $903.1 million and $1,255.0 million at losses of $43.4 million and $50.3 million, respectively. The Company generally does not buy and sell securities on a short-term basis.

Securities Borrowing, Lending 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 securities lending program whereby securities, reflected as investments on the Company's condensed consolidated balance sheets, are loaned to a third party. The Company receives securities as collateral, in an amount equal to a minimum of 105% of the fair value of the securities lent. The securities received are not reflected on the Company’s condensed consolidated balance sheets.

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, securities lent and securities collateral received as part of the securities lending program and repurchased/reverse repurchased securities pledged and received as of September 30, 2016 and December 31, 2015 (dollars in thousands).



	September 30, 2016				December 31, 2015
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Borrowed securities	$	267,360	$	288,310	$	259,540	$	266,297
Securities lending:
Securities loaned	60,375		62,104		—		—
Securities received	n/a		65,000		n/a		—
Repurchase program/reverse repurchase program:
Securities pledged	442,510		475,820		443,435		465,889
Securities received	n/a		514,052		n/a		481,197

The following table presents information on the Company's securities lending and repurchase transactions as of September 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.



	September 30, 2016
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
Securities lending transactions:
Corporate securities	$	—	$	—	$	—	$	62,104	$	62,104
Total	—		—		—		62,104		62,104
Repurchase transactions:
Corporate securities	—		3,906		5,239		133,551		142,696
Residential mortgage-backed securities	—		—		—		98,884		98,884
U.S. government and agencies	—		—		30,011		181,754		211,765
Foreign government	—		—		—		15,941		15,941
Other	6,534		—		—		—		6,534
Total	6,534		3,906		35,250		430,130		475,820
Total transactions	$	6,534	$	3,906	$	35,250	$	492,234	$	537,924

Gross amount of recognized liabilities for securities lending and repurchase transactions in preceding table									$	579,052
Amounts related to agreements not included in offsetting disclosure									$	41,128



	December 31, 2015
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
Repurchase transactions:
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 transactions	$	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

The Company has elected to offset amounts recognized as receivables and payables resulting from the repurchase/reverse repurchase program. After the effect of offsetting, the net amount presented on the condensed consolidated balance sheet as of September 30, 2016 was a liability of $3.3 million. Amounts owed to and due from the counterparties may be settled in cash or offset, in accordance with the agreements.

Mortgage Loans on Real Estate

Mortgage loans represented approximately 7.8% and 7.5% of the Company’s total investments as of September 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 23.4% and 22.3% of mortgage loans on real estate as of September 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 September 30, 2016 and December 31, 2015 (dollars in thousands):



	September 30, 2016				December 31, 2015
Property type:	Recorded Investment		% of Total		Recorded Investment		% of Total
Office building	$	1,173,087	32.4	%	$	980,858	31.3	%
Retail	1,116,602		30.9		1,026,018		32.7
Industrial	703,407		19.5		527,485		16.8
Apartment	436,290		12.1		420,014		13.4
Other commercial	185,060		5.1		182,389		5.8
Total	$	3,614,446	100.0	%	$	3,136,764	100.0	%

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



	September 30, 2016				December 31, 2015
	Recorded Investment		% of Total		Recorded Investment		% of Total
Due within five years	$	793,736	22.0	%	$	873,280	27.8	%
Due after five years through ten years	1,952,001		54.0		1,561,535		49.8
Due after ten years	868,709		24.0		701,949		22.4
Total	$	3,614,446	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 September 30, 2016 and December 31, 2015 is as follows (dollars in thousands):



	September 30, 2016				December 31, 2015
Internal credit quality grade:	Recorded Investment		% of Total		Recorded Investment		% of Total
High investment grade	$	2,097,202	58.0	%	$	1,621,601	51.7	%
Investment grade	1,430,439		39.6		1,397,996		44.6
Average	44,097		1.2		87,196		2.8
Watch list	35,794		1.0		13,550		0.4
In or near default	6,914		0.2		16,421		0.5
Total	$	3,614,446	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 September 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 September 30, 2016 and December 31, 2015 (dollars in thousands):



	September 30, 2016		December 31, 2015
Mortgage loans:
Individually measured for impairment	$	6,913	$	16,421
Collectively measured for impairment	3,607,533		3,120,343
Mortgage loans, gross of valuation allowances	3,614,446		3,136,764
Valuation allowances:
Individually measured for impairment	—		588
Collectively measured for impairment	6,746		6,225
Total valuation allowances	6,746		6,813
Mortgage loans, net of valuation allowances	$	3,607,700	$	3,129,951

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



	Three months ended September 30,					Nine months ended September 30,
	2016		2015			2016			2015
Balance, beginning of period	$	6,499	$	5,942		$	6,813		$	6,471
Provision (release)	247		(290		)	(67		)	(819		)
Balance, end of period	$	6,746	$	5,652		$	6,746		$	5,652

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



	Unpaid Principal Balance		Recorded Investment		Related Allowance		Carrying Value
September 30, 2016:
Impaired mortgage loans with no valuation allowance recorded	$	7,416	$	6,913	$	—	$	6,913
Impaired mortgage loans with valuation allowance recorded	—		—		—		—
Total impaired mortgage loans	$	7,416	$	6,913	$	—	$	6,913
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 September 30,
	2016				2015
	Average Recorded Investment⁽¹⁾		Interest Income		Average Recorded Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	6,953	$	107	$	6,364	$	71
Impaired mortgage loans with valuation allowance recorded	—		—		12,495		194
Total impaired mortgage loans	$	6,953	$	107	$	18,859	$	265

	Nine months ended September 30,
	2016				2015
	Average Recorded Investment⁽¹⁾		Interest Income		Average Recorded Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	4,687	$	324	$	6,533	$	212
Impaired mortgage loans with valuation allowance recorded	5,459		—		11,392		578
Total impaired mortgage loans	$	10,146	$	324	$	17,925	$	790

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

Policy Loans

Policy loans comprised approximately 3.1% and 3.5% of the Company’s total investments as of September 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 12.8% and 14.0% of the Company’s total investments as of September 30, 2016 and December 31, 2015, respectively. Of the $5.9 billion funds withheld at interest balance, net of embedded derivatives, as of September 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 3.8% and 3.1% of the Company’s total investments as of September 30, 2016 and December 31, 2015, respectively. Carrying values of these assets as of September 30, 2016 and December 31, 2015 are as follows (dollars in thousands):



	September 30, 2016		December 31, 2015
Equity securities	$	420,248	$	125,862
Limited partnership interests and real estate joint ventures	671,577		567,697
Derivatives	310,168		256,178
FVO contractholder-directed unit-linked investments	200,208		197,547
Other	174,864		150,836
Total other invested assets	$	1,777,065	$	1,298,120