INVESTMENTS

Fixed Maturity and Equity Securities Available-for-Sale

The Company holds various types of fixed maturity securities available-for-sale and classifies them as corporate securities (“Corporate”), Canadian and Canadian provincial government securities (“Canadian government”), residential mortgage-backed securities (“RMBS”), asset-backed securities (“ABS”), commercial mortgage-backed securities (“CMBS”), U.S. government and agencies (“U.S. government”), state and political subdivisions, and other foreign government, supranational and foreign government-sponsored enterprises (“Other foreign government”). The following tables provide information relating to investments in fixed maturity and equity securities by sector as of December 31, 2017 and 2016 (dollars in thousands):



December 31, 2017:	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		% of Total		Other-than- temporary impairments in AOCI
Available-for-sale:
Corporate	$	21,966,803	$	1,299,594	$	55,429	$	23,210,968	60.9	%	$	—
Canadian government	2,843,273		1,378,510		1,707		4,220,076		11.1		—
RMBS	1,695,126		36,632		11,878		1,719,880		4.5		—
ABS	1,634,758		18,798		5,194		1,648,362		4.3		275
CMBS	1,285,594		22,627		4,834		1,303,387		3.4		—
U.S. government	1,953,436		12,089		21,933		1,943,592		5.1		—
State and political subdivisions	647,727		59,997		4,296		703,428		1.8		—
Other foreign government	3,254,695		154,507		8,075		3,401,127		8.9		—
Total fixed maturity securities	$	35,281,412	$	2,982,754	$	113,346	$	38,150,820	100.0	%	$	275
Non-redeemable preferred stock	$	41,553	$	479	$	2,226	$	39,806	39.7	%
Other equity securities	61,288		479		1,421		60,346		60.3
Total equity securities	$	102,841	$	958	$	3,647	$	100,152	100.0	%



December 31, 2016:	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		% of Total		Other-than- temporary impairments in AOCI
Available-for-sale:
Corporate	$	18,924,711	$	911,618	$	217,245	$	19,619,084	61.1	%	$	—
Canadian government	2,561,605		1,085,982		3,541		3,644,046		11.4		—
RMBS	1,258,039		33,917		13,380		1,278,576		4.0		(375		)
ABS	1,443,822		9,350		23,828		1,429,344		4.5		275
CMBS	1,342,440		28,973		7,759		1,363,654		4.2		—
U.S. government	1,518,702		12,644		63,044		1,468,302		4.6		—
State and political subdivisions	566,761		37,499		12,464		591,796		1.8		—
Other foreign government	2,595,707		123,054		19,938		2,698,823		8.4		—
Total fixed maturity securities	$	30,211,787	$	2,243,037	$	361,199	$	32,093,625	100.0	%	$	(100	)
Non-redeemable preferred stock	$	55,812	$	1,648	$	6,337	$	51,123	18.6	%
Other equity securities	229,767		1,792		7,321		224,238		81.4
Total equity securities	$	285,579	$	3,440	$	13,658	$	275,361	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 consolidated balance sheets. Fixed maturity securities received as collateral are held in separate custodial accounts and are not recorded on the Company’s consolidated balance sheets. Subject to certain constraints, the Company is permitted by contract to sell or repledge collateral it receives; however, as of December 31, 2017 and 2016, none of the collateral received had been sold or repledged. The Company also holds assets in trust to satisfy collateral requirements under derivative transactions and 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 derivative transactions and certain third-party reinsurance treaties as of December 31, 2017 and 2016 (dollars in thousands):



	2017				2016
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities pledged as collateral	$	72,542	$	75,622	$	207,066	$	210,676
Fixed maturity securities received as collateral	n/a		590,417		n/a		300,925
Assets in trust held to satisfy collateral requirements	15,584,296		16,715,281		12,135,258		12,874,370

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 December 31, 2017 and 2016 (dollars in thousands):



	2017				2016
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities guaranteed or issued by:
Canadian province of Quebec	$	1,119,337	$	1,917,996	$	1,004,261	$	1,612,957
Canadian province of Ontario	939,837		1,282,944		832,764		1,126,433

The amortized cost and estimated fair value of fixed maturity securities available-for-sale at December 31, 2017 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	$	864,993	$	868,802
Due after one year through five years	7,988,167		8,234,097
Due after five years through ten years	9,286,543		9,781,323
Due after ten years	12,526,231		14,594,969
Asset and mortgage-backed securities	4,615,478		4,671,629
Total	$	35,281,412	$	38,150,820

Corporate Fixed Maturity Securities

The tables below show the major industry types of the Company’s corporate fixed maturity holdings as of December 31, 2017 and 2016 (dollars in thousands):



December 31, 2017:	Amortized Cost		Estimated Fair Value		% of Total
Finance	$	7,977,885	$	8,362,774	36.1	%
Industrial	11,535,166		12,199,333		52.5
Utility	2,453,752		2,648,861		11.4
Total	$	21,966,803	$	23,210,968	100.0	%

December 31, 2016:	Amortized Cost		Estimated Fair Value		% of Total
Finance	$	6,725,199	$	6,888,968	35.2	%
Industrial	10,228,813		10,639,613		54.2
Utility	1,970,699		2,090,503		10.6
Total	$	18,924,711	$	19,619,084	100.0	%

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

As discussed in Note 2 – “Summary of Significant Accounting Policies,” 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 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):



	2017			2016			2015
Balance, beginning of period	$	6,013		$	7,284		$	7,284
Additional impairments - credit loss OTTI recognized on securities previously impaired	—			231			—
Credit loss impairments previously recognized on securities impaired to fair value during the period	(2,336		)	—			—
Credit loss previously recognized on securities which matured, paid down, prepaid or were sold during the period	—			(1,502		)	—
Balance, end of period	$	3,677		$	6,013		$	7,284

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

The following table presents the total gross unrealized losses for the 1,116 and 1,535 fixed maturity and equity securities at December 31, 2017 and 2016, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):



	2017				2016
	Gross Unrealized Losses		% of Total		Gross Unrealized Losses		% of Total
Less than 20%	$	113,466	97.0	%	$	337,831	90.1	%
20% or more for less than six months	689		0.6		19,438		5.2
20% or more for six months or greater	2,838		2.4		17,588		4.7
Total	$	116,993	100.0	%	$	374,857	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 1,116 and 1,535 fixed maturity and equity securities that have estimated fair values below amortized cost as of December 31, 2017 and 2016, respectively. 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 (dollars in thousands):



	Less than 12 months				12 months or greater				Total
December 31, 2017:	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
Investment grade securities:
Corporate	$	1,886,212	$	17,099	$	1,009,750	$	28,080	$	2,895,962	$	45,179
Canadian government	18,688		91		111,560		1,596		130,248		1,687
RMBS	566,699		5,852		224,439		6,004		791,138		11,856
ABS	434,274		2,707		168,524		2,434		602,798		5,141
CMBS	220,401		1,914		103,269		2,920		323,670		4,834
U.S. government	800,298		6,177		767,197		15,756		1,567,495		21,933
State and political subdivisions	43,510		242		68,666		4,054		112,176		4,296
Other foreign government	369,717		2,707		191,265		4,704		560,982		7,411
Total investment grade securities	4,339,799		36,789		2,644,670		65,548		6,984,469		102,337
Below investment grade securities:
Corporate	194,879		3,317		75,731		6,933		270,610		10,250
Canadian government	1,995		20		—		—		1,995		20
RMBS	—		—		1,369		22		1,369		22
ABS	—		—		1,489		53		1,489		53
Other foreign government	28,600		113		15,134		551		43,734		664
Total below investment grade securities	225,474		3,450		93,723		7,559		319,197		11,009
Total fixed maturity securities	$	4,565,273	$	40,239	$	2,738,393	$	73,107	$	7,303,666	$	113,346
Non-redeemable preferred stock	$	82	$	1	$	26,471	$	2,225	$	26,553	$	2,226
Other equity securities	5,820		1,023		47,251		398		53,071		1,421
Total equity securities	$	5,902	$	1,024	$	73,722	$	2,623	$	79,624	$	3,647



	Less than 12 months				12 months or greater				Total
December 31, 2016:	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
Investment grade securities:
Corporate	$	4,661,706	$	124,444	$	549,273	$	43,282	$	5,210,979	$	167,726
Canadian government	101,578		3,541		—		—		101,578		3,541
RMBS	490,473		9,733		112,216		3,635		602,689		13,368
ABS	563,259		12,010		257,166		9,653		820,425		21,663
CMBS	368,465		6,858		10,853		166		379,318		7,024
U.S. government	1,056,101		63,044		—		—		1,056,101		63,044
State and political subdivisions	187,194		9,396		13,635		3,068		200,829		12,464
Other foreign government	524,236		13,372		51,097		2,981		575,333		16,353
Total investment grade securities	7,953,012		242,398		994,240		62,785		8,947,252		305,183
Below investment grade securities:
Corporate	330,757		7,914		163,152		41,605		493,909		49,519
RMBS	—		—		412		12		412		12
ABS	5,904		700		12,581		1,465		18,485		2,165
CMBS	5,815		735		—		—		5,815		735
Other foreign government	32,355		1,258		39,763		2,327		72,118		3,585
Total below investment grade securities	374,831		10,607		215,908		45,409		590,739		56,016
Total fixed maturity securities	$	8,327,843	$	253,005	$	1,210,148	$	108,194	$	9,537,991	$	361,199
Non-redeemable preferred stock	$	10,831	$	831	$	21,879	$	5,506	$	32,710	$	6,337
Other equity securities	202,068		7,020		6,751		301		208,819		7,321
Total equity securities	$	212,899	$	7,851	$	28,630	$	5,807	$	241,529	$	13,658

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 December 31, 2017 are primarily related to high-yield corporate securities. Changes in unrealized losses are primarily driven by changes in credit spreads and interest rates.

Investment Income, Net of Related Expenses

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



	2017			2016			2015
Fixed maturity securities	$	1,401,585		$	1,285,406		$	1,177,706
Mortgage loans on real estate	197,755			168,582			149,564
Policy loans	60,617			63,837			62,955
Funds withheld at interest	457,774			368,728			343,031
Short-term investments and cash and cash equivalents	7,171			8,051			7,574
Other	110,460			89,371			61,709
Investment income	2,235,362			1,983,975			1,802,539
Investment expense	(80,711		)	(72,089		)	(68,044		)
Investment income, net of related expenses	$	2,154,651		$	1,911,886		$	1,734,495

Investment Related Gains (Losses), Net

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



	2017			2016			2015
Fixed maturity and equity securities:
Other-than-temporary impairment losses on fixed maturities	$	(42,639	)	$	(38,805	)	$	(57,380	)
Portion of loss recognized in accumulated other comprehensive income	—			74			—
Net other-than-temporary impairment losses on fixed maturity securities recognized in earnings	$	(42,639	)	$	(38,731	)	$	(57,380	)
Impairment losses on equity securities	(1,202		)	—			—
Gain on investment activity	110,569			154,370			73,079
Loss on investment activity	(41,679		)	(49,965		)	(71,893		)
Other impairment losses and change in mortgage loan provision	(9,497		)	(11,006		)	(6,953		)
Derivatives and other, net	152,328			39,527			(101,603		)
Total investment related gains (losses), net	$	167,880		$	94,195		$	(164,750	)

The other-than-temporary impairment losses on fixed maturity securities for 2017, 2016 and 2015 are primarily due to emerging market and high-yield debt exposures. The fluctuations in investment related gains (losses) for derivatives and other are primarily due to changes in the fair value of embedded derivatives related to modified coinsurance and funds withheld treaties, as a result of changes in interest rates, driven primarily by credit spreads.

At December 31, 2017 and 2016 the Company held non-income producing securities with amortized costs of $38.8 million and $35.4 million, and estimated fair values of $39.3 million and $47.3 million, respectively. Generally, securities are non-income producing when principal or interest is not paid primarily as a result of bankruptcies or credit defaults, but also include securities where amortization has been discontinued. During 2017, 2016 and 2015 the Company sold fixed maturity and equity securities with fair values of $2,727.8 million, $1,181.6 million, and $1,523.6 million, which were below amortized cost, at gross realized losses of $41.7 million, $50.0 million and $71.9 million, respectively. The Company generally does not engage in short-term buying and selling of securities.

Securities Borrowing, Lending and Repurchase Agreements

The following table includes the amount of borrowed securities, securities lent and securities collateral received as part of the securities lending program, repurchased/reverse repurchased securities pledged and received and cash received as of December 31, 2017 and 2016 (dollars in thousands):



	2017				2016
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Borrowed securities	$	358,875	$	377,820	$	263,820	$	279,186
Securities lending:
Securities loaned	117,246		121,551		74,389		73,625
Securities received	n/a		128,000		n/a		80,000
Repurchase program/reverse repurchase program:
Securities pledged	413,819		428,344		476,531		499,891
Securities received	n/a		417,550		n/a		515,200

The Company also held cash collateral for securities lending and the repurchase program/reverse repurchase programs of $31.2 million and $28.8 million at December 31, 2017 and 2016, respectively. No cash or securities have been pledged by the Company for its securities borrowing program as of December 31, 2017 and 2016.

The following tables present information on the Company’s securities lending and repurchase transactions as of December 31, 2017 and 2016, respectively (dollars in thousands). Collateral associated with certain borrowed securities is not included within the tables as the collateral pledged to each counterparty is the right to reinsurance treaty cash flows.



	December 31, 2017
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
Securities lending transaction:
Corporate	$	—	$	—	$	—	$	121,551	$	121,551
Total	—		—		—		121,551		121,551
Repurchase transactions:
Corporate	—		—		312		184,334		184,646
RMBS	—		—		—		—		—
U.S. government	—		—		—		220,765		220,765
Foreign government	—		—		—		21,802		21,802
Other	1,131		—		—		—		1,131
Total	1,131		—		312		426,901		428,344
Total transactions	$	1,131	$	—	$	312	$	548,452	$	549,895

Gross amount of recognized liabilities for securities lending and repurchase transactions in preceding table									$	576,786
Amounts related to agreements not included in offsetting disclosure									$	26,891



	December 31, 2016
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
Securities lending transaction:
Corporate	$	—	$	—	$	4,017	$	69,608	$	73,625
Total	—		—		4,017		69,608		73,625
Repurchase transactions:
Corporate	$	—	$	—	$	3,220	$	166,979	$	170,199
RMBS	—		—		—		92,546		92,546
U.S. government	—		—		—		216,000		216,000
Foreign government	—		—		—		19,900		19,900
Other	1,246		—		—		—		1,246
Total	1,246		—		3,220		495,425		499,891
Total transactions	$	1,246	$	—	$	7,237	$	565,033	$	573,516

Gross amount of recognized liabilities for repurchase transactions in preceding table									$	624,032
Amounts related to agreements not included in offsetting disclosure									$	50,516

The Company has elected to offset amounts recognized as receivables and payables resulting from the repurchase/reverse repurchase programs. After the effect of offsetting, the net amount presented on the consolidated balance sheets was a liability of $1.1 million and $5.5 million as of December 31, 2017 and 2016, respectively. As of December 31, 2017 and 2016, the Company recognized payables resulting from cash received as collateral associated with a repurchase agreement as discussed above. 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 8.5% and 8.4% of the Company’s total investments as of December 31, 2017 and 2016, respectively. As of December 31, 2017, mortgage loans were geographically dispersed throughout the U.S. with the largest concentrations in California (19.5%), Texas (8.4%) and Georgia (7.6%) and include loans secured by properties in Canada (2.3%). The recorded investment in mortgage loans on real estate presented below is gross of unamortized deferred loan origination fees and expenses, and valuation allowances.

The distribution of mortgage loans by property type is as follows as of December 31, 2017 and 2016 (dollars in thousands):



	2017					2016
	Carrying Value			Percentage of Total		Carrying Value			Percentage of Total
Property type:
Office building	$	1,487,392		33.6	%	$	1,270,113		33.6	%
Retail	1,270,676			28.8		1,179,936			31.2
Industrial	938,612			21.3		713,461			18.8
Apartment	510,052			11.6		447,088			11.8
Other commercial	206,439			4.7		172,609			4.6
Recorded investment	4,413,171			100.0	%	$	3,783,207		100.0	%
Unamortized balance of loan origination fees and expenses	(3,254		)			—
Valuation allowances	(9,384		)			(7,685		)
Total mortgage loans on real estate	$	4,400,533				$	3,775,522

The maturities of the mortgage loans as of December 31, 2017 and 2016 are as follows (dollars in thousands):



	2017				2016
	Recorded Investment		% of Total		Recorded Investment		% of Total
Due within five years	$	1,091,066	24.8	%	$	822,073	21.7	%
Due after five years through ten years	2,516,872		57.0		2,099,559		55.5
Due after ten years	805,233		18.2		861,575		22.8
Total	$	4,413,171	100.0	%	$	3,783,207	100.0	%

The following tables set forth certain key credit quality indicators of the Company’s recorded investment in mortgage loans as of December 31, 2017 and 2016 (dollars in thousands):



	Recorded Investment
	Debt Service Ratios						Construction loans
	>1.20x		1.00x - 1.20x		<1.00x		Construction loans		Total		% of Total
December 31, 2017:
Loan-to-Value Ratio
0% - 59.99%	$	2,148,428	$	53,979	$	3,801	$	—	$	2,206,208	50.0	%
60% - 69.99%	1,517,029		47,128		43,921		—		1,608,078		36.4
70% - 79.99%	396,446		19,461		15,367		—		431,274		9.8
Greater than 80%	120,850		30,713		6,362		9,686		167,611		3.8
Total	$	4,182,753	$	151,281	$	69,451	$	9,686	$	4,413,171	100.0	%



	Recorded Investment
	Debt Service Ratios
	>1.20x		1.00x - 1.20x		<1.00x		Total		% of Total
December 31, 2016:
Loan-to-Value Ratio
0% - 59.99%	$	1,859,640	$	64,749	$	1,366	$	1,925,755	50.8	%
60% - 69.99%	1,257,788		34,678		—		1,292,466		34.2
70% - 79.99%	370,092		20,869		24,369		415,330		11.0
Greater than 80%	114,297		—		35,359		149,656		4.0
Total	$	3,601,817	$	120,296	$	61,094	$	3,783,207	100.0	%

The age analysis of the Company’s past due recorded investments in mortgage loans as of December 31, 2017 and 2016 (dollars in thousands):



	2017		2016
31-60 days past due	$	17,100	$	—
61-90 days past due	2,056		—
Total past due	19,156		—
Current	4,394,015		3,783,207
Total	$	4,413,171	$	3,783,207

The following table presents the recorded investment in mortgage loans, by method of measuring impairment, and the related valuation allowances, as of December 31, 2017 and 2016 (dollars in thousands):



	2017		2016
Mortgage loans:
Individually measured for impairment	$	5,858	$	2,216
Collectively measured for impairment	4,407,313		3,780,991
Recorded investment	4,413,171		3,783,207
Valuation allowances:
Individually measured for impairment	—		—
Collectively measured for impairment	9,384		7,685
Total valuation allowances	9,384		7,685

Information regarding the Company’s loan valuation allowances for mortgage loans as of December 31, 2017, 2016 and 2015 are as follows (dollars in thousands):



	2017		2016		2015
Balance, beginning of period	$	7,685	$	6,813	$	6,471
Provision	1,691		872		342
Translation adjustment	8		—		—
Balance, end of period	$	9,384	$	7,685	$	6,813

Information regarding the portion of the Company’s mortgage loans that were impaired as of December 31, 2017 and 2016 is as follows (dollars in thousands):



	Unpaid Principal Balance		Recorded Investment		Related Allowance		Carrying Value
December 31, 2017:
Impaired mortgage loans with no valuation allowance recorded	$	6,427	$	5,858	$	—	$	5,858
Impaired mortgage loans with valuation allowance recorded	—		—		—		—
Total impaired mortgage loans	$	6,427	$	5,858	$	—	$	5,858
December 31, 2016:
Impaired mortgage loans with no valuation allowance recorded	$	2,758	$	2,216	$	—	$	2,216
Impaired mortgage loans with valuation allowance recorded	—		—		—		—
Total impaired mortgage loans	$	2,758	$	2,216	$	—	$	2,216

The Company’s average investment balance of impaired mortgage loans and the related interest income are reflected in the table below for the years ended December 31, 2017, 2016 and 2015 (dollars in thousands):



	2017				2016				2015
	Average Investment⁽¹⁾		Interest Income		Average Investment⁽¹⁾		Interest Income		Average Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	3,621	$	186	$	2,249	$	142	$	6,033	$	330
Impaired mortgage loans with valuation allowance recorded	—		—		—		—		11,592		770
Total	$	3,621	$	186	$	2,249	$	142	$	17,625	$	1,100


(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 years ended December 31, 2017 and 2016. The Company had no mortgage loans that were on a nonaccrual status at December 31, 2017 and 2016.

Policy Loans

Policy loans comprised approximately 2.6% and 3.2% of the Company’s total investments as of December 31, 2017 and 2016, 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 11.8% and 13.1% of the Company’s total investments as of December 31, 2017 and 2016, respectively. Of the $6.1 billion funds withheld at interest balance, net of embedded derivatives, as of December 31, 2017, $4.1 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 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 FVO contractholder-directed unit-linked investments. Other invested assets also include Federal Home Loan Bank of Des Moines (“FHLB”) common stock, equity release mortgages and structured loans, all of which are included in other in the table below. Other invested assets represented approximately 3.1% and 3.6% of the Company’s total investments as of December 31, 2017 and 2016, respectively. Carrying values of these assets as of December 31, 2017 and 2016 are as follows (dollars in thousands):



	2017		2016
Equity securities	$	100,152	$	275,361
Limited partnerships and real estate joint ventures	781,124		687,522
Derivatives	137,613		229,108
FVO contractholder-directed unit-linked investments	218,541		190,120
Other	368,054		209,829
Total other invested assets	$	1,605,484	$	1,591,940