American National purchases over-the-counter equity-indexed options as economic hedges against fluctuations in the equity markets to which equity-indexed products are exposed. These options are not designated as hedging instruments for accounting purposes under U.S. GAAP. Equity-indexed contracts include a fixed host universal-life insurance or annuity contract and an equity-indexed embedded derivative. The detail of derivative instruments is shown below (in thousands, except number of instruments):



		December 31,
Derivatives Not Designated as Hedging Instruments	Location in the Consolidated Statements of Financial Position	2018					2017
Derivatives Not Designated as Hedging Instruments		Number of Instruments	Notional Amounts		Estimated Fair Value		Number of Instruments	Notional Amounts		Estimated Fair Value
Equity-indexed options	Other invested assets	493	$	2,391,000	$	148,006	468	$	1,885,600	$	220,190
Equity-indexed embedded derivative	Policyholders’ account balances	90,440	2,327,769		596,075		76,621	1,819,523		512,526



		Gains (Losses) Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments	Location in the Consolidated Statements of Operations	Years ended December 31,
Derivatives Not Designated as Hedging Instruments	Location in the Consolidated Statements of Operations	2018			2017			2016
Equity-indexed options	Net investment income	$	(54,951	)	$	91,055		$	28,869
Equity-indexed embedded derivative	Interest credited to policyholders’ account balances	17,862			(98,351		)	(25,239		)

The Company’s use of derivative instruments exposes it to credit risk in the event of non-performance by the counterparties. The Company has a policy of only dealing with counterparties it believes are creditworthy and obtaining sufficient collateral where appropriate, as a means of mitigating the financial loss from defaults. The Company holds collateral in cash and notes secured by U.S. government backed assets. The non-performance risk is the net counterparty exposure based on the fair value of the open contracts, less the fair value of collateral held. The Company maintains master netting agreements with its current active trading partners. As such, a right of offset has been applied to collateral that supports credit risk and has been recorded in the consolidated statements of financial position as an offset to “Other invested assets” with an associated payable to “Other liabilities” for excess collateral.

Information regarding the Company’s exposure to credit loss on the options it holds is presented below (in thousands):



		December 31, 2018
Counterparty	Moody/S&P Rating	Options Fair Value		Collateral Held in Cash		Collateral Held in Invested Assets		Total Collateral Held		Collateral Amounts used to Offset Exposure		Excess Collateral		Exposure Net of Collateral
Barclays	Baa3/BBB	$	38,905	$	11,063	$	28,041	$	39,104	$	38,905	$	199	$	—
Goldman-Sachs	A3/BBB+	615		670		—		670		615		55		—
ING	Baa1/A-	24,183		7,960		16,023		23,983		23,983		—		200
Morgan Stanley	A3/BBB+	11,649		2,046		9,013		11,059		11,059		—		590
NATIXIS*	A1/A+	26,786		27,610		—		27,610		26,786		824		—
SunTrust	Baa1/BBB+	23,488		6,520		17,025		23,545		23,464		81		24
Wells Fargo	A2/A-	22,380		7,030		15,022		22,052		22,052		—		328
Total		$	148,006	$	62,899	$	85,124	$	148,023	$	146,864	$	1,159	$	1,142



		December 31, 2017
Counterparty	Moody/S&P Rating	Options Fair Value		Collateral Held		Collateral Amounts used to Offset Exposure		Excess Collateral		Exposure Net of Collateral
Barclays	Baa2/BBB	$	55,215	$	56,883	$	55,215	$	1,668	$	—
Goldman-Sachs	A3/BBB+	956		780		780		—		176
ING	Baa1/A-	26,650		27,330		26,650		680		—
JP Morgan	A3/A-	189		—		—		—		189
Morgan Stanley	A3/BBB+	17,490		18,776		17,490		1,286		—
NATIXIS*	A2/A	37,550		33,860		33,860		—		3,690
SunTrust	Baa1/BBB+	37,266		36,560		36,560		—		706
Wells Fargo	A2/A	44,874		47,230		44,874		2,356		—
Total		$	220,190	$	221,419	$	215,429	$	5,990	$	4,761



*	Includes collateral restrictions