Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2019

Carrying Amount and Fair Value of Financial Instruments

The carrying amount and fair value of financial instruments are shown below (in thousands):



	March 31, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Fixed maturity securities, bonds held-to-maturity	$	8,208,129	$	8,323,600	$	8,211,449	$	8,130,084
Fixed maturity securities, bonds available-for-sale	6,584,393		6,584,393		6,215,563		6,215,563
Equity securities	1,698,314		1,698,314		1,530,228		1,530,228
Equity-indexed options	216,156		216,156		148,006		148,006
Mortgage loans on real estate, net of allowance	4,960,650		4,926,154		5,124,707		5,049,468
Policy loans	375,990		375,990		376,254		376,254
Short-term investments	726,759		726,759		206,760		206,760
Separate account assets ($990,983 and $905,824 included in fair value hierarchy)	1,004,475		1,004,475		918,369		918,369
Separately managed accounts	23,254		23,254		16,532		16,532
Total financial assets	$	23,798,120	$	23,879,095	$	22,747,868	$	22,591,264
Financial liabilities
Investment contracts	$	10,364,141	$	10,364,141	$	10,003,990	$	10,003,990
Embedded derivative liability for equity-indexed contracts	668,485		668,485		596,075		596,075
Notes payable	137,490		137,490		137,963		137,963
Separate account liabilities ($990,983 and $905,824 included in fair value hierarchy)	1,004,475		1,004,475		918,369		918,369
Total financial liabilities	$	12,174,591	$	12,174,591	$	11,656,397	$	11,656,397

Schedule of Significant Unobservable Inputs Used to Calculate Level 3 Fair Value of Embedded Derivatives within Policyholder Contract Deposits

Shown below are the significant unobservable inputs used to calculate the Level 3 fair value of the embedded derivatives within policyholder contract deposits (in millions, except range percentages):



	Fair Value					Range
	March 31, 2019		December 31, 2018		Unobservable Input	March 31, 2019	December 31, 2018
Indexed Annuities	$	656.4	$	592.8	Lapse Rate	1-70%	1-70%
					Mortality Multiplier	90-100%	90-100%
					Equity Volatility	12-25%	19-26%
Indexed Life	12.1		3.3		Equity Volatility	12-25%	19-26%

Quantitative Disclosures Regarding Fair Value Hierarchy Measurements

The fair value hierarchy measurements of the financial instruments are shown below (in thousands):



	Fair Value Measurement as of March 31, 2019
	Total Fair Value		Level 1		Level 2		Level 3
Financial assets
Fixed maturity securities, bonds held-to-maturity
U.S. states and political subdivisions	$	228,402	$	—	$	228,402	$	—
Foreign governments	4,416		—		4,416		—
Corporate debt securities	7,759,690		—		7,759,690		—
Residential mortgage-backed securities	221,794		—		221,794		—
Collateralized debt securities	109,147		—		109,147		—
Other debt securities	151		—		151		—
Total bonds held-to-maturity	8,323,600		—		8,323,600		—
Fixed maturity securities, bonds available-for-sale
U.S. treasury and government	28,526		—		28,526		—
U.S. states and political subdivisions	950,033		—		950,033		—
Foreign governments	6,290		—		6,290		—
Corporate debt securities	5,564,541		—		5,560,308		4,233
Residential mortgage-backed securities	24,469		—		24,469		—
Collateralized debt securities	10,534		—		10,534		—
Total bonds available-for-sale	6,584,393		—		6,580,160		4,233
Equity securities
Common stock	1,677,074		1,676,961		—		113
Preferred stock	21,240		21,240		—		—
Total equity securities	1,698,314		1,698,201		—		113
Options	216,156		—		—		216,156
Mortgage loans on real estate	4,926,154		—		4,926,154		—
Policy loans	375,990		—		—		375,990
Short-term investments	726,759		—		726,759		—
Separate account assets	990,983		253,824		737,159		—
Separately managed accounts	23,254		—		—		23,254
Total financial assets	$	23,865,603	$	1,952,025	$	21,293,832	$	619,746
Financial liabilities
Investment contracts	$	10,364,141	$	—	$	—	$	10,364,141
Embedded derivative liability for equity-indexed contracts	668,485		—		—		668,485
Notes payable	137,490		—		—		137,490
Separate account liabilities	990,983		253,824		737,159		—
Total financial liabilities	$	12,161,099	$	253,824	$	737,159	$	11,170,116



	Fair Value Measurement as of December 31, 2018
	Total Fair Value		Level 1		Level 2		Level 3
Financial assets
Fixed maturity securities, bonds held-to-maturity
U.S. states and political subdivisions	$	250,899	$	—	$	250,899	$	—
Foreign governments	4,430		—		4,430		—
Corporate debt securities	7,548,829		—		7,548,829		—
Residential mortgage-backed securities	319,910		—		319,910		—
Collateralized debt securities	5,285		—		5,285		—
Other debt securities	731		—		731		—
Total bonds held-to-maturity	8,130,084		—		8,130,084		—
Fixed maturity securities, bonds available-for-sale
U.S. treasury and government	28,399		—		28,399		—
U.S. states and political subdivisions	862,030		—		862,030		—
Foreign governments	6,210		—		6,210		—
Corporate debt securities	5,283,818		—		5,279,585		4,233
Residential mortgage-backed securities	31,662		—		31,662		—
Collateralized debt securities	3,444		—		3,444		—
Total bonds available-for-sale	6,215,563		—		6,211,330		4,233
Equity securities
Common stock	1,509,186		1,509,073		—		113
Preferred stock	21,042		21,042		—		—
Total equity securities	1,530,228		1,530,115		—		113
Options	148,006		—		—		148,006
Mortgage loans on real estate	5,049,468		—		5,049,468		—
Policy loans	376,254		—		—		376,254
Short-term investments	206,760		—		206,760		—
Separate account assets	905,824		227,448		678,376		—
Separately managed accounts	16,532		—		—		16,532
Total financial assets	$	22,578,719	$	1,757,563	$	20,276,018	$	545,138
Financial liabilities
Investment contracts	$	10,003,990	$	—	$	—	$	10,003,990
Embedded derivative liability for equity-indexed contracts	596,075		—		—		596,075
Notes payable	137,963		—		—		137,963
Separate account liabilities	905,824		227,448		678,376		—
Total financial liabilities	$	11,643,852	$	227,448	$	678,376	$	10,738,028

Financial Instruments Measured at Fair Value on Recurring Basis Using (Level 3) Inputs

For financial instruments measured at fair value on a recurring basis using Level 3 inputs during the period, a reconciliation of the beginning and ending balances is shown below (in thousands):



	Level 3
	Assets					Liability
	Investment Securities		Equity-Indexed Options			Embedded Derivative
Beginning balance at January 1, 2019	$	4,346	$	148,006		$	596,075
Total realized and unrealized investment gains (losses) included in other comprehensive income	—		—			—
Net fair value change included in realized gains (losses)	—		—			—
Net gain for derivatives included in net investment income	—		66,485			—
Net change included in interest credited	—		—			58,156
Purchases, sales and settlements or maturities
Purchases	—		17,356			—
Sales	—		—			—
Settlements or maturities	—		(15,691		)	—
Premiums less benefits	—		—			14,254
Ending balance at March 31, 2019	$	4,346	$	216,156		$	668,485
Beginning balance at January 1, 2018	$	—	$	220,190		$	512,526
Total realized and unrealized investment gains (losses) included in other comprehensive income	—		—			—
Net fair value change included in realized gains (losses)	—		—			—
Net loss for derivatives included in net investment income	—		(14,145		)	—
Net change included in interest credited	—		—			(13,436		)
Purchases, sales and settlements or maturities
Purchases	—		16,928			—
Sales	—		—			—
Settlements or maturities	—		(18,665		)	—
Premiums less benefits	—		—			36,551
Gross transfers into Level 3	—		—			—
Gross transfers out of Level 3	—		—			—
Ending balance at March 31, 2018	$	—	$	204,308		$	535,641

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details