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Derivative Instruments
 9 Months Ended
Sep. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments Derivative Instruments

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):
 
Derivatives Not Designated
as Hedging Instruments
 
Location in the Consolidated
Statements of Financial Position
 
September 30, 2019
 
December 31, 2018
 
 
Number of
Instruments
 
Notional
Amounts
 
Estimated
Fair Value
 
Number of
Instruments
 
Notional
Amounts
 
Estimated
Fair Value
 
 
Equity-indexed options
 
Other invested assets
 
483

 
$
2,587,000

 
$
224,184

 
493

 
$
2,391,000

 
$
148,006

 
Equity-indexed embedded derivative
 
Policyholders’ account balances
 
99,767

 
2,484,968

 
691,766

 
90,440

 
2,327,769

 
596,075


Derivatives Not Designated
as Hedging Instruments
 
Location in the Consolidated
Statements of Operations
 
Gains (Losses) Recognized in Income on Derivatives
 
Three months ended September 30,
 
Nine months ended September 30,
 
2019
 
2018
 
2019
 
2018
Equity-indexed options
 
Net investment income
 
$
6,278

 
$
50,943

 
$
95,888

 
$
58,576

Equity-indexed embedded derivative
 
Interest credited to policyholders’
 account balances
 
(11,462
)
 
(52,797
)
 
(105,873
)
 
(56,960
)


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):
 
 
 
 
September 30, 2019
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
 
$
52,648

 
$
24,363

 
$
28,000

 
$
52,363

 
$
52,363

 
$
—

 
$
285

Credit Suisse
 
Baa2/BBB+
 
2,345

 
2,110

 
—

 
2,110

 
2,110

 
—

 
235

Goldman-Sachs
 
A3/BBB+
 
934

 
930

 
—

 
930

 
930

 
—

 
4

ING
 
Baa1/A-
 
28,587

 
13,110

 
16,000

 
29,110

 
28,587

 
523

 
—

Morgan Stanley
 
A3/BBB+
 
27,802

 
18,716

 
9,000

 
27,716

 
27,716

 
—

 
86

NATIXIS*
 
A1/A+
 
27,069

 
27,160

 
—

 
27,160

 
27,069

 
91

 
—

SunTrust
 
Baa1/BBB+
 
54,475

 
36,690

 
17,000

 
53,690

 
53,669

 
21

 
806

Wells Fargo
 
A2/A-
 
30,324

 
15,370

 
15,000

 
30,370

 
30,247

 
123

 
77

       Total
 
 
 
$
224,184

 
$
138,449

 
$
85,000

 
$
223,449

 
$
222,691

 
$
758

 
$
1,493

 
 
 
 
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

*
Includes collateral restrictions.