Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2019

Carrying Amount and Fair Value of Financial Instruments

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



	December 31,
	2019				2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Fixed maturity securities, bonds held-to-maturity	$	8,631,261	$	8,968,690	$	8,211,449	$	8,130,084
Fixed maturity securities, bonds available-for-sale	6,725,085		6,725,085		6,215,563		6,215,563
Equity securities	1,700,960		1,700,960		1,530,228		1,530,228
Equity-indexed options	256,005		256,005		148,006		148,006
Mortgage loans on real estate, net of allowance	5,097,017		5,309,005		5,124,707		5,049,468
Policy loans	379,657		379,657		376,254		376,254
Short-term investments	425,321		425,321		206,760		206,760
Separate account assets ($1,049,938 and $905,824 included in fair value hierarchy)	1,073,891		1,073,891		918,369		918,369
Separately managed accounts	50,503		50,503		16,532		16,532
Total financial assets	$	24,339,700	$	24,889,117	$	22,747,868	$	22,591,264
Financial liabilities
Investment contracts	$	10,254,959	$	10,254,959	$	10,003,990	$	10,003,990
Embedded derivative liability for equity-indexed contracts	731,552		731,552		596,075		596,075
Notes payable	157,997		157,997		137,963		137,963
Separate account liabilities ($1,049,938 and $905,824 included in fair value hierarchy)	1,073,891		1,073,891		918,369		918,369
Total financial liabilities	$	12,218,399	$	12,218,399	$	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
	December 31,					December 31,
	2019		2018		Unobservable Input	2019	2018
Indexed Annuities	$	706.5	$	592.8	Lapse Rate	1-70%	1-70%
					Mortality Multiplier	90-100%	90-100%
					Equity Volatility	11-46%	19-26%
Indexed Life	25.1		3.3		Equity Volatility	11-46%	19-26%

Quantitative Disclosures Regarding Fair Value Hierarchy Measurements

The carrying value and estimated fair value of financial instruments not recorded at fair value on a recurring basis are shown below (in thousands):



	December 31, 2019
	FV Hierarchy Level	Carrying Amount		Fair Value
Financial assets
Fixed maturity securities, bonds held-to-maturity
U.S. states and political subdivisions	Level 2	$	165,109	$	170,114
Foreign governments	Level 2	3,907		4,349
Corporate debt securities	Level 2	8,099,098		8,424,969
Residential mortgage-backed securities	Level 2	237,516		242,828
Collateralized debt securities	Level 2	125,631		126,430
Total fixed maturity securities, bonds held-to-maturity		8,631,261		8,968,690
Mortgage loans on real estate, net of allowance	Level 3	5,097,017		5,309,005
Policy loans	Level 3	379,657		379,657
Total financial assets		$	14,107,935	$	14,657,352
Financial liabilities
Investment contracts	Level 3	$	10,254,959	$	10,254,959
Notes payable	Level 3	157,997		157,997
Total financial liabilities		$	10,412,956	$	10,412,956



	December 31, 2018
	FV Hierarchy Level	Carrying Amount		Fair Value
Financial assets
Fixed maturity securities, bonds held-to-maturity
U.S. states and political subdivisions	Level 2	$	245,360	$	250,899
Foreign governments	Level 2	3,961		4,430
Corporate debt securities	Level 2	7,640,891		7,548,829
Residential mortgage-backed securities	Level 2	315,306		319,910
Collateralized debt securities	Level 2	5,214		5,285
Other debt securities	Level 2	717		731
Total fixed maturity securities, bonds held-to-maturity		8,211,449		8,130,084
Mortgage loans on real estate, net of allowance	Level 3	5,124,707		5,049,468
Policy loans	Level 3	376,254		376,254
Total financial assets		$	13,712,410	$	13,555,806
Financial liabilities
Investment contracts	Level 3	$	10,003,990	$	10,003,990
Notes payable	Level 3	137,963		137,963
Total financial liabilities		$	10,141,953	$	10,141,953

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



	Assets and Liabilities Carried at Fair Value by Hierarchy Level at December 31, 2019
	Total Fair Value		Level 1		Level 2		Level 3
Financial assets
Fixed maturity securities, bonds available-for-sale
U.S. treasury and government	$	29,941	$	—	$	29,941	$	—
U.S. states and political subdivisions	1,078,165		—		1,078,165		—
Foreign governments	6,287		—		6,287		—
Corporate debt securities	5,576,620		—		5,531,776		44,844
Residential mortgage-backed securities	23,943		—		23,943		—
Collateralized debt securities	10,129		—		10,129		—
Total bonds available-for-sale	6,725,085		—		6,680,241		44,844
Equity securities
Common stock	1,682,149		1,681,686		—		463
Preferred stock	18,811		18,811		—		—
Total equity securities	1,700,960		1,700,497		—		463
Options	256,005		—		—		256,005
Short-term investments	425,321		—		425,321		—
Separate account assets	1,049,938		271,575		778,363		—
Separately managed accounts	50,503		—		—		50,503
Total financial assets	$	10,207,812	$	1,972,072	$	7,883,925	$	351,815
Financial liabilities
Embedded derivative for equity-indexed contracts	$	731,552	$	—	$	—	$	731,552
Separate account liabilities	1,049,938		271,575		778,363		—
Total financial liabilities	$	1,781,490	$	271,575	$	778,363	$	731,552



	Assets and Liabilities Carried at Fair Value by Hierarchy Level at December 31, 2018
	Total Fair Value		Level 1		Level 2		Level 3
Financial assets
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
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	$	9,022,913	$	1,757,563	$	7,096,466	$	168,884
Financial liabilities
Embedded derivative for equity-indexed contracts	$	596,075	$	—	$	—	$	596,075
Separate account liabilities	905,824		227,448		678,376		—
Total financial liabilities	$	1,501,899	$	227,448	$	678,376	$	596,075

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			Separately Managed Accounts		Embedded Derivative
Balance at December 31, 2016	$	14,264		$	156,479		$	—	$	314,330
Total realized and unrealized investment losses included in other comprehensive income	(4,465		)	—			—		—
Net gain for derivatives included in net investment income	—			90,433			—		—
Net change included in interest credited	—			—			—		98,351
Purchases, sales and settlements or maturities
Purchases	—			47,134			—		—
Sales	(12,436		)	(12,837		)	—		—
Settlements or maturities	(7,020		)	(61,019		)	—		—
Premiums less benefits	—			—			—		99,845
Carry value transfers in	15,000			—			—		—
Gross transfers into Level 3	382			—			—		—
Gross transfers out of Level 3	(5,725		)	—			—		—
Balance at December 31, 2017	$	—		$	220,190		$	—	$	512,526
Net loss for derivatives included in net investment income	—			(55,093		)	—		—
Net change included in interest credited	—			—			—		(17,862		)
Purchases, sales and settlements or maturities
Purchases	4,346			72,033			16,532		—
Sales	—			(18		)	—		—
Settlements or maturities	—			(89,106		)	—		—
Premiums less benefits	—			—			—		101,411
Balance at December 31, 2018	$	4,346		$	148,006		$	16,532	$	596,075
Net gain for derivatives included in net investment income	—			144,980			—		—
Net change included in interest credited	—			—			—		162,011
Net fair value change included in other comprehensive income	—			—			60		—
Purchases, sales and settlements or maturities
Purchases	45,307			75,163			33,911		—
Sales	(113		)	(13,396		)	—		—
Settlements or maturities	—			(98,748		)	—		—
Premiums less benefits	—			—			—		(26,534		)
Gross transfers out of Level 3	(4,233		)	—			—		—
Balance at December 31, 2019	$	45,307		$	256,005		$	50,503	$	731,552

- 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.

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