Derivative Instruments

3 Months Ended

Mar. 31, 2020

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 Condensed Consolidated Statements of Financial Position	March 31, 2020					December 31, 2019
		Number of Instruments	Notional Amounts		Estimated Fair Value		Number of Instruments	Notional Amounts		Estimated Fair Value
Equity-indexed options	Other invested assets	466	$	2,669,500	$	125,988	473	$	2,654,600	$	256,005
Equity-indexed embedded derivative	Policyholders’ account balances	103,593	2,545,271		630,952		101,950	2,527,205		731,552

Derivatives Not Designated as Hedging Instruments	Location in the Condensed Consolidated Statements of Operations	Gains (Losses) Recognized in Income on Derivatives
		Three months ended March 31,
		2020		2019
Equity-indexed options	Net investment income	$	(108,095)	$	66,485
Equity-indexed embedded derivative	Interest credited to policyholders’ account balances	89,581		(58,156)

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 condensed 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):

		March 31, 2020
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	Baa2/BBB	$	26,494	$	(87)	$	28,000	$	27,913	$	26,494	$	1,419	$	—
Credit Suisse	Baa2/BBB+	1,459		1,590		—		1,590		1,459		131		—
Goldman-Sachs	A3/BBB+	709		640		—		640		640		—		69
ING	Baa1/A-	23,193		7,560		16,000		23,560		23,193		367		—
Morgan Stanley	A3/BBB+	10,421		3,136		9,000		12,136		10,421		1,715		—
NATIXIS*	A1/A+	19,961		21,250		—		21,250		19,961		1,289		—
SunTrust	A3/A-	25,018		10,040		17,000		27,040		25,018		2,022		—
Wells Fargo	A2/A-	18,733		5,350		15,000		20,350		18,733		1,617		—
Total		$	125,988	$	49,479	$	85,000	$	134,479	$	125,919	$	8,560	$	69

		December 31, 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	$	54,583	$	27,343	$	28,000	$	55,343	$	54,583	$	760	$	—
Credit Suisse	Baa2/BBB+	7,117		7,390		—		7,390		7,009		381		108
Goldman-Sachs	A3/BBB+	1,053		930		—		930		930		—		123
ING	Baa1/A-	30,330		14,940		16,000		30,940		30,330		610		—
Morgan Stanley	A3/BBB+	34,988		25,926		9,000		34,926		34,926		—		62
NATIXIS*	A1/A+	29,918		30,200		—		30,200		29,918		282		—
SunTrust	A3/A-	60,360		41,720		17,000		58,720		58,645		75		1,715
Wells Fargo	A2/A-	37,656		24,110		15,000		39,110		37,656		1,454		—
Total		$	256,005	$	172,559	$	85,000	$	257,559	$	253,997	$	3,562	$	2,008

* Collateral is prohibited from being held in invested assets