Attached files
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EX-10.11(B) - EXHIBIT 10.11(B) - HORACE MANN EDUCATORS CORP /DE/ | hm63017ex1011b.htm |
EX-10.10(A) - EXHIBIT 10.10(A) - HORACE MANN EDUCATORS CORP /DE/ | hm63017ex1010a.htm |
EX-10.9(A) - EXHIBIT 10.9(A) - HORACE MANN EDUCATORS CORP /DE/ | hm63017ex109a.htm |
EX-31.1 - EXHIBIT 31.1 - HORACE MANN EDUCATORS CORP /DE/ | hm63017ex311.htm |
EX-32.1 - EXHIBIT 32.1 - HORACE MANN EDUCATORS CORP /DE/ | hm63017ex321.htm |
EX-99.1 - EXHIBIT 99.1 - HORACE MANN EDUCATORS CORP /DE/ | hm63017ex991.htm |
EX-10.7 - EXHIBIT 10.7 - HORACE MANN EDUCATORS CORP /DE/ | hm63017ex107.htm |
EX-32.2 - EXHIBIT 32.2 - HORACE MANN EDUCATORS CORP /DE/ | hm63017ex322.htm |
EX-31.2 - EXHIBIT 31.2 - HORACE MANN EDUCATORS CORP /DE/ | hm63017ex312.htm |
EX-11 - EXHIBIT 11 - HORACE MANN EDUCATORS CORP /DE/ | hm63017ex11.htm |
EX-15 - EXHIBIT 15 - HORACE MANN EDUCATORS CORP /DE/ | hm63017ex15.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2017
OR
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-10890
HORACE MANN EDUCATORS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 37-0911756 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1 Horace Mann Plaza, Springfield, Illinois 62715-0001
(Address of principal executive offices, including Zip Code)
Registrant’s Telephone Number, Including Area Code: 217-789-2500
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No
Indicate by check mark the registrant’s filer status, as such terms are defined in Rule 12b-2 of the Act.
Large accelerated filer | X | Accelerated filer | |||
Non-accelerated filer | Smaller reporting company | ||||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Act.
Yes No X
As of July 31, 2017, the registrant had 40,673,282 shares of Common Stock, par value $0.001 per share, outstanding.
HORACE MANN EDUCATORS CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2017
INDEX
PART I - FINANCIAL INFORMATION | Page | |
Item 1. | Financial Statements | |
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1A. | ||
Item 2. | ||
Item 5. | ||
Item 6. | ||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Horace Mann Educators Corporation:
We have reviewed the consolidated balance sheet of Horace Mann Educators Corporation and subsidiaries (the Company) as of June 30, 2017, the related consolidated statements of operations and comprehensive income for the three-month and six-month periods ended June 30, 2017 and 2016, and the related consolidated statements of changes in shareholders’ equity, and cash flows for the six-month periods ended June 30, 2017 and 2016. These consolidated financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Horace Mann Educators Corporation and subsidiaries as of December 31, 2016, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 1, 2017, we expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP | |
KPMG LLP | |
Chicago, Illinois | |
August 8, 2017 |
1
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share data)
June 30, 2017 | December 31, 2016 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Investments | ||||||||
Fixed maturity securities, available for sale, at fair value (amortized cost 2017, $7,161,917; 2016, $7,152,127) | $ | 7,578,585 | $ | 7,456,708 | ||||
Equity securities, available for sale, at fair value (cost 2017, $140,553; 2016, $134,013) | 156,909 | 141,649 | ||||||
Short-term and other investments | 502,443 | 401,015 | ||||||
Total investments | 8,237,937 | 7,999,372 | ||||||
Cash | 16,006 | 16,670 | ||||||
Deferred policy acquisition costs | 256,878 | 267,580 | ||||||
Goodwill | 47,396 | 47,396 | ||||||
Other assets | 341,684 | 321,874 | ||||||
Separate Account (variable annuity) assets | 1,976,234 | 1,923,932 | ||||||
Total assets | $ | 10,876,135 | $ | 10,576,824 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Policy liabilities | ||||||||
Investment contract and life policy reserves | $ | 5,480,863 | $ | 5,447,969 | ||||
Unpaid claims and claim expenses | 352,513 | 329,888 | ||||||
Unearned premiums | 248,123 | 246,274 | ||||||
Total policy liabilities | 6,081,499 | 6,024,131 | ||||||
Other policyholder funds | 713,004 | 708,950 | ||||||
Other liabilities | 495,931 | 378,620 | ||||||
Long-term debt | 247,337 | 247,209 | ||||||
Separate Account (variable annuity) liabilities | 1,976,234 | 1,923,932 | ||||||
Total liabilities | 9,514,005 | 9,282,842 | ||||||
Preferred stock, $0.001 par value, authorized 1,000,000 shares; none issued | — | — | ||||||
Common stock, $0.001 par value, authorized 75,000,000 shares; issued, 2017, 65,341,779; 2016, 64,917,683 | 65 | 65 | ||||||
Additional paid-in capital | 459,317 | 453,479 | ||||||
Retained earnings | 1,150,270 | 1,155,732 | ||||||
Accumulated other comprehensive income (loss), net of taxes: | ||||||||
Net unrealized investment gains on fixed maturity and equity securities | 243,510 | 175,738 | ||||||
Net funded status of benefit plans | (11,817 | ) | (11,817 | ) | ||||
Treasury stock, at cost, 2017, 24,672,932 shares; 2016, 24,672,932 shares | (479,215 | ) | (479,215 | ) | ||||
Total shareholders’ equity | 1,362,130 | 1,293,982 | ||||||
Total liabilities and shareholders’ equity | $ | 10,876,135 | $ | 10,576,824 |
See Notes to Consolidated Financial Statements.
2
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
($ in thousands, except per share data)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues | ||||||||||||||||
Insurance premiums and contract charges earned | $ | 195,718 | $ | 188,360 | $ | 391,440 | $ | 373,810 | ||||||||
Net investment income | 91,994 | 91,179 | 182,705 | 175,838 | ||||||||||||
Net realized investment gains | 2,072 | 3,080 | 1,830 | 2,926 | ||||||||||||
Other income | 1,652 | 939 | 2,765 | 2,287 | ||||||||||||
Total revenues | 291,436 | 283,558 | 578,740 | 554,861 | ||||||||||||
Benefits, losses and expenses | ||||||||||||||||
Benefits, claims and settlement expenses | 165,879 | 148,408 | 309,975 | 267,921 | ||||||||||||
Interest credited | 49,348 | 47,576 | 98,122 | 94,266 | ||||||||||||
Policy acquisition expenses amortized | 24,808 | 24,587 | 49,694 | 48,639 | ||||||||||||
Operating expenses | 46,228 | 43,345 | 94,984 | 86,141 | ||||||||||||
Interest expense | 2,945 | 2,948 | 5,901 | 5,883 | ||||||||||||
Total benefits, losses and expenses | 289,208 | 266,864 | 558,676 | 502,850 | ||||||||||||
Income before income taxes | 2,228 | 16,694 | 20,064 | 52,011 | ||||||||||||
Income tax (benefit) expense | (33 | ) | 4,828 | 2,485 | 14,992 | |||||||||||
Net income | $ | 2,261 | $ | 11,866 | $ | 17,579 | $ | 37,019 | ||||||||
Net income per share | ||||||||||||||||
Basic | $ | 0.05 | $ | 0.29 | $ | 0.43 | $ | 0.90 | ||||||||
Diluted | $ | 0.05 | $ | 0.29 | $ | 0.42 | $ | 0.89 | ||||||||
Weighted average number of shares and equivalent shares (in thousands) | ||||||||||||||||
Basic | 41,368 | 41,082 | 41,268 | 41,200 | ||||||||||||
Diluted | 41,493 | 41,314 | 41,416 | 41,416 | ||||||||||||
Net realized investment gains (losses) | ||||||||||||||||
Total other-than-temporary impairment losses on securities | $ | (3,564 | ) | $ | (3,853 | ) | $ | (6,361 | ) | $ | (7,526 | ) | ||||
Portion of losses recognized in other comprehensive income | — | (290 | ) | — | (290 | ) | ||||||||||
Net other-than-temporary impairment losses on securities recognized in earnings | (3,564 | ) | (3,563 | ) | (6,361 | ) | (7,236 | ) | ||||||||
Realized investment gains, net | 5,636 | 6,643 | 8,191 | 10,162 | ||||||||||||
Total | $ | 2,072 | $ | 3,080 | $ | 1,830 | $ | 2,926 |
See Notes to Consolidated Financial Statements.
3
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
($ in thousands)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Comprehensive income | ||||||||||||||||
Net income | $ | 2,261 | $ | 11,866 | $ | 17,579 | $ | 37,019 | ||||||||
Other comprehensive income, net of taxes: | ||||||||||||||||
Change in net unrealized investment gains on fixed maturity and equity securities | 45,239 | 84,996 | 67,772 | 154,486 | ||||||||||||
Change in net funded status of benefit plans | — | — | — | — | ||||||||||||
Other comprehensive income | 45,239 | 84,996 | 67,772 | 154,486 | ||||||||||||
Total | $ | 47,500 | $ | 96,862 | $ | 85,351 | $ | 191,505 |
See Notes to Consolidated Financial Statements.
4
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
($ in thousands, except per share data)
Six Months Ended June 30, | ||||||||
2017 | 2016 | |||||||
Common stock, $0.001 par value | ||||||||
Beginning balance | $ | 65 | $ | 65 | ||||
Options exercised, 2017, 127,774 shares; 2016, 94,225 shares | — | — | ||||||
Conversion of common stock units, 2017, 15,981 shares; 2016, 8,538 shares | — | — | ||||||
Conversion of restricted stock units, 2017, 280,341 shares; 2016, 171,042 shares | — | — | ||||||
Ending balance | 65 | 65 | ||||||
Additional paid-in capital | ||||||||
Beginning balance | 453,479 | 442,648 | ||||||
Options exercised and conversion of common stock units and restricted stock units | 1,909 | 939 | ||||||
Share-based compensation expense | 3,929 | 3,917 | ||||||
Ending balance | 459,317 | 447,504 | ||||||
Retained earnings | ||||||||
Beginning balance | 1,155,732 | 1,116,277 | ||||||
Net income | 17,579 | 37,019 | ||||||
Cash dividends, 2017, $0.55 per share; 2016, $0.53 per share | (23,041 | ) | (22,174 | ) | ||||
Ending balance | 1,150,270 | 1,131,122 | ||||||
Accumulated other comprehensive income, net of taxes | ||||||||
Beginning balance | 163,921 | 163,373 | ||||||
Change in net unrealized investment gains and losses on fixed maturity and equity securities | 67,772 | 154,486 | ||||||
Change in net funded status of benefit plans | — | — | ||||||
Ending balance | 231,693 | 317,859 | ||||||
Treasury stock, at cost | ||||||||
Beginning balance, 2017, 24,672,932 shares; 2016, 23,971,522 shares | (479,215 | ) | (457,702 | ) | ||||
Acquisition of shares, 2017, 0 shares; 2016, 701,410 shares | — | (21,513 | ) | |||||
Ending balance, 2017, 24,672,932 shares; 2016, 24,672,932 shares | (479,215 | ) | (479,215 | ) | ||||
Shareholders’ equity at end of period | $ | 1,362,130 | $ | 1,417,335 |
See Notes to Consolidated Financial Statements.
5
HORACE MANN EDUCATORS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
($ in thousands)
Six Months Ended June 30, | ||||||||
2017 | 2016 | |||||||
Cash flows - operating activities | ||||||||
Premiums collected | $ | 392,715 | $ | 367,182 | ||||
Policyholder benefits paid | (274,256 | ) | (268,212 | ) | ||||
Policy acquisition and other operating expenses paid | (141,913 | ) | (138,612 | ) | ||||
Federal income taxes paid | (8,068 | ) | (15,094 | ) | ||||
Investment income collected | 185,546 | 175,541 | ||||||
Interest expense paid | (5,738 | ) | (5,989 | ) | ||||
Other | 6,167 | 954 | ||||||
Net cash provided by operating activities | 154,453 | 115,770 | ||||||
Cash flows - investing activities | ||||||||
Fixed maturities | ||||||||
Purchases | (723,354 | ) | (834,114 | ) | ||||
Sales | 229,690 | 257,033 | ||||||
Maturities, paydowns, calls and redemptions | 491,739 | 475,532 | ||||||
Purchase of other invested assets | (53,716 | ) | (33,809 | ) | ||||
Net cash provided by (used in) short-term and other investments | (32,391 | ) | 7,925 | |||||
Net cash (used in) investing activities | (88,032 | ) | (127,433 | ) | ||||
Cash flows - financing activities | ||||||||
Dividends paid to shareholders | (23,041 | ) | (22,174 | ) | ||||
Acquisition of treasury stock | — | (21,513 | ) | |||||
Proceeds from exercise of stock options | 3,130 | 1,926 | ||||||
Withholding tax payments on RSUs tendered | (2,604 | ) | (3,233 | ) | ||||
Annuity contracts: variable, fixed and FHLB funding agreements | ||||||||
Deposits | 234,133 | 237,265 | ||||||
Benefits, withdrawals and net transfers to Separate Account (variable annuity) assets | (200,845 | ) | (162,575 | ) | ||||
Transfer of Company 401(k) assets to a third-party provider | (77,898 | ) | — | |||||
Life policy accounts | ||||||||
Deposits | 2,240 | 1,680 | ||||||
Withdrawals and surrenders | (2,287 | ) | (1,995 | ) | ||||
Change in bank overdrafts | 87 | 17,205 | ||||||
Net cash (used in) provided by financing activities | (67,085 | ) | 46,586 | |||||
Net (decrease) increase in cash | (664 | ) | 34,923 | |||||
Cash at beginning of period | 16,670 | 15,509 | ||||||
Cash at end of period | $ | 16,006 | $ | 50,432 |
See Notes to Consolidated Financial Statements.
6
HORACE MANN EDUCATORS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2017 and 2016
($ in thousands, except per share data)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements of Horace Mann Educators Corporation (“HMEC”; and together with its subsidiaries, the “Company” or “Horace Mann”) have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission (“SEC”), specifically Regulation S-X and the instructions to Form 10-Q. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP, but are not required for interim reporting purposes, have been omitted. The Company believes that these consolidated financial statements contain all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to present fairly the Company’s consolidated financial position as of June 30, 2017, the consolidated results of operations and comprehensive income for the three and six months ended June 30, 2017 and 2016, and the consolidated changes in shareholders’ equity and cash flows for the six months ended June 30, 2017 and 2016. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets and liabilities, (2) disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The subsidiaries of HMEC market and underwrite personal lines of property and casualty (primarily personal lines automobile and homeowners) insurance, retirement annuities (primarily tax-qualified products) and life insurance, primarily to K-12 teachers, administrators and other employees of public schools and their families. HMEC’s principal operating subsidiaries are Horace Mann Life Insurance Company, Horace Mann Insurance Company, Teachers Insurance Company, Horace Mann Property & Casualty Insurance Company and Horace Mann Lloyds.
These consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes to consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
The results of operations for the three and six months ended June 30, 2017 are not necessarily indicative of the results to be expected for the full year.
The Company reclassified the presentation of certain prior period information to conform to the 2017 presentation. See “Adopted Accounting Standards”.
Investment Contract and Life Policy Reserves
This table summarizes the Company’s investment contract and life policy reserves.
($ in thousands) | June 30, 2017 | December 31, 2016 | ||||||
Investment contract reserves | $ | 4,377,759 | $ | 4,360,456 | ||||
Life policy reserves | 1,103,104 | 1,087,513 | ||||||
Total | $ | 5,480,863 | $ | 5,447,969 |
7
Note 1 - Basis of Presentation (Continued)
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) represents the accumulated change in shareholders’ equity from transactions and other events and circumstances from non-shareholder sources. For the Company, accumulated other comprehensive income (loss) includes the after tax change in net unrealized investment gains and losses on fixed maturity and equity securities and the after tax change in net funded status of benefit plans for the period as shown in the Consolidated Statement of Changes in Shareholders’ Equity. The following tables reconcile these components.
($ in thousands) | Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities (1)(2) | Benefit Plans (1) | Total (1) | |||||||||
Beginning balance, April 1, 2017 | $ | 198,271 | $ | (11,817 | ) | $ | 186,454 | |||||
Other comprehensive income (loss) before reclassifications | 46,303 | — | 46,303 | |||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | (1,064 | ) | — | (1,064 | ) | |||||||
Net current period other comprehensive income | 45,239 | — | 45,239 | |||||||||
Ending balance, June 30, 2017 | $ | 243,510 | $ | (11,817 | ) | $ | 231,693 | |||||
Beginning balance, January 1, 2017 | $ | 175,738 | $ | (11,817 | ) | $ | 163,921 | |||||
Other comprehensive income (loss) before reclassifications | 68,633 | — | 68,633 | |||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | (861 | ) | — | (861 | ) | |||||||
Net current period other comprehensive income | 67,772 | — | 67,772 | |||||||||
Ending balance, June 30, 2017 | $ | 243,510 | $ | (11,817 | ) | $ | 231,693 |
(1) | All amounts are net of tax. |
(2) | The pretax amounts reclassified from accumulated other comprehensive income (loss), $1,638 thousand and $1,325 thousand, are included in net realized investment gains and losses and the related income tax expenses, $574 thousand and $464 thousand are included in income tax expense in the Consolidated Statements of Operations for the three and six months ended June 30, 2017, respectively. |
8
Note 1 - Basis of Presentation (Continued)
($ in thousands) | Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities (1)(2) | Benefit Plans (1) | Total (1) | |||||||||
Beginning balance, April 1, 2016 | $ | 244,657 | $ | (11,794 | ) | $ | 232,863 | |||||
Other comprehensive income (loss) before reclassifications | 87,809 | — | 87,809 | |||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | (2,813 | ) | — | (2,813 | ) | |||||||
Net current period other comprehensive income | 84,996 | — | 84,996 | |||||||||
Ending balance, June 30, 2016 | $ | 329,653 | $ | (11,794 | ) | $ | 317,859 | |||||
Beginning balance, January 1, 2016 | $ | 175,167 | $ | (11,794 | ) | $ | 163,373 | |||||
Other comprehensive income (loss) before reclassifications | 157,780 | — | 157,780 | |||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | (3,294 | ) | — | (3,294 | ) | |||||||
Net current period other comprehensive income | 154,486 | — | 154,486 | |||||||||
Ending balance, June 30, 2016 | $ | 329,653 | $ | (11,794 | ) | $ | 317,859 |
(1) | All amounts are net of tax. |
(2) | The pretax amounts reclassified from accumulated other comprehensive income (loss), $4,327 thousand and $5,067 thousand, are included in net realized investment gains and losses and the related income tax expenses, $1,514 thousand and $1,773 thousand, are included in income tax expense in the Consolidated Statements of Operations for the three and six months ended June 30, 2016, respectively. |
Comparative information for elements that are not required to be reclassified in their entirety to net income in the same reporting period is located in “Note 2 -- Investments -- Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities”.
Adopted Accounting Standards
Employee Share-based Payment Accounting
Effective January 1, 2017, the Company adopted new accounting guidance for employee share-based payments which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The recognition and classification of the excess tax benefit provisions were applied prospectively in the results of operations. This adoption resulted in additional excess tax benefits of $2,638 thousand which reduced the current provision for income taxes in the results of operations. The statutory tax withholding classification, which are cash payments made to taxing authorities for withheld taxes funded through tendered shares, were applied retrospectively and the Company reclassified the statutory tax withholding requirements in the statement of cash flows from Other in operating activities to Withholding tax payments on RSUs tendered in financing activities. This statutory withholding reclassification resulted in $2,604 thousand and $3,233 thousand being included in financing activities for the six months ended June 30, 2017 and 2016, respectively. There were no cumulative effect adjustments upon adoption of the new accounting guidance.
9
Note 1 - Basis of Presentation (Continued)
Pending Accounting Standards
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting guidance to provide a single comprehensive model in accounting for revenue arising from contracts with customers. The guidance applies to all contracts with customers; however, insurance contracts are specifically excluded from this updated guidance. The guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted only for annual reporting periods beginning after December 15, 2016. The Company plans to adopt the guidance as of January 1, 2018. Management believes the adoption of this accounting guidance will not have a material effect on the results of operations or financial position, and related disclosures, of the Company.
Recognition and Measurement of Financial Assets and Liabilities
In January 2016, the FASB issued accounting guidance to improve certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. Among other things, this guidance requires public entities to measure equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income and to perform a qualitative assessment to identify impairment for equity investments without readily determinable fair values. Companies are required to apply this guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the year of adoption and, for the guidance related to equity securities without readily determinable fair values, companies are required to apply a prospective approach to equity investments that exist as of the date of adoption. The guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those years. Early application is permitted. The guidance will not have an impact on the Company’s financial position and management is evaluating the impact that this guidance will have on the Company’s results of operations.
Statement of Cash Flows -- Classification
In August 2016, the FASB issued guidance to reduce diversity in practice in the statement of cash flows between operating, investing and financing activities related to the classification of cash receipts and cash payments for eight specific issues. The FASB acknowledged that current GAAP either is unclear or does not include specific guidance on these eight cash flow classification issues: (1) debt prepayment or extinguishment costs; (2) settlement of zero-coupon bonds (pertains to issuers); (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims (pertains to claimants); (5) proceeds from the settlement of corporate-owned life insurance policies; (6) distributions received from equity method investees; (7)beneficial interests in securitization transactions (pertains to transferors) and (8) separately identifiable cash flows and application of the predominance principle. For public business entities, the guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those years, using a retrospective approach. The guidance allows prospective adoption for individual issues if it is impracticable to apply the amendments retrospectively for those issues. Early application is permitted. Management believes the adoption of this accounting guidance will not have a material effect on the classifications in the Company’s consolidated statement of cash flows. The adoption of this accounting guidance will not have any effect on the results of operations or financial position of the Company.
10
Note 1 - Basis of Presentation (Continued)
Accounting for Leases
In February 2016, the FASB issued accounting and disclosure guidance to improve financial reporting and comparability among organizations about leasing transactions. Under the new guidance, for leases with lease terms of more than 12 months, a lessee will be required to recognize assets and liabilities on the balance sheet for the rights and obligations created by those leases. Consistent with current accounting guidance, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or an operating lease. However, while current guidance requires only capital leases to be recognized on the balance sheet, the new guidance will require both operating and capital leases to be recognized on the balance sheet. In transition to the new guidance, companies are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those years. Early application is permitted. Management is evaluating the impact this guidance will have on the results of operations and financial position of the Company.
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued guidance to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments, including reinsurance receivables, held by companies. The new guidance replaces the incurred loss impairment methodology and requires an organization to measure and recognize all current expected credit losses (“CECL”) for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Companies will need to utilize forward-looking information to better inform their credit loss estimates. Companies will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Credit losses related to available for sale debt securities -- which represent over 90% of Horace Mann’s total investment portfolio -- will be recorded through an allowance for credit losses with this allowance having a limit equal to the amount by which fair value is below amortized cost. The guidance also requires enhanced qualitative and quantitative disclosures to provide additional information about the amounts recorded in the financial statements. For public business entities that are SEC filers, the guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those years, using a modified-retrospective approach. Early application is permitted for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. Management is evaluating the impact this guidance will have on the results of operations and financial position of the Company.
Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued guidance to simplify the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will be required to disclose the amount of goodwill for reporting units with zero or negative carrying amounts. Public business entities should adopt the guidance prospectively for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early application is permitted. Management believes the adoption of this accounting guidance will not have a material effect on how it tests goodwill for impairment.
11
Note 2 - Investments
The Company’s investment portfolio includes free-standing derivative financial instruments (currently over the counter (“OTC”) index call option contracts) to economically hedge risk associated with its fixed indexed annuity (“FIA”) and indexed universal life (“IUL”) products’ contingent liabilities. The Company’s FIA and IUL products include embedded derivative features that are discussed in “Note 1 -- Summary of Significant Accounting Policies -- Investment Contract and Life Policy Reserves -- Reserves for Fixed Indexed Annuities and Indexed Universal Life Policies” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The Company’s investment portfolio included no other free-standing derivative financial instruments (futures, forwards, swaps, option contracts or other financial instruments with similar characteristics), and there were no other embedded derivative features related to the Company’s investment or insurance products during the six months ended June 30, 2017 and 2016.
12
Note 2 - Investments (Continued)
Fixed Maturity and Equity Securities
The Company’s investment portfolio is comprised primarily of fixed maturity securities and also includes equity securities. The amortized cost or cost, unrealized investment gains and losses, fair values and other-than-temporary impairment (“OTTI”) included in accumulated other comprehensive income (“AOCI”) of all fixed maturity and equity securities in the portfolio were as follows:
($ in thousands) | Amortized Cost or Cost | Unrealized Investment Gains | Unrealized Investment Losses | Fair Value | OTTI in AOCI (1) | |||||||||||||||
June 30, 2017 | ||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||
U.S. Government and federally sponsored agency obligations (2): | ||||||||||||||||||||
Mortgage-backed securities | $ | 589,643 | $ | 36,054 | $ | 2,633 | $ | 623,064 | $ | — | ||||||||||
Other, including | ||||||||||||||||||||
U.S. Treasury securities | 588,713 | 23,550 | 5,913 | 606,350 | — | |||||||||||||||
Municipal bonds | 1,659,648 | 168,001 | 10,429 | 1,817,220 | — | |||||||||||||||
Foreign government bonds | 93,779 | 6,272 | 5 | 100,046 | — | |||||||||||||||
Corporate bonds | 2,645,268 | 186,601 | 4,261 | 2,827,608 | — | |||||||||||||||
Other mortgage-backed securities | 1,584,866 | 26,076 | 6,645 | 1,604,297 | 1,447 | |||||||||||||||
Totals | $ | 7,161,917 | $ | 446,554 | $ | 29,886 | $ | 7,578,585 | $ | 1,447 | ||||||||||
Equity securities (3) | $ | 140,553 | $ | 17,911 | $ | 1,555 | $ | 156,909 | $ | — | ||||||||||
December 31, 2016 | ||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||
U.S. Government and federally sponsored agency obligations (2): | ||||||||||||||||||||
Mortgage-backed securities | $ | 587,355 | $ | 34,256 | $ | 6,720 | $ | 614,891 | $ | — | ||||||||||
Other, including | ||||||||||||||||||||
U.S. Treasury securities | 458,745 | 18,518 | 10,120 | 467,143 | — | |||||||||||||||
Municipal bonds | 1,648,252 | 143,733 | 22,588 | 1,769,397 | — | |||||||||||||||
Foreign government bonds | 93,864 | 5,102 | 297 | 98,669 | — | |||||||||||||||
Corporate bonds | 2,672,818 | 152,229 | 14,826 | 2,810,221 | — | |||||||||||||||
Other mortgage-backed securities | 1,691,093 | 21,153 | 15,859 | 1,696,387 | 1,618 | |||||||||||||||
Totals | $ | 7,152,127 | $ | 374,991 | $ | 70,410 | $ | 7,456,708 | $ | 1,618 | ||||||||||
Equity securities (3) | $ | 134,013 | $ | 13,210 | $ | 5,574 | $ | 141,649 | $ | — |
(1) | Related to securities for which an unrealized loss was bifurcated to distinguish the credit-related portion and the portion driven by other market factors. Represents the amount of OTTI losses in AOCI which was not included in earnings; amounts also include net unrealized investment gains and losses on such impaired securities relating to changes in the fair value of those securities subsequent to the impairment measurement date. |
(2) | Fair value includes securities issued by Federal National Mortgage Association (“FNMA”) of $310,403 thousand and $272,668 thousand; Federal Home Loan Mortgage Corporation (“FHLMC”) of $368,396 thousand and $378,683 thousand; and Government National Mortgage Association (“GNMA”) of $111,458 thousand and $115,627 thousand as of June 30, 2017 and December 31, 2016, respectively. |
(3) | Includes nonredeemable (perpetual) preferred stocks, common stocks and closed-end funds. |
13
Note 2 - Investments (Continued)
The following table presents the fair value and gross unrealized losses of fixed maturity and equity securities in an unrealized loss position at June 30, 2017 and December 31, 2016, respectively. The Company views the decrease in value of all of the securities with unrealized losses at June 30, 2017 -- which was driven largely by changes in interest rates, spread widening, financial market illiquidity and/or market volatility from the date of acquisition -- as temporary. For fixed maturity securities, management does not have the intent to sell the securities and it is not more likely than not the Company will be required to sell the securities before the anticipated recovery of the amortized cost bases, and management expects to recover the entire amortized cost bases of the fixed maturity securities. For equity securities, the Company has the ability and intent to hold the securities for the recovery of cost and recovery of cost is expected within a reasonable period of time.
($ in thousands) | 12 Months or Less | More than 12 Months | Total | |||||||||||||||||||||
Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||
June 30, 2017 | ||||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||||
U.S. Government and federally sponsored agency obligations: | ||||||||||||||||||||||||
Mortgage-backed securities | $ | 101,350 | $ | 2,320 | $ | 3,480 | $ | 313 | $ | 104,830 | $ | 2,633 | ||||||||||||
Other | 223,396 | 5,913 | — | — | 223,396 | 5,913 | ||||||||||||||||||
Municipal bonds | 179,314 | 6,893 | 10,023 | 3,536 | 189,337 | 10,429 | ||||||||||||||||||
Foreign government bonds | 1,980 | 5 | — | — | 1,980 | 5 | ||||||||||||||||||
Corporate bonds | 157,230 | 2,949 | 26,907 | 1,312 | 184,137 | 4,261 | ||||||||||||||||||
Other mortgage-backed securities | 449,341 | 4,764 | 133,899 | 1,881 | 583,240 | 6,645 | ||||||||||||||||||
Total fixed maturity securities | 1,112,611 | 22,844 | 174,309 | 7,042 | 1,286,920 | 29,886 | ||||||||||||||||||
Equity securities (1) | 8,748 | 727 | 4,863 | 828 | 13,611 | 1,555 | ||||||||||||||||||
Combined totals | $ | 1,121,359 | $ | 23,571 | $ | 179,172 | $ | 7,870 | $ | 1,300,531 | $ | 31,441 | ||||||||||||
Number of positions with a gross unrealized loss | 413 | 60 | 473 | |||||||||||||||||||||
Fair value as a percentage of total fixed maturity and equity securities fair value | 14.5 | % | 2.3 | % | 16.8 | % | ||||||||||||||||||
December 31, 2016 | ||||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||||
U.S. Government and federally sponsored agency obligations: | ||||||||||||||||||||||||
Mortgage-backed securities | $ | 186,439 | $ | 6,176 | $ | 3,235 | $ | 544 | $ | 189,674 | $ | 6,720 | ||||||||||||
Other | 219,372 | 10,120 | — | — | 219,372 | 10,120 | ||||||||||||||||||
Municipal bonds | 408,163 | 19,006 | 9,928 | 3,582 | 418,091 | 22,588 | ||||||||||||||||||
Foreign government bonds | 24,182 | 297 | — | — | 24,182 | 297 | ||||||||||||||||||
Corporate bonds | 459,402 | 11,056 | 57,261 | 3,770 | 516,663 | 14,826 | ||||||||||||||||||
Other mortgage-backed securities | 640,691 | 10,470 | 229,106 | 5,389 | 869,797 | 15,859 | ||||||||||||||||||
Total fixed maturity securities | 1,938,249 | 57,125 | 299,530 | 13,285 | 2,237,779 | 70,410 | ||||||||||||||||||
Equity securities (1) | 56,676 | 4,567 | 7,956 | 1,007 | 64,632 | 5,574 | ||||||||||||||||||
Combined totals | $ | 1,994,925 | $ | 61,692 | $ | 307,486 | $ | 14,292 | $ | 2,302,411 | $ | 75,984 | ||||||||||||
Number of positions with a gross unrealized loss | 629 | 102 | 731 | |||||||||||||||||||||
Fair value as a percentage of total fixed maturity and equity securities fair value | 26.3 | % | 4.0 | % | 30.3 | % |
(1) | Includes nonredeemable (perpetual) preferred stocks, common stocks and closed-end funds. |
14
Note 2 - Investments (Continued)
Fixed maturity and equity securities with an investment grade rating represented 82% of the gross unrealized losses as of June 30, 2017. With respect to fixed maturity securities involving securitized financial assets, the underlying collateral cash flows were stress tested to determine there was no adverse change in the present value of cash flows below the amortized cost basis.
Credit Losses
The following table summarizes the cumulative amounts related to the Company’s credit loss component of OTTI losses on fixed maturity securities held as of June 30, 2017 and 2016 that the Company did not intend to sell as of those dates, and it was not more likely than not that the Company would be required to sell the securities before the anticipated recovery of the amortized cost bases, for which the non-credit portions of OTTI losses were recognized in other comprehensive income:
($ in thousands) | Six Months Ended June 30, | |||||||
2017 | 2016 | |||||||
Cumulative credit loss (1) | ||||||||
Beginning of period | $ | 13,703 | $ | 7,844 | ||||
New credit losses | — | 300 | ||||||
Increases to previously recognized credit losses | 1,910 | 2,480 | ||||||
Gains related to securities sold or paid down during the period | (2 | ) | — | |||||
End of period | $ | 15,611 | $ | 10,624 |
(1) | The cumulative credit loss amounts exclude OTTI losses on securities held as of the periods indicated that the Company intended to sell or it was more likely than not that the Company would be required to sell the security before the recovery of the amortized cost basis. |
Maturities/Sales of Fixed Maturity and Equity Securities
The following table presents the distribution of the Company’s fixed maturity securities portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers’ utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, including mortgage-backed securities and other asset-backed securities, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.
($ in thousands) | Percent of Total Fair Value | June 30, 2017 | ||||||||||||
June 30, 2017 | December 31, 2016 | Fair Value | Amortized Cost | |||||||||||
Estimated expected maturity: | ||||||||||||||
Due in 1 year or less | 3.6 | % | 3.9 | % | $ | 275,005 | $ | 269,431 | ||||||
Due after 1 year through 5 years | 27.4 | 28.7 | 2,079,595 | 1,981,639 | ||||||||||
Due after 5 years through 10 years | 34.1 | 35.2 | 2,580,296 | 2,478,678 | ||||||||||
Due after 10 years through 20 years | 22.8 | 19.5 | 1,729,382 | 1,609,894 | ||||||||||
Due after 20 years | 12.1 | 12.7 | 914,307 | 822,275 | ||||||||||
Total | 100.0 | % | 100.0 | % | $ | 7,578,585 | $ | 7,161,917 | ||||||
Average option-adjusted duration, in years | 6.0 | 5.9 |
15
Note 2 - Investments (Continued)
Proceeds received from sales of fixed maturity and equity securities, each determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each period were:
($ in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Fixed maturity securities | ||||||||||||||||
Proceeds received | $ | 118,818 | $ | 174,944 | $ | 229,690 | $ | 257,033 | ||||||||
Gross gains realized | 4,080 | 8,382 | 6,569 | 10,858 | ||||||||||||
Gross losses realized | (496 | ) | (948 | ) | (1,377 | ) | (1,440 | ) | ||||||||
Equity securities | ||||||||||||||||
Proceeds received | $ | 11,507 | $ | 6,474 | $ | 16,996 | $ | 12,622 | ||||||||
Gross gains realized | 1,702 | 650 | 2,750 | 1,170 | ||||||||||||
Gross losses realized | (236 | ) | (195 | ) | (428 | ) | (841 | ) |
Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities
Net unrealized investment gains and losses are computed as the difference between fair value and amortized cost for fixed maturity securities or cost for equity securities. The following table reconciles the net unrealized investment gains and losses, net of tax, included in accumulated other comprehensive income (loss), before the impact on deferred policy acquisition costs:
($ in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net unrealized investment gains and losses on fixed maturity securities, net of tax | ||||||||||||||||
Beginning of period | $ | 219,385 | $ | 276,381 | $ | 197,978 | $ | 198,714 | ||||||||
Change in net unrealized investment gains and losses | 51,523 | 89,744 | 73,414 | 168,085 | ||||||||||||
Reclassification of net realized investment gains to net income | (74 | ) | 5,331 | (558 | ) | 4,657 | ||||||||||
End of period | $ | 270,834 | $ | 371,456 | $ | 270,834 | $ | 371,456 | ||||||||
Net unrealized investment gains and losses on equity securities, net of tax | ||||||||||||||||
Beginning of period | $ | 8,952 | $ | 5,030 | $ | 4,963 | $ | 2,649 | ||||||||
Change in net unrealized investment gains and losses | 2,670 | 4,710 | 5,972 | 6,898 | ||||||||||||
Reclassification of net realized investment losses to net income | (991 | ) | (1,557 | ) | (304 | ) | (1,364 | ) | ||||||||
End of period | $ | 10,631 | $ | 8,183 | $ | 10,631 | $ | 8,183 |
16
Note 2 - Investments (Continued)
Offsetting of Assets and Liabilities
The Company’s derivative instruments (call options) are subject to enforceable master netting arrangements. Collateral support agreements associated with each master netting arrangement provide that the Company will receive or pledge financial collateral in the event minimum thresholds are reached.
The following table presents the instruments that were subject to a master netting arrangement for the Company.
($ in thousands) | Gross Amounts Offset in the | Net Amounts of Assets/ Liabilities Presented in the | Gross Amounts Not Offset in the Consolidated Balance Sheets | |||||||||||||||||||||
Gross Amounts | Consolidated Balance Sheets | Consolidated Balance Sheets | Financial Instruments | Cash Collateral Received | Net Amount | |||||||||||||||||||
June 30, 2017 | ||||||||||||||||||||||||
Asset derivatives: | ||||||||||||||||||||||||
Free-standing derivatives | $ | 9,969 | $ | — | $ | 9,969 | $ | — | $ | 10,959 | $ | (990 | ) | |||||||||||
December 31, 2016 | ||||||||||||||||||||||||
Asset derivatives: | ||||||||||||||||||||||||
Free-standing derivatives | $ | 8,694 | $ | — | $ | 8,694 | $ | — | $ | 8,824 | $ | (130 | ) |
Deposits
At June 30, 2017 and December 31, 2016, fixed maturity securities with a fair value of $18,038 thousand and $18,119 thousand, respectively, were on deposit with governmental agencies as required by law in various states in which the insurance subsidiaries of HMEC conduct business. In addition, at June 30, 2017 and December 31, 2016, fixed maturity securities with a fair value of $621,068 thousand and $620,489 thousand, respectively, were on deposit with the Federal Home Loan Bank of Chicago (“FHLB”) as collateral for amounts subject to funding agreements which were equal to $575,000 thousand at both of the respective dates. The deposited securities are included in Fixed maturity securities on the Company’s Consolidated Balance Sheets.
Note 3 - Fair Value of Financial Instruments
The Company is required under GAAP to disclose estimated fair values for certain financial and nonfinancial assets and liabilities. Fair values of the Company’s insurance contracts other than annuity contracts are not required to be disclosed. However, the estimated fair values of liabilities under all insurance contracts are taken into consideration in the Company’s overall management of interest rate risk through the matching of investment maturities with amounts due under insurance contracts.
Information regarding the three-level hierarchy presented below and the valuation methodologies utilized by the Company to estimate fair values at a point in time is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, specifically in “Note 3 -- Fair Value of Financial Instruments”.
17
Note 3 - Fair Value of Financial Instruments (Continued)
Financial Instruments Measured and Carried at Fair Value
The following table presents the Company’s fair value hierarchy for those assets and liabilities measured and carried at fair value on a recurring basis. At June 30, 2017, Level 3 invested assets comprised 3.1% of the Company’s total investment portfolio fair value.
($ in thousands) | Fair Value Measurements at | |||||||||||||||||||
Carrying | Fair | Reporting Date Using | ||||||||||||||||||
Amount | Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
June 30, 2017 | ||||||||||||||||||||
Financial Assets | ||||||||||||||||||||
Investments | ||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||
U.S. Government and federally sponsored agency obligations: | ||||||||||||||||||||
Mortgage-backed securities | $ | 623,064 | $ | 623,064 | $ | — | $ | 619,479 | $ | 3,585 | ||||||||||
Other, including | ||||||||||||||||||||
U.S. Treasury securities | 606,350 | 606,350 | 14,341 | 592,009 | — | |||||||||||||||
Municipal bonds | 1,817,220 | 1,817,220 | — | 1,768,097 | 49,123 | |||||||||||||||
Foreign government bonds | 100,046 | 100,046 | — | 100,046 | — | |||||||||||||||
Corporate bonds | 2,827,608 | 2,827,608 | 14,976 | 2,735,580 | 77,052 | |||||||||||||||
Other mortgage-backed securities | 1,604,297 | 1,604,297 | — | 1,487,558 | 116,739 | |||||||||||||||
Total fixed maturity securities | 7,578,585 | 7,578,585 | 29,317 | 7,302,769 | 246,499 | |||||||||||||||
Equity securities | 156,909 | 156,909 | 101,847 | 55,056 | 6 | |||||||||||||||
Short-term investments | 104,087 | 104,087 | 104,087 | — | — | |||||||||||||||
Other investments | 21,482 | 21,482 | — | 21,482 | — | |||||||||||||||
Totals | $ | 7,861,063 | $ | 7,861,063 | $ | 235,251 | $ | 7,379,307 | $ | 246,505 | ||||||||||
Financial Liabilities | ||||||||||||||||||||
Investment contract and life policy reserves, embedded derivatives | $ | 286 | $ | 286 | $ | — | $ | 286 | $ | — | ||||||||||
Other policyholder funds, embedded derivatives | 67,995 | 67,995 | — | — | 67,995 | |||||||||||||||
December 31, 2016 | ||||||||||||||||||||
Financial Assets | ||||||||||||||||||||
Investments | ||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||
U.S. Government and federally sponsored agency obligations: | ||||||||||||||||||||
Mortgage-backed securities | $ | 614,891 | $ | 614,891 | $ | — | $ | 611,476 | $ | 3,415 | ||||||||||
Other, including | ||||||||||||||||||||
U.S. Treasury securities | 467,143 | 467,143 | 13,631 | 453,512 | — | |||||||||||||||
Municipal bonds | 1,769,397 | 1,769,397 | — | 1,722,900 | 46,497 | |||||||||||||||
Foreign government bonds | 98,669 | 98,669 | — | 98,669 | — | |||||||||||||||
Corporate bonds | 2,810,221 | 2,810,221 | 13,532 | 2,736,498 | 60,191 | |||||||||||||||
Other mortgage-backed securities | 1,696,387 | 1,696,387 | — | 1,595,143 | 101,244 | |||||||||||||||
Total fixed maturity securities | 7,456,708 | 7,456,708 |