Company Quick10K Filing
Quick10K
Torchmark
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$84.01 112 $9,370
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2019-02-05 Earnings, Exhibits
8-K 2018-10-24 Earnings, Exhibits
8-K 2018-09-27 Enter Agreement, Other Events, Exhibits
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-04-26 Officers, Shareholder Vote, Exhibits
8-K 2018-04-18 Earnings, Exhibits
8-K 2018-03-01 Officers, Exhibits
8-K 2018-02-07 Earnings, Exhibits
LFC China Life Insurance
LNC Lincoln National
ATH Athene Holding
PRI Primerica
BHF Brighthouse Financial
AEL American Equity Investment Life Holding
NWLI National Western Life Group
CIA Citizens
GWGH GWG Holdings
AAME Atlantic American
TMK 2018-09-30
Part I-Financial Information
Item 1. Condensed Consolidated Financial Statements
Note 1-Significant Accounting Policies
Note 2-New Accounting Standards
Note 3-Supplemental Information About Changes To Accumulated Other Comprehensive Income
Note 4-Investments
Note 5-Income Taxes
Note 6-Commitments and Contingencies
Note 7-Liability for Unpaid Claims
Note 8-Postretirement Benefits
Note 9-Earnings per Share
Note 10-Debt
Note 11-Business Segments
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
Item 6. Exhibits
EX-31.1 tmk201810-qq3exhibit311.htm
EX-31.2 tmk201810-qq3exhibit312.htm
EX-31.3 tmk201810-qq3exhibit313.htm
EX-32.1 tmk201810-qq3exhbit321.htm

Torchmark Earnings 2018-09-30

TMK 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 tmk201810-qq3document.htm 10-Q 3RD QTR 2018 Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
 
ý
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended September 30, 2018
 
 
¨
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 1-8052
torchmarklogocolora01rgba37.jpg
TORCHMARK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
 
63-0780404
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
3700 South Stonebridge Drive, McKinney, Texas
 
75070
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (972) 569-4000
NONE
Former name, former address and former fiscal year, if changed since last report.

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    ý            No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes   ý            No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
ý
  
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 Exchange Act).
Yes   ¨              No   ý
Indicate the number of shares outstanding for each of the issuer’s classes of common stock, as of the last practicable date.
 
CLASS
 
OUTSTANDING AT October 30, 2018
 
 
Common Stock,
$1.00 Par Value
 
111,540,403
 



INDEX
 
 
 
 
Page
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
Item 3.
 
 
 
 
Item 4.
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
Item 1A.
 
 
 
 
Item 2.
 
 
 
 
Item 6.



PART I–FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Financial Statements

TORCHMARK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollar amounts in thousands, except per share data)
 
September 30,
2018
 
December 31,
2017
Assets:

 
 
Investments:
 
 
 
Fixed maturities—available for sale, at fair value (amortized cost: 2018—$15,462,364; 2017—$14,995,101)
$
16,231,471

 
$
16,969,325

Policy loans
543,836

 
529,529

Other long-term investments (includes: 2018—$107,996; 2017—$0, under the fair value option)
191,191

 
108,559

Short-term investments
633,490

 
127,071

Total investments
17,599,988

 
17,734,484

Cash
77,439

 
118,563

Accrued investment income
244,851

 
233,453

Other receivables
406,907

 
391,775

Deferred acquisition costs
4,091,601

 
3,958,063

Goodwill
441,591

 
441,591

Other assets
538,540

 
528,536

Assets related to discontinued operations
68,571

 
68,520

Total assets
$
23,469,488

 
$
23,474,985

Liabilities:
 
 
 
Future policy benefits
$
13,842,694

 
$
13,439,472

Unearned and advance premiums
62,139

 
61,430

Policy claims and other benefits payable
337,981

 
333,294

Other policyholders' funds
97,007

 
97,635

Total policy liabilities
14,339,821

 
13,931,831

Current and deferred income taxes payable
1,072,856

 
1,312,002

Other liabilities
493,726

 
489,609

Short-term debt
615,011

 
328,067

Long-term debt (estimated fair value: 2018—$1,387,229; 2017—$1,228,392)
1,358,947

 
1,132,201

Liabilities related to discontinued operations
50,222

 
49,854

Total liabilities
17,930,583

 
17,243,564

Commitments and Contingencies (Note 6)

 

Shareholders’ equity:
 
 
 
Preferred stock, par value $1 per share—Authorized 5,000,000 shares; outstanding: 0 in 2018 and 2017

 

Common stock, par value $1 per share—Authorized 320,000,000 shares; outstanding: (2018— 124,218,183 issued, less 12,050,407 held in treasury and 2017—124,218,183 issued, less 9,625,104 held in treasury)
124,218

 
124,218

Additional paid-in capital
527,489

 
508,476

Accumulated other comprehensive income
477,624

 
1,424,274

Retained earnings
5,267,964

 
4,806,208

Treasury stock, at cost
(858,390
)
 
(631,755
)
Total shareholders’ equity
5,538,905

 
6,231,421

Total liabilities and shareholders’ equity
$
23,469,488

 
$
23,474,985


See accompanying Notes to Condensed Consolidated Financial Statements.

1
                                 TMK 2018 FORM 10-Q QTR 3



TORCHMARK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollar amounts in thousands, except per share data)
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
Life premium
$
605,547

 
$
576,223

 
$
1,806,384

 
$
1,725,896

Health premium
255,201

 
242,991

 
758,439

 
730,557

Other premium
2

 
3

 
12

 
9

Total premium
860,750

 
819,217

 
2,564,835

 
2,456,462

Net investment income
221,627

 
213,872

 
658,279

 
634,930

Realized investment gains (losses)
1,032

 
12,595

 
14,796

 
6,142

Other income
393

 
331

 
1,104

 
1,140

Total revenue
1,083,802

 
1,046,015

 
3,239,014

 
3,098,674

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Life policyholder benefits
396,701

 
386,445

 
1,196,616

 
1,168,383

Health policyholder benefits
162,574

 
155,774

 
483,654

 
470,104

Other policyholder benefits
8,581

 
9,000

 
25,852

 
26,923

Total policyholder benefits
567,856

 
551,219

 
1,706,122

 
1,665,410

Amortization of deferred acquisition costs
129,492

 
122,334

 
388,189

 
370,363

Commissions, premium taxes, and non-deferred acquisition costs
69,632

 
67,863

 
208,698

 
198,011

Other operating expense
74,059

 
63,019

 
209,503

 
187,788

Interest expense
22,433

 
20,970

 
66,466

 
62,825

Total benefits and expenses
863,472

 
825,405

 
2,578,978

 
2,484,397

 
 
 
 
 
 
 
 
Income before income taxes
220,330

 
220,610

 
660,036

 
614,277

Income taxes
(41,630
)
 
(67,264
)
 
(123,232
)
 
(183,390
)
Income from continuing operations
178,700

 
153,346

 
536,804

 
430,887

 
 
 
 
 
 
 
 
Income (loss) from discontinued operations, net of tax
24

 
(12
)
 
(55
)
 
(3,739
)
Net income
$
178,724

 
$
153,334

 
$
536,749

 
$
427,148

 
 
 
 
 
 
 
 
Basic net income (loss) per common share:
 
 
 

 
 
 
Continuing operations
$
1.59

 
$
1.32

 
$
4.74

 
$
3.69

Discontinued operations

 

 
(0.01
)
 
(0.03
)
Total basic net income per common share
$
1.59

 
$
1.32

 
$
4.73

 
$
3.66

 
 
 
 
 
 
 
 
Diluted net income (loss) per common share:
 
 
 

 
 
 
Continuing operations
$
1.55

 
$
1.29

 
$
4.64

 
$
3.61

Discontinued operations

 

 

 
(0.03
)
Total diluted net income per common share
$
1.55

 
$
1.29

 
$
4.64

 
$
3.58

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.16

 
$
0.15

 
$
0.48

 
$
0.45






See accompanying Notes to Condensed Consolidated Financial Statements.

2
                                 TMK 2018 FORM 10-Q QTR 3



TORCHMARK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollar amounts in thousands)
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
178,724

 
$
153,334

 
$
536,749

 
$
427,148

 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments:
 
 
 
 
 
 
 
Unrealized gains (losses) on securities:
 
 
 
 
 
 
 
Unrealized holding gains (losses) arising during period
(173,598
)
 
83,216

 
(1,202,762
)
 
692,747

Reclassification adjustment for (gains) losses on securities included in net income
(1,510
)
 
(12,910
)
 
(12,327
)
 
(13,264
)
Reclassification adjustment for amortization of (discount) and premium
1,052

 
119

 
2,612

 
(379
)
Foreign exchange adjustment on securities recorded at fair value
8,624

 
1,173

 
7,360

 
1,418

Unrealized gains (losses) on securities
(165,432
)
 
71,598

 
(1,205,117
)
 
680,522

Unrealized gains (losses) on other investments
1,310

 
473

 
(492
)
 
3,544

Total unrealized investment gains (losses)
(164,122
)
 
72,071


(1,205,609
)

684,066

Less applicable tax (expense) benefit
34,464

 
(25,225
)
 
253,176

 
(239,479
)
Unrealized investment gains (losses), net of tax
(129,658
)
 
46,846

 
(952,433
)
 
444,587

 
 
 
 
 
 
 
 
Deferred acquisition costs:
 
 
 
 
 
 
 
Unrealized gains (losses) attributable to deferred acquisition costs
1,178

 
505

 
3,669

 
(992
)
Less applicable tax (expense) benefit
(248
)
 
(177
)
 
(771
)
 
347

Unrealized gains (losses) attributable to deferred acquisition costs, net of tax
930

 
328

 
2,898

 
(645
)
 
 
 
 
 
 
 
 
Foreign exchange translation:
 
 
 
 
 
 
 
Foreign exchange translation adjustments, other than securities
(168
)
 
8,533

 
(7,684
)
 
16,049

Less applicable tax (expense) benefit
36

 
(2,986
)
 
1,615

 
(4,567
)
Foreign exchange translation adjustments, other than securities, net of tax
(132
)
 
5,547

 
(6,069
)
 
11,482

 
 
 
 
 
 
 
 
Pension:
 
 
 
 
 
 
 
Amortization of pension costs
3,778

 
3,108

 
11,334

 
9,326

Experience gain (loss)

 

 

 
371

Pension adjustments
3,778

 
3,108

 
11,334

 
9,697

Less applicable tax (expense) benefit
(793
)
 
(1,087
)
 
(2,380
)
 
(3,393
)
Pension adjustments, net of tax
2,985

 
2,021

 
8,954

 
6,304

 
 
 
 
 
 
 
 
Other comprehensive income (loss)
(125,875
)
 
54,742

 
(946,650
)
 
461,728

Comprehensive income (loss)
$
52,849

 
$
208,076

 
$
(409,901
)
 
$
888,876


See accompanying Notes to Condensed Consolidated Financial Statements.

3
                                 TMK 2018 FORM 10-Q QTR 3



TORCHMARK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(Dollar amounts in thousands, except per share data)
 
 
Preferred Stock
 
Common Stock
 
Additional Paid-in Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Retained Earnings
 
Treasury Stock
 
Total Shareholders’ Equity
Balance at January 1, 2017
 
$

 
$
127,218

 
$
490,421

 
$
577,574

 
$
3,890,798

 
$
(519,150
)
 
$
4,566,861

Comprehensive income (loss)
 

 

 

 
461,728

 
427,148

 

 
888,876

Common dividends declared ($0.45 per share)
 

 

 

 

 
(52,304
)
 

 
(52,304
)
Acquisition of treasury stock
 

 

 

 

 

 
(301,448
)
 
(301,448
)
Stock-based compensation
 

 

 
17,965

 

 
(606
)
 
7,450

 
24,809

Exercise of stock options
 

 

 


 

 
(25,454
)
 
66,345

 
40,891

Balance at September 30, 2017
 
$

 
$
127,218

 
$
508,386

 
$
1,039,302

 
$
4,239,582

 
$
(746,803
)
 
$
5,167,685

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred Stock
 
Common Stock
 
Additional Paid-in Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Retained Earnings
 
Treasury Stock
 
Total Shareholders’ Equity
Balance at January 1, 2018
 
$

 
$
124,218

 
$
508,476

 
$
1,424,274

 
$
4,806,208

 
$
(631,755
)
 
$
6,231,421

Adoption of ASU 2016-01(1)
 
 
 
 
 
 
 
 
 
4,896

 
 
 
4,896

Comprehensive income (loss)
 

 

 

 
(946,650
)
 
536,749

 

 
(409,901
)
Common dividends declared ($0.48 per share)
 

 

 

 

 
(54,231
)
 

 
(54,231
)
Acquisition of treasury stock
 

 

 

 

 

 
(298,314
)
 
(298,314
)
Stock-based compensation
 

 

 
19,013

 

 
(1,803
)
 
12,759

 
29,969

Exercise of stock options
 

 

 


 

 
(23,855
)
 
58,920

 
35,065

Balance at September 30, 2018
 
$

 
$
124,218

 
$
527,489

 
$
477,624

 
$
5,267,964

 
$
(858,390
)
 
$
5,538,905


(1)











See accompanying Notes to Condensed Consolidated Financial Statements.

4
                                 TMK 2018 FORM 10-Q QTR 3



TORCHMARK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollar amounts in thousands)

 
Nine Months Ended 
 September 30,
 
2018
 
2017
Cash provided from operating activities
$
937,289

 
$
1,085,842

 
 
 
 
Cash provided from (used for) investing activities:
 
 
 
Investments sold or matured:
 
 
 
Fixed maturities available for sale—sold
12,162

 
52,951

Fixed maturities available for sale—matured, called, and repaid
266,736

 
306,132

Other long-term investments
47

 
3,523

Total investments sold or matured
278,945

 
362,606

Acquisition of investments:
 
 
 
Fixed maturities—available for sale
(727,296
)
 
(1,042,705
)
Other long-term investments
(74,396
)
 
(16,775
)
Total investments acquired
(801,692
)
 
(1,059,480
)
Net (increase) decrease in policy loans
(14,307
)
 
(15,343
)
Net (increase) decrease in short-term investments
(506,419
)
 
6,556

Additions to property and equipment
(27,316
)
 
(13,451
)
Sale of other assets
17

 
18

Investment in low-income housing interests
(19,075
)
 
(13,852
)
Cash provided from (used for) investing activities
(1,089,847
)
 
(732,946
)
 
 
 
 
Cash provided from (used for) financing activities:
 
 
 
Issuance of common stock
35,065

 
40,891

Cash dividends paid to shareholders
(53,481
)
 
(51,532
)
Proceeds from issuance of debt
550,000

 

Payment for debt issuance costs
(6,797
)
 

Repayment of debt
(23,125
)
 
(1,250
)
Net borrowing (repayment) of commercial paper
(7,196
)
 
42,652

Acquisition of treasury stock
(298,314
)
 
(301,448
)
Net receipts (payments) from deposit-type product
(87,561
)
 
(65,912
)
Cash provided from (used for) financing activities
108,591

 
(336,599
)
 
 
 
 
Effect of foreign exchange rate changes on cash
2,843

 
(3,998
)
Net increase (decrease) in cash
(41,124
)
 
12,299

Cash at beginning of year
118,563

 
76,163

Cash at end of period
$
77,439

 
$
88,462









See accompanying Notes to Condensed Consolidated Financial Statements.

5
                                 TMK 2018 FORM 10-Q QTR 3


TORCHMARK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands, except per share data)



Note 1—Significant Accounting Policies
Basis of Presentation: The accompanying condensed consolidated financial statements of Torchmark Corporation (Torchmark or alternatively, the Company) have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all of the annual disclosures required by accounting principles generally accepted in the United States of America (GAAP). However, in the opinion of management, these statements include all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of the condensed consolidated financial position at September 30, 2018, and the condensed consolidated results of operations, comprehensive income, and cash flows for the periods ended September 30, 2018 and 2017. The interim period condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements that are included in the Form 10-K filed with the Securities Exchange Commission (SEC) on February 26, 2018.
Note 2—New Accounting Standards
Accounting Pronouncements Adopted in the Current Year:
ASU 2016-01: In January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which primarily revises the classification and measurement of certain equity investments such that they will be measured at fair value through net income. Additionally, the guidance eliminates the cost method for partnerships and joint ventures and requires these types of investments to be accounted for under the fair value through net income or equity method. This standard became effective for the Company on January 1, 2018.
On January 1, 2018, the Company adopted this standard on a modified retrospective basis for two types of investments: equity securities and certain limited partnerships. The adoption resulted in a $4.9 million after-tax positive adjustment to the opening balance of retained earnings. Subsequent to the adoption, the Company elected to measure its investment in certain limited partnerships at fair value in accordance with the fair value option for financial instruments with changes recognized in "Realized Investment Gains (Losses)" in the Condensed Consolidated Statements of Operations. As of September 30, 2018, the fair value balance of the limited partnerships were $108 million. See Note 4—Investments for further discussion.
ASU 2016-15: In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments to provide uniformity in the classification of cash receipts and payments recorded in the statement of cash flows including debt prepayment or debt extinguishment costs, settlement of zero-coupon bonds, and proceeds from the settlement of insurance claims. This standard became effective on January 1, 2018 and did not have a significant impact to the classification on the Condensed Statement of Cash Flows.
ASU 2016-16: In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other Than Inventory. This guidance was issued to improve the accounting for income tax consequences of intra-entity transfers of assets other than inventory by allowing the immediate recognition of the current and deferred income tax effects. Current guidance prohibits the recognition of current and deferred income taxes for an intra-entity transfer until the asset has been sold to an outside party. This guidance is applied on a modified retrospective approach and became effective on January 1, 2018. This adoption did not have a significant impact on the financial statements.
ASU 2017-07: In March 2017, the FASB issued ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This guidance was issued to simplify the reporting of pension costs by disaggregating the service-cost component from the other components of net benefit costs and reporting it separately on the income statement. The service-cost component is the only component of net benefit cost that will be eligible for capitalization. The guidance became effective on January 1, 2018 with a retrospective transition method for separation of net benefit costs and a prospective transition method for the capitalization of service costs. The Company will record approximately $3.2 million in additional expense to the 2018 Condensed Consolidated Statements of Operations due to the elimination of the ability to capitalize a portion of the benefit costs. For the nine months ended September 30, 2018, the Company recorded $2.4 million in additional expense.

6
                                 TMK 2018 FORM 10-Q QTR 3


TORCHMARK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands, except per share data)

Note 2—New Accounting Standards (continued)


ASU 2017-09: In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. This guidance was issued to provide clarity and guidance regarding changes to the terms or conditions of a share-based payment award that requires an entity to apply modification accounting. It became effective on January 1, 2018. The adoption had no significant impact on the financial statements as modifications to stock compensation are infrequent.
ASU 2018-02: In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (AOCI). This guidance was issued to allow the reclassification of taxes from AOCI to retained earnings as a result of the reduction in corporate income tax rates due to the Tax Cuts and Jobs Act of 2017 (Tax Legislation). Current accounting requires the effect of changes in tax rates used to measure deferred tax assets and liabilities to be reported in net income as of the date of enactment even though deferred taxes were previously recognized in AOCI (stranded taxes). This guidance, however, allows a company to elect to reclassify the stranded taxes in AOCI to retained earnings and is effective for years beginning after December 15, 2018, with early adoption permitted. The Company elected to early adopt this guidance resulting in a reclassification of $252 million from AOCI to retained earnings for the period ended December 31, 2017.
Accounting Pronouncements Not Yet Adopted
ASU 2016-02/ASU 2018-11: In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), with clarification guidance issued in July 2018. The guidance requires lessees to record a right-of-use asset and corresponding lease liability on the balance sheet for all operating leases that do not qualify for the practical expedients allowed for in this standard. Additional qualitative and quantitative disclosures will be required. This standard will become effective for the Company beginning January 1, 2019. The Company plans to adopt the optional transition method allowed for under ASU 2018-11 by not restating comparative periods and recognizing a cumulative-effect adjustment to the opening balance of retained earnings on the period of adoption. The Company is not a lessor.
The Company has made significant progress during 2018 and has implemented appropriate solutions to identify and quantify applicable operating leases in accordance with this guidance. The Company is in the process of finalizing the analysis of the impact of the new guidance, but does not expect the adoption to have a significant impact on the financial statements. Refer to Note 15—Commitments and Contingencies of the 2017 10-K for consideration of the noncancelable operating lease commitments.
ASU 2016-13: In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments as well as to change the loss impairment methodology for available-for-sale debt securities by use of an allowance rather than a direct write-down. This standard will become effective on January 1, 2020. The applicable section of the standard related to debt securities requires a prospective transition. The Company does not expect the adoption to have a significant impact on the financial statements as we have limited credit losses with respect to our current available-for-sale portfolio.
ASU 2017-04: In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance was issued to simplify the subsequent measurement of goodwill through the elimination of Step 2 from the goodwill impairment test which required a hypothetical purchase price allocation. It will become effective on January 1, 2020 and should be applied on a prospective basis. This adoption will not have an impact on the financial statements.
ASU 2017-08: In March 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities. This guidance was issued to shorten the amortization period for certain callable debt securities held at a premium. The guidance requires the premium to be amortized to the earliest call date. It will become effective on January 1, 2019 with early adoption permitted, including during interim periods. The adoption is to be applied on a modified retrospective basis through an adjustment to retained earnings. This adoption will not have a significant impact on the financial statements.

7
                                 TMK 2018 FORM 10-Q QTR 3


TORCHMARK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands, except per share data)

Note 2—New Accounting Standards (continued)


ASU 2018-12: In August 2018, the FASB issued ASU No. 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The guidance was primarily issued to 1) improve the timeliness of recognizing changes in the liability for future policy benefits and modify the rate used to discount future cash flows, 2) simplify and improve the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts, 3) simplify the amortization of deferred acquisition costs, and 4) improve the effectiveness of the required disclosures. This guidance is effective beginning January 1, 2021, and should be applied on a retrospective basis. Early adoption of the amendments is permitted. ASU 2018-12 will require changes to the Company's actuarial systems and data inputs related to the valuation of the liabilities. The Company is in the process of evaluating the impact this guidance will have on the financial statements and cannot reasonably estimate at this time.
ASU 2018-13: In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The amendment modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The revised guidance is effective beginning January 1, 2020. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. Early adoption of the amendments is permitted. The Company does not expect the adoption of this guidance to have a material impact on the financial statements.
ASU 2018-14: In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20), Changes to the Disclosure Requirements for Defined Benefit Plans. The guidance removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures and adds disclosure requirements identified as relevant. This guidance is effective beginning January 1, 2021, and will be applied retrospectively. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on the financial statements.
ASU 2018-15: In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The guidance was issued to align the accounting for implementation costs of hosting arrangements, regardless of whether they convey a license to the hosted software. Accordingly, the standard requires the capitalization of implementation costs incurred in a hosting arrangement that is a service contract, similar to the treatment for developed or obtained internal-use software. The guidance is effective beginning January 1, 2020, and the Company plans to apply the standards on a prospective basis. Early adoption of the amendments is also permitted. The Company is in the process of determining the impact this guidance will have on the financial statements.



8
                                 TMK 2018 FORM 10-Q QTR 3


TORCHMARK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands, except per share data)


Note 3—Supplemental Information about Changes to Accumulated Other Comprehensive Income

An analysis of the change in balance by component of Accumulated Other Comprehensive Income is as follows for the three and nine month periods ended September 30, 2018 and 2017.

Components of Accumulated Other Comprehensive Income
 
Three Months Ended September 30, 2017
 
Available
for Sale
Assets
 
Deferred
Acquisition
Costs
 
Foreign
Exchange
 
Pension
Adjustments
 
Total
Balance at July 1, 2017
$
1,090,055

 
$
(7,655
)
 
$
10,902

 
$
(108,742
)
 
$
984,560

Other comprehensive income (loss) before reclassifications, net of tax
55,160

 
328

 
5,547

 

 
61,035

Reclassifications, net of tax
(8,314
)
 

 

 
2,021

 
(6,293
)
Other comprehensive income (loss)
46,846

 
328

 
5,547

 
2,021

 
54,742

Balance at September 30, 2017
$
1,136,901

 
$
(7,327
)
 
$
16,449

 
$
(106,721
)
 
$
1,039,302

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2018
 
Available
for Sale
Assets
 
Deferred
Acquisition
Costs
 
Foreign
Exchange
 
Pension
Adjustments
 
Total
Balance at July 1, 2018
$
746,514

 
$
(6,579
)
 
$
10,365

 
$
(146,801
)
 
$
603,499

Other comprehensive income (loss) before reclassifications, net of tax
(129,296
)
 
930

 
(132
)
 

 
(128,498
)
Reclassifications, net of tax
(362
)
 

 

 
2,985

 
2,623

Other comprehensive income (loss)
(129,658
)
 
930

 
(132
)
 
2,985

 
(125,875
)
Balance at September 30, 2018
$
616,856

 
$
(5,649
)
 
$
10,233

 
$
(143,816
)
 
$
477,624











9
                                 TMK 2018 FORM 10-Q QTR 3


TORCHMARK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands except, per share data)

Note 3—Supplemental Information about Changes to Accumulated Other Comprehensive Income (continued)



 
 
Nine Months Ended September 30, 2017
 
 
Available
for Sale
Assets
 
Deferred
Acquisition
Costs
 
Foreign
Exchange
 
Pension
Adjustments
 
Total
Balance at January 1, 2017
 
$
692,314

 
$
(6,682
)
 
$
4,967

 
$
(113,025
)
 
$
577,574

Other comprehensive income (loss) before reclassifications, net of tax
 
453,455

 
(645
)
 
11,482

 
241

 
464,533

Reclassifications, net of tax
 
(8,868
)
 

 

 
6,063

 
(2,805
)
Other comprehensive income (loss)
 
444,587

 
(645
)
 
11,482

 
6,304

 
461,728

Balance at September 30, 2017
 
$
1,136,901

 
$
(7,327
)
 
$
16,449

 
$
(106,721
)
 
$
1,039,302

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
 
Available
for Sale
Assets
 
Deferred
Acquisition
Costs
 
Foreign
Exchange
 
Pension
Adjustments
 
Total
Balance at January 1, 2018
 
$
1,569,289

 
$
(8,547
)
 
$
16,302

 
$
(152,770
)
 
$
1,424,274

Other comprehensive income (loss) before reclassifications, net of tax
 
(944,758
)
 
2,898

 
(6,069
)
 

 
(947,929
)
Reclassifications, net of tax
 
(7,675
)
 

 

 
8,954

 
1,279

Other comprehensive income (loss)
 
(952,433
)
 
2,898

 
(6,069
)
 
8,954

 
(946,650
)
Balance at September 30, 2018
 
$
616,856

 
$
(5,649
)
 
$
10,233

 
$
(143,816
)
 
$
477,624

 

10
                                 TMK 2018 FORM 10-Q QTR 3


TORCHMARK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands except, per share data)

Note 3—Supplemental Information about Changes to Accumulated Other Comprehensive Income (continued)



                                                                                                                                                          

Reclassifications out of Accumulated Other Comprehensive Income are presented below for the three and nine month periods ended September 30, 2018 and 2017.
Reclassification Adjustments
  
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
Affected line items in the
Statement of Operations
 
 
2018
 
2017
 
2018
 
2017
 
Unrealized investment gains (losses) on available for sale assets:
 
 
 
 
 
 
 
 
 
 
Realized (gains) losses
 
$
(1,510
)
 
$
(12,910
)
 
$
(12,327
)
 
$
(13,264
)
 
Realized investment gains (losses)
Amortization of (discount) premium
 
1,052

 
119

 
2,612

 
(379
)
 
Net investment income
Total before tax
 
(458
)
 
(12,791
)
 
(9,715
)
 
(13,643
)
 
 
Tax
 
96

 
4,477

 
2,040

 
4,775

 
Income taxes
Total after-tax
 
(362
)
 
(8,314
)
 
(7,675
)
 
(8,868
)
 
 
Pension adjustments:
 
 
 
 
 
 
 
 
 
 
Amortization of prior service cost
 
119

 
118

 
357

 
356

 
Other operating expense
Amortization of actuarial gain (loss)
 
3,659

 
2,990

 
10,977

 
8,970

 
Other operating expense
Total before tax
 
3,778

 
3,108

 
11,334

 
9,326

 
 
Tax
 
(793
)
 
(1,087
)
 
(2,380
)
 
(3,263
)
 
Income taxes
Total after-tax
 
2,985

 
2,021

 
8,954

 
6,063

 
 
Total reclassifications (after-tax)
 
$
2,623

 
$
(6,293
)
 
$
1,279

 
$
(2,805
)
 
 


11
                                 TMK 2018 FORM 10-Q QTR 3


TORCHMARK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands, except per share data)


Note 4—Investments
Portfolio Composition:
A summary of fixed maturities available for sale by cost or amortized cost and estimated fair value at September 30, 2018 and December 31, 2017 is as follows:
 
September 30, 2018
 
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value(1)
 
% of Total
Fixed
Maturities(2)
Fixed maturities available for sale:
 
 
 
 
 
 
 
 
 
U.S. Government direct, guaranteed, and government-sponsored enterprises
$
392,779

 
$
255

 
$
(11,643
)
 
$
381,391

 
3
States, municipalities, and political subdivisions
1,262,710

 
84,503

 
(4,853
)
 
1,342,360

 
8
Foreign governments
18,918

 
1,721

 

 
20,639

 
Corporates, by sector:
 
 
 
 
 
 
 
 
 
Financial
3,363,794

 
239,614

 
(62,445
)
 
3,540,963

 
21
Utilities
1,964,029

 
215,959

 
(21,005
)
 
2,158,983

 
13
Energy
1,635,710

 
136,144

 
(37,978
)
 
1,733,876

 
11
Other corporate sectors
6,242,246

 
329,169

 
(165,172
)
 
6,406,243

 
40
Total corporates
13,205,779

 
920,886

 
(286,600
)
 
13,840,065

 
85
Collateralized debt obligations
57,794

 
26,119

 
(4,997
)
 
78,916

 
Other asset-backed securities
150,218

 
1,845

 
(872
)
 
151,191

 
1
Redeemable preferred stocks, by sector:
 
 
 
 
 
 
 
 
 
Financial
345,651

 
46,022

 
(4,197
)
 
387,476

 
3
Utilities
28,515

 
1,332

 
(414
)
 
29,433

 
Total redeemable preferred stocks
374,166

 
47,354

 
(4,611
)
 
416,909

 
3
Total fixed maturities
$
15,462,364

 
$
1,082,683

 
$
(313,576
)
 
$
16,231,471

 
100
(1)
Amounts reported on the balance sheet.
(2)
At fair value.

12
                                 TMK 2018 FORM 10-Q QTR 3


TORCHMARK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands, except per share data)

Note 4—Investments (continued)

 
December 31, 2017
 
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value(1)
 
% of Total
Fixed
Maturities(2)
Fixed maturities available for sale:
 
 
 
 
 
 
 
 
 
U.S. Government direct, guaranteed, and government-sponsored enterprises
$
390,646

 
$
18,173

 
$
(1,373
)
 
$
407,446

 
2
States, municipalities, and political subdivisions
1,091,960

 
127,890

 
(135
)
 
1,219,715

 
7
Foreign governments
20,236

 
1,782

 

 
22,018

 
Corporates, by sector:
 
 
 
 
 
 


 
 
Financial
3,282,526

 
475,961

 
(23,392
)
 
3,735,095

 
22
Utilities
1,955,737

 
369,406

 
(1,298
)
 
2,323,845

 
14
Energy
1,619,349

 
226,140

 
(25,392
)
 
1,820,097

 
11
Other corporate sectors
6,065,803

 
747,612

 
(20,616
)
 
6,792,799

 
40
Total corporates
12,923,415

 
1,819,119

 
(70,698
)
 
14,671,836

 
87
Collateralized debt obligations
59,150

 
20,084

 
(7,653
)
 
71,581

 
Other asset-backed securities
144,520

 
4,835

 

 
149,355

 
1
Redeemable preferred stocks, by sector:
 
 
 
 
 
 
 
 
 
Financial
336,621

 
62,892

 
(2,727
)
 
396,786

 
3
Utilities
28,553

 
2,132

 
(97
)
 
30,588

 
Total redeemable preferred stocks
365,174

 
65,024

 
(2,824
)
 
427,374

 
3
Total fixed maturities
$
14,995,101

 
$
2,056,907

 
$
(82,683
)
 
$
16,969,325

 
100
(1)
Amounts reported on the balance sheet.
(2)
At fair value.

A schedule of fixed maturities available for sale by contractual maturity date at September 30, 2018 is shown below on an amortized cost basis and on a fair value basis. Actual disposition dates could differ from contractual maturities due to call or prepayment provisions.
 
September 30, 2018
 
Amortized
Cost
 
Fair Value
Fixed maturities available for sale:
 
 
 
Due in one year or less
$
189,867

 
$
193,934

Due after one year through five years
611,511

 
632,417

Due after five years through ten years
1,686,348

 
1,820,952

Due after ten years through twenty years
5,023,824

 
5,505,111

Due after twenty years
7,742,061

 
7,848,163

Mortgage-backed and asset-backed securities
208,753

 
230,894

 
$
15,462,364

 
$
16,231,471







13
                                 TMK 2018 FORM 10-Q QTR 3


TORCHMARK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands, except per share data)

Note 4—Investments (continued)

Selected information about sales of fixed maturities available for sale is as follows.
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Fixed maturities available for sale:
 
 
 
 
 
 
 
Proceeds from sales
$
12,162

 
$
52,951

 
$
12,162

 
$
52,951

Gross realized gains
66

 
4,851

 
66

 
4,851

Gross realized losses

 

 

 



Fair Value Measurements: The following tables represent the fair value of fixed maturities available for sale measured on a recurring basis at September 30, 2018 and December 31, 2017.
 
Fair Value Measurements at September 30, 2018 using:
Description
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs (Level 3)
 
Total Fair
Value
Fixed maturities available for sale:
 
 
 
 
 
 
 
U.S. Government direct, guaranteed, and government-sponsored enterprises
$

 
$
381,391

 
$

 
$
381,391

States, municipalities, and political subdivisions

 
1,342,360

 

 
1,342,360

Foreign governments

 
20,639

 

 
20,639

Corporates, by sector:
 
 
 
 
 
 
 
Financial

 
3,497,807

 
43,156

 
3,540,963

Utilities

 
2,006,462

 
152,521

 
2,158,983

Energy

 
1,694,481

 
39,395

 
1,733,876

Other corporate sectors

 
6,085,281

 
320,962

 
6,406,243

Total corporates

 
13,284,031

 
556,034

 
13,840,065

Collateralized debt obligations

 

 
78,916

 
78,916

Other asset-backed securities

 
138,407

 
12,784

 
151,191

Redeemable preferred stocks, by sector:
 
 
 
 
 
 
 
Financial

 
387,476

 

 
387,476

Utilities

 
29,433

 

 
29,433

Total redeemable preferred stocks

 
416,909

 

 
416,909

Total fixed maturities
$

 
$
15,583,737

 
$
647,734

 
$
16,231,471

Percent of total
%
 
96.0
%
 
4.0
%
 
100.0
%

14
                                 TMK 2018 FORM 10-Q QTR 3


TORCHMARK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands, except per share data)

Note 4—Investments (continued)

 
Fair Value Measurements at December 31, 2017 using:
Description
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs (Level 3)
 
Total Fair
Value
Fixed maturities available for sale:
 
 
 
 
 
 
 
U.S. Government direct, guaranteed, and government-sponsored enterprises
$

 
$
407,446

 
$

 
$
407,446

States, municipalities, and political subdivisions
44

 
1,219,671

 

 
1,219,715

Foreign governments

 
22,018

 

 
22,018

Corporates, by sector:
 
 
 
 
 
 


Financial

 
3,673,089

 
62,006

 
3,735,095

Utilities

 
2,168,115

 
155,730

 
2,323,845

Energy

 
1,779,281

 
40,816

 
1,820,097

Other corporate sectors

 
6,468,541

 
324,258

 
6,792,799

Total corporates

 
14,089,026

 
582,810

 
14,671,836

Collateralized debt obligations

 

 
71,581

 
71,581

Other asset-backed securities

 
135,306

 
14,049

 
149,355

Redeemable preferred stocks, by sector:
 
 
 
 
 
 
 
Financial

 
396,786

 

 
396,786

Utilities

 
30,588

 

 
30,588

Total redeemable preferred stocks

 
427,374

 

 
427,374

Total fixed maturities
$
44

 
$
16,300,841

 
$
668,440

 
$
16,969,325

Percentage of total
%
 
96.1
%
 
3.9
%
 
100.0
%

The following tables represent an analysis of changes in fair value measurements using significant unobservable inputs (Level 3) for the nine months ended September 30, 2018 and 2017.
Analysis of Changes in Fair Value Measurements Using
Significant Unobservable Inputs (Level 3)
 
Nine Months Ended September 30, 2018
 
Asset-
Backed
Securities
 
Collateralized
Debt
Obligations
 
Corporates(1)
 
Total
Balance at January 1, 2018
$
14,049

 
$
71,581

 
$
582,810

 
$
668,440

Total gains or losses:
 
 
 
 
 
 
 
Included in realized gains/losses

 

 
698

 
698

Included in other comprehensive income
(950
)
 
8,691

 
(21,854
)
 
(14,113
)
Acquisitions

 

 
27,453

 
27,453

Sales

 

 

 

Amortization

 
3,572

 
13

 
3,585

Other(2)
(315
)
 
(4,928
)
 
(37,619
)
 
(42,862
)
Transfers in and/or out of Level 3(3)

 

 
4,533

 
4,533

Balance at September 30, 2018
$
12,784

 
$
78,916

 
$
556,034

 
$
647,734

Percent of total fixed maturities
0.1
%
 
0.5
%
 
3.4
%
 
4.0
%
(1)
Includes redeemable preferred stocks.
(2)
Includes capitalized interest, foreign exchange adjustments, and principal repayments.
(3)
Considered to be transferred at the end of the period. Transfers into Level 3 occur when observable inputs are no longer available. Transfers out of Level 3 occur when observable inputs become available.

15
                                 TMK 2018 FORM 10-Q QTR 3


TORCHMARK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands, except per share data)

Note 4—Investments (continued)


 
Nine Months Ended September 30, 2017
 
Asset-
Backed
Securities
 
Collateralized
Debt
Obligations
 
Corporates(1)
 
Total
Balance at January 1, 2017
$

 
$
63,503

 
$
559,600

 
$
623,103

Total gains or losses:
 
 
 
 
 
 
 
Included in realized gains/losses

 

 

 

Included in other comprehensive income
595

 
7,787

 
10,614

 
18,996

Acquisitions
14,000

 

 
21,666

 
35,666

Sales

 

 

 

Amortization

 
3,705

 
14

 
3,719

Other(2)
(212
)
 
(5,227
)
 
(7,411
)
 
(12,850
)
Transfers in and/or out of Level 3(3)

 

 

 

Balance at September 30, 2017
$
14,383

 
$
69,768

 
$
584,483

 
$
668,634

Percent of total fixed maturities
0.1
%
 
0.4
%
 
3.5
%
 
4.0
%
(1)
Includes redeemable preferred stocks.
(2)
Includes capitalized interest, foreign exchange adjustments, and principal repayments.
(3)
Considered to be transferred at the end of the period. Transfers into Level 3 occur when observable inputs are no longer available. Transfers out of Level 3 occur when observable inputs become available.


The following table presents transfers in and out of each of the valuation levels of fair values.
 
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
 
In
 
Out
 
Net
 
In