FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2012

FAIR VALUE OF FINANCIAL INSTRUMENTS

Schedule of assets and liabilities measured at fair value on a recurring basis

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2012:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	1,839,326	$	4	$	1,839,330
Commercial mortgage-backed securities	—		869,823		—		869,823
Other asset-backed securities	—		378,870		596,143		975,013
U.S. government-related securities	909,988		258,458		—		1,168,446
State, municipalities, and political subdivisions	—		1,439,378		4,275		1,443,653
Other government-related securities	—		80,767		20,011		100,778
Corporate bonds	207		20,197,528		167,892		20,365,627
Total fixed maturity securities - available-for-sale	910,195		25,064,150		788,325		26,762,670
Fixed maturity securities - trading
Residential mortgage-backed securities	—		357,803		—		357,803
Commercial mortgage-backed securities	—		171,073		—		171,073
Other asset-backed securities	—		87,395		70,535		157,930
U.S. government-related securities	304,704		1,169		—		305,873
State, municipalities, and political subdivisions	—		278,898		—		278,898
Other government-related securities	—		63,444		—		63,444
Corporate bonds	—		1,672,172		115		1,672,287
Total fixed maturity securities - trading	304,704		2,631,954		70,650		3,007,308
Total fixed maturity securities	1,214,899		27,696,104		858,975		29,769,978
Equity securities	273,072		35,116		65,527		373,715
Other long-term investments (1)	23,639		58,134		48,655		130,428
Short-term investments	214,295		2,492		—		216,787
Total investments	1,725,905		27,791,846		973,157		30,490,908
Cash	269,582		—		—		269,582
Other assets	—		—		—		—
Assets related to separate accounts
Variable annuity	9,601,417		—		—		9,601,417
Variable universal life	562,817		—		—		562,817
Total assets measured at fair value on a recurring basis	$	12,159,721	$	27,791,846	$	973,157	$	40,924,724
Liabilities:
Annuity account balances(2)	$	—	$	—	$	129,468	$	129,468
Other liabilities (1)	19,187		27,250		611,437		657,874
Total liabilities measured at fair value on a recurring basis	$	19,187	$	27,250	$	740,905	$	787,342

(1)Includes certain freestanding and embedded derivatives.

(2)Represents liabilities related to equity indexed annuities.

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2011:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	2,337,037	$	7	$	2,337,044
Commercial mortgage-backed securities	—		550,527		—		550,527
Other asset-backed securities	—		298,216		614,813		913,029
U.S. government-related securities	664,506		536,173		15,000		1,215,679
State, municipalities, and political subdivisions	—		1,327,713		—		1,327,713
Other government-related securities	—		93,017		—		93,017
Corporate bonds	204		18,440,822		119,565		18,560,591
Total fixed maturity securities - available-for-sale	664,710		23,583,505		749,385		24,997,600
Fixed maturity securities - trading
Residential mortgage-backed securities	—		313,963		—		313,963
Commercial mortgage-backed securities	—		190,247		—		190,247
Other asset-backed securities	—		29,585		28,343		57,928
U.S. government-related securities	555,601		255		—		555,856
State, municipalities, and political subdivisions	—		229,032		—		229,032
Other government-related securities	—		44,845		—		44,845
Corporate bonds	—		1,568,094		—		1,568,094
Total fixed maturity securities - trading	555,601		2,376,021		28,343		2,959,965
Total fixed maturity securities	1,220,311		25,959,526		777,728		27,957,565
Equity securities	211,023		11,310		70,080		292,413
Other long-term investments (1)	27,757		7,785		19,103		54,645
Short-term investments	101,470		—		—		101,470
Total investments	1,560,561		25,978,621		866,911		28,406,093
Cash	169,775		—		—		169,775
Other assets	—		—		—		—
Assets related to separate accounts
Variable annuity	6,741,959		—		—		6,741,959
Variable universal life	502,617		—		—		502,617
Total assets measured at fair value on a recurring basis	$	8,974,912	$	25,978,621	$	866,911	$	35,820,444
Liabilities:
Annuity account balances (2)	$	—	$	—	$	136,462	$	136,462
Other liabilities (1)	2,727		15,370		437,613		455,710
Total liabilities measured at fair value on a recurring basis	$	2,727	$	15,370	$	574,075	$	592,172

(1)Includes certain freestanding and embedded derivatives.

(2)Represents liabilities related to equity indexed annuities.

Schedule of valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments

	Fair Value
	As of		Valuation	Unobservable	Range
	December 31, 2012		Technique	Input	(Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	596,143	Discounted cash flow	Liquidity premium Paydown rate	0.72% - 1.68% (1.29%) 8.51% - 18.10% (11.40%)
Other government-related securities	20,011		Discounted cash flow	Spread over treasury	(0.30%)
Corporate bonds	168,007		Discounted cash flow	Spread over treasury	0.92% - 7.75% (3.34%)
Liabilities:
Embedded derivatives - GMWB(1)	$	169,041	Actuarial cash flow model	Mortality Lapse	57% of 1994 GMDB table 0% - 24%, depending on product/duration/funded
					status of guarantee
				Utilization	93% - 100%
				Nonperformance risk	0.09% - 1.34%
Annuity account balances(2)	129,468		Actuarial cash flow model	Asset earned rate Expenses	5.81% $88 - $108 per policy
				Withdrawal rate	2.20%
				Mortality	57% of 1994 GMDB table
				Lapse	2.2% - 45.0%, depending on duration/surrender charge period
				Return on assets	1.50% - 1.85% depending on surrender charge period
				Nonperformance risk	0.09% - 1.34%

(1)The fair value for the GMWB embedded derivative is presented as a net liability. Excludes modified coinsurance arrangements.

(2)Represents liabilities related to equity indexed annuities.

Schedule of reconciliation of the beginning and ending balances for fair value measurements, for which the Company has used significant unobservable inputs (Level 3)

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the year ended December 31, 2012, for which the Company has used significant unobservable inputs (Level 3):

																													Total
																													Gains (losses)
			Total				Total																						included in
			Realized and Unrealized				Realized and Unrealized																						Earnings
			Gains				Losses																						related to
					Included in					Included in																			Instruments
					Other					Other												Transfers							still held at
	Beginning		Included in		Comprehensive		Included in			Comprehensive												in/out of					Ending		the Reporting
	Balance		Earnings		Income		Earnings			Income			Purchases		Sales			Issuances		Settlements		Level 3		Other			Balance		Date
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	7	$	—	$	—	$	—		$	—		$	—	$	(3	)	$	—	$	—	$	—	$	—		$	4	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Other asset-backed securities	614,813		339		21,780		—			(22,587		)	—		(19,050		)	—		—		771		77			596,143		—
U.S. government-related securities	15,000		—		—		—			(2		)	—		(15,000		)	—		—		—		2			—		—
States, municipals, and political subdivisions	—		—		—		—			4,275			—		—			—		—		—		4,275			—
Other government-related securities	—		—		29		—			(27		)	20,024		—			—		—		—		(15		)	20,011		—
Corporate bonds	119,565		470		8,052		(4		)	(2,723		)	11,960		(9,854		)	—		—		40,060		366			167,892		—
Total fixed maturity securities - available-for-sale	749,385		809		29,861		(4		)	(25,339		)	36,259		(43,907		)	—		—		40,831		430			788,325		—
Fixed maturity securities - trading
Residential mortgage-backed securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Other asset-backed securities	28,343		4,086		—		(2,306		)	—			48,255		(9,896		)	—		—		—		2,053			70,535		1,780
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—		—			—		—
States, municipals and political subdivisions	—		—		—		—			—			—		—			—		—		—		—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Corporate bonds	—		2		—		—			—			1		—			—		—		112		—			115		10
Total fixed maturity securities - trading	28,343		4,088		—		(2,306		)	—			48,256		(9,896		)	—		—		112		2,053			70,650		1,790
Total fixed maturity securities	777,728		4,897		29,861		(2,310		)	(25,339		)	84,515		(53,803		)	—		—		40,943		2,483			858,975		1,790
Equity securities	70,080		8		827		—			(1,097		)	4		(4,295		)	—		—		—		—			65,527		—
Other long-term investments(1)	19,103		—		—		29,552			—			—		—			—		—		—		—			48,655		29,552
Short-term investments	—		—		—		—			—			—		—			—		—		—		—			—		—
Total investments	866,911		4,905		30,688		27,242			(26,436		)	84,519		(58,098		)	—		—		40,943		2,483			973,157		31,342
Total assets measured at fair value on a recurring basis	$	866,911	$	4,905	$	30,688	$	27,242		$	(26,436	)	$	84,519	$	(58,098	)	$	—	$	—	$	40,943	$	2,483		$	973,157	$	31,342
Liabilities:
Annuity account balances(2)	$	136,462	$	—	$	—	$	12,293		$	—		$	—	$	—		$	860	$	20,147	$	—	$	—		$	129,468	$	—
Other liabilities(1	437,613		86,523		—		(260,347		)	—			—		—			—		—		—		—			611,437		(173,824		)
Total liabilities measured at fair value on a recurring basis	$	574,075	$	86,523	$	—	$	(248,054	)	$	—		$	—	$	—		$	860	$	20,147	$	—	$	—		$	740,905	$	(173,824	)

(1)Represents certain freestanding and embedded derivatives.

(2)Represents liabilities related to equity indexed annuities.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the year ended December 31, 2011, for which the Company has used significant unobservable inputs (Level 3):

																														Total
																														Gains (losses)
			Total				Total																							included in
			Realized and Unrealized				Realized and Unrealized																							Earnings
			Gains				Losses																							related to
					Included in					Included in																				Instruments
					Other					Other												Transfers								still held at
	Beginning		Included in		Comprehensive		Included in			Comprehensive												in/out of						Ending		the Reporting
	Balance		Earnings		Income		Earnings			Income			Purchases		Sales			Issuances		Settlements		Level 3			Other			Balance		Date
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	20	$	—	$	12	$	(4	)	$	—		$	—	$	(12	)	$	—	$	—	$	(9	)	$	—		$	7	$	—
Commercial mortgage-backed securities	19,901		—		147		—			(719		)	—		(103		)	—		—		(19,224		)	(2		)	—		—
Other asset-backed securities	641,129		4,527		28,873		(8,661		)	(50,941		)	—		—			—		—		—			(114		)	614,813		—
U.S. government-related securities	15,109		—		—		—			(122		)	—		—			—		—		—			13			15,000		—
States, municipals, and political subdivisions	—		—		—		—			—			—		—			—		—		—			—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate bonds	64,996		—		5,216		—			(1,689		)	40,000		(3,543		)	—		—		14,585			—			119,565		—
Total fixed maturity securities - available-for-sale	741,155		4,527		34,248		(8,665		)	(53,471		)	40,000		(3,658		)	—		—		(4,648		)	(103		)	749,385		—
Fixed maturity securities - trading
Residential mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	59,925		1,213		—		(2,689		)	—			3,792		(40,292		)	—		—		4,002			2,392			28,343		(937		)
U.S. government-related securities	3,442		387		—		(476		)	—			—		(3,347		)	—		—		—			(6		)	—		—
States, municipals and political subdivisions	—		—		—		—			—			—		—			—		—		—			—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate bonds	—		611		—		(1,453		)	—			—		(37,292		)	—		—		38,039			95			—		—
Total fixed maturity securities - trading	63,367		2,211		—		(4,618		)	—			3,792		(80,931		)	—		—		42,041			2,481			28,343		(937		)
Total fixed maturity securities	804,522		6,738		34,248		(13,283		)	(53,471		)	43,792		(84,589		)	—		—		37,393			2,378			777,728		(937		)
Equity securities	66,592		49		555		—			(1,050		)	3,962		(49		)	—		—		21			—			70,080		—
Other long-term investments(1)	31,765		—		—		(12,662		)	—			—		—			—		—		—			—			19,103		(12,662		)
Short-term investments	—		—		—		—			—			—		—			—		—		—			—			—		—
Total investments	902,879		6,787		34,803		(25,945		)	(54,521		)	47,754		(84,638		)	—		—		37,414			2,378			866,911		(13,599		)
Total assets measured at fair value on a recurring basis	$	902,879	$	6,787	$	34,803	$	(25,945	)	$	(54,521	)	$	47,754	$	(84,638	)	$	—	$	—	$	37,414		$	2,378		$	866,911	$	(13,599	)
Liabilities:
Annuity account balances(2)	$	143,264	$	—	$	—	$	(5,850	)	$	—		$	—	$	—		$	654	$	13,306	$	—		$	—		$	136,462	$	—
Other liabilities(1)	190,529		—		—		(249,757		)	—			—		(2,673		)	—		—		—			—			437,613		(249,757		)
Total liabilities measured at fair value on a recurring basis	$	333,793	$	—	$	—	$	(255,607	)	$	—		$	—	$	(2,673	)	$	654	$	13,306	$	—		$	—		$	574,075	$	(249,757	)

(1)Represents certain freestanding and embedded derivatives.

(2)Represents liabilities related to equity indexed annuities.

Schedule of the carrying amounts and estimated fair value of the Company's financial instruments

		As of December 31,
		2012				2011
	Fair Value	Carrying				Carrying
	Level	Amounts		Fair Values		Amounts		Fair Values
	(Dollars In Thousands)
Assets:
Mortgage loans on real estate	3	$	4,948,625	$	5,723,579	$	5,351,902	$	6,251,902
Policy loans	3	865,391		865,391		879,819		879,819
Fixed maturities, held-to-maturity(1)	3	300,000		319,163		—		—
Liabilities:
Stable value product account balances	3	$	2,510,559	$	2,534,094	$	2,769,510	$	2,855,614
Annuity account balances	3	10,658,463		10,525,702		10,946,848		10,767,892
Mortgage loan backed certificates	3	—		—		19,755		19,893
Debt:
Non-recourse funding obligations(2)	3	$	1,446,900	$	1,357,290	$	1,248,600	$	1,060,275

Except as noted below, fair values were estimated using quoted market prices.

(1) Security purchased from unconsolidated subsidiary, Red Mountain LLC.

(2) Of this carrying amount $300 million, fair value of $297.6 million, relates to non-recourse funding obligations issued by Golden Gate V.