FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2012

FAIR VALUE OF FINANCIAL INSTRUMENTS

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		259,955		—		1,169,943
State, municipalities, and political subdivisions		—		1,439,378		4,335		1,443,713
Other government-related securities		—		80,767		20,011		100,778
Corporate bonds		207		20,213,952		167,892		20,382,051
Total fixed maturity securities—available-for-sale		910,195		25,082,071		788,385		26,780,651
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		27,714,025		859,035		29,787,959
Equity securities		307,252		35,116		69,418		411,786
Other long-term investments(1)		23,639		58,134		31,591		113,364
Short-term investments		215,320		2,492		—		217,812
Total investments		1,761,110		27,809,767		960,044		30,530,921
Cash		368,801		—		—		368,801
Other assets		8,239		—		—		8,239
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	$	12,302,384	$	27,809,767	$	960,044	$	41,072,195
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	$	—	$	2,342,123	$	7	$	2,342,130
Commercial mortgage-backed securities		—		551,559		—		551,559
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		69		1,327,782
Other government-related securities		—		93,017		—		93,017
Corporate bonds		204		18,460,480		119,601		18,580,285
Total fixed maturity securities—available-for-sale		664,710		23,609,281		749,490		25,023,481
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		25,985,302		777,833		27,983,446
Equity securities		243,336		11,310		80,586		335,232
Other long-term investments(1)		27,757		7,785		12,703		48,245
Short-term investments		101,489		—		—		101,489
Total investments		1,592,893		26,004,397		871,122		28,468,412
Cash		267,298		—		—		267,298
Other assets		6,960		—		—		6,960
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	$	9,111,727	$	26,004,397	$	871,122	$	35,987,246
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 the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of the financial instruments

	Fair Value As of December 31, 2012		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	596,143	Discounted cash flow	Liquidity premium	0.72% - 1.68% (1.29%)
				Paydown rate	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	57% of 1994 GMDB table
				Lapse	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	5.81%
				Expenses	$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) included in Earnings related to Instruments still held at the Reporting Date
			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3		Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	7	$	—	$	—	$	—		$	—		$	—	$	(3	)	$	—	$	—	$	—	$	—		$	4	$	—
Commercial mortgage-backed		614,813		339		21,780		—			(22,587	)		—		(19,050	)		—		—		771		77			596,143		—
Other asset-backed securities		—		—		—		—			—			—		—			—		—		—		—			—		—
U.S. government-related securities		15,000		—		—		—			(2	)		—		(15,000	)		—		—		—		2			—		—
States, municipals, and political subdivisions		69		—		—		—			(1	)		4,275		(9	)		—		—		—		1			4,335		—
Other government-related securities		—		—		29		—			(27	)		20,024		—			—		—		—		(15	)		20,011		—
Corporate bonds		119,601		470		8,052		(4	)		(2,723	)		11,960		(9,854	)		—		—		40,060		330			167,892		—
Total fixed maturity securities— available-for-sale		749,490		809		29,861		(4	)		(25,340	)		36,259		(43,916	)		—		—		40,831		395			788,385		—
Fixed maturity securities—trading
Residential mortgage-backed		—		—		—		—			—			—		—			—		—		—		—			—		—
Commercial mortgage-backed securities		—		—		—		—			—			—		—			—		—		—		—			—		—
Other asset-backed securities		28,343		4,086		—		(2,306	)		—			48,255		(9,896	)		—		—		—		2,053			70,535		1,780
States, municipals and political subdivisions		—		—		—		—			—			—		—			—		—		—		—			—		—
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		777,833		4,897		29,861		(2,310	)		(25,340	)		84,515		(53,812	)		—		—		40,943		2,448			859,035		1,790
Equity securities		80,586		8		826		—			(1,097	)		4		(4,295	)		—		—		—		(6,614	)		69,418		—
Other long-term investments(1)		12,703		26,747		—		(7,859	)		—			—		—			—		—		—		—			31,591		18,888
Total investments		871,122		31,652		30,687		(10,169	)		(26,437	)		84,519		(58,107	)		—		—		40,943		(4,166	)		960,044		20,678
Total assets measured at fair value on a recurring basis	$	871,122	$	31,652	$	30,687	$	(10,169	)	$	(26,437	)	$	84,519	$	(58,107	)	$	—	$	—	$	40,943	$	(4,166	)	$	960,044	$	20,678
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) included in Earnings related to Instruments still held at the Reporting Date
			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance
	(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		78		—		—		—			(1	)		—		(9	)		—		—		—			1			69		—
Other government-related securities		—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate bonds		65,032		—		5,216		—			(1,689	)		40,000		(3,543	)		—		—		14,585			—			119,601		—
Total fixed maturity securities—available-for-sale		741,269		4,527		34,248		(8,665	)		(53,472	)		40,000		(3,667	)		—		—		(4,648	)		(102	)		749,490		—
Fixed maturity securities—trading
Residential mortgage-backed		—		—		—		—			—			—		—			—		—		—			—			—		—
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	)		—		—
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		804,636		6,738		34,248		(13,283	)		(53,472	)		43,792		(84,598	)		—		—		37,393			2,379			777,833		(937	)
Equity securities		77,098		49		555		—			(1,050	)		3,962		(49	)		—		—		21			—			80,586		—
Other long-term investments(1)		25,065		—		—		(12,362	)		—			—		—			—		—		—			—			12,703		(12,362	)
Short-term investments		—		—		—		—			—			—		—			—		—		—			—			—		—
Total investments		906,799		6,787		34,803		(25,645	)		(54,522	)		47,754		(84,647	)		—		—		37,414			2,379			871,122		(13,299	)
Total assets measured at fair value on a recurring basis	$	906,799	$	6,787	$	34,803	$	(25,645	)	$	(54,522	)	$	47,754	$	(84,647	)	$	—	$	—	$	37,414		$	2,379		$	871,122	$	(13,299	)
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
	Carrying Amounts		Fair Values		Carrying Amounts		Fair Values
	(Dollars In Thousands)
Assets:
Mortgage loans on real estate	$	4,950,201	$	5,725,382	$	5,353,481	$	6,251,902
Policy loans		865,391		865,391		879,819		879,819
Fixed maturities, held-to-maturity(1)		300,000		319,163		—		—
Liabilities:
Stable value product account balances	$	2,510,559	$	2,534,094	$	2,769,510	$	2,855,614
Annuity account balances		10,658,463		10,525,702		10,946,848		10,767,892
Mortgage loan backed certificates		—		—		19,755		19,893
Debt:
Bank borrowings	$	50,000	$	50,000	$	170,000	$	170,000
Senior and Medium-Term Notes		1,350,000		1,584,438		1,350,000		1,494,346
Subordinated debt securities		540,593		556,524		524,743		525,483
Non-recourse funding obligations(2)		586,000		481,056		407,800		217,529

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.