FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2011

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 June 30, 2011:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	2,490,156	$	7	$	2,490,163
Commercial mortgage-backed securities	—		287,504		—		287,504
Other asset-backed securities	—		206,517		637,746		844,263
U.S. government-related securities	898,072		218,241		15,000		1,131,313
States, municipals, and political subdivisions	—		1,174,748		74		1,174,822
Other government-related securities	15,016		128,103		—		143,119
Corporate bonds	100		17,057,663		118,025		17,175,788
Total fixed maturity securities - available-for-sale	913,188		21,562,932		770,852		23,246,972
Fixed maturity securities - trading
Residential mortgage-backed securities	—		348,536		—		348,536
Commercial mortgage-backed securities	—		170,034		—		170,034
Other asset-backed securities	—		20,486		41,093		61,579
U.S. government-related securities	388,541		8,608		3,512		400,661
States, municipals, and political subdivisions	—		208,383		—		208,383
Other government-related securities	—		110,343		—		110,343
Corporate bonds	3,982		1,541,094		42,041		1,587,117
Total fixed maturity securities - trading	392,523		2,407,484		86,646		2,886,653
Total fixed maturity securities	1,305,711		23,970,416		857,498		26,133,625
Equity securities	257,575		11,381		80,782		349,738
Other long-term investments (1)	7,005		4,074		27,531		38,610
Short-term investments	134,698		—		—		134,698
Total investments	1,704,989		23,985,871		965,811		26,656,671
Cash	419,210		—		—		419,210
Other assets	7,204		—		—		7,204
Assets related to separate accounts Variable annuity	6,291,158		—		—		6,291,158
Variable universal life	556,419		—		—		556,419
Total assets measured at fair value on a recurring basis	$	8,978,980	$	23,985,871	$	965,811	$	33,930,662
Liabilities:
Annuity account balances (2)	$	—	$	—	$	142,470	$	142,470
Other liabilities (1)	6,578		26,507		213,659		246,744
Total liabilities measured at fair value on a recurring basis	$	6,578	$	26,507	$	356,129	$	389,214

(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, 2010:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	2,547,730	$	20	$	2,547,750
Commercial mortgage-backed securities	—		155,125		19,901		175,026
Other asset-backed securities	—		207,638		641,129		848,767
U.S. government-related securities	1,054,375		104,419		15,109		1,173,903
States, municipals, and political subdivisions	—		963,225		78		963,303
Other government-related securities	14,993		186,214		—		201,207
Corporate bonds	100		15,725,900		65,032		15,791,032
Total fixed maturity securities - available-for-sale	1,069,468		19,890,251		741,269		21,700,988
Fixed maturity securities - trading
Residential mortgage-backed securities	—		432,015		—		432,015
Commercial mortgage-backed securities	—		137,606		—		137,606
Other asset-backed securities	—		18,415		59,925		78,340
U.S. government-related securities	383,423		11,369		3,442		398,234
States, municipals, and political subdivisions	—		160,539		—		160,539
Other government-related securities	—		126,553		—		126,553
Corporate bonds	—		1,642,664		—		1,642,664
Total fixed maturity securities - trading	383,423		2,529,161		63,367		2,975,951
Total fixed maturity securities	1,452,891		22,419,412		804,636		24,676,939
Equity securities	271,483		10,831		77,098		359,412
Other long-term investments (1)	6,794		3,808		25,065		35,667
Short-term investments	344,796		8,028		—		352,824
Total investments	2,075,964		22,442,079		906,799		25,424,842
Cash	264,425		—		—		264,425
Other assets	6,222		—		—		6,222
Assets related to separate accounts Variable annuity	5,170,193		—		—		5,170,193
Variable universal life	534,219		—		—		534,219
Total assets measured at fair value on a recurring basis	$	8,051,023	$	22,442,079	$	906,799	$	31,399,901
Liabilities:
Annuity account balances (2)	$	—	$	—	$	143,264	$	143,264
Other liabilities (1)	23,995		28,987		190,529		243,511
Total liabilities measured at fair value on a recurring basis	$	23,995	$	28,987	$	333,793	$	386,775

(1)  Includes certain freestanding and embedded derivatives.

(2)  Represents liabilities related to equity indexed annuities.

Schedule of inputs for available-for-sale ABSs classified as Level 3

Investment grade credit rating	100.0%
Weighted-average yield	0.9%
Par value	$683.7 million
Weighted-average life	7.5 years

Schedule of weighted-average inputs for bonds and securities classified as Level 3

Investment grade credit rating	69.6%
Weighted-average yield	4.3%
Weighted-average coupon	4.5%
Par value	$194.2 million
Weighted-average stated maturity	5.7 years

Schedule of current key assumptions for valuation of annuity account balances

Asset Earned Rate	5.90%
Admin Expense per Policy	$91
Partial Withdrawal Rate (for ages less than 70)	2.20%
Partial Withdrawal Rate (for ages 70 and greater)	2.20%
Mortality	65% of 94 GMDB table
Lapse	2.2% to 55% depending on the surrender charge period
Return on Assets	1.5% to 1.85% depending on the guarantee period

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 three months ended June 30, 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	$	19	$	—	$	—	$	—		$	—		$	—	$	(12	)	$	—	$	—	$	—	$	—		$	7	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Other asset-backed securities	639,407		1,786		1,751		(2,133		)	(3,050		)	109,148		(109,148		)	—		—		—		(15		)	637,746		—
U.S. government-related securities	15,084		—		—		—			(87		)	—		—			—		—		—		3			15,000		—
States, municipals, and political subdivisions	78		—		—		—			—			—		(4		)	—		—		—		—			74		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Corporate bonds	64,907		—		1,471		—			(287		)	40,000		(764		)	—		—		12,698		—			118,025		—
Total fixed maturity securities - available-for-sale	719,495		1,786		3,222		(2,133		)	(3,424		)	149,148		(109,928		)	—		—		12,698		(12		)	770,852		—
Fixed maturity securities - trading
Residential mortgage-backed securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Other asset-backed securities	41,713		329		—		(457		)	—			3,792		(5,060		)	—		—		—		776			41,093		(128		)
U.S. government-related securities	3,384		130		—		—			—			—		—			—		—		—		(2		)	3,512		130
States, municipals and political subdivisions	—		—		—		—			—			—		—			—		—		—		—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Corporate bonds	—		—		—		—			—			—		—			—		—		42,041		—			42,041		374
Total fixed maturity securities - trading	45,097		459		—		(457		)	—			3,792		(5,060		)	—		—		42,041		774			86,646		376
Total fixed maturity securities	764,592		2,245		3,222		(2,590		)	(3,424		)	152,940		(114,988		)	—		—		54,739		762			857,498		376
Equity securities	79,544		49		—		—			(745		)	1,962		(49		)	—		—		21		—			80,782		—
Other long-term investments (1)	26,072		1,459		—		—			—			—		—			—		—		—		—			27,531		1,459
Short-term investments	—		—		—		—			—			—		—			—		—		—		—			—		—
Total investments	870,208		3,753		3,222		(2,590		)	(4,169		)	154,902		(115,037		)	—		—		54,760		762			965,811		1,835
Total assets measured at fair value on a recurring basis	$	870,208	$	3,753	$	3,222	$	(2,590	)	$	(4,169	)	$	154,902	$	(115,037	)	$	—	$	—	$	54,760	$	762		$	965,811	$	1,835
Liabilities:
Annuity account balances (2)	$	143,020	$	—	$	—	$	2,104		$	—		$	—	$	—		$	135	$	2,789	$	—	$	—		$	142,470	$	—
Other liabilities (1)	178,386		—		—		37,141			—			—		1,868			—		—		—		—			213,659		(37,141		)
Total liabilities measured at fair value on a recurring basis	$	321,406	$	—	$	—	$	39,245		$	—		$	—	$	1,868		$	135	$	2,789	$	—	$	—		$	356,129	$	(37,141	)

(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 three months ended June 30, 2010, for which the Company has used significant unobservable inputs (Level 3):

																	Total
																	Gains (losses)
																	included in
			Total Realized and Unrealized														Earnings
			Gains (losses)														related to
						Included in			Purchases,								Instruments
						Other			Issuances, and			Transfers in					still held at
	Beginning		Included in			Comprehensive			Settlements			and/or out of			Ending		the Reporting
	Balance		Earnings			Income			(net)			Level 3			Balance		Date
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	22	$	—		$	—		$	(1	)	$	—		$	21	$	—
Commercial mortgage-backed securities	—		—			—			39,952			—			39,952		—
Other asset-backed securities	599,116		—			(1,759		)	(66		)	—			597,291		—
U.S. government-related securities	15,151		—			(6		)	4			—			15,149		—
States, municipals, and political subdivisions	86		—			—			(4		)	—			82		—
Other government-related securities	—		—			—			—			—			—		—
Corporate bonds	95,367		—			(2,615		)	15,624			—			108,376		—
Total fixed maturity securities - available-for-sale	709,742		—			(4,380		)	55,509			—			760,871		—
Fixed maturity securities - trading
Residential mortgage-backed securities	3,563		(28		)	—			(3,535		)	—			—		—
Commercial mortgage-backed securities	—		—			—			—			—			—		—
Other asset-backed securities	48,450		(1,451		)	—			14,138			—			61,137		(1,451		)
U.S. government-related securities	3,310		254			—			(2		)	—			3,562		253
States, municipals and political subdivisions	—		—			—			—			—			—		—
Other government-related securities	—		—			—			—			—			—		—
Corporate bonds	26,971		404			—			(199		)	(27,133		)	43		(1		)
Total fixed maturity securities - trading	82,294		(821		)	—			10,402			(27,133		)	64,742		(1,199		)
Total fixed maturity securities	792,036		(821		)	(4,380		)	65,911			(27,133		)	825,613		(1,199		)
Equity securities	71,397		4			—			1,736			—			73,137		—
Other long-term investments (1)	16,962		(7,431		)	—			—			—			9,531		(7,431		)
Short-term investments	—		—			—			—			—			—		—
Total investments	880,395		(8,248		)	(4,380		)	67,647			(27,133		)	908,281		(8,630		)
Total assets measured at fair value on a recurring basis	$	880,395	$	(8,248	)	$	(4,380	)	$	67,647		$	(27,133	)	$	908,281	$	(8,630	)
Liabilities:
Annuity account balances (2)	$	150,630	$	(738	)	$	—		$	1,928		$	—		$	149,440	$	—
Other liabilities (1)	128,235		(104,962		)	—			—			—			233,197		(104,962		)
Total liabilities measured at fair value on a recurring basis	$	278,865	$	(105,700	)	$	—		$	1,928		$	—		$	382,637	$	(104,962	)

(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 six months ended June 30, 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		—			—			—		(102		)	—		—		(19,946		)	—			—		—
Other asset-backed securities	641,129		1,786		2,158		(2,133		)	(5,146		)	118,598		(118,598		)	—		—		—			(48		)	637,746		—
U.S. government-related securities	15,109		—		—		—			(115		)	—		—			—		—		—			6			15,000		—
States, municipals, and political
subdivisions	78		—		—		—			—			—		(4		)	—		—		—			—			74		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate bonds	65,032		—		1,485		—			(956		)	40,000		(2,121		)	—		—		14,585			—			118,025		—
Total fixed maturity securities - available-for-sale	741,269		1,786		3,802		(2,137		)	(6,217		)	158,598		(120,837		)	—		—		(5,370		)	(42		)	770,852		—
Fixed maturity securities - trading
Residential mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	59,925		1,152		—		(1,313		)	—			3,792		(23,952		)	—		—		—			1,489			41,093		71
U.S. government-related securities	3,442		130		—		(56		)	—			—		—			—		—		—			(4		)	3,512		74
States, municipals and political subdivisions	—		—		—		—			—			—		—			—		—		—			—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate bonds	—		—		—		—			—			—		—			—		—		42,041			—			42,041		374
Total fixed maturity securities - trading	63,367		1,282		—		(1,369		)	—			3,792		(23,952		)	—		—		42,041			1,485			86,646		519
Total fixed maturity securities	804,636		3,068		3,802		(3,506		)	(6,217		)	162,390		(144,789		)	—		—		36,671			1,443			857,498		519
Equity securities	77,098		49		445		—			(744		)	3,962		(49		)	—		—		21			—			80,782		—
Other long-term investments (1)	25,065		2,466		—		—			—			—		—			—		—		—			—			27,531		2,466
Short-term investments	—		—		—		—			—			—		—			—		—		—			—			—		—
Total investments	906,799		5,583		4,247		(3,506		)	(6,961		)	166,352		(144,838		)	—		—		36,692			1,443			965,811		2,985
Total assets measured at fair value on a recurring basis	$	906,799	$	5,583	$	4,247	$	(3,506	)	$	(6,961	)	$	166,352	$	(144,838	)	$	—	$	—	$	36,692		$	1,443		$	965,811	$	2,985
Liabilities:
Annuity account balances (2)	$	143,264	$	—	$	—	$	4,235		$	—		$	—	$	—		$	314	$	5,343	$	—		$	—		$	142,470	$	—
Other liabilities (1)	190,529		—		—		24,998			—			—		1,868			—		—		—			—			213,659		(24,998		)
Total liabilities measured at fair value on a recurring basis	$	333,793	$	—	$	—	$	29,233		$	—		$	—	$	1,868		$	314	$	5,343	$	—		$	—		$	356,129	$	(24,998	)

(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 six months ended June 30, 2010, for which the Company has used significant unobservable inputs (Level 3):

																	Total
																	Gains (losses)
																	included in
			Total Realized and Unrealized														Earnings
			Gains (losses)														related to
						Included in			Purchases,								Instruments
						Other			Issuances, and			Transfers in					still held at
	Beginning		Included in			Comprehensive			Settlements			and/or out of			Ending		the Reporting
	Balance		Earnings			Income			(net)			Level 3			Balance		Date
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	23	$	4		$	—		$	(6	)	$	—		$	21	$	—
Commercial mortgage-backed securities	844,535		—			38,281			(842,864		)(3)	—			39,952		—
Other asset-backed securities	693,930		5,868			(3,696		)	(89,473		)	(9,338		)	597,291		—
U.S. government-related securities	15,102		—			40			7			—			15,149		—
States, municipals, and political subdivisions	86		—			—			(4		)	—			82		—
Other government-related securities	—		—			—			—			—			—		—
Corporate bonds	86,328		—			3,166			18,732			150			108,376		—
Total fixed maturity securities - available-for-sale	1,640,004		5,872			37,791			(913,608		)	(9,188		)	760,871		—
Fixed maturity securities - trading
Residential mortgage-backed securities	7,244		(1		)	—			(3,855		)	(3,388		)	—		—
Commercial mortgage-backed securities	—		—			—			—			—			—		—
Other asset-backed securities	47,509		(755		)	—			14,383			—			61,137		(985		)
U.S. government-related securities	3,310		255			—			(3		)	—			3,562		255
States, municipals, and political subdivisions	4,994		77			—			—			(5,071		)	—		—
Other government-related securities	41,965		1,058			—			(47		)	(42,976		)	—		—
Corporate bonds	67		322			—			26,787			(27,133		)	43		(1		)
Total fixed maturity securities - trading	105,089		956			—			37,265			(78,568		)	64,742		(731		)
Total fixed maturity securities	1,745,093		6,828			37,791			(876,343		)	(87,756		)	825,613		(731		)
Equity securities	70,708		4			—			2,425			—			73,137		—
Other long-term investments (1)	16,525		(6,994		)	—			—			—			9,531		(6,994		)
Short-term investments	—		—			—			—			—			—		—
Total investments	1,832,326		(162		)	37,791			(873,918		)	(87,756		)	908,281		(7,725		)
Total assets measured at fair value on a recurring basis	$	1,832,326	$	(162	)	$	37,791		$	(873,918	)	$	(87,756	)	$	908,281	$	(7,725	)
Liabilities:
Annuity account balances (2)	$	149,893	$	(2,841	)	$	—		$	3,294		$	—		$	149,440	$	—
Other liabilities (1)	105,838		(127,359		)	—			—			—			233,197		(127,359		)
Total liabilities measured at fair value on a recurring basis	$	255,731	$	(130,200	)	$	—		$	3,294		$	—		$	382,637	$	(127,359	)

(1)  Represents certain freestanding and embedded derivatives.

(2)  Represents liabilities related to equity indexed annuities.

(3)  Represents mortgage loan held by the trusts that have been consolidated upon the adoption of ASU No. 2009-17.

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

	As of
	June 30, 2011				December 31, 2010
	Carrying				Carrying
	Amounts		Fair Values		Amounts		Fair Values
	(Dollars In Thousands)
Assets:
Mortgage loans on real estate	$	5,349,851	$	5,873,698	$	4,892,829	$	5,336,732
Policy loans	881,757		881,757		793,448		793,448
Liabilities:
Stable value product account balances	$	2,565,235	$	2,637,115	$	3,076,233	$	3,163,902
Annuity account balances	10,899,995		10,761,826		10,591,605		10,451,526
Mortgage loan backed certificates	42,862		43,602		61,678		63,127
Debt:
Bank borrowings	$	135,000	$	135,000	$	142,000	$	142,000
Senior and Medium-Term Notes	1,359,852		1,496,477		1,359,852		1,455,641
Subordinated debt securities	524,743		523,135		524,743		517,383
Non-recourse funding obligations	438,300		329,263		532,400		389,534