FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 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 September 30, 2011:

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	2,533,183	$	7	$	2,533,190
Commercial mortgage-backed securities	—		455,003		9,434		464,437
Other asset-backed securities	—		201,918		598,841		800,759
U.S. government-related securities	873,752		447,825		15,000		1,336,577
States, municipals, and political subdivisions	—		1,324,529		73		1,324,602
Other government-related securities	15,011		117,956		—		132,967
Corporate bonds	200		18,143,359		120,638		18,264,197
Total fixed maturity securities - available-for-sale	888,963		23,223,773		743,993		24,856,729
Fixed maturity securities - trading
Residential mortgage-backed securities	—		359,700		—		359,700
Commercial mortgage-backed securities	—		180,820		—		180,820
Other asset-backed securities	—		24,815		26,263		51,078
U.S. government-related securities	469,399		10,512		3,450		483,361
States, municipals, and political subdivisions	—		230,812		—		230,812
Other government-related securities	—		78,644		—		78,644
Corporate bonds	—		1,572,634		41,226		1,613,860
Total fixed maturity securities - trading	469,399		2,457,937		70,939		2,998,275
Total fixed maturity securities	1,358,362		25,681,710		814,932		27,855,004
Equity securities	235,772		11,553		80,477		327,802
Other long-term investments (1)	91,843		8,696		8,487		109,026
Short-term investments	80,387		—		—		80,387
Total investments	1,766,364		25,701,959		903,896		28,372,219
Cash	332,487		—		—		332,487
Other assets	6,404		—		—		6,404
Assets related to separate accounts
Variable annuity	5,947,391		—		—		5,947,391
Variable universal life	470,283		—		—		470,283
Total assets measured at fair value on a recurring basis	$	8,522,929	$	25,701,959	$	903,896	$	35,128,784
Liabilities:
Annuity account balances (2)	$	—	$	—	$	139,145	$	139,145
Other liabilities (1)	50,773		17,959		449,984		518,716
Total liabilities measured at fair value on a recurring basis	$	50,773	$	17,959	$	589,129	$	657,861

(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	1.5%
Par value	$693.7 million
Weighted-average life	12.0 years

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

Investment grade credit rating	69.8%
Weighted-average yield	4.4%
Weighted-average coupon	4.6%
Par value	$193.4 million
Weighted-average stated maturity	5.7 years

Schedule of current key assumptions for valuation of annuity account balances

Asset Earned Rate	5.89%
Admin Expense per Policy	$78 to $93 per policy
Partial Withdrawal Rate (for ages less than 70)	2.00%
Partial Withdrawal Rate (for ages 70 and greater)	2.00%
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 September 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	$	7	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—	$	—		$	7	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		9,434		—			9,434		—
Other asset-backed securities	637,746		—		1,478		—			(40,295		)	—		—			—		—		—		(88		)	598,841		—
U.S. government-related securities	15,000		—		—		—			(3		)	—		—			—		—		—		3			15,000		—
States, municipals, and political subdivisions	74		—		—		—			—			—		(1		)	—		—		—		—			73		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Corporate bonds	118,025		—		3,388		—			(100		)	—		(675		)	—		—		—		—			120,638		—
Total fixed maturity securities - available-for-sale	770,852		—		4,866		—			(40,398		)	—		(676		)	—		—		9,434		(85		)	743,993		—
Fixed maturity securities - trading
Residential mortgage-backed securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Other asset-backed securities	41,093		28		—		(918		)	—			—		(14,590		)	—		—		—		650			26,263		(734		)
U.S. government-related securities	3,512		—		—		(60		)	—			—		—			—		—		—		(2		)	3,450		(60		)
States, municipals and political subdivisions	—		—		—		—			—			—		—			—		—		—		—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Corporate bonds	42,041		—		—		(825		)	—			—		(71		)	—		—		—		81			41,226		(825		)
Total fixed maturity securities - trading	86,646		28		—		(1,803		)	—			—		(14,661		)	—		—		—		729			70,939		(1,619		)
Total fixed maturity securities	857,498		28		4,866		(1,803		)	(40,398		)	—		(15,337		)	—		—		9,434		644			814,932		(1,619		)
Equity securities	80,782		—		—		—			(305		)	—		—			—		—		—		—			80,477		—
Other long-term investments (1)	27,531		—		—		(19,044		)	—			—		—			—		—		—		—			8,487		(19,043		)
Short-term investments	—		—		—		—			—			—		—			—		—		—		—			—		—
Total investments	965,811		28		4,866		(20,847		)	(40,703		)	—		(15,337		)	—		—		9,434		644			903,896		(20,662		)
Total assets measured at fair value on a recurring basis	$	965,811	$	28	$	4,866	$	(20,847	)	$	(40,703	)	$	—	$	(15,337	)	$	—	$	—	$	9,434	$	644		$	903,896	$	(20,662	)
Liabilities:
Annuity account balances (2)	$	142,470	$	—	$	—	$	22		$	—		$	—	$	—		$	161	$	3,508	$	—	$	—		$	139,145	$	—
Other liabilities (1)	213,659		—		—		237,130			—			—		805			—		—		—		—			449,984		(237,130		)
Total liabilities measured at fair value on a recurring basis	$	356,129	$	—	$	—	$	237,152		$	—		$	—	$	805		$	161	$	3,508	$	—	$	—		$	589,129	$	(237,130	)

(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 September 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	$	21	$	—		$	—		$	(1	)	$	—		$	20	$	—
Commercial mortgage-backed securities	39,952		—			1,932			(85		)	(21,633		)	20,166		—
Other asset-backed securities	597,291		—			4,923			5			—			602,219		—
U.S. government-related securities	15,149		—			(29		)	3			—			15,123		—
States, municipals, and political subdivisions	82		—			—			—			—			82		—
Other government-related securities	—		—			—			—			—			—		—
Corporate bonds	108,376		—			5,289			19,221			7,414			140,300		—
Total fixed maturity securities - available-for-sale	760,871		—			12,115			19,143			(14,219		)	777,910		—
Fixed maturity securities - trading
Residential mortgage-backed securities	—		—			—			—			—			—		—
Commercial mortgage-backed securities	—		—			—			—			—			—		—
Other asset-backed securities	61,137		905			—			714			—			62,756		643
U.S. government-related securities	3,562		126			—			(2		)	—			3,686		126
States, municipals and political subdivisions	—		—			—			—			—			—		—
Other government-related securities	—		—			—			—			—			—		—
Corporate bonds	43		—			—			—			4,489			4,532		616
Total fixed maturity securities - trading	64,742		1,031			—			712			4,489			70,974		1,385
Total fixed maturity securities	825,613		1,031			12,115			19,855			(9,730		)	848,884		1,385
Equity securities	73,137		1,225			1,171			—			5,985			81,518		1,224
Other long-term investments (1)	9,531		1,787			—			—			—			11,318		1,787
Short-term investments	—		—			—			—			—			—		—
Total investments	908,281		4,043			13,286			19,855			(3,745		)	941,720		4,396
Total assets measured at fair value on a recurring basis	$	908,281	$	4,043		$	13,286		$	19,855		$	(3,745	)	$	941,720	$	4,396
Liabilities:
Annuity account balances (2)	$	149,440	$	2,578		$	—		$	2,696		$	—		$	144,166	$	—
Other liabilities (1)	233,197		(106,384		)	—			—			—			339,581		(106,384		)
Total liabilities measured at fair value on a recurring basis	$	382,637	$	(103,806	)	$	—		$	2,696		$	—		$	483,747	$	(106,384	)

(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 nine months ended September 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		—			—			—		(103		)	—		—		(10,511		)	—			9,434		—
Other asset-backed securities	641,129		1,786		3,637		(2,133		)	(45,441		)	118,598		(118,598		)	—		—		—			(137		)	598,841		—
U.S. government-related securities	15,109		—		—		—			(119		)	—		—			—		—		—			10			15,000		—
States, municipals, and political subdivisions	78		—		—		—			—			—		(5		)	—		—		—			—			73		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate bonds	65,032		—		4,873		—			(1,055		)	40,000		(2,797		)	—		—		14,585			—			120,638		—
Total fixed maturity securities - available-for-sale	741,269		1,786		8,669		(2,137		)	(46,615		)	158,598		(121,515		)	—		—		4,065			(127		)	743,993		—
Fixed maturity securities - trading
Residential mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	59,925		1,180		—		(2,230		)	—			3,793		(38,543		)	—		—		—			2,138			26,263		(656		)
U.S. government-related securities	3,442		130		—		(117		)	—			—		—			—		—		—			(5		)	3,450		14
States, municipals and political subdivisions	—		—		—		—			—			—		—			—		—		—			—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate bonds	—		—		—		(825		)	—			—		(71		)	—		—		42,041			81			41,226		(451		)
Total fixed maturity securities - trading	63,367		1,310		—		(3,172		)	—			3,793		(38,614		)	—		—		42,041			2,214			70,939		(1,093		)
Total fixed maturity securities	804,636		3,096		8,669		(5,309		)	(46,615		)	162,391		(160,129		)	—		—		46,106			2,087			814,932		(1,093		)
Equity securities	77,098		49		445		—			(1,049		)	3,962		(49		)	—		—		21			—			80,477		—
Other long-term investments (1)	25,065		—		—		(16,578		)	—			—		—			—		—		—			—			8,487		(16,577		)
Short-term investments	—		—		—		—			—			—		—			—		—		—			—			—		—
Total investments	906,799		3,145		9,114		(21,887		)	(47,664		)	166,353		(160,178		)	—		—		46,127			2,087			903,896		(17,670		)
Total assets measured at fair value on a recurring basis	$	906,799	$	3,145	$	9,114	$	(21,887	)	$	(47,664	)	$	166,353	$	(160,178	)	$	—	$	—	$	46,127		$	2,087		$	903,896	$	(17,670	)
Liabilities:
Annuity account balances (2)	$	143,264	$	—	$	—	$	4,257		$	—		$	—	$	—		$	475	$	8,851	$	—		$	—		$	139,145	$	—
Other liabilities(1)	190,529		—		—		262,128			—			—		2,673			—		—		—			—			449,984		(262,128		)
Total liabilities measured at fair value on a recurring basis	$	333,793	$	—	$	—	$	266,385		$	—		$	—	$	2,673		$	475	$	8,851	$	—		$	—		$	589,129	$	(262,128	)

(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 nine months ended September 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		$	—	$	(7	)	$	—		$	20	$	—
Commercial mortgage-backed securities	844,535		—			40,213		(842,949		)(3)	(21,633		)	20,166		—
Other asset-backed securities	693,930		5,868			1,227		(89,468		)	(9,338		)	602,219		—
U.S. government-related securities	15,102		—			11		10			—			15,123		—
States, municipals, and political subdivisions	86		—			—		(4		)	—			82		—
Other government-related securities	—		—			—		—			—			—		—
Corporate bonds	86,328		—			8,454		37,954			7,564			140,300		—
Total fixed maturity securities - available-for-sale	1,640,004		5,872			49,905		(894,464		)	(23,407		)	777,910		—
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		150			—		15,097			—			62,756		(377		)
U.S. government-related securities	3,310		381			—		(5		)	—			3,686		381
States, municipals, and political subdivisions	4,994		77			—		—			(5,071		)	—		—
Other government-related securities	41,965		1,058			—		(47		)	(42,976		)	—		—
Corporate bonds	67		323			—		26,786			(22,644		)	4,532		616
Total fixed maturity securities - trading	105,089		1,988			—		37,976			(74,079		)	70,974		620
Total fixed maturity securities	1,745,093		7,860			49,905		(856,488		)	(97,486		)	848,884		620
Equity securities	70,708		1,229			1,171		2,425			5,985			81,518		1,224
Other long-term investments (1)	16,525		(5,207		)	—		—			—			11,318		(5,207		)
Short-term investments	—		—			—		—			—			—		—
Total investments	1,832,326		3,882			51,076		(854,063		)	(91,501		)	941,720		(3,363		)
Total assets measured at fair value on a recurring basis	$	1,832,326	$	3,882		$	51,076	$	(854,063	)	$	(91,501	)	$	941,720	$	(3,363	)
Liabilities:
Annuity account balances (2)	$	149,893	$	(263	)	$	—	$	5,990		$	—		$	144,166	$	—
Other liabilities (1)	105,838		(233,743		)	—		—			—			339,581		(233,743		)
Total liabilities measured at fair value on a recurring basis	$	255,731	$	(234,006	)	$	—	$	5,990		$	—		$	483,747	$	(233,743	)

(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
	September 30, 2011				December 31, 2010
	Carrying				Carrying
	Amounts		Fair Values		Amounts		Fair Values
	(Dollars In Thousands)
Assets:
Mortgage loans on real estate	$	5,377,977	$	6,270,590	$	4,892,829	$	5,336,732
Policy loans	880,203		880,203		793,448		793,448
Liabilities:
Stable value product account balances	$	2,827,862	$	2,923,560	$	3,076,233	$	3,163,902
Annuity account balances	10,975,016		10,836,441		10,591,605		10,451,526
Mortgage loan backed certificates	32,471		32,877		61,678		63,127
Debt:
Bank borrowings	$	145,000	$	145,000	$	142,000	$	142,000
Senior and Medium-Term Notes	1,350,000		1,487,636		1,359,852		1,455,641
Subordinated debt securities	524,743		521,315		524,743		517,383
Non-recourse funding obligations	414,800		227,434		532,400		389,534