4. Summary of Investments

The following tables summarize fixed maturity investments classified as available-for-sale and the non-credit-related component of OTTI in AOCI at December 31, 2012 and 2011:

	December 31, 2012
	Amortized		Gross unrealized		Gross unrealized		Estimated fair value		OTTI (gain) loss
Fixed maturities:	cost		gains		losses		and carrying value		included in AOCI (1)
U.S. government direct obligations and U.S. agencies	$	2,735,917	$	101,568	$	3,411	$	2,834,074	$	—
Obligations of U.S. states and their subdivisions	1,676,289		342,445		229		2,018,505		—
Corporate debt securities (2)	9,511,411		974,231		111,551		10,374,091		(2,293		)
Asset-backed securities	1,795,122		120,471		54,454		1,861,139		(66,293		)
Residential mortgage-backed securities	407,715		17,900		30		425,585		(240		)
Commercial mortgage-backed securities	616,011		48,247		1,303		662,955		—
Collateralized debt obligations	13,751		14		1,770		11,995		—
Total fixed maturities	$	16,756,216	$	1,604,876	$	172,748	$	18,188,344	$	(68,826	)

(1) Indicates the amount of any OTTI (gain) loss included in AOCI that is included in gross unrealized gains and losses. OTTI (gain) loss included in AOCI, as presented above, includes both the initial recognition of non-credit losses and the effects of subsequent increases and decreases in estimated fair value for those fixed maturity securities that had previous non-credit impairment. The non-credit loss component of OTTI (gain) loss was in an unrealized gain position due to increases in estimated fair value subsequent to initial recognition of non-credit losses on such securities.

(2) Includes perpetual debt investments with amortized cost of $226,069 and estimated fair value of $153,100 at December 31, 2012.

	December 31, 2011
	Amortized		Gross unrealized		Gross unrealized		Estimated fair value		OTTI (gain) loss
Fixed maturities:	cost		gains		losses		and carrying value		included in AOCI (1)
U.S. government direct obligations and U.S. agencies	$	2,209,420	$	107,363	$	1,112	$	2,315,671	$	—
Obligations of U.S. states and their subdivisions	1,773,687		297,488		5		2,071,170		—
Corporate debt securities (2)	8,287,960		762,045		154,259		8,895,746		3,672
Asset-backed securities (3)	2,006,544		70,117		125,217		1,951,444		(23,837		)
Residential mortgage-backed securities	578,046		17,461		3,965		591,542		1,409
Commercial mortgage-backed securities	712,831		42,538		7,572		747,797		—
Collateralized debt obligations	18,482		3		2,072		16,413		—
Total fixed maturities	$	15,586,970	$	1,297,015	$	294,202	$	16,589,783	$	(18,756	)

(2) Includes perpetual debt investments with amortized cost of $253,023 and estimated fair value of $166,284 at December 31, 2011.

(3) The non-credit loss component of OTTI (gain) loss for asset-backed securities was in an unrealized gain position due to increases in estimated fair value subsequent to initial recognition of non-credit losses on such securities.

See Note 6 for additional discussion regarding fair value measurements.

The amortized cost and estimated fair value of fixed maturity investments classified as available-for-sale at December 31, 2012, based on estimated cash flows, are shown in the table below. Actual maturities will likely differ from these projections because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	December 31, 2012
	Amortized cost		Estimated fair value
Maturing in one year or less	$	672,982	$	711,671
Maturing after one year through five years	3,074,443		3,374,411
Maturing after five years through ten years	3,685,547		4,192,495
Maturing after ten years	3,895,658		4,271,934
Mortgage-backed and asset-backed securities	5,427,586		5,637,833
	$	16,756,216	$	18,188,344

Mortgage-backed (commercial and residential) and asset-backed securities include those issued by U.S. government and U.S. agencies.

The following table summarizes information regarding the sales of securities classified as available-for-sale for the years ended December 31, 2012, 2011 and 2010:

	Year ended December 31,
	2012		2011		2010
Proceeds from sales	$	6,821,092	$	3,958,589	$	3,222,700
Gross realized gains from sales	113,984		104,893		62,702
Gross realized losses from sales	4,371		23,138		26

The increase in proceeds from sales during the year ended December 31, 2012 was primarily due to sales of government agency securities to enter into dollar repurchase transactions. Gross realized gains and losses from sales during the year were primarily attributable to changes in interest rates and gains and losses on repurchase agreement transactions.

The Company had no fixed maturity securities that had been non-income producing for the twelve months preceding December 31, 2012. The Company had a corporate fixed maturity security with a fair value of $9,949 that had been non-income producing for the twelve months preceding December 31, 2011.

Mortgage loans on real estate - The following table summarizes the carrying value of the mortgage loan portfolio by component as of December 31, 2012 and 2011:

	December 31, 2012			December 31, 2011
Principal	$	2,866,411		$	2,510,949
Unamortized premium (discount)	18,237			23,268
Mortgage provision allowance	(2,890		)	(21,130		)
Total mortgage loans	$	2,881,758		$	2,513,087

The average recorded investment of impaired mortgage loans was $1,034, $5,822 and $5,101 for the years ended December 31, 2012, 2011 and 2010, respectively.

The following table summarizes the recorded investment of the mortgage loan portfolio by risk assessment category as of December 31, 2012 and 2011:

	December 31, 2012		December 31, 2011
Performing	$	2,884,648	$	2,532,150
Non-performing	—		2,067
Total	$	2,884,648	$	2,534,217

The following table summarizes activity in the mortgage provision allowance for the years ended December 31, 2012, 2011 and 2010:

	Year ended December, 31
	2012			2011		2010
	Commercial mortgages			Commercial mortgages		Commercial mortgages
Beginning balance	$	21,130		$	16,300	$	14,854
Provision increases	1,067			4,830		1,446
Charge-off	(992		)	—		—
Recovery	(75		)	—		—
Provision decreases	(18,240		)	—		—
Ending balance	$	2,890		$	21,130	$	16,300

Allowance ending balance by basis of impairment method:
Collectively evaluated for impairment	$	2,890		$	21,130	$	16,300

Recorded investment balance in the mortgage loan portfolio, gross of allowance, by basis of impairment method:	$	2,884,648		$	2,534,217	$	1,738,722
Individually evaluated for impairment	14,970			18,493		27,250
Collectively evaluated for impairment	2,869,678			2,515,724		1,711,472

Limited partnership and other corporation interests - At December 31, 2012 and 2011, the Company had $124,814 and $169,233, respectively, invested in limited partnership and other corporation interests, which include limited partnerships established for the purpose of investing in low-income housing that qualify for federal and state tax credits.

The Company has determined each investment in low-income housing limited partnerships (“LIHLP”) to be considered a VIE. Although the Company is involved with the VIE, it determined that consolidation was not required because it has no power to direct the activities that most significantly impact the entities’ economic performance.

As a 99% limited partner in various upper-tier LIHLPs, the Company has few or no voting rights, but expects to receive the tax credits allocated to the partnership and operating losses from depreciation and interest expense. The Company is only an equity investor and views the LIHLP as a single investment. The general partner of the LIHLPs is most closely involved in the development and management of the LIHLP project. The general partner has a small ownership of the partnership, which requires a de minimus capital contribution. This equity investment is reduced based on fees paid at inception by the limited partner; therefore, the general partner does not qualify as having an equity investment at risk in the LIHLP project. However, the limited partner does not have the direct or indirect ability through voting rights or similar rights to make decisions about the general partner’s activities that have a significant effect on the success of the partnership.

The carrying value and maximum exposure to loss in relation to the activities of the VIEs was $71,370 and $111,631 at December 31, 2012 and 2011, respectively.

Special deposits and securities lending - The Company had securities on deposit with government authorities as required by certain insurance laws with fair values of $15,791 and $16,631 at December 31, 2012 and 2011, respectively.

The Company participates in a securities lending program whereby securities are loaned to third parties. Securities with a cost or amortized cost of $138,654 and $7,266 and estimated fair values of $138,297 and $6,823 were on loan under the program at December 31, 2012 and 2011, respectively. The Company received restricted cash collateral of $142,022 and $7,099 at December 31, 2012 and 2011, respectively.

Unrealized losses on fixed maturity investments classified as available-for-sale - The following tables summarize unrealized investment losses, including the non-credit-related portion of OTTI losses reported in AOCI, by class of investment at December 31, 2012 and 2011:

	December 31, 2012
	Less than twelve months				Twelve months or longer				Total
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
Fixed maturities:	fair value		loss and OTTI		fair value		loss and OTTI		fair value		loss and OTTI
U.S. government direct obligations and U.S. agencies	$	538,612	$	3,270	$	7,252	$	141	$	545,864	$	3,411
Obligations of U.S. states and their subdivisions	25,679		229		—		—		25,679		229
Corporate debt securities	527,280		12,287		291,611		99,264		818,891		111,551
Asset-backed securities	30,810		97		647,715		54,357		678,525		54,454
Residential mortgage-backed securities	9,834		8		1,210		22		11,044		30
Commercial mortgage-backed securities	34,727		169		35,960		1,134		70,687		1,303
Collateralized debt obligations	—		—		11,963		1,770		11,963		1,770
Total fixed maturities	$	1,166,942	$	16,060	$	995,711	$	156,688	$	2,162,653	$	172,748

Total number of securities in an unrealized loss position			85				133				218

	December 31, 2011
	Less than twelve months				Twelve months or longer				Total
Fixed maturities:	Estimated fair value		Unrealized loss and OTTI		Estimated fair value		Unrealized loss and OTTI		Estimated fair value		Unrealized loss and OTTI
U.S. government direct obligations and U.S. agencies	$	297,410	$	913	$	17,531	$	199	$	314,941	$	1,112
Obligations of U.S. states and their subdivisions	1,557		5		—		—		1,557		5
Corporate debt securities	363,111		12,986		479,441		141,273		842,552		154,259
Asset-backed securities	218,850		10,365		841,415		114,852		1,060,265		125,217
Residential mortgage-backed securities	14,203		373		120,364		3,592		134,567		3,965
Commercial mortgage-backed securities	6,726		13		68,952		7,559		75,678		7,572
Collateralized debt obligations	—		—		16,392		2,072		16,392		2,072
Total fixed maturities	$	901,857	$	24,655	$	1,544,095	$	269,547	$	2,445,952	$	294,202

Total number of securities in an unrealized loss position			89				167				256

Fixed maturity investments - Total unrealized losses and OTTI decreased by $121,454, or 41%, from December 31, 2011 to December 31, 2012. This decrease in unrealized losses was across most asset classes and reflects continued recovery in market liquidity and lower interest rates, although the economic uncertainty in certain asset classes still remains.

Unrealized losses on corporate debt securities decreased by $42,708 from December 31, 2011 to December 31, 2012. The valuation of these securities has been influenced by market conditions with increased liquidity and lower interest rates in the finance sector resulting in generally higher valuations of these fixed income securities. The finance sector accounts for 91% of the corporate debt securities’ unrealized loss at December 31, 2012.

Corporate debt securities account for 63% of the unrealized losses and OTTI greater than twelve months. Of the $99,264 of unrealized losses and OTTI over twelve months on corporate debt securities, 55% are on securities which continue to be rated investment grade. Of the $44,669 of unrealized losses and OTTI greater than twelve months on non-investment grade corporate debt securities, 98% of the losses are on perpetual debt investments issued by banks in the United Kingdom, which have bank ratings of A- or higher. The Company determined the majority of the unrealized losses on perpetual securities were due to widening credit spreads and low LIBOR based coupon rates on the securities, which are not expected to compromise the issuers’ ability to service the investments. Management does not have the intent to sell these assets prior to a full recovery; therefore, an OTTI was not recognized in earnings.

Asset-backed securities account for 35% of the unrealized losses and OTTI greater than twelve months. Of the $54,357 of unrealized losses and OTTI over twelve months on asset-backed securities, 63% of the losses are on securities which continue to be rated investment grade. The present value of the cash flows expected to be collected is not less than amortized cost and management does not have the intent to sell these assets prior to a full recovery; therefore, an OTTI was not recognized in earnings.

See Note 6 for additional discussion regarding fair value measurements.

Other-than-temporary impairment recognition - The Company recorded OTTI on fixed maturity investments for the years ended December 31, 2012, 2011 and 2010 as follows:

	Year ended December 31, 2012
	OTTI recognized in realized gains/(losses)				OTTI recognized in OCI (2)
Fixed maturities:	Credit related (1)		Non-credit related		Non-credit related			Total
Corporate debt securities	$	254	$	—	$	—		$	254
Asset-backed securities	4,429		—		(61		)	4,368
Total fixed maturities	$	4,683	$	—	$	(61	)	$	4,622

(1) All of the $4,429 in credit related OTTI is bifurcated credit loss recognized on two asset-backed fixed maturities.

(2) Amounts are recognized in OCI in the period incurred.

	Year ended December 31, 2011
	OTTI recognized in realized gains/(losses)				OTTI recognized in OCI (2)
Fixed maturities:	Credit related (1)		Non-credit related		Non-credit related		Total
Corporate debt securities	$	501	$	—	$	—	$	501
Asset-backed securities	6,264		—		10,005		16,269
Total fixed maturities	$	6,765	$	—	$	10,005	$	16,770

(1) All of the $6,264 in credit related OTTI is bifurcated credit loss recognized on one asset-backed fixed maturities.

(2) Amounts are recognized in OCI in the period incurred.

	Year ended December 31, 2010
	OTTI recognized in realized gains/(losses)				OTTI recognized in OCI (2)
Fixed maturities:	Credit related (1)		Non-credit related		Non-credit related		Total
U.S. government direct obligations and U.S. agencies	$	750	$	10,035	$	—	$	10,785
Corporate debt securities	—		1,529		—		1,529
Asset-backed securities	64,896		—		16,242		81,138
Residential mortgage-backed securities	1,390		—		505		1,895
Collateralized debt obligations	34		—		—		34
Total fixed maturities	$	67,070	$	11,564	$	16,747	$	95,381

(1) Of the credit-related OTTI on asset-backed securities, $53,327 and $8,558 were related to Ambac Financial Group, Inc. and Financial Guaranty Insurance Company, respectively. Of the $67,070 in total fixed maturities, $66,286 is the bifurcated credit loss recognized on securities.

(2) Amounts are recognized in OCI in the period incurred.

The OTTI of fixed maturity securities where the loss portion is bifurcated and the credit related component is recognized in realized investment gains (losses) is summarized as follows:

	Year ended December 31,
	2012			2011			2010
Bifurcated credit loss:
Beginning balance	$	186,999		$	181,611		$	115,325
Additions:
Initial impairments - credit loss on securities not previously impaired	4,429			6,264			66,286
Reductions:
Due to sales, maturities, or payoffs during the period	(23,640		)	(876		)	—
Ending balance	$	167,788		$	186,999		$	181,611

Net Investment Income

The following table summarizes net investment income for the years ended December 31, 2012, 2011 and 2010:

	Year ended December 31,
	2012			2011			2010
Investment income:
Fixed maturity and short-term investments	$	808,215		$	821,582		$	823,828
Mortgage loans on real estate	138,411			117,796			96,711
Policy loans	213,300			218,663			234,944
Limited partnership interests	7,566			6,915			5,767
Net interest on funds withheld balances under reinsurance agreements, related party	19,382			18,376			17,130
Derivative instruments (1)	16,008			(11,613		)	7,182
Other	5,222			3,113			5,079
	1,208,104			1,174,832			1,190,641
Investment expenses	(16,553		)	(16,346		)	(15,897		)
Net investment income	$	1,191,551		$	1,158,486		$	1,174,744

(1) Includes gains (losses) on the hedged asset for fair value hedges.

Realized Investment Gains (Losses)

The following table summarizes realized investment gains (losses) for the years ended December 31, 2012, 2011 and 2010:

	Year ended December 31,
	2012			2011			2010
Realized investment gains (losses):
Fixed maturity and short-term investments	$	105,675		$	78,637		$	(15,793	)
Derivative instruments	(10,221		)	(47,264		)	(17,076		)
Other	4,015			(2,048		)	9,820
Provision for mortgage impairments, net of recoveries	17,248			(4,830		)	(1,446		)
Realized investment gains (losses)	$	116,717		$	24,495		$	(24,495	)

Included in net investment income and realized investment gains (losses) are amounts allocable to the participating fund account. This allocation is based upon the activity in a specific block of investments that are segmented for the benefit of the participating fund account.