6. Summary of Investments

The following tables summarize fixed maturity investments classified as available-for-sale and the non-credit-related component of other-than-temporary impairments (“OTTI”) in accumulated other comprehensive income (loss) (“AOCI”) at June 30, 2013 and December 31, 2012:

	June 30, 2013
	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	$	923,046	$	56,313	$	6,875	$	972,484	$	—
Obligations of U.S. states and their subdivisions	1,731,629		235,248		7,784		1,959,093		—
Foreign government securities	2,698		—		25		2,673		—
Corporate debt securities (2)	10,164,568		618,701		240,214		10,543,055		(2,455		)
Asset-backed securities	1,743,165		120,098		32,660		1,830,603		(78,652		)
Residential mortgage-backed securities	338,222		11,948		2,490		347,680		(214		)
Commercial mortgage-backed securities	593,273		26,092		5,976		613,389		—
Collateralized debt obligations	13,166		14		598		12,582		—
Total fixed maturities	$	15,509,767	$	1,068,414	$	296,622	$	16,281,559	$	(81,321	)

(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 with 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 $172,054 and estimated fair value of $135,573.

	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	)

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

See Note 9 for additional discussion regarding fair value measurements.

The amortized cost and estimated fair value of fixed maturity investments classified as available-for-sale at June 30, 2013, 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.

	June 30, 2013
	Amortized cost		Estimated fair value
Maturing in one year or less	$	815,999	$	849,614
Maturing after one year through five years	3,071,738		3,321,878
Maturing after five years through ten years	3,626,928		3,889,260
Maturing after ten years	4,607,710		4,669,382
Mortgage-backed and asset-backed securities	3,387,392		3,551,425
	$	15,509,767	$	16,281,559

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 three and six-month periods ended June 30, 2013 and 2012:

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Proceeds from sales	$	2,059,748	$	964,142	$	5,360,913	$	2,390,054
Gross realized gains from sales	18,191		23,499		51,404		43,505
Gross realized losses from sales	19,636		1,420		26,912		2,901

For the three months ended June 30, 2013, gross realized losses from sales were attributable to sales of certain perpetual debt investments.

Included in net investment income are unrealized losses of $6,575 and $634 on held-for-trading fixed maturity investments still held at June 30, 2013 and December 31, 2012, respectively.

Mortgage loans on real estate — The following table summarizes the carrying value of the mortgage loan portfolio by component as of June 30, 2013 and December 31, 2012:

	June 30, 2013			December 31, 2012
Principal	$	3,044,912		$	2,866,411
Unamortized premium (discount)	15,884			18,237
Mortgage provision allowance	(2,890		)	(2,890		)
Total mortgage loans	$	3,057,906		$	2,881,758

The recorded investment of the mortgage loan portfolio categorized as performing was $3,060,796 and $2,884,648 as of June 30, 2013 and December 31, 2012, respectively.

The following table summarizes activity in the mortgage provision allowance for the six months ended June 30, 2013 and the year ended December 31, 2012:

	Six months ended June 30, 2013			Year ended December 31, 2012
	Commercial mortgages			Commercial mortgages
Beginning balance	$	2,890		$	21,130
Provision increases	273			1,067
Charge-off	(273		)	(992		)
Recovery	—			(75		)
Provision decreases	—			(18,240		)
Ending balance	$	2,890		$	2,890

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

Recorded investment balance in the mortgage loan portfolio, gross of allowance, by basis of impairment method:	$	3,060,796		$	2,884,648
Individually evaluated for impairment	21,167			14,970
Collectively evaluated for impairment	3,039,629			2,869,678

Limited partnership and other corporation interests — At June 30, 2013 and December 31, 2012, the Company had $102,000 and $124,814, 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 variable interest entity (“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 $51,351 and $71,370 at June 30, 2013 and December 31, 2012, 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 $14,835 and $15,791 at June 30, 2013 and December 31, 2012, respectively.

The Company participates in a securities lending program whereby securities are loaned to third parties. Securities with a cost or amortized cost of $62,096 and $138,654 and estimated fair values of $61,918 and $138,297 were on loan under the program at June 30, 2013 and December 31, 2012, respectively. The Company received restricted cash collateral of $64,116 and $142,022 at June 30, 2013 and December 31, 2012, 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 June 30, 2013 and December 31, 2012:

	June 30, 2013
	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	$	206,332	$	6,720	$	4,532	$	155	$	210,864	$	6,875
Obligations of U.S. states and their subdivisions	135,157		7,784		—		—		135,157		7,784
Foreign government securities	2,673		25		—		—		2,673		25
Corporate debt securities	2,651,521		173,565		228,995		66,649		2,880,516		240,214
Asset-backed securities	273,746		10,285		354,453		22,375		628,199		32,660
Residential mortgage-backed securities	36,313		2,471		1,104		19		37,417		2,490
Commercial mortgage-backed securities	77,276		5,976		—		—		77,276		5,976
Collateralized debt obligations	—		—		12,550		598		12,550		598
Total fixed maturities	$	3,383,018	$	206,826	$	601,634	$	89,796	$	3,984,652	$	296,622

Total number of securities in an unrealized loss position			354				92				446

	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

Fixed maturity investments — Total unrealized losses and OTTI increased by $123,874, or 72%, from December 31, 2012 to June 30, 2013. This increase in unrealized losses was across most asset classes and reflects an increase in interest rates and widening credit spreads.

Unrealized losses and OTTI less than twelve months increased by $190,766 from December 31, 2012 to June 30, 2013. This increase was across all asset classes and was due to higher interest rates and widening credit spreads resulting in generally lower valuations of these fixed maturity securities. The securities continue to be rated investment grade.

The utility and finance sectors account for 31% and 30%, respectively, of the corporate debt securities’ total unrealized loss at June 30, 2013.

Corporate debt securities account for 74% of the unrealized losses and OTTI greater than twelve months. Of the $66,649 of unrealized losses and OTTI over twelve months on corporate debt securities, 76% are on securities which continue to be rated investment grade. Non-investment grade corporate debt securities account for $15,714 of the unrealized losses and OTTI greater than twelve months and $14,323 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; therefore, an OTTI was not recognized in earnings.

Asset-backed securities account for 25% of the unrealized losses and OTTI greater than twelve months. 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; therefore, an OTTI was not recognized in earnings.

See Note 9 for additional discussion regarding fair value measurements.

Other-than-temporary impairment recognition — The OTTI on 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:

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Beginning balance	$	167,961	$	186,999	$	167,788	$	186,999
Additional credit loss recognized on securities previously impaired	—		—		173		—
Ending balance	$	167,961	$	186,999	$	167,961	$	186,999