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”):

	September 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	$	880,358	$	54,286	$	7,739	$	926,905	$	—
Obligations of U.S. states and their subdivisions	1,768,156		217,037		13,535		1,971,658		—
Foreign government securities	2,657		—		12		2,645		—
Corporate debt securities (2)	10,290,656		600,229		224,131		10,666,754		(2,343		)
Asset-backed securities	1,671,565		119,243		29,605		1,761,203		(83,505		)
Residential mortgage-backed securities	311,397		10,483		2,634		319,246		(178		)
Commercial mortgage-backed securities	571,740		23,544		6,894		588,390		—
Collateralized debt obligations	12,844		14		624		12,234		—
Total fixed maturities	$	15,509,373	$	1,024,836	$	285,174	$	16,249,035	$	(86,026	)

(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 $134,641.

	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, 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.

	September 30, 2013
	Amortized cost		Estimated fair value
Maturing in one year or less	$	711,203	$	745,013
Maturing after one year through five years	3,115,236		3,376,902
Maturing after five years through ten years	3,774,464		4,012,364
Maturing after ten years	4,658,928		4,706,795
Mortgage-backed and asset-backed securities	3,249,542		3,407,961
	$	15,509,373	$	16,249,035

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:

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Proceeds from sales	$	2,661,364	$	2,010,884	$	8,022,277	$	4,400,898
Gross realized gains from sales	11,061		26,486		62,465		69,991
Gross realized losses from sales	2		—		26,914		2,901

Gross realized losses were attributable to sales of certain perpetual debt investments.

Mortgage loans on real estate — The following table summarizes the carrying value of the mortgage loan portfolio by component:

	September 30, 2013			December 31, 2012
Principal	$	3,028,814		$	2,866,411
Unamortized premium (discount)	13,321			18,237
Mortgage provision allowance	(2,890		)	(2,890		)
Total mortgage loans	$	3,039,245		$	2,881,758

The recorded investment of the mortgage loan portfolio categorized as performing was $3,042,135 and $2,884,648 as of September 30, 2013 and December 31, 2012, respectively.

The following table summarizes activity in the mortgage provision allowance:

	Nine months ended September 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:	$	3,042,135		$	2,884,648
Individually evaluated for impairment	20,606			14,970
Collectively evaluated for impairment	3,021,529			2,869,678

Limited partnership and other corporation interests — At September 30, 2013 and December 31, 2012, the Company had $92,569 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 $42,604 and $71,370 at September 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 $14,523 and $15,791 at September 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 $63,253 and $138,654 and estimated fair values of $64,367 and $138,297 were on loan under the program at September 30, 2013 and December 31, 2012, respectively. The Company received restricted cash collateral of $65,711 and $142,022 at September 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:

	September 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	$	199,464	$	7,606	$	4,464	$	133	$	203,928	$	7,739
Obligations of U.S. states and their subdivisions	207,344		13,346		891		189		208,235		13,535
Foreign government securities	2,645		12		—		—		2,645		12
Corporate debt securities	2,582,039		151,637		253,749		72,494		2,835,788		224,131
Asset-backed securities	362,146		10,413		325,632		19,192		687,778		29,605
Residential mortgage-backed securities	33,899		2,615		1,058		19		34,957		2,634
Commercial mortgage-backed securities	98,575		4,854		16,984		2,040		115,559		6,894
Collateralized debt obligations	—		—		12,203		624		12,203		624
Total fixed maturities	$	3,486,112	$	190,483	$	614,981	$	94,691	$	4,101,093	$	285,174

Total number of securities in an unrealized loss position			359				93				452

	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 $112,426, or 65%, from December 31, 2012 to September 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 $174,423 from December 31, 2012 to September 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 finance and utility sectors account for 32% and 29%, respectively, of the corporate debt securities’ total unrealized loss at September 30, 2013.

Corporate debt securities account for 77% of the unrealized losses and OTTI greater than twelve months. Of the $72,494 of unrealized losses and OTTI over twelve months on corporate debt securities, 79% are on securities which continue to be rated investment grade. Non-investment grade corporate debt securities account for $15,224 of the unrealized losses and OTTI greater than twelve months and $13,321 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 London Interbank Offered Rate (“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 20% 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 September 30,					Nine months ended September 30,
	2013		2012			2013		2012
Beginning balance	$	167,961	$	186,999		$	167,788	$	186,999
Additional credit loss recognized on securities previously impaired	—		—			173		—
Reductions due to sales, maturities, or payoffs during the period	—		(23,640		)	—		(23,640		)
Ending balance	$	167,961	$	163,359		$	167,961	$	163,359