Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. The Company utilizes valuation techniques that maximize the use of observable inputs and minimizes the use of unobservable inputs.

The Company has categorized its financial instruments that are carried at fair value into a three-level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

On April 1, 2009, the FASB issued additional guidance on estimating fair value when the volume and level of activity for the asset or liability have significantly decreased, as well as guidance on identifying circumstances which indicate that a transaction is not orderly. The Company reviewed its pricing sources and methodologies and has concluded that its various pricing sources and methodologies are in compliance with this guidance. During the nine-month period ended September 30, 2011, there were no changes to these valuation techniques and the related inputs.

Financial assets and liabilities recorded at fair value in the Company's unaudited condensed consolidated balance sheets are categorized as follows:

 Unadjusted quoted prices for identical assets or liabilities in an active market.

The types of assets and liabilities utilizing Level 1 valuations include U.S. Treasury and agency securities, investments in publicly-traded mutual funds with quoted market prices and listed derivatives.

 Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly.

b) Quoted prices for identical or similar assets or liabilities in non-active markets,

d) Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

The types of assets and liabilities utilizing Level 2 valuations generally include U.S. Government securities not backed by the full faith and credit of the Government, municipal bonds, structured notes and certain asset-backed securities (“ABS”), including collateralized debt obligations, residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”), certain corporate debt, certain private equity investments and certain derivatives, including certain derivatives embedded in reinsurance contracts.

 Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management's assumptions about what a market participant would use in pricing the asset or liability.

Generally, the types of assets and liabilities utilizing Level 3 valuations are certain ABS, RMBS, and CMBS, certain corporate debt, certain private equity investments, certain mutual fund holdings and certain derivatives, including certain derivatives embedded in reinsurance and annuity contracts and certain funding agreements.

The following table presents the Company's categories for its assets measured at fair value on a recurring basis as of September 30, 2011 (in 000's):

	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale fixed maturity securities:
Asset-backed securities	$	-	$	55	$	1	$	56
Residential mortgage-backed securities		-		28,528		-		28,528
Commercial mortgage-backed securities		-		12,247		2,144		14,391
Foreign government & agency securities		-		-		-		-
U.S. states and political subdivision securities		-		221		-		221
U.S. treasury and agency securities		508,850		-		-		508,850
Corporate securities		-		1,099,401		6,744		1,106,145
Total available-for-sale fixed maturity securities		508,850		1,140,452		8,889		1,658,191

Trading fixed maturity securities:
Asset-backed securities		-		257,103		81,751		338,854
Residential mortgage-backed securities		-		645,259		126,579		771,838
Commercial mortgage-backed securities		-		651,319		61,554		712,873
Foreign government & agency securities		-		116,115		-		116,115
U.S. states and political subdivision securities		-		514		-		514
U.S. treasury and agency securities		329,978		7,100		560		337,638
Corporate securities		-		8,201,357		76,763		8,278,120
Total trading fixed maturity securities		329,978		9,878,767		347,207		10,555,952

Derivative instruments – receivable:
Interest rate contracts		-		381,316		-		381,316
Foreign currency contracts		-		2,249		-		2,249
Equity contracts		50,859		11,804		1,270		63,933
Futures contracts		79,711		-		-		79,711
Total derivative instruments - receivable		130,570		395,369		1,270		527,209

Other invested assets (3)		2,194		22,666		1,978		26,838
Short-term investments		137,120		-		-		137,120
Cash and cash equivalents		937,346		-		-		937,346
Total investments and cash		2,046,058		11,437,254		359,344		13,842,656

Separate account assets:
Mutual fund investments		21,536,816		-		-		21,536,816
Equity investments		150,661		8,033		49		158,743
Fixed income investments		425,478		6,018,554		65,118		6,509,150
Alternative investments		9,253		65,046		371,481		445,780
Other investments		(5,066)		-		-		(5,066)
Total separate account assets (1) (2)		22,117,142		6,091,633		436,648		28,645,423

Total assets measured at fair value on a recurring basis	$	24,163,200	$	17,528,887	$	795,992	$	42,488,079

(1) Pursuant to the conditions set forth in FASB ASC Topic 944,”Financial Services–Insurance,” the value of separate account liabilities is set to equal the fair value of the separate account assets.

(2) Excludes $2,307.6 million, primarily related to investment purchases payable, net of investment sales receivable, that are not subject to FASB ASC Topic 820, “Fair Value Measurement.”

(3) Excludes $2.8 million of other invested assets that are not subject to FASB ASC Topic 820.

The following table presents the Company's categories for its liabilities measured at fair value on a recurring basis as of September 30, 2011 (in 000's):

	Level 1		Level 2		Level 3		Total
Liabilities
Other policy liabilities:
Guaranteed minimum withdrawal benefit liability (1)	$	-	$	-	$	1,006,418	$	1,006,418
Guaranteed minimum accumulation benefit liability (1)		-		-		222,881		222,881
Derivatives embedded in reinsurance contracts (1)		-		92,762		1,270		94,032
Fixed index annuities (1)		-		-		105,885		105,885
Total other policy liabilities		-		92,762		1,336,454		1,429,216

Derivative instruments - payable:
Interest rate contracts		-		317,501		-		317,501
Foreign currency contracts		-		2,031		-		2,031
Equity contracts		-		-		-		-
Credit contracts		-		-		26,748		26,748
Futures contracts		2,454		-		-		2,454
Total derivative instruments – payable		2,454		319,532		26,748		348,734

Other liabilities:
Bank overdrafts		39,509		-		-		39,509

Total liabilities measured at fair value on a recurring basis	$	41,963	$	412,294	$	1,363,202	$	1,817,459

(1) The balances are included within the contractholder deposits funds and other policy liabilities in the Company's condensed consolidated balance sheet.

The following table presents the Company's categories for its assets measured at fair value on a recurring basis as of December 31, 2010 (in 000's):

	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale fixed maturity securities:
Asset-backed securities	$	-	$	704	$	11	$	715
Residential mortgage-backed securities		-		34,614		-		34,614
Commercial mortgage-backed securities		-		13,003		2,047		15,050
Foreign government & agency securities		-		563		-		563
U.S. states and political subdivision securties		-		214		-		214
U.S. treasury and agency securities		375,233		-		-		375,233
Corporate securities		-		1,068,399		1,135		1,069,534
Total available-for-sale fixed maturity securities		375,233		1,117,497		3,193		1,495,923

Trading fixed maturity securities:
Asset-backed securities		-		321,129		90,851		411,980
Residential mortgage-backed securities		-		834,074		88,719		922,793
Commercial mortgage-backed securities		-		737,024		82,171		819,195
Foreign government & agency securities		-		116,986		13,790		130,776
U.S. states and political subdivision securities		-		613		-		613
U.S. treasury and agency securities		737,936		8,582		1,101		747,619
Corporate securities		-		8,301,586		132,556		8,434,142
Total trading fixed maturity securities		737,936		10,319,994		409,188		11,467,118

Derivative instruments receivable:
Interest rate contracts		-		97,060		-		97,060
Foreign currency contracts		-		32,504		-		32,504
Equity contracts		14,873		30,739		13,785		59,397
Futures contracts		9,103		-		-		9,103
Total derivative instruments - receivable		23,976		160,303		13,785		198,064

Other invested assets		2,890		11,120		8,343		22,353
Short-term investments		832,739		-		-		832,739
Cash and cash equivalents		736,323		-		-		736,323
Total investments and cash		2,709,097		11,608,914		434,509		14,752,520

Separate account assets:
Mutual fund investments		21,892,209		30,517		-		21,922,726
Equity investments		188,216		277		-		188,493
Fixed income investments		317,713		5,812,900		56,323		6,186,936
Alternative investments		24,094		78,164		293,254		395,512
Other investments		900		-		-		900
Total separate account assets (1) (2)		22,423,132		5,921,858		349,577		28,694,567

Total assets measured at fair value on a recurring basis	$	25,132,229	$	17,530,772	$	784,086	$	43,447,087

(1) Pursuant to the conditions set forth in FASB ASC Topic 944, the value of separate account liabilities is set to equal the fair value of the separate account assets.

(2) Excludes $1,814.1 million, primarily related to investment purchases payable, net of investment sales receivable, that are not subject to FASB ASC Topic 820.

(3) Excludes $5.1 million of other invested assets that are not subject to FASB ASC Topic 820.

The following table presents the Company's categories for its liabilities measured at fair value on a recurring basis as of December 31, 2010 (000's):

	Level 1		Level 2		Level 3		Total
Liabilities
Other policy liabilities:
Guaranteed minimum withdrawal benefit liability	$	-	$	-	$	2,245	$	2,245
Guaranteed minimum accumulation benefit liability		-		-		49		49
Derivatives embedded in reinsurance contracts		-		41,272		-		41,272
Fixed index annuities		-		-		131,608		131,608
Total other policy liabilities		-		41,272		133,902		175,174

Derivative instruments - payable:
Interest rate contracts		-		329,214		-		329,214
Foreign currency contracts		-		3,878		-		3,878
Credit contracts		-		-		27,341		27,341
Futures contracts		1,590		-		-		1,590
Total derivative instruments - payable		1,590		333,092		27,341		362,023

Other liabilities:
Bank overdrafts		61,227		-		-		61,227

Total liabilities measured at fair value on a recurring basis	$	62,817	$	374,364	$	161,243	$	598,424

The methods and assumptions that the Company uses in determining the estimated fair value of its financial instruments that are measured at fair value on a recurring basis are summarized below:

Fixed maturity securities: The Company determines the fair value of its publicly traded fixed maturity securities using three primary pricing methods: third-party pricing services, non-binding broker quotes and pricing models. Prices are first sought from third-party pricing services; the remaining unpriced securities are priced using one of the remaining two methods. Third-party pricing services derive the security prices through recently reported trades for identical or similar securities with adjustments for trading volumes and market observable information through the reporting date. In the event that there are no recent market trades, pricing services and brokers may use pricing models to develop a security price based on future expected cash flows discounted at an estimated market rate using collateral performance and vintages. The Company generally does not adjust quotes or prices obtained from brokers or pricing services.

Structured securities, such as ABS, RMBS and CMBS, are priced using third-party pricing services, a fair value model or independent broker quotations. ABS and RMBS are priced using models and independent broker quotations. CMBS securities are priced using the last sale price of the day or a broker quote, if no sales were transacted that day. Typical inputs used by these three pricing methods include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids and/or estimated cash flows and prepayment speeds. In addition, estimates of expected future prepayments are factors in determining the price of ABS, RMBS and CMBS. These estimates are based on the underlying collateral and structure of the security, as well as prepayment speeds previously experienced in the market at interest rate levels projected for the underlying collateral. Actual prepayment experience may vary from these estimates.

For privately-placed fixed maturity securities, fair values are estimated using models which take into account credit spreads for publicly traded securities of similar credit risk, maturity, prepayment and liquidity characteristics. A portion of privately-placed fixed maturity securities are also priced using market prices or broker quotes.

Derivative instruments - receivables and payables: The fair values of swaps are based on current settlement values, dealer quotes and market prices. Fair values for options and futures are also based on dealer quotes and market prices. The Company uses credit valuation adjustments (“CVAs”) to properly reflect the component of fair value of certain derivative instruments that arise from default risk. CVAs are based on a methodology that primarily uses published credit default swap spreads as a key input in determining an implied level of expected loss over the total life of the derivative contract. When this information is not available, the Company also may utilize credit spreads implied from published bond yields, or published cumulative default experience data adjusted for current trends. CVAs may be calculated based on the credit risk of counterparties for asset positions or the Company's own credit risk for liability positions. The CVAs also take into account contractual factors designed to reduce the Company's credit exposure to each counterparty, such as collateral and legal rights of offset.

Other invested assets: This financial instrument primarily consists of equity securities. The fair value of the Company's equity securities is first based on quoted market prices. Similar to fixed maturity securities, the Company uses pricing services and broker quotes to price the equity securities for which the quoted market price is not available.

Cash, cash equivalents and short-term investments: The carrying value for cash, cash equivalents and short-term investments approximates fair value due to the short-term nature and liquidity of the balances.

Separate accounts, assets and liabilities: The estimated fair value of assets held in separate accounts is based on quoted market prices. The fair value of liabilities related to separate accounts is the amount payable on demand, which excludes surrender charges.

Other policy liabilities: The fair values of S&P 500 Index and other equity-linked embedded derivatives are produced using standard derivative valuation techniques. Guaranteed minimum accumulation benefit (“GMAB”) or guaranteed minimum withdrawal benefit (“GMWB”) are considered to be derivatives under FASB ASC Topic 815, “Derivatives and Hedging,” and are included in contractholder deposit funds and other policy liabilities in the Company's unaudited condensed consolidated balance sheets. Consistent with the provisions of FASB ASC Topic 820, the Company incorporates risk margins and the Company's own credit standing, as well as changes in assumptions regarding policyholder behavior, in the calculation of the fair value of embedded derivatives.

Other liabilities: This financial instrument consists of issued checks and transmitted wires that have not been cashed and processed in the Company's bank accounts as of the end of the reporting period. Similar to cash, the carrying value for other liabilities approximates fair value due to the liquidity of the balance.

The following table shows a reconciliation of the beginning and ending balances for assets which are categorized as

			Total realized and unrealized gains (losses)
Assets	Beginning balance		Included in earnings		Included in OCI		Purchases		Sales		Settlements		Transfers into level 3		Transfers out of level 3		Ending balance		Change in unrealized gains (losses) (2)
Available-for-sale fixed maturity securities:
Asset-backed	$	11	$	(16)	$	6	$	-	$	-	$	-	$	-	-	-	$	1	$	-
Residential mortgage-backed		-		-		-		-		-		-		-		-		-		-
Commercial mortgage-backed securities		2,047		(302)		399		-		-		-		-		-		2,144		-
Foreign government & agency securities		-		-		-		-		-		-		-		-		-		-
U.S. states and political subdivisions securities		-		-		-		-		-		-		-		-		-		-
U.S. treasury and agency		-		-		-		-		-		-		-		-		-		-
Corporate securities		1,135		18		97		6,102		-		-		-		(608)		6,744		-
Total available-for-sale fixed maturity securities		3,193		(300)		502		6,102		-		-		-		(608)		8,889		-

Trading fixed maturity securities:
Asset-backed		90,851		760		-		-		-		(3,636)		14,654		(20,878)		81,751		512
Residential mortgage-backed		88,719		6,025		-		304		(275)		(26,559)		97,000		(38,635)		126,579		15,737
Commercial mortgage-backed securities		82,171		620		-		-		-		(19,679)		-		(1,558)		61,554		1,658
Foreign government & agency securities		13,790		-		-		-		-		-		-		(13,790)		-		-
U.S. states and political subdivisions securities		-		-		-		-		-		-		-		-		-		-
U.S. treasury and agency		1,101		-		-		560		-		-		-		(1,101)		560		-
Corporate securities		132,556		6,488		-		8,053		(5,088)		(7,794)		17,345		(74,797)		76,763		4,566
Total trading fixed maturity securities		409,188		13,893		-		8,917		(5,363)		(57,668)		128,999		(150,759)		347,207		22,473

Derivative instruments – receivable:
Interest rate contracts		-		-		-		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-		-		-		-
Equity contracts		13,785		(2,775)		-		1,269		-		(11,009)		-		-		1,270		(2,775)
Futures contracts		-		-		-		-		-		-		-		-		-		-
Total derivative instruments– receivable		13,785		(2,775)		-		1,269		-		(11,009)		-		-		1,270		(2,775)

Other invested assets		8,343		285		-		1,000		-		-		-		(7,650)		1,978		284
Total investments and cash		434,509		11,103		502		17,288		(5,363)		(68,677)		128,999		(159,017)		359,344		19,982

Separate account assets:
Mutual fund investments		-		-		-		-		-		-		-		-		-		-
Equity investments		-		-		-		-		-		-		49		-		49		-
Fixed income investments		56,323		115		-		129,484		(110,779)		(12,061)		35,740		(33,704)		65,118		(816)
Alternative investments		293,254		7,424		-		193,725		(120,082)		(6,040)		3,200		-		371,481		5,864
Other investments		-		-		-		-		-		-		-		-		-		-
Total separate account assets (1)		349,577		7,539		-		323,209		(230,861)		(18,101)		38,989		(33,704)		436,648		5,048

Total assets measured at fair value on a recurring basis	$	784,086	$	18,642	$	502	$	340,497	$	(236,224)	$	(86,778)	$	167,988	$	(192,721)	$	795,992	$	25,030

The following table shows a reconciliation of the beginning and ending balances for liabilities which are categorized as Level 3

			Total realized and unrealized (gains) losses
Liabilities	Beginning balance		Included in earnings		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers into level 3		Transfers out of level 3		Ending balance		Change in unrealized (gains) losses (2)
Other policy liabilities:
Guaranteed minimum withdrawal benefit liability benefit liability	$	2,245	$	853,288	$	-	$	-	$	-	$	150,885	$	-	$	-	$	-	$	1,006,418	$	839,449
Guaranteed minimum accumulation benefit liability		49		206,972		-		-		-		15,860		-		-		-		222,881		201,509
Derivatives embedded in reinsurance contracts		-		(9,450)		-		-		-		21,729		(11,009)		-		-		1,270		(9,449)
Fixed index annuities		131,608		(63,060)		-		-		-		37,337		-		-		-		105,885		(3,659)
Total other policy liabilities (1)		133,902		987,750		-		-		-		225,811		(11,009)		-		-		1,336,454		1,027,850

Derivative instruments – payable:
Interest rate contracts		-		-		-		-		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-		-		-		-		-
Credit contracts		27,341		(593)		-		-		-		-		-		-		-		26,748		(593)
Futures contracts		-		-		-		-		-		-		-		-		-		-		-
Total derivative instruments – payable		27,341		(593)		-		-		-		-		-		-		-		26,748		(593)

Other liabilities:
Bank overdrafts		-		-		-		-		-		-		-		-		-		-		-
Total liabilities measured at fair value	$	161,243	$	987,157	$	-	$	-	$	-	$	225,811	$	(11,009)	$	-	$	-	$	1,363,202	$	1,027,257

Gains and losses related to Level 3 assets and liabilities, as included in the Company's unaudited condensed consolidated statements of operations for the nine-month period ended September 30, 2011, are reported as follows (in 000's):

The following table shows a reconciliation of the beginning and ending balances for assets which are categorized as

			Total realized and unrealized gains (losses)
Assets	Beginning balance		Included in earnings		Included in other comprehensive income		Purchases, issuances, and settlements (net)		Transfers in and/or (out) of level 3		Ending balance		Change in unrealized gains (losses) (2)

Available-for-sale fixed maturity securities:
Asset-backed securities	$	37	$	(31)	$	10	$	-	$	-	$	16	$	-
Collateralized mortgage obligations		-		-		-		-		-		-		-
Commercial mortgage-backed securities		1,930		(371)		(121)		-		-		1,438		-
Foreign government & agency securities		-		-		-		-		-		-		-
U.S. states and political subdivisions securities		-		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-		-
Corporate securities		7,936		(17)		1,217		1,940		(434)		10,642		-
Total available-for-sale fixed maturity securities		9,903		(419)		1,106		1,940		(434)		12,096		-

Trading fixed maturity securities:
Asset-backed securities		111,650		15,020		-		(36,320)		(30,732)		59,618		17,186
Collateralized mortgage obligations		154,551		3,739		-		(9,211)		(81,506)		67,573		9,017
Commercial mortgage-backed securities		14,084		2,175		-		47,602		(696)		63,165		3,439
Foreign government & agency securities		15,323		(1,050)		-		-		-		14,273		140
U.S. states and political subdivisions securities		-		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-		-
Corporate securities		107,886		5,716		-		(6,243)		(21,364)		85,995		5,565
Total trading fixed maturity securities		403,494		25,600		-		(4,172)		(134,298)		290,624		35,347

Derivative instruments - receivable:
Interest rate contracts		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-
Equity contracts		8,821		(1,509)		-		(1,907)		-		5,405		(1,509)
Futures contracts		-		-		-		-		-		-		-
Total derivative instruments - receivable		8,821		(1,509)		-		(1,907)		-		5,405		(1,509)

Other invested assets		-		(174)		-		1,486		-		1,312		(174)
Total investments and cash		422,218		23,498		1,106		(2,653)		(134,732)		309,437		33,664

Separate account assets:
Mutual fund investments		-		-		-		-		-		-		-
Equity investments		7		8		-		-		-		15		8
Fixed income investments		276,530		6,240		-		(9,135)		(98,550)		175,085		2,560
Alternative investments		267,196		(565)		-		21,824		(16,634)		271,821		(1,270)
Other fund investments		4,108		-		-		-		(4,108)		-		-
Total separate account assets (1)		547,841		5,683		-		12,689		(119,292)		446,921		1,298

Total assets measured at fair value on a recurring basis	$	970,059	$	29,181	$	1,106	$	10,036	$	(254,024)	$	756,358	$	34,962

(1) The gains and losses included in net income for separate account assets are offset by an equal amount for separate account liabilities which results in a net zero impact on net income for the Company.

(2) Included in earnings relating to instruments still held at the reporting date.

The following table shows a reconciliation of the beginning and ending balances for liabilities which are categorized as Level 3 for the nine-month period ended September 30, 2010 (in 000's):

			Total realized and unrealized (gains) losses
Liabilities	Beginning balance		Included in earnings		Included in other comprehensive income		Purchases, issuances, and settlements (net)		Transfers in and/or (out) of level 3		Ending balance		Change in unrealized (gains) losses (2)

Other policy liabilities:
Guaranteed minimum withdrawal benefit liability	$	168,786	$	245,325	$	-	$	105,597	$	-	$	519,708	$	249,721
Guaranteed minimum accumulation benefit liability		81,669		74,640		-		17,288		-		173,597		76,218
Derivatives embedded in reinsurance contracts		-		-		-		-		-		-		-
Fixed index annuities		140,966		(17,026)		-		4,261		-		128,201		10,886
Total other policy liabilities (1)		391,421		302,939		-		127,146		-		821,506		336,825

Derivative instruments - payable:
Interest rate contracts		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-
Credit contracts		34,349		(3,716)		-		-		-		30,633		(3,716)
Futures contracts		-		-		-		-		-		-		-
Total derivative instruments - payable		34,349		(3,716)		-		-		-		30,633		(3,716)


Other liabilities:
Bank overdrafts		-		-		-		-		-		-		-

Total liabilities measured at fair value on a recurring basis	$	425,770	$	299,223	$	-	$	127,146	$	-	$	852,139	$	333,109

(1) The balances are included within the contractholder deposits funds and other policy liabilities in the Company's condensed consolidated balance sheet.

(2) Included in earnings relating to instruments still held at the reporting date.

Gains and losses, related to Level 3 assets and liabilities, included in the Company's condensed consolidated statements of operations for the nine-month period ended September 30, 2010, are reported as follows (in 000's):

The following table shows a reconciliation of the beginning and ending balances for assets which are categorized as Level 3 for the three-month period ended September 30, 2011 (in 000's):

			Total realized and unrealized gains (losses)
Assets	Beginning balance		Included in earnings		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers into level 3		Transfers out of level 3		Ending balance		Change in unrealized gains (losses) (2)

Available-for-sale fixed maturity securities:
Asset-backed	$	3	$	(3)	$	1	$	-	$	-	$	-	$	-	$	-	$	-	$	1	$	-
Residential mortgage-backed		-		-		-		-		-		-		-		-		-		-		-
Commercial mortgage-backed		2,137		(103)		110		-		-		-		-		-		-		2,144		-
Foreign government & agency		-		-		-		-		-		-		-		-		-		-		-
U.S. states and political subdivisions		-		-		-		-		-		-		-		-		-		-		-
U.S. treasury and agency		-		-		-		-		-		-		-		-		-		-		-
Corporate		7,462		7		(143)		-		-		-		-		-		(582)		6,744		-
Total available-for-sale fixed maturity securities		9,602		(99)		(32)		-		-		-		-		-		(582)		8,889		-

Trading fixed maturity securities:
Asset-backed		75,535		(8,681)		-		-		-		-		(464)		21,007		(5,646)		81,751		(8,621)
Residential mortgage-backed		157,814		(1,229)		-		304		(275)		-		(17,009)		37,746		(50,772)		126,579		2,526
Commercial mortgage-backed		67,031		216		-		-		-		-		(726)		-		(4,967)		61,554		551
Foreign government & agency		13,003		-		-		-		-		-		-		-		(13,003)		-		-
U.S. states and political subdivisions		-		-		-		-		-		-		-		-		-		-		-
U.S. treasury and agency		963		-		-		560		-		-		-		-		(963)		560		-
Corporate		106,654		(1,219)		-		1,623		(4,428)		-		(4,095)		17,449		(39,221)		76,763		(2,509)
Total trading fixed maturity securities		421,000		(10,913)		-		2,487		(4,703)		-		(22,294)		76,202		(114,572)		347,207		(8,053)

Derivative instruments – receivable:
Interest rate contracts		-		-		-		-		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-		-		-		-		-
Equity contracts		18,035		(6,886)		-		1,164		-		-		(11,043)		-		-		1,270		(6,886)
Futures contracts		-		-		-		-		-		-		-		-		-		-		-
Total derivative instruments– receivable		18,035		(6,886)		-		1,164		-		-		(11,043)		-		-		1,270		(6,886)

Other invested assets		2,133		(155)		-		-		-		-		-		-		-		1,978		(156)
Total investments and cash		450,770		(18,053)		(32)		3,651		(4,703)		-		(33,337)		76,202		(115,154)		359,344		(15,095)

Separate account assets:
Mutual fund investments		-		-		-		-		-		-		-		-		-		-		-
Equity investments		59		(10)		-		-		-		-		-		-		-		49		-
Fixed income investments		97,452		249		-		20,978		(21,196)		-		(1,917)		5,307		(35,755)		65,118		(305)
Alternative investments		366,109		(10,659)		-		44,904		(28,019)		-		(854)		-		-		371,481		(10,858)
Other investments		-		-		-		-		-		-		-		-		-		-		-
Total separate account assets (1)		463,620		(10,420)		-		65,882		(49,215)		-		(2,771)		5,307		(35,755)		436,648		(11,163)

Total assets measured at fair value on a recurring basis	$	914,390	$	(28,473)	$	(32)	$	69,533	$	(53,918)	$	-	$	(36,108)	$	81,509	$	(150,909)	$	795,992	$	(26,258)

(1) The realized/unrealized gains (losses) included in net income for separate account assets are offset by an equal amount for separate account liabilities which results in a net zero impact on net income for the Company

(2) Included in earnings relating to instruments still held at the reporting date.

The following table shows a reconciliation of the beginning and ending balances for liabilities which are categorized as Level 3 for the three-month period ended September 30, 2011 (in 000's):

			Total realized and unrealized (gains) losses
Liabilities	Beginning balance		Included in earnings		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers into level 3		Transfers out of level 3		Ending balance		Change in unrealized (gains) losses (2)

Other policy liabilities:
Guaranteed minimum withdrawal benefit liability benefit liability	$	(7,645)	$	968,467	$	-	$	-	$	-	$	45,596	$	-	$	-	$	-	$	1,006,418	$	957,648
Guaranteed minimum accumulation benefit liability		(2,554)		221,102		-		-		-		4,333		-		-		-		222,881		216,402
Derivatives embedded in reinsurance contracts		18,035		(6,886)		-		-		-		1,164		(11,043)		-		-		1,270		(6,886)
Fixed index annuities		132,804		(43,622)		-		-		-		-		16,703		-		-		105,885		(20,087)
Total other policy liabilities (1)		140,640		1,139,061		-		-		-		51,093		5,660		-		-		1,336,454		1,147,077

Derivative instruments – payable:
Interest rate contracts		-		-		-		-		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-		-		-		-		-
Credit contracts		22,563		4,185		-		-		-		-		-		-		-		26,748		4,185
Futures contracts		-		-		-		-		-		-		-		-		-		-		-
Total derivative instruments – payable		22,563		4,185		-		-		-		-		-		-		-		26,748		4,185


Other liabilities:
Bank overdrafts		-		-		-		-		-		-		-		-		-		-		-

Total liabilities measured at fair value on a recurring basis	$	163,203	$	1,143,246	$	-	$	-	$	-	$	51,093	$	5,660	$	-	$	-	$	1,363,202	$	1,151,262

(1) The balances are included within the contractholder deposits funds and other policy liabilities in the Company's condensed consolidated balance sheet..

(2) Included in earnings relating to instruments still held at the reporting date.

Gains and losses related to Level 3 assets and liabilities, included in the Company's condensed consolidated statements of operations for the three-month period ended September 30, 2011 , are reported as follows (in 000's):

The following table shows a reconciliation of the beginning and ending balances for assets which are categorized as Level 3 for the three-month period ended September 30, 2010 (in 000's):

			Total realized and unrealized gains (losses)
Assets	Beginning balance		Included in earnings		Included in other comprehensive income		Purchases, issuances, and settlements (net)		Transfers in and/or (out) of level 3 (2)		Ending balance		Change in unrealized gains (losses) (2)
Available-for-sale fixed maturity securities:
Asset-backed securities	$	22	$	-	$	(6)	$	-	$	-	$	16	$	-
Residential mortgage-backed securities		-		-		-		-		-		-		-
Commercial mortgage-backed securities		1,371		-		67		-		-		1,438		-
Foreign government & agency securities		-		-		-		-		-		-		-
U.S. states and political subdivisions securities		-		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-		-
Corporate securities		678		(1,998)		3,169		1,998		6,795		10,642		-
Total available-for-sale fixed maturity securities		2,071		(1,998)		3,230		1,998		6,795		12,096		-

Trading fixed maturity securities:
Asset-backed securities		47,668		7,533		-		(746)		5,163		59,618		6,787
Residential mortgage-backed securities		98,323		1,540		-		(3,897)		(28,393)		67,573		(2,358)
Commercial mortgage-backed securities		62,793		1,376		-		(1,004)		-		63,165		372
Foreign government & agency securities		14,638		(365)		-		-		-		14,273		(365)
U.S. states and political subdivisions securities		-		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-		-
Corporate securities		48,551		2,204		-		1,808		33,432		85,995		4,012
Total trading fixed maturity securities		271,973		12,288		-		(3,839)		10,202		290,624		8,448

Interest rate contracts		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-
Equity contracts		1,723		887		-		2,795		-		5,405		887
Futures contracts		-		-		-		-		-		-		-
Total derivative instruments - receivable		1,723		887		-		2,795		-		5,405		887

Other invested assets		1,614		(302)		-		-		-		1,312		(302)
Total investments and cash		277,381		10,875		3,230		954		16,997		309,437		9,033

Separate account assets:
Mutual fund investments		-		-		-		-		-		-		-
Equity investments		197		(182)		-		-		-		15		(182)
Fixed income investments		92,963		2,020		-		83,648		(3,546)		175,085		1,160
Alternative investments		269,757		1,913		-		9,738		(9,587)		271,821		1,662
Other investments		-		-		-		-		-		-		-
Total separate account assets (1)		362,917		3,751		-		93,386		(13,133)		446,921		2,640

Total assets measured at fair value on
a recurring basis	$	640,298	$	14,626	$	3,230	$	94,340	$	3,864	$	756,358	$	12,277

(1)The realized/unrealized gains (losses) included in net income for separate account assets are offset by an equal amount for separate account liabilities which results in a net zero impact on net income for the Company.

(2) Included in earnings relating to instruments still held at the reporting date.

The following table shows a reconciliation of the beginning and ending balances for liabilities which are categorized as Level 3 for the

			Total realized and unrealized (gains) losses
Liabilities	Beginning balance		Included in earnings		Included in other comprehensive income		Purchases, issuances, and settlements (net)		Transfers in and/or (out) of level 3		Ending balance		Change in unrealized (gains) losses (2)

Other policy liabilities:
Guaranteed minimum withdrawal benefit liability	$	618,029	$	(140,238)	$	-	$	41,917	$	-	$	519,708	$	(137,957)
Guaranteed minimum accumulation benefit liability		231,911		(64,087)		-		5,773		-		173,597		(63,318)
Derivatives embedded in reinsurance contracts		-		-		-		-		-		-		-
Fixed index annuities		118,287		10,100		-		(186)		-		128,201		18,052
Total other policy liabilities (1)		968,227		(194,225)		-		47,504		-		821,506		(183,223)

Derivative instruments - payable:
Interest rate contracts		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-
Credit contracts		33,726		(3,093)		-		-		-		30,633		(3,093)
Futures contracts		-		-		-		-		-		-		-
Total derivative instruments - payable	$	33,726	$	(3,093)	$	-	$	-	$	-	$	30,633	$	(3,093)

Other liabilities:
Bank overdrafts		-		-		-		-		-		-		-
Total liabilities measured at fair value on a
recurring basis	$	1,001,953	$	(197,318)	$	-	$	47,504	$	-	$	852,139	$	(186,316)

(1) The balances are included within the contractholder deposits funds and other policy liabilities in the Company's condensed consolidated balance sheet.

(2) Included in earnings relating to instruments still held at the reporting date.

The Company determines transfers between levels based on the fair value of each security as of the beginning of the reporting period.

During the nine-month period ended September 30, 2011, the Company transferred the following assets into (out of) levels 1, 2 and 3:

	Level 1 Transfers				Level 2 Transfers				Level 3 Transfers
	Into		(Out of)		Into		(Out of)		Into		(Out of)
Assets
Available-for-sale fixed maturity securities:
Asset-backed securities	$	-	$	-	$	-	$	-	$	-	$	-
Residential mortgage-backed securities		-		-		-		-		-		-
Commercial mortgage-backed securities		-		-		-		-		-		-
Foreign government & agency securities		-		-		-		-		-		-
U.S. states and political subdivisions
securities		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-
Corporate securities		-		-		608		-		-		(608)

Total available-for-sale fixed maturity securities		-		-	-	608		-		-		(608)

Trading fixed maturity securities:
Asset-backed securities		-		-		20,878		(14,654)		14,654		(20,878)
Residential mortgage-backed securities		-		-		38,635		(97,000)		97,000		(38,635)
Commercial mortgage-backed securities		-		-		1,558		-		-		(1,558)
Foreign government & agency securities		-		-		13,790		-		-		(13,790)
U.S. states and political subdivisions		-		-		-		-		-		-
securities		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		1,101		-		-		(1,101)
Corporate securities		-		-		74,797		(17,345)		17,345		(74,797)
Total trading fixed maturity securities		-		-		150,759		(128,999)		128,999		(150,759)


Derivative instruments- receivable
Interest rate contracts		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-
Equity contracts		-		-		-		-		-		-
Futures contracts		-		-		-		-		-		-
Total derivative instruments-receivable		-		-		-		-		-		-

Other invested assets		-		-		7,650		-		-		(7,650)
Total investments and cash		-		-		159,017		(128,999)		128,999		(159,017)

Mutual fund investments
Equity investments		-		-		-		(49)		49		-
Fixed income investments		-		-		33,704		(35,740)		35,740		(33,704)
Alternative investments		-		-		-		(3,200)		3,200		-
Other investments		-		-		-		-		-		-
Total separate account assets		-		-		33,704		(38,989)		38,989		(33,704)

Total assets measured at fair value on a recurring basis	$	-	$	-	$	192,721	$	(167,988)	$	167,988	$	(192,721)

The Company did not change the categorization of its financial instruments during the nine-month period ended September 30, 2011. The transfers into (out of) Level 2 and Level 3 were primarily due to changes in the level of observability of inputs used to price these securities.

The Company determines transfers between levels based on the fair value of each security as of the beginning of the reporting period.

During the nine-month period ended September 30, 2010, the Company transferred the following assets into (out of) levels 1, 2 and 3:

	Level 1 Transfers				Level 2 Transfers				Level 3 Transfers
	Into		(Out of)		Into		(Out of)		Into		(Out of)
Assets
Available-for-sale fixed maturity securities:
Asset-backed securities	$	-	$	-	$	-	$	-	$	-	$	-
Residential mortgage-backed securities		-		-		-		-		-		-
Commercial mortgage-backed securities		-		-		-		-		-		-
Foreign government & agency securities		-		-		-		-		-		-
U.S. states and political subdivisions securities		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-
Corporate securities		-		-		434		-		-		(434)
Total available-for-sale fixed maturity securities		-		-		434		-		-		(434)

Trading fixed maturity securities:
Asset-backed securities		-		-		45,553		(14,821)		14,821		(45,553)
Residential mortgage-backed securities		-		-		106,147		(24,641)		24,641		(106,147)
Commercial mortgage-backed securities		-		-		696		-		-		(696)
Foreign government & agency securities		-		-		-		-		-		-
U.S. states and political subdivisions securities		-		-		-		-		-		-
U.S. treasury and agency securities		-		(1,346)		1,346		-		-		-
Corporate securities		-		-		47,741		(26,377)		26,377		(47,741)
Total trading fixed maturity securities		-		(1,346)		201,483		(65,839)		65,839		(200,137)

Derivative instruments- receivable
Interest rate contracts		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-
Equity contracts		-		-		-		-		-		-
Futures contracts		-		-		-		-		-		-
Total derivative instruments-receivable		-		-		-		-		-		-

Separate account assets:
Mutual fund investments		-		-		-		-		-		-
Equity investments		5,372		-		-		(5,372)		-		-
Fixed income investments		-		(39)		17,229		(556)		556		(17,190)
Alternative investments		-		-		98,550		-		-		(98,550)
Other investments		4,108		-		-		-		-		(4,108)
Total separate account assets		9,480		(39)		115,779		(5,928)		556		(119,848)

Total assets measured at fair value on a recurring basis	$	9,480	$	(1,385)	$	317,696	$	(71,767)	$	66,395	$	(320,419)

The Company did not change the categorization of its financial instruments during the nine-month period ended September 30, 2010. The transfers into (out of) Level 2 and Level 3 were primarily due to changes in the level of observability of inputs used to price these securities.

The Company determines transfers between levels based on the fair value of each security as of the beginning of the reporting period.

During the three-month period ended September 30, 2011, the Company transferred the following assets into (out of) Levels 1, 2 and 3:

	Level 1 Transfers				Level 2 Transfers				Level 3 Transfers
	Into		(Out of)		Into		(Out of)		Into		(Out of)
Assets
Available-for-sale fixed maturity securities:
Asset-backed securities	$	-	$	-	$	-	$	-	$	-	$	-
Residential mortgage-backed securities		-		-		-		-		-		-
Commercial mortgage-backed securities		-		-		-		-		-		-
Foreign government & agency securities		-		-		-		-		-		-
U.S. states and political subdivisions		-		-		-		-		-		-
securities		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-
Corporate securities		-		-		582		-		-		(582)
Total available-for-sale fixed maturity securities		-		-		582		-		-		(582)

Trading fixed maturity securities:
Asset-backed securities		-		-		5,646		(21,007)		21,007		(5,646)
Residential mortgage-backed securities		-		-		50,772		(37,746)		37,746		(50,772)
Commercial mortgage-backed securities		-		-		4,967		-		-		(4,967)
Foreign government & agency securities		-		-		13,003		-		-		(13,003)
U.S. states and political subdivisions
securities		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		963		-		-		(963)
Corporate securities		-		-		39,221		(17,449)		17,449		(39,221)
Total trading fixed maturity securities		-		-		114,572		(76,202)		76,202		(114,572)

Derivative instruments- receivable		-		-		-		-		-		-
Interest rate contracts		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-
Equity contracts		-		-		-		-		-		-
Futures contracts		-		-		-		-		-		-
Total derivative instruments-receivable		-		-		-		-		-		-

Other invested assets		-		-		-		-		-		-
Total investments and cash		-		-		115,154		(76,202)		76,202		(115,154)

Equity investments		-		-		-		-		-		-
Fixed income investments		-		-		35,755		(5,307)		5,307		(35,755)
Alternative investments		-		-		-		-		-		-
Other investments		-		-		-		-		-		-
Total separate account assets		-		-		35,755		(5,307)		5,307		(35,755)

Total assets measured at fair value on a recurring basis	$	-	$	-	$	150,909	$	(81,509)	$	81,509	$	(150,909)

The Company did not change the categorization of its financial instruments during the three-month period ended September 30, 2011. The transfers into (out of) Level 2 and Level 3 were primarily due to changes in the level of observability of inputs used to price these securities.

The Company determines transfers between levels based on the fair value of each security as of the beginning of the reporting period.

During the three-month period ended September 30, 2010, the Company transferred the following assets into (out of) Levels 1, 2 and 3:

		Level 1 Transfers				Level 2 Transfers				Level 3 Transfers
		Into		(Out of)		Into		(Out of)		Into		(Out of)
Assets
Available-for-sale fixed maturity securities:
Asset-backed securities	$	-	$	-	$	-	$	-	$	-	$	-
Residential mortgage-backed securities		-		-		-		-		-		-
Commercial mortgage-backed securities		-		-		-		-		-		-
Foreign government & agency securities		-		-		-		-		-		-
U.S. states and political subdivisions securities		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-
Corporate securities		-		-		-		(6,795)		6,795		-
Total available-for-sale fixed maturity securities		-		-		-		(6,795)		6,795		-

Trading fixed maturity securities:		-		-		-		-		-		-
Asset-backed securities		-		-		5,911		(11,074)		11,074		(5,911)
Residential mortgage-backed securities		-		-		50,118		(21,725)		21,725		(50,118)
Commercial mortgage-backed securities		-		-		-		-		-		-
Foreign government & agency securities		-		-		-		-		-		-
U.S. states and political subdivisions securities		-		-		-		-		-		-
U.S. treasury and agency securities		-		(1,250)		1,250		-		-		-
Corporate securities		-		-		-		(33,432)		33,432		-
Total trading fixed maturity securities		-		(1,250)		57,279		(66,231)		66,231		(56,029)

Derivative instruments- receivable		-		-		-		-		-		-
Interest rate contracts		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-
Equity contracts		-		-		-		-		-		-
Futures contracts		-		-		-		-		-		-
Total derivative instruments-receivable		-		-		-		-		-		-

Separate account assets:
Mutual fund investments		-		-		-		-		-		-
Equity investments		-		-		-		-		-		-
Fixed income investments		9,899		-		3,546		(9,899)		-		(3,546)
Alternative investments		10,144		-		-		(557)		557		(10,144)
Other investments		-		-		-		-		-		-
Total separate account assets		20,043		-		3,546		(10,456)		557		(13,690)

Total assets measured at fair value on a recurring basis	$	20,043	$	(1,250)	$	60,825	$	(83,482)	$	73,583	$	(69,719)

The Company did not change the categorization of its financial instruments during the three-month period ended September 30, 2010. The transfers into (out of) Level 2 and Level 3 were primarily due to changes in the level of observability of inputs used to price these securities.

FASB ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of certain financial instruments including those that are not carried at fair value. FASB ASC Topic 825 also excludes certain insurance liabilities and other non-financial instruments from its disclosure requirements. The fair value amounts presented herein do not include the expected interest margin (interest earnings over interest credited) to be earned in the future on investment-type products or other intangible items. Accordingly, the aggregate fair value amounts presented herein do not necessarily represent the underlying value to the Company. Likewise, care should be exercised in deriving conclusions about the Company's business or financial condition based on the fair value information presented herein.

The following table presents the carrying value and estimated fair value of the Company's financial instruments that are not carried at fair value (in 000's) at:

The following methods and assumptions were used by the Company in determining the estimated fair value of the above financial instruments:

Interest receivable on the above financial instruments is stated at carrying value which approximates fair value.

Mortgage loans: The fair value of mortgage loans are estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Policy loans: The fair value of policy loans is determined by estimating future policy loan cash flows and discounting the cash flows at a current market interest rate.

Contractholder deposit funds and other policy liabilities: The fair value of the Company's general account insurance reserves and contractholder deposits under investment-type contracts (e.g., insurance, annuity and pension contracts that do not involve mortality or morbidity risks) are estimated using discounted cash flow analyses or surrender values based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for all contracts being valued. Those contracts that are deemed to have short-term guarantees have a carrying amount equal to the estimated market value. The fair values of other deposits with future maturity dates are estimated using discounted cash flows.

Debt payable to affiliates: The fair value of notes payable and other borrowings is based on future cash flows discounted at the stated interest rate, considering all appropriate terms of the related agreements. Due to certain provisions included in such agreements, whereby the issuer of the notes has the ability to call each note at par with appropriate approvals, the fair value is equal to par value.