FAIR VALUE MEASUREMENT

12 Months Ended

Dec. 31, 2011

Fair Value Measurement [Abstract]

Fair Value Disclosures [Text Block]

5. FAIR VALUE MEASUREMENT

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 indicating 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 year ended December 31, 2011, there were no changes to these valuation techniques and the related inputs.

5. FAIR VALUE MEASUREMENT (CONTINUED)

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

Level 1

       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.

Level 2

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

Level 2 inputs include the following:

a)       Quoted prices for similar assets or liabilities in active markets,

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

c)       Inputs other than quoted market prices that are observable, and

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 ABSincluding collateralized debt obligations, RMBS, CMBS, certain corporate debt, certain private equity investments and certain derivatives, including derivatives embedded in reinsurance contracts.

Level 3

       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.

5. FAIR VALUE MEASUREMENT (CONTINUED)

Fair Value Hierarchy

The following table presents the Company's categories for its assets measured at fair value on a recurring basis as of December 31, 2011:

		Level 1		Level 2		Level 3		Total
Assets
Available-for-sale fixed maturity securities:
	Asset-backed securities	$	-	$	55	$	-	$	55
	Residential mortgage-backed securities		-		26,543		-		26,543
	Commercial mortgage-backed securities		-		6,781		2,131		8,912
	Foreign government & agency securities		-		-		-		-
	U.S. states and political subdivision securities		-		221		-		221
	U.S. treasury and agency securities		382,569		-		-		382,569
	Corporate securities		-		977,356		6,869		984,225
Total available-for-sale fixed maturity securities			382,569		1,010,956		9,000		1,402,525
Trading fixed maturity securities:
	Asset-backed securities		-		215,343		76,909		292,252
	Residential mortgage-backed securities		-		593,066		120,129		713,195
	Commercial mortgage-backed securities		-		619,180		63,838		683,018
	Foreign government & agency securities		-		96,205		20,393		116,598
	U.S. states and political subdivision securities		-		527		-		527
	U.S. treasury and agency securities		327,827		7,199		1,928		336,954
	Corporate securities		-		8,062,279		75,713		8,137,992
Total trading fixed maturity securities			327,827		9,593,799		358,910		10,280,536
Derivative instruments - receivable:
	Interest rate contracts		-		362,753		-		362,753
	Foreign currency contracts		-		577		-		577
	Equity contracts		24,499		17,252		5,193		46,944
	Futures contracts		12,130		-		-		12,130
Total derivative instruments - receivable			36,629		380,582		5,193		422,404
Other invested assets (1)			1,896		21,621		9,252		32,769
Short-term investments			105,895		-		-		105,895
Cash and cash equivalents			872,064		-		-		872,064
Total investments and cash			1,726,880		11,006,958		382,355		13,116,193
Separate account assets:
	Mutual fund investments		21,668,110		-		-		21,668,110
	Equity investments		-		-		-		-
	Fixed income investments		785,438		5,236,487		16,012		6,037,937
	Alternative investments		4,122		62,989		360,463		427,574
	Other investments		(1,328)		-		-		(1,328)
Total separate account assets (2) (3)			22,456,342		5,299,476		376,475		28,132,293
Total assets measured at fair value on a recurring basis		$	24,183,222	$	16,306,434	$	758,830	$	41,248,486

(1) Excludes $4.3 million of other invested assets that are not subject to FASB ASC Topic 820.

(2)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.

5. FAIR VALUE MEASUREMENT (CONTINUED)

Fair Value Hierarchy(continued)

The following table presents the Company's categories for its liabilities measured at fair value on a recurring basis as of December 31, 2011:

		Level 1		Level 2		Level 3		Total
Liabilities
Other policy liabilities:
	Guaranteed minimum withdrawal benefit liability	$	-	$	-	$	1,071,126	$	1,071,126
	Guaranteed minimum accumulation benefit liability		-		-		215,598		215,598
	Derivatives embedded in reinsurance contracts		-		107,965		5,193		113,158
	Derivatives embedded in fixed index annuities		-		-		116,395		116,395
Total other policy liabilities (1)			-		107,965		1,408,312		1,516,277
Derivative instruments – payable:
	Interest rate contracts		-		257,719		-		257,719
	Foreign currency contracts		-		3,422		-		3,422
	Credit contracts		-		-		17,723		17,723
	Futures contracts		8,210		-		-		8,210
Total derivative instruments – payable			8,210		261,141		17,723		287,074
Other liabilities:
	Bank overdrafts (2)		48,893		-		-		48,893
Total liabilities measured at fair value on a recurring basis		$	57,103	$	369,106	$	1,426,035	$	1,852,244

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

(2) Bank overdrafts are included within other liabilities in the Company's consolidated balance sheet.

Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents the Company's categories for its assets measured at fair value on a nonrecurring basis at December 31, 2011:

		Level 1		Level 2		Level 3		Total		Total Loss
Asset
Mortgage loans	$	-	$	-	$	79,067	$	79,067	$	(38,634)

At December 31, 2011, the Company determined that certain mortgage loans were impaired and as a practical expedient, measured the impairment using the fair value of the related collateral. The fair value of the collateral was based on real estate valuations.

5. FAIR VALUE MEASUREMENT (CONTINUED)

Fair Value Hierarchy(continued)

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

		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 securities		-		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 (1)			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 (2) (3)			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

5. FAIR VALUE MEASUREMENT (CONTINUED)

Fair Value Hierarchy(continued)

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

		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
	Derivatives embedded in fixed index annuities		-		-		131,608		131,608
Total other policy liabilities (1)			-		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 (2)		61,227		-		-		61,227
Total liabilities measured at fair value on a recurring basis		$	62,817	$	374,364	$	161,243	$	598,424

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

(2) Bank overdrafts are included within other liabilities in the Company's consolidated balance sheet.

5. FAIR VALUE MEASUREMENT (CONTINUED)

Fair Value Hierarchy(continued)

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. 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 also are priced using market prices or broker quotes.

The Company's ability to liquidate positions in privately-placed fixed securities and mortgages could be impacted to a significant degree by the lack of an actively traded market. Although the Company believes that its estimates reasonably reflect the fair value of those instruments, its key assumptions about risk-free interest rates, risk premiums, performance of underlying collateral (if any) and other factors may not reflect those of an active market.

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.

5. FAIR VALUE MEASUREMENT (CONTINUED)

Fair Value Hierarchy(continued)

Other policy liabilities: The fair values of S&P 500 Index and other equity-linked embedded derivatives are produced using standard derivative valuation techniques. GMABandGMWB are considered to be derivatives under FASB ASC Topic 815 and are included in contractholder deposit funds and other policy liabilities in the Company's 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 bank overdraft balances which are due to issued checks and transmitted wires that were not cashed and processed in the Company's bank accounts at 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.

5. FAIR VALUE MEASUREMENT (CONTINUED)

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

year ended December 31, 2011:

			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 securities	$ 11	$ (16)	$ 5	$ -	$ -	$ -	$ -	$ -	$ -	$ -	$ -
	Residential mortgage-backed securities	-	-	-	-	-	-	-	-	-	-	-
	Commercial mortgage-backed securities	2,047	(362)	446	-	-	-	-	-	-	2,131	-
	Foreign government & agency securities	-	-	-	-	-	-	-	-	-	-	-
	U.S. states and political subdivision securities	-	-	-	-	-	-	-	-	-	-	-
	U.S. treasury and agency securities	-	-	-	-	-	-	-	-	-	-	-
	Corporate securities	1,135	1,636	(1,653)	-	-	-	-	6,360	(609)	6,869	-
Total available-for-sale fixed maturity securities		3,193	1,258	(1,202)	-	-	-	-	6,360	(609)	9,000	-
Trading fixed maturity securities:
	Asset-backed securities	90,851	(4,497)	-	-	-	-	(5,534)	14,639	(18,550)	76,909	(2,925)
	Residential mortgage-backed securities	88,719	3,586	-	-	-	-	(44,230)	99,785	(27,731)	120,129	16,101
	Commercial mortgage-backed securities	82,171	(1,391)	-	-	-	-	(21,896)	4,954	-	63,838	168
	Foreign government & agency securities	13,790	6,603	-	-	-	-	-	-	-	20,393	8,292
	U.S. states and political subdivision securities	-	-	-	-	-	-	-	-	-	-	-
	U.S. treasury and agency securities	1,101	47	-	-	-	-	(431)	2,312	(1,101)	1,928	42
	Corporate securities	132,556	3,602	-	-	(7,984)	-	(9,419)	32,343	(75,385)	75,713	588
Total trading fixed maturity securities		409,188	7,950	-	-	(7,984)	-	(81,510)	154,033	(122,767)	358,910	22,266
Derivative instruments – receivable:
	Interest rate contracts	-	-	-	-	-	-	-	-	-	-	-
	Foreign currency contracts	-	-	-	-	-	-	-	-	-	-	-
	Equity contracts	13,785	(4,102)	-	9,295	-	-	(13,785)	-	-	5,193	(4,102)
	Futures contracts	-	-	-	-	-	-	-	-	-	-	-
Total derivative instruments– receivable		13,785	(4,102)	-	9,295	-	-	(13,785)	-	-	5,193	(4,102)
Other invested assets		8,343	(4)	-	8,859	(296)	-	-	-	(7,650)	9,252	196
Short-term investments		-	-	-	-	-	-	-	-	-	-	-
Cash and cash equivalents		-	-	-	-	-	-	-	-	-	-	-
Total investments and cash		434,509	5,102	(1,202)	18,154	(8,280)	-	(95,295)	160,393	(131,026)	382,355	18,360
Separate account assets:
	Mutual fund investments	-	-	-	-	-	-	-	-	-	-	-
	Equity investments	-	-	-	-	(49)	-	-	49	-	-	-
	Fixed income investments	56,323	(432)	-	523,188	(530,132)	-	(7,327)	8,096	(33,704)	16,012	(515)
	Alternative investments	293,254	411	-	207,717	(124,666)	-	(19,453)	3,200	-	360,463	(5,874)
	Other investments	-	-	-	-	-	-	-	-	-	-	-
Total separate account assets (1)		349,577	(21)	-	730,905	(654,847)	-	(26,780)	11,345	(33,704)	376,475	(6,389)
Total assets measured at fair value on
a recurring basis		$ 784,086	$ 5,081	$ (1,202)	$ 749,059	$ (663,127)	$ -	$ (122,075)	$ 171,738	$ (164,730)	$ 758,830	$ 11,971

5. FAIR VALUE MEASUREMENT (CONTINUED)

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

year ended December 31, 2011:

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

(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 consolidated statements of operations for the

year ended December 31, 2011, are reported as follows:

	Total gains (losses) included in earnings		Change in unrealized gains (losses) related to assets and liabilities still held at the reporting date
Net investment income	$	7,946	$	22,462
Net derivative loss		(1,257,778)		(1,171,489)
Net realized investment gains, excluding impairment losses on available-for-sale securities		1,258		-
Net losses	$	(1,248,574)	$	(1,149,027)

5. FAIR VALUE MEASUREMENT (CONTINUED)

The following table shows a reconciliation of the beginning and ending balances for assets which are categorized as Level 3 for the year endedDecember 31, 2010:

			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) included in earnings relating to instruments still held at the reporting date
Available-for-sale fixed maturity securities:
	Asset-backed securities	$ 37	$ (40)	$ 14	$ -	$ -	$ 11	$ -
	Residential mortgage-backed securities	-	-	-	-	-	-	-
	Commercial mortgage-backed
	securities	1,930	(472)	589	-	-	2,047	-
	Foreign government & agency
	securities	-	-	-	-	-	-	-
	U.S. states and political subdivision	-	-	-	-	-	-	-
	securities	-	-	-	-	-	-	-
	U.S. treasury and agency securities				-
	Corporate securities	7,936	(23)	53	(6,831)	-	1,135	-
Total available-for-sale fixed maturity securities		9,903	(535)	656	(6,831)	-	3,193	-
Trading fixed maturity securities:
	Asset-backed securities	111,650	26,351	-	(38,060)	(9,090)	90,851	28,061
	Residential mortgage-backed securities	154,551	11,159	-	(34,087)	(42,904)	88,719	24,255
	Commercial mortgage-backed
	securities	14,084	1,833	-	66,950	(696)	82,171	3,334
	Foreign government & agency
	securities	15,323	(1,533)	-	-	-	13,790	65
	U.S. states and political subdivision
	securities	0	-	-	-	-	-	0
	U.S. treasury and agency securities	0	(13)	-	(232)	1,346	1,101	21
	Corporate securities	107,886	4,805	-	(11,997)	31,862	132,556	5,111
Total trading fixed maturity securities		403,494	42,602	-	(17,426)	(19,482)	409,188	60,847
Derivative instruments – receivable:
	Interest rate contracts	-	-	-	-	-	-	-
	Foreign currency contracts	-	-	-	-	-	-	-
	Equity contracts	8,821	-	-	4,964	-	13,785	-
	Futures contracts	-	-	-	-	-	-	-
Total derivative instruments– receivable		8,821	-	-	4,964	-	13,785	-
Other invested assets		-	(50)	900	7,493	-	8,343	(50)
Short-term investments		-	-	-	-	-	-	0
Cash and cash equivalents		-	-	-	-	-	-	0
Total investments and cash		422,218	42,017	1,556	(11,800)	(19,482)	434,509	60,797
Separate account assets:
	Mutual fund investments	-	-	-	-	-	-	0
	Equity investments	7	-	-	(7)	-	-	0
	Fixed income investments	276,530	(11,998)	-	(91,989)	(116,220)	56,323	(4,607)
	Alternative investments	267,196	12,671	-	30,021	(16,634)	293,254	12,341
	Other investments	4,108	-	-	-	(4,108)	-	0
	Total separate account assets (1)	547,841	673	0	(61,975)	(136,962)	349,577	7,734
Total assets measured at fair value on
a recurring basis		$ 970,059	$ 42,690	$ 1,556	$ (73,775)	$ (156,444)	$ 784,086	$ 68,531

(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 netzero impact on net income for the Company.

(2)Transfers in and/or (out) of Level 3 during the year ended December 31, 2010are primarily attributable to changes in the observability of inputs used to price the securities.

5. FAIR VALUE MEASUREMENT (CONTINUED)

The following table shows a reconciliation of the beginning and ending balances for liabilities which are categorized as Level 3 for the year endedDecember 31, 2010:

			Total realized and unrealized (gains) losses							Change in unrealized (gains) losses included in earnings relating to instruments still held at the reporting date
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
Other policy liabilities:
	Guaranteed minimum withdrawal benefit liability	$ 168,786		$ (319,563)		$ -	$ 153,022	$ -	$ 2,245	$ (314,652)
	Guaranteed minimum accumulation benefit liability	81,669		(104,831)		-	23,211	-	49	(103,091)
	Derivatives embedded in reinsurance contracts	-		-		-	-	-	-	-
	Derivatives embedded in fixed index annuities	140,966		(13,153)		-	3,795	-	131,608	20,397
Total other policy liabilities (1)		391,421		(437,547)		-	180,028	-	133,902	(397,346)
Derivative instruments – payable:
	Interest rate contracts	-		-		-	-	-	-	-
	Foreign currency contracts	-		-		-	-	-	-	-
	Credit contracts	34,349		(7,008)		-	-	-	27,341	(7,008)
	Futures contracts	-		-		-	-	-	-	-
Total derivative instruments – payable		34,349		(7,008)		-	-	-	27,341	(7,008)
Other liabilities:
	Bank overdrafts	-		-		-	-	-	-	-
Total liabilities measured at fair value on a recurring basis		$ 425,770		$ (444,555)		$ -	$ 180,028	$ -	$ 161,243	$ (404,354)

(1)The balances are included within the contractholder deposit funds and other policy liabilities in the Company consolidated balance sheets.

Gains and losses related to Level 3 assets and liabilities, included in the Company's consolidated statements of operations for the year endedDecember 31, 2010, are reported as follows:

		Total gains (losses) included in earnings		Change in unrealized gains related to assets and liabilities still held at the reporting date
Net investment income	$	42,552	$	60,797
Net derivative gains		444,555		404,354
Net realized investment losses, excluding impairment
losses on available-for-sale securities		(535)		-
Net gains	$	486,572	$	465,151

5. FAIR VALUE MEASUREMENT (CONTINUED)

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

During the year endedDecember 31, 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 subdivision securities		-		-		-		-		-		-
	U.S. treasury and agency securities		-		-		-		-		-		-
	Corporate securities		-		-		609		(6,360)		6,360		(609)
Total available-for-sale fixed maturity securities			-		-		609		(6,360)		6,360		(609)
Trading fixed maturity securities:
	Asset-backed securities		-		-		18,550		(14,639)		14,639		(18,550)
	Residential mortgage-backed securities		-		-		27,731		(99,785)		99,785		(27,731)
	Commercial mortgage-backed securities		-		-		0		(4,954)		4,954		0
	Foreign government & agency securities		-		-		-		-		-		-
	U.S. states and political subdivision securities		-		-		-		-		-		-
	U.S. treasury and agency securities		-		(2,312)		1,101		-		2,312		(1,101)
	Corporate securities		-		-		75,385		(32,343)		32,343		(75,385)
Total trading fixed maturity securities			-		(2,312)		122,767		(151,721)		154,033		(122,767)
Derivative instruments- receivable:
	Interest rate contracts		-		-		-		-		-		-
	Foreign currency contracts		-		-		-		-		-		-
	Equity contracts		-		-		-		-		-		-
	Credit contracts		-		-		-		-		-		-
	Futures		-		-		-		-		-		-
Total derivative instruments-receivable			-		-		-		-		-		-
Other invested assets			-		-		7,650		-		-		(7,650)
Short-term investments			-		-		-		-		-		-
Cash and cash equivalents			-		-		-		-		-		-
Total investments and cash			-		(2,312)		131,026		(158,081)		160,393		(131,026)
Separate account assets:
	Mutual fund investments		-		-		-		-		-		-
	Equity investments		-		-		-		(49)		49		-
	Fixed income investments		-		-		33,704		(8,096)		8,096		(33,704)
	Alternative investments		-		-		-		(3,200)		3,200		-
	Other investments		-		-		-		-		-		-
Total separate account assets			-		-		33,704		(11,345)		11,345		(33,704)
Total assets measured at fair value on a
recurring basis		$	-	$	(2,312)	$	164,730	$	(169,426)	$	171,738	$	(164,730)

The Company did not change the categorization of its financial instruments during the year ended December 31, 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.

5. FAIR VALUE MEASUREMENT (CONTINUED)

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

During the year ended December 31, 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 subdivision securities		-		-		-		-		-		-
	U.S. treasury and agency securities		-		-		-		-		-		-
	Corporate securities		-		-		-		-		-		-
Total available-for-sale fixed maturity securities			-		-		-		-		-		-
Trading fixed maturity securities:
	Asset-backed securities		-		-		44,458		(35,368)		35,368		(44,458)
	Residential mortgage-backed securities		-		-		79,192		(36,288)		36,288		(79,192)
	Commercial mortgage-backed securities		-		-		696		-		-		(696)
	Foreign government & agency securities		-		-		-		-		-		-
	U.S. states and political subdivision securities		-		-		-		-		-		-
	U.S. treasury and agency securities		-		(1,346)		-		-		1,346		-
	Corporate securities		-		-		32,579		(64,441)		64,441		(32,579)
Total trading fixed maturity securities			-		(1,346)		156,925		(136,097)		137,443		(156,925)
Derivative instruments- receivable:
	Interest rate contracts		-		-		-		-		-		-
	Foreign currency contracts		-		-		-		-		-		-
	Equity contracts		-		-		-		-		-		-
	Credit contracts		-		-		-		-		-		-
	Futures contracts		-		-		-		-		-		-
Total derivative instruments-receivable			-		-		-		-		-		-
Separate account assets:
	Mutual fund investments		-		-		-		-		-		-
	Equity investments		-		-		-		-		-		-
	Fixed income investments		-		-		116,220		-		-		(116,220)
	Alternative investments		14,221		-		2,968		(555)		555		(17,189)
	Other investments		4,108		-		-		-		-		(4,108)
Total separate account assets			18,329		-		119,188		(555)		555		(137,517)
Total assets measured at fair value on a
recurring basis		$	18,329	$	(1,346)	$	276,113	$	(136,652)	$	137,998	$	(294,442)

The Company did not change the categorization of its financial instruments during the year ended December 31, 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.

5. FAIR VALUE MEASUREMENT (CONTINUED)

Financial Instruments Not Considered at Fair Value

FASB ASC Topic 825 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 at:

			December 31, 2011			December 31, 2010
		Carrying		Estimated		Carrying		Estimated
		Amount		Fair Value		Amount		Fair Value
Financial assets:
	Mortgage loans	$	1,457,356	$	1,588,473	$	1,737,528	$	1,811,567
	Policy loans	$	603,371	$	651,876	$	717,408	$	859,668
Financial liabilities:
	Contractholder deposit funds and other policy liabilities	$	9,503,446	$	9,183,946	$	11,944,058	$	11,490,525
	Debt payable to affiliates	$	683,000	$	683,503	$	783,000	$	783,000

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 values 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 values 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 agreementsDue to certain provisions included in such agreements, whereby the issuer of most of the notes has the ability to call the notes at par with appropriate approvals, the fair value is equal to par value. The note, whose issuer does not have the ability to call at par, is reported at fair value.