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 six-month period ended June 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 June 30, 2011 (in 000's):

	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale fixed maturity securities:
Asset-backed securities	$	-	$	205	$	3	$	208
Residential mortgage-backed securities		-		30,658		-		30,658
Commercial mortgage-backed securities		-		12,542		2,137		14,679
Foreign government & agency securities		-		-		-		-
U.S. states and political subdivisions securities		-		220		-		220
U.S. treasury and agency securities		488,949		-		-		488,949
Corporate securities		-		1,100,755		7,462		1,108,217
Total available-for-sale fixed maturity securities		488,949		1,144,380		9,602		1,642,931

Trading fixed maturity securities:
Asset-backed securities		-		302,947		75,535		378,482
Residential mortgage-backed securities		-		666,785		157,814		824,599
Commercial mortgage-backed securities		-		726,745		67,031		793,776
Foreign government & agency securities		-		109,482		13,003		122,485
U.S. states and political subdivisions securities		-		627		-		627
U.S. treasury and agency securities		320,658		1,631		963		323,252
Corporate securities		-		8,178,459		106,654		8,285,113
Total trading fixed maturity securities		320,658		9,986,676		421,000		10,728,334

Derivative instruments - receivable:
Interest rate contracts		-		100,122		-		100,122
Foreign currency contracts		-		36,988		-		36,988
Equity contracts		28,751		35,811		18,035		82,597
Futures contracts		1,137		-		-		1,137
Total derivative instruments - receivable		29,888		172,921		18,035		220,844

Other invested assets		3,276		28,236		2,133		33,645
Short-term investments		12,997		-		-		12,997
Cash and cash equivalents		1,978,125		-		-		1,978,125
Total investments and Cash		2,833,893		11,332,213		450,770		14,616,876

Separate account assets:
Mutual fund investments		23,506,664		-		-		23,506,664
Equity investments		187,826		26,925		59		214,810
Fixed income investments		290,954		6,008,621		97,452		6,397,027
Alternative investments		9,754		75,916		366,109		451,779
Other investments		1,894		-		-		1,894
Total separate account assets (1) (2)		23,997,092		6,111,462		463,620		30,572,174

Total assets measured at fair value on a recurring basis	$	26,830,985	$	17,443,675	$	914,390	$	45,189,050

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

(2) Excludes $2,270.9 million, primarily related to investment purchases payable, net of investment sales receivable, that are not subject to FASB ASC Topic 820 “Fair Value Measurement.”

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

	Level 1		Level 2		Level 3		Total
Liabilities
Other policy liabilities:
Guaranteed minimum withdrawal benefit liability (1)	$	-	$	-	$	(7,645)	$	(7,645)
Guaranteed minimum accumulation benefit liability (1)		-		-		(2,554)		(2,554)
Derivatives embedded in reinsurance contracts (1)		-		78,075		18,035		96,110
Fixed index annuities (1)		-		-		132,804		132,804
Total other policy liabilities		-		78,075		140,640		218,715

Derivative instruments - payable:
Interest rate contracts		-		282,615		-		282,615
Foreign currency contracts		-		6,767		-		6,767
Equity Contracts		-		-		-		-
Credit contracts		-		-		22,563		22,563
Futures contracts		23,550		-		-		23,550
Total derivative instruments – payable		23,550		289,382		22,563		335,495

Other liabilities:
Bank overdrafts		41,883		-		-		41,883

Total liabilities measured at fair value on a recurring basis	$	65,433	$	367,457	$	163,203	$	596,093

(1) The balances are included within the contractholder deposits funds and other policy liabilities in the Company's unaudited condensed consolidated balance sheets. At June 30, 2011, the net balances of guaranteed minimum withdrawal and accumulation benefits were in an asset position.

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 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.

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 Level 3 for

Assets	Beginning balance		Total realized and unrealized (gains) losses				Purchases		Sales		Issuances		Settlements		Transfers into level 3		Transfers out of level 3		Ending balance		Change in total (gains) losses included in earnings relating to instruments still held at the reporting date
			Total realized and unrealized (gains) losses
				Included in earnings		Included in OCI

Available-for-sale fixed maturity securities:
Asset-backed	$	11	$	(12)	$	4	$	-	$	-	$	-	$	-	$	-	-	-	$	3	$	-
Residential mortgage-backed		-		-		-		-		-		-		-		-		-		-		-
Commercial mortgage-backed securities		2,047		(199)		289		-		-		-		-		-		-		2,137		-
Foreign government & agency securities		-		-		-		-		-		-		-		-		-		-		-
U.S. states and political subdivisions securities		-		-		-		-		-		-		-		-		-		-		-
U.S. treasury and agency		-		-		-		-		-		-		-		-		-		-		-
Corporate securities		1,135		11		248		6,102		-		-		(34)		-		-		7,462		-
Total available-for-sale fixed maturity securities		3,193		(200)		541		6,102		-		-		(34)		-		-		9,602		-

Trading fixed maturity securities:
Asset-backed		90,851		9,464		-		-		-		-		(3,198)		5,192		(26,774)		75,535		9,072
Residential mortgage-backed		88,719		12,472		-		-		-		-		(20,315)		133,509		(56,571)		157,814		14,918
Commercial mortgage-backed securities		82,171		(967)		-		-		-		-		(19,127)		4,954		-		67,031		(7)
Foreign government & agency securities		13,790		(787)		-		-		-		-		-		-		-		13,003		45
U.S. states and political subdivisions securities		-		-		-		-		-		-		-		-		-		-		-
U.S. treasury and agency		1,101		(22)		-		-		-		-		(116)		-		-		963		(7)
Corporate		132,556		7,567		-		6,932		(3,404)		-		(4,578)		3,202		(35,621)		106,654		7,019
Total trading fixed maturity securities		409,188		27,727		-		6,932		(3,404)		-		(47,334)		146,857		(118,966)		421,000		31,040

Derivative instruments – receivable:
Interest rate contracts		-		-		-		-		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-		-		-		-		-
Equity contracts		13,785		5,330		-		3,124		-		-		(4,204)		-		-		18,035		5,330
Futures contracts		-		-		-		-		-		-		-		-		-		-		-
Total derivative instruments– receivable		13,785		5,330		-		3,124		-		-		(4,204)		-		-		18,035		5,330

Other invested assets		8,343		440		-		1,000		-		-		-		-		(7,650)		2,133		440
Short-term investments		-		-		-		-		-		-		-		-		-		-		-
Cash and cash equivalents		-		-		-		-		-		-		-		-		-		-		-
Total investments and cash		434,509		33,297		541		17,158		(3,404)		-		(51,572)		146,857		(126,616)		450,770		36,810

Separate account assets:
Mutual fund investments		-		-		-		-		-		-		-		-		-		-		-
Equity investments		-		-		-		-		-		-		-		59		-		59		-
Fixed income investments		56,323		(393)		-		142,395		(91,583)		-		(10,216)		32,618		(31,692)		97,452		(762)
Alternative investments		293,254		18,067		-		148,821		(92,047)		-		(5,186)		3,200		-		366,109		16,706
Other investments		-		-		-		-		-		-		-		-		-		-		-
Total separate account assets (1)		349,577		17,674		-		291,216		(183,630)		-		(15,402)		35,877		(31,692)		463,620		15,944

Total assets measured at fair value on a recurring basis	$	784,086	$	50,971	$	541	$	308,374	$	(187,034)	$	-	$	(66,974)	$	182,734	$	(158,308)	$	914,390	$	52,754

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

Liabilities	Beginning balance		Total realized and unrealized (gains) losses				Purchases		Sales		Issuances		Settlements		Transfers into level 3		Transfers out of level 3		Ending balance		Change in total (gains) losses included in earnings relating to instruments still held at the reporting date
Liabilities	Beginning balance			Included in earnings		Included in OCI			Sales		Issuances		Settlements		Transfers into level 3		Transfers out of level 3		Ending balance
Other policy liabilities:							Purchases
Guaranteed minimum withdrawal benefit liability benefit liability (1)	$	2,245	$	(115,180)	$	-	$	-	$	-	$	105,290	$	-	$	-	$	-	$	(7,645)	$	(118,199)
Guaranteed minimum accumulation benefit liability (1)		49		(14,131)		-		-		-		11,528		-		-		-		(2,554)		(14,893)
Derivatives embedded in reinsurance contracts		-		(1,344)		-		3,124		-		20,459		(4,204)		-		-		18,035		(1,344)
Fixed index annuities		131,608		(19,438)		-		-		-		20,634		-		-		-		132,804		16,427
Total other policy liabilities		133,902		(150,093)		-		3,124		-		157,911		(4,204)		-		-		140,640		(118,009)

Derivative instruments – payable:
Interest rate contracts		-		-		-		-		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-		-		-		-		-
Credit contracts		27,341		(4,778)		-		-		-		-		-		-		-		22,563		(4,778)
Futures contracts		-		-		-		-		-		-		-		-		-		-		-
Total derivative instruments – payable		27,341		(4,778)		-		-		-		-		-		-		-		22,563		(4,778)

Other liabilities:
Bank overdrafts		-		-		-		-		-		-		-		-		-		-		-
Total liabilities measured at fair value	$	161,243	$	(154,871)	$	-	$	3,124	$	-	$	157,911	$	(4,204)	$	-	$	-	$	163,203	$	(122,787)

(1) The balances are included within the contractholder deposits funds and other policy liabilities in the Company's unaudited condensed consolidated balance sheet. At June 30, 2011, the net balances of guaranteed minimum withdrawal and accumulated benefits were in an asset position.

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

Assets	Beginning balance		Total realized and unrealized gains (losses)				Purchases, issuances, and settlements (net)		Transfers in and/or (out) of level 3		Ending balance		Change in unrealized gains (losses) included in earnings relating to instruments still held at the reporting date
Assets	Beginning balance			Included in earnings		Included in other comprehensive income			Transfers in and/or (out) of level 3		Ending balance
							Purchases, issuances, and settlements (net)
Available-for-sale fixed maturity securities:
Asset-backed securities	$	37	$	(22)	$	7	$	-	$	-	$	22	$	-
Collateralized mortgage obligations		-		-		-		-		-		-		-
Commercial mortgage-backed securities		1,930		(307)		(252)		-		-		1,371		-
Foreign government & agency securities		-		-		-		-		-		-		-
U.S. states and political subdivisions securities		-		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-		-
Corporate securities		7,936		(12)		(5)		(57)		(7,184)		678		-
Total available-for-sale fixed maturity securities		9,903		(341)		(250)		(57)		(7,184)		2,071		-

Trading fixed maturity securities:
Asset-backed securities		111,650		(8,524)		-		(18,975)		(36,483)		47,668		7,159
Collateralized mortgage obligations		154,551		2,505		-		(6,416)		(52,317)		98,323		5,066
Commercial mortgage-backed securities		14,084		798		-		48,607		(696)		62,793		1,670
Foreign government & agency securities		15,323		(685)		-		-		-		14,638		103
U.S. states and political subdivisions securities		-		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-		-
Corporate securities		107,886		(6,196)		-		2,187		(55,326)		48,551		1,635
Total trading fixed maturity securities		403,494		(12,102)		-		25,403		(144,822)		271,973		15,633

Derivative instruments - receivable:
Interest rate contracts		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-
Equity contracts		8,821		(3,894)		-		(3,204)		-		1,723		(3,894)
Futures		-		-		-		-		-		-		-
Total derivative instruments - receivable		8,821		(3,894)		-		(3,204)		-		1,723		(3,894)

Other invested assets		-		128		-		1,486		-		1,614		127
Short-term investments		-		-		-		-		-		-		-
Cash and cash equivalents		-		-		-		-		-		-		-
Total investments and cash		422,218		(16,209)		(250)		23,628		(152,006)		277,381		11,866

Separate account assets:
Mutual fund investments		-		-		-		-		-		-		-
Equity investments		7		11		-		179		-		197		10
Fixed income investments		276,530		4,140		-		(78,387)		(109,320)		92,963		1,313
Alternative investments		267,196		(10,652)		-		16,182		(2,969)		269,757		(10,741)
Other fund investments		4,108		-		-		-		(4,108)		-		-
Total separate account assets (1)		547,841		(6,501)		-		(62,026)		(116,397)		362,917		(9,418)

Total assets measured at fair value on a recurring basis	$	970,059	$	(22,710)	$	(250)	$	(38,398)	$	(268,403)	$	640,298	$	2,448

(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.

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

Liabilities	Beginning balance		Total realized and unrealized (gains) losses					Purchases, issuances, and settlements (net)	Transfers in and/or (out) of level 3		Ending balance		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			Transfers in and/or (out) of level 3		Ending balance
								Purchases, issuances, and settlements (net)
Other policy liabilities:
Guaranteed minimum withdrawal benefit liability (1)	$	168,786	$	385,563	$	-	$	63,680	$	-	$	618,029	$	387,678
Guaranteed minimum accumulation benefit liability (1)		81,669		138,727		-		11,515		-		231,911		139,536
Derivatives embedded in reinsurance contracts		-		-		-		-		-		-		-
Fixed index annuities		140,966		(27,126)		-		4,447		-		118,287		(7,166)
Total other policy liabilities		391,421		497,164		-		79,642		-		968,227		520,048

Derivative instruments - payable:
Interest rate contracts		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-
Credit contracts		34,349		(623)		-		-		-		33,726		(623)
Futures contracts		-		-		-		-		-		-		-
Total derivative instruments - payable		34,349		(623)		-		-		-		33,726		(623)


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

Total liabilities measured at fair value on a recurring basis	$	425,770	$	496,541	$	-	$	79,642	$	-	$	1,001,953	$	519,425

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

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

Assets	Beginning balance		Total realized and unrealized gains (losses)				Purchases		Sales		Issuances		Settlements		Transfers into level 3		Transfers out of level 3		Ending balance		Change in unrealized gains (losses) included in earnings relating to instruments still held at the reporting date
Assets	Beginning balance			Included in earnings		Included in OCI			Sales		Issuances		Settlements		Transfers into level 3		Transfers out of level 3		Ending balance
							Purchases
Available-for-sale fixed maturity securities:
Asset-backed	$	7	$	(5)	$	1	$	-	$	-	$	-	$	-	$	-	$	-	$	3	$	-
Residential mortgage-backed		-		-		-		-		-		-		-		-		-		-		-
Commercial mortgage-backed		2,089		(66)		114		-		-		-		-		-		-		2,137		-
Foreign government & agency		-		-		-		-		-		-		-		-		-		-		-
U.S. states and political subdivisions		-		-		-		-		-		-		-		-		-		-		-
U.S. treasury and agency		-		-		-		-		-		-		-		-		-		-		-
Corporate		7,386		6		70		-		-		-		-		-		-		7,462		-
Total available-for-sale fixed maturity securities		9,482		(65)		185		-		-		-		-		-		-		9,602		-

Trading fixed maturity securities:
Asset-backed		90,706		582		-		-		-		-		(1,272)		1,696		(16,177)		75,535		500
Residential mortgage-backed		145,035		3,223		-		-		-		-		(7,356)		78,250		(61,338)		157,814		3,778
Commercial mortgage-backed		81,994		(1,710)		-		-		-		-		(18,119)		4,866		-		67,031		(1,144)
Foreign government & agency		13,165		(162)		-		-		-		-		-		-		-		13,003		257
U.S. states and political subdivisions		-		-		-		-		-		-		-		-		-		-		-
U.S. treasury and agency		1,096		(17)		-		-		-		-		(116)		-		-		963		(10)
Corporate		106,537		568		-		-		-		-		(451)		-		-		106,654		588
Total trading fixed maturity securities		438,533		2,484		-		-		-		-		(27,314)		84,812		(77,515)		421,000		3,969

Derivative instruments – receivable:
Interest rate contracts		-		-		-		-		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-		-		-		-		-
Equity contracts		20,459		350		-		1,586		-		-		(4,360)		-		-		18,035		350
Futures contracts		-		-		-		-		-		-		-		-		-		-		-
Total derivative instruments– receivable		20,459		350		-		1,586		-		-		(4,360)		-		-		18,035		350

Other invested assets		10,156		(193)		-		-		-		-		-		-		(7,830)		2,133		(193)
Short-term investments		-		-		-		-		-		-		-		-		-		-		-
Cash and cash equivalents		-		-		-		-		-		-		-		-		-		-		-
Total investments and cash		478,630		2,576		185		1,586		-		-		(31,674)		84,812		(85,345)		450,770		4,126

Separate account assets:
Mutual fund investments		-		-		-		-		-		-		-		-		-		-		-
Equity investments		64		-		-		-		-		-		-		-		(5)		59		-
Fixed income investments		66,935		(396)		-		78,155		(24,369)		-		(5,411)		7,188		(24,650)		97,452		(632)
Alternative investments		348,076		4,863		-		104,227		(88,337)		-		(2,720)		-		-		366,109		4,164
Other investments		-		-		-		-		-		-		-		-		-		-		-
Total separate account assets (1)		415,075		4,467		-		182,382		(112,706)		-		(8,131)		7,188		(24,655)		463,620		3,532

Total assets measured at fair value on a recurring basis	$	893,705	$	7,043	$	185	$	183,968	$	(112,706)	$	-	$	(39,805)	$	92,000	$	(110,000)	$	914,390	$	7,658

(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.

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 June 30, 2011 (in 000's):

	Beginning balance		Total realized and unrealized gains (losses)				Purchases		Sales		Issuances		Settlements		Transfers into level 3		Transfers out of level 3		Ending balance		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 OCI			Sales		Issuances		Settlements		Transfers into level 3		Transfers out of level 3		Ending balance
							Purchases
Other policy liabilities:
Guaranteed minimum withdrawal benefit liability benefit liability (1)	$	(122,682)	$	60,797	$	-	$	-	$	-	$	54,240	$	-	$	-	$	-	$	(7,645)	$	59,234
Guaranteed minimum accumulation benefit liability (1)		(34,560)		26,377		-		-		-		5,629		-		-		-		(2,554)		26,010
Derivatives embedded in reinsurance contracts		20,459		350		-		1,587		-		-		(4,361)		-		-		18,035		350
Fixed index annuities		139,577		(24,962)		-		-		-		-		18,189		-		-		132,804		593
Total other policy liabilities		2,794		62,562		-		1,587		-		59,869		13,828		-		-		140,640		86,187

Derivative instruments – payable:
Interest rate contracts		-		-		-		-		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-		-		-		-		-
Credit contracts		23,846		(1,283)		-		-		-		-		-		-		-		22,563		(1,283)
Futures contracts		-		-		-		-		-		-		-		-		-		-		-
Total derivative instruments – payable		23,846		(1,283)		-		-		-		-		-		-		-		22,563		(1,283)


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

Total liabilities measured at fair value on a recurring basis	$	26,640	$	61,279	$	-	$	1,587	$	-	$	59,869	$	13,828	$	-	$	-	$	163,203	$	84,904

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 June 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 June 30, 2010 (in 000's):

Assets	Beginning balance		Total realized and unrealized gains (losses)				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
Assets	Beginning balance			Included in earnings		Included in other comprehensive income			Transfers in and/or (out) of level 3 (2)		Ending balance
Available-for-sale fixed maturity securities:							Purchases, issuances, and settlements (net)
Asset-backed securities	$	29	$	(10)	$	3	$	-	$	-	$	22	$	-
Residential mortgage-backed securities		-		-		-		-		-		-		-
Commercial mortgage-backed securities		1,135		(64)		300		-		-		1,371		-
Foreign government & agency securities		-		-		-		-		-		-		-
U.S. states and political subdivisions securities		-		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-		-
Corporate securities		939		(6)		(1)		-		(254)		678		-
Total available-for-sale fixed maturity securities		2,103		(80)		302		-		(254)		2,071		-

Trading fixed maturity securities:
Asset-backed securities		48,924		769		-		(261)		(1,764)		47,668		921
Residential mortgage-backed securities		105,554		473		-		(3,268)		(4,436)		98,323		1,388
Commercial mortgage-backed securities		12,892		1,294		-		48,607		-		62,793		2,439
Foreign government & agency securities		15,093		(455)		-		-		-		14,638		(58)
U.S. states and political subdivisions securities		-		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-		-
Corporate securities		96,653		(6,863)		-		4,416		(45,655)		48,551		979
Total trading fixed maturity securities		279,116		(4,782)		-		49,494		(51,855)		271,973		5,669

Interest rate contracts		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-
Equity contracts		11,956		(7,048)		-		(3,185)		-		1,723		(7,049)
Futures contracts		-		-		-		-		-		-		-
Total investments and cash		11,956		(7,048)		-		(3,185)		-		1,723		(7,049)

Other invested assets		-		128		-		1,486		-		1,614		128
Short-term investments		-		-		-		-		-		-		-
Cash and cash equivalents		-		-		-		-		-		-		-
Total investments and cash		293,175		(11,782)		302		47,795		(52,109)		277,381		(1,252)

Separate account assets:
Mutual fund investments		-		-		-		-		-		-		-
Equity investments		7		11		-		179		-		197		10
Fixed income investments		313,747		(78)		-		(88,136)		(132,570)		92,963		(2,723)
Alternative investments		259,762		(10,187)		-		20,182		-		269,757		(9,519)
Other investments		725		-		-		-		(725)		-		-
Total separate account assets (1)		574,241		(10,254)		-		(67,775)		(133,295)		362,917		(12,232)

Total assets measured at fair value on
a recurring basis	$	867,416	$	(22,036)	$	302	$	(19,980)	$	(185,404)	$	640,298	$	(13,484)

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

	Beginning balance		Total realized and unrealized (gains) losses				Purchases, issuances, and settlements (net)		Transfers in and/or (out) of level 3		Ending balance		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			Transfers in and/or (out) of level 3		Ending balance
							Purchases, issuances, and settlements (net)
Other policy liabilities:
Guaranteed minimum withdrawal benefit liability	$	168,786	$	385,563	$	-	$	63,680	$	-	$	618,029	$	480,587
Guaranteed minimum accumulation benefit liability		46,030		180,406		-		5,475		-		231,911		181,178
Derivatives embedded in reinsurance contracts		-		-		-		-		-		-		-
Fixed index annuities		139,012		(21,771)		-		1,046		-		118,287		(11,167)
Total other policy liabilities		353,828		544,198		-		70,201		-		968,227		650,598

Derivative instruments - payable:
Interest rate contracts		-		-		-		-		-		-		-
Foreign currency contracts		-		-		-		-		-		-		-
Credit contracts		34,612		(886)		-		-		-		33,726		(886)
Futures contracts		-		-		-		-		-		-		-
Total derivative instruments - payable	$	34,612	$	(886)	$	-	$	-	$	-	$	33,726	$	(886)

Other liabilities:
Bank overdrafts		-		-		-		-		-		-		-
Total liabilities measured at fair value on a
recurring basis	$	388,440	$	543,312	$	-	$	70,201	$	-	$	1,001,953	$	649,712

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

During the six-month period ended June 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		-		-		-		-		-		-
Total available-for-sale fixed maturity securities
securities		-		-	-	-		-		-		-

Trading fixed maturity securities:
Asset-backed securities		-		-		26,774		(5,192)		5,192		(26,774)
Collateralized mortgage obligations		-		-		-		(4,954)		4,954		-
Residential mortgage-backed securities		-		-		56,571		(133,509)		133,509		(56,571)
Commercial mortgage-backed securities		-		-		-		-		-		-
Foreign government & agency securities		-		-		-		-		-		-
U.S. states and political subdivisions		-		-		-		-		-		-
securities		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-
Corporate securities		-		-		35,621		(3,202)		3,202		(35,621)
Total trading fixed maturity securities		-		-		118,966		(146,857)		146,857		(118,966)

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

Other invested assets		-		-		7,650		-		-		(7,650)
Total investments and cash		-		-		126,616		(146,857)		146,857		(126,616)

Mutual fund investments
Equity investments		-		-		-		(59)		59		-
Fixed income investments		-		-		31,692		(32,618)		32,618		(31,692)
Alternative investments		-		-		-		(3,200)		3,200		-
Other investments		-		-		-		-		-		-
Total separate account assets		-		-		31,692		(35,877)		35,877		(31,692)

Total assets measured at fair value on a recurring basis	$	-	$	-	$	158,308	$	(182,734)	$	182,734	$	(158,308)

The Company did not change the categorization of its financial instruments during the six-month period ended June 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 six-month period ended June 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		-		-		7,184		-		-		(7,184)
Total available-for-sale fixed maturity securities		-		-		7,184		-		-		(7,184)

Trading fixed maturity securities:
Asset-backed securities		-		-		45,553		(9,070)		9,070		(45,553)
Residential mortgage-backed securities		-		-		91,399		(39,082)		39,082		(91,399)
Commercial mortgage-backed securities		-		-		696		-		-		(696)
Foreign government & agency securities		-		-		-		-		-		-
U.S. states and political subdivisions securities		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-
Corporate securities		-		-		55,326		-		-		(55,326)
Total trading fixed maturity securities		-		-		192,974		(48,152)		48,152		(192,974)

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		-		-		109,320		-		-		(109,320)
Alternative investments		-		-		2,969		-		-		(2,969)
Other investments		4,108		-		-		-		-		(4,108)
Total separate account assets		4,108		-		112,289		-		-		(116,397)

Total assets measured at fair value on a recurring basis	$	4,108	$	-	$	312,447	$	(48,152)	$	48,152	$	(316,555)

The Company did not change the categorization of its financial instruments during the six-month period ended June 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 June 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		-		-		-		-		-		-
Total available-for-sale fixed maturity
securities		-		-		-		-		-		-

Trading fixed maturity securities:
Asset-backed securities		-		-		16,177		(1,696)		1,696		(16,177)
Collateralized mortgage obligations		-		-		-		-		-		-
Residential mortgage-backed securities		-		-		61,338		(78,250)		78,250		(61,338)
Commercial mortgage-backed securities		-		-		-		(4,866)		4,866		-
Foreign government & agency securities		-		-		-		-		-		-
U.S. states and political subdivisions
securities		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-
Corporate securities		-		-		-		-		-		-
Total trading fixed maturity securities		-		-		77,515		(84,812)		84,812		(77,515)

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

Other invested assets		-		-		7,830		-		-		(7,830)
Total investments and cash		-		-		85,345		(84,812)		84,812		(85,345)

Equity investments		-		-		6		-		-		(6)
Fixed income investments		-		-		24,649		(7,188)		7,188		(24,649)
Alternative investments		-		-		-		-		-		-
Other investments		-		-		-		-		-		-
Total separate account assets		-		-		24,655		(7,188)		7,188		(24,655)

Total assets measured at fair value on a
recurring basis	$	-	$	-	$	110,000	$	(92,000)	$	92,000	$	(110,000)

The Company did not change the categorization of its financial instruments during the three-month period ended June 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 June 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		-		-		254		-		-		(254)
Total available-for-sale fixed maturity securities		-		-		254		-		-		(254)

Trading fixed maturity securities:		-		-		-		-		-		-
Asset-backed securities		-		-		7,908		(6,144)		6,144		(7,908)
Residential mortgage-backed securities		-		-		57,646		(53,210)		53,210		(57,646)
Commercial mortgage-backed securities		-		-		-		-		-		-
Foreign government & agency securities		-		-		-		-		-		-
U.S. states and political subdivisions securities		-		-		-		-		-		-
U.S. treasury and agency securities		-		-		-		-		-		-
Corporate securities		-		-		45,655		-		-		(45,655)
Total trading fixed maturity securities		-		-		111,209		(59,354)		59,354		(111,209)

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		-		-		132,570		-		-		(132,570)
Alternative investments		-		-		-		-		-		-
Other investments		725		-		-		-		-		(725)
Total separate account assets		725		-		132,570		-		-		(133,295)

Total assets measured at fair value on a recurring basis	$	725	$	-	$	244,033	$	(59,354)	$	59,354	$	(244,758)

The Company did not change the categorization of its financial instruments during three-month period ended June 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 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 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.