The Company had total cash and invested assets of $24.6 billion and $23.1 billion at June 30, 2011 and December 31, 2010, respectively, as illustrated below (dollars in thousands):

		June 30, 2011		December 31, 2010
Fixed maturity securities, available-for-sale		$	15,153,807	$	14,304,597
Mortgage loans on real estate			908,048		885,811
Policy loans			1,229,663		1,228,418
Funds withheld at interest			5,671,844		5,421,952
Short-term investments			125,618		118,387
Other invested assets			799,341		707,403
Cash and cash equivalents			710,973		463,661
	Total cash and invested assets	$	24,599,294	$	23,130,229

All investments held by the Company are monitored for conformance to the qualitative and quantitative limits prescribed by the applicable jurisdiction's insurance laws and regulations. In addition, the operating companies' boards of directors periodically review their respective investment portfolios. The Company's investment strategy is to maintain a predominantly investment-grade, fixed maturity securities portfolio, which will provide adequate liquidity for expected reinsurance obligations and maximize total return through prudent asset management. The Company's asset/liability duration matching differs between operating segments. Based on Canadian reserve requirements, the Canadian liabilities are matched with long-duration Canadian assets. The duration of the Canadian portfolio exceeds twenty years. The average duration for all portfolios, when consolidated, ranges between eight and ten years.

The Company participates in a securities borrowing program whereby securities, which are not reflected on the Company's condensed consolidated balance sheets, are borrowed from a third party. The Company is required to maintain a minimum of 100% of the market value of the borrowed securities as collateral. The Company had borrowed securities with an amortized cost of $150.0 million and a market value of $150.7 million as of June 30, 2011. The borrowed securities are used to provide collateral under an affiliated reinsurance transaction. There were no securities borrowed as of December 31, 2010.

Investment Income, Net of Related Expenses

Major categories of investment income, net of related expenses consist of the following (dollars in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2011		2010		2011		2010
Fixed maturity securities available-for-sale	$	191,030	$	175,638	$	375,591	$	353,130
Mortgage loans on real estate		13,593		11,954		27,328		24,160
Policy loans		16,724		18,037		33,095		37,879
Funds withheld at interest		111,700		84,392		264,760		175,573
Short-term investments		883		1,130		1,808		2,378
Other invested assets		10,512		6,256		20,210		14,767
Investment revenue		344,442		297,407		722,792		607,887
Investment expense		(7,006)		(5,736)		(14,316)		(11,958)
Investment income, net of related expenses	$	337,436	$	291,671	$	708,476	$	595,929

Investment Related Gains (Losses), Net

Investment related gains (losses), net consist of the following (dollars in thousands):

			Three months ended				Six months ended
			June 30,				June 30,
			2011		2010		2011		2010
Fixed maturity and equity securities available for sale:
	Other-than-temporary impairment losses on fixed maturities		$	(5,582)	$	(3,489)	$	(7,138)	$	(10,919)
	Portion of loss recognized in accumulated other
		comprehensive income (before taxes)		292		(139)		292		2,205
	Net other-than-temporary impairment losses on fixed
		maturities recognized in earnings		(5,290)		(3,628)		(6,846)		(8,714)
	Impairment losses on equity securities			(3,680)		(10)		(3,680)		(32)
	Gain on investment activity			28,208		19,363		57,584		35,462
	Loss on investment activity			(6,653)		(5,662)		(13,567)		(14,194)
Other impairment losses and change in mortgage loan provision				(3,186)		(1,165)		(2,610)		(2,395)
Derivatives and other, net				17,989		14,094		120,127		144,050
Net gains			$	27,388	$	22,992	$	151,008	$	154,177

The net other-than-temporary impairment losses on fixed maturity securities recognized in earnings of $5.3 million and $6.8 million in the second quarter and first six months of 2011, respectively, are primarily due to a decline in value of structured securities with exposure to mortgages and corporate bankruptcies. The impairment losses on equity securities of $3.7 million in the second quarter and first six months of 2011 are primarily due to the financial condition of European financial institutions. The decrease in derivative gains for the first six months is primarily due to a decrease in the fair value of free-standing derivatives.

During the three months ended June 30, 2011 and 2010, the Company sold fixed maturity securities and equity securities with fair values of $135.0 million and $159.2 million at gross losses of $6.7 million and $5.7 million, respectively, or at 95.3% and 96.6% of amortized cost, respectively. During the six months ended June 30, 2011 and 2010, the Company sold fixed maturity securities and equity securities with fair values of $331.6 million and $399.3 million at gross losses of $13.6 million and $14.2 million, respectively, or at 96.1% and 96.6% of amortized cost, respectively. The Company generally does not engage in short-term buying and selling of securities.

The Company identifies fixed maturity and equity securities that could potentially have credit impairments that are other-than-temporary by monitoring market events that could impact issuers' credit ratings, business climates, management changes, litigation, government actions and other similar factors. The Company also monitors late payments, pricing levels, rating agency actions, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues.

The Company reviews all securities to determine whether an other-than-temporary decline in value exists and whether losses should be recognized. The Company considers relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other-than-temporary. Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in fair value; (3) the issuer's financial position and access to capital and (4) for fixed maturity securities, the Company's intent to sell a security or whether it is more likely than not it will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity and for equity securities, its ability and intent to hold the security for a period of time that allows for the recovery in value. To the extent the Company determines that a security is deemed to be other-than-temporarily impaired, an impairment loss is recognized.

Impairment losses on equity securities are recognized in net income. Recognition of impairment losses on fixed maturity securities is dependent on the facts and circumstances related to a specific security. If the Company intends to sell a security or it is more likely than not that it would be required to sell a security before the recovery of its amortized cost, it recognizes an other-than-temporary impairment in net income for the difference between amortized cost and fair value. If the Company does not expect to recover the amortized cost basis, it does not plan to sell the security and if it is not more likely than not that it would be required to sell a security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated. The Company recognizes the credit loss portion in net income and the non-credit loss portion in accumulated other comprehensive income (“AOCI”).

The Company estimates the amount of the credit loss component of a fixed maturity security impairment as the difference between amortized cost and the present value of the expected cash flows of the security. The present value is determined using the best estimate cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating-rate security. The techniques and assumptions for establishing the best estimate cash flows vary depending on the type of security. The asset-backed securities' cash flow estimates are based on security-specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and guarantees. The corporate fixed maturity security cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or the disposition of assets using security specific facts and circumstances including timing, security interests and loss severity.

In periods after an other-than-temporary impairment loss is recognized on a fixed maturity security, the Company will report the impaired security as if it had been purchased on the date it was impaired and will continue to estimate the present value of the estimated cash flows of the security. Accordingly, the discount (or reduced premium) based on the new cost basis is accreted into net investment income over the remaining term of the fixed maturity security in a prospective manner based on the amount and timing of estimated future cash flows.

The following tables set forth the amount of credit loss impairments on fixed maturity securities held by the Company as of the dates indicated, for which a portion of the other-than-temporary impairment (“OTTI”) loss was recognized in AOCI, and the corresponding changes in such amounts (dollars in thousands):

	Three months ended June 30,
	2011		2010
Balance, beginning of period	$	47,949	$	51,578
Initial impairments - credit loss OTTI recognized on securities not previously impaired		1,473		1,152
Additional impairments - credit loss OTTI recognized on securities previously impaired		3,780		3,303
Credit loss impairments previously recognized on securities which were sold during the period		(718)		(2,685)
Balance, end of period	$	52,484	$	53,348

	Six months ended June 30,
	2011		2010
Balance, beginning of period	$	47,291	$	47,905
Initial impairments - credit loss OTTI recognized on securities not previously impaired		1,473		2,724
Additional impairments - credit loss OTTI recognized on securities previously impaired		4,438		5,404
Credit loss impairments previously recognized on securities which were sold during the period		(718)		(2,685)
Balance, end of period	$	52,484	$	53,348

The following tables provide information relating to investments in fixed maturity securities and equity securities by sector as of June 30, 2011 and December 31, 2010 (dollars in thousands):

													Other-than-
									Estimated				temporary
June 30, 2011:			Amortized		Unrealized		Unrealized		Fair		% of		impairments
			Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
	Corporate securities		$	7,307,996	$	470,307	$	81,235	$	7,697,068	50.8	%	$	--
	Canadian and Canadian provincial
		governments		2,533,410		677,586		2,840		3,208,156	21.2			--
	Residential mortgage-backed securities			1,320,758		59,345		14,319		1,365,784	9.0			(258)
	Asset-backed securities			415,637		12,925		51,642		376,920	2.5			(6,258)
	Commercial mortgage-backed securities			1,333,832		92,380		67,107		1,359,105	9.0			(8,375)
	U.S. government and agencies			191,048		10,832		602		201,278	1.3			--
	State and political subdivisions			192,368		11,057		5,061		198,364	1.3			--
	Other foreign government securities			746,298		8,557		7,723		747,132	4.9			--
		Total fixed maturity securities	$	14,041,347	$	1,342,989	$	230,529	$	15,153,807	100.0	%	$	(14,891)

Non-redeemable preferred stock			$	104,444	$	5,337	$	2,263	$	107,518	75.6	%
Other equity securities				34,237		1,498		1,027		34,708	24.4
		Total equity securities	$	138,681	$	6,835	$	3,290	$	142,226	100.0	%

													Other-than-
									Estimated				temporary
December 31, 2010:			Amortized		Unrealized		Unrealized		Fair		% of		impairments
			Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
	Corporate securities		$	6,826,937	$	436,384	$	107,816	$	7,155,505	50.0	%	$	--
	Canadian and Canadian provincial
		governments		2,354,418		672,951		3,886		3,023,483	21.1			--
	Residential mortgage-backed securities			1,443,892		55,765		26,580		1,473,077	10.3			(1,650)
	Asset-backed securities			440,752		12,001		61,544		391,209	2.7			(4,963)
	Commercial mortgage-backed securities			1,353,279		81,839		97,265		1,337,853	9.4			(10,010)
	U.S. government and agencies			199,129		7,795		708		206,216	1.4			--
	State and political subdivisions			170,479		2,098		8,117		164,460	1.2			--
	Other foreign government securities			556,136		4,304		7,646		552,794	3.9			--
		Total fixed maturity securities	$	13,345,022	$	1,273,137	$	313,562	$	14,304,597	100.0	%	$	(16,623)

Non-redeemable preferred stock			$	100,718	$	4,130	$	5,298	$	99,550	71.0	%
Other equity securities				34,832		6,100		271		40,661	29.0
		Total equity securities	$	135,550	$	10,230	$	5,569	$	140,211	100.0	%

The tables above exclude fixed maturity securities posted by the Company as collateral to counterparties with an amortized cost of $57.9 million and $46.9 million, and an estimated fair value of $60.3 million and $48.2 million, as of June 30, 2011 and December 31, 2010 respectively, which are included in other invested assets in the consolidated balance sheets.

As of June 30, 2011, the Company held securities with a fair value of $1,005.2 million that were issued by the Canadian province of Ontario and $898.6 million in one entity that were guaranteed by the Canadian province of Quebec, both of which exceeded 10% of consolidated stockholders' equity. As of December 31, 2010, the Company held securities with a fair value of $959.5 million that were issued by the Canadian province of Ontario and $871.6 million in one entity that were guaranteed by the Canadian province of Quebec, both of which exceeded 10% of consolidated stockholders' equity.

The amortized cost and estimated fair value of fixed maturity securities available-for-sale at June 30, 2011 are shown by contractual maturity in the table below. Actual maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. At June 30, 2011, the contractual maturities of investments in fixed maturity securities were as follows (dollars in thousands):

			Amortized		Fair
			Cost		Value
Available-for-sale:
	Due in one year or less		$	195,747	$	200,924
	Due after one year through five years			2,245,281		2,323,086
	Due after five year through ten years			3,637,689		3,888,290
	Due after ten years			4,892,402		5,639,698
	Asset and mortgage-backed securities			3,070,228		3,101,809
		Total	$	14,041,347	$	15,153,807

The table below includes major industry types and weighted average credit ratings of the Company's corporate fixed maturity holdings as of June 30, 2011 and December 31, 2010 (dollars in thousands):

June 30, 2011:					Estimated			Average Credit
			Amortized Cost		Fair Value	% of Total		Ratings
Finance		$	2,827,556	$	2,907,045	37.8	%	A
Industrial			3,366,149		3,604,280	46.8		BBB+
Utility			1,105,801		1,176,889	15.3		BBB+
Other			8,490		8,854	0.1		AA
	Total	$	7,307,996	$	7,697,068	100.0	%	A-

December 31, 2010:					Estimated			Average Credit
			Amortized Cost		Fair Value	% of Total		Ratings
Finance		$	2,782,936	$	2,833,022	39.6	%	A
Industrial			3,121,326		3,341,104	46.7		BBB+
Utility			908,737		967,017	13.5		BBB+
Other			13,938		14,362	0.2		AA+
	Total	$	6,826,937	$	7,155,505	100.0	%	A-

The following table presents the total gross unrealized losses for fixed maturity and equity securities as of June 30, 2011 and December 31, 2010, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):

		June 30, 2011					December 31, 2010
			Gross					Gross
		Number of	Unrealized				Number of	Unrealized
		Securities	Losses		% of Total		Securities	Losses		% of Total
Less than 20%		890	$	123,789	52.9	%	908	$	146,404	45.9	%
20% or more for less than six months		15		7,965	3.4		14		18,114	5.7
20% or more for six months or greater		56		102,065	43.7		106		154,613	48.4
	Total	961	$	233,819	100.0	%	1,028	$	319,131	100.0	%

As of June 30, 2011 and December 31, 2010, respectively, 70.7% and 66.1% of these gross unrealized losses were associated with investment grade securities. The unrealized losses on these securities decreased as credit spreads continued to tighten across all sectors. While credit spreads tightened, treasury rates rose slightly to moderate the credit spread gains during the quarter.

The Company's determination of whether a decline in value is other-than-temporary includes analysis of the underlying credit and the extent and duration of a decline in value. The Company's credit analysis of an investment includes determining whether the issuer is current on its contractual payments, evaluating whether it is probable that the Company will be able to collect all amounts due according to the contractual terms of the security and analyzing the overall ability of the Company to recover the amortized cost of the investment. The Company continues to consider valuation declines as a potential indicator of credit deterioration. The Company believes that due to fluctuating market conditions and an extended period of economic uncertainty, the extent and duration of a decline in value have become less indicative of when there has been credit deterioration with respect to an issuer.

The following tables present the estimated fair values and gross unrealized losses, including other-than-temporary impairment losses reported in AOCI, for fixed maturity securities and equity securities that have estimated fair values below amortized cost as of June 30, 2011 and December 31, 2010, respectively (dollars in thousands). These investments are presented by class and grade of security, as well as the length of time the related market value has remained below amortized cost.

			Less than 12 months				12 months or greater				Total
					Gross				Gross				Gross
June 30, 2011:			Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
			Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
	Corporate securities		$	1,051,097	$	22,729	$	322,201	$	50,525	$	1,373,298	$	73,254
	Canadian and Canadian provincial
		governments		132,591		2,840		--		--		132,591		2,840
	Residential mortgage-backed securities			122,968		1,979		56,186		10,083		179,154		12,062
	Asset-backed securities			40,152		874		100,050		29,877		140,202		30,751
	Commercial mortgage-backed securities			154,382		8,007		68,039		21,881		222,421		29,888
	U.S. government and agencies			14,288		602		--		--		14,288		602
	State and political subdivisions			19,834		985		32,473		4,076		52,307		5,061
	Other foreign government securities			161,417		3,945		39,267		3,778		200,684		7,723
		Total investment grade securities		1,696,729		41,961		618,216		120,220		2,314,945		162,181

Non-investment grade securities:
	Corporate securities			120,371		2,918		65,818		5,063		186,189		7,981
	Residential mortgage-backed securities			5,075		931		11,169		1,326		16,244		2,257
	Asset-backed securities			2,852		424		26,391		20,467		29,243		20,891
	Commercial mortgage-backed securities			22,876		1,492		80,145		35,727		103,021		37,219
		Total non-investment grade securities		151,174		5,765		183,523		62,583		334,697		68,348
		Total fixed maturity securities	$	1,847,903	$	47,726	$	801,739	$	182,803	$	2,649,642	$	230,529

	Non-redeemable preferred stock		$	2,291	$	4	$	21,100	$	2,259	$	23,391	$	2,263
	Other equity securities			3,551		391		5,887		636		9,438		1,027
		Total equity securities	$	5,842	$	395	$	26,987	$	2,895	$	32,829	$	3,290

	Total number of securities in an
		unrealized loss position		550				411				961

			Less than 12 months				12 months or greater				Total
					Gross				Gross				Gross
December 31, 2010:			Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
			Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
	Corporate securities		$	1,170,016	$	34,097	$	368,128	$	61,945	$	1,538,144	$	96,042
	Canadian and Canadian provincial
		governments		118,585		3,886		--		--		118,585		3,886
	Residential mortgage-backed securities			195,406		4,986		105,601		13,607		301,007		18,593
	Asset-backed securities			23,065		570		131,172		38,451		154,237		39,021
	Commercial mortgage-backed securities			132,526		4,143		109,158		29,059		241,684		33,202
	U.S. government and agencies			11,839		708		--		--		11,839		708
	State and political subdivisions			68,229		2,890		31,426		5,227		99,655		8,117
	Other foreign government securities			322,363		3,142		43,796		4,504		366,159		7,646
		Total investment grade securities		2,042,029		54,422		789,281		152,793		2,831,310		207,215

Non-investment grade securities:
	Corporate securities			58,420		1,832		91,205		9,942		149,625		11,774
	Residential mortgage-backed securities			1,162		605		38,206		7,382		39,368		7,987
	Asset-backed securities			--		--		23,356		22,523		23,356		22,523
	Commercial mortgage-backed securities			--		--		89,170		64,063		89,170		64,063
		Total non-investment grade securities		59,582		2,437		241,937		103,910		301,519		106,347
		Total fixed maturity securities	$	2,101,611	$	56,859	$	1,031,218	$	256,703	$	3,132,829	$	313,562

	Non-redeemable preferred stock		$	15,987	$	834	$	28,549	$	4,464	$	44,536	$	5,298
	Other equity securities			6,877		271		318		--		7,195		271
		Total equity securities	$	22,864	$	1,105	$	28,867	$	4,464	$	51,731	$	5,569

	Total number of securities in an
		unrealized loss position		520				508				1,028

As of June 30, 2011, the Company does not intend to sell these fixed maturity securities and does not believe it is more likely than not that it will be required to sell these fixed maturity securities before the recovery of the fair value up to the current amortized cost of the investment, which may be maturity. However, unforeseen facts and circumstances may cause the Company to sell fixed maturity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality, asset-liability management and liquidity guidelines.

As of June 30, 2011, the Company has the ability and intent to hold the equity securities until the recovery of the fair value up to the current cost of the investment. However, unforeseen facts and circumstances may cause the Company to sell equity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality and liquidity guidelines.

Mortgage loans represented approximately 3.7% and 3.8% of the Company's cash and invested assets as of June 30, 2011 and December 31, 2010, respectively. The Company makes mortgage loans on income producing properties, such as apartments, retail and office buildings, light warehouses and light industrial facilities. Loan-to-value ratios at the time of loan approval are 75% or less. The Company acquired $37.8 million of mortgage loans during the six months ended June 30, 2011.

The Company holds commercial mortgages and has established an internal credit risk grading process for these loans. The internal risk rating model is used to estimate the probability of default and the likelihood of loss upon default. The rating scale ranges from “high investment grade” to “in or near default” with high investment grade being the highest quality and least likely to default and lose principal. Likewise, a rating of in or near default indicates the lowest quality and the most likely to default or lose principal. All loans are assigned a rating at origination and ratings are updated at least annually. Lower rated loans appear on the Company's watch list and are re-evaluated more frequently. The debt service coverage ratio and the loan to value ratio are the most heavily weighted factors in determining the loan rating. Other factors involved in determining the final rating are loan amortization, tenant rollover, location and market stability, and borrower's financial condition and experience. Information regarding the Company's credit quality indicators for its recorded investment in mortgage loans gross of valuation allowances as of June 30, 2011 and December 31, 2010 are as follows (dollars in thousands):

The age analysis of the Company's past due recorded investment in mortgage loans gross of valuation allowances as of June 30, 2011 and December 31, 2010 are as follows (dollars in thousands):


			June 30, 2011		December 31, 2010
31-60 days past due			$	--	$	--
61-90 days past due				4,298		--
Greater than 90 days				13,021		15,555
	Total past due			17,319		15,555
Current				898,421		876,495
		Total	$	915,740	$	892,050

The following table presents the recorded investment in mortgage loans, by method of evaluation of credit loss, and the related valuation allowances, by type of credit loss, at (dollars in thousands):

			June 30, 2011		December 31, 2010
Mortgage loans:
	Evaluated individually for credit losses		$	35,919	$	35,646
	Evaluated collectively for credit losses			879,821		856,404
		Mortgage loans, gross of valuation allowances		915,740		892,050

Valuation allowances:
	Specific for credit losses			4,594		6,239
	Non-specifically identified credit losses			3,098		--
		Total valuation allowances		7,692		6,239

		Mortgage loans, net of valuation allowances	$	908,048	$	885,811

Non-specific valuation allowances are established for mortgage loans based on an internal credit quality rating where a property-specific or market-specific risk has not been identified, but for which the Company expects to incur a credit loss. These evaluations are based upon several loan portfolio segment-specific factors, including the Company's experience for loan losses, defaults and loss severity, loss expectations for loans with similar risk characteristics and industry statistics. These evaluations are revised as conditions change and new information becomes available.

Information regarding the Company's loan valuation allowances for mortgage loans as of June 30, 2011 and 2010 are as follows (dollars in thousands):

Information regarding the portion of the Company's mortgage loans that were impaired as of June 30, 2011 and December 31, 2010 are as follows (dollars in thousands):


			June 30, 2011		December 31, 2010
Impaired loans with valuation allowances			$	29,080	$	18,745
Impaired loans without valuation allowances				6,839		16,901
		Subtotal		35,919		35,646
Less: Valuation allowances on impaired loans				4,594		6,239
	Impaired loans		$	31,325	$	29,407

The Company's average investment per impaired loan with valuation allowances was $3.6 million and $6.7 million as of June 30, 2011 and 2010, respectively. The Company's average investment per impaired loan without valuation allowances was $2.3 million and $3.1 million as of June 30, 2011 and 2010, respectively. Interest income on impaired loans with valuation allowances was $0.2 million and $0.5 million for the three and six months ended June 30, 2011, respectively. Interest income on impaired loans with valuation allowances was not material for the three and six months ended June 30, 2010. Interest income on impaired loans without valuation allowances was $0.1 million for the three and six months ended June 30, 2011, respectively. Interest income on impaired loans without valuation allowances was $0.1 million and $0.3 million for the three and six months ended June 30, 2010, respectively. The Company did not acquire any impaired mortgage loans during the six months ended June 30, 2011. The Company had $13.0 million and $15.6 million of mortgage loans, gross of valuation allowances, that were on nonaccrual status at June 30, 2011 and December 31, 2010, respectively.