Derivative Instruments

The Company’s investment strategy allows for the use of derivative securities. The Company’s derivative instruments are recorded on its consolidated balance sheets at fair value. The fair values of those derivatives are based on quoted market prices. All realized and unrealized contract gains and losses are reflected in the Company’s results of operations. The Company utilizes exchange traded U.S. Treasury note, Eurodollar and other futures contracts and commodity futures to manage portfolio duration or replicate investment positions in its portfolios. Certain of the Company’s corporate bonds are managed in a global bond portfolio which incorporates the use of foreign currency forward contracts which are intended to provide an economic hedge against foreign currency movements on the portfolio’s non-U.S. Dollar denominated holdings. The Company routinely utilizes other foreign currency forward contracts, currency options, index futures contracts and other derivatives as part of its total return objective.

In addition, the Company purchases to-be-announced mortgage backed securities (“TBAs”) as part of its investment strategy. TBAs represent commitments to purchase a future issuance of agency mortgage backed securities. For the period between purchase of a TBA and issuance of the underlying security, the Company’s position is accounted for as a derivative. The Company purchases TBAs in both long and short positions to enhance investment performance and as part of its overall investment strategy. The Company did not hold any derivatives which were designated as hedging instruments at March 31, 2013 or December 31, 2012.

The following table summarizes information on the fair values and notional values of the Company’s derivative instruments. The fair value of TBAs is included in “fixed maturities available for sale, at fair value” while the fair value of all other derivatives is included in “other investments available for sale, at fair value” in the consolidated balance sheets.



	Asset Derivatives		Liability Derivatives			Net Derivatives
	Fair Value		Fair Value			Fair Value			Notional Value
March 31, 2013
Futures contracts	$	638	$	(175	)	$	463		$	311,532
Foreign currency forward contracts	2,598		(4,617		)	(2,019		)	542,136
TBAs	432,730		(290,526		)	142,204			684,500
Other	2,027		(1,047		)	980			287,716
Total	$	437,993	$	(296,365	)	$	141,628

December 31, 2012
Futures contracts	$	52	$	(52	)	$	—		$	340,400
Foreign currency forward contracts	2,809		(2,678		)	131			396,468
TBAs	23,599		(4,346		)	19,253			26,000
Other	448		(676		)	(228		)	50,341
Total	$	26,908	$	(7,752	)	$	19,156

The Company's derivative instruments are generally traded under master netting agreements, which establish terms that apply to all derivative transactions with a counterparty. In the event of a bankruptcy or other stipulated event of default, such agreements provide that the non-defaulting party may elect to terminate all outstanding derivative transactions, in which case all individual derivative positions (loss or gain) with a counterparty are closed out and netted and replaced with a single amount, usually referred to as the termination amount, which is expressed in a single currency. The resulting single net amount, where positive, is payable to the party "in-the-money" regardless of whether or not it is the defaulting party, unless the parties have agreed that only the non-defaulting party is entitled to receive a termination payment where the net amount is positive and is in its favor. Effectively, contractual close-out netting reduces derivatives credit exposure from gross to net exposure. At March 31, 2013, asset derivatives and liability derivatives of $165.4 million and $72.3 million, respectively, were subject to a master netting agreement, compared to $26.9 million and $7.8 million, respectively, at December 31, 2012. The remaining derivatives included in the table above were not subject to a master netting agreement.

The following table summarizes net realized gains (losses) recorded on the Company’s derivative instruments in the consolidated statements of income:



	Three Months Ended
Derivatives not designated as	March 31,
hedging instruments	2013			2012
Futures contracts	$	(829	)	$	(2,021	)
Foreign currency forward contracts	(725		)	(1,881		)
TBAs	541			323
Other	635			(1,090		)
Total	$	(378	)	$	(4,669	)