Fair Value of Financial Instruments

The following tables show the fair values and carrying values of the Company’s financial assets and liabilities measured on a recurring basis and the associated fair value hierarchy amounts as of December 31, 2013 and 2012. Included are balances associated with the consolidated CLOs:



			2013
Assets:	Quoted Prices in active markets Level 1		Other Significant Observable inputs Level 2		Significant unobservable inputs Level 3		Fair Value		Carrying Value
Trading investments:
Privately held equity securities (1)	$	—	$	—	$	5,306	$	5,306	$	5,306
Tax exempt securities	—		30,707		273		30,980		30,980
CDO	—		—		520		520		520
CLO	—		—		825		825		825
Corporate bonds (2)	—		—		17,674		17,674		17,674
Total trading investments	—		30,707		24,598		55,305		55,305
Derivative assets:
IRS	—		52		—		52		52
Total derivative assets	—		52		—		52		52
Total trading securities	—		30,759		24,598		55,357		55,357
Corporate loans (3)	—		1,438,699		30,543		1,469,242		1,469,242
Available for sale securities:
U.S. Treasury securities	7,751		—		—		7,751		7,751
Obligations of state and political subdivisions	—		4,238		—		4,238		4,238
Certificates of deposit	—		100		—		100		100
Corporate bonds	—		5,596		—		5,596		5,596
Asset-backed securities	—		78		—		78		78
Total available for sale securities	7,751		10,012		—		17,763		17,763



			2013
	Quoted Prices in Active markets Level 1		Other Significant Level 2		Significant Unobservable inputs Level 3		Fair Value		Carrying Value

Separate Account Assets:
Cash	$	26,129	$	—	$	—	$	26,129	$	26,129
Short-term investments	171,927		—		—		171,927		171,927
Debt Securities:
U.S. Treasury securities	17,634		—		—		17,634		17,634
U.S. government agencies	—		1,436		—		1,436		1,436
Municipal bonds	—		8,014		—		8,014		8,014
Asset-backed securities	—		8,113		—		8,113		8,113
Corporate bonds	—		18,116		—		18,116		18,116
Preferred stocks	1,018		—		—		1,018		1,018
Common stocks	100,630		—		—		100,630		100,630
Mutual funds	195,736		—		—		195,736		195,736
Real estate funds	—		—		2,719,387		2,719,387		2,719,387
Private equity	—		—		138		138		138
Hedge funds
Multi-strategy	—		66,615		682,751		749,366		749,366
Long/short	—		19,115		84,315		103,430		103,430
Fund of funds	—		2,509		191,423		193,932		193,932
Event driven	—		—		86,724		86,724		86,724
Long only	—		34,787		20,305		55,092		55,092
Global Macro	—		13,157		8,245		21,402		21,402
Fixed income arbitrage	—		—		8,669		8,669		8,669
Master limited partnerships	—		102,394		28,814		131,208		131,208
Fixed income (non-arbitrage)	—		4,117		2,557		6,674		6,674
Other	—		—		73		73		73
Other	—		251		—		251		251
Subtotal - separate account assets	513,074		278,624		3,833,401		4,625,099		4,625,099
Total assets	$	520,825	$	1,758,094	$	3,888,542	$	6,167,461	$	6,167,461
Liabilities:
Debt Securities:
U.S. Treasury securities	$	18,493	$	—	$	—	$	18,493	$	18,493
Derivative Liabilities:
Credit Derivatives	—		598		—		598		598
Total liabilities	$	18,493	$	598	$	—	$	19,091	$	19,091

(1) Includes $1,692 related to CLOs classified in Level 3.

(2) Includes $17,674 related to CLOs classified in Level 3.

(3) Includes $1,267,612 and $30,543 classified in Level 2 and Level 3, respectively, related to CLOs.



			2012
Assets:	Quoted Prices in active markets Level 1		Other Significant Observable inputs Level 2		Significant unobservable inputs Level 3		Fair Value		Carrying Value
Trading Investments:
Exchange-traded equity securities	$	2,433	$	—	$	—	$	2,433	$	2,433
Privately held equity securities (1)	—		—		7,809		7,809		7,809
Tax exempt securities	—		50,784		264		51,048		51,048
CDO	—		—		650		650		650
CLO	—		—		525		525		525
Corporate bonds (2)	—		—		16,486		16,486		16,486
Total trading investments	2,433		50,784		25,734		78,951		78,951
Derivative assets:
CDS	—		—		834		834		834
Total derivative assets	—		—		834		834		834
Total trading securities	2,433		50,784		26,568		79,785		79,785
Corporate loans (3)	—		756,311		5,855		762,166		762,166

Available for sale securities:
U.S. government obligations	—		3,851		—		3,851		3,851
U.S. Treasury securities	5,290		—		—		5,290		5,290
Obligations of state and political subdivisions	—		478		—		478		478
Certificates of deposit	—		100		—		100		100
Corporate bonds	—		6,277		—		6,277		6,277
Asset-backed securities	—		307		—		307		307
Total available for sale securities	5,290		11,013		—		16,303		16,303



			2012
	Quoted Prices in Active markets Level 1		Other Significant Level 2		Significant Unobservable inputs Level 3		Fair Value		Carrying Value

Separate Account Assets:
Cash	$	3,771	$	—	$	—	$	3,771	$	3,771
Short-term investments	87,409		—		—		87,409		87,409
Debt Securities:
U.S. Treasury securities	19,230		—		—		19,230		19,230
U.S. government agencies	—		1,625		—		1,625		1,625
Municipal bonds	—		3,034		—		3,034		3,034
Asset-backed securities	—		2,843		—		2,843		2,843
Corporate bonds	—		18,373		—		18,373		18,373
Preferred stocks	25		—		—		25		25
Common stocks	97,600		—		—		97,600		97,600
Mutual funds	146,860		—		—		146,860		146,860
Real estate funds	—		—		2,563,992		2,563,992		2,563,992
Private equity	—		—		251		251		251
Hedge funds
Multi-Strategy	—		58,580		617,979		676,559		676,559
Long/Short	—		32,665		75,640		108,305		108,305
Fund of Funds	—		1,347		123,793		125,140		125,140
Event Driven	—		40,907		29,230		70,137		70,137
Long only	—		31,825		—		31,825		31,825
Global Macro	—		11,562		7,374		18,936		18,936
Fixed Income Arbitrage	—		—		4,994		4,994		4,994
Master limited partnerships	—		—		42,501		42,501		42,501
Fixed Income (Non-Arbitrage)	—		5,013		4,700		9,713		9,713
Other	—		—		1,746		1,746		1,746
Other	—		184		—		184		184
Subtotal - separate account assets	354,895		207,958		3,472,200		4,035,053		4,035,053
Total assets	$	362,618	$	1,026,066	$	3,504,623	$	4,893,307	$	4,893,307
Liabilities:
Debt Securities:
U.S. Treasury securities	$	20,175	$	—	$	—	$	20,175	$	20,175
Derivative Liabilities:
IRS	—		3,172		—		3,172		3,172
Total liabilities	$	20,175	$	3,172	$	—	$	23,347	$	23,347

(1) Includes $2,483 related to CLOs classified in Level 3.

(2) Includes $16,486 related to CLOs classified in Level 3.

(3) Includes $735,888 and $5,855 classified in Level 2 and Level 3, respectively, related to CLOs.

The following table represents additional information about assets that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value for the year ending December 31, 2013 and 2012:



	Fair value measurement for the twelve months ended December 31, 2013 using significant unobservable inputs Level 3			Fair value measurement for the twelve months ended December 31, 2012 using significant unobservable inputs Level 3
Balance at December 31,	$	3,504,623		$	3,116,455
Net realized gains/(losses)	(1,830		)	827
Net unrealized gains/(losses)	(144		)	(2,514		)
Purchases	305,336			409,992
Sales	(377,891		)	(279,103		)
Issuances	932			—
Settlements	(1,195		)	10,454
Transfers into/(out of) Level 3, net	53,538			(30,211		)
Attributable to policyowner	405,173			278,723
Balance at December 31,	$	3,888,542		$	3,504,623

For the year ended December 31, 2013, $53,538 was transferred between Level 2 and Level 3 primarily due to the temporary restrictions on the liquidation of hedge funds included in the separate accounts balance. For the year ended December 31 2012, $30,211 was transferred from Level 3 into Level 2. The majority of these amounts in 2012 were due to tax exempt municipal securities as quoted prices for these assets were obtained from active markets.

ASC Topic 820, as amended by ASU 2011-04, requires disclosure of quantitative information about the significant unobservable inputs used in the valuation of assets and liabilities classified as Level 3 within the fair value hierarchy. Disclosure of this information is not required in circumstances where a valuation (unadjusted) is obtained from a third-party pricing service and the information regarding the unobservable inputs is not reasonably available to the Company. As such, the disclosure provided below provides quantitative information only about the significant unobservable inputs used in the valuation of certain privately held securities, credit default assets and tax-exempt municipal securities.



Assets	Fair Value at December 31, 2013		Fair Value at December 31, 2012		Valuation Technique	Unobservable input(s)	December 31, 2013 Range (Weighted average)	December 31, 2012 Range (Weighted average)
Trading Securities:
Privately held equity securities	$	—	$	1,224	Discounted cash flow	Swap rate	—	0.239%-0.300& (0.270%)
						CMBS spread	—	34.50	%
						Expected term	—	1.00-4.79 years (2.90 years)
						Expected quarterly cash flow streams	—	$52-$1,574 ($147)
Tax-exempt municipal	274		264		Discounted cash flow	Short and long term cash flows	.58% - 33.68%	.8435%-37.469%
Derivative Assets:
CDS	—		834		Market comparable approach	Offered quote	—	88.28%-96.66% (93.71%)
Total	$	274	$	2,322

The following tables show the fair values and carrying values of the Company’s financial assets and liabilities and the fair value hierarchy level(s) associated with these assets and liabilities as of December 31, 2013 and 2012:



	2013
	Level within Fair Value Hierarchy	Fair Value		Carrying Value
Assets:
Cash and cash equivalents-unrestricted	1	$	120,557	$	120,557
Cash and cash equivalents-restricted	1	26,395		26,395
Trading securities	2,3	35,991		35,991
Due from brokers, dealers, and trustees	1	6,956		6,956
Due from separate accounts	1	1,963		1,963
Investments in loans	2	171,087		171,087
Loans owned	2	48,212		40,260
Policy loans	3	102,147		102,147
Available for sale securities	1,2,3	17,763		17,763
Separate account assets	1,2,3	4,625,099		4,625,099
Assets of consolidated CLOs	2,3	1,414,616		1,414,616

Total Assets		$	6,570,786	$	6,562,834

Liabilities:
Debt securities-U.S. Treasury securities	1	18,493		18,493
Debt	3	376,250		360,609
Separate account liabilities	1,2,3	4,625,099		4,625,099
Due to brokers, dealers and trustees	1	8,193		8,193
Derivative liabilities	2	598		598
Liabilities of consolidated CLOs	2,3	1,175,606		1,175,606

Total Liabilities		$	6,204,239	$	6,188,598



	2012
	Level within Fair Value Hierarchy	Fair Value		Carrying Value
Assets:
Cash and cash equivalents-unrestricted	1	$	88,563	$	88,563
Cash and cash equivalents-restricted	1	20,748		20,748
Trading securities	1,2,3	60,816		60,816
Due from brokers, dealers, and trustees	1	8,539		8,539
Due from separate accounts	1	2,128		2,128
Corporate loans	2	20,423		20,423
Loans owned	2	8,104		5,467
Policy loans	3	99,123		99,123
Available for sale securities	1,2,3	16,303		16,303
Separate account assets	1,2,3	4,035,053		4,035,053
Assets of consolidated CLOs	2,3	844,852		844,852

Total Assets		$	5,204,652	$	5,202,015

Liabilities:
Debt securities-U.S. Treasury securities	1	$	20,175	$	20,175
Derivative liabilities	2	3,172		3,172
Debt	3	182,994		195,648
Separate account liabilities	1,2,3	4,035,053		4,035,053
Liabilities of consolidated CLOs	2,3	778,925		620,310

Total Liabilities		$	5,020,319	$	4,874,358