DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2013

DERIVATIVE FINANCIAL INSTRUMENTS

Schedule of realized investment gains (losses) - derivative financial instruments

Realized investment gains (losses) - derivative financial instruments

	For The						For The
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
	(Dollars In Thousands)
Derivatives related to variable annuity contracts:
Interest rate futures - VA	$	(7,654	)	$	69,196		$	(24,138	)	$	35,790
Equity futures - VA	(4,036		)	(220		)	(27,261		)	(25,319		)
Currency futures - VA	(112		)	1,764			7,971			780
Volatility futures - VA	—			343			—			(132		)
Variance swaps - VA	2,214			1,063			(8,219		)	(821		)
Equity options - VA	(8,131		)	3,153			(36,537		)	(20,719		)
Interest rate swaptions - VA	1,639			8,831			(2,463		)	5,312
Interest rate swaps - VA	(89,722		)	5,954			(106,278		)	3,826
Embedded derivative - GMWB	25,939			(85,456		)	106,314			(35,289		)
Funds withheld derivative	9,837			—			9,837			—
Total derivatives related to variable annuity contracts	(70,026		)	4,628			(80,774		)	(36,572		)
Embedded derivative - Modco reinsurance treaties	144,998			(48,679		)	161,773			(37,973		)
Embedded derivative - FIA	(41		)	—			(41		)	—
Interest rate swaps	1,909			(2,916		)	2,912			(879		)
Interest rate caps	—			(351		)	—			(2,515		)
Derivatives with PLC(1)	(9,751		)	500			(13,529		)	500
Other derivatives	(498		)	(950		)	(143		)	(238		)
Total realized gains (losses) - derivatives	$	66,591		$	(47,768	)	$	70,198		$	(77,677	)

(1)     These derivatives include the Interest, YRT premium support, and portfolio maintenance agreements between certain of the Company’s subsidiaries and PLC.

Notional amounts and fair values of derivative financial instruments

	As of
	June 30, 2013				December 31, 2012
	Notional		Fair		Notional		Fair
	Amount		Value		Amount		Value
	(Dollars In Thousands)
Other long-term investments
Cash flow hedges:
Inflation	$	—	$	—	$	—	$	—
Derivatives not designated as hedging instruments:
Interest rate swaps	225,000		3,658		355,000		6,532
Variance swaps	1,300		834		500		406
Derivatives with PLC(1)	1,442,128		3,535		1,404,750		17,064
Embedded derivative - Modco reinsurance treaties	45,580		1,069		30,244		1,330
Embedded derivative - GMWB	1,274,129		43,234		1,640,075		30,261
Equity futures	43,543		637		147,581		595
Currency futures	152,545		3,258		15,944		784
Interest rate caps	—		—		3,000,000		—
Equity options	1,211,937		93,124		573,493		61,833
Interest rate swaptions	625,000		26,253		400,000		11,370
Other	224		319		224		253
	$	5,021,386	$	175,921	$	7,567,811	$	130,428
Other liabilities
Cash flow hedges:
Inflation	$	182,965	$	4,429	$	182,965	$	5,027
Derivatives not designated as hedging instruments:
Interest rate swaps	1,500,000		111,748		400,000		10,025
Variance swaps	—		—		2,675		12,198
Embedded derivative - Modco reinsurance treaties	2,610,999		249,873		2,655,134		411,907
Funds withheld derivative	1,107,501		66,273		—		—
Embedded derivative - GMWB	288,009		5,777		5,253,961		199,530
Embedded derivative - FIA	19,547		1,126		—		—
Interest rate futures	246,042		3,674		893,476		13,970
Equity futures	120,665		711		152,364		3,316
Currency futures	—		—		131,979		1,901
Equity options	32,125		1,097		—		—
	$	6,107,853	$	444,708	$	9,672,554	$	657,874

(1)These derivatives include the Interest, YRT premium support, and portfolio maintenance agreements between certain of the Company’s subsidiaries and PLC.

Schedule of gain (loss) on derivatives in cash flow hedging relationship

Gain (Loss) on Derivatives in Cash Flow Relationship

				Amount and Location of
	Amount of Gains (Losses)			Gains (Losses)
	Deferred in			Reclassified from			Amount and Location of
	Accumulated Other			Accumulated Other			(Losses) Recognized in
	Comprehensive Income			Comprehensive Income			Income (Loss) on
	(Loss) on Derivatives			(Loss) into Income (Loss)			Derivatives
	(Effective Portion)			(Effective Portion)			(Ineffective Portion)
				Benefits and settlement			Realized investment
				expenses			gains (losses)
	(Dollars In Thousands)
For The Three Months Ended June 30, 2013
Inflation	$	(4,589	)	$	(580	)	$	(558	)
Total	$	(4,589	)	$	(580	)	$	(558	)
For The Six Months Ended June 30, 2013
Inflation	$	(180	)	$	(1,077	)	$	(190	)
Total	$	(180	)	$	(1,077	)	$	(190	)

Gain (Loss) on Derivatives in Cash Flow Relationship

				Amount and Location of
	Amount of Gains (Losses)			Gains (Losses)
	Deferred in			Reclassified from			Amount and Location of
	Accumulated Other			Accumulated Other			(Losses) Recognized in
	Comprehensive Income			Comprehensive Income			Income (Loss) on
	(Loss) on Derivatives			(Loss) into Income (Loss)			Derivatives
	(Effective Portion)			(Effective Portion)			(Ineffective Portion)
				Benefits and settlement			Realized investment
				expenses			gains (losses)
	(Dollars In Thousands)
For The Three Months Ended June 30, 2012
Interest rate	$	(2	)	$	(858	)	$	—
Inflation	(7,068		)	(113		)	(870		)
Total	$	(7,070	)	$	(971	)	$	(870	)
For The Six Months Ended June 30, 2012
Interest rate	$	(75	)	$	(1,712	)	$	—
Inflation	1,209			67			(224		)
Total	$	1,134		$	(1,645	)	$	(224	)

Schedule of realized investment gains (losses) - all other investments

Realized investment gains (losses) - all other investments

	For The Three Months Ended June 30,					For The Six Months Ended June 30,
	2013			2012		2013			2012
	(Dollars In Thousands)
Modco trading portfolio(1)	$	(126,694	)	$	56,063	$	(142,022	)	$	74,162

(1)The Company elected to include the use of alternate disclosures for trading activities.