Fair Values of Financial Instruments

6 Months Ended

Jun. 30, 2011

FAIR VALUES OF FINANCIAL INSTRUMENTS [Abstract]

Fair Value Disclosures [Text Block]

FAIR VALUES OF FINANCIAL INSTRUMENTS

Effective January 1, 2008, the Company adopted FASB guidance which defines fair value, establishes a framework for measuring fair value under GAAP, and requires additional disclosures about fair value measurements. In compliance with this GAAP guidance, the Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy. 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.

Financial assets and liabilities recorded at fair value on the Consolidated Balance Sheets are categorized as follows:

Level 1: Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. These generally provide the most reliable evidence and are used to measure fair value whenever available. The Company's Level 1 assets include equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets.

Level 2: Fair value is based upon significant inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable for substantially the full term of the asset or liability through corroboration with observable market data as of the reporting date. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities, model-derived valuations whose inputs are observable or whose significant value drivers are observable and other observable inputs. The Company's Level 2 assets include fixed maturity debt securities (corporate and private bonds, government or agency securities, asset-backed and mortgage-backed securities), preferred stock, certain equity securities, and over-the-counter derivative contracts. The Company's Level 2 liabilities consist of certain product-related embedded derivatives. Valuations are generally obtained from third party pricing services for identical or comparable assets or determined through use of valuation methodologies using observable market inputs.

Level 3: Fair value is based on significant unobservable inputs which reflect the entity's or third party pricing service's assumptions about the assumptions market participants would use in pricing an asset or liability. The Company's Level 3 assets include certain equity securities and certain less liquid or private fixed maturity debt securities where significant valuation inputs cannot be corroborated with market observable data. The Company's Level 3 liabilities consist of share-based compensation obligations. Valuations are estimated based on non-binding broker prices or internally developed valuation models or methodologies, discounted cash flow models and other similar techniques.

The following tables set forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of the date indicated:

	June 30, 2011
	Total		Level 1	Level 2	Level 3
	(In thousands)
Debt securities, available for sale	$	2,476,443	—	2,459,286	17,157
Equity securities, available for sale	16,720		8,142	460	8,118
Derivatives, index options	97,698		—	97,698	—
Total assets	$	2,590,861	8,142	2,557,444	25,275
Policyholder account balances (a)	$	109,531	—	109,531	—
Other liabilities (b)	3,090		—	—	3,090
Total liabilities	$	112,621	—	109,531	3,090

During the six months ended June 30, 2011, the Company did not make any transfers of assets into or out of levels 1, 2 or 3.

	December 31, 2010
	Total		Level 1	Level 2	Level 3
	(In thousands)
Debt securities, available for sale	$	2,374,877	—	2,356,275	18,602
Equity securities, available for sale	15,230		7,607	59	7,564
Derivatives, index options	80,284		—	80,284	—
Total assets	$	2,470,391	7,607	2,436,618	26,166
Policyholder account balances (a)	$	93,147	—	93,147	—
Other liabilities (b)	4,512		—	—	4,512
Total liabilities	$	97,659	—	93,147	4,512

(a)  Represents the fair value of certain product-related embedded derivatives that were recorded at fair value.

(b)  Represents the liability for share-based compensation.

The following tables present, by pricing source and fair value hierarchy level, the Company’s assets that are measured at fair value on a recurring basis:

	June 30, 2011
	Total			Level 1	Level 2		Level 3
	(In thousands)
Debt securities, available for sale:
Priced by third-party vendors	$	2,459,286		—	2,459,286		—
Priced internally	17,157			—	—		17,157
Subtotal	2,476,443			—	2,459,286		17,157
Equity securities, available for sale:
Priced by third-party vendors	8,602			8,142	460		—
Priced internally	8,118			—	—		8,118
Subtotal	16,720			8,142	460		8,118
Derivatives, index options:
Priced by third-party vendors	97,698			—	97,698		—
Priced internally	—			—	—		—
Subtotal	97,698			—	97,698		—
Total	$	2,590,861		8,142	2,557,444		25,275
Percent of total	100.0		%	—	99.0	%	1.0	%

	December 31, 2010
	Total			Level 1	Level 2		Level 3
	(In thousands)
Debt securities, available for sale:
Priced by third-party vendors	$	2,356,275		—	2,356,275		—
Priced internally	18,602			—	—		18,602
Subtotal	2,374,877			—	2,356,275		18,602
Equity securities, available for sale:
Priced by third-party vendors	7,666			7,607	59		—
Priced internally	7,564			—	—		7,564
Subtotal	15,230			7,607	59		7,564
Derivatives, index options:
Priced by third-party vendors	80,284			—	80,284		—
Priced internally	—			—	—		—
Subtotal	80,284			—	80,284		—
Total	$	2,470,391		7,607	2,436,618		26,166
Percent of total	100.0		%	—	99.0	%	1.0	%

The following tables provide additional information about fair value measurements for which significant unobservable (Level 3) inputs were utilized to determine fair value.

	For the Three Months Ended June 30, 2011
	Debt Securities, Available for Sale			Equity Securities, Available for Sale	Total Assets		Other Liabilities
	(In thousands)
Beginning balance, April 1, 2011	$	19,059		8,118	27,177		3,511
Total realized and unrealized gains (losses):
Included in net income	—			—	—		(196	)
Included in other comprehensive income	(1,115		)	—	(1,115	)	—
Purchases, sales, issuances and settlements, net	(787		)	—	(787	)	(225	)
Transfers into (out of) Level 3	—			—	—		—
Balance at end of period	$	17,157		8,118	25,275		3,090
Amount of total gains (losses) for the period included in net income attributable to the change in unrealized gains (losses) relating to assets still held at end of period	$	—		—	—		(196	)

	For the Three Months Ended June 30, 2010
	Debt Securities, Available for Sale			Equity Securities, Available for Sale	Total Assets		Other Liabilities
	(In thousands)
Beginning balance, April 1, 2010	$	17,733		7,565	25,298		6,076
Total realized and unrealized gains (losses):
Included in net income	—			—	—		(1,755	)
Included in other comprehensive income	(296		)	—	(296	)	—
Purchases, sales, issuances and settlements, net	—			—	—		(115	)
Transfers into (out of) Level 3	—			—	—		—
Balance at end of period	$	17,437		7,565	25,002		4,206
Amount of total gains (losses) for the period included in net income attributable to the change in unrealized gains (losses) relating to assets still held at end of period	$	—		—	—		(1,985	)

	For the Six Months Ended June 30, 2011
	Debt Securities, Available for Sale			Equity Securities, Available for Sale	Total Assets		Other Liabilities
	(In thousands)
Beginning balance, January 1, 2011	$	18,602		7,564	26,166		4,512
Total realized and unrealized gains (losses):
Included in net income	—			—	—		(865	)
Included in other comprehensive income	(813		)	554	(259	)	—
Purchases, sales, issuances and settlements, net	(632		)	—	(632	)	(557	)
Transfers into (out of) Level 3	—			—	—		—
Balance at end of period	$	17,157		8,118	25,275		3,090
Amount of total gains (losses) for the period included in net income attributable to the change in unrealized gains (losses) relating to assets still held at end of period	$	—		—	—		(865	)

	For the Six Months Ended June 30, 2010
	Debt Securities, Available for Sale		Equity Securities, Available for Sale	Total Assets	Other Liabilities
	(In thousands)
Beginning balance, January 1, 2010	$	16,650	7,157	23,807	5,373
Total realized and unrealized gains (losses):
Included in net income	—		—	—	(1,025	)
Included in other comprehensive income	659		408	1,067	—
Purchases, sales, issuances and settlements, net	128		—	128	(142	)
Transfers into (out of) Level 3	—		—	—	—
Balance at end of period	$	17,437	7,565	25,002	4,206
Amount of total gains (losses) for the period included in net income attributable to the change in unrealized gains (losses) relating to assets still held at end of period	$	—	—	—	(1,255	)

Realized gains (losses) on debt and equity securities are reported in the condensed consolidated statements of earnings as net investment gains (losses). Unrealized gains (losses) on available for sale debt and equity securities are reported as other comprehensive income (loss) within stockholders' equity.

The fair value hierarchy classifications are reviewed each reporting period. Reclassification of certain financial assets and liabilities may result based on changes in the observability of valuation attributes. Reclassifications are reported as transfers into and out of Level 3 at the beginning fair value for the reporting period in which the changes occur.

The carrying amounts and fair values of the Company's financial instruments are as follows:

	June 30, 2011			December 31, 2010
	Carrying Values		Fair Values	Carrying Values	Fair Values
	(In thousands)
ASSETS
Investments in debt and equity securities:
Securities held to maturity	$	5,302,886	5,636,086	4,977,516	5,259,332
Securities available for sale	2,493,163		2,493,163	2,390,107	2,390,107
Cash and short-term investments	80,667		80,667	80,332	80,332
Mortgage loans	160,897		158,255	141,247	139,169
Policy loans	75,743		75,743	78,448	78,448
Other loans	15,344		15,241	10,231	10,183
Derivatives, index options	97,698		97,698	80,284	80,284
Life interest in Libbie Shearn Moody Trust	494		12,775	657	12,775
LIABILITIES
Deferred annuity contracts	$	6,189,117	5,831,768	5,787,490	5,451,494
Immediate annuity and supplemental contracts	504,972		515,531	490,365	488,966

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.