Derivative Investments

6 Months Ended

Jun. 30, 2011

DERIVATIVE INVESTMENTS [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

DERIVATIVE INVESTMENTS

Fixed-indexed products provide traditional fixed annuities and universal life contracts with the option to have credited interest rates linked in part to an underlying equity index or a combination of equity indices. The equity return component of such policy contracts is identified separately and accounted for in future policy benefits as embedded derivatives on the consolidated balance sheet. The remaining portions of these policy contracts are considered the host contracts and are recorded separately as fixed annuity or universal life contracts. The host contracts are accounted for under debt instrument type accounting in which future policy benefits are recorded as discounted debt instruments that are accreted, using the effective yield method, to their minimum account values at their projected maturities or termination dates.

The Company purchases over-the-counter index options, which are derivative financial instruments, to hedge the equity return component of its fixed-indexed annuity and life products. The index options act as hedges to match closely the returns on the underlying index or indices. The amounts which may be credited to policyholders are linked, in part, to the returns of the underlying index or indices. As a result, changes to policyholders' liabilities are substantially offset by changes in the value of the options. Cash is exchanged upon purchase of the index options and no principal or interest payments are made by either party during the option periods. Upon maturity or expiration of the options, cash may be paid to the Company depending on the performance of underlying index or indices and terms of the contract.

The Company does not elect hedge accounting relative to these derivative instruments.The index options are reported at fair value in the accompanying condensed consolidated financial statements. The changes in the values of the index options and the changes in the policyholder liabilities are both reflected in the condensed consolidated statement of earnings. Any changes relative to the embedded derivatives associated with policy contracts are reflected in contract interest in the condensed consolidated statement of earnings. Any gains or losses from the sale or expiration of the options, as well as period-to-period changes in values, are reflected as net investment income in the condensed consolidated statement of earnings.

Although there is credit risk in the event of nonperformance by counterparties to the index options, the Company does not expect any counterparties to fail to meet their obligations, given their high credit ratings. In addition, credit support agreements are in place with all counterparties for option holdings in excess of specific limits, which may further reduce the Company's credit exposure.

The tables below present the fair value of derivative instruments as of June 30, 2011 and December 31, 2010, respectively.

	June 30, 2011
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
		(In thousands)			(In thousands)
Derivatives not designated as hedging instruments
Equity index options	Derivatives, Index Options	$	97,698
Fixed-indexed products				Universal Life and Annuity Contracts	$	109,531
Total		$	97,698		$	109,531

	December 31, 2010
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
		(In thousands)			(In thousands)
Derivatives not designated as hedging instruments
Equity index options	Derivatives, Index Options	$	80,284
Fixed-indexed products				Universal Life and Annuity Contracts	$	93,147
Total		$	80,284		$	93,147

The table below presents the effect of derivative instruments in the condensed consolidated statement of earnings for the three months ended June 30, 2011 and 2010.

		June 30, 2011			June 30, 2010
Derivatives Not Designated  As Hedging Instruments	Location of Gain  or (Loss) Recognized In Income on Derivative	Amount of Gain or  (Loss) Recognized in  Income on Derivative
		(In thousands)
Equity index options	Net investment income	$	(9,098	)	(43,965	)
Fixed-index products	Universal life and annuity contract interest	7,614			49,718
		$	(1,484	)	5,753

The table below presents the effect of derivative instruments in the condensed consolidated statement of earnings for the six months ended June 30, 2011 and 2010.

		June 30, 2011			June 30, 2010
Derivatives Not Designated  As Hedging Instruments	Location of Gain  or (Loss) Recognized In Income on Derivative	Amount of Gain or  (Loss) Recognized in  Income on Derivative
		(In thousands)
Equity index options	Net investment income	$	22,751		(32,018	)
Fixed-index products	Universal life and annuity contract interest	(23,781		)	39,941
		$	(1,030	)	7,923