Fair Value of Assets and Liabilities

6 Months Ended

Jun. 30, 2011

Fair Value of Assets and Liabilities

Fair Value of Assets and Liabilities

7. FAIR VALUE OF ASSETS AND LIABILITIES

Fair Value Measurement – Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance around fair value established a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are 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. These generally provide the most reliable evidence and are used to measure fair value whenever available. Active markets are defined as having the following characteristics for the measured asset/liability: (i) many transactions, (ii) current prices, (iii) price quotes not varying substantially among market makers, (iv) narrow bid/ask spreads and (v) most information publicly available. The Company's Level 1 assets and liabilities primarily include certain cash equivalents and short term investments, equity securities and derivative contracts that are traded in an active exchange market. Prices are obtained from readily available sources for market transactions involving identical assets or liabilities.

Level 2 – Fair value is based on significant inputs, other than Level 1 inputs, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. 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, and other market observable inputs. The Company's Level 2 assets and liabilities include: fixed maturities (corporate public and private bonds, most government securities, certain asset-backed and mortgage-backed securities, etc.), and certain over-the-counter derivatives. Valuations are generally obtained from third party pricing services for identical or comparable assets or liabilities or through the use of valuation methodologies using observable market inputs. Prices from services are validated through comparison to trade data and internal estimates of current fair value, generally developed using market observable inputs and economic indicators.

Level 3 – Fair value is based on at least one or more significant unobservable inputs for the asset or liability. These inputs reflect the Company's assumptions about the inputs market participants would use in pricing the asset or liability. The Company's Level 3 assets and liabilities primarily include: certain private fixed maturities and equity securities, certain manually priced public equity securities and fixed maturities, certain highly structured over-the-counter derivative contracts, and embedded derivatives resulting from certain products with guaranteed benefits. Prices are determined using valuation methodologies such as option pricing models, discounted cash flow models and other similar techniques. Non-binding broker quotes, which are utilized when pricing service information is not available, are reviewed for reasonableness based on the Company's understanding of the market, and are generally considered Level 3. Under certain conditions, based on its observations of transactions in active markets, the Company may conclude the prices received from independent third party pricing services or brokers are not reasonable or reflective of market activity. In those instances, the Company may choose to over-ride the third-party pricing information or quotes received and apply internally developed values to the related assets or liabilities. To the extent the internally developed valuations use significant unobservable inputs, they are classified as Level 3. As of June 30, 2011 and December 31, 2010 these over-rides on a net basis were not material.

Asset and Liabilities by Hierarchy Level -The tables below present the balances of assets and liabilities measured at fair value on a recurring basis, as of the dates indicated.

	As of June 30, 2011
	Level 1		Level 2		Level 3		Total
	(in thousands)
Fixed maturities, available for sale:
U.S. government securities	$	—	$	130,874	$	—	$	130,874
State and municipal securities		—		87,156		—		87,156
Foreign government securities		—		135,831		—		135,831
Corporate securities		—		3,564,702		93,700		3,658,402
Asset-backed securities		—		155,066		53,889		208,955
Commercial mortgage-backed securities		—		437,418		—		437,418
Residential mortgage-backed securities		—		228,558		—		228,558
Sub-total		—		4,739,605		147,589		4,887,194
Trading account assets:
Asset-backed securities		—		31,616		—		31,616
Equity securities		7,176		—		—		7,176
Sub-total		7,176		31,616		—		38,792
Equity securities, available for sale		19,487		—		230		19,717
Short-term investments		285,594		—		—		285,594
Cash equivalents		3,611		—		—		3,611
Other long term investments		—		53,883		186		54,069
Reinsurance recoverable		—		—		118,635		118,635
Other assets		—		28,988		—		28,988
Sub-total excluding separate account assets		315,868		4,854,092		266,640		5,436,600
Separate account assets (1)		1,570,886		46,995,638		—		48,566,524
Total assets	$	1,886,754	$	51,849,730	$	266,640	$	54,003,124
Future policy benefits	$	—	$	—	$	95,603	$	95,603
Total liabilities	$	—	$	—	$	95,603	$	95,603

(1) Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts.

	As of December 31, 2010
	Level 1		Level 2		Level 3		Total
	(in thousands)
Fixed maturities, available for sale:
U.S. government securities	$	—	$	193,305	$	—	$	193,305
State and municipal securities		—		77,516		—		77,516
Foreign government securities		—		136,513		—		136,513
Corporate Securities		—		3,876,695		74,255		3,950,950
Asset-backed securities		—		160,113		53,857		213,970
Commercial mortgage-backed securities		—		490,569		—		490,569
Residential mortgage-backed securities		—		393,398		—		393,398
Sub-total		—		5,328,109		128,112		5,456,221
Trading account assets:
Asset backed securities		—		70,831		—		70,831
Equity Securities		8,774		—		—		8,774
Sub-total		8,774		70,831		—		79,605
Equity securities, available for sale		16,611		976		—		17,587
Short-term investments		228,383		—		—		228,383
Cash equivalents		—		—		—		—
Other long-term investments		—		51,000		—		51,000
Reinsurance recoverable		—		—		186,735		186,735
Other assets		—		29,201		—		29,201
Sub-total excluding separate account assets		253,768		5,480,117		314,847		6,048,732
Separate account assets (1)		1,488,369		46,786,974		—		48,275,343
Total assets	$	1,742,137	$	52,267,091	$	314,847	$	54,324,075
Future policy benefits	$	—	$	—	$	164,283	$	164,283
Total liabilities	$	—	$	—	$	164,283	$	164,283

(1) Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts.

The methods and assumptions the Company uses to estimate the fair value of assets and liabilities measured at fair value on a recurring basis are summarized below. Information regarding separate account assets is excluded as the risk associated with these assets is primarily borne by the customers and policyholders.

Fixed Maturity Securities - The fair values of the Company's public fixed maturity securities are generally based on prices obtained from independent pricing services. Prices from pricing services are sourced from multiple vendors, and a vendor hierarchy is maintained by asset type based on historical pricing experience and vendor expertise. The Company generally receives prices from multiple pricing services for each security, but ultimately uses the price from the pricing service highest in the vendor hierarchy based on the respective asset type. To validate reasonableness, prices are reviewed by internal asset managers through comparison with directly observed recent market trades and internal estimates of current fair value, developed using market observable inputs and economic indicators. Consistent with the fair value hierarchy described above, securities with validated quotes from pricing services are generally reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs. If the pricing information received from third party pricing services is not reflective of market activity or other inputs observable in the market, the Company may challenge the price through a formal process with the pricing service. If the pricing service updates the price to be more consistent in comparison to the presented market observations, the security remains within Level 2.

If the Company ultimately concludes that pricing information received from the independent pricing service is not reflective of market activity, non-binding broker quotes are used, if available. If the Company concludes the values from both pricing services and brokers are not reflective of market activity, it may over-ride the information from the pricing service or broker with an internally developed valuation. As of June 30, 2011 and December 31, 2010 over-rides on a net basis were not material. Internally developed valuations or non-binding broker quotes are also used to determine fair value in circumstances where vendor pricing is not available. These estimates may use significant unobservable inputs, which reflect the Company's own assumptions about the inputs market participants would use in pricing the asset. Circumstances where observable market data are not available may include events such as market illiquidity and credit events related to the security. Pricing service over-rides, internally developed valuations and non-binding broker quotes are generally included in Level 3 in the fair value hierarchy.

The fair value of private fixed maturities, which are primarily comprised of investments in private placement securities, originated by internal private asset managers, are primarily determined using a discounted cash flow model. In certain cases these models primarily use observable inputs with a discount rate based upon the average of spread surveys collected from private market intermediaries who are active in both primary and secondary transactions, taking into account, among other factors, the credit quality and industry sector of the issuer and the reduced liquidity associated with private placements. Generally, these securities have been reflected within Level 2. For certain private fixed maturities, the discounted cash flow model may also incorporate significant unobservable inputs, which reflect the Company's own assumptions about the inputs market participants would use in pricing the asset. To the extent management determines that such unobservable inputs are not significant to the price of a security, a Level 2 classification is made. Otherwise, a Level 3 classification is used.

Private fixed maturities also include debt investments in funds that, in addition to a stated coupon, pay a return based upon the results of the underlying portfolios. The fair values of these securities are determined by reference to the funds' net asset value (NAV). Since the NAV at which the funds trade can be observed by redemption and subscription transactions between third parties, the fair values of these investments have been reflected within Level 2 in the fair value hierarchy.

Trading Account Assets – Trading account assets consist primarily of asset-backed and equity securities whose fair values are determined consistent with similar instruments described under "Fixed Maturity Securities" and under "Equity Securities."

Equity Securities - Equity securities consist principally of investments in common and preferred stock of publicly traded companies. The fair values of most publicly traded equity securities are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the fair value hierarchy. The fair values of preferred equity securities are based on prices obtained from independent pricing services. These prices are then validated for reasonableness against recently traded market prices. Accordingly, these securities are generally classified within Level 2 in the fair value hierarchy.

Derivative Instruments - Derivatives are recorded at fair value either as assets, within "Other long-term investments," or as liabilities, within "Other liabilities," except for embedded derivatives which are recorded with the associated host contract. The fair values of derivative contracts are determined based on quoted prices in active exchanges or through the use of valuation models. The fair values of derivative contracts can be affected by changes in interest rates, foreign exchange rates, credit spreads, market volatility, expected returns, non-performance risk and liquidity as well as other factors. Liquidity valuation adjustments are made to reflect the cost of exiting significant risk positions, and consider the bid-ask, spread, maturity, complexity, and other specific attributes of the underlying derivative position. Fair values can also be affected by changes in estimates and assumptions including those related to counterparty behavior used in valuation models.

The majority of the Company's derivative positions are traded in the over-the-counter ("OTC") derivative market and are classified within Level 2 in the fair value hierarchy. OTC derivatives classified within Level 2 are valued using models generally accepted in the financial services industry that use actively quoted or observable market input values from external market data providers, third-party pricing vendors and/or recent trading activity. The fair values of most OTC derivatives, including interest rate and cross currency swaps and single name credit default swaps are determined using discounted cash flow models. These models' key assumptions include the contractual terms of the respective contract, along with significant observable inputs, including interest rates, currency rates, credit spreads, equity prices, index dividend yields non-performance risk and volatility, and are classified as Level 2.

To reflect the market's perception of its own and the counterparty's non-performance risk, the Company incorporates additional spreads over London Interbank Offered Rate ("LIBOR") into the discount rate used in determining the fair value of OTC derivative assets and liabilities which are uncollateralized. Most OTC derivative contract inputs have bid and ask prices that are actively quoted or can be readily obtained from external market data providers. The Company's policy is to use mid-market pricing in determining its best estimate of fair value and classify these derivative contracts as Level 2.

Derivatives classified as Level 3 include first-to-default credit basket swaps and other structured products. These derivatives are valued based upon models with some significant unobservable market inputs or inputs from less actively traded markets. The fair values of first-to-default credit basket swaps are derived from relevant observable inputs such as: individual credit default spreads, interest rates, recovery rates and unobservable model-specific input values such as correlation between different credits within the same basket. Other structured options and derivatives are valued using simulation models such as the Monte Carlo technique. Level 3 methodologies are validated through periodic comparison of the Company's fair values to broker-dealer values. As of June 30, 2011 and December 31, 2010, there were derivatives with the fair value of $186 thousand and $0 classified within Level 3, and all other derivatives were classified within Level 2. See Note 8 for more details on the fair value of derivative instruments by primary underlying.

Cash Equivalents and Short-Term Investments - Cash equivalents and short-term investments include money market instruments, commercial paper and other highly liquid debt instruments. Money market instruments are generally valued using unadjusted quoted prices in active markets that are accessible for identical assets and are primarily classified as Level 1. The remaining instruments in the Cash Equivalents and Short-term Investments category are typically not traded in active markets; however, their fair values are based on market observable inputs and, accordingly, these investments have been classified within Level 2 in the fair value hierarchy.

Other Assets - Other assets carried at fair value include affiliated bonds within our legal entity whose fair value are determined consistent with similar securities described above under "Fixed Maturity Securities" managed by affiliated asset managers.

Reinsurance Recoverables - Reinsurance recoverables carried at fair value include the reinsurance of our living benefit guarantees on certain of our variable annuities. These guarantees are considered embedded derivatives and are described below in "Future Policy Benefits". The reinsurance agreements covering these guarantees are derivatives with fair value determined in the same manner as the embedded derivative guarantee.

Future Policy Benefits – The liability for future policy benefits includes general account liabilities for guarantees on variable annuity contracts, including guaranteed minimum accumulation benefits ("GMAB"), guaranteed minimum withdrawal benefits ("GMWB") and guaranteed minimum income and withdrawal benefits ("GMIWB"), accounted for as embedded derivatives. The fair values of the GMAB, GMWB and GMIWB liabilities are calculated as the present value of future expected benefit payments to customers less the present value of assessed rider fees attributable to the embedded derivative feature. This methodology could result in either a liability or asset balance, given changing capital market conditions and various policyholder behavior assumptions. Since there is no observable active market for the transfer of these obligations, the valuations are calculated using internally developed models with option pricing techniques. The models are based on a risk neutral valuation framework and incorporate premiums for risks inherent in valuation techniques, inputs, and the general uncertainty around the timing and amount of future cash flows. The determination of these risk premiums requires the use of management judgment.

The Company is also required to incorporate the market perceived risk of its own non-performance in the valuation of the embedded derivatives associated with its optional living benefit features. Since insurance liabilities are senior to debt, the Company believes that reflecting the financial strength ratings of the Company in the valuation of the liability or asset appropriately takes into consideration the Company's own risk of non-performance. To reflect the market's perception of its non-performance risk, the Company incorporates an additional spread over LIBOR into the discount rate used in the valuations of the embedded derivatives associated with its optional living benefit features. The additional spread over LIBOR is determined taking into consideration publicly available information relating to the financial strength of the Company, as indicated by the credit spreads associated with funding agreements issued by an affiliated company. The Company adjusts these credit spreads to remove any liquidity risk premium. The additional spread over LIBOR incorporated into the discount rate as of June 30, 2011 generally ranged from 60 to 200 basis points for the portion of the interest rate curve most relevant to these liabilities. This additional spread is applied at an individual contract level and only to those embedded derivatives in a liability position and not to those in an asset position.

Other significant inputs to the valuation models for the embedded derivatives associated with the optional living benefit features of the Company's variable annuity products include capital market assumptions, such as interest rate and implied volatility assumptions, as well as various policyholder behavior assumptions that are actuarially determined, including lapse rates, benefit utilization rates, mortality rates and withdrawal rates. These assumptions are reviewed at least annually, and updated based upon historical experience and give consideration to any observable market data, including market transactions such as acquisitions and reinsurance transactions. Since many of the assumptions utilized in the valuation of the embedded derivatives associated with the Company's optional living benefit features are unobservable and are considered to be significant inputs to the liability valuation, the liability included in future policy benefits has been reflected within Level 3 in the fair value hierarchy.

Transfers between Levels 1 and 2 – During the three and six months ended June 30, 2011 and 2010, there were no material transfers between Level 1 and Level 2.

Changes in Level 3 assets and liabilities - The following tables provide a summary of the changes in fair value of Level 3 assets and liabilities for the three and six months ended June 30, 2011, as well as the portion of gains or losses included in income for the three and six months ended June 30, 2011 attributable to unrealized gains or losses related to those assets and liabilities still held at June 30, 2011.

	Three Months Ended June 30, 2011
	Fixed Maturities Available For Sale - Corporate Securities				Fixed Maturities Available For Sale -  Asset Backed Securities				Equity Securities - Available For Sale				Other Long- Term Investments				Reinsurance Recoverable (3)
	(in thousands)
Fair value, beginning of period assets/(liabilities)		$	101,585			$	54,515			$	977			$	244			$	(19,884	)
Total gains or (losses) (realized/unrealized):
Included in earnings:
Realized investment gains (losses), net			10				—				—				(58	)			84,761
Included in other comprehensive income (loss)			1,785				369				(1	)			—				—
Net investment income			1,124				124				—				—				—
Purchases			7,302				—				—				—				53,758
Sales			—				—				(746	)							—
Settlements			(902	)			(1,119	)			—				—				—
Transfers into Level 3 (1)			4,308				—				—				—				—
Transfers out of Level 3 (1)			(21,512	)			—				—				—				—
Fair value, end of period assets/(liabilities)		$	93,700			$	53,889			$	230			$	186			$	118,635
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period (2):
Included in earnings:
Realized investment gains (losses), net		$	—			$	—			$	—			$	(56	)		$	85,394
Asset administration fees and other income		$	—			$	—			$	—			$	—			$	—
Included in other comprehensive income (loss)		$	1,785			$	369			$	(1	)		$	—			$	—
	Three Months Ended June 30, 2011
	Future Policy Benefits
	(in thousands)
Fair value, beginning of period assets/(liabilities)		$	48,529
Total gains or (losses) (realized/unrealized):
Included in earnings:
Realized investment gains (losses), net			(87,815	)
Purchases			(56,317	)
Sales
Settlements			—
Transfers into Level 3 (1)			—
Transfers out of Level 3 (1)			—
Fair Value, end of period assets/(liabilities)		$	(95,603	)
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period (2):
Included in earnings:
Realized investment gains (losses), net		$	(88,232	)
Interest credited to policyholders' account balances		$	—
Included in other comprehensive income (loss)		$	—

(1) Transfers into or out of level 3 are generally reported as the value as of the beginning of the quarter in which the transfer occurs.

(2) Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts.

(3) Reinsurance Recoverable classified as Other Liabilities at March 31, 2011 were reclassified to Other Assets-Reinsurance Recoverable at June 30, 2011 as they were in a net asset position.

Transfers –Transfers out of Level 3 were typically due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company was able to validate. Transfers into Level 3 were primarily the result of unobservable inputs utilized within valuation methodologies and the use of broker quotes (that could not be validated) when previously, information from third party pricing services (that could be validated) was utilized.

	Six Months Ended June 30, 2011
	Fixed Maturities Available For Sale - Corporate Securities				Fixed Maturities Available For Sale -  Asset Backed Securities				Equity Securities - Available For Sale				Other  Long- Term Investments			Reinsurance Recoverable
	(in thousands)
Fair value, beginning of period assets/(liabilities)		$	74,255			$	53,858			$	—			$	—		$	186,735
Total gains or (losses) (realized/unrealized):
Included in earnings:
Realized investment gains (losses), net			35				—				—				186			(174,132	)
Included in other comprehensive income (loss)			540				1,132				1				—			—
Net investment income			2,237				241				—				—			—
Purchases			8,252				—				—				—			106,032
Sales			—				—				(747	)						—
Settlements			(1,644	)			(1,342	)			—				—			—
Transfers into Level 3 (1)			31,537				—				976				—			—
Transfers out of Level 3 (1)			(21,512	)			—				—				—			—
Fair value, end of period assets/(liabilities)		$	93,700			$	53,889			$	230			$	186		$	118,635
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period (2):
Included in earnings:
Realized investment gains (losses), net		$	—			$	—			$	—			$	162		$	(169,271	)
Asset administration fees and other income		$	—			$	—			$	—			$	—		$	—
Included in other comprehensive income (loss)		$	534			$	1,132			$	1			$	—		$	—
	Six Months Ended June 30, 2011
	Future Policy Benefits
	(in thousands)
Fair value, beginning of period assets/(liabilities)		$	(164,283	)
Total gains or (losses) (realized/unrealized):
Included in earnings:
Realized investment gains (losses), net			179,758
Purchases			(111,078	)
Sales
Settlements			—
Transfers into Level 3 (1)			—
Transfers out of Level 3 (1)			—
Fair Value, end of period assets/(liabilities)		$	(95,603	)
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period (2):
Included in earnings:
Realized investment gains (losses), net		$	175,186
Interest credited to policyholders' account balances		$	—
Included in other comprehensive income (loss)		$	—

(1) Transfers into or out of level 3 are generally reported as the value as of the beginning of the quarter in which the transfer occurs.

(2) Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts.

Transfers – As a part of an ongoing assessment of pricing inputs to ensure appropriateness of the level classification in the fair value hierarchy the Company may reassign level classification from time to time. As a result of such a review in the first quarter of 2011, it was determined that the pricing inputs for perpetual preferred stocks provided by third party pricing services were primarily based on non-binding broker quotes which could not always be verified against directly observable market information. Consequently, perpetual preferred stocks were transferred into Level 3 within the fair value hierarchy. This represents the majority of the transfers into Level 3 for Equity Securities Available for Sale. Other transfers into Level 3 were primarily the result of unobservable inputs utilized within valuation methodologies and the use of broker quotes (that could not be validated) when previously, information from third party pricing services (that could be validated) was utilized. Transfers out of Level 3 were primarily due to the use of observable inputs in valuation methodologies as well as the utilization of pricing service information for certain assets that the Company was able to validate.

The following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the three and six months ended June 30, 2010, as well as the portion of gains or losses included in income for three and six months ended June 30, 2010 attributable to unrealized gains or losses related to those assets and liabilities still held at June 30, 2010.

	Three Months Ended June 30, 2010
	Fixed Maturities Available  For Sale - Corporate Securities				Fixed Maturities Available For Sale - Foreign Government Bonds				Fixed Maturities Available For Sale - Asset- Backed Securities				Reinsurance Recoverable (3)
	(in thousands)
Fair value, beginning of period assets/(liabilities)		$	64,738			$	1,203			$	41,014			$	(103,450	)
Total gains or (losses) (realized/unrealized):
Included in earnings:
Realized investment gains (losses), net			—				—				—				734,795
Included in other comprehensive income (loss)			3,766				4				—				—
Net investment income			973				(1	)			—				—
Purchases, sales, issuances and settlements			—				—				4,275				45,826
Transfers into Level 3 (1)			5,211				—				—				—
Transfers out of Level 3 (1)			—				—				(17,422	)			—
Fair value, end of period assets/(liabilities)		$	74,688			$	1,206			$	27,867			$	677,171
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period (2):
Included in earnings:
Realized investment gains (losses), net		$	—			$	—			$	—			$	705,955
Asset management fees and other income		$	—			$	—			$	—			$	—
Included in other comprehensive income (loss)		$	3,766			$	4			$	—			$	—
	Three Months Ended June 30, 2010
	Future Policy Benefits				Other Liabilities
	(in thousands)
Fair value, beginning of period assets/(liabilities)		$	135,920			$	(31	)
Total gains or (losses) (realized/unrealized):
Included in earnings:
Realized investment gains (losses), net			(757,484	)			(21	)
Purchases, sales, issuances and settlements			(48,032	)			—
Transfers into Level 3 (1)			—				—
Transfers out of Level 3 (1)			—				—
Fair value, end of period assets/(liabilities)		$	(669,596	)		$	(52	)
Unrealized gains (losses) for the period relating to Level 3 assets that were still held by the Company at the end of the period (2):
Included in earnings:
Realized investment gains (losses), net		$	(728,659	)		$	(20	)
Interest credited to policyholders' account balances		$	—			$	—
Included in other comprehensive income (loss)		$	—			$	—

(1) Transfers into or out of level 3 are generally reported as the value as of the beginning of the quarter in which the transfer occurs.

(2) Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts.

(3) Reinsurance Recoverable classified as Other Liabilities at March 31, 2010 were reclassified to Other Assets-Reinsurance Recoverable at June 30, 2010 as they were in a net asset position.

	Six Months Ended June 30, 2010
	Fixed Maturities Available For Sale - Corporate Securities				Fixed Maturities Available For Sale - Foreign Government Bonds				Fixed Maturities Available For Sale - Asset- Backed Securities				Reinsurance Recoverable
	(in thousands)
Fair value, beginning of period assets/(liabilities)		$	63,634			$	1,219			$	43,795			$	40,351
Total gains or (losses) (realized/unrealized):
Included in earnings:
Realized investment gains (losses), net			—				—				(1,247	)			548,265
Included in other comprehensive income (loss)			4,046				(12	)			(1,215	)			—
Net investment income			1,924				(1	)			(203	)			—
Purchases, sales, issuances and settlements			(127	)			—				4,159				88,555
Transfers into Level 3 (1)			5,211				—				—				—
Transfers out of Level 3 (1)			—				—				(17,422	)			—
Fair value, end of period assets/(liabilities)		$	74,688			$	1,206			$	27,867			$	677,171
Unrealized gains (losses) for the period relating to those Level 3 assets that were still held by the Company at the end of the period (2):
Included in earnings:
Realized investment gains (losses), net		$	—			$	—			$	(654	)		$	548,398
Asset management fees and other income		$	—			$	—			$	—			$	—
Included in other comprehensive income (loss)		$	4,046			$	(12	)		$	(1,215	)		$	—
	Six Months Ended June 30, 2010
	Future Policy Benefits				Other Liabilities
	(in thousands)
Fair value, beginning of period assets/(liabilities)		$	(10,874	)		$	(53	)
Total gains or (losses) (realized/unrealized):
Included in earnings:
Realized investment gains (losses), net			(565,935	)			1
Purchases, sales, issuances and settlements			(92,787	)			—
Transfers into Level 3 (1)			—				—
Transfers out of Level 3 (1)			—				—
Fair value, end of period assets/(liabilities)		$	(669,596	)		$	(52	)
Unrealized gains (losses) for the period relating to Level 3 assets that were still held by the Company at the end of the period (2):
Included in earnings:
Realized investment gains (losses), net		$	(565,298	)		$	1
Interest credited to policyholders' account balances		$	—			$	—
Included in other comprehensive income (loss)		$	—			$	—

(1) Transfers into or out of level 3 are generally reported as the value as of the beginning of the quarter in which the transfer occurs.

(2) Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts.

Fair Value of Financial Instruments – The Company is required by US GAAP to disclose the fair value of certain financial instruments including those that are not carried at fair value. For the following financial instruments the carrying amount equals or approximates fair value: fixed maturities classified as available for sale, trading account assets, equity securities, short-term investments, cash and cash equivalents, separate account assets and long-term and short-term borrowing.

The following table discloses the Company's financial instruments where the carrying amounts and fair values may differ:

	June 30, 2011				December 31, 2010
	Carrying value		Fair value		Carrying value		Fair value
	(in thousands)
Assets:
Commercial mortgage and other loans	$	397,969	$	431,419	$	431,432	$	465,099
Policy loans	$	14,193	$	18,324	$	13,905	$	18,374
Liabilities:
Investment Contracts - Policyholders' Account Balances	$	63,880	$	63,775	$	58,549	$	58,679

The fair values presented above for those financial instruments where the carrying amounts and fair values may differ have been determined by using available market information and by applying market valuation methodologies, as described in more detail below.

Commercial mortgage and other loans

The fair value of commercial mortgage and other loans is primarily based upon the present value of the expected future cash flows discounted at the appropriate U.S. Treasury rate adjusted for the current market spread for similar quality loans.

Policy Loans

The fair value of U.S. insurance policy loans is calculated using a discounted cash flow model based upon current U.S. Treasury rates and historical loan repayment patterns.

Investment Contracts – Policyholders' Account Balances

Only the portion of policyholders' account balances related to products that are investment contracts (those without significant mortality or morbidity risk) are reflected in the table above. For payout annuities and other similar contracts without life contingencies, fair values are derived using discounted projected cash flows based on interest rates that are representative of the Company's financial strength ratings, and hence reflects the Company's own non-performance risk.