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 establishes 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. The Company's Level 1 assets and liabilities primarily include certain cash equivalents and short term investments, and equity securities that trade on an active exchange market.

Level 2 - Fair value is based on significant inputs, other than quoted prices included in Level 1, 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.), certain equity securities (mutual funds, which do not actively trade and are priced based on a net asset value, certain short term investments and certain cash equivalents (primarily commercial paper), and certain over-the-counter derivatives.

Level 3 - Fair value is based on at least one or more significant unobservable inputs for the asset or liability. The assets and liabilities in this category may require significant judgment or estimation in determining the fair value. 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.

The Company has established policies and guidelines that require the establishment of valuation methodologies and consistent application of such methodologies. These policies and guidelines govern the use of inputs and price source hierarchies and provide controls around the valuation processes. These controls include appropriate review and analysis of prices against market activity or indicators of reasonableness, approval of price source changes, price overrides, methodology changes and classification of fair value hierarchy levels. The valuation policies and guidelines are reviewed and updated as appropriate.

Assets 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 September 30, 2012
		Level 1		Level 2		Level 3			Netting (2)	Total
		(in thousands)
Fixed maturities, available-for-sale:
	U.S Treasury securities and obligations of U.S. government authorities and agencies	$	-	$	35,764	$	-	$	-	$	35,764
	Obligations of U.S. states and their political subdivisions		-		102,915		-		-		102,915
	Foreign government bonds		-		56,325		-		-		56,325
	Corporate securities		-		3,281,845		95,390		-		3,377,235
	Asset-backed securities		-		127,282		57,703		-		184,985
	Commercial mortgage-backed securities		-		429,529		-		-		429,529
	Residential mortgage-backed securities		-		341,157		-		-		341,157
Sub-total			-		4,374,817		153,093		-		4,527,910
Trading account assets:
	Asset-backed securities		-		2,029		-		-		2,029
	Equity securities		5,702		-		195		-		5,897
Sub-total			5,702		2,029		195		-		7,926
Equity securities, available-for-sale			-		22		-		-		22
Short-term investments			175,729		-		-		-		175,729
Cash equivalents			39		-		-		-		39
Other long-term investments			-		195,750		1,757		(32,202)		165,305
Reinsurance recoverables			-		-		1,822,323		-		1,822,323
Other assets			-		24,696		-		-		24,696
Sub-total excluding separate account assets			181,470		4,597,314		1,977,368		(32,202)		6,723,950
Separate account assets (1)			171,842		44,962,212		-		-		45,134,054
Total assets		$	353,312	$	49,559,526	$	1,977,368	$	(32,202)	$	51,858,004
Future policy benefits		$	-	$	-	$	1,886,648	$	-	$	1,886,648
Other liabilities			-		32,202		-		(32,202)		-
Total liabilities		$	-	$	32,202	$	1,886,648	$	(32,202)	$	1,886,648

		As of December 31, 2011 (3)
		Level 1		Level 2		Level 3			Netting (2)	Total
		(in thousands)
Fixed maturities, available-for-sale:
	U.S Treasury securities and obligations of U.S. government authorities and agencies	$	-	$	86,036	$	-	$	-	$	86,036
	Obligations of U.S. states and their political subdivisions		-		94,158		-		-		94,158
	Foreign government securities		-		77,230		-		-		77,230
	Corporate securities		6,705		3,854,846		89,658		-		3,951,209
	Asset-backed securities		-		128,821		48,563		-		177,384
	Commercial mortgage-backed securities		-		491,757		-		-		491,757
	Residential mortgage-backed securities		-		395,993		-		-		395,993
Sub-total			6,705		5,128,841		138,221		-		5,273,767
Trading account assets:
	Asset-backed securities		-		31,571		-		-		31,571
	Equity securities		6,804		-		203		-		7,007
Sub-total			6,804		31,571		203		-		38,578
Equity securities, available-for-sale			3,071		-		-		-		3,071
Short-term investments			227,235		10,366		-		-		237,601
Cash equivalents			8,112		-		-		-		8,112
Other long-term investments			-		191,144		1,213		(40,012)		152,345
Reinsurance recoverables			-		-		1,747,757		-		1,747,757
Other assets			-		25,225		-		-		25,225
Sub-total excluding separate account assets			251,927		5,387,147		1,887,394		(40,012)		7,486,456
Separate account assets (1)			1,039,821		41,902,937		-		-		42,942,758
Total assets		$	1,291,748	$	47,290,084	$	1,887,394	$	(40,012)	$	50,429,214
Future policy benefits		$	-	$	-	$	1,783,595	$	-	$	1,783,595
Other liabilities			-		40,012		-		(40,012)		-
Total liabilities		$	-	$	40,012	$	1,783,595	$	(40,012)	$	1,783,595

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.

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. 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 with the presented market observations, the security remains within Level 2.

Internally-developed valuations or indicative broker quotes are also used to determine fair value in circumstances where vendor pricing is not available, or where the Company ultimately concludes that pricing information received from the independent pricing service is not reflective of market activity. 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 September 30, 2012 and December 31, 2011 over-rides on a net basis were not material. 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. Pricing service over-rides, internally developed valuations and indicative broker quotes are generally included in Level 3 in the fair value hierarchy.

The fair value of private fixed maturities, which are comprised of investments in private placement securities, originated by internal private asset managers, are primarily determined using a discounted cash flow model. In cases where these models primarily use observable inputs, the 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. In these cases, 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, equity securities, and perpetual preferred stocks whose fair values are determined consistent with similar instruments described above under “Fixed Maturity Securities” and below under “Equity Securities.”

Equity Securities - Equity securities consist principally of investments in common and preferred stock of publicly traded companies, as well as mutual fund shares. 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 mutual fund shares that transact regularly (but do not trade in active markets because they are not publicly available) are based on transaction prices of identical fund shares and are classified within Level 2 in the fair value hierarchy. The fair values of perpetual preferred stock are based on inputs obtained from independent pricing services that are primarily based on indicative broker quotes, as the directly observable market inputs are not available. As a result, the fair values of perpetual preferred stock are classified as Level 3.

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, liquidity and 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.

The majority of the Company's derivative positions is 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 that utilize actively quoted or observable market input values from external market data providers, third-party pricing vendors and/or recent trading activity. The Company's policy is to use mid-market pricing in determining its best estimate of fair value. 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. The fair values of European style option contracts are determined using Black-Scholes option pricing models. These models' key inputs 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, volatility, and other factors.

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 that are not otherwise collateralized.

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 (e.g. individual credit default spreads, interest rates, and 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 and other techniques. Level 3 methodologies are validated through periodic comparison of the Company's fair values to broker-dealer values. As of September 30, 2012 and December 31, 2011, there were derivatives with the fair value of $1.4 million and $1.0 million classified within Level 3, and all other derivatives were classified within Level 2. See Note 5 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 and other highly liquid debt instruments. Certain money market instruments are 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 short-term investments category are typically not traded in active markets; however, their fair values are generally based on market observable inputs and, accordingly, these investments have been primarily classified within Level 2 in the fair value hierarchy.

Separate Account Assets – Separate Account Assets include fixed maturity securities, treasuries, and equity securities for which values are determined consistent with similar instruments described above under "Fixed Maturity Securities” and “Equity Securities.”

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 accounted for as 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 primarily 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 contra-liability 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 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, the Company's market-perceived risk of its own non-performance (“NPR”), as well as various assumptions that are actuarially determined, including lapse rates, benefit utilization rates, withdrawal rates, and mortality rates. Since many of these assumptions 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.

Capital market inputs and actual policyholders' account values are updated each quarter based on capital market conditions as of the end of the quarter, including interest rates, equity markets, and implied volatility. In the risk neutral valuation, interest rates are used to both grow the policyholders' account values as well as discount all projected future cash flows. The Company's discount rate assumption is based on the LIBOR swap curve, and is adjusted for NPR, as discussed below. Assuming all other assumptions remain unchanged, a decline in interest rates will generally cause account values to grow more slowly, increasing future expected benefit payments, as well as decreasing the discounting impact in the present value calculation, both of which would cause increases in the fair value of the liability. The opposite impacts occur as interest rates rise. Implied volatility also impacts the estimate of future expected benefit payments as discussed below.

Actuarial assumptions are reviewed at least annually, and updated based upon historical experience giving consideration to any observable market data, including available industry studies or market transactions such as acquisitions and reinsurance transactions. Assumptions relating to contractholder behavior such as lapse, benefit utilization, withdrawal, and mortality rates, are based on experience by product type and/or year of contract issuance, as well as available industry studies. Unless a material change in contractholder behavior or mortality experience that the Company feels is indicative of a long term trend is observed in an interim periods, assumptions related to contractholder behavior and mortality are generally updated in the third quarter of each year by considering recent experience that has occurred during the period from the most recent update to the expected amounts or updates to industry studies. These assumptions require the use of management judgment and are discussed in further detail below.

Level 3 Assets and Liabilities by Price Source – The table below presents the balances of Level 3 assets and liabilities measured at fair value with their corresponding pricing sources.

Quantitative Information Regarding Internally Priced Level 3 Assets and Liabilities – The table below presents quantitative information on significant internally priced Level 3 assets and liabilities for which the investment risks associated with market value changes are borne by the Company.

	As of September 30, 2012
		Fair Value	Valuation Techniques	Unobservable Inputs	Range (Weighted Average)
	(in thousands)
Assets:
Corporate securities	$	92,063	Discounted cash flow	Discount rate	3.20 - 17.50% (3.75%)
			Cap at call price	Call price	100% (100%)
Reinsurance recoverables	$	1,822,323	Fair values are determined in the same manner as future policy benefits

Liabilities:
Future policy benefits	$	1,886,648	Discounted cash flow	Lapse rate	0% - 14%
				NPR spread	0.24% - 1.82%
				Utilization rate	70% - 94%
				Withdrawal rate	85% - 100%
				Mortality rate (1)	0% - 13%
				Equity Volatility curve	19% - 34%

Sensitivity to Changes in Unobservable Inputs- The following is a general description of sensitivities of significant unobservable inputs and their impact on the fair value measurement, for the assets and liabilities reflected in the table above.

Corporate Securities – Internally priced corporate securities classified in Level 3 include certain below investment grade watchlist and distressed fixed maturity securities. For securities where discounted cash flows are used, the primary unobservable input is an internally developed discount rate. Significant increases (decreases) in the discount rate would result in a significantly lower (higher) fair value measurement. In isolation, an increase (decrease) in the value of these inputs would result in a higher (lower) fair value measurement.

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 accounted for as 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 – Future policy benefits classified as Level 3 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. As described above, the significant unobservable inputs to the valuation models for the embedded derivatives associated with the optional living benefit features of the Company's variable annuity products include various assumptions that are actuarially determined, including lapse rates, benefit utilization rates, withdrawal rates and mortality rates as well as volatility assumptions and assumptions used to reflect NPR.

The Company's dynamic lapse rate assumption adjusts the base lapse rate at the contract level based on a comparison of the actuarially calculated guaranteed amount and the current policyholder account value as well as other factors, such as the applicability of any surrender charges. The dynamic lapse adjustment reduces the base lapse rate based on the magnitude of the difference between the guaranteed amount and the account value. In-the-money contracts are those with a guaranteed benefit in excess of the current policyholder account value. Since in-the-money contracts are less likely to lapse, the dynamic lapse adjustment will reduce the lapse rate assumption for these contracts. For less in the money contracts, the lapse rate assumption will be closer to the base lapse rate. Lapse rates are also generally assumed to be lower for the period where surrender charges apply. A higher base lapse rate is applied to contracts in the year the surrender charge period expires.

To reflect NPR, 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. 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 NPR. The additional spread over LIBOR is determined taking into consideration publicly available information relating to the financial strength of the Company. The Company adjusts these credit spreads to remove any illiquidity risk premium, which is subject to a floor based on a percentage of the credit spread. This additional spread, as mentioned in the table above, is applied at an individual contract level and only to those individual living benefit contracts in a liability position and generally not to those in a contra-liability position. An increase in the spread over LIBOR increases the discounting impact in the present value calculation and will generally cause a decrease in the fair value of the liability.

The Company's benefit utilization rate assumption estimates the percentage of contracts that will utilize the benefit during the contract duration, including the estimated timing of the first lifetime income withdrawal by the contractholder. These assumptions vary based on the product type, the age of the contractholder, and the age of the contract. The utilization rate varies by product, based on the availability of an enhanced guarantee after a certain waiting period. For example, the utilization rates for a product with the opportunity to double the guaranteed value after a 10, 12 or 20 year accumulation period are adjusted based on contractholder experience related to such enhancement. Generally, the Company assumes a certain percentage of contractholders will utilize the guaranteed benefit (depending on the product type, contractholder age and contract age) and will begin lifetime withdrawals at various time intervals from contract inception with the remaining contractholders either beginning lifetime withdrawals immediately or never utilizing the benefit. The impact of changes in these assumptions is highly dependent on the contract type and age of the contractholder at the time of the sale and the timing of the first lifetime income withdrawal.

The Company's withdrawal rate assumption estimates the magnitude of annual contractholder withdrawals relative to the maximum allowable amount under the contract. Larger differences in the withdrawal rate assumption compared to the contractual guaranteed income withdrawal percentage, either positive or negative, will generally result in a decrease in the fair value of the liability. Prior to the exhaustion of the contractholder's total account value the Company assumes contractholders will withdraw a certain percentage of the maximum allowable amount under the contract and will withdraw the maximum once the contractholder account value is completely exhausted.

Based on historical experience the Company applies a set of age specific mortality rate adjustments compared to standard industry tables. For newly issued contracts, lower mortality rates are assumed in early durations. A mortality improvement assumption is also incorporated into the overall mortality table. Since the variable annuity living benefits generally provide for a minimum withdrawal benefit for life, increases in mortality rates will decrease the fair value of the liability, with the reverse being true with decreases in mortality rates.

Market volatility also impacts the estimate of future expected benefit payments. The Company uses an equity volatility curve based on third party inputs. The curve starts with first year implied volatility and grades to a long-term realized volatility. The first year implied volatility determines the overall slope of the equity volatility curve. An increase in implied volatility will generally increase future expected benefit payments, causing an increase in the fair value of the liability.

Transfers between Levels 1 and 2 – During the three months ended September 30, 2012, $7.0 million of preferred stock was transferred from Level 1 to Level 2. Additionally, during the nine months ended September 30, 2012, $3.2 million of equity securities, available for sale, transferred from Level 1 to Level 2. These assets were mutual funds whose fair values are based on net asset values. These transfers were the result of an ongoing monitoring assessment of pricing inputs to ensure appropriateness of the level classification in the fair value hierarchy. There were no transfers between Levels 1 and 2 for the three and nine months ended September 30, 2011.

Changes in Level 3 assets and liabilities - The following tables provide summaries of the changes in fair values of Level 3 assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods.

					Three Months Ended September 30, 2012
					Fixed Maturities Available-For-Sale - Corporate Securities		Fixed Maturities Available-For-Sale - Asset Backed Securities		Trading Account Assets- Equity Securities			Other Long-Term Investments		Reinsurance Recoverables
					(in thousands)
Fair Value, beginning of period assets/(liabilities)					$	92,461	$	51,766	$	197	$	305	$	1,761,274
	Total gains or (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net			1,567		-		-		(646)		4,037
			Asset management fees and other income			-		-		(2)		10		-
		Included in other comprehensive income (loss)				2,143		10		-		-		-
	Net investment income					1,120		151		-		-		-
	Purchases					-		7,992		-		2,089		57,012
	Sales					-		-		-		-		-
	Issuances					-		-		-		-		-
	Settlements					(1,901)		(2,216)		-		(1)		-
	Transfers into Level 3 (1)					-		-		-		-		-
	Transfers out of Level 3 (1)					-		-		-		-		-
Fair Value, end of period assets/(liabilities)					$	95,390	$	57,703	$	195	$	1,757	$	1,822,323

Unrealized gains (losses) for the period relating to
	those Level 3 assets that were still held
	at the end of the period (2):
		Included in earnings:
			Realized investment gains (losses), net		$	-	$	-	$	-	$	-	$	16,488
			Asset management fees and other income		$	-	$	-	$	(2)	$	10	$	-
			Interest credited to policyholders' account balances		$	-	$	-	$	-	$	-	$	-

				Three Months Ended September 30, 2012
				Future Policy Benefits
				(in thousands)
Fair Value, beginning of period assets/(liabilities)					$	(1,795,715)
	Total gains or (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net			(31,202)
			Purchases			-
			Sales			-
			Issuances			(59,731)
			Settlements			-
			Transfers into Level 3 (1)			-
			Transfers out of Level 3 (1)			-
Fair Value, end of period assets/(liabilities)					$	(1,886,648)

Unrealized gains (losses) for the period relating to
	those Level 3 assets that were still held
	at the end of the period (2):
		Included in earnings:
			Realized investment gains (losses), net		$	(43,763)
			Interest credited to policyholders' account balances		$	-

				Nine Months Ended September 30, 2012
				Fixed Maturities, Available For Sale – Corporate Securities		Fixed Maturities, Available For Sale –Asset- Backed Securities		Trading Account Assets - Equity Securities			Other Long Term Investments		Reinsurance Recoverables
				(in thousands)
Fair Value, beginning of period assets/(liabilities)				$	89,658	$	48,563	$	203	$	1,213	$	1,747,757
	Total gains (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net		1,576		-		-		(1,623)		(93,818)
			Asset management fees and other income		-		-		(8)		12		-
		Included in other comprehensive income (loss)			2,883		963		-		-		-
	Net investment income				3,497		502		-		-		-
	Purchases				5,400		15,492		-		2,149		168,384
	Sales				(29)		-		-		-		-
	Issuances				-		-		-		-		-
	Settlements				(7,896)		(7,817)		-		6		-
	Transfers into Level 3 (1)				11,992		-		-		-		-
	Transfers out of Level 3 (1)				(11,691)		-		-		-		-
Fair Value, end of period assets/(liabilities)				$	95,390	$	57,703	$	195	$	1,757	$	1,822,323

Unrealized gains (losses) for the period relating to those
	Level 3 assets that were still held at the end of the period (2):
		Included in earnings:
			Realized investment gains (losses), net	$	-	$	-	$	-	$	-	$	(55,459)
			Asset management fees and other income	$	-	$	-	$	(8)	$	12	$	-
			Interest credited to policyholders' account balances	$	-	$	-	$	-	$	-	$	-

				Nine Months Ended September 30, 2012
				Future Policy Benefits
				(in thousands)
Fair Value, beginning of period assets/(liabilities)				$	(1,783,595)
	Total gains (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net		73,429
			Asset management fees and other income		-
			Interest credited to policyholder account balances		-
		Included in other comprehensive income (loss)			-
	Net investment income				-
	Issuances				(176,482)
	Settlements				-
	Transfers into Level 3 (1)				-
	Transfers out of Level 3 (1)				-
Fair Value, end of period assets/(liabilities)				$	(1,886,648)

Unrealized gains (losses) for the period relating to those
	Level 3 assets that were still held at the end of the period (2):
		Included in earnings:
			Realized investment gains (losses), net	$	34,583
			Asset management fees and other income	$	-
			Interest credited to policyholders' account balances	$	-

					Three Months Ended September 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		Trading Account Assets - Equity Securities
					(in thousands)
Fair Value, beginning of period assets/(liabilities)					$	93,700	$	53,890	$	230	$	186	$	118,635	$	-
	Total gains or (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net			-		-		-		65		1,665,947		-
		Included in other comprehensive income (loss)				4,794		(834)		-		(56)		-		1
	Net investment income					1,157		92		-		-		-		-
	Purchases					450		-		-		219		53,547		-
	Sales					-		-		-		-		-		-
	Issuances					-		-		-		-		-		-
	Settlements					(749)		(1,433)		-		-		-		-
	Transfers into Level 3 (1)					19,600		-		-		-		-		-
	Transfers out of Level 3 (1)					(8,129)		-		-		-		-		-
	Other (3)					-		-		(230)		-		-		230
Fair Value, end of period assets/(liabilities)					$	110,823	$	51,715	$	-	$	414	$	1,838,129	$	231
Unrealized gains (losses) for the period relating to those
	Level 3 assets that were still held at the
	end of the period (2):
		Included in earnings:
			Realized investment gains (losses), net		$	-	$	-	$	-	$	64	$	1,667,836	$	-
			Asset management fees and other income		$	-	$	-	$	-	$	(27)	$	-	$	2
			Interest credited to policyholders' account balances		$	-	$	-	$	-		-		-		-

				Three Months Ended September 30, 2011
				Future Policy Benefits
				(in thousands)
Fair Value, beginning of period assets/(liabilities)					$	(95,603)
	Total gains or (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net			(1,722,775)
			Purchases			-
			Sales			-
			Issuances			(56,149)
			Settlements			-
			Transfers into Level 3 (1)			-
			Transfers out of Level 3 (1)			-
Fair Value, end of period assets/(liabilities)					$	(1,874,527)
Unrealized gains (losses) for the period relating to
	Level 3 assets that were still held at the
	end of the period (2):
		Included in earnings:
			Realized investment gains (losses), net		$	(1,724,423)
			Interest credited to policyholders' account balances		$	-

					Nine Months Ended September 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		Trading Account Assets- Equity Securities
					(in thousands)
Fair Value, beginning of period assets/(liabilities)					$	74,255	$	53,857	$	-	$	-	$	186,735	$	-
	Total gains or (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net			35		-		-		251		1,491,815		-
			Asset management fees and other income			-		-		-		(56)		-		-
		Included in other comprehensive income (loss)				5,334		297		-		-		-		1
	Net investment income					3,394		333		-		-		-		-
	Purchases					8,703		-		-		219		159,579		-
	Sales					-		-		(746)		-		-		-
	Issuances					-		-		-		-		-		-
	Settlements					(2,392)		(2,772)		-		-		-		-
	Transfers into Level 3 (1)					51,134		-		976		-		-		-
	Transfers out of Level 3 (1)					(29,640)		-		-		-		-		-
	Other (3)					-		-		(230)		-		-		230
Fair Value, end of period assets/(liabilities)					$	110,823	$	51,715	$	-	$	414	$	1,838,129	$	231
Unrealized gains (losses) for the period relating to those
	Level 3 assets that were still held
	at the end of the period (2):
		Included in earnings:
			Realized investment gains (losses), net		$	-	$	-	$	-	$	226	$	1,498,922	$	-
			Asset management fees and other income		$	-	$	-	$	-	$	(56)	$	-	$	2

				Nine Months Ended September 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			(1,543,017)
			Purchases			-
			Sales			-
			Issuances			(167,227)
			Settlements			-
			Transfers into Level 3 (1)			-
			Transfers out of Level 3 (1)			-
Fair Value, end of period assets/(liabilities)					$	(1,874,527)
Unrealized gains (losses) for the period relating to
	Level 3 assets that were still held
	at the end of the period (2):
		Included in earnings:
			Realized investment gains (losses), net		$	(1,549,569)
			Interest credited to policyholders' account balances		$	-

(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) Other primarily represents reclasses of certain assets between reporting categories.

Transfers – Transfers into Level 3 are generally the result of unobservable inputs utilized within valuation methodologies and the use of broker quotes (that cannot be validated) for which information from third party pricing services (that can be validated) was previously utilized. Transfers out of Level 3 are generally 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 is able to validate. Other significant transfers into and out of Level 3 are discussed below:

For the nine months ended September 30, 2011, the majority of the Equity Securities Available for Sale transfers into Level 3 were due to the determination that the pricing inputs for perpetual preferred stocks provided by third party pricing services were primarily based on indicative broker quotes which could not always be verified against directly observable market information. Perpetual preferred stocks were included in Equity Securities Available for Sale and subsequently transferred to Trading Account Assets.

The table below presents the carrying amount and fair value by fair value hierarchy level of certain financial instruments that are not reported at fair value. However, in some cases, as described below, the carrying amount equals or approximates fair value.

				September 30, 2012										December 31, 2011
				Fair Value								Carrying Amount (1)		Fair Value		Carrying Amount
				Level 1		Level 2		Level 3		Total		Total		Total		Total

			(in thousands)
Assets:
	Commercial mortgage and other loans		$	-	$	-	$	511,077	$	511,077	$	461,186	$	490,151	$	449,359
	Policy loans			-		-		12,065		12,065		12,065		14,316		14,316
	Cash			438		-		-		438		438		749		749
	Accrued investment income			-		52,574		-		52,574		52,574		59,033		59,033
	Other assets			-		13,352		-		13,352		13,352		12,237		12,237
		Total assets	$	438	$	65,926	$	523,142	$	589,506	$	539,615	$	576,486	$	535,694

Liabilities:
	Policyholders' Account Balances - Investment contracts		$	-	$	-	$	74,331	$	74,331	$	71,895	$	66,659	$	66,176
	Cash collateral for loaned securities			-		48,371		-		48,371		48,371		125,884		125,884
	Short-term debt			-		83,502		-		83,502		83,502		27,803		27,803
	Long-term debt			-		642,557		-		642,557		600,000		627,415		600,000
	Other liabilities			-		137,693		-		137,693		137,693		169,139		169,139
	Separate account liabilities - investment contracts			-		1,030		-		1,030		1,030		1,192		1,192
		Total liabilities	$	-	$	913,153	$	74,331	$	987,484	$	942,491	$	1,018,092	$	990,194

		(1) Carrying values presented herein differ from those in the Company’s Unaudited Interim Statement of Financial Position because certain items within the respective financial statement captions are not considered financial instruments or out of scope under authoritative guidance relating to disclosures of the fair value of financial instruments. Financial statement captions excluded from the above table are not considered financial instruments.

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

The fair value of most commercial mortgage loans is based upon the present value of the expected future cash flows discounted at the appropriate U.S. Treasury rate plus an appropriate credit spread for similar quality loans. The quality ratings for these loans, a primary determinant of the credit spreads and a significant component of the pricing process, are based on an internally-developed methodology.

The Company believes that due to the short-term nature of certain assets, the carrying value approximates fair value. These assets include: cash, accrued investment income, and other assets that meet the definition of financial instruments, including receivables such as unsettled trades, accounts receivable. The Company believes that carrying value approximates fair value due to the short term until settlement of most of these assets.

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 reflect the Company's own non-performance risk. For those balances that can be withdrawn by the customer at any time without prior notice or penalty, the fair value is the amount estimated to be payable to the customer as of the reporting date, which is generally the carrying value.

The fair value of short−term and long−term debt is generally determined by either prices obtained from independent pricing services, which are validated by the Company, or discounted cash flow models. These fair values consider the Company's own non−performance risk. Discounted cash flow models predominately use market observable inputs such as the borrowing rates currently available to the Company for debt and financial instruments with similar terms and remaining maturities. For commercial paper issuances and other debt with a maturity of less than 90 days, the carrying value approximates fair value.

This represents the collateral received or paid in connection with loaning or borrowing securities. For these transactions, the carrying value of the related asset/liability approximates fair value as they equal the amount of cash collateral received/paid.

Other liabilities are primarily payables, such as unsettled trades, drafts, escrow deposits and accrued expense payables. Due to the short term until settlement of most of these liabilities, the Company believes that carrying value approximates fair value.

Only the portion of separate account liabilities related to products that are investments contracts are reflected in the table above. Separate account liabilities are recorded at the amount credited to the contractholder, which equals the change in fair value of the corresponding separate account assets including contracholder deposit less withdrawals and fees. Therefore, carrying value approximates fair value.