The following tables provide information relating to fixed maturities and equity securities (excluding investments classified as trading) as of the dates indicated:

			September 30, 2012
											Other-than-
						Gross		Gross			temporary
			Amortized			Unrealized		Unrealized	Fair		impairments
			Cost			Gains		Losses	Value		in AOCI (3)

			(in thousands)
Fixed maturities, available-for-sale
U.S. Treasury securities and obligations of U.S.
	government authorities and agencies		$	35,363	$	401	$	-	$	35,764	$	-
Obligations of U.S. states and their political
	subdivisions			94,734		8,452		271		102,915		-
Foreign government bonds				45,855		10,470		-		56,325		-
Corporate securities				3,034,106		344,149		1,020		3,377,235		-
Asset-backed securities (1)				177,191		9,054		1,260		184,985		(3,704)
Commercial mortgage-backed securities				399,534		30,038		43		429,529		-
Residential mortgage-backed securities (2)				323,350		17,807		-		341,157		(50)
Total fixed maturities, available-for-sale			$	4,110,133	$	420,371	$	2,594	$	4,527,910	$	(3,754)

Equity securities, available-for-sale
	Common Stocks
		Industrial, miscellaneous & other	$	18	$	4	$	-	$	22

			December 31, 2011 (4)
											Other-than-
						Gross		Gross			temporary
			Amortized			Unrealized		Unrealized	Fair		impairments
			Cost			Gains		Losses	Value		in AOCI (3)

			(in thousands)
Fixed maturities, available-for-sale
	U.S. Treasury securities and obligations of U.S.
		government authorities and agencies	$	85,196	$	839	$	-	$	86,035	$	-
	Obligations of U.S. states and their political
		subdivisions		85,822		8,336		-		94,158		-
	Foreign government bonds			66,449		10,782		-		77,231		-
	Corporate securities			3,585,776		369,769		4,336		3,951,209		(236)
	Asset-backed securities (1)			172,390		9,798		4,804		177,384		(3,906)
	Commercial mortgage-backed securities			463,576		28,189		8		491,757		-
	Residential mortgage-backed securities (2)			379,486		16,562		55		395,993		(55)
Total fixed maturities, available-for-sale			$	4,838,695	$	444,275	$	9,203	$	5,273,767	$	(4,197)

Equity securities, available-for-sale
	Common Stocks
		Industrial, miscellaneous & other	$	2,510	$	561	$	-	$	3,071

The amortized cost and fair value of fixed maturities by contractual maturities at September 30, 2012, are as follows:

		Available-for-Sale
		Amortized		Fair
		Cost		Value

		(in thousands)
Due in one year or less		$	833,834	$	868,462
Due after one year through five years			1,299,010		1,425,074
Due after five years through ten years			587,882		681,147
Due after ten years			489,332		597,556
Asset-backed securities			177,191		184,985
Commercial mortgage-backed securities			399,534		429,529
Residential mortgage-backed securities			323,350		341,157
	Total	$	4,110,133	$	4,527,910

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Asset-backed, commercial mortgage-backed, and residential mortgage-backed securities are shown separately in the table above, as they are not due at a single maturity date.

The following table depicts the sources of fixed maturity proceeds and related gross investment gains (losses), as well as losses on impairments of both fixed maturities and equity securities:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2012		2011		2012		2011

		(in thousands)
Fixed maturities, available-for-sale
	Proceeds from sales	$	186,603	$	10,700	$	380,099	$	562,602
	Proceeds from maturities/repayments		282,052		146,615		655,857		376,721
	Gross investment gains from sales, prepayments, and maturities		2,233		7,734		16,266		53,698
	Gross investment losses from sales and maturities		(109)		(216)		(133)		(216)

Fixed maturity and equity security impairments
	Net writedowns for other-than-temporary impairment losses
	on fixed maturities recognized in earnings (1)	$	(71)	$	(559)	$	(223)	$	(858)
	Writedowns for impairments on equity securities		-		3,500		-		4,250

As discussed in Note 2, a portion of certain OTTI losses on fixed maturity securities are recognized in OCI. For these securities the net amount recognized in earnings (“credit loss impairments”) represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. Any remaining difference between the fair value and amortized cost is recognized in OCI.

The following tables set forth the amount of pre-tax credit loss impairments on fixed maturity securities held by the Company as of the dates indicated, for which a portion of the OTTI loss was recognized in OCI, and the corresponding changes in such amounts.

		Three Months Ended		Nine Months Ended
		September 30,		September 30,
		2012		2012

			(in thousands)
Balance, beginning of period		$	3,387	$	3,542
Credit loss impairments previously recognized on securities which matured, paid down,
	prepaid or were sold during the period		(59)		(190)
Additional credit loss impairments recognized in the current period on securities previously impaired			71		223
Increases due to the passage of time on previously recorded credit losses			28		79
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected
	to be collected		(114)		(341)
Balance, end of period		$	3,313	$	3,313


		Three Months Ended		Nine Months Ended
		September 30,		September 30,
		2011		2011

			(in thousands)
Balance, beginning of period		$	11,201	$	14,148
Credit loss impairments previously recognized on securities which matured, paid down,
	prepaid or were sold during the period		(8,206)		(11,420)
Additional credit loss impairments recognized in the current period on securities previously impaired			558		857
Increases due to the passage of time on previously recorded credit losses			55		317
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected			(76)		(370)
	to be collected
Balance, end of period		$	3,532	$	3,532

The following table sets forth the composition of the Company's “trading account assets” as of the dates indicated:

	September 30, 2012				December 31, 2011
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value

	(in thousands)

Fixed maturities - Asset-backed securities	$	1,964	$	2,029	$	30,800	$	31,571
Equity securities		5,171		5,897		6,664		7,007
Total trading account assets	$	7,135	$	7,926	$	37,464	$	38,578

The net change in unrealized gains and losses from trading account assets still held at period end, recorded within “Asset administration fees and other income” included $0.2 million of gains and ($1.1) million of losses during the three months ended September 30, 2012 and 2011, respectively, and ($0.3) million and ($3.9) million of losses during the nine months ended September 30, 2012 and 2011, respectively.

The Company's commercial mortgage and other loans are comprised as follows, as of the dates indicated:

		September 30, 2012				December 31, 2011
			% of				% of
		Amount	Total			Amount	Total

Commercial mortgage and other loans by property type:		(in thousands)				(in thousands)
Office	$	59,684	12.9	%	$	60,220	13.3	%
Retail		80,490	17.4			68,369	15.1
Apartments/Multi-Family		111,297	24.0			114,900	25.5
Industrial		144,163	31.1			144,513	32.1
Hospitality		9,228	2.0			9,289	2.1
Total commercial mortgage loans		404,862	87.4			397,291	88.1
Agricultural property loans		53,815	11.6			48,964	10.9
Other		4,597	1.0			4,605	1.0
Total commercial mortgage and other loans		463,274	100.0	%		450,860	100.0	%
Valuation allowance		(2,088)				(1,501)
Total net commercial mortgage and other loans by property type	$	461,186			$	449,359

The commercial mortgage and agricultural property loans are geographically dispersed throughout the United States, Canada and Asia with the largest concentrations in California (23%), New York (16%), and Ohio (10%) at September 30, 2012.

Activity in the allowance for losses for all commercial mortgage and other loans, as of the dates indicated, is as follows:

(1) Agricultural loans represent $0.2 million of the ending allowance at both September 30, 2012 and December 31, 2011.

The following tables set forth the allowance for credit losses and the recorded investment in commercial mortgage and other loans as of dates indicated:


	September 30, 2012		December 31, 2011
	Total Loans		Total Loans

	(in thousands)
Allowance for Credit Losses:
Ending balance: individually evaluated for impairment (1)	$	-	$	-
Ending balance: collectively evaluated for impairment (2)		2,088		1,501
Total ending balance	$	2,088	$	1,501

Recorded Investment (3):
Ending balance gross of reserves: individually evaluated for impairment (1)	$	-	$	-
Ending balance gross of reserves: collectively evaluated for impairment (2)		463,274		450,860
Total ending balance, gross of reserves	$	463,274	$	450,860

Impaired loans include those loans for which it is probable that all amounts due will not be collected according to the contractual terms of the loan agreement. As shown in the table above, there were no impaired commercial mortgage and other loans identified in management's specific review of probable loan losses and related allowance at September 30, 2012 and December 31, 2011. The average recorded investment in impaired loans with an allowance recorded, before the allowance for losses, was $0 million and $3 million at September 30, 2012 and December 31, 2011, respectively.

There was no net investment income recognized on these loans for the nine months ended September 30, 2012 and for the year ended December 31, 2011. See Note 2 for information regarding the Company's accounting policies for non-performing loans.

Impaired commercial mortgage and other loans with no allowance for losses are loans in which the fair value of the collateral or the net present value of the loans' expected future cash flows equals or exceeds the recorded investment. The Company had no such loans at September 30, 2012 or December 31, 2011. See Note 2 for information regarding the Company's accounting policies for non-performing loans.

As described in Note 2, loan-to-value and debt service coverage ratios are measures commonly used to assess the quality of commercial mortgage and other loans. As of September 30, 2012 and December 31, 2011, 86% or $397 million of the recorded investment and 85% or $384 million of the recorded investment, respectively, had a loan-to-value ratio of less than 80%. As of September 30, 2012 and December 31, 2011, 92% and 96% of the recorded investment had a debt service coverage ratio of 1.0X or greater, respectively. As of September 30, 2012 and December 31, 2011, approximately 8% or $38 million and 4% or $19 million, respectively, of the recorded investment had a loan-to-value ratio greater than 100% or debt service coverage ratio less than 1.0X, reflecting loans where the mortgage amount exceeds the collateral value or where current debt payments are greater than income from property operations; none of which related to agricultural loans.

All commercial mortgage and other loans were in current status including $0 million and $3.1 million of hospitality loans in non-accrual status at September 30, 2012, and December 31, 2011, respectively. Nonaccrual loans are those on which the accrual of interest has been suspended after the loans become 90 days delinquent as to principal or interest payments, or earlier when the Company has doubts about collectability and loans for which a loan specific reserve has been established. See Note 2 for further discussion regarding non-accrual status loans.

During 2011, the Company sold commercial mortgage loans to an affiliated company. See Note 7 for further discussion regarding related party transactions.

Commercial mortgage and other loans are occasionally restructured in a troubled debt restructuring. These restructurings generally include one or more of the following: full or partial payoffs outside of the original contract terms: changes to interest rates; extensions of maturity; or additions or modifications to covenants. Additionally, the Company may accept assets in full or partial satisfaction of the debt as part of a troubled debt restructuring. When restructurings occur, they are evaluated individually to determine whether the restructuring or modification constitutes a “troubled debt restructuring” as defined by authoritative accounting guidance. The Company's outstanding investment related to commercial mortgage and other loans that have been restructured in a troubled debt restructuring is not material.

As of September 30, 2012, the Company has not committed to provide additional funds to borrowers that have been involved in a troubled debt restructuring.

Net investment income for the three and nine months ended September 30, 2012 and 2011, was from the following sources:

			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2012		2011		2012		2011
		(in thousands)
Fixed maturities, available-for-sale			$	59,419	$	68,351	$	190,400	$	211,147
Equity securities, available-for-sale				-		(10)		7		333
Trading account assets				35		412		849		1,563
Commercial mortgage and other loans				6,871		6,300		20,584		21,444
Policy loans				273		158		625		564
Short-term investments and cash equivalents				140		186		503		499
Other long-term investments				6,614		(760)		7,529		252
Gross investment income				73,352		74,637		220,497		235,802
Less investment expenses				(1,981)		(1,650)		(6,056)		(5,097)
	Net investment income		$	71,371	$	72,987	$	214,441	$	230,705

Realized investment gains (losses), net, for the three and nine months ended September 30, 2012 and 2011, were from the following sources:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2012		2011		2012		2011

		(in thousands)
Fixed maturities		$	2,056	$	6,959	$	15,912	$	52,624
Equity securities			703		2,039		703		1,996
Commercial mortgage and other loans			(483)		439		(588)		5,114
Derivatives			(62,916)		46,731		(77,590)		24,451
Other			-		(107)		-		(109)
	Realized investment gains (losses), net	$	(60,640)	$	56,061	$	(61,563)	$	84,076

Net unrealized investment gains and losses on securities classified as “available-for-sale” and certain other long-term investments and other assets are included in the Unaudited Interim Statements of Financial Position as a component of AOCI. Changes in these amounts include reclassification adjustments to exclude from OCI those items that are included as part of “Net income” for a period that had been part of OCI in earlier periods. The amounts for the periods indicated below, split between amounts related to fixed maturity securities on which an OTTI loss has been recognized, and all other net unrealized investment gains and losses, are as follows:

Net Unrealized Investment Gains and Losses on Fixed Maturity Securities on which an OTTI loss has been recognized


				Deferred Policy				Accumulated Other
				Acquisition Costs,				Comprehensive
				Deferred Sales				Income (Loss) Related
		Net Unrealized		Inducements		Deferred		To Net Unrealized
		Gains (Losses) on		and Valuation of		Income Tax		Investment
		Investments		Business Acquired		(Liability) Benefit		Gains (Losses)
		(in thousands)
Balance, December 31, 2011		$	(1,740)	$	691	$	367	$	(682)
Net investment (losses) gains on investments arising during
	the period		2,399		-		(840)		1,559
Reclassification adjustment for gains (losses) included in
	net income		(1)		-		-		(1)
Impact of net unrealized investment (losses) gains on
	deferred policy acquisition costs, deferred sales inducements and
	valuation of business acquired		-		(949)		332		(617)
Balance, September 30, 2012		$	658	$	(258)	$	(141)	$	259

				Deferred Policy						Accumulated Other
				Acquisition Costs,						Comprehensive
				Deferred Sales			Policy	Deferred		Income (Loss) Related
		Net Unrealized		Inducements			Holders'	Income Tax		To Net Unrealized
		Gains/(Losses) on		and Valuation of			Account	(Liability)		Investment
		Investments (1)		Business Acquired			Balances	Benefit		Gains (Losses)
		(in thousands)
Balance, December 31, 2011		$	441,680	$	(192,122)	$	-	$	(88,164)	$	161,394
Net investment gains (losses) on investments arising during
	the period		(4,629)		-		-		1,620		(3,009)
Reclassification adjustment for (losses) gains included in
	net income		(16,612)		-		-		5,814		(10,798)
Impact of net unrealized investment (losses) gains on
	deferred policy acquisition costs, deferred sales inducements and
	and valuation of business acquired		-		30,618		-		(10,723)		19,895

Impact of net unrealized investment (gains) losses on
	policyholders' account balances		-		-		(2,279)		798		(1,481)
Balance, September 30, 2012		$	420,439	$	(161,504)		(2,279)	$	(90,655)	$	166,001

The table below presents net unrealized gains (losses) on investments by asset class as of the dates indicated:


		September 30, 2012		December 31, 2011

		(in thousands)
Fixed maturity securities on which an OTTI loss has been recognized		$	658	$	(1,740)
Fixed maturity securities, available-for-sale - all other			417,119		436,812
Equity securities, available-for-sale			4		561
Affiliated notes			4,734		5,263
Derivatives designated as cash flow hedges (1)			(1,453)		(962)
Other investments			35		3
Unrealized gains (losses) on investments and derivatives		$	421,097	$	439,937

	(1) See Note 5 for more information on cash flow hedges.

Duration of Gross Unrealized Loss Positions for Fixed Maturities and Equity Securities

The following table shows the fair value and gross unrealized losses aggregated by investment category and length of time that individual fixed maturity securities and equity securities have been in a continuous unrealized loss position, as of the dates indicated:

			September 30, 2012
			Less than twelve months				Twelve months or more				Total
			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

			(in thousands)
Fixed maturities, available-for-sale
U.S. Treasury securities and obligations of
	U.S. government authorities and agencies		$	7,183	$	271	$	-	$	-	$	7,183	$	271
Corporate securities				37,216	$	639		35,863		381		73,079		1,020
Commercial mortgage-backed securities				4,666		43		-		-		4,666		43
Asset-backed securities				15,455		38		31,925		1,222		47,380		1,260
Residential mortgage-backed securities				-		-		-		-		-		-
		Total	$	64,520	$	991	$	67,788	$	1,603	$	132,308	$	2,594
Equity securities, available-for-sale			$	-	$	-	$	-	$	-	$	-	$	-

		December 31, 2011
		Less than twelve months				Twelve months or more				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

		(in thousands)
Fixed maturities, available-for-sale
Corporate securities		$	129,881	$	4,010	$	1,130	$	326	$	131,011	$	4,336
Commercial mortgage-backed securities			7,014		8		-		-		7,014		8
Asset-backed securities			48,831		782		28,430		4,022		77,261		4,804
Residential mortgage-backed securities			484		55		-		-		484		55
	Total	$	186,210	$	4,855	$	29,560	$	4,348	$	215,770	$	9,203
Equity securities, available-for-sale		$	-	$	-	$	-	$	-	$	-	$	-

The gross unrealized losses, related to fixed maturities at September 30, 2012 and December 31, 2011 are composed of $1.5 million and $5.4 million, respectively, related to high or highest quality securities based on National Association of Insurance Commissioners (“NAIC”) or equivalent rating and $1.1 million and $3.8 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. At September 30, 2012, none of the gross unrealized losses represented declines in value of greater than 20%, as compared to $3.4 million at December 31, 2011 that represented declines in value of greater than 20%, $0.3 million of which had been in that position for less than six months. At September 30, 2012, the $1.6 million of gross unrealized losses of twelve months or more were concentrated in asset backed securities and the service and manufacturing sectors of the Company's corporate securities. At December 31, 2011, $4.3 million of gross unrealized losses of twelve months or more were concentrated in asset backed securities, $1.7 million in services and $1.1 million in manufacturing sector of the Company's corporate securities.

In accordance with its policy described in Note 2, the Company concluded that an adjustment to earnings for other-than-temporary impairments for these securities was not warranted at September 30, 2012 or December 31, 2011. These conclusions are based on a detailed analysis of the underlying credit and cash flows on each security. The gross unrealized losses are primarily attributable to credit spread widening and increased liquidity discounts. At September 30, 2012, the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell the securities before the anticipated recovery of its remaining amortized cost basis.

At September 30, 2012 and December 31, 2011, there were no gross unrealized losses, related to equity securities that represented declines of greater than 20%.