Fair Value of Assets and Liabilities

3 Months Ended

Mar. 31, 2013

Fair Value of Assets and Liabilities [Abstract]

Fair Value of Assets and Liabilities

4.    FAIR VALUE OF ASSETS AND LIABILITIES

Fair Value Measurement – Fair value represents 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 fair value guidance establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. 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. The Company's Level 1 assets and liabilities primarily include certain cash equivalents, 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.

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 March 31, 2013
		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	$	-	$	4,654	$	-	$	-	$	4,654
	Obligations of U.S. states and their political subdivisions		-		102,443		-		-		102,443
	Foreign government bonds		-		39,586		-		-		39,586
	Corporate securities		-		2,887,973		95,575		-		2,983,548
	Asset-backed securities		-		110,393		72,740		-		183,133
	Commercial mortgage-backed securities		-		391,470		9,107		-		400,577
	Residential mortgage-backed securities		-		234,267		-		-		234,267
Sub-total			-		3,770,786		177,422		-		3,948,208
Trading account assets:
	Asset-backed securities		-		2,014		-		-		2,014
	Equity securities		6,149		-		267		-		6,416
Sub-total			6,149		2,014		267		-		8,430
Equity securities, available-for-sale			-		22		-		-		22
Short-term investments			135,193		1,088		-		-		136,281
Cash equivalents			160		-		-		-		160
Other long-term investments			-		139,623		463		(51,032)		89,054
Reinsurance recoverables			-		-		1,191,409		-		1,191,409
Other assets			-		20,315		2,000		-		22,315
Sub-total excluding separate account assets			141,502		3,933,848		1,371,561		(51,032)		5,395,879
Separate account assets (1)			127,467		45,617,673		-		-		45,745,140
Total assets		$	268,969	$	49,551,521	$	1,371,561	$	(51,032)	$	51,141,019
Future policy benefits		$	-	$	-	$	1,230,323	$	-	$	1,230,323
Other liabilities			-		51,032		-		(51,032)		-
Total liabilities		$	-	$	51,032	$	1,230,323	$	(51,032)	$	1,230,323

		As of December 31, 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	$	-	$	4,686	$	-	$	-	$	4,686
	Obligations of U.S. states and their political subdivisions		-		102,116		-		-		102,116
	Foreign government securities		-		55,529		-		-		55,529
	Corporate securities		-		3,095,699		95,555		-		3,191,254
	Asset-backed securities		-		118,179		69,298		-		187,477
	Commercial mortgage-backed securities		-		394,902		-		-		394,902
	Residential mortgage-backed securities		-		267,486		-		-		267,486
Sub-total			-		4,038,597		164,853		-		4,203,450
Trading account assets:
	Asset-backed securities		-		2,022		-		-		2,022
	Equity securities		5,687		-		207		-		5,894
Sub-total			5,687		2,022		207		-		7,916
Equity securities, available-for-sale			-		22		-		-		22
Short-term investments			103,761		-		-		-		103,761
Cash equivalents			-		-		-		-		-
Other long-term investments			-		173,348		1,054		(42,351)		132,051
Reinsurance recoverables			-		-		1,732,094		-		1,732,094
Other assets			-		20,632		1,995		-		22,627
Sub-total excluding separate account assets			109,448		4,234,621		1,900,203		(42,351)		6,201,921
Separate account assets (1)			122,142		44,479,578		-		-		44,601,720
Total assets		$	231,590	$	48,714,199	$	1,900,203	$	(42,351)	$	50,803,641
Future policy benefits		$	-	$	-	$	1,793,137	$	-	$	1,793,137
Other liabilities			-		42,351		-		(42,351)		-
Total liabilities		$	-	$	42,351	$	1,793,137	$	(42,351)	$	1,793,137

• 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.Separate account liabilities are not included in the above table as they are reported at contract value and not fair value in the Company's Unaudited InterimStatements of Financial Position.
• “Netting” amounts represent the impact of offsetting asset and liability positions held with the same counterparty.

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 for each security are generally sourced from multiple pricing vendors, and a vendor hierarchy is maintained by asset type based on historical pricing experience and vendor expertise. The Company 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 with an internally developed valuation. As of March 31, 2013 and December 31, 2012 over-rides on a net basis were not material. 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. If the fair value is determined using pricing inputs that are observable in the market, the securities have been reflected within Level 2; otherwise a Level 3 classification is used.

Private fixed maturities also include debt investments in funds that pay a stated coupon anda 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 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. Estimated fair values for most privately traded equity securities are determined using discounted cash flow, earnings multiple and other valuation models that require a substantial level of judgment around inputs and therefore are classified within Level 3. 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 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 can be affected by changes in interest rates, foreign exchange rates, credit spreads, market volatility, expected returns, non-performance risk (“NPR”), 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 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 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 structured products. These derivatives are valued based upon models (such as Monte Carlo simulation models and other techniques) with some significant unobservable market inputs or inputs (e.g. interest rates, equity indices, dividend yields, etc.) from less actively traded markets (e.g model-specific input values, including volatility parameters, etc.). Level 3 methodologies are validated through periodic comparison of the Company's fair values to broker-dealer values.As of March 31, 2013 and December 31, 2012, there were derivatives with the fair value of $116 thousand and $739 thousand, respectively, 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 instrumentsand 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 this category are generally fair valued based on market observable inputs, and these investments have primarily beenclassified within Level 2.

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 living benefit guarantees.

Future Policy Benefits - The liability for future policy benefits primarily includes general account liabilities for the optional living benefit features of the Company's 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 contractholders less the present value of assessed rider fees attributable to the optional living benefit feature. This methodology could result in either a liability or contra-liability balance, given changing capital market conditions and various contractholder 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 these embedded derivatives include capital market assumptions, such as interest rateand implied volatility assumptions, the Company's market-perceived risk of its own non-performance, as well as actuarially determined assumptions, including contractholder behavior, such as 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 contractholders' 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 contractholders' account values and discount all projected future cash flows. The Company's discount rate assumption is based on the LIBOR swap curve, adjusted for an additional spread over LIBOR to reflect NPR.

Actuarial assumptions, including contractholder behavior and mortality, 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. These assumptions are generally updated in the third quarter of each year unless a material change that the Company feels is indicative of a long term trend is observed in an interim period.

Transfers between Levels 1 and 2–There were no transfers between Levels 1 and 2 for the three months ended March 31, 2013 and 2012. Transfers between levels are generally reported at the values as of the beginning of the period in which the transfers occur.

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

	As of March 31, 2013
		Internal (1)		External (2)		Total
	(in thousands)
Corporate securities	$	93,484	$	2,091	$	95,575
Asset-backed securities		-		72,740		72,740
Commercial mortgage-backed securities		-		9,107		9,107
Equity securities		-		267		267
Other long-term Investments		116		347		463
Reinsurance recoverables		1,191,409		-		1,191,409
Other assets		-		2,000		2,000
Total assets	$	1,285,009	$	86,552	$	1,371,561
Future policy benefits		1,230,323		-		1,230,323
Total liabilities	$	1,230,323	$	-	$	1,230,323
	As of December 31, 2012
		Internal (1)		External (2)		Total
	(in thousands)
Corporate securities	$	92,263	$	3,292	$	95,555
Asset-backed securities		-		69,298		69,298
Equity securities		-		207		207
Other long-term Investments		739		315		1,054
Reinsurance recoverables		1,732,094		-		1,732,094
Other assets		-		1,995		1,995
Total assets	$	1,825,096	$	75,107	$	1,900,203
Future policy benefits		1,793,137		-		1,793,137
Total liabilities	$	1,793,137	$	-	$	1,793,137

• Represents valuations reflecting both internally-derived and market inputs, as well as third-party pricing information or quotes. See below for additional information related to internally-developed valuation for significant items in the above table.
• Represents unadjusted prices from independent pricing services and independent non-binding broker quotes where pricing inputs are not readily available.

Quantitative Information Regarding Internally Priced Level 3 Assets and Liabilities – The tables below present quantitative information on significant internally priced Level 3 assets and liabilities.

	As of March 31, 2013
		Fair Value	Primary Valuation Techniques	Unobservable Inputs	Range (Weighted Average)	Impact of Increase in Input on Fair Value (1)
	(in thousands)
Assets:
Corporate securities	$	93,484	Discounted cash flow	Discount rate	3.26 - 15.00% (3.65%)	Decrease
			Cap at call price	Call price	100% (100%)	Increase
Reinsurance recoverables	$	1,191,409	Fair values are determined in the same manner as future policy benefits
Liabilities:
Future policy benefits	$	1,230,323	Discounted cash flow	Lapse rate (2)	0% - 14%	Decrease
				NPR spread (3)	0.18% - 1.52%	Decrease
				Utilization rate (4)	70% - 94%	Increase
				Withdrawal rate (5)	85% - 100%	Increase
				Mortality rate (6)	0% - 13%	Decrease
				Equity Volatility curve	16% - 33%	Increase
	As of December 31, 2012
		Fair Value	Primary Valuation Techniques	Unobservable Inputs	Range (Weighted Average)	Impact of Increase in Input on Fair Value (1)
	(in thousands)
Assets:
Corporate securities	$	92,263	Discounted cash flow	Discount rate	3.27 - 17.50% (3.74%)	Decrease
			Cap at call price	Call price	100% (100%)	Increase
Reinsurance recoverables	$	1,732,094	Fair values are determined in the same manner as future policy benefits
Liabilities:
Future policy benefits	$	1,793,137	Discounted cash flow	Lapse rate (2)	0% - 14%	Decrease
				NPR spread (3)	0.20% - 1.60%	Decrease
				Utilization rate (4)	70% - 94%	Increase
				Withdrawal rate (5)	85% - 100%	Increase
				Mortality rate (6)	0% - 13%	Decrease
				Equity Volatility curve	19% - 34%	Increase

• Conversely, the impact of a decrease in input would have the opposite impact for the fair value as that presented in the table.
• Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed amount and the current contractholder account value as well as other factors, such as the applicability of any surrender charges. A dynamic lapse adjustment reduces the base lapse rate when the guaranteed amount is greater than the account value, as in-the-money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower for the period where surrender charges apply.
• To reflect NPR, the Company incorporates an additional spread over LIBOR into the discount rate used in the valuation of individual living benefit contracts in a liability position and generally not to those in a contra-liability position. In determining the NPR spread, the Company believes it appropriate to reflect the financial strength ratings of the Company as these are insurance liabilities and senior to debt. The additional spread over LIBOR is determined taking into consideration publicly available information relating to the financial strength of the Company adjusted for any illiquidity risk premium.
• The utilization rate assumption estimates the percentage of contracts that will utilize the benefit during the contract duration, and begin lifetime withdrawals at various time intervals from contract inception. The remaining contractholders are assumed to either begin lifetime withdrawals immediately or never utilize the benefit. These assumptions vary based on the product type, the age of the contractholder, and the age of the contract. 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 withdrawal rate assumption estimates the magnitude of annual contractholder withdrawals relative to the maximum allowable amount under the contract. The fair value of the liability will generally increase the closer the withdrawal rate is to 100%.
• Range reflects the mortality rate for the vast majority of business with living benefits, with contractholders ranging from 35 to 90 years old. While the majority of living benefits have a minimum age requirement, certain benefits do not have an age restriction. This results in contractholders for certain benefits with mortality rates approaching 0%. Based on historical experience, the Company applies a set of age and duration specific mortality rate adjustments compared to standard industry tables. A mortality improvement assumption is also incorporated into the overall mortality table.

Interrelationships Between Unobservable Inputs—In addition to the sensitivities of fair value measurements to changes in each unobservable input in isolation, as reflected in the table above, interrelationships between these inputs may also exist, such that a change in one unobservable input may give rise to a change in another, or multiple, inputs. Examples of such interrelationships for significant internally-priced Level 3 assets and liabilities are as follows:

Corporate Securities—The rate used to discount future cash flows reflects current risk free rates plus credit and liquidity spread requirements that market participants would use to value an asset. The discount rate may be influenced by many factors, including market cycles, expectations of default, collateral, term, and asset complexity. Each of these factors can influence discount rates, either in isolation, or in response to other factors.

Future Policy Benefits—The unobservable contractholder behavior inputs related to the liability for the optional living benefit features of the Company's variable annuity contracts included in future policy benefits are generally based on a long-term view of historical experience. While experience for these products is still emerging, the Company expects efficient benefit utilization and withdrawal rates to generally be correlated with lapse rates. However, contractholder behavior is generally highly dependent on the facts and circumstances surrounding the individual contractholder, such as their liquidity needs or tax situation, which could drive lapse behavior independent of other contractholder behavior assumptions. The dynamic lapse adjustment assumes lower lapses when the guaranteed amount is greater than the account value, as in-the-money contracts are less likely to lapse. Therefore, to the extent contractholder behavior results in greater in-the-moneyness at the contract level, the dynamic lapse function will reduce lapse rates for those contracts. Similarly, to the extent that increases in equity volatility are correlated with overall declines in the capital markets, the dynamic lapse function will lower overall lapse rates as contracts become more in-the-money.

Valuation Process for Fair Value Measurements Categorized within Level 3 - The Company has established an internal control infrastructure over the valuation of financial instruments that requires ongoing oversight by its various Business Groups. These management control functions are segregated from the trading and investing functions. For invested assets, the Company has established oversight teams, often in the form of Pricing Committees within each asset management group. The teams, which typically include representation from investment, accounting, operations, legal and other disciplines are responsible for overseeing and monitoring the pricing of the Company's investments and performing periodic due diligence reviews of independent pricing services. An actuarial valuation unit oversees the valuation of optional living benefit features of the Company's variable annuity contracts. This unit works with segregated modeling and database administration teams to validate the appropriateness of input data and logic, data flow and implementation.

The Company has also 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 investment prices against market activity or indicators of reasonableness, approval of price source changes, price overrides, methodology changes and classification of fair value hierarchy levels. For optional living benefit features of the Company's variable annuity products, the actuarial valuation unit periodically performs baseline testing of contract input data and actuarial assumptions are reviewed at least annually, and updated based upon historical experience giving consideration to any observable market data, including available industry studies. The valuation policies and guidelines are reviewed and updated as appropriate.

Within the trading and investing functions, the Company has established policies and procedures that relate to the approval of all new transaction types, transaction pricing sources and fair value hierarchy coding within the financial reporting system. For variable annuity product changes or new launches of optional living benefit features, the actuarial valuation unit validates input logic and new product features and agrees new input data directly to source documents.

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 March 31, 2013
				Fixed Maturities Available-For-Sale							Trading Account Assets - Equity Securities
				Corporate Securities		Asset- Backed Securities			Commercial Mortgage-Backed				Other Long Term Investments
				(in thousands)
Fair Value, beginning of period assets/(liabilities)				$	95,555	$	69,298	$	-	$	207	$	1,054
	Total gains (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net		4		-		-		-		(624)
			Asset management fees and other income		-		-		-		60		33
		Included in other comprehensive income (loss)			(271)		162		-		-		-
	Net investment income				1,154		135		17		-		-
	Purchases				600		7,058		9,090		-		-
	Sales				-		-		-		-		-
	Issuances				-		-		-		-		-
	Settlements				(1,467)		(3,913)		-		-		-
	Transfers into Level 3 (1)				-		-		-		-		-
	Transfers out of Level 3 (1)				-		-		-		-		-
Fair Value, end of period assets/(liabilities)				$	95,575	$	72,740	$	9,107	$	267	$	463
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	$	-	$	-	$	-	$	-	$	(624)
			Asset management fees and other income	$	-	$	-	$	-	$	61	$	33
			Interest credited to policyholders' account balances	$	-	$	-	$	-	$	-	$	-
				Three Months Ended March 31, 2013
				Reinsurance Recoverables		Other Assets		Future Policy Benefits
				(in thousands)
Fair Value, beginning of period assets/(liabilities)				$	1,732,094	$	1,995	$	(1,793,136)
	Total gains (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net		(598,821)		-		623,786
			Asset management fees and other income		-		-		-
			Interest credited to policyholder account balances
		Included in other comprehensive income (loss)			-		5		-
	Net investment income				-		-		-
	Purchases				58,136		-		-
	Sales				-		-		-
	Issuances				-		-		(60,973)
	Settlements				-		-		-
	Transfers into Level 3 (1)				-		-		-
	Transfers out of Level 3 (1)				-		-		-
Fair Value, end of period assets/(liabilities)				$	1,191,409	$	2,000	$	(1,230,323)
					.
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	$	(588,859)	$	-	$	613,833
			Asset management fees and other income	$	-	$	-	$	-
			Interest credited to policyholders' account balances	$	-	$	-	$	-

					Three Months Ended March 31, 2012
					Fixed Maturities Available-For-Sale
					Corporate Securities			Asset Backed Securities		Other Long-Term Investments		Reinsurance Recoverable	Trading Account Assets - Equity Securities
					(in thousands)
Fair Value, beginning of period assets/(liabilities)					$	89,658	$	48,563	$	1,213	$	1,747,757	$	203
	Total gains or (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net			7		-		(977)		(598,252)		-
			Asset management fees and other income			-		-		13		-		(2)
		Included in other comprehensive income (loss)				(856)		862		-		-		-
	Net investment income					1,228		158		-		-		-
	Purchases					2,625		-		-		55,757		-
	Sales					-		-		-		-		-
	Issuances					2,775		-		-		-		-
	Settlements					(4,298)		(2,883)		7		-		-
	Transfers into Level 3 (1)					11,991		-		-		-		-
	Transfers out of Level 3 (1)					-		-		-		-		-
	Other (3)					-		-		-		-		-
Fair Value, end of period assets/(liabilities)					$	103,130	$	46,700	$	256	$	1,205,262	$	201
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		$	-	$	-	$	(874)	$	(585,098)	$	-
			Asset management fees and other income		$	-	$	-	$	13	$	-	$	(1)
			Interest credited to policyholders' account		$	-	$	-	$	-		-	$	-
		Included in other comprehensive income (loss)			$	(782)	$	885	$	-	$	-	$	-
				Three Months Ended March 31, 2012
				Future Policy Benefits
				(in thousands)
Fair Value, beginning of period assets/(liabilities)					$	(1,783,595)
	Total gains or (losses) (realized/unrealized):
		Included in earnings:
			Realized investment gains (losses), net			621,492
			Sales			-
			Issuances			(58,447)
			Settlements			-
			Transfers out of Level 3 (1)			-
Fair Value, end of period assets/(liabilities)					$	(1,220,550)
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		$	608,066
			Asset management fees and other income			-
			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

Fair Value of Financial Instruments

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.

				March 31, 2013										December 31, 2012
				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		$	-	$	-	$	481,771	$	481,771	$	432,216	$	473,964	$	426,981
	Policy loans			-		-		12,300		12,300		12,300		11,957		11,957
	Cash			5,038		-		-		5,038		5,038		266		266
	Accrued investment income			-		46,996		-		46,996		46,996		44,656		44,656
	Receivables from parent and affiliates			-		8,274		-		8,274		8,274		199		199
	Other assets			-		26,139		-		26,139		26,139		12,410		12,410
		Total assets	$	5,038	$	81,409	$	494,071	$	580,518	$	530,963	$	543,452	$	496,469
Liabilities:
	Policyholders' Account Balances - Investment contracts		$	-	$	-	$	80,952	$	80,952	$	78,093	$	78,159	$	75,242
	Long-term debt			-		423,937		-		423,937		400,000		426,827		400,000
	Other liabilities			-		162,333		-		162,333		162,333		194,047		194,047
	Separate account liabilities - investment contracts			-		942		-		942		942		964		964
		Total liabilities	$	-	$	-	$	-	$	690,393	$	663,597	$	738,973	$	709,229
		(1) Carrying values presented herein differ from those in the Company’s Unaudited Interim Statements 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 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 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.

Policy Loans

Policy Loans carrying value approximates fair value.

Cash, Accrued Investment Income, Receivables from Parent and Affiliates,and Other Assets

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.

Policyholders' Account Balances – Investment Contracts

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.

Cash Collateral for Loaned Securities

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.

Long-Term Debt

The fair value of 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.

Other Liabilities

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.

Separate Account Liabilities–Investment Contracts

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 reflects the change in fair value of the corresponding separate account assets including contractholder deposits less withdrawals and fees. Therefore, carrying value approximates fair value.