Fair values of financial instruments have been determined by using available market information and the valuation techniques described below. Considerable judgment is often required in interpreting market data to develop estimates of fair value. The use of different assumptions or valuation techniques may have a material effect on the estimated fair value amounts. The following table presents the carrying amounts and estimated fair values of the Company's financial instruments at December 31, 2011 and 2010 (dollars in thousands).

			December 31, 2011				December 31, 2010
						Estimated Fair				Estimated Fair
				Carrying Value		Value		Carrying Value		Value
Assets:
	Fixed maturity securities		$	16,200,950	$	16,200,950	$	14,304,597	$	14,304,597
	Mortgage loans on real estate			991,731		1,081,924		885,811		933,513
	Policy loans			1,260,400		1,260,400		1,228,418		1,228,418
	Funds withheld at interest			5,410,424		6,041,984		5,421,952		5,838,064
	Short-term investments			88,566		88,566		118,387		118,387
	Other invested assets			963,626		966,237		683,307		681,242
	Cash and cash equivalents			962,870		962,870		463,661		463,661
	Accrued investment income			144,334		144,334		127,874		127,874
	Reinsurance ceded receivables			3,643		1,248		95,557		91,893
Liabilities:
	Interest-sensitive contract liabilities		$	6,203,001	$	6,307,779	$	5,856,945	$	5,866,088
	Long-term and short-term debt			1,414,688		1,462,329		1,216,410		1,226,517
	Collateral finance facility			652,032		390,900		850,039		514,250
	Company-obligated mandatorily
		redeemable preferred securities		--		--		159,421		221,341

Publicly traded fixed maturity securities are valued based upon quoted market prices or estimates from independent pricing services, independent broker quotes and pricing matrices. Private placement fixed maturity securities are valued based on the credit quality and duration of marketable securities deemed comparable by the Company's investment advisor, which may be of another issuer. The Company utilizes information from third parties, such as pricing services and brokers, to assist in determining fair values for certain assets and liabilities; however, management is ultimately responsible for all fair values presented in the Company's financial statements. The fair value of mortgage loans on real estate is estimated using discounted cash flows. Policy loans typically carry an interest rate that is adjusted annually based on a market index and therefore carrying value approximates fair value. The carrying value of funds withheld at interest approximates fair value except where the funds withheld are specifically identified in the agreement. When funds withheld are specifically identified in the agreement, the fair value is based on the fair value of the underlying assets which are held by the ceding company. The carrying values of cash and cash equivalents and short-term investments approximates fair values due to the short-term maturities of these instruments. Common and preferred equity investments included in other invested assets are reflected at fair value on the consolidated balance sheets based primarily on quoted market prices in active markets. Derivative financial instruments included in other invested assets are reflected at fair value on the consolidated balance sheets and are principally valued using an income approach. Limited partnership interests included in other invested assets consist of those investments accounted for using the cost method. The fair value of limited partnerships is based on net asset values. The remaining carrying value recognized in the consolidated balance sheets represents investments in limited partnership interests accounted for using the equity method, which do not meet the definition of financial instruments for which fair value is required to be disclosed. The carrying value for accrued investment income approximates fair value.

The carrying and fair values of interest-sensitive contract liabilities reflected in the table above exclude contracts with significant mortality risk. The fair value of the Company's interest-sensitive contract liabilities and related reinsurance ceded receivables is based on the cash surrender value of the liabilities, adjusted for recapture fees. The fair value of the Company's long-term debt is estimated based on either quoted market prices or quoted market prices for the debt of corporations with similar credit quality. The fair values of the Company's collateral finance facility and company-obligated mandatorily redeemable preferred securities are estimated using discounted cash flows. See Note 13 – “Debt and Trust Preferred Securities,” for information regarding the company-obligated mandatorily redeemable preferred securities.

General accounting principles for Fair Value Measurements and Disclosures define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In accordance with these principles, valuation techniques utilized by management for invested assets and embedded derivatives reported at fair value are generally categorized into three types:

Market Approach. Market approach valuation techniques use prices and other relevant information from market transactions involving identical or comparable assets or liabilities. Valuation techniques consistent with the market approach include comparables and matrix pricing. Comparables use market multiples, which might lie in ranges with a different multiple for each comparable. The selection of where within the range the appropriate multiple falls requires judgment, considering both quantitative and qualitative factors specific to the measurement. Matrix pricing is a mathematical technique used principally to value certain securities without relying exclusively on quoted prices for the specific securities but comparing the securities to benchmark or comparable securities.

Income Approach. Income approach valuation techniques convert future amounts, such as cash flows or earnings, to a single discounted amount. These techniques rely on current expectations of future amounts. Examples of income approach valuation techniques include present value techniques, option-pricing models and binomial or lattice models that incorporate present value techniques.

Cost Approach. Cost approach valuation techniques are based upon the amount that, at present, would be required to replace the service capacity of an asset, or the current replacement cost. That is, from the perspective of a market participant (seller), the price that would be received for the asset is determined based on the cost to a market participant (buyer) to acquire or construct a substitute asset of comparable utility.

The three approaches described above are consistent with generally accepted valuation techniques. While all three approaches are not applicable to all assets or liabilities reported at fair value, where appropriate and possible, one or more valuation techniques may be used. The selection of the valuation technique(s) to apply considers the definition of an exit price and the nature of the asset or liability being valued and significant expertise and judgment is required. The Company performs regular analysis and review of the various techniques utilized in determining fair value to ensure that the valuation approaches utilized are appropriate and consistently applied, and that the various assumptions are reasonable. As indicated above, the Company also utilizes information from third parties, such as pricing services and brokers, to assist in determining fair values for certain assets and liabilities; however, management is ultimately responsible for all fair values presented in the Company's financial statements. The Company performs analysis and review of the information and prices received from third parties to ensure that the prices represent a reasonable estimate of the fair value. This process involves quantitative and qualitative analysis and is overseen by the Company's investment and accounting personnel. Examples of procedures performed include, but are not limited to, initial and ongoing review of third party pricing services and techniques, review of pricing trends and monitoring of recent trade information. In addition, the Company utilizes both internal and external cash flow models to analyze the reasonableness of fair values utilizing credit spread and other market assumptions, where appropriate. As a result of the analysis, if the Company determines there is a more appropriate fair value based upon the available market data, the price received from the third party is adjusted accordingly.

For invested assets reported at fair value, the Company utilizes when available, fair values based on quoted prices in active markets that are regularly and readily obtainable. Generally, these are very liquid investments and the valuation does not require management judgment. When quoted prices in active markets are not available, fair value is based on the market valuation techniques described above, primarily a combination of the market approach, including matrix pricing and the income approach. For corporate and government securities, the assumptions and inputs used by management in applying these techniques include, but are not limited to: using standard market observable inputs which are derived from, or corroborated by, market observable data including market yield curve, duration, call provisions, observable prices and spreads for similar publicly traded or privately traded issues that incorporate the credit quality and industry sector of the issuer. For private placement and structured securities that include residential mortgage-backed securities, commercial mortgage-backed securities and asset-backed securities, valuation is based primarily on matrix pricing or other similar techniques using standard market inputs including spreads for actively traded securities, spreads off benchmark yields, expected prepayment speeds and volumes, current and forecasted loss severity, rating, weighted average coupon, weighted average maturity, average delinquency rates, geographic region, debt-service coverage ratios and issuance-specific information including, but not limited to: collateral type, payment terms of the underlying assets, payment priority within the tranche, structure of the security, deal performance and vintage of loans.

When observable inputs are not available, the market standard valuation techniques for determining the estimated fair value of certain types of securities that trade infrequently, and therefore have little or no price transparency, rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management judgment or estimation, and cannot be supported by reference to market activity. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and are believed to be consistent with what other market participants would use when pricing such securities.

The use of different techniques, assumptions and inputs may have a material effect on the estimated fair values of the Company's securities holdings.

For the years ended December 31, 2011 and 2010, the application of market standard valuation techniques applied to similar assets and liabilities has been consistent.

General accounting principles for Fair Value Measurements and Disclosures also establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1- Quoted prices in active markets for identical assets or liabilities. The Company's Level 1 assets and liabilities include investment securities and derivative contracts that are traded in exchange markets.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or market standard valuation techniques and assumptions with significant inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Such observable inputs include benchmarking prices for similar assets in active, liquid markets, quoted prices in markets that are not active and observable yields and spreads in the market. The Company's Level 2 assets and liabilities include investment securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose values are determined using market standard valuation techniques. This category primarily includes corporate securities, Canadian and Canadian provincial government securities, and residential and commercial mortgage-backed securities, among others. Level 2 valuations are generally obtained from third party pricing services for identical or comparable assets or liabilities or through the use of valuation methodologies using observable market inputs. Prices from services are validated through analytical reviews and assessment of current market activity.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the related assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using market standard valuation techniques described above. When observable inputs are not available, the market standard techniques for determining the estimated fair value of certain securities that trade infrequently, and therefore have little transparency, rely on inputs that are significant to the estimated fair value and that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management judgment or estimation and cannot be supported by reference to market activity. Even though unobservable, management believes these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing similar assets and liabilities. For the Company's invested assets, this category generally includes corporate securities (primarily private placements), asset-backed securities (including those with exposure to subprime mortgages), and to a lesser extent, certain residential and commercial mortgage-backed securities, among others. Prices are determined using valuation methodologies such as discounted cash flow models and other similar techniques. Non-binding broker quotes, which are utilized when pricing service information is not available, are reviewed for reasonableness based on the Company's understanding of the market, and are generally considered Level 3. Under certain circumstances, based on its observations of transactions in active markets, the Company may conclude the prices received from independent third party pricing services or brokers are not reasonable or reflective of market activity. In those instances, the Company would apply internally developed valuation techniques to the related assets or liabilities. Additionally, the Company's embedded derivatives, all of which are associated with reinsurance treaties, are classified in Level 3 since their values include significant unobservable inputs associated with actuarial assumptions regarding policyholder behavior.

When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest priority level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, gains and losses for such assets and liabilities categorized within Level 3 may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). Assets and liabilities measured at fair value on a recurring basis as of December 31, 2011 and December 31, 2010 are summarized below (dollars in thousands).

December 31, 2011:								Fair Value Measurements Using:
						Total		Level 1		Level 2		Level 3
Assets:
	Fixed maturity securities – available-for-sale:
		Corporate securities			$	7,461,106	$	76,097	$	6,410,840	$	974,169
		Canadian and Canadian provincial governments				3,869,933		--		3,869,933		--
		Residential mortgage-backed securities				1,227,234		--		1,145,579		81,655
		Asset-backed securities				401,991		--		208,499		193,492
		Commercial mortgage-backed securities				1,242,219		--		1,126,243		115,976
		U.S. government and agencies securities				374,002		300,514		73,488		--
		State and political subdivision securities				205,386		12,894		182,119		10,373
		Other foreign government, supranational and foreign
			government-sponsored enterprises			1,419,079		223,440		1,195,639		--
				Total fixed maturity securities – available-for-sale		16,200,950		612,945		14,212,340		1,375,665
	Funds withheld at interest – embedded derivatives					(361,456)		--		--		(361,456)
	Cash equivalents					563,895		563,895		--		--
	Short-term investments					46,671		37,155		9,516		--
	Other invested assets:
		Non-redeemable preferred stock				78,183		58,906		19,277		--
		Other equity securities				35,717		5,308		18,920		11,489
		Derivatives:
			Interest rate swaps			168,484		--		168,484		--
			Foreign currency forwards			4,560		--		4,560		--
			CPI swaps			766		--		766		--
			Credit default swaps			(4,003)		--		(4,003)		--
			Equity options			87,243		--		87,243		--
		Collateral				32,622		27,052		5,570		--
				Total other invested assets		403,572		91,266		300,817		11,489
	Reinsurance ceded receivable – embedded derivatives					4,945		--		--		4,945
		Total			$	16,858,577	$	1,305,261	$	14,522,673	$	1,030,643

Liabilities:
	Interest sensitive contract liabilities – embedded derivatives				$	1,028,241	$	--	$	--	$	1,028,241
	Other liabilities:
		Derivatives:
			Interest rate swaps			3,171		--		3,171		--
			Credit default swaps			5,633		--		5,633		--
			Equity options			(2,864)		--		(2,864)		--
			Foreign currency swaps			23,710		--		23,710		--
		Total			$	1,057,891	$	--	$	29,650	$	1,028,241

December 31, 2010:								Fair Value Measurements Using:
						Total		Level 1		Level 2		Level 3
Assets:
	Fixed maturity securities – available-for-sale:
		Corporate securities			$	6,710,443	$	15,089	$	5,823,175	$	872,179
		Canadian and Canadian provincial governments				3,057,567		--		3,057,567		--
		Residential mortgage-backed securities				1,473,077		--		1,289,786		183,291
		Asset-backed securities				391,209		--		162,651		228,558
		Commercial mortgage-backed securities				1,337,853		--		1,190,297		147,556
		U.S. government and agencies securities				206,216		166,861		39,355		--
		State and political subdivision securities				164,460		6,865		150,612		6,983
		Other foreign government, supranational and foreign
			government-sponsored enterprises			963,772		5,130		951,906		6,736
				Total fixed maturity securities – available-for-sale		14,304,597		193,945		12,665,349		1,445,303
	Funds withheld at interest – embedded derivatives					(274,220)		--		--		(274,220)
	Cash equivalents⁽¹⁾					253,746		253,746		--		--
	Short-term investments					7,310		5,257		2,053		--
	Other invested assets:
		Non-redeemable preferred stock				99,550		72,393		26,737		420
		Other equity securities				40,661		5,126		19,119		16,416
		Derivatives:
			Interest rate swaps			20,042		--		20,042		--
			Foreign currency forwards			5,924		--		5,924		--
			CPI swaps			1,491		--		1,491		--
			Credit default swaps			2,429		--		2,429		--
			Equity options			5,043		--		5,043		--
		Collateral				48,223		48,223		--		--
				Total other invested assets		223,363		125,742		80,785		16,836
	Reinsurance ceded receivable – embedded derivatives					75,431		--		--		75,431
		Total			$	14,590,227	$	578,690	$	12,748,187	$	1,263,350

Liabilities:
	Interest sensitive contract liabilities – embedded derivatives				$	721,485	$	--	$	--	$	721,485
	Other liabilities:
		Derivatives:⁽²⁾
			Interest rate swaps			18,850		--		18,850		--
			Credit default swaps			131		--		131		--
			Foreign currency swaps			45,749		--		45,749		--
		Total			$	786,215	$	--	$	64,730	$	721,485

(1)				Information as of December 31, 2010 was recast to reflect the disclosure of fair value information for certain cash equivalents during 2011.
(2)				Balances have been adjusted due to typographical errors in the 2010 Annual Report on Form 10-K.

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

If the Company ultimately concludes that pricing information received from the independent pricing service is not reflective of market activity, non-binding broker quotes are used, if available. If the Company concludes the values from both pricing services and brokers are not reflective of market activity, it may override the information from the pricing service or broker with an internally developed valuation; however, this occurs infrequently. Internally developed valuations or non-binding broker quotes are also used to determine fair value in circumstances where vendor pricing is not available. These estimates may use significant unobservable inputs, which reflect the Company's assumptions about the inputs market participants would use in pricing the asset. Circumstances where observable market data are not available may include events such as market illiquidity and credit events related to the security. Pricing service overrides, internally developed valuations and non-binding broker quotes are generally based on significant unobservable inputs and are often reflected as Level 3 in the valuation hierarchy.

The fair values of private placement securities are primarily determined using a discounted cash flow model. In certain cases these models primarily use observable inputs with a discount rate based upon the average of spread surveys collected from private market intermediaries who are active in both primary and secondary transactions, taking into account, among other factors, the credit quality and industry sector of the issuer and the reduced liquidity associated with private placements. Generally, these securities have been reflected within Level 3. 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 security.

Embedded Derivatives – For embedded derivative liabilities associated with the underlying products in reinsurance treaties, primarily equity-indexed and variable annuity treaties, the Company utilizes a market standard technique, which includes an estimate of future equity option purchases and an adjustment for the Company's own credit risk that takes into consideration the Company's financial strength rating. The capital market inputs to the model, such as equity indexes, equity volatility, interest rates and the Company's credit adjustment, are generally observable. However, the valuation models also use inputs requiring certain actuarial assumptions such as future interest margins, policyholder behavior, including future equity participation rates, and explicit risk margins related to non-capital market inputs, that are generally not observable and may require use of significant management judgment. Changes in interest rates, equity indices, equity volatility, the Company's own credit risk, and actuarial assumptions regarding policyholder behavior may result in significant fluctuations in the value of embedded derivatives liabilities associated with equity-indexed annuity reinsurance treaties.

The fair value of embedded derivatives associated with funds withheld reinsurance treaties is determined based upon a total return swap technique with reference to the fair value of the investments held by the ceding company that support the Company's funds withheld at interest asset. The fair value of the underlying assets is generally based on market observable inputs using industry standard valuation techniques. However, the valuation also requires certain significant inputs based on actuarial assumptions, which are generally not observable and accordingly, the valuation is considered Level 3 in the fair value hierarchy.

Cash Equivalents and Short-Term Investments – Cash equivalents and short-term investments include money market instruments, commercial paper and other highly liquid debt instruments. Money market instruments are generally valued using unadjusted quoted prices in active markets that are accessible for identical assets and are primarily classified as Level 1. The fair value of certain other short-term investments, such as floating rate notes and bonds with original maturities less then twelve months, are based upon other market observable data and are typically classified as Level 2. Various time deposits carried as cash equivalents or short-term investments are not measured at estimated fair value and therefore are excluded from the tables presented.

Equity Securities – Equity securities consist principally of preferred stock of publicly and privately traded companies. The fair values of most publicly traded equity securities are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the fair value hierarchy. Estimated fair values for most privately traded equity securities are determined using valuation models that require a substantial level of judgment. In determining the fair value of certain privately traded equity securities the models may also use unobservable inputs, which reflect the Company's assumptions about the inputs market participants would use in pricing. Most privately traded equity securities are classified within Level 3. The fair values of preferred equity securities are based on prices obtained from independent pricing services and these securities are generally classified within Level 2 in the fair value hierarchy.

Derivative Assets and Derivative Liabilities – Level 1 measurement includes assets and liabilities comprised of exchange-traded derivatives. Valuation is based on unadjusted quoted prices in active markets that are readily and regularly available. Level 2 measurement includes all types of derivative instruments utilized by the Company with the exception of exchange-traded derivatives. These derivatives are principally valued using an income approach. Valuations of interest rate contracts, non-option-based, are based on present value techniques, which utilize significant inputs that may include the swap yield curve, LIBOR basis curves, and repurchase rates. Valuations of foreign currency contracts, non-option-based, are based on present value techniques, which utilize significant inputs that may include the swap yield curve, LIBOR basis curves, currency spot rates, and cross currency basis curves. Valuations of credit contracts, non-option-based, are based on present value techniques, which utilize significant inputs that may include the swap yield curve, credit curves, and recovery rates. Valuations of equity market contracts, non-option-based, are based on present value techniques, which utilize significant inputs that may include the swap yield curve, spot equity index levels, and dividend yield curves. Valuations of equity market contracts, option-based, are based on option pricing models, which utilize significant inputs that may include the swap yield curve, spot equity index levels, dividend yield curves, and equity volatility. The Company does not currently have derivatives included in Level 3 measurement.

As of December 31, 2011 and 2010, respectively, the Company classified approximately 8.5% and 10.1% of its fixed maturity securities in the Level 3 category. These securities primarily consist of private placement corporate securities with an inactive trading market. Additionally, the Company has included asset-backed securities with sub-prime exposure and mortgage-backed securities with below investment grade ratings in the Level 3 category due to the current market uncertainty associated with these securities and the Company's utilization of information from third parties for the valuation of these securities.

The Company's recognizes transfers of financial instruments into and out of levels within the fair value hierarchy at the beginning of the quarter in which the actual event or change in circumstances that caused the transfer occurs. Financial instruments transferred into Level 3 are due to a lack of observable market transactions and price information. Financial instruments are transferred out of Level 3 when circumstances change such that significant inputs can be corroborated with market observable data. This may be due to a significant increase in market activity for the financial instrument, a specific event, one or more significant input(s) becoming observable or when a long-term interest rate significant to a valuation becomes short-term and thus observable. Transfers out of Level 3 were primarily the result of the Company using observable pricing information or a third party pricing quotation that appropriately reflects the fair value of those financial instruments, without the need for adjustment based on the Company's own assumptions regarding the characteristics of a specific financial instrument or the current liquidity in the market. In addition, certain transfers out of Level 3 were also due to increased observations of market transactions and price information for those financial instruments. Transfers from Level 1 to Level 2 are due to the lack of observable market data when pricing these securities, while transfers from Level 2 to Level 1 are due to an increase in the availability of market observable data in an active market. During 2011, there were $77.3 million of fixed maturity securities and $2.3 million of equity securities transferred from Level 1 to Level 2, and $55.7 million of fixed maturity securities and $3.3 million of equity securities transferred from Level 2 to Level 1. Transfers between Level 1 and Level 2 were not significant in 2010.

The tables below provide a summary of the changes in fair value of Level 3 assets and liabilities for the year ended December 31, 2011, as well as the portion of gains or losses included in income for the year ended December 31, 2011 attributable to unrealized gains or losses related to those assets and liabilities still held at December 31, 2011 (dollars in thousands).

For the year ended December 31, 2011:				Fixed maturity securities - available-for-sale
							Residential				Commercial
				Corporate			mortgage-backed		Asset-backed		mortgage-backed
				securities			securities		securities		securities
Balance January 1, 2011				$	872,336	$	183,291	$	228,558	$	147,556
	Total gains/losses (realized/unrealized)
		Included in earnings, net:
			Investment income, net of related expenses		218		836		1,686		2,321
			Investment related gains (losses), net		1,863		(2,032)		(10,236)		(12,354)
			Claims & other policy benefits		--		--		--		--
			Interest credited		--		--		--		--
			Policy acquisition costs and other insurance expenses		--		--		--		--
		Included in other comprehensive income			21,011		4,580		3,902		8,060
	Purchases⁽¹⁾				305,401		6,478		65,467		7,683
	Sales⁽¹⁾				(48,653)		(21,178)		(27,844)		--
	Settlements⁽¹⁾				(125,797)		(16,672)		(24,092)		(3,548)
	Transfers into Level 3				80,302		30,159		45,984		76,955
	Transfers out of Level 3				(132,512)		(103,807)		(89,933)		(110,697)
Balance December 31, 2011				$	974,169	$	81,655	$	193,492	$	115,976

Unrealized gains and losses recorded in earnings for the period relating to those Level 3 assets and liabilities that were still held at the end of the period

		Included in earnings, net:
			Investment income, net of related expenses	$	162	$	816	$	1,595	$	2,307
			Investment related gains (losses), net		(1,223)		(594)		(5,058)		(12,366)
			Claims & other policy benefits		--		--		--		--
			Interest credited		--		--		--		--
			Policy acquisition costs and other insurance expenses		--		--		--		--

For the year ended December 31, 2011 (continued):				Fixed maturity securities - available-for-sale
				Fixed maturity securities - available-for-sale
						Other foreign
				State		government,		Funds withheld
				and political		supranational and		at interest-
				subdivision		foreign government-		embedded
				securities		sponsored enterprises		derivative
Balance January 1, 2011				$	6,983	$	6,579	$	(274,220)
	Total gains/losses (realized/unrealized)
		Included in earnings, net:
			Investment income, net of related expenses		361		2		--
			Investment related gains (losses), net		(15)		--		(87,236)
			Claims & other policy benefits		--		--		--
			Interest credited		--		--		--
			Policy acquisition costs and other insurance expenses		--		--		--
		Included in other comprehensive income			3,390		4		--
	Purchases⁽¹⁾				2,334		--		--
	Sales⁽¹⁾				--		--		--
	Settlements⁽¹⁾				(88)		--		--
	Transfers into Level 3				48,469		20		--
	Transfers out of Level 3				(51,061)		(6,605)		--
Balance December 31, 2011				$	10,373	$	--	$	(361,456)

Unrealized gains and losses recorded in earnings for the period relating to those Level 3 assets and liabilities that were still held at the end of the period

		Included in earnings, net:
			Investment income, net of related expenses	$	361	$	(36)	$	--
			Investment related gains (losses), net		--		--		(87,236)
			Claims & other policy benefits		--		--		--
			Interest credited		--		--		--
			Policy acquisition costs and other insurance expenses		--		--		--

For the year ended December 31, 2011 (continued):				Other invested				Reinsurance		Interest sensitive
				assets- non-		Other invested		ceded receivable-		contract liabilities
				redeemable		assets- other		embedded		embedded
				preferred stock		equity securities		derivative		derivative
Balance January 1, 2011				$	420	$	16,416	$	75,430	$	(721,485)
	Total gains/losses (realized/unrealized)
		Included in earnings, net:
			Investment income, net of related expenses		--		--		--		--
			Investment related gains (losses), net		--		3,504		--		(224,184)
			Claims & other policy benefits		--		--		--		(2,230)
			Interest credited		--		--		--		(88,255)
			Policy acquisition costs and other insurance expenses		--		--		9,421		--
		Included in other comprehensive income			--		(4,663)		--		--
	Purchases⁽¹⁾				--		797		6,201		(71,505)
	Sales⁽¹⁾				(420)		(4,565)		--		--
	Settlements⁽¹⁾				--		--		(86,107)		79,418
	Transfers into Level 3				--		--		--		--
	Transfers out of Level 3				--		--		--		--
Balance December 31, 2011				$	--	$	11,489	$	4,945	$	(1,028,241)

Unrealized gains and losses recorded in earnings for the period relating to those Level 3 assets and liabilities that were still held at the end of the period

		Included in earnings, net:
			Investment income, net of related expenses	$	--	$	--	$	--	$	--
			Investment related gains (losses), net		--		--		--		(228,910)
			Claims & other policy benefits		--		--		--		(2,346)
			Interest credited		--		--		--		(167,673)
			Policy acquisition costs and other insurance expenses		--		--		18,589		--

(1)			The amount reported within purchases, sales, issuances and settlements is the purchase/issuance price (for purchases and issuances) and the sales/settlement proceeds (for sales and settlements) based upon the actual date purchased/issued or sold/settled. Items purchased/issued and sold/settled in the same period are excluded from the rollforward.

The tables below provide a summary of the changes in fair value of Level 3 assets and liabilities for the year ended December 31, 2010, as well as the portion of gains or losses included in income for the year ended December 31, 2010 attributable to unrealized gains or losses related to those assets and liabilities still held at December 31, 2010 (dollars in thousands).

For the year ended December 31, 2010:				Fixed maturity securities - available-for-sale
							Residential				Commercial
				Corporate			mortgage-backed		Asset-backed		mortgage-backed
				securities			securities		securities		securities
Balance January 1, 2010				$	994,219	$	144,457	$	262,767	$	329,559
	Total gains/losses (realized/unrealized)
		Included in earnings, net:
			Investment income, net of related expenses		657		1,763		2,843		3,467
			Investment related gains (losses), net		839		(7,479)		(7,494)		(6,369)
			Claims & other policy benefits		--		--		--		--
			Interest credited		--		--		--		--
			Policy acquisition costs and other insurance expenses		--		--		--		--
		Included in other comprehensive income			34,319		26,808		31,340		22,907
	Purchases, issuances, sales and settlements⁽¹⁾				71,695		(43,236)		(45,677)		37,476
	Transfers into Level 3				126,133		102,939		78,880		73,653
	Transfers out of Level 3				(355,683)		(41,961)		(94,101)		(313,137)
Balance December 31, 2010				$	872,179	$	183,291	$	228,558	$	147,556

Unrealized gains and losses recorded in earnings for the period relating to those Level 3 assets and liabilities that were still held at the end of the period

		Included in earnings, net:
			Investment income, net of related expenses	$	548	$	1,592	$	2,731	$	3,449
			Investment related gains (losses), net		(594)		(4,637)		(4,052)		(6,563)
			Claims & other policy benefits		--		--		--		--
			Interest credited		--		--		--		--
			Policy acquisition costs and other insurance expenses		--		--		--		--

For the year ended December 31, 2010 (continued):				Fixed maturity securities - available-for-sale
				Fixed maturity securities - available-for-sale
						Other foreign
				State		government,		Funds withheld
				and political		supranational and		at interest-
				subdivision		foreign government-		embedded		Short-term
				securities		sponsored enterprises		derivative		investments
Balance January 1, 2010				$	12,080	$	59,975	$	(434,494)	$	443
	Total gains/losses (realized/unrealized)
		Included in earnings, net:
			Investment income, net of related expenses		118		2		--		--
			Investment related gains (losses), net		(14)		(10)		160,274		--
			Claims & other policy benefits		--		--		--		--
			Interest credited		--		--		--		--
			Policy acquisition costs and other insurance expenses		--		--		--		--
		Included in other comprehensive income			961		304		--		--
	Purchases, issuances, sales and settlements⁽¹⁾				34,841		1,416		--		381
	Transfers into Level 3				1,820		2,178		--		--
	Transfers out of Level 3				(42,823)		(57,129)		--		(824)
Balance December 31, 2010				$	6,983	$	6,736	$	(274,220)	$	--

Unrealized gains and losses recorded in earnings for the period relating to those Level 3 assets and liabilities that were still held at the end of the period

		Included in earnings, net:
			Investment income, net of related expenses	$	118	$	6	$	--	$	--
			Investment related gains (losses), net		--		--		160,274		--
			Claims & other policy benefits		--		--		--		--
			Interest credited		--		--		--		--
			Policy acquisition costs and other insurance expenses		--		--		--		--

For the year ended December 31, 2010 (continued):				Other invested				Reinsurance		Interest sensitive
				assets- non-		Other invested		ceded receivable-		contract liabilities
				redeemable		assets- other		embedded		embedded
				preferred stock		equity securities		derivative		derivative
Balance January 1, 2010				$	6,775	$	10,436	$	68,873	$	(608,654)
	Total gains/losses (realized/unrealized)
		Included in earnings, net:
			Investment income, net of related expenses		--		--		--		--
			Investment related gains (losses), net		550		--		--		(28,786)
			Claims & other policy benefits		--		--		--		(872)
			Interest credited		--		--		--		(52,569)
			Policy acquisition costs and other insurance expenses		--		--		7,621		--
		Included in other comprehensive income			160		4,848		--		--
	Purchases, issuances, sales and settlements⁽¹⁾				(5,146)		1,132		(1,063)		(30,604)
	Transfers into Level 3				--		--		--		--
	Transfers out of Level 3				(1,919)		--		--		--
Balance December 31, 2010				$	420	$	16,416	$	75,431	$	(721,485)

Unrealized gains and losses recorded in earnings for the period relating to those Level 3 assets and liabilities that were still held at the end of the period

		Included in earnings, net:
			Investment income, net of related expenses	$	(1)	$	--	$	--	$	--
			Investment related gains (losses), net		(32)		--		--		(28,786)
			Claims & other policy benefits		--		--		--		(2,824)
			Interest credited		--		--		--		(101,970)
			Policy acquisition costs and other insurance expenses		--		--		7,621		--

(1)			The amount reported within purchases, sales, issuances and settlements is the purchase/issuance price (for purchases and issuances) and the sales/settlement proceeds (for sales and settlements) based upon the actual date purchased/issued or sold/settled. Items purchased/issued and sold/settled in the same period are excluded from the rollforward.

Nonrecurring Fair Value Measurements - Certain assets and liabilities are measured at fair value on a nonrecurring basis. Nonrecurring fair value adjustments on certain foreclosed commercial mortgage loans resulted in $1.2 million of gains being recorded for the year ended December 31, 2011. The carrying value of these foreclosed mortgage loans as of December 31, 2011 was $4.6 million, based on the fair value of the underlying real estate collateral. In addition, nonrecurring fair value adjustments on impaired commercial mortgage loans resulted in $6.1 million of net losses being recorded in 2011. The carrying value of these impaired mortgage loans as of December 31, 2011 was $33.0 million. There were no material assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2010.