Investments

3 Months Ended

Mar. 31, 2012

Investments Abstract

Investments

4.Investments

The Company had total cash and invested assets of $26.4 billion and $25.9 billion at March 31, 2012 and December 31, 2011, respectively, as illustrated below (dollars in thousands):

		March 31, 2012		December 31, 2011
Fixed maturity securities, available-for-sale		$	16,794,057	$	16,200,950
Mortgage loans on real estate			1,040,733		991,731
Policy loans			1,260,070		1,260,400
Funds withheld at interest			5,472,532		5,410,424
Short-term investments			75,425		88,566
Other invested assets			867,507		1,012,541
Cash and cash equivalents			873,933		962,870
	Total cash and invested assets	$	26,384,257	$	25,927,482

All investments held by the Company are monitored for conformance to the qualitative and quantitative limits prescribed by the applicable jurisdiction's insurance laws and regulations. In addition, the operating companies' boards of directors periodically review their respective investment portfolios. The Company's investment strategy is to maintain a predominantly investment-grade, fixed maturity securities portfolio, which will provide adequate liquidity for expected reinsurance obligations and maximize total return through prudent asset management. The Company's asset/liability duration matching differs between operating segments. Based on Canadian reserve requirements, the Canadian liabilities are matched with long-duration Canadian assets. The duration of the Canadian portfolio exceeds twenty years. The average duration for all portfolios, when consolidated, ranges between eight and ten years.

The Company participates in a securities borrowing program whereby securities, which are not reflected on the Company's condensed consolidated balance sheets, are borrowed from a third party. The Company is required to maintain a minimum of 100% of the market value of the borrowed securities as collateral. The Company had borrowed securities with an amortized cost and an estimated fair value of $150.0 millionas of March 31, 2012 and December 31, 2011. The borrowed securities are used to provide collateral under an affiliated reinsurance transaction.

Investment Income, Net of Related Expenses
Major categories of investment income, net of related expenses, consist of the following (dollars in thousands):
	Three months ended
	March 31,
	2012		2011
Fixed maturity securities available-for-sale	$	191,418	$	184,561
Mortgage loans on real estate		14,965		13,734
Policy loans		16,783		16,371
Funds withheld at interest		115,014		153,060
Short-term investments		988		925
Other invested assets		11,322		9,698
Investment revenue		350,490		378,349
Investment expense		9,550		7,309
Investment income, net of related expenses	$	340,940	$	371,040

Investment Related Gains (Losses), Net
Investment related gains (losses), net consist of the following (dollars in thousands):
		Three months ended
		March 31,
		2012		2011
Fixed maturities and equity securities available for sale:
	Other-than-temporary impairment losses on fixed maturities	$	(7,607)	$	(1,556)
	Portion of loss recognized in accumulated other comprehensive income (before taxes)		(7,221)		--
	Net other-than-temporary impairment losses on fixed maturities recognized in earnings		(14,828)		(1,556)
	Impairment losses on equity securities		(839)		--
	Gain on investment activity		22,312		29,376
	Loss on investment activity		(7,504)		(6,914)
Other impairment losses and change in mortgage loan provision			(5,843)		576
Derivatives and other, net			50,222		102,138
Net gains		$	43,520	$	123,620

The net other-than-temporary impairment losses on fixed maturity securities recognized in earnings of $14.8 million and $1.6 million in the first three months of 2012 and 2011, respectively, are primarily due to a decline in value of structured securities with exposure to commercial mortgages and corporate bankruptcies.The decrease in derivatives and other is primarily due to a decrease in the fair value of free-standing derivatives.

During the three months ended March 31, 2012 and 2011, the Company sold fixed maturity securities and equity securities with fair values of $248.1 million and $196.6 million at losses of $7.5 million and $6.9 million, respectively. The Company generally does not engage in short-term buying and selling of securities.

Other-Than-Temporary Impairments

As discussed in Note 2 – “Summary of Significant Accounting Policies” of the Company's 2011 Annual Report, a portion of certain other-than-temporary impairment ("OTTI") losses on fixed maturity securities are recognized in AOCI. 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 AOCI. The following table sets 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 AOCI, and the corresponding changes in such amounts (dollars in thousands):

	Three months ended
	2012		2011
Balance, beginning of period	$	63,947	$	47,291
Initial impairments - credit loss OTTI recognized on securities not previously impaired		1,902		--
Additional impairments - credit loss OTTI recognized on securities previously impaired		8,720		658
Credit loss OTTI previously recognized on securities impaired to fair value during the period		(11,381)		--
Credit loss OTTI previously recognized on securities which matured, paid down, prepaid or were sold during the period		(952)		--
Balance, end of period	$	62,236	$	47,949

Fixed Maturity and Equity Securities Available-for-Sale       

The following tables provide information relating to investments in fixed maturity securities and equity securities by sector as of March 31, 2012 and December 31, 2011 (dollars in thousands):

													Other-than-
									Estimated				temporary
March 31, 2012:			Amortized		Unrealized		Unrealized		Fair		% of		impairments
			Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
	Corporate securities		$	7,518,983	$	671,100	$	78,629	$	8,111,454	48.3	%	$	--
	Canadian and Canadian provincial
		governments		2,610,735		1,229,402		797		3,839,340	22.9			--
	Residential mortgage-backed securities			1,075,073		72,598		9,443		1,138,228	6.8			(710)
	Asset-backed securities			448,688		11,390		45,551		414,527	2.5			(4,512)
	Commercial mortgage-backed securities			1,302,734		104,586		64,899		1,342,421	8.0			(6,118)
	U.S. government and agencies			257,928		22,500		1,335		279,093	1.6			--
	State and political subdivisions			191,113		27,873		4,982		214,004	1.3			--
	Other foreign government, supranational and
		foreign government-sponsored enterprises		1,409,605		49,908		4,523		1,454,990	8.6			--
		Total fixed maturity securities	$	14,814,859	$	2,189,357	$	210,159	$	16,794,057	100.0	%	$	(11,340)
Non-redeemable preferred stock			$	77,766	$	4,963	$	2,706	$	80,023	81.6	%
Other equity securities				16,046		3,446		1,487		18,005	18.4
		Total equity securities	$	93,812	$	8,409	$	4,193	$	98,028	100.0	%

													Other-than-
									Estimated				temporary
December 31, 2011:			Amortized		Unrealized		Unrealized		Fair		% of		impairments
			Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
	Corporate securities		$	6,931,958	$	654,519	$	125,371	$	7,461,106	46.0	%	$	--
	Canadian and Canadian provincial
		governments		2,507,802		1,362,160		29		3,869,933	23.9			--
	Residential mortgage-backed securities			1,167,265		76,393		16,424		1,227,234	7.6			(1,042)
	Asset-backed securities			443,974		11,692		53,675		401,991	2.5			(5,256)
	Commercial mortgage-backed securities			1,233,958		87,750		79,489		1,242,219	7.7			(12,225)
	U.S. government and agencies			341,087		32,976		61		374,002	2.3			--
	State and political subdivisions			184,308		24,419		3,341		205,386	1.3			--
	Other foreign government, supranational and
		foreign government-sponsored enterprises		1,372,528		50,127		3,576		1,419,079	8.7			--
		Total fixed maturity securities	$	14,182,880	$	2,300,036	$	281,966	$	16,200,950	100.0	%	$	(18,523)
Non-redeemable preferred stock			$	82,488	$	4,677	$	8,982	$	78,183	68.6	%
Other equity securities				35,352		1,903		1,538		35,717	31.4
		Total equity securities	$	117,840	$	6,580	$	10,520	$	113,900	100.0	%

The Company enters into various collateral arrangements that require both the pledging and acceptance of fixed maturity securities as collateral, which are excluded from the tables above. The Company pledged fixed maturity securities as collateral to derivative and reinsurance counterparties with an amortized cost of $37.4 million and $29.0 million, and an estimated fair value of $41.3 million and $32.6 million,as of March 31, 2012 and December 31, 2011 respectively, which are included in other invested assets in the condensed consolidated balance sheets.

The Company received fixed maturity securities as collateral from derivative and reinsurance counterparties with an estimated fair value of $30.1 million and $1.0 million, as of March 31, 2012 and December 31, 2011, respectively. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral; however, as ofMarch 31, 2012 and December 31, 2011, none of the collateral had been sold or re-pledged.

As of March 31, 2012, the Company held securities with a fair value of $1,179.0 million that were issued by the Canadian province of Ontario and $1,083.2 million that were issued by an entity that is guaranteed by the Canadian province of Quebec, both of which exceeded 10% of condensed consolidated stockholders' equity. As of December 31, 2011, the Company held securities with a fair value of $1,171.2 million that were issued by the Canadian province of Ontario and $1,107.7 million that were issued by an entity that is guaranteed by the Canadian province of Quebec, both of which exceeded 10% of condensed consolidated stockholders' equity.

The amortized cost and estimated fair value of fixed maturity securities available-for-sale at March 31, 2012 are shown by contractual maturity in the table below. Actual maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.At March 31, 2012, the contractual maturities of investments in fixed maturity securities were as follows (dollars in thousands):

			Amortized		Fair
			Cost		Value
Available-for-sale:
	Due in one year or less		$	179,357	$	180,864
	Due after one year through five years			2,659,446		2,770,954
	Due after five year through ten years			4,094,202		4,447,320
	Due after ten years			5,055,359		6,499,742
	Asset and mortgage-backed securities			2,826,495		2,895,177
		Total	$	14,814,859	$	16,794,057

The tables below show the major industry types of the Company's corporate fixed maturity holdings as of March 31, 2012 and December 31, 2011 (dollars in thousands):

March 31, 2012:					Estimated
			Amortized Cost		Fair Value	% of Total
Finance		$	2,578,694	$	2,686,141	33.1	%
Industrial			3,751,858		4,109,403	50.7
Utility			1,179,592		1,306,787	16.1
Other			8,839		9,123	0.1
	Total	$	7,518,983	$	8,111,454	100.0	%
December 31, 2011:					Estimated
			Amortized Cost		Fair Value	% of Total
Finance		$	2,411,175	$	2,442,149	32.7	%
Industrial			3,402,099		3,760,187	50.4
Utility			1,115,384		1,255,090	16.9
Other			3,300		3,680	-
	Total	$	6,931,958	$	7,461,106	100.0	%

The creditworthiness of Greece, Ireland, Italy, Portugal and Spain, commonly referred to as “Europe's peripheral region,” is under ongoing stress and uncertainty due to high debt levels and economic weakness. The Company did not have exposure to sovereign fixed maturity securities, which includes global government agencies, from Europe's peripheral region as of March 31, 2012 and December 31, 2011. In addition, the Company did not purchase or sell credit protection, through credit default swaps, referenced to sovereign entities of Europe's peripheral region. The tables below show the Company's exposure to sovereign fixed maturity securities originated in countries other than Europe's peripheral region, included in “Other foreign government, supranational and foreign government-sponsored enterprises,” in Note 4 – “Investments,” as of March 31, 2012 and December 31, 2011 (dollars in thousands):

March 31, 2012:					Estimated
			Amortized Cost		Fair Value	% of Total
Australia		$	455,583	$	462,177	37.9	%
Japan			199,435		203,543	16.7
United Kingdom			121,984		132,406	10.8
South Africa			59,393		60,381	5.0
New Zealand			53,981		53,238	4.4
Cayman Islands			48,374		51,807	4.2
Germany			42,434		44,326	3.6
Other			197,465		212,848	17.4
	Total	$	1,178,649	$	1,220,726	100.0	%
December 31, 2011:					Estimated
			Amortized Cost		Fair Value	% of Total
Australia		$	437,713	$	446,694	39.1	%
Japan			214,994		219,276	19.2
United Kingdom			118,618		130,106	11.4
Germany			72,926		75,741	6.6
New Zealand			51,547		51,544	4.5
South Africa			37,624		38,528	3.4
South Korea			30,592		32,025	2.8
Other			139,927		148,792	13.0
	Total	$	1,103,941	$	1,142,706	100.0	%

The tables below show the Company's exposure to non-sovereign fixed maturity securities and equity securities, based on the security's country of issuance, from Europe's peripheral region as of March 31, 2012 and December 31, 2011 (dollars in thousands):

March 31, 2012:							Estimated
					Amortized Cost		Fair Value	% of Total
Financial institutions:
	Ireland			$	4,160	$	4,569	6.6	%
	Spain				25,656		23,715	34.3
		Total financial institutions			29,816		28,284	40.9
Other:
	Ireland				12,475		13,285	19.3
	Italy				2,980		3,058	4.4
	Spain				24,449		24,450	35.4
		Total other			39,904		40,793	59.1
			Total	$	69,720	$	69,077	100.0	%

December 31, 2011:							Estimated
					Amortized Cost		Fair Value	% of Total
Financial institutions:
	Ireland			$	4,084	$	4,397	5.9	%
	Spain				25,565		20,378	27.6
		Total financial institutions			29,649		24,775	33.5
Other:
	Ireland				12,474		13,149	17.8
	Italy				2,898		2,808	3.8
	Spain				34,459		33,137	44.9
		Total other			49,831		49,094	66.5
			Total	$	79,480	$	73,869	100.0	%

Unrealized Losses for Fixed Maturity Securities Available-for-Sale

The following table presents the total gross unrealized losses for the 851 and 940 fixed maturity and equity securities as of March 31, 2012 and December 31, 2011, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):

		March 31, 2012				December 31, 2011
		Gross				Gross
		Unrealized				Unrealized
		Losses		% of Total		Losses		% of Total
Less than 20%		$	92,037	42.9	%	$	131,155	44.8	%
20% or more for less than six months			9,986	4.7			51,503	17.6
20% or more for six months or greater			112,329	52.4			109,828	37.6
	Total	$	214,352	100.0	%	$	292,486	100.0	%

As of March 31, 2012 and December 31, 2011, respectively, 58.9%and 65.3% of these gross unrealized losses were associated with investment grade securities. The unrealized losses on these securities decreased primarily due to a decline in interest ratessince December 31, 2011.

The Company's determination of whether a decline in value is other-than-temporary includes analysis of the underlying credit and the extent and duration of a decline in value. The Company's credit analysis of an investment includes determining whether the issuer is current on its contractual payments, evaluating whether it is probable that the Company will be able to collect all amounts due according to the contractual terms of the security and analyzing the overall ability of the Company to recover the amortized cost of the investment. The Company continues to consider valuation declines as a potential indicator of credit deterioration. The Company believes that due to fluctuating market conditions and an extended period of economic uncertainty, the extent and duration of a decline in value have become less indicative of when there has been credit deterioration with respect to a fixed maturity security since it may not have an impact on the ability of the issuer to service all scheduled payments and the Company's evaluation of the recoverability of all contractual cash flows or the ability to recover an amount at least equal to amortized cost. In the Company's impairment review process, the duration and severity of an unrealized loss position for equity securities are given greater weight and consideration given the lack of contractual cash flows or deferability features. As of March 31, 2012 and December 31, 2011, gross unrealized losses on equity securities greater than 20 percent and 12 months or more totaled $0.5 million.

The following tables present the estimated fair values and gross unrealized losses, including other-than-temporary impairment losses reported in AOCI, for 851 and 940 fixed maturity securities and equity securities that have estimated fair values below amortized cost as of March 31, 2012 and December 31, 2011, respectively (dollars in thousands). These investments are presented by class and grade of security, as well as the length of time the related market value has remained below amortized cost.

			Less than 12 months				12 months or greater				Total
					Gross				Gross				Gross
March 31, 2012:			Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
			Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
	Corporate securities		$	862,016	$	21,354	$	257,018	$	39,896	$	1,119,034	$	61,250
	Canadian and Canadian provincial
		governments		28,422		797		--		--		28,422		797
	Residential mortgage-backed securities			73,291		1,148		49,221		6,875		122,512		8,023
	Asset-backed securities			90,691		2,241		96,052		24,491		186,743		26,732
	Commercial mortgage-backed securities			92,710		1,432		52,313		13,549		145,023		14,981
	U.S. government and agencies			87,486		1,335		--		--		87,486		1,335
	State and political subdivisions			27,839		3,462		12,020		1,520		39,859		4,982
	Other foreign government, supranational and
		foreign government-sponsored enterprises		221,491		2,401		17,336		2,122		238,827		4,523
		Total investment grade securities		1,483,946		34,170		483,960		88,453		1,967,906		122,623
Non-investment grade securities:
	Corporate securities			147,646		9,931		47,308		7,448		194,954		17,379
	Residential mortgage-backed securities			3,851		167		14,434		1,253		18,285		1,420
	Asset-backed securities			11		30		25,023		18,789		25,034		18,819
	Commercial mortgage-backed securities			32,637		1,201		61,562		48,717		94,199		49,918
		Total non-investment grade securities		184,145		11,329		148,327		76,207		332,472		87,536
		Total fixed maturity securities	$	1,668,091	$	45,499	$	632,287	$	164,660	$	2,300,378	$	210,159
	Non-redeemable preferred stock		$	7,603	$	484	$	19,099	$	2,222	$	26,702	$	2,706
	Other equity securities			20		183		5,537		1,304		5,557		1,487
		Total equity securities	$	7,623	$	667	$	24,636	$	3,526	$	32,259	$	4,193

			Less than 12 months				12 months or greater				Total
					Gross				Gross				Gross
December 31, 2011:			Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
			Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
	Corporate securities		$	790,758	$	40,180	$	286,244	$	63,117	$	1,077,002	$	103,297
	Canadian and Canadian provincial
		governments		3,094		29		--		--		3,094		29
	Residential mortgage-backed securities			128,622		3,549		58,388		10,382		187,010		13,931
	Asset-backed securities			101,263		3,592		93,910		29,036		195,173		32,628
	Commercial mortgage-backed securities			109,455		3,538		58,979		22,001		168,434		25,539
	U.S. government and agencies			1,764		61		--		--		1,764		61
	State and political subdivisions			21,045		1,845		12,273		1,268		33,318		3,113
	Other foreign government, supranational and
		foreign government-sponsored enterprises		148,416		1,085		16,588		2,491		165,004		3,576
		Total investment grade securities		1,304,417		53,879		526,382		128,295		1,830,799		182,174
Non-investment grade securities:
	Corporate securities			212,795		10,852		47,310		11,222		260,105		22,074
	Residential mortgage-backed securities			23,199		712		10,459		1,781		33,658		2,493
	Asset-backed securities			2,363		940		21,275		20,107		23,638		21,047
	Commercial mortgage-backed securities			34,918		7,220		62,357		46,730		97,275		53,950
	State and political subdivisions			4,000		228		--		--		4,000		228
		Total non-investment grade securities		277,275		19,952		141,401		79,840		418,676		99,792
		Total fixed maturity securities	$	1,581,692	$	73,831	$	667,783	$	208,135	$	2,249,475	$	281,966
	Non-redeemable preferred stock		$	19,516	$	4,478	$	15,694	$	4,504	$	35,210	$	8,982
	Other equity securities			1,662		602		5,905		936		7,567		1,538
		Total equity securities	$	21,178	$	5,080	$	21,599	$	5,440	$	42,777	$	10,520

As of March 31, 2012, the Company does not intend to sell these fixed maturity securities and does not believe it is more likely than not that it will be required to sell these fixed maturity securities before the recovery of the fair value up to the current amortized cost of the investment, which may be maturity. However, unforeseen facts and circumstances may cause the Company to sell fixed maturity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality, asset-liability management and liquidity guidelines.

As of March 31, 2012, the Company has the ability and intent to hold the equity securities until the recovery of the fair value up to the current cost of the investment. However, unforeseen facts and circumstances may cause the Company to sell equity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality and liquidity guidelines.

Unrealized losses on non-investment grade securities are principally related to asset-backed securities, residential mortgage-backed securities and commercial mortgage-backed securities and were the result of wider credit spreads resulting from higher risk premiums since the time of initial purchase, largely due to macroeconomic conditions and credit market deterioration, including the impact of lower real estate valuations. As of March 31, 2012 and December 31, 2011, approximately $68.8 million and $68.6 million, respectively, of gross unrealized losses greater than 12 months was associated with non-investment grade asset and mortgage-backed securities. This class of securities was evaluated based on actual and projected collateral losses relative to the securities' positions in the respective securitization trusts and security specific expectations of cash flows. This evaluation also takes into consideration credit enhancement, measured in terms of (i) subordination from other classes of securities in the trust that are contractually obligated to absorb losses before the class of security the Company owns, and (ii) the expected impact of other structural features embedded in the securitization trust beneficial to the class of securities the Company owns, such as overcollateralization and excess spread.

Mortgage Loans

Mortgage loans represented approximately 3.9% and 3.8% of the Company's cash and invested assets as of March 31, 2012 and December 31, 2011, respectively. The Company makes mortgage loans on income producing properties, such as apartments, retail and office buildings, light warehouses and light industrial facilities. Loan-to-value ratios at the time of loan approval are 75% or less.

Information regarding the Company's credit quality indicators for its recorded investment in mortgage loans,gross of valuation allowances,as of March 31, 2012 and December 31, 2011 are as follows (dollars in thousands):

Internal credit risk grade:			March 31, 2012		December 31, 2011
	High investment grade		$	295,266	$	252,333
	Investment grade			539,872		526,608
	Average			93,324		105,177
	Watch list			107,225		91,037
	In or near default			19,696		28,369
		Total	$	1,055,383	$	1,003,524

The age analysis of the Company's past due recorded investment in mortgage loans, gross of valuation allowances, as of March 31, 2012 and December 31, 2011 are as follows (dollars in thousands):

			March 31, 2012		December 31, 2011
31-60 days past due			$	11,937	$	21,800
61-90 days past due				3,634		--
Greater than 90 days				17,153		20,316
	Total past due			32,724		42,116
Current				1,022,659		961,408
		Total	$	1,055,383	$	1,003,524

The following table presents the recorded investment in mortgage loans, by method of evaluation of credit loss, and the related valuation allowances, by type of credit loss, at (dollars in thousands):

			March 31, 2012		December 31, 2011
Mortgage loans:
	Evaluated individually for credit losses		$	56,855	$	60,904
	Evaluated collectively for credit losses			998,528		942,620
		Mortgage loans, gross of valuation allowances		1,055,383		1,003,524
Valuation allowances:
	Specific for credit losses			9,884		8,188
	Non-specifically identified credit losses			4,766		3,605
		Total valuation allowances		14,650		11,793
		Mortgage loans, net of valuation allowances	$	1,040,733	$	991,731

Information regarding the Company's loan valuation allowances for mortgage loans for the three months ending March 31, 2012 and 2011 are as follows (dollars in thousands):

	Three Months Ended March 31,
	2012		2011
Balance, beginning of period	$	11,793	$	6,239
Charge-offs		(2,193)		--
Provision (release)		5,050		(575)
Balance, end of period	$	14,650	$	5,664

Information regarding the portion of the Company's mortgage loans that were impaired as of March 31, 2012 and December 31, 2011 are as follows (dollars in thousands):

		Unpaid Principal Balance		Recorded Investment		Related Allowance		Carrying Value
March 31, 2012:
Impaired mortgage loans with no valuation allowance recorded		$	12,189	$	11,646	$	-	$	11,646
Impaired mortgage loans with valuation allowance recorded			45,352		45,209		9,884		35,325
	Total impaired mortgage loans	$	57,541	$	56,855	$	9,884	$	46,971
December 31, 2011:
Impaired mortgage loans with no valuation allowance recorded		$	32,088	$	31,496	$	--	$	31,496
Impaired mortgage loans with valuation allowance recorded			29,724		29,408		8,188		21,220
	Total impaired mortgage loans	$	61,812	$	60,904	$	8,188	$	52,716

The Company's average investment in impaired mortgage loans and the related interest income are reflected in the table below for the periods indicated (dollars in thousands):

		Three Months Ended
		March 31, 2012				March 31, 2011
		Average Investment(1)		Interest Income		Average Investment(1)		Interest Income
Impaired mortgage loans with no valuation allowance recorded		$	21,571	$	169	$	17,751	$	167
Impaired mortgage loans with valuation allowance recorded			37,308		308		18,741		118
	Total	$	58,879	$	477	$	36,492	$	285
(1)	Average recorded investment represents the average loan balances as of the beginning of period and all subsequent quarterly end of period balances.

The Company did not acquire any impaired mortgage loans during the three months ended March 31, 2012 and 2011. The Company had $17.2 million and $20.3 million of mortgage loans, gross of valuation allowances, that were on nonaccrual status at March 31, 2012 and December 31, 2011, respectively.

Other Invested Assets

Other invested assets include equity securities, limited partnership interests, structured loans and derivative contracts. Other invested assets represented approximately 3.3% and 3.9% of the Company's cash and invested assets as of March 31, 2012 and 2011, respectively. Carrying values of these assets as of March 31, 2012 and December 31, 2011 are as follows (dollars in thousands):

		March 31, 2012		December 31, 2011
Equity securities		$	98,028	$	113,900
Limited partnerships			265,879		251,315
Structured loans			245,246		281,022
Derivatives			168,961		257,050
Other			89,393		109,254
	Total other invested assets	$	867,507	$	1,012,541

The decrease in derivatives in 2012 is primarily due to a decrease in the carrying value of derivatives (primarily interest rate swaps and equity options) used to economically hedge changes in the fair value of liabilities associated with the reinsurance of variable annuities with guaranteed living benefits.