Investments

Fixed Maturity and Equity Securities Available-for-Sale

The following tables provide information relating to investments in fixed maturity and equity securities by sector as of June 30, 2013 and December 31, 2012 (dollars in thousands):



June 30, 2013:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate securities	$	11,346,144	$	648,955	$	191,618	$	11,803,481	55.4	%	$	—
Canadian and Canadian provincial governments	2,633,388		901,567		9,162		3,525,793		16.6		—
Residential mortgage-backed securities	1,015,155		53,581		13,768		1,054,968		5.0		(241		)
Asset-backed securities	789,849		18,998		18,537		790,310		3.7		(2,259		)
Commercial mortgage-backed securities	1,564,924		110,294		36,586		1,638,632		7.7		(5,125		)
U.S. government and agencies	394,026		21,417		2,453		412,990		1.9		—
State and political subdivisions	278,148		25,513		11,850		291,811		1.4		—
Other foreign government, supranational and foreign government-sponsored enterprises	1,735,687		51,165		20,621		1,766,231		8.3		—
Total fixed maturity securities	$	19,757,321	$	1,831,490	$	304,595	$	21,284,216	100.0	%	$	(7,625	)
Non-redeemable preferred stock	$	85,483	$	6,722	$	1,747	$	90,458	56.4	%
Other equity securities	74,273		—		4,392		69,881		43.6
Total equity securities	$	159,756	$	6,722	$	6,139	$	160,339	100.0	%



December 31, 2012:	Amortized		Unrealized		Unrealized		Estimated Fair		% of		Other-than- temporary impairments
	Cost		Gains		Losses		Value		Total		in AOCI
Available-for-sale:
Corporate securities	$	11,333,431	$	1,085,973	$	39,333	$	12,380,071	55.5	%	$	—
Canadian and Canadian provincial governments	2,676,777		1,372,731		174		4,049,334		18.2		—
Residential mortgage-backed securities	969,267		76,520		3,723		1,042,064		4.7		(241		)
Asset-backed securities	700,455		19,898		28,798		691,555		3.1		(2,259		)
Commercial mortgage-backed securities	1,608,376		142,369		51,842		1,698,903		7.6		(6,125		)
U.S. government and agencies	231,256		33,958		24		265,190		1.2		—
State and political subdivisions	270,086		38,058		5,646		302,498		1.4		—
Other foreign government, supranational and foreign government-sponsored enterprises	1,769,784		94,929		2,714		1,861,999		8.3		—
Total fixed maturity securities	$	19,559,432	$	2,864,436	$	132,254	$	22,291,614	100.0	%	$	(8,625	)
Non-redeemable preferred stock	$	68,469	$	6,542	$	170	$	74,841	33.6	%
Other equity securities	148,577		416		1,134		147,859		66.4
Total equity securities	$	217,046	$	6,958	$	1,304	$	222,700	100.0	%

The Company enters into various collateral arrangements that require both the pledging and acceptance of fixed maturity securities as collateral. The Company pledged fixed maturity securities as collateral to derivative and reinsurance counterparties with an amortized cost of $32.9 million and $16.9 million, and an estimated fair value of $33.9 million and $17.0 million, as of June 30, 2013 and December 31, 2012 respectively. The pledged fixed maturity securities are included in fixed maturity securities, available-for-sale in the condensed consolidated balance sheets as of June 30, 2013, and are included in other invested assets in the condensed consolidated balance sheets as of December 31, 2012. Securities with an amortized cost of $8,046.9 million and $7,549.0 million, and an estimated fair value of $8,377.6 million and $7,913.8 million, as of June 30, 2013 and December 31, 2012, respectively, were held in trust to satisfy collateral requirements under certain third-party reinsurance treaties.

The Company received fixed maturity securities as collateral from derivative and reinsurance counterparties with an estimated fair value of $91.5 million and $95.6 million, as of June 30, 2013 and December 31, 2012, respectively. The collateral is held in separate custodial accounts and is not recorded on the Company’s condensed consolidated balance sheets. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral; however, as of June 30, 2013 and December 31, 2012, none of the collateral had been sold or re-pledged.

As of June 30, 2013, the Company held securities with a fair value of $1,231.6 million that were guaranteed or issued by the Canadian province of Ontario and $1,516.3 million that were guaranteed or issued by the Canadian province of Quebec, both of which exceeded 10% of total stockholders’ equity. As of December 31, 2012, the Company held securities with a fair value of $1,400.0 million that were guaranteed or issued by the Canadian province of Ontario and $1,785.0 million that were guaranteed or issued by the Canadian province of Quebec, both of which exceeded 10% of total stockholders’ equity.

The amortized cost and estimated fair value of fixed maturity securities available-for-sale at June 30, 2013 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. Asset and mortgage-backed securities are shown separately in the table below, as they are not due at a single maturity date. At June 30, 2013, the contractual maturities of investments in fixed maturity securities were as follows (dollars in thousands):



	Amortized Cost		Fair Value
Available-for-sale:
Due in one year or less	$	426,022	$	432,495
Due after one year through five years	3,613,328		3,773,306
Due after five years through ten years	6,893,971		7,127,743
Due after ten years	5,454,072		6,466,762
Asset and mortgage-backed securities	3,369,928		3,483,910
Total	$	19,757,321	$	21,284,216

The tables below show the major industry types of the Company’s corporate fixed maturity holdings as of June 30, 2013 and December 31, 2012 (dollars in thousands):



June 30, 2013:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	3,636,121	$	3,770,773	32.0	%
Industrial	5,914,051		6,138,234		52.0
Utility	1,768,696		1,867,151		15.8
Other	27,276		27,323		0.2
Total	$	11,346,144	$	11,803,481	100.0	%

December 31, 2012:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	3,619,455	$	3,900,152	31.5	%
Industrial	5,881,967		6,443,846		52.0
Utility	1,799,658		2,002,611		16.2
Other	32,351		33,462		0.3
Total	$	11,333,431	$	12,380,071	100.0	%

Other-Than-Temporary Impairments

As discussed in Note 2 – “Summary of Significant Accounting Policies” of the 2012 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 June 30,
	2013			2012
Balance, beginning of period	$	14,773		$	62,236
Initial impairments - credit loss OTTI recognized on securities not previously impaired	—			60
Additional impairments - credit loss OTTI recognized on securities previously impaired	—			161
Credit loss OTTI previously recognized on securities impaired to fair value during the period	(1,449		)	(8,288		)
Credit loss OTTI previously recognized on securities which matured, paid down, prepaid or were sold during the period	—			(8,266		)
Balance, end of period	$	13,324		$	45,903

	Six months ended June 30,
	2013			2012
Balance, beginning of period	$	16,675		$	63,947
Initial impairments - credit loss OTTI recognized on securities not previously impaired	—			1,962
Additional impairments - credit loss OTTI recognized on securities previously impaired	—			8,881
Credit loss OTTI previously recognized on securities impaired to fair value during the period	(1,449		)	(19,669		)
Credit loss OTTI previously recognized on securities which matured, paid down, prepaid or were sold during the period	(1,902		)	(9,218		)
Balance, end of period	$	13,324		$	45,903

Purchased Credit Impaired Fixed Maturity Securities Available-for-Sale

In the third quarter of 2012, the Company began purchasing certain structured securities that had experienced deterioration in credit quality since their issuance. Securities acquired with evidence of credit quality deterioration since origination and for which it is probable at the acquisition date that the Company will be unable to collect all contractually required payments are classified as purchased credit impaired securities. For each security, the excess of the cash flows expected to be collected as of the acquisition date over its acquisition date fair value is referred to as the accretable yield and is recognized as net investment income on an effective yield basis. At the date of acquisition, the timing and amount of the cash flows expected to be collected was determined based on a best estimate using key assumptions, such as interest rates, default rates and prepayment speeds. If subsequently, based on current information and events, it is probable that there is a significant increase in cash flows previously expected to be collected or if actual cash flows are significantly greater than cash flows previously expected to be collected, the accretable yield is adjusted prospectively. The excess of the contractually required payments (including interest) as of the acquisition date over the cash flows expected to be collected as of the acquisition date is referred to as the nonaccretable difference, and this amount is not expected to be realized as net investment income. Decreases in cash flows expected to be collected can result in OTTI.

The following tables present information on the Company’s purchased credit impaired securities, which are included in fixed maturity securities available-for-sale (dollars in thousands):



	June 30, 2013		December 31, 2012
Outstanding principal and interest balance⁽¹⁾	$	178,911	$	108,831
Carrying value, including accrued interest⁽²⁾	$	132,985	$	84,765


(1)	Represents the contractually required payments which is the sum of contractual principal, whether or not currently due, and accrued interest.


(2)	Estimated fair value plus accrued interest.

The following table presents information about purchased credit impaired investments acquired during the six months ended June 30, 2013 (dollars in thousands).



	At Date of Acquisition
Contractually required payments (including interest)	$	109,931
Cash flows expected to be collected⁽¹⁾	88,422
Fair value of investments acquired	58,471


(1)	Represents undiscounted principal and interest cash flow expectations at the date of acquisition.

The following table presents activity for the accretable yield on purchased credit impaired securities for the three and six months ended June 30, 2013 (dollars in thousands):



	Three months ended June 30, 2013			Six months ended June 30, 2013
Balance, beginning of period	$	59,915		$	39,239
Investments purchased	7,885			29,951
Accretion	(1,879		)	(3,822		)
Disposals	(832		)	(832		)
Reclassification from nonaccretable difference	1,180			1,733
Balance, end of period	$	66,269		$	66,269

Unrealized Losses for Fixed Maturity and Equity Securities Available-for-Sale

The following table presents the total gross unrealized losses for the 1,394 and 567 fixed maturity and equity securities as of June 30, 2013 and December 31, 2012, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):



	June 30, 2013				December 31, 2012
	Gross Unrealized Losses		% of Total		Gross Unrealized Losses		% of Total
Less than 20%	$	267,765	86.2	%	$	54,951	41.2	%
20% or more for less than six months	5,629		1.8		734		0.5
20% or more for six months or greater	37,340		12.0		77,873		58.3
Total	$	310,734	100.0	%	$	133,558	100.0	%

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 declines in value as a potential indicator of credit deterioration. However, 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.

The following tables present the estimated fair values and gross unrealized losses, including other-than-temporary impairment losses reported in AOCI, for 1,394 and 567 fixed maturity and equity securities that have estimated fair values below amortized cost as of June 30, 2013 and December 31, 2012, respectively (dollars in thousands). These investments are presented by class and grade of security, as well as the length of time the related fair value has remained below amortized cost.



	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
June 30, 2013:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate securities	$	3,229,715	$	161,032	$	89,098	$	12,531	$	3,318,813	$	173,563
Canadian and Canadian provincial governments	138,843		9,162		—		—		138,843		9,162
Residential mortgage-backed securities	210,336		9,553		14,822		2,643		225,158		12,196
Asset-backed securities	220,912		4,719		51,673		5,567		272,585		10,286
Commercial mortgage-backed securities	227,712		9,172		18,893		6,455		246,605		15,627
U.S. government and agencies	191,973		2,344		4,037		109		196,010		2,453
State and political subdivisions	97,877		6,351		11,402		5,499		109,279		11,850
Other foreign government, supranational and foreign government-sponsored enterprises	657,957		19,787		5,698		721		663,655		20,508
Total investment grade securities	4,975,325		222,120		195,623		33,525		5,170,948		255,645
Non-investment grade securities:
Corporate securities	366,159		11,452		40,425		6,603		406,584		18,055
Residential mortgage-backed securities	53,715		1,007		2,359		565		56,074		1,572
Asset-backed securities	25,233		376		30,434		7,875		55,667		8,251
Commercial mortgage-backed securities	19,324		198		43,879		20,761		63,203		20,959
Other foreign government, supranational and foreign government-sponsored enterprises	952		113		—		—		952		113
Total non-investment grade securities	465,383		13,146		117,097		35,804		582,480		48,950
Total fixed maturity securities	$	5,440,708	$	235,266	$	312,720	$	69,329	$	5,753,428	$	304,595
Non-redeemable preferred stock	$	30,787	$	1,745	$	1	$	2	$	30,788	$	1,747
Other equity securities	69,881		4,392		—		—		69,881		4,392
Total equity securities	$	100,668	$	6,137	$	1	$	2	$	100,669	$	6,139



	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
December 31, 2012:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate securities	$	786,203	$	13,276	$	108,187	$	17,386	$	894,390	$	30,662
Canadian and Canadian provincial governments	12,349		174		—		—		12,349		174
Residential mortgage-backed securities	22,288		97		19,394		3,199		41,682		3,296
Asset-backed securities	59,119		449		96,179		9,508		155,298		9,957
Commercial mortgage-backed securities	89,507		797		29,181		7,974		118,688		8,771
U.S. government and agencies	7,272		24		—		—		7,272		24
State and political subdivisions	20,602		1,514		11,736		4,132		32,338		5,646
Other foreign government, supranational and foreign government-sponsored enterprises	244,817		1,953		7,435		761		252,252		2,714
Total investment grade securities	1,242,157		18,284		272,112		42,960		1,514,269		61,244
Non-investment grade securities:
Corporate securities	181,168		3,170		39,123		5,501		220,291		8,671
Residential mortgage-backed securities	15,199		80		2,633		347		17,832		427
Asset-backed securities	3,421		26		31,938		18,815		35,359		18,841
Commercial mortgage-backed securities	3,317		764		68,405		42,307		71,722		43,071
Total non-investment grade securities	203,105		4,040		142,099		66,970		345,204		71,010
Total fixed maturity securities	$	1,445,262	$	22,324	$	414,211	$	109,930	$	1,859,473	$	132,254
Non-redeemable preferred stock	$	5,577	$	52	$	5,679	$	118	$	11,256	$	170
Other equity securities	85,374		1,134		—		—		85,374		1,134
Total equity securities	$	90,951	$	1,186	$	5,679	$	118	$	96,630	$	1,304

As of June 30, 2013, 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. As of June 30, 2013, 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 fixed maturity and equity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality, asset-liability management and liquidity guidelines.

Unrealized losses on non-investment grade securities are principally related to asset and 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 June 30, 2013 and December 31, 2012, approximately $29.2 million and $61.5 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.

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 June 30,						Six months ended June 30,
	2013			2012			2013			2012
Fixed maturity securities available-for-sale	$	240,590		$	193,388		$	479,834		$	384,806
Mortgage loans on real estate	28,362			16,000			56,605			30,966
Policy loans	15,450			16,334			33,360			33,117
Funds withheld at interest	159,212			62,992			296,471			178,006
Short-term investments	422			781			1,235			1,769
Investment receivable	—			36,752			—			36,752
Other invested assets	13,379			11,356			27,301			22,679
Investment revenue	457,415			337,603			894,806			688,095
Investment expense	(13,181		)	(9,269		)	(25,441		)	(18,821		)
Investment income, net of related expenses	$	444,234		$	328,334		$	869,365		$	669,274

Investment Related Gains (Losses), Net

Investment related gains (losses), net consist of the following (dollars in thousands):



	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Fixed maturities and equity securities available for sale:
Other-than-temporary impairment losses on fixed maturities	$	(9,803	)	$	(1,959	)	$	(10,005	)	$	(9,566	)
Portion of loss recognized in accumulated other comprehensive income (before taxes)	(306		)	162			(306		)	(7,059		)
Net other-than-temporary impairment losses on fixed maturities recognized in earnings	(10,109		)	(1,797		)	(10,311		)	(16,625		)
Impairment losses on equity securities	—			(2,186		)	—			(3,025		)
Gain on investment activity	26,845			26,593			48,525			48,905
Loss on investment activity	(6,760		)	(8,918		)	(17,972		)	(16,422		)
Other impairment losses and change in mortgage loan provision	125			1,762			(1,501		)	(4,081		)
Derivatives and other, net	38,142			8,347			123,873			58,569
Total investment related gains (losses), net	$	48,243		$	23,801		$	142,614		$	67,321

The net other-than-temporary impairment losses on fixed maturity securities recognized in earnings were $10.1 million and $1.8 million for the three months ended June 30, 2013 and 2012, and $10.3 million and $16.6 million for the first six months of 2013 and 2012, respectively. The other-than-temporary impairment losses on fixed maturity securities in the second quarter and first six months of 2013 were primarily due to the decision to sell certain subordinated commercial mortgage-backed securities. The other-than-temporary impairments in the first six months of 2012 were primarily due to a decline in value of structured securities with exposure to commercial mortgages and general credit deterioration in select corporate and foreign securities. The increase in derivatives and other in 2013 is primarily due to an increase in the fair value of embedded derivatives.

During the three months ended June 30, 2013 and 2012, the Company sold fixed maturity and equity securities with fair values of $257.6 million and $153.5 million at losses of $6.8 million and $8.9 million, respectively. During the six months ended June 30, 2013 and 2012, the Company sold fixed maturity and equity securities with fair values of $461.9 million and $401.6 million at losses of $18.0 million and $16.4 million, respectively. The Company generally does not engage in short-term buying and selling of securities.

Securities Borrowing and Other

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 fair value of the borrowed securities as collateral, which consists of rights to reinsurance treaty cash flows. The Company had borrowed securities with an amortized cost of $87.5 million as of June 30, 2013 and December 31, 2012, which was equal to the fair value in both periods. The borrowed securities are used to provide collateral under an affiliated reinsurance transaction.

The Company also participates in a repurchase/reverse repurchase program in which securities, reflected as investments on the Company’s condensed consolidated balance sheets, are pledged to a third party. In return, the Company receives securities from the third party with an estimated fair value equal to a minimum of 100% of the securities pledged. The securities received are not reflected on the Company’s condensed consolidated balance sheets. As of June 30, 2013 the Company had pledged securities with an amortized cost of $292.1 million and an estimated fair value of $307.7 million, and in return the Company received securities with an estimated fair value of $338.0 million. As of December 31, 2012 the Company had pledged securities with an amortized cost of $290.2 million and an estimated fair value of $305.9 million, and in return the Company received securities with an estimated fair value of $342.0 million.

Mortgage Loans on Real Estate

Mortgage loans represented approximately 7.5% and 7.0% of the Company’s total investments as of June 30, 2013 and December 31, 2012. The Company makes mortgage loans on income producing properties, such as apartments, retail and office buildings, and light industrial facilities. Loan-to-value ratios at the time of loan approval are 75% or less. The distribution of mortgage loans, gross of valuation allowances, by property type is as follows as of June 30, 2013 and December 31, 2012 (dollars in thousands):



	June 30, 2013				December 31, 2012
	Recorded Investment		% of Total		Recorded Investment		% of Total
Apartment	$	220,117	9.2	%	$	229,266	9.9	%
Retail	747,282		31.3		669,958		29.0
Office building	841,842		35.3		825,406		35.7
Industrial	450,140		18.9		455,682		19.7
Other commercial	125,768		5.3		131,855		5.7
Total	$	2,385,149	100.0	%	$	2,312,167	100.0	%

As of June 30, 2013 and December 31, 2012, the Company’s mortgage loans, gross of valuation allowances, were distributed throughout the United States as follows (dollars in thousands):



	June 30, 2013				December 31, 2012
	Recorded Investment		% of Total		Recorded Investment		% of Total
Pacific	$	636,084	26.7	%	$	593,589	25.7	%
South Atlantic	507,010		21.3		477,068		20.5
Mountain	257,130		10.8		233,174		10.1
Middle Atlantic	276,799		11.6		300,475		13.0
West North Central	174,764		7.3		168,063		7.3
East North Central	222,991		9.2		224,122		9.7
West South Central	158,666		6.7		161,451		7.0
East South Central	61,966		2.6		62,789		2.7
New England	89,739		3.8		91,436		4.0
Total	$	2,385,149	100.0	%	$	2,312,167	100.0	%

The maturities of the mortgage loans, gross of valuation allowances, as of June 30, 2013 and December 31, 2012 are as follows (dollars in thousands):



	June 30, 2013				December 31, 2012
	Recorded Investment		% of Total		Recorded Investment		% of Total
Due within five years	$	1,066,678	44.7	%	$	1,187,387	51.3	%
Due after five years through ten years	875,596		36.7		776,655		33.6
Due after ten years	442,875		18.6		348,125		15.1
Total	$	2,385,149	100.0	%	$	2,312,167	100.0	%

Information regarding the Company’s credit quality indicators for its recorded investment in mortgage loans, gross of valuation allowances, as of June 30, 2013 and December 31, 2012 is as follows (dollars in thousands):



	June 30, 2013				December 31, 2012
Internal credit risk grade:	Recorded Investment		% of Total		Recorded Investment		% of Total
High investment grade	$	1,475,089	61.8	%	$	1,235,605	53.5	%
Investment grade	694,476		29.1		834,494		36.1
Average	127,967		5.4		132,607		5.7
Watch list	53,831		2.3		76,463		3.3
In or near default	33,786		1.4		32,998		1.4
Total	$	2,385,149	100.0	%	$	2,312,167	100.0	%

The age analysis of the Company’s past due recorded investment in mortgage loans, gross of valuation allowances, as of June 30, 2013 and December 31, 2012 is as follows (dollars in thousands):



	June 30, 2013		December 31, 2012
31-60 days past due	$	20,563	$	7,504
61-90 days past due	—		—
Greater than 90 days	7,930		16,886
Total past due	28,493		24,390
Current	2,356,656		2,287,777
Total	$	2,385,149	$	2,312,167

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):



	June 30, 2013		December 31, 2012
Mortgage loans:
Evaluated individually for credit losses	$	37,617	$	39,956
Evaluated collectively for credit losses	2,347,532		2,272,211
Mortgage loans, gross of valuation allowances	2,385,149		2,312,167
Valuation allowances:
Specific for credit losses	4,738		6,980
Non-specifically identified credit losses	3,165		4,600
Total valuation allowances	7,903		11,580
Mortgage loans, net of valuation allowances	$	2,377,246	$	2,300,587

Information regarding the Company’s loan valuation allowances for mortgage loans for the three and six months ended June 30, 2013 and 2012 is as follows (dollars in thousands):



	Three months ended June 30,
	2013			2012
Balance, beginning of period	$	9,924		$	14,650
Charge-offs	(1,296		)	(1,876		)
Provision (release)	(725		)	(1,763		)
Balance, end of period	$	7,903		$	11,011

	Six months ended June 30,
	2013			2012
Balance, beginning of period	$	11,580		$	11,793
Charge-offs	(2,148		)	(4,069		)
Provision (release)	(1,529		)	3,287
Balance, end of period	$	7,903		$	11,011

Information regarding the portion of the Company’s mortgage loans that were impaired as of June 30, 2013 and December 31, 2012 is as follows (dollars in thousands):



	Unpaid Principal Balance		Recorded Investment		Related Allowance		Carrying Value
June 30, 2013:
Impaired mortgage loans with no valuation allowance recorded	$	16,714	$	16,104	$	—	$	16,104
Impaired mortgage loans with valuation allowance recorded	21,582		21,513		4,738		16,775
Total impaired mortgage loans	$	38,296	$	37,617	$	4,738	$	32,879
December 31, 2012:
Impaired mortgage loans with no valuation allowance recorded	$	13,039	$	12,496	$	—	$	12,496
Impaired mortgage loans with valuation allowance recorded	27,527		27,460		6,980		20,480
Total impaired mortgage loans	$	40,566	$	39,956	$	6,980	$	32,976
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 June 30,
	2013				2012
	Average Investment⁽¹⁾		Interest Income		Average Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	15,181	$	49	$	10,585	$	28
Impaired mortgage loans with valuation allowance recorded	24,211		294		41,747		410
Total	$	39,392	$	343	$	52,332	$	438

	Six months ended June 30,
	2013				2012
	Average Investment⁽¹⁾		Interest Income		Average Investment⁽¹⁾		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	14,286	$	184	$	17,555	$	197
Impaired mortgage loans with valuation allowance recorded	25,294		534		37,634		718
Total	$	39,580	$	718	$	55,189	$	915

(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 six months ended June 30, 2013 and 2012. The Company had $7.9 million and $16.9 million of mortgage loans, gross of valuation allowances, that were on nonaccrual status at June 30, 2013 and December 31, 2012, respectively.

Policy Loans

Policy loans comprised approximately 3.9% of the Company’s total investments as of both June 30, 2013 and December 31, 2012, substantially all of which are associated with one client. These policy loans present no credit risk because the amount of the loan cannot exceed the obligation due to the ceding company upon the death of the insured or surrender of the underlying policy. The provisions of the treaties in force and the underlying policies determine the policy loan interest rates. As policy loans represent premature distributions of policy liabilities, they have the effect of reducing future disintermediation risk. In addition, the Company earns a spread between the interest rate earned on policy loans and the interest rate credited to corresponding liabilities.

Funds Withheld at Interest

Funds withheld at interest comprised approximately 18.2% and 17.0% of the Company’s total investments as of June 30, 2013 and December 31, 2012, respectively. As of June 30, 2013 and December 31, 2012, approximately 70.8% and 69.7%, respectively, of the Company’s funds withheld at interest balance, net of embedded derivatives, was associated with one client. For reinsurance agreements written on a modified coinsurance basis and certain agreements written on a coinsurance funds withheld basis, assets equal to the net statutory reserves are withheld and legally owned and managed by the ceding company and are reflected as funds withheld at interest on the Company’s condensed consolidated balance sheets. In the event of a ceding company’s insolvency, the Company would need to assert a claim on the assets supporting its reserve liabilities. However, the risk of loss to the Company is mitigated by its ability to offset amounts it owes the ceding company for claims or allowances with amounts owed to the Company from the ceding company. The Company is subject to the investment performance on the withheld assets, although it does not directly control them. These assets are primarily fixed maturity investment securities and pose risks similar to the fixed maturity securities the Company owns. To mitigate this risk, the Company helps set the investment guidelines followed by the ceding company and monitors compliance.

Other Invested Assets

Other invested assets include equity securities, limited partnership interests, real estate joint ventures, structured loans, derivative contracts, Federal Home Loan Bank of Des Moines ("FHLB") common stock (included in other), and real estate held-for-investment (included in other). Other invested assets represented approximately 3.3% and 3.5% of the Company’s total investments as of June 30, 2013 and December 31, 2012, respectively. Carrying values of these assets as of June 30, 2013 and December 31, 2012 are as follows (dollars in thousands):



	June 30, 2013		December 31, 2012
Equity securities	$	160,339	$	222,700
Limited partnerships and real estate joint ventures	423,790		356,419
Structured loans	245,734		306,497
Derivatives	118,791		168,208
Other	87,155		105,719
Total other invested assets	$	1,035,809	$	1,159,543