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Investments
 6 Months Ended
Jun. 30, 2012
Investments Abstract  
Investments

4. Investments

The Company had total cash and invested assets of $32.5 billion and $25.9 billion at June 30, 2012 and December 31, 2011, respectively, as illustrated below (dollars in thousands):

  June 30, 2012 December 31, 2011 
Fixed maturity securities, available-for-sale$17,244,192 $16,200,950 
Mortgage loans on real estate 1,157,049  991,731 
Policy loans 1,250,238  1,260,400 
Funds withheld at interest 5,457,888  5,410,424 
Short-term investments 49,981  88,566 
Investment receivable 5,406,898   -- 
Other invested assets 940,605  1,012,541 
Cash and cash equivalents 957,341  962,870 
 Total cash and invested assets$32,464,192 $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 $237.5 million and $150.0 million as of June 30, 2012 and December 31, 2011, respectively. 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  Six months ended
 June 30,  June 30,
 2012 2011  2012 2011
Fixed maturity securities available-for-sale$ 193,388 $ 191,030  $ 384,806 $ 375,591
Mortgage loans on real estate  16,000   13,593    30,966   27,328
Policy loans  16,334   16,724    33,117   33,095
Funds withheld at interest  62,992   111,700    178,006   264,760
Short-term investments  781   883    1,769   1,808
Investment receivable  36,752   -    36,752   -
Other invested assets  11,356   10,512    22,679   20,210
Investment revenue  337,603   344,442    688,095   722,792
Investment expense  (9,269)   (7,006)    (18,821)   (14,316)
Investment income, net of related expenses$ 328,334 $ 337,436  $ 669,274 $ 708,476

Investment Related Gains (Losses), Net          
               
Investment related gains (losses), net consist of the following (dollars in thousands):       
               
   Three months ended  Six months ended
   June 30,  June 30,
   2012 2011  2012 2011
Fixed maturity and equity securities available for sale:            
 Other-than-temporary impairment losses on fixed maturities$ (1,959) $ (5,582)  $ (9,566) $ (7,138)
 Portion of loss recognized in accumulated other            
  comprehensive income (before taxes)  162   292    (7,059)   292
 Net other-than-temporary impairment losses on fixed            
  maturities recognized in earnings  (1,797)   (5,290)    (16,625)   (6,846)
 Impairment losses on equity securities   (2,186)   (3,680)    (3,025)   (3,680)
 Gain on investment activity  26,593   28,208    48,905   57,584
 Loss on investment activity   (8,918)   (6,653)    (16,422)   (13,567)
Other impairment losses and change in mortgage loan provision  1,762   (3,186)    (4,081)   (2,610)
Derivatives and other, net  8,347   17,989    58,569   120,127
Total investment related gains (losses), net$ 23,801 $ 27,388  $ 67,321 $ 151,008

The net other-than-temporary impairment losses on fixed maturity securities recognized in earnings of $16.6 million and $6.8 million in the first six months of 2012 and 2011, respectively, are 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 decreases in derivatives and other for the three and six months ended June 30, 2012 is primarily due to changes in the fair value of embedded derivative liabilities associated with modified coinsurance and funds withheld treaties and guaranteed minimum benefit riders.

During the three months ended June 30, 2012 and 2011, the Company sold fixed maturity and equity securities with fair values of $153.5 million and $135.0 million at losses of $8.9 million and $6.7 million, respectively. During the six months ended June 30, 2012 and 2011, the Company sold fixed maturity and equity securities with fair values of $401.6 million and $331.6 million at losses of $16.4 million and $13.6 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 DAC Current 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,
 2012 2011
Balance, beginning of period$ 62,236 $ 47,949
Initial impairments - credit loss OTTI recognized on securities not previously impaired  60   1,473
Additional impairments - credit loss OTTI recognized on securities previously impaired  161   3,780
Credit loss OTTI previously recognized on securities impaired to fair value during the period  (8,288)   --
Credit loss OTTI previously recognized on securities which matured, paid down, prepaid or were sold during the period  (8,266)   (718)
Balance, end of period$ 45,903 $ 52,484
      
 Six months ended June 30,
 2012 2011
Balance, beginning of period$ 63,947 $ 47,291
Initial impairments - credit loss OTTI recognized on securities not previously impaired  1,962   1,473
Additional impairments - credit loss OTTI recognized on securities previously impaired  8,881   4,438
Credit loss OTTI previously recognized on securities impaired to fair value during the period  (19,669)   --
Credit loss OTTI previously recognized on securities which matured, paid down, prepaid or were sold during the period  (9,218)   (718)
Balance, end of period$ 45,903 $ 52,484

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, 2012 and December 31, 2011 (dollars in thousands):

                  Other-than-
            Estimated    temporary
June 30, 2012:Amortized Unrealized Unrealized Fair % of  impairments
   Cost Gains Losses Value Total in AOCI
Available-for-sale:                 
 Corporate securities$ 7,675,473 $ 792,051 $ 65,615 $ 8,401,909 48.7% $ --
 Canadian and Canadian provincial                 
  governments  2,579,161   1,350,301   88   3,929,374 22.8    --
 Residential mortgage-backed securities  1,007,793   78,727   7,958   1,078,562 6.3    (520)
 Asset-backed securities  469,616   12,746   41,311   441,051 2.6    (3,521)
 Commercial mortgage-backed securities  1,308,668   107,284   67,905   1,348,047 7.8    (6,119)
 U.S. government and agencies  218,164   31,761   11   249,914 1.4    --
 State and political subdivisions  204,108   34,066   8,398   229,776 1.3    --
 Other foreign government, supranational and                 
  foreign government-sponsored enterprises  1,494,182   73,916   2,539   1,565,559 9.1    --
  Total fixed maturity securities$ 14,957,165 $ 2,480,852 $ 193,825 $ 17,244,192 100.0% $ (10,160)
                    
Non-redeemable preferred stock$ 73,265 $ 5,170 $ 2,465 $ 75,970 95.9%   
Other equity securities  2,235   1,001   9   3,227 4.1    
  Total equity securities$ 75,500 $ 6,171 $ 2,474 $ 79,197 100.0%   

                  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 $23.3 million and $29.0 million, and an estimated fair value of $26.4 million and $32.6 million, as of June 30, 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 $31.4 million and $1.0 million, as of June 30, 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 of June 30, 2012 and December 31, 2011, none of the collateral had been sold or re-pledged.

As of June 30, 2012, the Company held securities with a fair value of $1,185.1 million that were issued by the Canadian province of Ontario and $1,129.0 million that were issued by an entity that is guaranteed by the Canadian province of Quebec, both of which exceeded 10% of total 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 total stockholders' equity.

The amortized cost and estimated fair value of fixed maturity securities available-for-sale at June 30, 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 June 30, 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$153,228 $155,606 
 Due after one year through five years 2,734,890  2,866,290 
 Due after five year through ten years 4,269,704  4,695,994 
 Due after ten years 5,013,266  6,658,641 
 Asset and mortgage-backed securities 2,786,077  2,867,661 
  Total $14,957,165 $17,244,192 

The tables below show the major industry types of the Company's corporate fixed maturity holdings as of June 30, 2012 and December 31, 2011 (dollars in thousands):

June 30, 2012:    Estimated      
   Amortized Cost  Fair Value % of Total    
Finance$ 2,618,913 $ 2,762,847  32.9%   
Industrial  3,834,519   4,257,907  50.7    
Utility  1,213,333   1,372,024  16.3    
Other  8,708   9,131  0.1    
  Total$ 7,675,473 $ 8,401,909  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 June 30, 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,” as of June 30, 2012 and December 31, 2011 (dollars in thousands):

June 30, 2012:    Estimated    
    Amortized Cost  Fair Value % of Total  
Australia$ 475,097 $ 490,913  37.2% 
Japan  214,420   220,390  16.7  
United Kingdom  124,547   136,672  10.3  
South Africa  66,353   68,691  5.2  
New Zealand  52,684   53,231  4.0  
Cayman Islands  48,133   53,013  4.0  
Germany  40,406   42,863  3.2  
Other  236,277   256,300  19.4  
   Total$ 1,257,917 $ 1,322,073  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 and equity securities, based on the security's country of issuance, from Europe's peripheral region as of June 30, 2012 and December 31, 2011 (dollars in thousands):

June 30, 2012:    Estimated    
     Amortized Cost  Fair Value % of Total  
Financial institutions:         
 Ireland$ 3,477 $ 3,864  6.1% 
 Spain  23,486   20,865  32.9  
  Total financial institutions  26,963   24,729  39.0  
             
Other:         
 Ireland  12,476   13,042  20.6  
 Italy  3,544   3,438  5.4  
 Spain  24,420   22,148  35.0  
  Total other  40,440   38,628  61.0  
   Total$ 67,403 $ 63,357  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 and Equity Securities Available-for-Sale

The following table presents the total gross unrealized losses for the 752 and 940 fixed maturity and equity securities as of June 30, 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):

  June 30, 2012 December 31, 2011
  Gross     Gross   
  Unrealized    Unrealized   
  Losses % of Total Losses % of Total
Less than 20%$77,198 39.3% $131,155 44.8%
20% or more for less than six months 6,739 3.4   51,503 17.6 
20% or more for six months or greater 112,362 57.3   109,828 37.6 
 Total$196,299 100.0% $292,486 100.0%

As of June 30, 2012 and December 31, 2011, respectively, 58.4% 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 rates since 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.

The following tables present the estimated fair values and gross unrealized losses, including other-than-temporary impairment losses reported in AOCI, for 752 and 940 fixed maturity and equity securities that have estimated fair values below amortized cost as of June 30, 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
June 30, 2012:Estimated Unrealized Estimated Unrealized Estimated Unrealized
   Fair Value Losses Fair Value Losses Fair Value Losses
Investment grade securities:                 
 Corporate securities$ 397,287 $ 12,765 $ 299,074 $ 41,570 $ 696,361 $ 54,335
 Canadian and Canadian provincial                 
  governments   10,573   88   --   --   10,573   88
 Residential mortgage-backed securities  36,106   425   54,545   6,573   90,651   6,998
 Asset-backed securities  59,722   938   101,011   24,734   160,733   25,672
 Commercial mortgage-backed securities  129,450   2,590   73,130   12,757   202,580   15,347
 U.S. government and agencies  4,004   11   --   --   4,004   11
 State and political subdivisions  24,191   2,532   18,688   5,866   42,879   8,398
 Other foreign government, supranational and                 
  foreign government-sponsored enterprises  79,976   465   33,620   1,449   113,596   1,914
  Total investment grade securities  741,309   19,814   580,068   92,949   1,321,377   112,763
                    
Non-investment grade securities:                 
 Corporate securities  135,253   4,001   49,063   7,279   184,316   11,280
 Residential mortgage-backed securities  2,025   178   9,858   782   11,883   960
 Asset-backed securities  7   18   19,374   15,621   19,381   15,639
 Commercial mortgage-backed securities  12,483   1,218   73,062   51,340   85,545   52,558
 Other foreign government, supranational and                 
  foreign government-sponsored enterprises  11,779   625   --   --   11,779   625
  Total non-investment grade securities  161,547   6,040   151,357   75,022   312,904   81,062
  Total fixed maturity securities$ 902,856 $ 25,854 $ 731,425 $ 167,971 $ 1,634,281 $ 193,825
                    
 Non-redeemable preferred stock$ 1,743 $ 245 $ 17,280 $ 2,220 $ 19,023 $ 2,465
 Other equity securities  --   --   309   9   309   9
  Total equity securities$ 1,743 $ 245 $ 17,589 $ 2,229 $ 19,332 $ 2,474

   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 June 30, 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 June 30, 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 June 30, 2012 and December 31, 2011, approximately $67.7 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 on Real Estate

Mortgage loans represented approximately 3.6% and 3.8% of the Company's cash and invested assets as of June 30, 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 June 30, 2012 and December 31, 2011 is as follows (dollars in thousands):

Internal credit risk grade:June 30, 2012 December 31, 2011   
 High investment grade$ 306,845 $ 252,333   
 Investment grade  656,968   526,608   
 Average  92,668   105,177   
 Watch list  95,727   91,037   
 In or near default  15,852   28,369   
  Total$ 1,168,060 $ 1,003,524   

The age analysis of the Company's past due recorded investment in mortgage loans, gross of valuation allowances, as of June 30, 2012 and December 31, 2011 is as follows (dollars in thousands):

   June 30, 2012 December 31, 2011   
31-60 days past due$ 18,211 $ 21,800   
61-90 days past due  3,610   --   
Greater than 90 days  14,367   20,316   
 Total past due  36,188   42,116   
Current  1,131,872   961,408   
  Total$ 1,168,060 $ 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):
           
   June 30, 2012 December 31, 2011   
Mortgage loans:        
 Evaluated individually for credit losses$ 47,808 $ 60,904   
 Evaluated collectively for credit losses  1,120,252   942,620   
  Mortgage loans, gross of valuation allowances  1,168,060   1,003,524   
           
Valuation allowances:        
 Specific for credit losses  6,959   8,188   
 Non-specifically identified credit losses  4,052   3,605   
  Total valuation allowances  11,011   11,793   
           
  Mortgage loans, net of valuation allowances$ 1,157,049 $ 991,731   

Information regarding the Company's loan valuation allowances for mortgage loans for the three months ended June 30, 2012 and 2011 is as follows (dollars in thousands):

   Three Months Ended June 30, Six Months Ended June 30,
   2012 2011 2012 2011
Balance, beginning of period$ 14,650 $ 5,664 $ 11,793 $ 6,239
Charge-offs  (1,876)   (1,157)   (4,069)   (1,157)
Provision (release)  (1,763)   3,185   3,287   2,610
Balance, end of period$ 11,011 $ 7,692 $ 11,011 $ 7,692

Information regarding the portion of the Company's mortgage loans that were impaired as of June 30, 2012 and December 31, 2011 is as follows (dollars in thousands):

  Unpaid Principal Balance Recorded Investment Related Allowance Carrying Value
June 30, 2012:           
Impaired mortgage loans with no valuation allowance recorded$ 10,066 $ 9,523 $ -- $ 9,523
Impaired mortgage loans with valuation allowance recorded  38,424   38,285   6,959   31,326
 Total impaired mortgage loans$ 48,490 $ 47,808 $ 6,959 $ 40,849
             
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
  June 30, 2012 June 30, 2011
  Average Investment(1) Interest Income Average Investment(1) Interest Income
Impaired mortgage loans with no valuation allowance recorded$ 10,585 $ 28 $ 12,720 $ 51
Impaired mortgage loans with valuation allowance recorded  41,747   410   23,908   209
 Total$ 52,332 $ 438 $ 36,628 $ 260
             
  Six Months Ended
  June 30, 2012 June 30, 2011
 Average Investment(1) Interest Income Average Investment(1) Interest Income
Impaired mortgage loans with no valuation allowance recorded$ 17,555 $ 197 $ 14,114 $ 93
Impaired mortgage loans with valuation allowance recorded  37,634   718   22,187   453
 Total$ 55,189 $ 915 $ 36,301 $ 546
             
(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, 2012 and 2011. The Company had $14.4 million and $20.3 million of mortgage loans, gross of valuation allowances, that were on nonaccrual status at June 30, 2012 and December 31, 2011, respectively.

Investment Receivable

During the second quarter of 2012, the Company added a large fixed deferred annuity reinsurance transaction in its U.S. Asset Intensive sub-segment. This transaction increased the Company's invested asset base by approximately $5.4 billion which is reflected on the condensed consolidated balance sheet as an investment receivable. The transaction is considered a non-cash transaction in the condensed consolidated statement of cash flows. Investment receivable represented approximately 16.7% of the Company's cash and invested assets as of June 30, 2012 which represents cash, cash equivalents and invested assets, valued as of the effective date of the transaction, and the related accrued investment income expected to be received. The Company recorded these assets as a receivable since they were not received until July 31, 2012 and August 3, 2012, see Note 13 – “Subsequent Event” for more information.

 

 

Other Invested Assets

Other invested assets include equity securities, limited partnership interests, structured loans and derivative contracts. Other invested assets represented approximately 2.9% and 3.9% of the Company's cash and invested assets as of June 30, 2012 and December 31, 2011, respectively. Carrying values of these assets as of June 30, 2012 and December 31, 2011 are as follows (dollars in thousands):

   June 30, 2012 December 31, 2011   
Equity securities$ 79,197 $ 113,900   
Limited partnerships and joint ventures  300,385   251,315   
Structured loans  238,367   281,022   
Derivatives  250,460   257,050   
Other  72,196   109,254   
 Total other invested assets$ 940,605 $ 1,012,541