Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2014

Summary of Company's fair value hierarchy measured at recurring basis

The following table presents the Company’s fair value hierarchy for those assets and liabilities measured and carried at fair value on a recurring basis. At March 31, 2014, Level 3 invested assets comprised approximately 1.8% of the Company’s total investment portfolio fair value.

					Fair Value Measurements at
	Carrying		Fair		Reporting Date Using
	Amount		Value		Level 1		Level 2		Level 3
March 31, 2014
Financial Assets
Investments
Fixed maturities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	577,268	$	577,268	$	-	$	577,268	$	-
Other, including
U.S. Treasury securities		466,990		466,990		22,857		444,133		-
Municipal bonds		1,546,159		1,546,159		-		1,533,380		12,779
Foreign government bonds		55,863		55,863		-		55,863		-
Corporate bonds		2,784,638		2,784,638		10,422		2,714,012		60,204
Other mortgage-backed securities		967,524		967,524		-		914,973		52,551
Total fixed maturities		6,398,442		6,398,442		33,279		6,239,629		125,534
Equity securities		94,189		94,189		76,322		17,861		6
Short-term investments		75,484		75,484		75,080		404		-
Other investments		5,236		5,236		-		5,236		-
Totals		6,573,351		6,573,351		184,681		6,263,130		125,540
Separate Account
(variable annuity) assets (1)		1,745,044		1,745,044		1,745,044		-		-
Financial Liabilities
Other policyholders funds, embedded derivatives		2,747		2,747		-		-		2,747

December 31, 2013
Financial Assets
Investments
Fixed maturities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	569,725	$	569,725	$	-	$	569,725	$	-
Other, including
U.S. Treasury securities		435,574		435,574		17,757		417,817		-
Municipal bonds		1,471,527		1,471,527		-		1,468,833		2,694
Foreign government bonds		54,951		54,951		-		54,951		-
Corporate bonds		2,614,409		2,614,409		10,181		2,543,402		60,826
Other mortgage-backed securities		863,387		863,387		-		817,378		46,009
Total fixed maturities		6,009,573		6,009,573		27,938		5,872,106		109,529
Equity securities		91,858		91,858		74,279		17,573		6
Short-term investments		206,758		206,758		206,354		404		-
Other investments		5,000		5,000		-		5,000		-
Totals		6,313,189		6,313,189		308,571		5,895,083		109,535
Separate Account
(variable annuity) assets (1)		1,747,995		1,747,995		1,747,995		-		-
Financial Liabilities
Other policyholders funds, embedded derivatives		-		-		-		-		-

(1)	Separate Account (variable annuity) liabilities are set equal to Separate Account (variable annuity) assets.

Table for reconciliations for all Level 3 assets measured at fair value on a recurring basis

The Company did not have any transfers between Levels 1 and 2 during the three months ended March 31, 2014. The following table presents reconciliations for the periods indicated for all Level 3 assets measured at fair value on a recurring basis.

													Financial
	Financial Assets												Liabilities(1)
	Municipal Bonds		Corporate Bonds		Other Mortgage- Backed Securities		Total Fixed Maturities		Equity Securities		Total

Beginning balance January 1, 2014	$	2,694	$	60,826	$	46,009	$	109,529	$	6	$	109,535	$	-
Transfers into Level 3 (2)		10,055		-		7,109		17,164		-		17,164		-
Transfers out of Level 3 (2)		-		-		(519)		(519)		-		(519)		-
Total gains or losses
Net realized gains (losses) included in net income		-		-		-		-		-		-		-
Net unrealized gains (losses) included in other comprehensive income		98		1,014		184		1,296		-		1,296		-
Purchases		-		-		-		-		-		-		-
Issuances		-		-		-		-		-		-		2,747
Sales		-		-		-		-		-		-		-
Settlements		-		-		-		-		-		-		-
Paydowns, maturities and distributions		(68)		(1,636)		(232)		(1,936)		-		(1,936)		-
Ending balance, March 31, 2014	$	12,779	$	60,204	$	52,551	$	125,534	$	6	$	125,540	$	2,747

Beginning balance, January 1, 2013	$	12,275	$	85,722	$	33,172	$	131,169	$	340	$	131,509	$	-
Transfers into Level 3 (2)		2,907		4,671		8,466		16,044		-		16,044		-
Transfers out of Level 3 (2)		-		(33,678)		-		(33,678)		-		(33,678)		-
Total gains or losses
Net realized gains (losses) included in net income		-		-		-		-		-		-		-
Net unrealized gains (losses) included in other comprehensive income		(36)		(885)		(127)		(1,048)		-		(1,048)		-
Purchases		-		-		-		-		-		-		-
Issuances		-		-		-		-		-		-		-
Sales		-		-		-		-		-		-		-
Settlements		-		-		-		-		-		-		-
Paydowns, maturities and distributions		-		(303)		(8,428)		(8,731)		-		(8,731)		-
Ending balance, March 31, 2013	$	15,146	$	55,527	$	33,083	$	103,756	$	340	$	104,096	$	-

(1)	Represents embedded derivatives, all related to the Company’s FIA products, reported in Other Policyholder Funds in the Company’s Consolidated Balance Sheets.

(2)

Transfers into and out of Level 3 during the periods ended March 31, 2014 and 2013 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company’s policy is to recognize transfers into and transfers out of the levels as having occurred at the end of the reporting period in which the transfers were determined.

Carrying value, fair value and fair value hierarchy of financial assets and financial liabilities

The Company has various other financial assets and financial liabilities used in the normal course of business that are not carried at fair value, but for which fair value disclosure is required. The following table presents the carrying value, fair value and fair value hierarchy of these financial assets and financial liabilities.

					Fair Value Measurements at
	Carrying		Fair		Reporting Date Using
	Amount		Value		Level 1		Level 2		Level 3
March 31, 2014
Financial Assets
Investments
Other investments	$	140,651	$	144,894	$	-	$	-	$	144,894
Financial Liabilities
Fixed annuity contract liabilities		3,564,453		3,347,970		-		-		3,347,970
Policyholder account balances on interest-sensitive life contracts		78,187		79,262		-		-		79,262
Other policyholder funds		344,838		344,838		-		250,051		94,787
Short-term debt		38,000		38,000		-		38,000		-
Long-term debt		199,890		216,773		216,773		-		-
Other liabilities, repurchase agreement obligations		49,232		49,232		-		49,232		-

December 31, 2013
Financial Assets
Investments
Other investments	$	140,685	$	144,921	$	-	$	-	$	144,921
Financial Liabilities
Fixed annuity contract liabilities		3,515,865		3,302,333		-		-		3,302,333
Policyholder account balances on interest-sensitive life contracts		78,598		79,678		-		-		79,678
Other policyholder funds		346,292		346,292		-		250,000		96,292
Short-term debt		38,000		38,000		-		38,000		-
Long-term debt		199,874		218,565		218,565		-		-
Other liabilities, repurchase agreement obligations		25,864		25,864		-		25,864		-

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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