Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 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 June 30, 2014, Level 3 invested assets comprised approximately 2.0% 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
June 30, 2014
Financial Assets
Investments
Fixed maturities
U.S. Government and federally
sponsored agency obligations:
Mortgage-backed securities	$	582,132	$	582,132	$	-	$	582,132	$	-
Other, including
U.S. Treasury securities		476,178		476,178		17,854		458,324		-
Municipal bonds		1,597,889		1,597,889		-		1,584,835		13,054
Foreign government bonds		57,039		57,039		-		57,039		-
Corporate bonds		2,863,737		2,863,737		10,599		2,779,212		73,926
Other mortgage-backed securities		1,099,364		1,099,364		-		1,046,842		52,522
Total fixed maturities		6,676,339		6,676,339		28,453		6,508,384		139,502
Equity securities		109,462		109,462		80,821		28,635		6
Short-term investments		68,458		68,458		68,055		403		-
Other investments		5,708		5,708		-		5,708		-
Totals		6,859,967		6,859,967		177,329		6,543,130		139,508
Separate Account
(variable annuity) assets (1)		1,814,152		1,814,152		1,814,152		-		-
Financial Liabilities
Other policyholder funds,
embedded derivatives		6,915		6,915		-		-		6,915

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 policyholder 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 six months ended June 30, 2014. The following tables present reconciliations for the periods indicated for all Level 3 assets and liabilities measured at fair value on a recurring basis.

																								Financial
		Financial Assets																						Liabilities(1)
	MunicipalBonds				CorporateBonds				OtherMortgage- Backed Securities				TotalFixed Maturities				EquitySecurities			Total

Beginning balance April 1, 2014		$	12,779			$	60,204			$	52,551			$	125,534			$	6		$	125,540			$	2,747
Transfers into Level 3 (2)			-				12,452				-				12,452				-			12,452				-
Transfers out of Level 3 (2)			-				-				-				-				-			-				-
Total gains or losses
Net realized gains (losses) included in net income			-				-				(26	)			(26	)			-			(26	)			57
Net unrealized gains (losses) included in other comprehensive income			337				1,546				108				1,991				-			1,991				-
Purchases			-				-				-				-				-			-				-
Issuances			-				-				-				-				-			-				4,121
Sales			-				-				-				-				-			-				-
Settlements			-				-				-				-				-			-				-
Paydowns, maturities and distributions			(62	)			(276	)			(111	)			(449	)			-			(449	)			(10	)
Ending balance, June 30, 2014		$	13,054			$	73,926			$	52,522			$	139,502			$	6		$	139,508			$	6,915

Beginning balance, January 1, 2014		$	2,694			$	60,826			$	46,009			$	109,529			$	6		$	109,535			$	-
Transfers into Level 3 (2)			10,056				12,452				7,109				29,617				-			29,617				-
Transfers out of Level 3 (2)			-				-				(519	)			(519	)			-			(519	)			-
Total gains or losses
Net realized gains (losses) included in net income			-				-				(26	)			(26	)			-			(26	)			69
Net unrealized gains (losses) included in other comprehensive income			434				2,560				292				3,286				-			3,286				-
Purchases			-				-				-				-				-			-				-
Issuances			-				-				-				-				-			-				6,856
Sales			-				-				-				-				-			-				-
Settlements			-				-				-				-				-			-				-
Paydowns, maturities and distributions			(130	)			(1,912	)			(343	)			(2,385	)			-			(2,385	)			(10	)
Ending balance, June 30, 2014		$	13,054			$	73,926			$	52,522			$	139,502			$	6		$	139,508			$	6,915

___________________________________________________________________

(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 three and six months ended June 30, 2014 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.

	Financial Assets
	MunicipalBonds				CorporateBonds				OtherMortgage- Backed Securities				TotalFixed Maturities				EquitySecurities				Total

Beginning balance April 1, 2013		$	15,146			$	55,527			$	33,083			$	103,756			$	340			$	104,096
Transfers into Level 3 (1)			1,000				18,768				35,533				55,301				-				55,301
Transfers out of Level 3 (1)			-				(16,663	)			(18,403	)			(35,066	)			-				(35,066	)
Total gains or losses
Net realized gains (losses) included in net income			-				-				-				-				-				-
Net unrealized gains (losses) included in other comprehensive income			(315	)			(824	)			(291	)			(1,430	)			-				(1,430	)
Purchases			-				-				-				-				-				-
Issuances			-				-				-				-				-				-
Sales			-				-				-				-				(334	)			(334	)
Settlements			-				-				-				-				-				-
Paydowns, maturities and distributions			(12,067	)			(218	)			(579	)			(12,864	)			-				(12,864	)
Ending balance, June 30, 2013		$	3,764			$	56,590			$	49,343			$	109,697			$	6			$	109,703

Beginning balance, January 1, 2013		$	12,275			$	85,722			$	33,172			$	131,169			$	340			$	131,509
Transfers into Level 3 (1)			3,907				23,439				43,999				71,345				-				71,345
Transfers out of Level 3 (1)			-				(50,341	)			(18,403	)			(68,744	)			-				(68,744	)
Total gains or losses
Net realized gains (losses) included in net income			-				-				-				-				-				-
Net unrealized gains (losses) included in other comprehensive income			(351	)			(1,709	)			(418	)			(2,478	)			-				(2,478	)
Purchases			-				-				-				-				-				-
Issuances			-				-				-				-				-				-
Sales			-				-				-				-				(334	)			(334	)
Settlements			-				-				-				-				-				-
Paydowns, maturities and distributions			(12,067	)			(521	)			(9,007	)			(21,595	)			-				(21,595	)
Ending balance, June 30, 2013		$	3,764			$	56,590			$	49,343			$	109,697			$	6			$	109,703

_________________________________________________________________

(1)

Transfers into and out of Level 3 during the three and six months ended June 30, 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 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

June 30, 2014
Financial Assets
Investments
Other investments	$	142,257	$	146,547	$	-	$	-	$	146,547
Financial Liabilities
Fixed annuity contract liabilities		3,629,065		3,408,658		-		-		3,408,658
Policyholder account balances on
interest-sensitive life contracts		77,848		78,917		-		-		78,917
Other policyholder funds		340,137		340,137		-		250,044		90,093
Short-term debt		38,000		38,000		-		38,000		-
Long-term debt		199,907		214,597		214,597		-		-
Other liabilities, repurchase
agreement obligations		139,959		139,959		-		139,959		-

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.

+ References+ Details

- 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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