Fair Value of Financial Instruments

The following tables show the fair values and carrying values of the Company’s financial assets and liabilities measured on a recurring basis and the associated fair value hierarchy amounts as of September 30, 2013 and December 31, 2012. Included are balances associated with the consolidated CLOs:



			September 30, 2013
Assets:	Quoted Prices in active markets Level 1		Other Significant Observable inputs Level 2		Significant unobservable inputs Level 3		Fair Value		Carrying Value
Trading securities:
Privately held equity securities (1)	$	—	$	—	$	5,074	$	5,074	$	5,074
Tax exempt securities	—		33,880		298		34,178		34,178
CDO	—		—		820		820		820
CLO	—		—		721		721		721
Corporate bonds (2)	—		—		17,537		17,537		17,537
Total trading securities	—		33,880		24,450		58,330		58,330
Corporate loans (3)	—		1,462,777		—		1,462,777		1,462,777
Available for sale securities:
U.S. Treasury securities	7,872		—		—		7,872		7,872
Obligations of state and political subdivisions	—		4,237		—		4,237		4,237
Certificates of deposit	—		100		—		100		100
Corporate bonds	—		5,424		—		5,424		5,424
Asset-backed securities	—		88		—		88		88
Total available for sale securities	7,872		9,849		—		17,721		17,721
Derivative Assets:
CDS	—		—		2		2		2
Total Derivative Assets	$	—	$	—	$	2	$	2	$	2



			September 30, 2013
	Quoted Prices in Active markets Level 1		Other Significant Level 2		Significant Unobservable inputs Level 3		Fair Value		Carrying Value
Separate Account Assets:
Cash	$	4,039	$	—	$	—	$	4,039	$	4,039
Short-term investments	131,750		—		—		131,750		131,750
Debt Securities:
U.S. Treasury securities	13,706		—		—		13,706		13,706
U.S. government agencies	—		569		—		569		569
Municipal bonds	—		3,568		—		3,568		3,568
Asset-backed securities	—		8,170		—		8,170		8,170
Corporate bonds	—		13,230		—		13,230		13,230
Preferred stocks	25		—		—		25		25
Common stocks	107,587		—		—		107,587		107,587
Mutual funds	163,627		—		—		163,627		163,627
Real estate funds	—		—		2,593,508		2,593,508		2,593,508
Private equity	—		—		244		244		244
Hedge funds									—
Multi-strategy	—		63,996		672,564		736,560		736,560
Long/short	—		27,530		79,445		106,975		106,975
Fund of funds	—		1,514		188,626		190,140		190,140
Event driven	—		45,776		36,541		82,317		82,317
Long only	—		33,960		—		33,960		33,960
Global Macro	—		11,663		7,699		19,362		19,362
Fixed income arbitrage	—		—		4,917		4,917		4,917
Master limited partnerships	—		—		132,236		132,236		132,236
Fixed income (non-arbitrage)	—		1,155		5,536		6,691		6,691
Other	—		—		84		84		84
Other	—		225		—		225		225
Subtotal - separate account assets	420,734		211,356		3,721,400		4,353,490		4,353,490
Total assets	$	428,606	$	1,717,862	$	3,745,852	$	5,892,320	$	5,892,320
Liabilities:
Debt Securities:
U.S. Treasury securities	$	18,945	$	—	$	—	$	18,945	$	18,945
Derivative Liabilities:
Total liabilities	$	18,945	$	—	$	—	$	18,945	$	18,945

(1) Includes $1,460 related to CLOs classified in Level 3.

(2) Includes $17,537 related to CLOs classified in Level 3.

(3) Includes $1,334,310 related to CLOs classified in Level 2.



			December 31, 2012
Assets:	Quoted Prices in active markets Level 1		Other Significant Observable inputs Level 2		Significant unobservable inputs Level 3		Fair Value		Carrying Value
Trading Securities:
Exchange-traded equity securities	$	2,434	$	—	$	—	$	2,434	$	2,434
Privately held equity securities (1)	—		—		7,809		7,809		7,809
Tax exempt securities	—		50,784		264		51,048		51,048
CDO	—		—		650		650		650
CLO	—		—		525		525		525
Corporate bonds (2)	—		—		16,486		16,486		16,486
Total trading securities	2,434		50,784		25,734		78,952		78,952
Corporate loans (3)	—		756,311		5,855		762,166		762,166

Available for sale securities:
U.S. government obligations	—		3,851		—		3,851		3,851
U.S. Treasury securities	5,290		—		—		5,290		5,290
Obligations of state and political subdivisions	—		478		—		478		478
Certificates of deposit	—		100		—		100		100
Corporate bonds	—		6,277		—		6,277		6,277
Asset-backed securities	—		307		—		307		307
Total available for sale securities	5,290		11,013		—		16,303		16,303
Derivative Assets:	—		—		834		834		834
CDS	$	—	$	—	$	834	$	834	$	834



			December 31, 2012
	Quoted Prices in Active markets Level 1		Other Significant Level 2		Significant Unobservable inputs Level 3		Fair Value		Carrying Value
Separate Account Assets:
Cash	$	3,771	$	—	$	—	$	3,771	$	3,771
Short-term investments	87,409		—		—		87,409		87,409
Debt Securities:									—
U.S. Treasury securities	19,230		—		—		19,230		19,230
U.S. government agencies	—		1,625		—		1,625		1,625
Municipal bonds	—		3,034		—		3,034		3,034
Asset-backed securities	—		2,843		—		2,843		2,843
Corporate bonds	—		18,373		—		18,373		18,373
Preferred stocks	25		—		—		25		25
Common stocks	97,600		—		—		97,600		97,600
Mutual funds	146,860		—		—		146,860		146,860
Real estate funds	—		—		2,563,992		2,563,992		2,563,992
Private equity	—		—		251		251		251
Hedge funds
Multi-Strategy	—		58,580		617,979		676,559		676,559
Long/Short	—		32,665		75,640		108,305		108,305
Fund of Funds	—		1,347		123,793		125,140		125,140
Event Driven	—		40,907		29,230		70,137		70,137
Long only	—		31,825		—		31,825		31,825
Global Macro	—		11,562		7,374		18,936		18,936
Fixed Income Arbitrage	—		—		4,994		4,994		4,994
Master limited partnerships	—		—		42,501		42,501		42,501
Fixed Income (Non-Arbitrage)	—		5,013		4,700		9,713		9,713
Other	—		—		1,746		1,746		1,746
Other	—		184		—		184		184
Subtotal - separate account assets	354,895		207,958		3,472,200		4,035,053		4,035,053
Total assets	$	362,619	$	1,026,066	$	3,504,623	$	4,893,308	$	4,893,308
Liabilities:
Debt Securities:
U.S. Treasury securities	$	20,175	$	—	$	—	$	20,175	$	20,175
Derivative Liabilities:
IRS	—		3,172		—		3,172		3,172
Total liabilities	$	20,175	$	3,172	$	—	$	23,347	$	23,347

(1) Includes $2,484 related to CLOs classified in Level 3.

(2) Includes $16,486 related to CLOs classified in Level 3.

(3) Includes $735,888 and $5,855 classified in Level 2 and Level 3, respectively, related to CLOs.

The following table represents additional information about assets that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value for the periods ending September 30, 2013 and September 30, 2012:



	Fair value measurement for the three and nine months ended September 30, 2013 using significant unobservable inputs Level 3			Fair value measurement for the three and nine months ended September 30, 2012 using significant unobservable inputs Level 3
Balance at December 31,	$	3,504,625		$	3,116,455
Net realized gains/(losses)	(1,570		)	—
Net unrealized gains/(losses)	2,722			5,709
Purchases	180,124			331,983
Sales	(90,024		)	(122,370		)
Issuances	—			—
Settlements	(1,195		)	—
Transfers into/(out of) Level 3, net	7,983			4,043
Attributable to policyowner	121,437			45,112
Balance at June 30,	$	3,724,102		$	3,380,932
Net realized gains/(losses)	(228		)	811
Net unrealized gains/(losses)	(2,326		)	4,205
Purchases	36,116			48,078
Sales	(64,356		)	(108,081		)
Issuances	214			—
Settlements	—			386
Transfers into/(out of) Level 3, net	(9,632		)	(14,681		)
Attributable to policyowner	61,961			92,447
Balance at September 30,	$	3,745,851		$	3,404,097

ASC Topic 820, as amended by ASU 2011-04, requires disclosure of quantitative information about the significant unobservable inputs used in the valuation of assets and liabilities classified as Level 3 within the fair value hierarchy. Disclosure of this information is not required in circumstances where a valuation (unadjusted) is obtained from a third-party pricing service and the information regarding the unobservable inputs is not reasonably available to the Company. As such, the disclosure provided below provides quantitative information only about the significant observable inputs used in the valuation of certain privately held securities, credit default assets and tax-exempt municipal securities.



Assets	Fair Value at September 30, 2013		Fair Value at December 31, 2012		Valuation Technique	Unobservable input(s)	September 30, 2013 Range (Weighted average)	December 31, 2012 Range (Weighted average)
Trading Securities:
Privately held equity securities	$	—	$	1,224	Discounted cash flow	Swap rate	—	0.239%-0.300& (0.270%)
						CMBS spread	—	34.50	%
						Expected term	—	1.00-4.79 years (2.90 years)
						Expected quarterly cash flow streams	—	$52-$1,574 ($147)
Tax-exempt municipal	298		264		Discounted cash flow	Short and long term cash flows	.6294% - 33.73%	.8435%-37.469%
Derivative Assets:
CDS	—		834		Market comparable approach	Offered quote	—	88.28%-96.66% (93.71%)
Total	$	298	$	2,322

The following tables show the fair values and carrying values of the Company's financial assets and liabilities and the fair value hierarchy level(s) associated with these assets and liabilities as of September 30, 2013 and December 31, 2012 :



	September 30, 2013
	Level within Fair Value Hierarchy	Fair Value		Carrying Value
Assets:
Cash and cash equivalents-unrestricted	1	$	123,721	$	123,721
Cash and cash equivalents-restricted	1	34,210		34,210
Trading securities	1,2,3	39,333		39,333
Due from brokers, dealers, and trustees	1	247		247
Due from separate accounts	1	2,467		2,467
Investments in loans	2	128,467		128,467
Loans owned	2	41,397		32,443
Policy loans	3	104,875		104,875
Available for sale securities	1,2,3	17,721		17,721
Derivative assets-CDS	3	2		2
Separate account assets	1,2,3	4,353,490		4,353,490
Assets of consolidated CLOs	2,3	1,477,716		1,477,716

Total Assets		$	6,323,646	$	6,314,692

Liabilities:
Debt securities-U.S. Treasury securities	1	18,945		18,945
Mortgage notes payable	3	32,685		33,254
Loans payable	3	58,749		58,749
Notes payable	3	162,681		146,500
Separate account liabilities	1,2,3	4,353,490		4,353,490
Due to brokers, dealers and trustees	1	47,120		47,120
Liabilities of consolidated CLOs	2,3	1,393,604		1,250,931

Total Liabilities		$	6,067,274	$	5,908,989



	December 31, 2012
	Level within Fair Value Hierarchy	Fair Value		Carrying Value
Assets:
Cash and cash equivalents-unrestricted	1	$	88,563	$	88,563
Cash and cash equivalents-restricted	1	20,748		20,748
Trading securities	1,2,3	59,982		59,982
Due from brokers, dealers, and trustees	1	8,539		8,539
Due from separate accounts	1	2,128		2,128
Corporate loans	2	20,423		20,423
Loans owned	2	8,104		5,467
Policy loans	3	99,123		99,123
Available for sale securities	1,2,3	16,303		16,303
Derivative assets-CDS	3	834		834
Separate account assets	1,2,3	4,035,053		4,035,053
Assets of consolidated CLOs	2,3	844,852		844,852

Total Assets		$	5,204,652	$	5,202,015

Liabilities:
Debt securities-U.S. Treasury securities	1	$	20,175	$	20,175
Derivative liabilities-IRS	2	3,172		3,172
Mortgage notes payable	3	82,578		95,232
Notes payable	3	100,416		100,416
Separate account liabilities	1,2,3	4,035,053		4,035,053
Liabilities of consolidated CLOs	2,3	778,925		620,310

Total Liabilities		$	5,020,319	$	4,874,358