Fair Value of Financial Instruments (Tables)

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 June 30, 2014 and December 31, 2013. Included are balances associated with the consolidated CLOs:



			June 30, 2014
Assets:	Quoted prices in active markets Level 1		Other significant observable inputs Level 2		Significant unobservable inputs Level 3		Fair value		Carrying value
Trading investments:
Privately held equity securities	$	—	$	—	$	4,171	$	4,171	$	4,171
Privately held equity securities⁽¹⁾	—		—		3,219		3,219		3,219
Tax exempt securities	—		24,442		3,551		27,993		27,993
CDO	—		—		300		300		300
CLO	—		—		825		825		825
Corporate bonds⁽¹⁾	—		—		18,253		18,253		18,253
Total trading investments	—		24,442		30,319		54,761		54,761
Derivative assets:
IRLC	—		619		—		619		619
Credit derivatives	—		221		—		221		221
Total derivative assets	—		840		—		840		840
Total trading securities	—		25,282		30,319		55,601		55,601
Loans held for sale	—		25,104		—		25,104		25,104
Investment in loans	—		99,945		22,039		121,984		121,984
Investment in loans⁽¹⁾	—		1,159,983		405,933		1,565,916		1,565,916
Available for sale securities:
U.S. Treasury securities	7,445		—		—		7,445		7,445
Obligations of state and political subdivisions	—		3,610		—		3,610		3,610
Certificates of deposit	—		100		—		100		100
Corporate bonds	—		6,729		—		6,729		6,729
Asset-backed securities	—		68		—		68		68
Total available for sale securities	7,445		10,507		—		17,952		17,952



			June 30, 2014
	Quoted prices in active markets Level 1		Other significant Level 2		Significant unobservable inputs Level 3		Fair value		Carrying value

Separate Account Assets:
Cash	$	3,357	$	—	$	—	$	3,357	$	3,357
Short-term investments	157,378		—		—		157,378		157,378
Debt securities:
U.S. Treasury securities	2,791		—		—		2,791		2,791
U.S. government agencies	—		1,192		—		1,192		1,192
Municipal bonds	—		6,878		—		6,878		6,878
Asset-backed securities	—		99		—		99		99
Corporate bonds	—		8,826		—		8,826		8,826
Preferred stocks	1,193		—		—		1,193		1,193
Common stocks	108,328		—		—		108,328		108,328
Mutual funds	103,604		137,092		—		240,696		240,696
Real estate funds	—		—		2,769,159		2,769,159		2,769,159
Private equity	—		—		84		84		84
Hedge funds:
Multi-strategy	—		66,652		714,672		781,324		781,324
Long/short	—		22,255		80,047		102,302		102,302
Fund of funds	—		3,379		177,862		181,241		181,241
Event driven	—		—		90,855		90,855		90,855
Long only	—		36,114		20,721		56,835		56,835
Global macro	—		13,549		6,819		20,368		20,368
Fixed income arbitrage	—		—		6,953		6,953		6,953
Master limited partnerships	—		200,907		53,826		254,733		254,733
Fixed income (non-arbitrage)	—		4,027		742		4,769		4,769
Other	—		—		63		63		63
Other	—		144		—		144		144
Subtotal - separate account assets	376,651		501,114		3,921,803		4,799,568		4,799,568
Total	$	384,096	$	1,821,935	$	4,380,094	$	6,586,125	$	6,586,125
Liabilities:
Debt securities:
U.S. Treasury securities	$	19,254	$	—	$	—	$	19,254	$	19,254
Derivative liabilities:
IRS	—		672		—		672		672
Credit derivatives	—		845		—		845		845



Total derivative liabilities	—		1,517		—		1,517		1,517
Total	$	19,254	$	1,517	$	—	$	20,771	$	20,771

(1) Indicates assets related to consolidated CLOs.



	December 31, 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 investments:
Privately held equity securities⁽¹⁾	$	—	$	—	$	5,306	$	5,306	$	5,306
Tax exempt securities	—		30,707		273		30,980		30,980
CDO	—		—		520		520		520
CLO	—		—		825		825		825
Corporate bonds ⁽²⁾	—		—		17,674		17,674		17,674
Total trading investments	—		30,707		24,598		55,305		55,305
Derivative assets:
IRS	—		52		—		52		52
Total derivative assets	—		52		—		52		52
Total trading securities	—		30,759		24,598		55,357		55,357
Investment in loans⁽³⁾	—		1,438,699		30,543		1,469,242		1,469,242
Available for sale securities:
U.S. Treasury securities	7,751		—		—		7,751		7,751
Obligations of state and political subdivisions	—		4,238		—		4,238		4,238
Certificates of deposit	—		100		—		100		100
Corporate bonds	—		5,596		—		5,596		5,596
Asset-backed securities	—		78		—		78		78
Total available for sale securities	7,751		10,012		—		17,763		17,763



	December 31, 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	$	26,129	$	—	$	—	$	26,129	$	26,129
Short-term investments	171,927		—		—		171,927		171,927
Debt securities:
U.S. Treasury securities	17,634		—		—		17,634		17,634
U.S. government agencies	—		1,436		—		1,436		1,436
Municipal bonds	—		8,014		—		8,014		8,014
Asset-backed securities	—		8,113		—		8,113		8,113
Corporate bonds	—		18,116		—		18,116		18,116
Preferred stocks	1,018		—		—		1,018		1,018
Common stocks	100,630		—		—		100,630		100,630
Mutual funds	195,736		—		—		195,736		195,736
Real estate funds	—		—		2,719,387		2,719,387		2,719,387
Private equity	—		—		138		138		138
Hedge funds
Multi-strategy	—		66,615		682,751		749,366		749,366
Long/short	—		19,115		84,315		103,430		103,430
Fund of funds	—		2,509		191,423		193,932		193,932
Event driven	—		—		86,724		86,724		86,724
Long only	—		34,787		20,305		55,092		55,092
Global macro	—		13,157		8,245		21,402		21,402
Fixed income arbitrage	—		—		8,669		8,669		8,669
Master limited partnerships	—		102,394		28,814		131,208		131,208
Fixed income (non-arbitrage)	—		4,117		2,557		6,674		6,674
Other	—		—		73		73		73
Other	—		251		—		251		251
Subtotal - separate account assets	513,074		278,624		3,833,401		4,625,099		4,625,099
Total	$	520,825	$	1,758,094	$	3,888,542	$	6,167,461	$	6,167,461
Liabilities:
Debt securities:
U.S. Treasury securities	$	18,493	$	—	$	—	$	18,493	$	18,493
Derivative Liabilities:
Credit derivatives	—		598		—		598		598
Total	$	18,493	$	598	$	—	$	19,091	$	19,091

(1) Includes $1,692 related to CLOs classified in Level 3.

(2) Includes $17,674 related to CLOs classified in Level 3.

(3) Includes $1,267,612 and $30,543 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 period ending June 30, 2014 and 2013:



	Fair value measurement for the three months and six months ended June 30, 2014 using significant unobservable inputs Level 3			Fair value measurement for the three months and six months ended June 30, 2013 using significant unobservable inputs Level 3
Balance at December 31,	$	3,888,542		$	3,504,623
Net realized gains/(losses)	880			3
Net unrealized gains/(losses)	149			4,209
Purchases	41,308			152,549
Sales	(68,691		)	(45,589		)
Issuances	531			—
Settlements	—			8
Transfers into/(out of) Level 3, net	370,433			5,177
Attributable to policyowner	43,750			130,110
Balance at March 31,	4,276,902			3,751,090
Net realized gains/(losses)	602			(1,574		)
Net unrealized gains/(losses)	(235		)	(1,487		)
Purchases	55,452			27,575
Sales	(126,868		)	(44,435		)
Issuances	761			(8		)
Settlements	—			(1,195		)
Transfers into/(out of) Level 3, net	90,622			2,810
Attributable to policyowner	82,858			(8,673		)
Balance at June 30,	$	4,380,094		$	3,724,103
Changes in unrealized gains included in earnings related to assets still held at period end	$	86		$	2,722

As such, the disclosure provided below provides quantitative information only about the significant unobservable inputs used in the valuation of certain privately held securities, credit default assets and tax-exempt municipal securities.



Assets	Fair value at June 30, 2014		Fair value at December 31, 2013		Valuation technique	Unobservable input(s)	June 30, 2014 Range (weighted average)	December 31, 2013 Range (weighted average)
Tax-exempt municipal	193		274		Discounted cash flow	Short and long term cash flows	.54% - 33.65%	.58% - 33.68%
Total	$	193	$	274

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 June 30, 2014 and December 31, 2013:



	June 30, 2014
	Level within fair value hierarchy	Fair value		Carrying value
Assets:
Cash and cash equivalents-unrestricted	1	$	122,050	$	122,050
Cash and cash equivalents-restricted	1	22,796		22,796
Trading securities	2,3	34,129		34,129
Due from brokers, dealers, and trustees⁽¹⁾	1	11,809		11,809
Due from separate accounts⁽¹⁾	1	2,926		2,926
Loans held for sale	2	25,104		25,104
Investments in loans	2	122,138		122,138
Loans owned	2	63,572		55,003
Policy loans	3	92,711		92,711
Available for sale securities	1,2,3	17,952		17,952
Separate account assets	1,2,3	4,799,568		4,799,568
Assets of consolidated CLOs	2,3	1,758,909		1,758,909

Total Financial Assets		$	7,073,664	$	7,065,095

Liabilities:
Debt securities-U.S. Treasury securities	1	19,254		19,254
Debt	3	300,434		285,706
Separate account liabilities	1,2,3	4,799,568		4,799,568
Due to brokers, dealers and trustees	1	71,068		71,068
Derivative liabilities	2	1,517		1,517
Liabilities of consolidated CLOs	2,3	1,522,093		1,522,093

Total Financial Liabilities		$	6,713,934	$	6,699,206

(1) Included as a component of other assets on the Company’s Consolidated balance sheets.



	December 31, 2013
	Level within fair value hierarchy	Fair value		Carrying value
Assets:
Cash and cash equivalents-unrestricted	1	$	120,557	$	120,557
Cash and cash equivalents-restricted	1	26,395		26,395
Trading securities	2,3	35,991		35,991
Due from brokers, dealers, and trustees (1)	1	6,956		6,956
Due from separate accounts (1)	1	1,963		1,963
Investment in loans	2	171,087		171,087
Loans owned	2	48,212		40,260
Policy loans	3	102,147		102,147
Available for sale securities	1,2,3	17,763		17,763
Separate account assets	1,2,3	4,625,099		4,625,099
Assets of consolidated CLOs	2,3	1,414,616		1,414,616

Total Financial Assets		$	6,570,786	$	6,562,834

Liabilities:
Debt securities-U.S. Treasury securities	1	$	18,493	$	18,493
Derivative liabilities	2	598		598
Debt	3	376,250		360,609
Due to brokers, dealer and trustees	1	8,193		8,193
Separate account liabilities	1,2,3	4,625,099		4,625,099
Liabilities of consolidated CLOs	2,3	1,175,606		1,175,606

Total Financial Liabilities		$	6,204,239	$	6,188,598

- 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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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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