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Fair Value Disclosures (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 and 2011, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.

FAIR VALUE MEASUREMENTS ON A RECURRING BASIS

(Dollars in Thousands)

		December 31, 2012 Fair Value				Quoted Prices in Active Markets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets:
Investments-trading:
U.S. government agency MBS and CMOs		$	34,592			$	—			$	34,592			$	—
U.S. government agency debt securities			21,066				—				21,066				—
RMBS			583				—				583				—
CMBS			12				—				12				—
U.S. Treasury securities			147				147				—				—
Interests in securitizations (1)			352				—				57				295
SBA loans			15,705				—				15,705				—
Corporate bonds and redeemable preferred stock			56,022				5,643				50,379				—
Foreign government bonds			448				—				448				—
Municipal bonds			37,745				—				37,745				—
Certificates of deposit			8,934				—				8,934				—
Equity securities			533				395				138				—
Total investments-trading		$	176,139			$	6,185			$	169,659			$	295
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (2)		$	2,054			$	—			$	—			$	2,054
Star Asia (3)			30,169				—				—				30,169
Tiptree (4)			2,834				—				—				2,834
			35,057				—				—				35,057
Investment Funds
Star Asia Special Situations Fund (3)			2,503				—				—				2,503
			2,503				—				—				2,503
Other			431				24				407				—
Total equity securities			37,991				24				407				37,560
Interests in securitizations (1)			77				—				—				77
Residential loans			255				—				255				—
Total other investments, at fair value		$	38,323			$	24			$	662			$	37,637
Liabilities:
Trading securities sold, not yet purchased:
U.S. government agency MBS		$	13			$	—			$	13			$	—
U.S. Treasury securities			19,722				19,722				—				—
Corporate bonds and redeemable preferred stock			21,976				152				21,824				—
Municipal bonds			128				—				128				—
Certificates of deposit			2,325				—				2,325				—
Equity securities			3				3				—				—
Total trading securities sold, not yet purchased		$	44,167			$	19,877			$	24,290			$	—

(1) Primarily comprised of CDOs, CLOs, and ABS.

(2) Hybrid Securities Fund — European.

(3) Real Estate Fund — Asian.

(4) Diversified Fund.

		December 31, 2011 Fair Value				Quoted Prices in Active Markets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets:
Investments-trading:
U.S. government agency MBS and CMOs		$	7,563			$	—			$	7,563			$	—
U.S. government agency debt securities			14,600				144				14,456				—
RMBS			7,108				—				2,176				4,932
CMBS			1,587				—				1,587				—
U.S. Treasury securities			8,524				8,524				—				—
Interests in securitizations (1)			608				—				387				221
SBA loans			9,049				—				9,049				—
Corporate bonds and redeemable preferred stock			65,445				779				64,666				—
Foreign government bonds			67				—				67				—
Municipal bonds			9,225				—				9,225				—
Certificates of deposit			710				—				710				—
Equity securities			60				25				—				35
Total investments-trading		$	124,546			$	9,472			$	109,886			$	5,188
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (2)			2,370				—				—				2,370
Star Asia (3)			37,358				—				—				37,358
Tiptree (4)			2,533				—				—				2,533
			42,261				—				—				42,261
Other			156				24				—				132
Total equity securities			42,417				24				—				42,393
Interests in securitizations (1)			88				—				—				88
Residential loans			267				—				—				267
Total other investments, at fair value		$	42,772			$	24			$	—			$	42,748
Liabilities:
Trading securities sold, not yet purchased:
U.S. government agency MBS		$	16			$	—			$	16			$	—
U.S. Treasury securities			11,755				11,755				—				—
Corporate bonds and redeemable preferred stock			87,537				1,084				86,453				—
Foreign government bonds			158				—				158				—
Municipal bonds			143				—				143				—
Certificates of deposit			4				—				4				—
Total trading securities sold, not yet purchased		$	99,613			$	12,839			$	86,774			$	—

(1) Primarily comprised of CDOs, CLOs, and ABS.

(2) Hybrid Securities Fund — European

(3) Real Estate Fund — Asian

(4) Diversified Fund

Schedule of Additional Information about Assets and Liabilities Measured at Fair Value on a Recurring Basis Level 3 Inputs

The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which the Company has utilized level 3 inputs to determine fair value for the years ended December 31, 2012 and 2011:

LEVEL 3 INPUTS

Year Ended December 31, 2012

(Dollars in Thousands)

		January 1, 2012				Total gains and losses included in earnings								Transfers out of Level 3				Purchases (1)				Sales				December 31, 2012				Change in unrealized gains/(losses) for the period included in earnings (2)
						Net trading				Principal transactions and other income
Assets:
Investments-trading:
RMBS		$	4,932			$	17			$	—			$	—			$	171			$	(5,120	)		$	—			$	—
Interests in securitizations (3)			221				126				—				—				2,861				(2,913	)			295				63
Equity securities			35				(104	)			—				(57	)			126				—				—				—
Total investments-trading		$	5,188			$	39			$	—				(57	)		$	3,158			$	(8,033	)		$	295			$	63
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (4)		$	2,370			$	—			$	(331	)			—			$	15			$	—			$	2,054			$	(331	)
Star Asia (5)			37,358				—				(7,274	)			—				85				—				30,169				(7,274	)
Tiptree (6)			2,533				—				301				—				—				—				2,834				301
			42,261				—				(7,304	)			—				100				—				35,057				(7,304	)
Investment Funds
Star Asia Special Situations Fund (5)			—				—				662				—				1,841				—				2,503				662
			—				—				662				—				1,841				—				2,503				662
Other			132				—				(41	)			(91	)			—				—				—				—
Total equity securities			42,393				—				(6,683	)			(91	)			1,941				—				37,560				(6,642	)
Interests in securitizations (3)			88				—				(11	)			—				—				—				77				(11	)
Residential loans			267				—				—				(267	)			—				—				—				—
Total other investments, at fair value		$	42,748			$	—			$	(6,694	)		$	(358	)		$	1,941			$	—			$	37,637			$	(6,653	)

(1) For more information on the purchase of $1,841 attributable to the Star Asia Special Situations Fund, see notes 3-F, 15, 28 and 29.

(2) Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(3) Primarily comprised of CDOs, CLOs, and ABS.

(4) Hybrid Securities Funds — European.

(5) Real Estate Funds — Asian.

(6) Diversified Fund.

LEVEL 3 INPUTS

Year Ended December 31, 2011

(Dollars in Thousands)

		January 1, 2011				Net realized/ unrealized gains / (losses) included in  income								Transfers into Level 3				Transfers out of Level 3				Purchases				Sales (1)				December 31, 2011				Change in unrealized gains/(losses) for the period included in earnings (2)
						Net trading				Principal transactions and other income
Assets:
Investments-trading:
U.S. government agency MBS and CMOs		$	68,885			$	575			$	—			$	4,332			$	—			$	20,805			$	(94,597	)		$	—			$	—
RMBS			—				(149	)			—				7,814				(2,080	)			4,949				(5,602	)			4,932				16
CMBS			—				(475	)			—				—				—				1,233				(758	)			—				—
Interests in securitizations (3)			4,500				5,614				—				—				—				10,364				(20,257	)			221				111
Municipal bonds			—				7				—				—				—				977				(984	)			—				—
Certificates of deposit			—				3				—				—				—				761				(764	)			—				—
Equity securities			—				(8	)			—				—				—				70				(27	)			35				35
Total investments-trading		$	73,385			$	5,567			$	—			$	12,146			$	(2,080	)		$	39,159			$	(122,989	)		$	5,188			$	162
Other investments, at fair value:
Equity Securities:
Other Investment Vehicles
EuroDekania (4)		$	1,258			$	—			$	579			$	—			$	—			$	533			$	—			$	2,370			$	579
Star Asia (5)			38,025				—				(542	)			—				—				351				(476	)			37,358				(542	)
Tiptree (6)			2,480				—				53				—				—				—				—				2,533				53
			41,763				—				90				—				—				884				(476	)			42,261				90
Investment Funds
Deep Value (7)			28				—				(9	)			—				—				—				(19	)			—				—
			28				—				(9	)			—				—				—				(19	)			—				—
Other			500				—				(290	)			—				—				36				(114	)			132				(290	)
Total equity securities			42,291				—				(209	)			—				—				920				(609	)			42,393				(200	)
Interests in securitizations (3)			105				—				(17	)			—				—				—				—				88				(17	)
Residential loans			303				—				22				—				—				—				(58	)			267				22
Total other investments, at fair value		$	42,699			$	—			$	(204	)		$	—			$	—			$	920			$	(667	)		$	42,748			$	(195	)

(1) Includes return of principal/capital of interests in U.S. government agency MBS and CMOs, securitizations, investment funds, and residential loans. See note 28.

(2) Represents the change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period.

(3) Primarily comprised of CDOs and CLOs.

(4) Hybrid Securities Funds — European

(5) Real Estate Funds — Asian

(6) Diversified Fund.

(7) Real Estate Funds

Quantitative Information about Level 3 Fair Value Measurements

The following table provides the quantitative information about level 3 fair value measurements as of December 31, 2012:

QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS

(Dollars in Thousands)

Fair Value at December 31, 2012

Valuation Technique

Significant Unobservable Inputs

Weighted average

Range of Significant Inputs

Assets:

Other investments, at fair value:

Equity Securities:

Star Asia

$

30,169

Adjusted NAV

Discount rate on debt

6.82

%

6.82

%

Schedule of Fair Value Measurements of Investments in Certain Entities that Calculate Net Asset Value Per Share

The following table presents additional information about investments in certain entities that calculate net asset value per share (regardless of whether the “practical expedient” provisions of FASB ASC 820 have been applied) which are measured at fair value on a recurring basis at December 31, 2012 and 2011:

FAIR VALUE MEASUREMENTS OF INVESTMENTS IN CERTAIN ENTITIES

THAT CALCULATE NET ASSET VALUE PER SHARE (OR ITS EQUIVALENT)

Fair Value at December 31, 2012 (dollars in thousands)

Unfunded Commitments

Redemption Frequency (if Currently Eligible)

Redemption Notice Period

Other Investment Vehicles:

EuroDekania (a)

$

2,054

N/A

N/A

N/A

Star Asia (b)

30,169

N/A

N/A

N/A

Tiptree (c)

2,834

N/A

N/A

N/A

35,057

Investment Funds:

Star Asia Special Situations Fund (d)

2,503

$

321

N/A

N/A

2,503

Total

$

37,560

Fair Value at December 31, 2011 (dollars in thousands)

Unfunded Commitments

Redemption Frequency (if Currently Eligible)

Redemption Notice Period

Other Investment Vehicles:

EuroDekania (a)

$

2,370

N/A

N/A

N/A

Star Asia (b)

37,358

N/A

N/A

N/A

Tiptree (c)

2,533

N/A

N/A

N/A

Total

$

42,261

N/A — Not applicable.

(a) EuroDekania’s investment strategy is to make investments in hybrid capital securities that have attributes of debt and equity, primarily in the form of subordinated debt issued by insurance companies, banks and bank holding companies based primarily in Western Europe; widely syndicated leveraged loans by European corporations; CMBS, including subordinated interests in first mortgage real estate loans; and RMBS and other ABS backed by consumer and commercial receivables. The majority of the assets are denominated in Euros and UK Pounds Sterling. The fair value of the investment in this category has been estimated using the net asset value per share of the investment in accordance with the “practical expedient” provisions of FASB ASC 820.

(b) Star Asia’s investment strategy is to make investments in Asian real estate structured finance investments, including CMBS, corporate debt of REITs and real estate operating companies, whole loans, mezzanine loans, and other commercial real estate fixed income investments. The fair value of the investment in this category has been estimated using an internal valuation model that uses a market approach. If the Company had used Star Asia’s unadjusted reported net asset value to determine its fair value, the carrying value of its investment in Star Asia would have been $39,998 as of December 31, 2012 and $46,031 as of December 31, 2011.

(c) The investment strategy of Tiptree is focused on investing in (a) specialty finance companies, (b) alternative asset management companies, and (c) diversified credit assets and related equity interests. Tiptree primarily seeks to acquire majority ownership interests in its investees. The fair value of the investment in this category has been estimated using the net asset value per share of the investment in accordance with the “practical expedient” provisions of FASB ASC 820. The Company uses the latest reported net asset value from Tiptree. From time to time, the net asset value may be one quarter in arrears.

(d) The Star Asia Special Situations Fund’s investment strategy is to make investments in real estate and securities backed by real estate in Japan. The Star Asia Special Situations Fund is a closed end fund that does not allow investor redemptions. It has an initial life of three years, which can be extended under certain circumstances for up to two years. The fair value of the investment in this category has been estimated using the net asset value per share of the investment in accordance with the “practical expedient” provisions of FASB ASC 820. As of December 31, 2012, the Company has an unfunded commitment of $321. The Company’s unfunded commitment is denominated in Japanese Yen and may fluctuate based on the foreign exchange spot rate used at any particular period. The two year commitment expires on December 31, 2014.

X

- 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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2

-Subparagraph (c)

-URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19207-110258



Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19279-110258



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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

-Subparagraph c

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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Tabular disclosure of quantitative information about the inputs used in the fair value measurement of assets. This disclosure may include, but is not limited to, the fair value of the asset, valuation technique used to measure fair value, the inputs used to measure fair value, the ranges of the inputs, and the weighted averages of the inputs.

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- Definition

Tabular disclosure of the fair value of investees that calculate net asset value per share (including by unit, membership interest, or other equity (ownership interest) unit measure) (alternative investments), whether measured at fair value on a recurring or nonrecurring basis, by major category of assets and liabilities (as defined), including, for example, (i) fair value measurements at the reporting date, (ii) the level within the fair value hierarchy in which the fair value measurements fall, (iii) a reconciliation of beginning and ending balances for those alternative investments that are measured at fair value using unobservable inputs (Level 3 - fair value hierarchy fair value measurement inputs), (iv) the inputs and valuation techniques used to measure fair value, (v) a discussion of changes to valuation techniques and inputs, if any, during the period, (vi) a description of the nature and risk associated with the alternative investments, and (vii) a discussion of the probability that any of the alternative investments are to be sold.

+ References

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Tabular disclosure of assets and liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

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