Edgar Filing: AMERICAN EQUITY INVESTMENT LIFE HOLDING CO

2012-09-30-AEL-10Q

FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number : 001-31911

American Equity Investment Life Holding Company

(Exact name of registrant as specified in its charter)



Iowa		42-1447959
(State of Incorporation)		(I.R.S. Employer Identification No.)

6000 Westown Parkway West Des Moines, Iowa		50266
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code		(515) 221-0002
		(Telephone)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered
Common Stock, par value $1		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $1

Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer o		Accelerated filer x
Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o No x

APPLICABLE TO CORPORATE ISSUERS:

Shares of common stock outstanding at October 31, 2012: 62,805,580

TABLE OF CONTENTS



	Page
PART I — FINANCIAL INFORMATION
Item 1: Financial Statements:	2
Consolidated Balance Sheets	2
Consolidated Statements of Operations	3
Consolidated Statements of Comprehensive Income	4
Consolidated Statements of Changes in Stockholders’ Equity	5
Consolidated Statements of Cash Flows	6
Notes to Consolidated Financial Statements	8
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3: Quantitative and Qualitative Disclosures about Market Risk	51
Item 4: Controls and Procedures	53

PART II — OTHER INFORMATION
Item 1: Legal Proceedings	53
Item 1A: Risk Factors	53
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 6: Exhibits	54

Signatures	55

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)



	September 30, 2012			December 31, 2011
	(Unaudited)
Assets
Investments:
Fixed maturity securities:
Available for sale, at fair value (amortized cost: 2012 - $20,136,014; 2011 - $16,980,279)	$	22,410,492		$	18,464,109
Held for investment, at amortized cost (fair value: 2012 - $63,759; 2011 - $2,644,422)	76,048			2,644,206
Equity securities, available for sale, at fair value (cost: 2012 - $50,597; 2011 - $58,438)	61,604			62,845
Mortgage loans on real estate	2,724,321			2,823,047
Derivative instruments	577,784			273,314
Other investments	196,779			115,930
Total investments	26,047,028			24,383,451

Cash and cash equivalents	2,397,434			404,952
Coinsurance deposits	2,913,273			2,818,642
Accrued investment income	276,875			228,937
Deferred policy acquisition costs	1,639,791			1,683,857
Deferred sales inducements	1,234,471			1,242,787
Deferred income taxes	—			21,981
Income taxes recoverable	—			8,441
Other assets	88,901			81,671
Total assets	$	34,597,773		$	30,874,719

Liabilities and Stockholders' Equity
Liabilities:
Policy benefit reserves	$	30,980,046		$	28,118,716
Other policy funds and contract claims	457,162			400,594
Notes payable	306,696			297,608
Subordinated debentures	245,825			268,593
Deferred income taxes	73,835			—
Income taxes payable	1,415			—
Other liabilities	817,841			380,529
Total liabilities	32,882,820			29,466,040

Stockholders' equity:
Preferred stock, par value $1 per share, 2,000,000 shares authorized, 2012 and 2011 no shares issued and outstanding	—			—
Common stock, par value $1 per share, 200,000,000 shares authorized; issued and outstanding: 2012 - 61,548,127 shares (excluding 5,089,549 treasury shares); 2011 - 57,836,540 shares (excluding 5,616,595 treasury shares)	61,548			57,837
Additional paid-in capital	493,797			468,281
Unallocated common stock held by ESOP; 2012 - 294,770 shares; 2011 - 336,093 shares	(2,931		)	(3,620		)
Accumulated other comprehensive income	712,186			457,229
Retained earnings	450,353			428,952
Total stockholders' equity	1,714,953			1,408,679
Total liabilities and stockholders' equity	$	34,597,773		$	30,874,719

See accompanying notes to unaudited consolidated financial statements.

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues:
Traditional life insurance premiums	$	3,300		$	3,126		$	9,770		$	9,331
Annuity product charges	23,875			20,405			65,176			57,259
Net investment income	318,594			305,502			965,763			894,508
Change in fair value of derivatives	161,090			(333,621		)	269,404			(206,997		)
Net realized losses on investments, excluding other than temporary impairment ("OTTI") losses	(1,238		)	(17,292		)	(7,925		)	(19,339		)
OTTI losses on investments:
Total OTTI losses	—			(5,133		)	(2,156		)	(10,346		)
Portion of OTTI losses recognized from other comprehensive income	(1,686		)	(3,758		)	(3,389		)	(7,345		)
Net OTTI losses recognized in operations	(1,686		)	(8,891		)	(5,545		)	(17,691		)
Total revenues	503,935			(30,771		)	1,296,643			717,071

Benefits and expenses:
Insurance policy benefits and change in future policy benefits	1,865			1,888			6,232			6,282
Interest sensitive and index product benefits	246,105			223,232			527,961			621,317
Amortization of deferred sales inducements	7,709			(28,065		)	50,359			22,892
Change in fair value of embedded derivatives	188,201			(205,565		)	466,278			(138,225		)
Interest expense on notes payable	7,141			7,984			21,208			23,723
Interest expense on subordinated debentures	3,235			3,488			10,384			10,435
Interest expense on amounts due under repurchase agreements	—			—			—			5
Amortization of deferred policy acquisition costs	25,954			(28,930		)	105,086			65,155
Other operating costs and expenses	36,170			15,903			76,785			50,011
Total benefits and expenses	516,380			(10,065		)	1,264,293			661,595
Income (loss) before income taxes	(12,445		)	(20,706		)	32,350			55,476
Income tax expense (benefit)	(4,616		)	(7,638		)	10,949			18,927
Net income (loss)	$	(7,829	)	$	(13,068	)	$	21,401		$	36,549

Earnings (loss) per common share	$	(0.13	)	$	(0.22	)	$	0.35		$	0.62
Earnings (loss) per common share - assuming dilution	$	(0.13	)	$	(0.22	)	$	0.34		$	0.59
Weighted average common shares outstanding (in thousands):
Earnings (loss) per common share	62,504			59,596			60,723			59,429
Earnings (loss) per common share - assuming dilution	65,262			62,698			65,232			62,783

See accompanying notes to unaudited consolidated financial statements.

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011

Net income (loss)	$	(7,829	)	$	(13,068	)	21,401			36,549
Other comprehensive income:
Change in net unrealized investment gains/losses (1)	202,184			507,702			390,575			570,298
Noncredit component of OTTI losses (1)	1,377			1,880			1,667			3,379
Other comprehensive income before income tax	203,561			509,582			392,242			573,677
Income tax effect related to other comprehensive income	(71,247		)	(178,354		)	(137,285		)	(200,787		)
Other comprehensive income	132,314			331,228			254,957			372,890
Comprehensive income	$	124,485		$	318,160		$	276,358		$	409,439

(1) Net of related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs.

See accompanying notes to unaudited consolidated financial statements.

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Dollars in thousands, except per share data)

(Unaudited)



	Common Stock			Additional Paid-in Capital			Unallocated Common Stock Held by ESOP			Accumulated Other Comprehensive Income		Retained Earnings		Total Stockholders' Equity

Balance at December 31, 2011	$	57,837		$	468,281		$	(3,620	)	$	457,229	$	428,952	$	1,408,679
Net income for period	—			—			—			—		21,401		21,401
Other comprehensive income	—			—			—			254,957		—		254,957
Conversion of $20,770 of subordinated debentures	2,564			17,027			—			—		—		19,591
Allocation of 63,946 shares of common stock by ESOP, including excess income tax benefits	—			32			689			—		—		721
Share-based compensation, including excess income tax benefits	—			5,495			—			—		—		5,495
Issuance of 1,147,440 shares of common stock under compensation plans, including excess income tax benefits	1,147			2,962			—			—		—		4,109
Balance at September 30, 2012	$	61,548		$	493,797		$	(2,931	)	$	712,186	$	450,353	$	1,714,953

Balance at December 31, 2010	$	56,968		$	454,454		$	(4,815	)	$	81,820	$	349,620	$	938,047
Net income for period	—			—			—			—		36,549		36,549
Other comprehensive income	—			—			—			372,890		—		372,890
Acquisition of 1,250 shares of common stock	(1		)	(12		)	—			—		—		(13		)
Allocation of 78,897 shares of common stock by ESOP, including excess income tax benefits	—			65			850			—		—		915
Share-based compensation, including excess income tax benefits	—			6,575			—			—		—		6,575
Issuance of 888,179 shares of common stock under compensation plans, including excess income tax benefits	888			3,686			—			—		—		4,574
Balance at September 30, 2011	$	57,855		$	464,768		$	(3,965	)	$	454,710	$	386,169	$	1,359,537

See accompanying notes to unaudited consolidated financial statements.

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)



	Nine Months Ended September 30,
	2012			2011
Operating activities
Net income	$	21,401		$	36,549
Adjustments to reconcile net income to net cash provided by operating activities:
Interest sensitive and index product benefits	527,961			621,317
Amortization of deferred sales inducements	50,359			22,892
Annuity product charges	(65,176		)	(57,259		)
Change in fair value of embedded derivatives	466,278			(138,225		)
Increase in traditional life and accident and health insurance reserves	27,850			70,612
Policy acquisition costs deferred	(287,285		)	(342,299		)
Amortization of deferred policy acquisition costs	105,086			65,155
Provision for depreciation and other amortization	13,969			14,113
Amortization of discounts and premiums on investments	(75,596		)	(115,340		)
Realized gains/losses on investments and net OTTI losses recognized in operations	13,470			37,030
Change in fair value of derivatives	(269,404		)	205,264
Deferred income taxes	(41,469		)	(78,920		)
Share-based compensation	4,907			5,591
Change in accrued investment income	(47,938		)	(45,147		)
Change in income taxes recoverable/payable	9,856			(11,902		)
Change in other assets	(5,354		)	4,375
Change in other policy funds and contract claims	56,568			152,508
Change in collateral held for derivatives	324,596			(284,870		)
Change in other liabilities	3,442			(61,921		)
Other	(3,873		)	516
Net cash provided by operating activities	829,648			100,039

Investing activities
Sales, maturities, or repayments of investments:
Fixed maturity securities - available for sale	1,942,533			3,433,977
Fixed maturity securities - held for investment	2,618,207			—
Equity securities - available for sale	7,604			2,958
Mortgage loans on real estate	341,771			133,560
Derivative instruments	276,227			432,411
Other investments	25,901			91
Acquisition of investments:
Fixed maturity securities - available for sale	(4,987,848		)	(3,685,523		)
Fixed maturity securities - held for investment	—			(1,940,163		)
Mortgage loans on real estate	(280,749		)	(413,536		)
Derivative instruments	(280,407		)	(295,099		)
Other investments	(83,779		)	(77,189		)
Purchases of property, furniture and equipment	(378		)	(4,643		)
Net cash used in investing activities	(420,918		)	(2,413,156		)

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Dollars in thousands)

(Unaudited)



	Nine Months Ended September 30,
	2012			2011
Financing activities
Receipts credited to annuity and single premium universal life policyholder account balances	$	2,878,818		$	3,718,010
Coinsurance deposits	(16,364		)	(80,932		)
Return of annuity policyholder account balances	(1,275,208		)	(1,357,892		)
Financing fees incurred and deferred	—			(1,566		)
Repayment of subordinated debentures	(270		)	—
Acquisition of common stock	—			(13		)
Excess tax benefits realized from share-based compensation plans	624			1,060
Proceeds from issuance of common stock	4,055			4,461
Change in checks in excess of cash balance	(7,903		)	4,537
Net cash provided by financing activities	1,583,752			2,287,665
Increase (decrease) in cash and cash equivalents	1,992,482			(25,452		)
Cash and cash equivalents at beginning of period	404,952			597,766
Cash and cash equivalents at end of period	$	2,397,434		$	572,314

Supplemental disclosures of cash flow information
Cash paid during period for:
Interest expense	$	20,858		$	22,129
Income taxes	41,938			108,800
Non-cash operating activity:
Deferral of sales inducements	220,784			281,376
Non-cash investing activity:
Real estate acquired in satisfaction of mortgage loans	14,932			17,358
Mortgage loan on real estate sold	—			1,215
Non-cash financing activities:
Conversion of subordinated debentures	20,770			—

See accompanying notes to unaudited consolidated financial statements.

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(Unaudited)

1. Significant Accounting Policies

Consolidation and Basis of Presentation

The accompanying consolidated financial statements of American Equity Investment Life Holding Company (“we”, “us” or “our”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements. The consolidated financial statements reflect all adjustments, consisting only of normal recurring items, which are necessary to present fairly our financial position and results of operations on a basis consistent with the prior audited consolidated financial statements. Operating results for the three and nine month periods ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ended December 31, 2012. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements requires the use of management estimates. For further information related to a description of areas of judgment and estimates and other information necessary to understand our financial position and results of operations, refer to the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2011.

During 2011, we discovered a prior period error related to policy benefit reserves for our single premium immediate annuity products. Accordingly, we made an adjustment in the first quarter of 2011 which resulted in a decrease of policy benefit reserves and a decrease in interest sensitive and index product benefits of $4.2 million. On an after-tax basis, the adjustment resulted in a $2.7 million increase in net income for the nine months ended September 30, 2011.

Adopted Accounting Pronouncements

In October 2010, as a result of a consensus of the Financial Accounting Standards Board ("FASB") Emerging Issues Task Force (EITF), the FASB issued an accounting standards update (ASU) that modifies the definition of the types of costs incurred that can be capitalized in the acquisition of new and renewal insurance contracts. This guidance defines the costs that qualify for deferral as incremental direct costs that result directly from and are essential to successful contract transactions and would not have been incurred by the insurance entity had the contract transactions not occurred. In addition, it lists certain costs as deferrable as those that are directly related to underwriting, policy issuance and processing, medical and inspection, and sales force contract selling as deferrable, as well as the portion of an employee's total compensation related directly to time spent performing those activities for actual acquired contracts and other costs related directly to those activities that would not have been incurred if the contract had not been acquired. This amendment to current GAAP became effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. Other operating costs and expenses for the three and nine months ended September 30, 2012, increased $2.2 million and $7.2 million, respectively, due to the prospective adoption of this ASU effective January 1, 2012, which increased net loss $1.5 million and loss per share $0.02 for three months ended September 30, 2012 and decreased net income $4.6 million and earnings per share $0.07 for the nine months ended September 30, 2012.

In May 2011, the FASB issued an ASU that addresses fair value measurement and disclosure as part of its convergence efforts with the International Accounting Standards Board. The guidance is intended to create common fair value measurement and disclosure requirements in GAAP and International Financial Reporting Standards. This ASU changes the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements. Some changes clarify the FASB's intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The disclosure requirements add information about transfers between Level 1 and Level 2 of the fair value hierarchy, information about the sensitivity of a fair value measurement categorized within Level 3 of the fair value hierarchy to changes in unobservable inputs and any interrelationships between those unobservable inputs and the categorization by level of the fair value hierarchy for items that are not measured at fair value in the statement of financial position, but for which the fair value of such items is required to be disclosed. This ASU became effective for interim and annual periods beginning after December 15, 2011. See note 2 for disclosures regarding fair value measurements.

In June 2011, the FASB issued an ASU that expands the disclosure requirements related to other comprehensive income (loss). A reporting entity is now required to present the total of comprehensive income (loss), the components of net income, and the components of other comprehensive income (loss) either in a single continuous statement of comprehensive income (loss) or in two separate but consecutive statements. Under both choices, the reporting entity is required to present each component of net income along with total net income, each component of other comprehensive income (loss) along with a total for other comprehensive income (loss) and a total amount for comprehensive income (loss). This ASU became effective for interim and annual periods beginning after December 15, 2011. We adopted this ASU on January 1, 2012.

New Accounting Pronouncements

There are no accounting standards updates finalized to become effective in the future that will significantly affect our consolidated financial statements.

Significant Accounting Policy - Deferred Policy Acquisition Costs

Our accounting policy for deferred policy acquisition costs which follows, has been updated from our Form 10-K for the year ended December 31, 2011 to reflect the adoption of new accounting standards.

To the extent recoverable from future policy revenues and gross profits, certain costs that are incremental or directly related to the successful production of new business are not expensed when incurred but instead are capitalized as deferred policy acquisition costs. Deferred policy acquisition costs are subject to loss recognition testing on a quarterly basis or when an event occurs that may warrant loss recognition. Deferred policy acquisition costs consist primarily of commissions and certain costs of policy issuance.

For annuity products, these capitalized costs are being amortized generally in proportion to expected gross profits from investment spreads, including the cost of hedging the fixed indexed annuity obligations, and, to a lesser extent, from product charges and mortality and expense margins. That amortization is adjusted retrospectively through an unlocking process when estimates of current or future gross profits/margins (including the impact of net realized gains on investments and net OTTI losses recognized in operations) to be realized from a group of products are revised. Deferred policy acquisition costs are also adjusted for the change in amortization that would have occurred if available for sale fixed maturity securities and equity securities had been sold at their aggregate fair value at the end of the reporting period and the proceeds reinvested at current yields. The impact of this adjustment is included in accumulated other comprehensive income within consolidated stockholders' equity, net of applicable taxes.

2. Fair Values of Financial Instruments

The following sets forth a comparison of the fair values and carrying amounts of our financial instruments:



	September 30, 2012				December 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in thousands)
Assets
Fixed maturity securities:
Available for sale	$	22,410,492	$	22,410,492	$	18,464,109	$	18,464,109
Held for investment	76,048		63,759		2,644,206		2,644,422
Equity securities, available for sale	61,604		61,604		62,845		62,845
Mortgage loans on real estate	2,724,321		2,969,635		2,823,047		3,030,308
Derivative instruments	577,784		577,784		273,314		273,314
Other investments	162,215		164,902		79,109		76,648
Cash and cash equivalents	2,397,434		2,397,434		404,952		404,952
Coinsurance deposits	2,913,273		2,661,627		2,818,642		2,549,025
Interest rate caps	3,252		3,252		—		—
2015 notes hedges	40,020		40,020		45,593		45,593

Liabilities
Policy benefit reserves	30,666,825		25,459,927		27,842,770		23,407,540
Single premium immediate annuity (SPIA) benefit reserves	456,331		471,389		397,248		412,998
Notes payable	306,696		398,479		297,608		376,370
Subordinated debentures	245,825		221,626		268,593		233,809
2015 notes embedded derivatives	40,020		40,020		45,593		45,593
Interest rate swap	4,319		4,319		—		—

Fair value is the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. The objective of a fair value measurement is to determine that price for each financial instrument at each measurement date. We meet this objective using various methods of valuation that include market, income and cost approaches.

We categorize our financial instruments into three levels of fair value hierarchy based on the priority of inputs used in determining fair value. The hierarchy defines the highest priority inputs (Level 1) as quoted prices in active markets for identical assets or liabilities. The lowest priority inputs (Level 3) are our own assumptions about what a market participant would use in determining fair value such as estimated future cash flows. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. We categorize financial assets and liabilities recorded at fair value in the consolidated balance sheets as follows:


Level 1—	Quoted prices are available in active markets for identical financial instruments as of the reporting date. We do not adjust the quoted price for these financial instruments, even in situations where we hold a large position and a sale could reasonably impact the quoted price.


Level 2—	Quoted prices in active markets for similar financial instruments, quoted prices for identical or similar financial instruments in markets that are not active; and models and other valuation methodologies using inputs other than quoted prices that are observable.

Level 3—

Models and other valuation methodologies using significant inputs that are unobservable for financial instruments and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in Level 3 are securities for which no market activity or data exists and for which we used discounted expected future cash flows with our own assumptions about what a market participant would use in determining fair value.

Transfers of securities among the levels occur at times and depend on the type of inputs used to determine fair value of each security, however there were no transfers between levels during the nine months ended September 30, 2012.

Our assets and liabilities which are measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011 are presented below based on the fair value hierarchy levels:



	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
September 30, 2012
Assets
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	5,205	$	5,205	$	—	$	—
United States Government sponsored agencies	1,958,737		—		1,958,737		—
United States municipalities, states and territories	3,571,462		—		3,571,462		—
Foreign government obligations	98,825		—		98,825		—
Corporate securities	13,242,999		38,049		13,204,950		—
Residential mortgage backed securities	2,565,959		—		2,564,087		1,872
Commercial mortgage backed securities	78,912		—		78,912		—
Other asset backed securities	888,393		383		888,010		—
Equity securities, available for sale: finance, insurance and real estate	61,604		44,851		16,753		—
Derivative instruments	577,784		—		577,784		—
Cash and cash equivalents	2,397,434		2,397,434		—		—
Interest rate caps	3,252		—		3,252		—
2015 notes hedges	40,020		—		40,020		—
	$	25,490,586	$	2,485,922	$	23,002,792	$	1,872
Liabilities
2015 notes embedded derivatives	$	40,020	$	—	$	40,020	$	—
Interest rate swap	4,319		—		4,319		—
Fixed index annuities - embedded derivatives	3,266,782		—		—		3,266,782
	$	3,311,121	$	—	$	44,339	$	3,266,782

December 31, 2011
Assets
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	4,678	$	4,678	$	—	$	—
United States Government sponsored agencies	1,799,779		—		1,799,779		—
United States municipalities, states and territories	3,333,383		—		3,333,383		—
Foreign government obligations	43,228		—		43,228		—
Corporate securities	10,116,361		58,827		10,057,534		—
Residential mortgage backed securities	2,703,290		—		2,701,192		2,098
Other asset backed securities	463,390		370		463,020		—
Equity securities, available for sale: finance, insurance and real estate	62,845		44,229		18,616		—
Derivative instruments	273,314		—		273,314		—
Cash and cash equivalents	404,952		404,952		—		—
2015 notes hedges	45,593		—		45,593		—
	$	19,250,813	$	513,056	$	18,735,659	$	2,098
Liabilities
2015 notes embedded derivatives	$	45,593	$	—	$	45,593	$	—
Fixed index annuities - embedded derivatives	2,530,496		—		—		2,530,496
	$	2,576,089	$	—	$	45,593	$	2,530,496

The following methods and assumptions were used in estimating the fair values of financial instruments during the periods presented in these consolidated financial statements.

Fixed maturity securities and equity securities

The fair values of fixed maturity securities and equity securities in an active and orderly market are determined by utilizing independent pricing services. The independent pricing services incorporate a variety of observable market data in their valuation techniques, including:


•	reported trading prices,


•	benchmark yields,


•	broker-dealer quotes,


•	benchmark securities,


•	bids and offers,


•	credit ratings,


•	relative credit information, and


•	other reference data.

The independent pricing services also take into account perceived market movements and sector news, as well as a security's terms and conditions, including any features specific to that issue that may influence risk and marketability. Depending on the security, the priority of the use of observable market inputs may change as some observable market inputs may not be relevant or additional inputs may be necessary.

The independent pricing services provide quoted market prices when available. Quoted prices are not always available due to market inactivity. When quoted market prices are not available, the third parties use yield data and other factors relating to instruments or securities with similar characteristics to determine fair value for securities that are not actively traded. We generally obtain one value from our primary external pricing service. In situations where a price is not available from this service, we may obtain further quotes or prices from additional parties as needed. In addition, for our callable United States Government sponsored agencies we obtain two broker quotes and take the average of two broker prices received. Market indices of similar rated asset class spreads are considered for valuations and broker indications of similar securities are compared. Inputs used by the broker include market information, such as yield data and other factors relating to instruments or securities with similar characteristics. Valuations and quotes obtained from third party commercial pricing services are non-binding and do not represent quotes on which one may execute the disposition of the assets.

We validate external valuations at least quarterly through a combination of procedures that include the evaluation of methodologies used by the pricing services, analytical reviews and performance analysis of the prices against trends, and maintenance of a securities watch list. Additionally, as needed we utilize discounted cash flow models or perform independent valuations on a case-by-case basis of inputs and assumptions similar to those used by the pricing services. Although we do identify differences from time to time as a result of these validation procedures, we did not make any significant adjustments as of September 30, 2012 and December 31, 2011.

Mortgage loans on real estate

Mortgage loans on real estate are not measured at fair value on a recurring basis. The fair values of mortgage loans on real estate are calculated using discounted expected cash flows using current competitive market interest rates currently being offered for similar loans. The fair values of impaired mortgage loans on real estate that we have considered to be collateral dependent are based on the fair value of the real estate collateral (based on appraised values) less estimated costs to sell. The inputs utilized to determine fair value of all mortgage loans are unobservable market data (competitive market interest rates and appraised property values); therefore, fair value of mortgage loans falls into Level 3 in the fair value hierarchy.

Derivative instruments

The fair values of derivative instruments, primarily call options, are based upon the amount of cash that we will receive to settle each derivative instrument on the reporting date. These amounts are obtained from each of the counterparties using industry accepted valuation models and are adjusted for the nonperformance risk of each counterparty net of any collateral held. Inputs include market volatility and risk free interest rates and are used in income valuation techniques in arriving at a fair value for each option contract. The nonperformance risk for each counterparty is based upon its credit default swap rate. We have no performance obligations related to the call options purchased to fund our fixed index annuity policy liabilities.

Other investments

None of the financial instruments included in other investments are measured at fair value on a recurring basis. Financial instruments included in other investments are policy loans, an equity method investment and company owned life insurance (COLI). We have not attempted to determine the fair values associated with our policy loans, as we believe any differences between carrying value and the fair values afforded these instruments are immaterial to our consolidated financial position and, accordingly, the cost to provide such disclosure does not justify the benefit to be derived. The fair value of our equity method investment qualifies as a Level 3 fair value and was determined by calculating the present value of future cash flows discounted by a risk free rate, a risk spread and a liquidity discount. The risk spread and liquidity discount are rates determined by our investment professionals and are unobservable market inputs. The fair value of our COLI approximates the cash surrender value of the policies and whose fair values fall within Level 2 of the fair value hierarchy.

Cash and cash equivalents

Amounts reported in the consolidated balance sheets for these instruments are reported at their historical cost which approximates fair value due to the nature of the assets assigned to this category.

Interest rate swaps and caps

The fair values of our pay fixed/receive variable interest rate swaps and interest rate caps are obtained from third parties and are determined by discounting expected future cash flows using projected LIBOR rates for the term of the swaps and caps.

2015 notes hedges

The fair value of these call options is determined by a third party who applies market observable data such as our common stock price, its dividend yield and its volatility, as well as the time to expiration of the call options to determine a fair value of the buy side of these options.

Policy benefit reserves, coinsurance deposits and SPIA benefit reserves

The fair values of the liabilities under contracts not involving significant mortality or morbidity risks (principally deferred annuities), are stated at the cost we would incur to extinguish the liability (i.e., the cash surrender value) as these contracts are generally issued without an annuitization date. The coinsurance deposits related to the annuity benefit reserves have fair values determined in a similar fashion. For period-certain annuity benefit contracts, the fair value is determined by discounting the benefits at the interest rates currently in effect for newly purchased immediate annuity contracts. We are not required to and have not estimated the fair value of the liabilities under contracts that involve significant mortality or morbidity risks, as these liabilities fall within the definition of insurance contracts that are exceptions from financial instruments that require disclosures of fair value. Policy benefit reserves, coinsurance deposits and SPIA benefit reserves are not measured at fair value on a recurring basis. All of the fair values presented within these categories fall within Level 3 of the fair value hierarchy as most of the inputs are unobservable market data.

Notes payable

The fair value of the convertible senior notes is based upon pricing matrices developed by a third party pricing service when quoted market prices are not available and are categorized as Level 2 within the fair value hierarchy. Notes payable are not remeasured at fair value on a recurring basis.

Subordinated debentures

Fair values for subordinated debentures are estimated using discounted cash flow calculations based principally on observable inputs including our incremental borrowing rates, which reflect our credit rating, for similar types of borrowings with maturities consistent with those remaining for the debt being valued. These fair values are categorized as Level 2 within the fair value hierarchy. Subordinated debentures are not measured at fair value on a recurring basis.

2015 notes embedded derivatives

The fair value of this embedded derivative is determined by pricing the call options that hedge this potential liability. The terms of the conversion premium are identical to the 2015 notes hedges and the method of determining fair value of the call options is based upon observable market data.

Fixed index annuities - embedded derivatives

We estimate the fair value of the embedded derivative component of our fixed index annuity policy benefit reserves at each valuation date by (i) projecting policy contract values and minimum guaranteed contract values over the expected lives of the contracts and (ii) discounting the excess of the projected contract value amounts at the applicable risk free interest rates adjusted for our nonperformance risk related to those liabilities. The projections of policy contract values are based on our best estimate assumptions for future policy growth and future policy decrements. Our best estimate assumptions for future policy growth include assumptions for the expected index credit on the next policy anniversary date which are derived from the fair values of the underlying call options purchased to fund such index credits and the expected costs of annual call options we will purchase in the future to fund index credits beyond the next policy anniversary. The projections of minimum guaranteed contract values include the same best estimate assumptions for policy decrements as were used to project policy contract values.

The following tables provide a reconciliation of the beginning and ending balances for our Level 3 assets and liabilities, which are measured at fair value on a recurring basis using significant unobservable inputs for the three and nine months ended September 30, 2012 and 2011:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(Dollars in thousands)
Available for sale securities
Beginning balance	$	2,005		$	2,193		$	2,098		$	2,702
Principal returned	(101		)	(80		)	(194		)	(346		)
(Amortization)/accretion of premium/discount	13			29			60			37
Total gains (losses) (realized/unrealized):
Included in other comprehensive income (loss)	28			105			211			384
Included in operations	(73		)	(152		)	(303		)	(682		)
Ending balance	$	1,872		$	2,095		$	1,872		$	2,095

The Level 3 assets included in the table above are not material to our financial position, results of operations or cash flows, and it is management's opinion that the sensitivity of the inputs used in determining the fair value of these assets is not material as well.



	Three Months Ended September 30,					Nine Months Ended September 30,
	2012		2011			2012		2011
	(Dollars in thousands)
Fixed index annuities - embedded derivatives
Beginning balance	$	2,914,948	$	2,368,533		$	2,530,496	$	1,971,383
Premiums less benefits	229,340		274,579			418,845		742,255
Change in unrealized gains, net	122,494		(244,015		)	317,441		(314,541		)
Ending balance	$	3,266,782	$	2,399,097		$	3,266,782	$	2,399,097

Change in unrealized gains, net for each period in our embedded derivatives are included in change in fair value of embedded derivatives in the unaudited consolidated statements of operations.

Certain derivatives embedded in our fixed index annuity contracts are our most significant financial instrument measured at fair value that are categorized as Level 3 in the fair value hierarchy. The contractual obligations for future annual index credits within our fixed index annuity contracts are treated as a "series of embedded derivatives" over the expected life of the applicable contracts. We estimate the fair value of these embedded derivatives at each valuation date by the method described above under fixed index annuities - embedded derivatives. The projections of minimum guaranteed contract values include the same best estimate assumptions for policy decrements as were used to project policy contract values.

The most sensitive assumption in determining policy liabilities for fixed index annuities is the rates used to discount the excess projected contract values. As indicated above, the discount rate reflects our nonperformance risk. If the discount rates used to discount the excess projected contract values at September 30, 2012, were to increase by 100 basis points, the fair value of the embedded derivatives would decrease by $232.6 million recorded through operations as a decrease in the change in fair value of embedded derivatives and there would be a corresponding decrease of $141.6 million to our combined balance for deferred policy acquisition costs and deferred sales inducements recorded through operations as an increase in amortization of deferred policy acquisition costs and deferred sales inducements. A decrease by 100 basis points in the discount rate used to discount the excess projected contract values would increase the fair value of the embedded derivatives by $260.4 million recorded through operations as an increase in the change in fair value of embedded derivatives and increase our combined balance for deferred policy acquisition costs and deferred sales inducements by $159.2 million recorded through operations as a decrease in amortization of deferred policy acquisition costs and deferred sales inducements.

3. Investments

At September 30, 2012 and December 31, 2011, the amortized cost and fair value of fixed maturity securities and equity securities were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in thousands)
September 30, 2012
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	4,590	$	615	$	—		$	5,205
United States Government sponsored agencies	1,939,562		19,661		(486		)	1,958,737
United States municipalities, states and territories	3,096,008		475,456		(2		)	3,571,462
Foreign government obligations	81,126		17,699		—			98,825
Corporate securities	11,652,586		1,617,343		(26,930		)	13,242,999
Residential mortgage backed securities	2,433,080		173,881		(41,002		)	2,565,959
Commercial mortgage backed securities	78,682		260		(30		)	78,912
Other asset backed securities	850,380		39,876		(1,863		)	888,393
	$	20,136,014	$	2,344,791	$	(70,313	)	$	22,410,492
Held for investment:
Corporate security	$	76,048	$	—	$	(12,289	)	$	63,759
Equity securities, available for sale:
Finance, insurance, and real estate	$	50,597	$	12,164	$	(1,157	)	$	61,604

December 31, 2011
Fixed maturity securities:
Available for sale:
United States Government full faith and credit	$	4,084	$	594	$	—		$	4,678
United States Government sponsored agencies	1,780,401		19,378		—			1,799,779
United States municipalities, states and territories	2,981,699		351,694		(10		)	3,333,383
Foreign government obligations	60,809		7,766		(242		)	68,333
Corporate securities	9,092,737		1,078,511		(79,992		)	10,091,256
Residential mortgage backed securities	2,618,040		157,331		(72,081		)	2,703,290
Other asset backed securities	442,509		26,492		(5,611		)	463,390
	$	16,980,279	$	1,641,766	$	(157,936	)	$	18,464,109
Held for investment:
United States Government sponsored agencies	$	2,568,274	$	16,806	$	—		$	2,585,080
Corporate security	75,932		—		(16,590		)	59,342
	$	2,644,206	$	16,806	$	(16,590	)	$	2,644,422
Equity securities, available for sale:
Finance, insurance, and real estate	$	58,438	$	8,752	$	(4,345	)	$	62,845

During the nine months ended September 30, 2012 and 2011, we received $3.8 billion and $2.9 billion, respectively, in redemption proceeds related to calls of our callable United States Government sponsored agency securities and public and private corporate bonds, of which $2.6 billion for the nine months ended September 30, 2012 were classified as held for investment . There were no calls of held for investment securities during the nine months ended September 30, 2011. The proceeds from these redemptions that have been reinvested have primarily been in United States government sponsored agencies, corporate securities, commercial mortgage backed securities and other asset backed securities. For the remaining amount to be reinvested we are considering further diversification into other asset classes, but we remain committed to maintaining a high quality investment portfolio with low credit risk. At September 30, 2012, 30% of our fixed income securities have call features and 1% ($0.1 billion) were subject to call redemption. Another 10% ($1.9 billion) will become subject to call redemption during the next twelve months (principally the last quarter of 2012 and the second quarter of 2013).

The amortized cost and fair value of fixed maturity securities at September 30, 2012, by contractual maturity, are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. All of our mortgage and other asset backed securities provide for periodic payments throughout their lives and are shown below as separate lines.



	Available for sale				Held for investment
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Due in one year or less	$	41,968	$	43,181	$	—	$	—
Due after one year through five years	623,552		700,154		—		—
Due after five years through ten years	3,868,878		4,262,988		—		—
Due after ten years through twenty years	5,294,593		5,820,676		—		—
Due after twenty years	6,944,881		8,050,229		76,048		63,759
	16,773,872		18,877,228		76,048		63,759
Residential mortgage backed securities	2,433,080		2,565,959		—		—
Commercial mortgage backed securities	78,682		78,912		—		—
Other asset backed securities	850,380		888,393		—		—
	$	20,136,014	$	22,410,492	$	76,048	$	63,759

Net unrealized gains on available for sale fixed maturity securities and equity securities reported as a separate component of stockholders' equity were comprised of the following:



	September 30, 2012			December 31, 2011
	(Dollars in thousands)
Net unrealized gains on available for sale fixed maturity securities and equity securities	$	2,285,485		$	1,488,237
Adjustments for assumed changes in amortization of deferred policy acquisition costs and deferred sales inducements	(1,224,482		)	(819,476		)
Deferred income tax valuation allowance reversal	22,534			22,534
Deferred income tax benefit	(371,351		)	(234,066		)
Net unrealized gains reported as accumulated other comprehensive income	$	712,186		$	457,229

The National Association of Insurance Commissioners (“NAIC”) assigns designations to fixed maturity securities. These designations range from Class 1 (highest quality) to Class 6 (lowest quality). In general, securities are assigned a designation based upon the ratings they are given by the Nationally Recognized Statistical Rating Organizations (“NRSRO’s”). The NAIC designations are utilized by insurers in preparing their annual statutory statements. NAIC Class 1 and 2 designations are considered “investment grade” while NAIC Class 3 through 6 designations are considered “non-investment grade.” Based on the NAIC designations, we had 98% of our fixed maturity portfolio rated investment grade at September 30, 2012 and December 31, 2011.

The following table summarizes the credit quality, as determined by NAIC designation, of our fixed maturity portfolio as of the dates indicated:



	September 30, 2012				December 31, 2011
NAIC Designation	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
1	$	13,007,318	$	14,591,003	$	14,359,272	$	15,486,571
2	6,846,088		7,538,539		4,894,739		5,272,759
3	319,697		304,463		335,642		315,406
4	31,719		32,361		26,674		23,989
5	4,451		4,006		4,932		5,756
6	2,789		3,879		3,226		4,050
	$	20,212,062	$	22,474,251	$	19,624,485	$	21,108,531

The following tables show our investments' gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities (consisting of 150 and 246 securities, respectively) have been in a continuous unrealized loss position, at September 30, 2012 and December 31, 2011:



	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
September 30, 2012
Fixed maturity securities:
Available for sale:
United States Government sponsored agencies	$	483,280	$	(486	)	$	—	$	—		$	483,280	$	(486	)
United States municipalities, states and territories	271		(2		)	—		—			271		(2		)
Corporate securities:
Finance, insurance and real estate	139,777		(2,670		)	130,932		(10,981		)	270,709		(13,651		)
Manufacturing, construction and mining	118,741		(1,445		)	20,948		(2,315		)	139,689		(3,760		)
Utilities and related sectors	63,822		(549		)	50,043		(7,868		)	113,865		(8,417		)
Wholesale/retail trade	12,368		(447		)	9,900		(561		)	22,268		(1,008		)
Services, media and other	5,929		(94		)	—		—			5,929		(94		)
Residential mortgage backed securities	168,342		(7,091		)	404,344		(33,911		)	572,686		(41,002		)
Commercial mortgage backed securities	18,419		(30		)	—		—			18,419		(30		)
Other asset backed securities	25,250		(448		)	31,027		(1,415		)	56,277		(1,863		)
	$	1,036,199	$	(13,262	)	$	647,194	$	(57,051	)	$	1,683,393	$	(70,313	)
Held for investment:
Corporate security:
Insurance	$	—	$	—		$	63,759	$	(12,289	)	$	63,759	$	(12,289	)

Equity securities, available for sale:
Services, media and other	$	8,968	$	(1,157	)	$	—	$	—		$	8,968	$	(1,157	)

December 31, 2011
Fixed maturity securities:
Available for sale:
United States municipalities, states and territories	$	3,535	$	(10	)	$	—	$	—		$	3,535	$	(10	)
Foreign government obligations	—		—			14,282		(242		)	14,282		(242		)
Corporate securities:
Finance, insurance and real estate	363,909		(36,575		)	146,354		(15,611		)	510,263		(52,186		)
Manufacturing, construction and mining	201,762		(7,131		)	15,593		(1,627		)	217,355		(8,758		)
Utilities and related sectors	174,251		(7,576		)	37,778		(6,946		)	212,029		(14,522		)
Wholesale/retail trade	15,523		(188		)	9,275		(1,194		)	24,798		(1,382		)
Services, media and other	27,688		(249		)	17,105		(2,895		)	44,793		(3,144		)
Residential mortgage backed securities	295,352		(19,920		)	709,612		(52,161		)	1,004,964		(72,081		)
Other asset backed securities	115,542		(2,863		)	15,550		(2,748		)	131,092		(5,611		)
	$	1,197,562	$	(74,512	)	$	965,549	$	(83,424	)	$	2,163,111	$	(157,936	)
Held for investment:
Corporate security:
Insurance	$	—	$	—		$	59,342	$	(16,590	)	$	59,342	$	(16,590	)

Equity securities, available for sale:
Finance, insurance and real estate	$	20,028	$	(3,095	)	$	3,750	$	(1,250	)	$	23,778	$	(4,345	)

The following is a description of the factors causing the temporary unrealized losses by investment category as of September 30, 2012:

United States Government sponsored agencies and United States municipalities, states and territories: These securities are relatively long in duration; however, they are callable in less than 12 months making the value of such securities sensitive to changes in market interest rates. The timing of when some of these securities were purchased in 2012 gave rise to unrealized losses at September 30, 2012.

Corporate securities: The unrealized losses in these securities are due partially to the timing of purchases in 2012 and a small number of securities seeing their credit spreads remain wide due to issuer or industry specific news. In addition, some financial and industrial sector credit spreads remain wide due to continued economic uncertainty and concerns of economic instability in the European Union.

Residential mortgage backed securities: At September 30, 2012, we had no exposure to sub-prime residential mortgage backed securities. All of our residential mortgage backed securities are pools of first-lien residential mortgage loans. Substantially all of the securities that we own are in the most senior tranche of the securitization in which they are structured and are not subordinated to any other tranche. Our "Alt-A" residential mortgage backed securities are comprised of 36 securities with a total amortized cost basis of $389.9 million and a fair value of $380.9 million. Despite recent improvements in the capital markets, the fair values of RMBS continue at prices below amortized cost. RMBS prices will likely remain below our cost basis until the housing market is able to absorb current and future foreclosures.

Other asset backed securities: The unrealized losses in these securities are predominantly assigned to financial sector capital trust securities which have longer maturity dates and have declined in price due to prolonged stress in the financial sector. Only one security in an unrealized loss position is rated below investment grade.

Equity securities: Equity securities in an unrealized loss position consist of a perpetual preferred security of an industrial company. Despite modest deterioration of its business profile our view for the investment over the intermediate term is constructive.

Approximately 90% and 83% of the unrealized losses on fixed maturity securities shown in the above table for September 30, 2012 and December 31, 2011, respectively, are on securities that are rated investment grade, defined as being the highest two NAIC designations. All of the securities with unrealized losses, except one security with a principal amount outstanding of $4.5 million and an unrealized loss of $0.4 million, are current with respect to the payment of principal and interest.

Changes in net unrealized gains/losses on investments for the three and nine months ended September 30, 2012 and 2011 are as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
							(Dollars in thousands)
Fixed maturity securities held for investment carried at amortized cost	$	(626	)	$	22,325		$	(12,505	)	$	51,727
Investments carried at fair value:
Fixed maturity securities, available for sale	$	402,274		$	1,094,823		$	790,648		$	1,245,506
Equity securities, available for sale	2,963			(1,212		)	6,600			1,428
	405,237			1,093,611			797,248			1,246,934
Adjustment for effect on other balance sheet accounts:
Deferred policy acquisition costs and deferred sales inducements	(201,676		)	(584,029		)	(405,006		)	(673,257		)
Deferred income tax asset	(71,247		)	(178,354		)	(137,285		)	(200,787		)
	(272,923		)	(762,383		)	(542,291		)	(874,044		)
Increase in net unrealized gains on investments carried at fair value	$	132,314		$	331,228		$	254,957		$	372,890

Proceeds from sales of available for sale securities for the nine months ended September 30, 2012 and 2011 were $276.1 million and $144.4 million, respectively. Scheduled principal repayments, calls and tenders for available for sale securities for the nine months ended September 30, 2012 and 2011 were