DEBT

We have the following debt outstanding at June 30, 2011:



(In Thousands)
	Repayment of Funds are Due on or Before	Amount Due
Federal Home Loan Bank of Des Moines	September 26, 2011	$	29,900
Bankers Trust Company	March 23, 2012 ⁽¹⁾	50,000
Union Bank of California	November 16, 2011	3,000
Total		$	82,900

(1) The borrowing under the line of credit is due on March 23, 2012; however, we have agreed to prepay to the lender the outstanding amount of any loan or loans, plus interest, on or before the nine-month anniversary of the loan issuance date, which was March 24, 2011.

The proceeds of our loans with Federal Home Loan Bank of Des Moines and Bankers Trust Company were used to finance our acquisition of Mercer Insurance Group.

In the first quarter of 2011, United Life Insurance Company borrowed $29.9 million from the Federal Home Loan Bank of Des Moines. Under the terms of the loan, the effective interest rate is 0.37 percent and is calculated on a ratio of a 360 day year and the actual days of the month the principal is outstanding. The loan agreement contains customary terms and conditions. Interest payments are due at maturity on this line. We deposited $35.2 million in collateral with the Federal Home Loan Bank of Des Moines to secure that loan.

In the first quarter of 2011, we entered into a $50.0 million line of credit with Bankers Trust Company. For the six-month period ended June 30, 2011, we utilized our entire line of credit to assist in the funding of our acquisition of Mercer Insurance Group. Under the terms of our credit agreement, interest on outstanding balances is adjusted monthly to the monthly London Interbank Offered Rate (“LIBOR”), as published in the Wall Street Journal, plus 180 basis points, calculated using a 360 day year and the actual days of the month the principal is outstanding. In addition, the line of credit incurs an annual facility charge of $25,000. Interest payments are due monthly on this line. The line of credit contains certain financial covenants including covenants that require us to maintain our A.M. Best rating, a debt to capitalization ratio and minimum stockholders equity.

In addition, Mercer Insurance Group has the ability to borrow up to $7.5 million on a bank line of credit with Union Bank of California. Under the terms of that credit agreement, the line of credit bears interest at the bank’s base rate or an optional rate based on LIBOR. The effective annual interest rate as of June 30, 2011, was 3.25 percent. In addition, the line of credit incurs an annual facility charge of $10,000. Interest payments are due monthly on this line. The line of credit contains certain financial covenants, including covenants that require Mercer Insurance Group to maintain a minimum statutory surplus and to distribute from subsidiaries no more than 50.0 percent of allowable dividends.

We were in compliance with all covenants for all credit agreements as of June 30, 2011.