Investments

12 Months Ended

Dec. 31, 2012

Investments [Abstract]

Investments

2. Investments

Short-term investments held at December 31, 2012 include $63.5 million of corporate bonds, certificates of deposit of $0.9 million and $4.5 million of municipal securities. Short-term investments held at December 31, 2011 include $37.0 million of corporate bonds, certificates of deposits of $9.7 million and $0.3 million of municipal securities. All certificates of deposits are fully insured by the Federal Deposit Insurance Corporation.

The gross unrealized gains and losses on, and the cost and fair value of, those investments classified as held-to-maturity at December 31, 2012 are summarized as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
States and political subdivisions	$	400,687	$	31,387	$	(106	)	$	431,968
Corporate bonds		82,824		1,565		(12	)		84,377
Commercial mortgage-backed securities		51,529		6,433		—			57,962
U.S. agency-based mortgage-backed securities		32,984		3,063		(5	)		36,042
U.S. Treasury securities and obligations of U.S. Government agencies		11,034		1,721		—			12,755
Asset-backed securities		4,229		192		(176	)		4,245
Totals	$	583,287	$	44,361	$	(299	)	$	627,349

The gross unrealized gains and losses on, and the cost and fair value of, those investments classified as available-for-sale at December 31, 2012 are summarized as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Fixed Maturity:
States and political subdivisions	$	93,362	$	5,022	$	(142	)	$	98,242
Corporate bonds		39,211		623		(24	)		39,810
U.S. agency-based mortgage-backed securities		11,941		5		(859	)		11,087
Total Fixed Maturity		144,514		5,650		(1,025	)		149,139
Equity securities		7,000		451		(685	)		6,766
Totals	$	151,514	$	6,101	$	(1,710	)	$	155,905

The gross unrealized gains and losses on, and the cost and fair value of, those investments classified as held-to-maturity at December 31, 2011 are summarized as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
States and political subdivisions	$	441,273	$	29,026	$	(360	)	$	469,939
Corporate bonds		92,682		1,539		(130	)		94,091
Commercial mortgage-backed securities		51,550		4,195		—			55,745
U.S. agency-based mortgage-backed securities		46,096		4,162		(44	)		50,214
U.S. Treasury securities and obligations of U.S. Government agencies		9,141		1,634		—			10,775
Asset-backed securities		5,306		17		(845	)		4,478
Totals	$	646,048	$	40,573	$	(1,379	)	$	685,242

The gross unrealized gains and losses on, and the cost and fair value of, those investments classified as available-for-sale at December 31, 2011 are summarized as follows:

	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Fixed Maturity:
States and political subdivisions	$	55,275	$	2,488	$	(1	)	$	57,762
Corporate bonds		42,802		411		(233	)		42,980
Total Fixed Maturity		98,077		2,899		(234	)		100,742
Equity securities		11,776		661		(197	)		12,240
Totals	$	109,853	$	3,560	$	(431	)	$	112,982

A summary of the cost or amortized cost and fair value of investments in fixed maturity securities, classified as held-to-maturity at December 31, 2012, by contractual maturity, is as follows:

	Cost or Amortized Cost		Fair Value
	(In thousands)
Maturity:
Due in 2013	$	81,159	$	81,897
In 2014 through 2017		147,800		156,272
In 2018 through 2022		138,680		154,343
After 2022		126,906		136,588
U.S. agency-based mortgage-backed securities		32,984		36,042
Commercial mortgage-backed securities		51,529		57,962
Asset-backed securities		4,229		4,245
Totals	$	583,287	$	627,349

A summary of the cost or amortized cost and fair value of investments in fixed maturity securities, classified as available-for-sale at December 31, 2012, by contractual maturity, is as follows:

	Cost or Amortized Cost		Fair Value
	(In thousands)
Maturity:
Due in 2013	$	7,239	$	7,223
In 2014 through 2017		24,641		25,003
In 2018 through 2022		18,708		19,342
After 2021		81,985		86,484
U.S. agency-based mortgage-backed securities		11,941		11,087
Totals	$	144,514	$	149,139

At December 31, 2012, there were $16.3 million of held-to-maturity investments on deposit with regulatory agencies of states in which the Company does business.

A summary of the Company’s realized gains and losses on sales, calls or redemptions of investments for 2012, 2011 and 2010 is as follows:

	Fixed Maturity Securities Available for Sale		Equity Securities			Other			Total
	(In thousands)
Year ended December 31, 2012
Proceeds from sales	$	22,363	$	10,777		$	—		$	33,140
Gross realized investment gains	$	1,555	$	1,186		$	—		$	2,741
Gross realized investment (losses)		—		—			—			—
Net realized investment gain		1,555		1,186			—			2,741
Other, including gains on calls and redemptions		15		—			223			238
Net realized investment gains	$	1,570	$	1,186		$	223		$	2,979
Year ended December 31, 2011
Proceeds from sales	$	21,560	$	14,769		$	—		$	36,329
Gross realized investment gains	$	815	$	1,621		$	—		$	2,436
Gross realized investment (losses)		—		(98	)		(1	)		(99	)
Net realized investment gain		815		1,523			(1	)		2,337
Impairments		—		—			(169	)		(169	)
Other, including gains on calls and redemptions		—		—			60			60
Net realized investment gains	$	815	$	1,523		$	(110	)	$	2,228
Year ended December 31, 2010
Proceeds from sales	$	15,462	$	14,695		$	—		$	30,157
Gross realized investment gains	$	—	$	2,650		$	—		$	2,650
Gross realized investment (losses)		—		—			—			—
Net realized investment gain		—		2,650			—			2,650
Impairments		—		(693	)		—			(693	)
Other, including gains on calls and redemptions		411		—			81			492
Net realized investment gains	$	411	$	1,957		$	81		$	2,449

Major categories of the Company’s net investment income are summarized as follows:

	Year Ended December 31,
	2012			2011			2010
	(In thousands)
Gross investment income:
Fixed maturity securities	$	27,167		$	26,769		$	26,571
Short-term investments and cash and cash equivalents		489			590			819
Equity securities		446			181			71
Total gross investment income		28,102			27,540			27,461
Investment expenses		(1,084	)		(1,200	)		(1,219	)
Net investment income	$	27,018		$	26,340		$	26,242

The following table summarizes, as of December 31, 2012, the gross unrealized losses on securities that were at a loss for either less than twelve months or twelve months or longer:

	As of December 31, 2012
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses
	(in thousands)
Held-to-Maturity
Fixed maturity securities:
Corporate bonds	$	10,734	$	12	$	—	$	—	$	10,734	$	12
States and political subdivisions		11,913		106		—		—		11,913		106
U.S. agency-based mortgage-backed securities		117		—		68		5		185		5
Asset-backed securities		—		—		2,277		176		2,277		176
Total held-to-maturity securities		22,764		118		2,345		181		25,109		299
Available-for Sale
Fixed maturity securities:
Corporate bonds	$	6,411	$	24	$	—	$	—	$	6,411	$	24
States and political subdivisions		6,281		142		—		—		6,281		142
U.S. agency-based mortgage-backed securities		10,919		859		—		—		10,919		859
Equity Securities		4,186		685		—		—		4,186		685
Total available-for-sale securities		27,797		1,710		—		—		27,797		1,710
Total	$	50,561	$	1,828	$	2,345	$	181	$	52,906	$	2,009

The following table summarizes, as of December 31, 2011, the gross unrealized losses on securities that were at a loss for either less than twelve months or twelve months or longer:

	As of December 31, 2011
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses
	(in thousands)
Held-to-Maturity
Fixed maturity securities:
Corporate bonds	$	23,063	$	130	$	—	$	—	$	23,063	$	130
States and political subdivisions		2,291		3		5,718		357		8,009		360
U.S. agency-based mortgage-backed securities		—		—		1,012		44		1,012		44
Asset-backed securities		545		15		3,880		830		4,425		845
Total held-to-maturity securities		25,899		148		10,610		1,231		36,509		1,379
Available-for Sale
Fixed maturity securities:
Corporate bonds	$	14,301	$	233	$	—	$	—	$	14,301	$	233
States and political subdivisions		222		1		—		—		222		1
Equity Securities		2,789		197		—		—		2,789		197
Total available-for-sale securities		17,312		431		—		—		17,312		431
Total	$	43,211	$	579	$	10,610	$	1,231	$	53,821	$	1,810

The Company regularly reviews its investment portfolio to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of our investments. The Company considers various factors in determining if a decline in the fair value of an individual security is other-than-temporary. The key factors considered are:

• any reduction or elimination of dividends, or nonpayment of scheduled principal or interest payments;

• the financial condition and near-term prospects of the issuer of the applicable security, including any specific events that may affect its operations or earnings;

• how long and by how much the fair value of the security has been below its cost or amortized cost;

• any downgrades of the security by a rating agency;

• our intent not to sell the security for a sufficient time period for it to recover its value;

• the likelihood of being forced to sell the security before the recovery of its value; and

• an evaluation as to whether there are any credit losses on debt securities.

The Company reviewed all securities with unrealized losses in accordance with the impairment policy described above. The Company determined that the unrealized losses in the fixed maturity securities portfolio related primarily to changes in market interest rates since the date of purchase, current conditions in the capital markets and the impact of those conditions on market liquidity and prices generally, and the transfer of the investments from the available-for-sale classification to the held-to-maturity classification in January 2004. The Company expects to recover the carrying value of these securities since management does not intend to sell the securities and it is not more likely than not that the Company will be required to sell the security before the recovery of its amortized cost basis. In addition, none of the unrealized losses on debt securities are considered credit losses.