Investments |
Investments The cost or amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the Company’s investments were as follows: | | | | | | | | | | | | | | | | | | | | Cost or Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value | | | (in thousands) | At June 30, 2013 | | | | | | | | | Fixed maturity securities | | | | | | | | | U.S. Treasuries | | $ | 143,294 |
| | $ | 8,830 |
| | $ | (39 | ) | | $ | 152,085 |
| U.S. Agencies | | 85,104 |
| | 3,930 |
| | (3 | ) | | 89,031 |
| States and municipalities | | 713,702 |
| | 45,248 |
| | (4,117 | ) | | 754,833 |
| Corporate securities | | 725,567 |
| | 31,031 |
| | (9,790 | ) | | 746,808 |
| Residential mortgage-backed securities | | 231,561 |
| | 10,260 |
| | (2,796 | ) | | 239,025 |
| Commercial mortgage-backed securities | | 53,618 |
| | 423 |
| | (2,608 | ) | | 51,433 |
| Asset-backed securities | | 36,977 |
| | 94 |
| | (259 | ) | | 36,812 |
| Total fixed maturity securities | | 1,989,823 |
| | 99,816 |
| | (19,612 | ) | | 2,070,027 |
| Equity securities | | 85,559 |
| | 55,114 |
| | (304 | ) | | 140,369 |
| Total investments | | $ | 2,075,382 |
| | $ | 154,930 |
| | $ | (19,916 | ) | | $ | 2,210,396 |
|
| | | | | | | | | | | | | | | | | | At December 31, 2012 | | | | | | | | | Fixed maturity securities | | | | | | | | | U.S. Treasuries | | $ | 138,839 |
| | $ | 13,651 |
| | $ | — |
| | $ | 152,490 |
| U.S. Agencies | | 88,202 |
| | 5,765 |
| | — |
| | 93,967 |
| States and municipalities | | 689,776 |
| | 68,740 |
| | — |
| | 758,516 |
| Corporate securities | | 627,047 |
| | 49,461 |
| | (265 | ) | | 676,243 |
| Residential mortgage-backed securities | | 236,461 |
| | 16,488 |
| | (97 | ) | | 252,852 |
| Commercial mortgage-backed securities | | 54,755 |
| | 1,410 |
| | (45 | ) | | 56,120 |
| Asset-backed securities | | 34,062 |
| | 211 |
| | (33 | ) | | 34,240 |
| Total fixed maturity securities | | 1,869,142 |
| | 155,726 |
| | (440 | ) | | 2,024,428 |
| Equity securities | | 81,067 |
| | 45,399 |
| | (1,380 | ) | | 125,086 |
| Total investments | | $ | 1,950,209 |
| | $ | 201,125 |
| | $ | (1,820 | ) | | $ | 2,149,514 |
|
The amortized cost and estimated fair value of fixed maturity securities at June 30, 2013, by contractual maturity, are shown below. Expected maturities differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. | | | | | | | | | | | | Amortized Cost | | Estimated Fair Value | | | (in thousands) | Due in one year or less | | $ | 151,956 |
| | $ | 154,046 |
| Due after one year through five years | | 751,560 |
| | 784,120 |
| Due after five years through ten years | | 583,868 |
| | 614,269 |
| Due after ten years | | 180,283 |
| | 190,322 |
| Mortgage and asset-backed securities | | 322,156 |
| | 327,270 |
| Total | | $ | 1,989,823 |
| | $ | 2,070,027 |
|
The following is a summary of investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or greater as of June 30, 2013 and December 31, 2012. | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2013 | | December 31, 2012 | | | Estimated Fair Value | | Gross Unrealized Losses | | Number of Issues | | Estimated Fair Value | | Gross Unrealized Losses | | Number of Issues | | | (dollars in thousands) | Less than 12 months: | | | | | | | | | | | | | Fixed maturity securities | | | | | | | | | | | | | U.S. Treasuries | | $ | 12,107 |
| | $ | (39 | ) | | 5 |
| | $ | — |
| | $ | — |
| | — |
| U.S. Agencies | | 3,025 |
| | (3 | ) | | 1 |
| | — |
| | — |
| | — |
| States and municipalities | | 96,389 |
| | (4,117 | ) | | 26 |
| | — |
| | — |
| | — |
| Corporate securities | | 292,305 |
| | (9,664 | ) | | 110 |
| | 36,338 |
| | (265 | ) | | 12 |
| Residential mortgage-backed securities | | 80,475 |
| | (2,785 | ) | | 36 |
| | 14,629 |
| | (28 | ) | | 6 |
| Commercial mortgage-backed securities | | 33,254 |
| | (2,608 | ) | | 10 |
| | 10,432 |
| | (45 | ) | | 4 |
| Asset-backed securities | | 28,903 |
| | (259 | ) | | 13 |
| | 16,714 |
| | (33 | ) | | 5 |
| Total fixed maturity securities | | 546,458 |
| | (19,475 | ) | | 201 |
| | 78,113 |
| | (371 | ) | | 27 |
| Equity securities | | 10,005 |
| | (268 | ) | | 38 |
| | 11,645 |
| | (1,207 | ) | | 35 |
| Total less than 12 months | | $ | 556,463 |
| | $ | (19,743 | ) | | 239 |
| | $ | 89,758 |
| | $ | (1,578 | ) | | 62 |
| | | | | | | | | | | | | | 12 months or greater: | | | | | | | | | | | | | Fixed maturity securities | | | | | | | | | | | | | Corporate securities | | $ | 2,460 |
| | $ | (126 | ) | | 1 |
| | $ | — |
| | $ | — |
| | — |
| Residential mortgage-backed securities | | 511 |
| | (11 | ) | | 17 |
| | 2,341 |
| | (69 | ) | | 17 |
| Total fixed maturity securities | | 2,971 |
| | (137 | ) | | 18 |
| | 2,341 |
| | (69 | ) | | 17 |
| Equity securities | | 331 |
| | (36 | ) | | 2 |
| | 456 |
| | (173 | ) | | 4 |
| Total 12 months or greater | | $ | 3,302 |
| | $ | (173 | ) | | 20 |
| | $ | 2,797 |
| | $ | (242 | ) | | 21 |
| | | | | | | | | | | | | | Total available-for-sale: | | | | | | | | | | | | | Fixed maturity securities | | | | | | | | | | | | | U.S. Treasuries | | $ | 12,107 |
| | $ | (39 | ) | | 5 |
| | $ | — |
| | $ | — |
| | — |
| U.S. Agencies | | 3,025 |
| | (3 | ) | | 1 |
| | — |
| | — |
| | — |
| States and municipalities | | 96,389 |
| | (4,117 | ) | | 26 |
| | — |
| | — |
| | — |
| Corporate securities | | 294,765 |
| | (9,790 | ) | | 111 |
| | 36,338 |
| | (265 | ) | | 12 |
| Residential mortgage-backed securities | | 80,986 |
| | (2,796 | ) | | 53 |
| | 16,970 |
| | (97 | ) | | 23 |
| Commercial mortgage-backed securities | | 33,254 |
| | (2,608 | ) | | 10 |
| | 10,432 |
| | (45 | ) | | 4 |
| Asset-backed securities | | 28,903 |
| | (259 | ) | | 13 |
| | 16,714 |
| | (33 | ) | | 5 |
| Total fixed maturity securities | | 549,429 |
| | (19,612 | ) | | 219 |
| | 80,454 |
| | (440 | ) | | 44 |
| Equity securities | | 10,336 |
| | (304 | ) | | 40 |
| | 12,101 |
| | (1,380 | ) | | 39 |
| Total available-for-sale | | $ | 559,765 |
| | $ | (19,916 | ) | | 259 |
| | $ | 92,555 |
| | $ | (1,820 | ) | | 83 |
|
Based on reviews of the fixed maturity securities, the Company determined that unrealized losses as of June 30, 2013 were primarily the result of changes in prevailing interest rates and not the credit quality of the issuers. The fixed maturity securities whose total fair value was less than amortized cost were not determined to be other-than-temporarily impaired given the severity and duration of the impairment, the credit quality of the issuers, the Company’s intent to not sell the securities, and a determination that it is not more likely than not that the Company will be required to sell the securities until fair value recovers to above cost, or maturity. Based on reviews of the equity securities as of June 30, 2013, the Company recognized an impairment of $0.1 million in the fair value of one equity security as a result of the severity and duration of the change in fair value of that security. Realized gains on investments, net, and the change in unrealized gains (losses) on fixed maturity and equity securities are determined on a specific-identification basis and were as follows: | | | | | | | | | | | | | | | | | | | | Three Months Ended | | Six Months Ended | | | June 30, | | June 30, | | | 2013 |
| 2012 | | 2013 |
| 2012 | | | (in thousands) | Realized gains on investments, net | | | | | | | | | Fixed maturity securities | | | | | | | | | Gross gains | | $ | 1 |
| | $ | 592 |
| | $ | 1 |
| | $ | 2,295 |
| Gross losses | | — |
| | — |
| | — |
| | (5 | ) | Realized gains on fixed maturity securities, net | | $ | 1 |
| | $ | 592 |
| | $ | 1 |
| | $ | 2,290 |
| Equity securities | | | | | | | | | Gross gains | | $ | 3,933 |
| | $ | 613 |
| | $ | 4,977 |
| | $ | 1,161 |
| Gross losses | | (68 | ) | | (260 | ) | | (318 | ) | | (728 | ) | Realized gains on equity securities, net | | $ | 3,865 |
| | $ | 353 |
| | $ | 4,659 |
| | $ | 433 |
| Total | | $ | 3,866 |
| | $ | 945 |
| | $ | 4,660 |
| | $ | 2,723 |
| | | | | | | | | | Change in unrealized gains (losses) | | |
| | |
| | | | | Fixed maturity securities | | $ | (62,851 | ) | | $ | 8,015 |
| | $ | (75,082 | ) | | $ | 3,558 |
| Equity securities | | (687 | ) | | (3,047 | ) | | 10,790 |
| | 8,931 |
| Total | | $ | (63,538 | ) | | $ | 4,968 |
| | $ | (64,292 | ) | | $ | 12,489 |
|
Net investment income was as follows: | | | | | | | | | | | | | | | | | | | | Three Months Ended | | Six Months Ended | | | June 30, | | June 30, | | | 2013 | | 2012 | | 2013 | | 2012 | | | (in thousands) | Fixed maturity securities | | $ | 17,280 |
| | $ | 18,045 |
| | $ | 34,526 |
| | $ | 36,289 |
| Equity securities | | 947 |
| | 777 |
| | 1,783 |
| | 1,424 |
| Cash equivalents and restricted cash | | 28 |
| | 94 |
| | 63 |
| | 223 |
| | | 18,255 |
| | 18,916 |
| | 36,372 |
| | 37,936 |
| Investment expenses | | (610 | ) | | (619 | ) | | (1,322 | ) | | (1,254 | ) | Net investment income | | $ | 17,645 |
| | $ | 18,297 |
| | $ | 35,050 |
| | $ | 36,682 |
|
The Company is required by various state laws and regulations to keep securities or letters of credit in depository accounts with certain states in which it does business. As of June 30, 2013 and December 31, 2012, securities having a fair value of $592.1 million and $530.6 million, respectively, were on deposit. These laws and regulations govern not only the amount, but also the types of securities that are eligible for deposit. The deposits are limited to fixed maturity securities in all states. Additionally, certain reinsurance contracts require Company funds to be held in trust for the benefit of the ceding reinsurer to secure the outstanding liabilities assumed by the Company. The fair value of fixed maturity securities held in trust for the benefit of ceding reinsurers at June 30, 2013 and December 31, 2012 was $32.0 million and $35.0 million, respectively. Pursuant to the Amended Credit Facility, a portion of the Company's debt was secured by fixed maturity securities and restricted cash and cash equivalents that had a fair value of $107.2 million and $110.4 million at June 30, 2013 and December 31, 2012, respectively. |