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Investments
 9 Months Ended
Sep. 30, 2017
Investments, Debt and Equity Securities [Abstract]  
Investments
INVESTMENTS

(A)
Investment Gains and Losses

The table below presents realized investment gains and losses, excluding impairment losses, for the periods indicated.

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
(In thousands)
 
 
 
 
 
 
 
 
Available for sale debt securities:
 
 
 
 
 
 
 
Realized gains on disposal
$
1,529

 
1,773

 
4,137

 
2,455

Realized losses on disposal
—

 
(23
)
 
—

 
(29
)
Held to maturity debt securities:
 
 
 
 
 
 
 
Realized gains on disposal
555

 
3,278

 
4,059

 
4,764

Realized losses on disposal
—

 
(3
)
 
(34
)
 
(109
)
Equity securities realized gains (losses)
(10
)
 
401

 
87

 
607

Real estate gains (losses)
—

 
—

 
2,657

 
2,901

 
 
 
 
 
 
 
 
Totals
$
2,074

 
5,426

 
10,906

 
10,589



Disposals in the held to maturity category during the periods shown primarily represent calls initiated by the credit issuer of the debt security. It is the Company's policy to initiate disposals of debt securities in the held to maturity category only in instances in which the credit status of the issuer comes into question and the realization of all or a significant portion of the investment principal of the holding is deemed to be in jeopardy.

The Company uses the specific identification method in computing realized gains and losses. For the three months ended September 30, 2017 and 2016 the percentage of gains on bonds due to the call of securities was 100.0% and 95.0%, respectively. For the nine months ended September 30, 2017 and 2016 the percentage of gains on bonds due to the call of securities was 88.0% and 87.0%, respectively. This includes calls out of the Company's available for sale portfolio of debt securities.

The table below presents net impairment losses recognized in earnings for the periods indicated.

 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
Total other-than-temporary impairment gains (losses) on debt securities
 
$
26

 
27

 
69

 
80

Portion of loss (gain) recognized in comprehensive income
 
(26
)
 
(27
)
 
(69
)
 
(80
)
 
 
 
 
 
 
 
 
 
Net impairment losses on debt securities recognized in earnings
 
—

 
—

 
—

 
—

Equity securities impairments
 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
Totals
 
$
—

 
—

 
—

 
—



The table below presents a roll forward of credit losses on securities for which the Company also recorded non-credit other-than-temporary impairments in other comprehensive loss.

 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30, 2017
 
Year Ended
December 31,
2016
 
(In thousands)
 
 
 
 
 
 
Beginning balance, cumulative credit losses related to other-than-temporary impairments
$
1,440

 
1,440

 
2,278

Reductions for securities sold during current period
—

 
—

 
(838
)
Additions for credit losses not previously recognized in other-than-temporary impairments
—

 
—

 
—

 
 
 
 
 
 
Ending balance, cumulative credit losses related to other-than-temporary impairments
$
1,440

 
1,440

 
1,440



(B)
Debt and Equity Securities

The table below presents amortized costs and fair values of securities held to maturity at September 30, 2017.

 
Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. Treasury
$
1,336

 
205

 
—

 
1,541

States and political subdivisions
455,435

 
21,927

 
(723
)
 
476,639

Public utilities
1,109,167

 
37,863

 
(489
)
 
1,146,541

Corporate
4,397,029

 
146,802

 
(7,402
)
 
4,536,429

Residential mortgage-backed
1,293,507

 
38,274

 
(3,922
)
 
1,327,859

Home equity
7,377

 
1,305

 
—

 
8,682

Manufactured housing
1,144

 
87

 
—

 
1,231

 
 
 
 
 
 
 
 
Totals
$
7,264,995

 
246,463

 
(12,536
)
 
7,498,922



The table below presents amortized costs and fair values of securities available for sale at September 30, 2017.

 
Securities Available for Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
States and political subdivisions
$
577

 
9

 
—

 
586

Foreign governments
9,962

 
451

 
—

 
10,413

Public utilities
103,908

 
4,864

 
—

 
108,772

Corporate
2,783,263

 
98,637

 
(8,125
)
 
2,873,775

Residential mortgage-backed
21,790

 
1,693

 
(69
)
 
23,414

Home equity
8,287

 
380

 
—

 
8,667

Manufactured housing
—

 
—

 
—

 
—

 
2,927,787

 
106,034

 
(8,194
)
 
3,025,627

 
 
 
 
 
 
 
 
Equity securities
14,807

 
5,371

 
(202
)
 
19,976

 
 
 
 
 
 
 
 
Totals
$
2,942,594

 
111,405

 
(8,396
)
 
3,045,603



The table below presents amortized costs and fair values of securities held to maturity at December 31, 2016.

 
Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. Treasury
$
1,333

 
235

 
—

 
1,568

States and political subdivisions
456,069

 
22,697

 
(2,841
)
 
475,925

Public utilities
1,087,176

 
36,904

 
(3,133
)
 
1,120,947

Corporate
4,237,029

 
116,720

 
(29,701
)
 
4,324,048

Residential mortgage-backed
1,367,270

 
42,345

 
(6,468
)
 
1,403,147

Home equity
8,826

 
1,462

 
—

 
10,288

Manufactured housing
1,556

 
132

 
—

 
1,688

 
 
 
 
 
 
 
 
Totals
$
7,159,259

 
220,495

 
(42,143
)
 
7,337,611



The table below presents amortized costs and fair values of securities available for sale at December 31, 2016.

 
Securities Available for Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
States and political subdivisions
$
580

 
—

 
(6
)
 
574

Foreign governments
9,956

 
380

 
—

 
10,336

Public utilities
127,181

 
4,745

 
(232
)
 
131,694

Corporate
2,802,852

 
80,414

 
(22,603
)
 
2,860,663

Residential mortgage-backed
27,110

 
2,137

 
(91
)
 
29,156

Home equity
9,341

 
286

 
—

 
9,627

Manufactured housing
—

 
—

 
—

 
—

 
2,977,020

 
87,962

 
(22,932
)
 
3,042,050

 
 
 
 
 
 
 
 
Equity securities
14,022

 
4,657

 
(366
)
 
18,313

 
 
 
 
 
 
 
 
Totals
$
2,991,042

 
92,619

 
(23,298
)
 
3,060,363



The Company does not consider securities to be other-than-temporarily impaired when the market decline is attributable to factors such as interest rate movements, market volatility, liquidity, spread widening and credit quality and when recovery of all amounts due under the contractual terms of the security is anticipated. Based on the review and the Company's ability and intent not to sell these securities until maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2017. The Company will monitor the investment portfolio for future changes in issuer facts and circumstances that could result in future impairments beyond those currently identified.

During the three and nine months ended September 30, 2017, the Company recorded no other-than-temporary impairment on debt and equity securities.

Unrealized losses for securities held to maturity and securities available for sale decreased during the first nine months of 2017 primarily due to the downward movement in market interest rates during this period (which increases the market price of debt securities).

The following table shows the gross unrealized losses and fair values of the Company's held to maturity investments by investment category and length of time the individual securities have been in a continuous unrealized loss position at September 30, 2017.
 
Securities Held to Maturity
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
States and political subdivisions
$
39,659

 
(723
)
 
—

 
—

 
39,659

 
(723
)
Public utilities
41,567

 
(489
)
 
—

 
—

 
41,567

 
(489
)
Corporate
456,605

 
(5,863
)
 
104,355

 
(1,539
)
 
560,960

 
(7,402
)
Residential mortgage-backed
220,414

 
(3,556
)
 
9,036

 
(366
)
 
229,450

 
(3,922
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
758,245

 
(10,631
)
 
113,391

 
(1,905
)
 
871,636

 
(12,536
)


The following table shows the gross unrealized losses and fair values of the Company's available for sale investments by investment category and length of time the individual securities have been in a continuous unrealized loss position at September 30, 2017.

 
Securities Available for Sale
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
States and political subdivisions
$
—

 
—

 
—

 
—

 
—

 
—

Public utilities
—

 
—

 
—

 
—

 
—

 
—

Corporate
350,939

 
(6,120
)
 
57,034

 
(2,005
)
 
407,973

 
(8,125
)
Residential mortgage-backed
1,371

 
(14
)
 
1,115

 
(55
)
 
2,486

 
(69
)
 
352,310

 
(6,134
)
 
58,149

 
(2,060
)
 
410,459

 
(8,194
)
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
940

 
(128
)
 
375

 
(74
)
 
1,315

 
(202
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
353,250

 
(6,262
)
 
58,524

 
(2,134
)
 
411,774

 
(8,396
)



The following table shows the gross unrealized losses and fair values of the Company's held to maturity investments by investment category and length of time the individual securities have been in a continuous unrealized loss position at December 31, 2016.

 
Securities Held to Maturity
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
States and political subdivisions
$
80,507

 
(2,841
)
 
—

 
—

 
80,507

 
(2,841
)
Public utilities
162,587

 
(3,133
)
 
—

 
—

 
162,587

 
(3,133
)
Corporate
1,063,194

 
(22,867
)
 
179,113

 
(6,834
)
 
1,242,307

 
(29,701
)
Residential mortgage-backed
274,045

 
(5,989
)
 
8,943

 
(479
)
 
282,988

 
(6,468
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
1,580,333

 
(34,830
)
 
188,056

 
(7,313
)
 
1,768,389

 
(42,143
)


The following table shows the gross unrealized losses and fair values of the Company's available for sale investments by investment category and length of time that the individual securities have been in a continuous unrealized loss position at December 31, 2016.

 
Securities Available for Sale
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
States and political subdivisions
$
574

 
(6
)
 
—

 
—

 
574

 
(6
)
Public utilities
10,765

 
(232
)
 
—

 
—

 
10,765

 
(232
)
Corporate
680,988

 
(16,427
)
 
106,969

 
(6,176
)
 
787,957

 
(22,603
)
Residential mortgage-backed
1,292

 
(91
)
 
—

 
—

 
1,292

 
(91
)
 
693,619

 
(16,756
)
 
106,969

 
(6,176
)
 
800,588

 
(22,932
)
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
4,154

 
(305
)
 
422

 
(61
)
 
4,576

 
(366
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
697,773

 
(17,061
)
 
107,391

 
(6,237
)
 
805,164

 
(23,298
)




Debt securities. The gross unrealized losses for debt securities are made up of 168 individual issues, or 12.7% of the total debt securities held by the Company at September 30, 2017. The market value of these bonds as a percent of amortized cost approximates 98.4%. Of the 168 securities, 28, or 16.7%, fall in the 12 months or greater aging category; and 163 were rated investment grade at September 30, 2017.

Equity securities.  The gross unrealized losses for equity securities are made up of 26 individual issues at September 30, 2017.  These holdings are reviewed quarterly for impairment.  

The amortized cost and fair value of investments in debt securities at September 30, 2017, by contractual maturity, are shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 
Debt Securities Available for Sale
 
Debt Securities Held to Maturity
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
 
(In thousands)
 
 
 
 
 
 
 
 
Due in 1 year or less
$
107,418

 
109,701

 
327,702

 
334,140

Due after 1 year through 5 years
1,134,227

 
1,193,059

 
2,165,828

 
2,270,603

Due after 5 years through 10 years
1,604,862

 
1,638,814

 
3,103,155

 
3,174,126

Due after 10 years
51,203

 
51,972

 
366,282

 
382,281

 
2,897,710

 
2,993,546

 
5,962,967

 
6,161,150

 
 
 
 
 
 
 
 
Mortgage and asset-backed securities
30,077

 
32,081

 
1,302,028

 
1,337,772

 
 
 
 
 
 
 
 
Total
$
2,927,787

 
3,025,627

 
7,264,995

 
7,498,922



(C)
 Transfer of Securities

During the three and nine months ended September 30, 2017 the Company made no transfers from the held to maturity category to securities available for sale.

(D) Mortgage Loans and Real Estate

A financing receivable is a contractual right to receive money on demand or on fixed or determinable dates that is recognized as an asset in a company's statement of financial position. Mortgage, equity, participation and mezzanine loans on real estate are considered financing receivables reported by the Company.

Credit and default risk is minimized through strict underwriting guidelines and diversification of underlying property types and geographic locations. In addition to being secured by the property, mortgage loans with leases on the underlying property are often guaranteed by the lease payments and also by the borrower. This approach has proved to result in quality mortgage loans with few defaults. Mortgage loan interest income is recognized on an accrual basis with any premium or discount amortized over the life of the loan. Prepayment and late fees are recorded on the date of collection.

Loans in foreclosure, loans considered impaired or loans past due 90 days or more are placed on a non-accrual status. If a mortgage loan is determined to be on non-accrual status, the mortgage loan does not accrue any revenue into the Condensed Consolidated Statements of Earnings. The loan is independently monitored and evaluated as to potential impairment or foreclosure. If delinquent payments are made and the loan is brought current, then the Company returns the loan to active status and accrues income accordingly. The Company had no mortgage loans past due 90 days or more at September 30, 2017 or 2016 and as a result all interest income was recognized at September 30, 2017 and 2016.

The following table represents the mortgage loan portfolio by loan-to-value ratio.

 
September 30, 2017
 
December 31, 2016
 
Amount
 
%
 
Amount
 
%
 
(In thousands)
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
Mortgage Loans by Loan-to-Value Ratio (1):
 
 
 
 
 
 
 
Less than 50%
$
80,202

 
42.4

 
$
54,783

 
31.3

50% to 60%
27,630

 
14.6

 
12,946

 
7.4

60% to 70%
64,253

 
33.9

 
76,959

 
43.9

70% to 80%
4,657

 
2.5

 
6,192

 
3.5

80% to 90%
6,999

 
3.7

 
18,688

 
10.7

Greater than 90%
5,532

 
2.9

 
5,616

 
3.2

Gross balance
189,273

 
100.0

 
175,184

 
100.0

 
 
 
 
 
 
 
 
Allowance for possible losses
(650
)
 
(0.3
)
 
(650
)
 
(0.4
)
 
 
 
 
 
 
 
 
Totals
$
188,623

 
99.7

 
$
174,534

 
99.6


(1) Loan-to-Value Ratio is determined using the most recent appraised value. Appraisals are required at the time of funding and may be updated if a material change occurs from the original loan agreement.

All mortgage loans are analyzed quarterly in order to monitor the financial quality of these assets. Based on ongoing monitoring, mortgage loans with a likelihood of becoming delinquent are identified and placed on an internal “watch list”. Among the criteria that may indicate a potential problem include: major tenant vacancies or bankruptcies, late payments, and loan relief/restructuring requests. The mortgage loan portfolio is analyzed for the need for a valuation allowance on any loan that is on the internal watch list, in the process of foreclosure or that currently has a valuation allowance.

Mortgage loans are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. When it is determined that a loan is impaired, a loss is recognized for the difference between the carrying amount of the mortgage loan and the estimated value reduced by the cost to sell. Estimated value is typically based on the loan's observable market price or the fair value of the collateral less cost to sell. Impairments and changes in the valuation allowance are reported in net realized investment gains (losses) in the Condensed Consolidated Statements of Earnings.

The following table represents the mortgage loan allowance.
 
September 30, 2017
 
December 31, 2016
 
(In thousands)
 
 
 
 
Balance, beginning of period
$
650

 
650

Provision
—

 
—

Releases
—

 
—

 
 
 
 
Balance, end of period
$
650

 
650



The Company's direct investments in real estate are not a significant portion of its total investment portfolio and totaled approximately $31.3 million and $31.8 million at September 30, 2017 and December 31, 2016, respectively. The Company recognized operating income on real estate properties of approximately $2.1 million and $2.0 million for the first nine months of 2017 and 2016, respectively.