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Investments
 3 Months Ended
Mar. 31, 2018
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 March 31,
 
2018
 
2017
 
(In thousands)
 
 
 
 
Available for sale debt securities:
 
 
 
Realized gains on disposal
$
40

 
973

Realized losses on disposal
—

 
—

Held to maturity debt securities:
 
 
 
Realized gains on disposal
571

 
1,557

Realized losses on disposal
—

 
(34
)
Equity securities realized gains (losses)
—

 
89

 
 
 
 
Totals
$
611

 
2,585



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 March 31, 2018 and 2017 the percentage of gains on bonds due to the call of securities was 99.0% and 63.0%, 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
 
 
March 31,
 
 
2018
 
2017
 
 
(In thousands)
 
 
 
 
 
Total other-than-temporary impairment gains (losses) on debt securities
 
$
3

 
20

Portion of loss (gain) recognized in comprehensive income
 
(3
)
 
(20
)
 
 
 
 
 
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 March 31, 2018
 
Year Ended
December 31,
2017
 
(In thousands)
 
 
 
 
Beginning balance, cumulative credit losses related to other-than-temporary impairments
$
627

 
1,440

Reductions for securities sold during current period
—

 
(813
)
Additions for credit losses not previously recognized in other-than-temporary impairments
—

 
—

 
 
 
 
Ending balance, cumulative credit losses related to other-than-temporary impairments
$
627

 
627



(B)
Debt Securities

The table below presents amortized costs and fair values of debt securities held to maturity at March 31, 2018.

 
Debt Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. Treasury
$
1,338

 
150

 
—

 
1,488

States and political subdivisions
462,708

 
14,097

 
(1,580
)
 
475,225

Public utilities
1,038,226

 
14,664

 
(8,408
)
 
1,044,482

Corporate
4,521,036

 
52,589

 
(49,835
)
 
4,523,790

Residential mortgage-backed
1,251,971

 
15,936

 
(15,895
)
 
1,252,012

Home equity
3,994

 
56

 
(8
)
 
4,042

Manufactured housing
927

 
68

 
—

 
995

 
 
 
 
 
 
 
 
Totals
$
7,280,200

 
97,560

 
(75,726
)
 
7,302,034



The table below presents amortized costs and fair values of debt securities available for sale at March 31, 2018. As indicated in Note (2) New Accounting Pronouncements, effective January 1, 2018, equity securities are no longer included in the Securities Available for Sale category.

 
Debt Securities Available for Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
States and political subdivisions
$
574

 
—

 
(25
)
 
549

Foreign governments
9,967

 
88

 
—

 
10,055

Public utilities
83,461

 
2,342

 
(128
)
 
85,675

Corporate
2,967,125

 
36,520

 
(43,336
)
 
2,960,309

Residential mortgage-backed
19,248

 
1,191

 
(36
)
 
20,403

Home equity
7,452

 
346

 
—

 
7,798

 
 
 
 
 
 
 
 
Totals
$
3,087,827

 
40,487

 
(43,525
)
 
3,084,789



The table below presents amortized costs and fair values of securities held to maturity at December 31, 2017.

 
Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. Treasury
$
1,337

 
177

 
—

 
1,514

States and political subdivisions
467,437

 
21,907

 
(100
)
 
489,244

Public utilities
1,062,545

 
30,527

 
(894
)
 
1,092,178

Corporate
4,430,099

 
121,978

 
(7,876
)
 
4,544,201

Residential mortgage-backed
1,280,307

 
27,445

 
(6,216
)
 
1,301,536

Home equity
4,262

 
57

 
(4
)
 
4,315

Manufactured housing
1,037

 
79

 
—

 
1,116

 
 
 
 
 
 
 
 
Totals
$
7,247,024

 
202,170

 
(15,090
)
 
7,434,104



The table below presents amortized costs and fair values of securities available for sale at December 31, 2017.

 
Securities Available for Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
States and political subdivisions
$
575

 
—

 
(29
)
 
546

Foreign governments
9,964

 
326

 
—

 
10,290

Public utilities
83,466

 
3,640

 
—

 
87,106

Corporate
2,842,381

 
81,737

 
(10,744
)
 
2,913,374

Residential mortgage-backed
20,246

 
1,376

 
(52
)
 
21,570

Home equity
7,878

 
367

 
—

 
8,245

Manufactured housing
—

 
—

 
—

 
—

 
2,964,510

 
87,446

 
(10,825
)
 
3,041,131

 
 
 
 
 
 
 
 
Equity securities
12,890

 
5,708

 
(120
)
 
18,478

 
 
 
 
 
 
 
 
Totals
$
2,977,400

 
93,154

 
(10,945
)
 
3,059,609



The Company does not consider securities to be other-than-temporarily impaired when the market decline is attributable to factors such as market volatility, liquidity, spread widening and credit quality where it is anticipated that a recovery of all amounts due under the contractual terms of the security will occur and the Company has the intent and ability to hold until recovery or maturity. Based on its review, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2018. 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 months ended March 31, 2018, the Company recorded no other-than-temporary impairment on debt securities.

Unrealized losses for debt securities held to maturity and debt securities available for sale increased during the first three months of 2018 primarily due to the upward movement in market interest rates during this period (which decreases the market price of debt securities).

The following table shows the gross unrealized losses and fair values of the Company's held to maturity debt securities by investment category and length of time the individual securities have been in a continuous unrealized loss position at March 31, 2018.
 
Debt 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
$
64,701

 
(1,393
)
 
4,768

 
(187
)
 
69,469

 
(1,580
)
Public utilities
408,005

 
(7,032
)
 
33,205

 
(1,376
)
 
441,210

 
(8,408
)
Corporate
1,833,024

 
(32,380
)
 
420,683

 
(17,455
)
 
2,253,707

 
(49,835
)
Residential mortgage-backed
389,982

 
(5,863
)
 
187,700

 
(10,032
)
 
577,682

 
(15,895
)
Home equity
2,609

 
(8
)
 
—

 
—

 
2,609

 
(8
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
2,698,321

 
(46,676
)
 
646,356

 
(29,050
)
 
3,344,677

 
(75,726
)


The following table shows the gross unrealized losses and fair values of the Company's available for sale debt securities by investment category and length of time the individual securities have been in a continuous unrealized loss position at March 31, 2018.

 
Debt 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
$
549

 
(25
)
 
—

 
—

 
549

 
(25
)
Public utilities
17,841

 
(128
)
 
—

 
—

 
17,841

 
(128
)
Corporate
1,133,923

 
(24,410
)
 
290,548

 
(18,926
)
 
1,424,471

 
(43,336
)
Residential mortgage-backed
—

 
—

 
1,067

 
(36
)
 
1,067

 
(36
)
Home equity
1,482

 
—

 
—

 
—

 
1,482

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
1,153,795

 
(24,563
)
 
291,615

 
(18,962
)
 
1,445,410

 
(43,525
)

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, 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
$
6,308

 
(14
)
 
4,869

 
(86
)
 
11,177

 
(100
)
Public utilities
68,368

 
(407
)
 
34,091

 
(487
)
 
102,459

 
(894
)
Corporate
248,844

 
(1,296
)
 
431,591

 
(6,580
)
 
680,435

 
(7,876
)
Residential mortgage-backed
130,015

 
(738
)
 
192,399

 
(5,478
)
 
322,414

 
(6,216
)
Home equity
2,830

 
(4
)
 
—

 
—

 
2,830

 
(4
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
456,365

 
(2,459
)
 
662,950

 
(12,631
)
 
1,119,315

 
(15,090
)


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, 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
$
546

 
(29
)
 
—

 
—

 
546

 
(29
)
Corporate
201,575

 
(1,134
)
 
296,845

 
(9,610
)
 
498,420

 
(10,744
)
Residential mortgage-backed
1,325

 
(14
)
 
1,085

 
(38
)
 
2,410

 
(52
)
Home equity
1,653

 
—

 
—

 
—

 
1,653

 
—

 
205,099

 
(1,177
)
 
297,930

 
(9,648
)
 
503,029

 
(10,825
)
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
1,246

 
(77
)
 
289

 
(43
)
 
1,535

 
(120
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
206,345

 
(1,254
)
 
298,219

 
(9,691
)
 
504,564

 
(10,945
)


Debt securities. The gross unrealized losses for debt securities are made up of 531 individual issues, or 40.1% of the total debt securities held by the Company at March 31, 2018. The market value of these bonds as a percent of amortized cost approximates 97.6%. Of the 531 securities, 120, or 22.6%, fall in the 12 months or greater aging category; and 521 were rated investment grade at March 31, 2018.

The amortized cost and fair value of investments in debt securities at March 31, 2018, 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
$
106,417

 
108,474

 
292,516

 
297,632

Due after 1 year through 5 years
1,263,298

 
1,283,396

 
2,610,334

 
2,642,441

Due after 5 years through 10 years
1,633,364

 
1,607,304

 
2,738,879

 
2,713,736

Due after 10 years
58,048

 
57,414

 
381,579

 
391,176

 
3,061,127

 
3,056,588

 
6,023,308

 
6,044,985

 
 
 
 
 
 
 
 
Mortgage and asset-backed securities
26,700

 
28,201

 
1,256,892

 
1,257,049

 
 
 
 
 
 
 
 
Total
$
3,087,827

 
3,084,789

 
7,280,200

 
7,302,034



(C)
 Transfer of Securities

During the three months ended March 31, 2018 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. The Company's mortgage, participation and mezzanine loans on real estate are the only financing receivables included in the Consolidated Balance Sheets.

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 March 31, 2018 or 2017 and as a result all interest income was recognized at March 31, 2018 and 2017.

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

 
March 31, 2018
 
December 31, 2017
 
Amount
 
%
 
Amount
 
%
 
(In thousands)
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
Mortgage Loans by Loan-to-Value Ratio (1):
 
 
 
 
 
 
 
Less than 50%
$
90,863

 
44.2

 
$
82,224

 
39.4

50% to 60%
16,176

 
7.9

 
27,395

 
13.1

60% to 70%
86,232

 
41.9

 
86,849

 
41.6

70% to 80%
—

 
—

 
—

 
—

80% to 90%
12,327

 
6.0

 
6,929

 
3.3

Greater than 90%
—

 
—

 
5,502

 
2.6

Gross balance
205,598

 
100.0

 
208,899

 
100.0

 
 
 
 
 
 
 
 
Allowance for possible losses
(650
)
 
(0.3
)
 
(650
)
 
(0.3
)
 
 
 
 
 
 
 
 
Totals
$
204,948

 
99.7

 
$
208,249

 
99.7


(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 for the periods shown.
 
March 31, 2018
 
December 31, 2017
 
(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 $37.2 million and $37.4 million at March 31, 2018 and December 31, 2017, respectively. The Company recognized operating income on real estate properties of approximately $0.5 million and $0.7 million for the first three months of 2018 and 2017, respectively.