Investments

The Company invests primarily in fixed maturity securities, which totaled 85.1% of total investments and cash and cash equivalents at September 30, 2012.



	September 30, 2012				December 31, 2011
	Carrying Value		% of Total Carrying Value		Carrying Value		% of Total Carrying Value
	(In thousands)				(In thousands)
Fixed maturity securities	$	797,857	85.1	%	$	741,753	85.0	%
Equity securities	44,091		4.7	%	46,137		5.3	%
Mortgage loans	1,521		0.2	%	1,557		0.2	%
Policy loans	42,784		4.6	%	39,090		4.5	%
Real estate and other long-term investments	8,708		0.9	%	8,644		1.0	%
Short-term investments	2,356		0.3	%	2,048		0.2	%
Cash and cash equivalents	39,830		4.2	%	33,255		3.8	%
Total cash, cash equivalents and investments	$	937,147	100.0	%	$	872,484	100.0	%

The following tables represent the cost, gross unrealized gains and losses and fair value for fixed maturities and equity securities as of the periods indicated.



	September 30, 2012
	Cost or Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
	(In thousands)
Fixed maturities:
Available-for-sale:
U.S. Treasury securities	$	10,184	3,931	—	14,115
U.S. Government-sponsored enterprises	89,397		4,255	32	93,620
States and political subdivisions	233,712		16,678	748	249,642
Foreign governments	105		38	—	143
Corporate	209,153		21,397	669	229,881
Commercial mortgage-backed	547		19	1	565
Residential mortgage-backed	6,107		549	2	6,654
Total available-for-sale securities	549,205		46,867	1,452	594,620
Held-to-maturity securities:
U.S. Government-sponsored enterprises	51,136		622	4	51,754
States and political subdivisions	119,206		4,975	287	123,894
Corporate	32,895		1,054	17	33,932
Total held-to-maturity securities	203,237		6,651	308	209,580
Total fixed maturities	$	752,442	53,518	1,760	804,200
Equity securities:
Stock mutual funds	$	10,463	263	24	10,702
Bond mutual funds	31,503		649	19	32,133
Common stock	17		—	3	14
Preferred stock	829		413	—	1,242
Total equity securities	$	42,812	1,325	46	44,091



	December 31, 2011
	Cost or Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
	(In thousands)
Fixed maturities:
Available-for-sale securities:
U.S. Treasury securities	$	10,228	3,730	—	13,958
U.S. Government-sponsored enterprises	143,684		3,198	65	146,817
States and political subdivisions	151,058		10,275	1,391	159,942
Foreign governments	105		37	—	142
Corporate	171,462		14,576	1,493	184,545
Commercial mortgage-backed	736		23	—	759
Residential mortgage-backed	7,536		562	8	8,090
Total available-for-sale securities	484,809		32,401	2,957	514,253
Held-to-maturity securities:
U.S. Government-sponsored enterprises	160,411		742	12	161,141
States and political subdivisions	56,260		1,941	84	58,117
Corporate	10,829		49	43	10,835
Total held-to-maturity securities	227,500		2,732	139	230,093
Total fixed maturity securities	$	712,309	35,133	3,096	744,346
Equity securities:
Stock mutual funds	$	12,686	415	376	12,725
Bond mutual funds	31,504		27	117	31,414
Common stock	17		7	—	24
Preferred stock	1,392		582	—	1,974
Total equity securities	$	45,599	1,031	493	46,137

At September 30, 2012, the Company had $6.7 million of mortgage-backed security holdings based on amortized cost, of which $6.1 million, or 91.0%, were residential U.S. Government-sponsored issues. Mortgage-backed securities are also referred to as securities not due at a single maturity date throughout this report. The majority of the Company's equity securities are diversified stock and bond mutual funds.

Valuation of Investments in Fixed Maturity and Equity Securities

Held-to-maturity securities are reported in the financial statements at amortized cost and available-for-sale securities are reported at fair value.

The Company monitors all debt and equity securities on an on-going basis relative to changes in credit ratings, market prices, earnings trends and financial performance, in addition to specific region or industry reviews. The assessment of whether impairments have occurred is based on a case-by-case evaluation of underlying reasons for the decline in fair value. The Company determines other-than-temporary impairment by reviewing relevant evidence related to the specific security issuer as well as the Company's intent to sell the security, or if it is more likely than not that the Company would be required to sell a security before recovery of its amortized cost.

When an other-than-temporary impairment has occurred, the amount of the other-than-temporary impairment recognized in earnings depends on whether the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis. If the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis, the other-than-temporary impairment is recognized in earnings equal to the entire difference between the investment's cost and its fair value at the balance sheet date. If the Company does not intend to sell the security and it is more likely than not that the Company will not be required to sell the security before recovery of its amortized cost basis, the other-than-temporary impairment is separated into the following: (a) the amount representing the credit loss; and (b) the amount related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the other-than-temporary impairment recognized in earnings becomes the new amortized cost basis of the investment. The new amortized cost basis is not adjusted for subsequent recoveries in fair value.

The Company evaluates whether a credit impairment exists for debt securities by considering primarily the following factors: (a) changes in the financial condition of the security's underlying collateral; (b) whether the issuer is current on contractually obligated interest and principal payments; (c) changes in the financial condition, credit rating and near-term prospects of the issuer; (d) the length of time to which the fair value has been less than the amortized cost of the security; and (e) the payment structure of the security. The Company's best estimate of expected future cash flows used to determine the credit loss amount is a quantitative and qualitative process. Quantitative review includes information received from third party sources such as financial statements, pricing and rating changes, liquidity and other statistical information. Qualitative factors include judgments related to business strategies, economic impacts on the issuer and overall judgment related to estimates and industry factors. The Company's best estimate of future cash flows involves assumptions including, but not limited to, various performance indicators, such as historical and projected default and recovery rates, credit ratings, and current delinquency rates. These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries, which may include estimating the underlying collateral value. In addition, projections of expected future debt security cash flows may change based upon new information regarding the performance of the issuer.

The primary factors considered in evaluating whether an impairment exists for an equity security include, but are not limited to: (a) the length of time and the extent to which the fair value has been less than the cost of the security; (b) changes in the financial condition, credit rating and near-term prospects of the issuer; (c) whether the issuer is current on contractually obligated payments; and (d) the intent and ability of the Company to retain the investment for a period of time sufficient to allow for recovery.

The Company did not recognize any other-than-temporary impairments ("OTTI") during the nine months ended September 30, 2012 and 2011.

The following tables present the fair values and gross unrealized losses of fixed maturities and equity securities that have remained in a continuous unrealized loss position for the periods indicated.



	September 30, 2012
	Less than 12 months				Greater than 12 months			Total
	Fair Value		Unrealized Losses	# of Securities	Fair Value	Unrealized Losses	# of Securities	Fair Value	Unrealized Losses	# of Securities
	(In thousands, except for # of securities)
Fixed maturities:
Available-for-sale securities:
U.S. Government-sponsored enterprises	$	9,993	32	8	—	—	—	9,993	32	8
States and political subdivisions	44,391		408	40	5,095	340	2	49,486	748	42
Corporate	14,820		315	10	4,623	354	4	19,443	669	14
Commercial mortgage-backed	143		1	1	—	—	—	143	1	1
Residential mortgage-backed	—		—	—	55	2	1	55	2	1
Total available-for-sale securities	69,347		756	59	9,773	696	7	79,120	1,452	66
Held-to-maturity securities:
U.S. Government-sponsored enterprises	1,751		2	3	1,105	2	1	2,856	4	4
States and political subdivisions	37,322		287	32	—	—	—	37,322	287	32
Corporate	4,255		17	3	—	—	—	4,255	17	3
Total held-to-maturity securities	43,328		306	38	1,105	2	1	44,433	308	39
Total fixed maturities	$	112,675	1,062	97	10,878	698	8	123,553	1,760	105
Equity securities:
Stock mutual funds	$	—	—	—	976	24	1	976	24	1
Bond mutual funds	—		—	—	2,981	19	2	2,981	19	2
Common stocks	14		3	1	—	—	—	14	3	1
Total equities	$	14	3	1	3,957	43	3	3,971	46	4

As of September 30, 2012, the Company had 7 available-for-sale securities and 1 held-to-maturity security that were in an unrealized loss position for greater than 12 months. These securities consisted of U.S. Government-sponsored enterprises, municipals, corporate and mortgage-backed securities.



	December 31, 2011
	Less than 12 months				Greater than 12 months			Total
	Fair Value		Unrealized Losses	# of Securities	Fair Value	Unrealized Losses	# of Securities	Fair Value	Unrealized Losses	# of Securities
	(In thousands, except for # of securities)
Fixed maturities:
Available-for-sale securities:
U.S. Government-sponsored enterprises	$	—	—	—	3,718	65	2	3,718	65	2
States and political subdivisions	1,965		29	4	11,777	1,362	9	13,742	1,391	13
Corporate	27,239		976	30	8,886	517	6	36,125	1,493	36
Residential mortgage-backed	536		4	1	67	4	2	603	8	3
Total available-for-sale securities	29,740		1,009	35	24,448	1,948	19	54,188	2,957	54
Held-to-maturity securities:
U.S. Government-sponsored enterprises	6,997		2	4	1,121	10	1	8,118	12	5
States and political subdivisions	8,345		84	7	—	—	—	8,345	84	7
Corporate	6,706		43	4	—	—	—	6,706	43	4
Total held-to-maturity securities	22,048		129	15	1,121	10	1	23,169	139	16
Total fixed maturities	$	51,788	1,138	50	25,569	1,958	20	77,357	3,096	70
Equity securities:
Stock mutual funds	$	7,158	376	2	—	—	—	7,158	376	2
Bond mutual funds	25,387		117	10	—	—	—	25,387	117	10
Total equities	$	32,545	493	12	—	—	—	32,545	493	12

We have reviewed these securities for the periods ended September 30, 2012 and December 31, 2011 and determined that no other-than-temporary impairment exists based on our evaluation of the credit worthiness of the issuers and the fact that we do not intend to sell the investments nor is it likely that we will be required to sell the securities before recovery of their amortized cost bases which may be maturity. We continue to monitor all securities on an on-going basis, and future information may become available which could result in impairments being recorded.

The amortized cost and fair value of fixed maturity securities at September 30, 2012 by contractual maturity are shown in the table below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	September 30, 2012
	Amortized Cost		Fair Value
	(In thousands)
Available-for-sale securities:
Due in one year or less	$	15,102	15,309
Due after one year through five years	74,476		79,431
Due after five years through ten years	111,759		119,654
Due after ten years	341,214		373,007
Securities not due at a single maturity date	6,654		7,219
Total available-for-sale securities	549,205		594,620
Held-to-maturity securities:
Due in one year or less	10,013		10,044
Due after one year through five years	35,564		35,841
Due after five years through ten years	47,212		50,192
Due after ten years	110,448		113,503
Total held-to-maturity securities	203,237		209,580
Total fixed maturities	$	752,442	804,200

The securities not due at a single maturity date are primarily mortgage-backed obligations of U.S. Government-sponsored enterprises and corporate securities.

The Company uses the specific identification method of the individual security to determine the cost basis used in the calculation of realized gains and losses related to security sales. Proceeds and gross realized gains from sales of securities for the three and nine months ended September 30, 2012 and 2011 are summarized as follows.



	Fixed Maturities Available-for-Sale					Equity Securities
	Three Months Ended September 30,			Nine Months Ended September 30,		Three Months Ended September 30,		Nine Months Ended September 30,
	2012		2011	2012	2011	2012	2011	2012	2011
	(In thousands)
Proceeds	$	—	—	503	—	2,856	—	2,856	—
Gross realized gains	$	—	—	4	—	632	—	632	—
Gross realized losses	$	—	—	3	—	—	—	—	—

During the nine months ended September 30, 2012, one equity mutual fund security was sold which resulted in a realized gain of approximately $0.6 million. There were no securities sold at a loss during the three month period ended September 30, 2012 and one sold at a loss for the nine months ended September 30, 2012. There were no securities sold from the held-to-maturity portfolio for the nine months ended September 30, 2012 and 2011.