Investments

The Company invests primarily in fixed maturity securities, which totaled 84.4% of total investments and cash and cash equivalents at September 30, 2013.



	September 30, 2013				December 31, 2012
	Carrying Value		% of Total Carrying Value		Carrying Value		% of Total Carrying Value
	(In thousands)				(In thousands)
Fixed maturity securities	$	822,718	84.4	%	$	791,528	82.7	%
Equity securities	53,067		5.4	%	53,741		5.6	%
Mortgage loans	680		0.1	%	1,509		0.2	%
Policy loans	47,359		4.9	%	42,993		4.5	%
Real estate and other long-term investments	8,533		0.9	%	8,553		0.9	%
Short-term investments	—		—	%	2,340		0.2	%
Cash and cash equivalents	41,687		4.3	%	56,299		5.9	%
Total cash, cash equivalents and investments	$	974,044	100.0	%	$	956,963	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, 2013
	Cost or Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
	(In thousands)
Fixed maturities:
Available-for-sale:
U.S. Treasury securities	$	10,124	2,679	—	12,803
U.S. Government-sponsored enterprises	62,949		1,510	152	64,307
States and political subdivisions	320,691		8,195	9,964	318,922
Foreign governments	104		27	—	131
Corporate	187,120		13,093	1,442	198,771
Commercial mortgage-backed	318		11	—	329
Residential mortgage-backed	3,821		297	2	4,116
Total available-for-sale securities	585,127		25,812	11,560	599,379
Held-to-maturity securities:
U.S. Government-sponsored enterprises	8,909		283	—	9,192
States and political subdivisions	176,686		2,461	5,407	173,740
Corporate	37,744		752	313	38,183
Total held-to-maturity securities	223,339		3,496	5,720	221,115
Total fixed maturities	$	808,466	29,308	17,280	820,494
Equity securities:
Stock mutual funds	$	10,463	1,022	—	11,485
Bond mutual funds	41,504		23	672	40,855
Common stock	17		—	3	14
Preferred stock	408		305	—	713
Total equity securities	$	52,392	1,350	675	53,067



	December 31, 2012
	Cost or Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
	(In thousands)
Fixed maturities:
Available-for-sale securities:
U.S. Treasury securities	$	10,170	3,773	—	13,943
U.S. Government-sponsored enterprises	81,788		3,815	22	85,581
States and political subdivisions	265,812		17,227	777	282,262
Foreign governments	105		36	—	141
Corporate	195,755		20,536	286	216,005
Commercial mortgage-backed	481		17	2	496
Residential mortgage-backed	5,625		469	2	6,092
Total available-for-sale securities	559,736		45,873	1,089	604,520
Held-to-maturity securities:
U.S. Government-sponsored enterprises	28,632		514	—	29,146
States and political subdivisions	125,634		5,435	378	130,691
Corporate	32,742		1,160	—	33,902
Total held-to-maturity securities	187,008		7,109	378	193,739
Total fixed maturity securities	$	746,744	52,982	1,467	798,259
Equity securities:
Stock mutual funds	$	10,463	250	28	10,685
Bond mutual funds	41,504		541	129	41,916
Common stock	17		—	2	15
Preferred stock	760		365	—	1,125
Total equity securities	$	52,744	1,156	159	53,741

At September 30, 2013, the Company had $4.1 million of mortgage-backed security holdings based on amortized cost, of which $3.8 million, or 92.7%, 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, 2013 and 2012.

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, 2013
	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	$	11,609	152	8	—	—	—	11,609	152	8
States and political subdivisions	148,560		8,662	163	13,375	1,302	15	161,935	9,964	178
Corporate	39,735		1,098	25	2,434	344	2	42,169	1,442	27
Commercial mortgage-backed	4		—	1	46	2	1	50	2	2
Total available-for-sale securities	199,908		9,912	197	15,855	1,648	18	215,763	11,560	215
Held-to-maturity securities:
States and political subdivisions	88,943		4,453	106	14,394	954	17	103,337	5,407	123
Corporate	7,390		313	6	—	—	—	7,390	313	6
Total held-to-maturity securities	96,333		4,766	112	14,394	954	17	110,727	5,720	129
Total fixed maturities	$	296,241	14,678	309	30,249	2,602	35	326,490	17,280	344
Equity securities:
Bond mutual funds	$	30,904	307	4	6,058	365	2	36,962	672	6
Common stocks	—		—	—	13	3	1	13	3	1
Total equities	$	30,904	307	4	6,071	368	3	36,975	675	7

As of September 30, 2013, the Company had 18 fixed maturity available-for-sale securities and 17 held-to-maturity securities that were in an unrealized loss position for greater than 12 months. These securities consisted of municipals, corporates and mortgage-backed securities. There are two bond mutual funds and one common stock that are now in a loss position for greater than 12 months. These are diversified U.S. Government bond funds that have a large percentage of mortgage exposure in Pass Thru and CMO security types which have refinanced in the current interest rate environment. The funds are comprised of only U.S. Government bond assets.



	December 31, 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	$	10,603	22	9	—	—	—	10,603	22	9
States and political subdivisions	54,115		443	61	5,099	334	2	59,214	777	63
Corporate	22,316		286	16	—	—	—	22,316	286	16
Commercial mortgage-backed	94		2	1	—	—	—	94	2	1
Residential mortgage-backed	—		—	—	52	2	1	52	2	1
Total available-for-sale securities	87,128		753	87	5,151	336	3	92,279	1,089	90
Held-to-maturity securities:
States and political subdivisions	40,611		378	32	—	—	—	40,611	378	32
Total held-to-maturity securities	40,611		378	32	—	—	—	40,611	378	32
Total fixed maturities	$	127,739	1,131	119	5,151	336	3	132,890	1,467	122
Equity securities:
Stock mutual funds	$	—	—	—	972	28	1	972	28	1
Bond mutual funds	3,335		88	1	2,959	41	2	6,294	129	3
Common stock	15		2	1	—	—	—	15	2	1
Total equities	$	3,350	90	2	3,931	69	3	7,281	159	5

We have reviewed these securities for the periods ended September 30, 2013 and December 31, 2012 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, 2013 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, 2013
	Amortized Cost		Fair Value
	(In thousands)
Available-for-sale securities:
Due in one year or less	$	5,077	5,142
Due after one year through five years	110,617		117,370
Due after five years through ten years	99,777		102,778
Due after ten years	365,517		369,644
Securities not due at a single maturity date	4,139		4,445
Total available-for-sale securities	585,127		599,379
Held-to-maturity securities:
Due in one year or less	3,783		3,834
Due after one year through five years	43,808		44,518
Due after five years through ten years	45,721		46,413
Due after ten years	130,027		126,350
Total held-to-maturity securities	223,339		221,115
Total fixed maturities	$	808,466	820,494

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, 2013 and 2012 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,
	2013		2012	2013	2012	2013	2012	2013	2012
	(In thousands)
Proceeds	$	259	—	317	503	—	2,856	—	2,856
Gross realized gains	$	7	—	8	4	—	632	—	632
Gross realized losses	$	1	—	1	3	—	—	—	—

During the nine months ended September 30, 2013, four fixed maturity security was sold which resulted in minimal realized gains and losses. There was one previously impaired equity stock mutual fund security sold during the three and nine month period ended September 30, 2012 which resulted in a realized gain of $0.6 million. There were no securities sold from the held-to-maturity portfolio for the three or nine months ended September 30, 2013 or 2012.