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Quarterly Financial Information
 12 Months Ended
Dec. 31, 2012
Quarterly Financial Data [Abstract]  
Quarterly Financial Information
Quarterly Financial Information (Unaudited)
Summarized quarterly financial data for 2012 and 2011 are as follows:
 
 
Quarter Ended
 
 
March 31
 
June 30
 
September 30
 
December 31
 
 
(Amounts in thousands, except per share data)
 
2012
 
 
 
 
 
 
 
 
Net premiums earned
$
635,812

 
$
637,247

 
$
646,084

  
$
655,777

 
Change in fair value of investments pursuant to the fair value option
$
49,343

 
$
(24,788
)
 
$
44,783


$
(23,829
)
 
Income (loss) before income taxes
$
101,994

 
$
(18,853
)
 
$
91,330


$
(39,161
)
 
Net income (loss)
$
73,356

 
$
(5,264
)
 
$
66,201


$
(17,382
)
 
Basic earnings per share
$
1.34

 
$
(0.10
)
 
$
1.21


$
(0.32
)
 
Diluted earnings per share
$
1.34

 
$
(0.10
)
(1) 
$
1.21

 
$
(0.32
)
(1) 
Dividends paid per share
$
0.61

 
$
0.61

 
$
0.61

  
$
0.6125

 
2011
 
 
 
 
 
 
 
 
Net premiums earned
$
638,487

 
$
642,331

 
$
643,626

  
$
641,613

 
Change in fair value of investments pursuant to the fair value option
$
20,904

 
$
20,597

 
$
(64,312
)

$
54,100

 
Income (loss) before income taxes
$
76,911

 
$
75,613

 
$
(18,118
)

$
110,693

 
Net income (loss)
$
58,226

 
$
57,251

 
$
(3,782
)

$
79,469

 
Basic earnings per share
$
1.06

 
$
1.04

 
$
(0.07
)

$
1.45

 
Diluted earnings per share
$
1.06

 
$
1.04

 
$
(0.07
)
(1) 
$
1.45

 
Dividends paid per share
$
0.60

 
$
0.60

 
$
0.60

  
$
0.61

 
 __________
(1)
The dilutive impact of incremental shares is excluded from loss position in accordance with GAAP.

Net income during 2012 was primarily affected by slightly higher net premiums earned and lower operating expenses, offset by unfavorable development on loss reserves, catastrophe related losses, and higher loss frequency and severity on the California private passenger automobile line of business. The decrease in operating expenses in 2012 was primarily due to ongoing cost reduction efforts and lower profitability related expenses. The unfavorable development of loss reserves is largely the result of re-estimates of California BI losses . The primary causes of the net loss during the second quarter of 2012 were driven by unfavorable development on loss reserves, catastrophic losses in the Midwest region, and declines in the fair value of the Company’s equity securities due to the overall decline in the equity markets. The net loss during the fourth quarter of 2012 was primarily due to increased losses resulting from catastrophe losses from Hurricane Sandy, high seasonal frequency in California, and declines in the fair value of the Company’s municipal and equity securities due to the overall decline in the municipal and equity markets.

Net income during 2011 was mainly affected by lower policy acquisition costs and operating expenses, offset by unfavorable development on loss reserves. The lower policy acquisition costs are due to the lower premium deficiency reserve and declines in other underwriting costs including agent contingent commissions. The operating expenses in 2011 decreased as a result of decreased consulting, advertising, and information technology expenditures. The unfavorable development of loss reserves is largely the result of re-estimates of California BI losses. The primary causes of the net loss during the third quarter of 2011 were driven by declines in the fair value of the Company’s equity securities due to the overall decline in the equity markets.