2. Investments

The Company applies the fair value option to all fixed maturity and equity securities and short-term investments at the time an eligible item is first recognized. Gains and losses due to changes in fair value for items measured at fair value pursuant to application of the fair value option are included in net realized investment gains in the Company's consolidated statements of operations, while interest and dividend income on investment holdings are recognized on an accrual basis on each measurement date and are included in net investment income in the Company's consolidated statements of operations.

The following table presents gains and losses due to changes in fair value of investments that are measured at fair value pursuant to application of the fair value option:


	Year Ended December 31,
	2011			2010			2009
	(Amounts in thousands)
Fixed maturity securities	$	62,149		$	967		$	261,866
Equity securities		(30,879	)		45,659			133,580
Short-term investments		19			(46	)		36

Total	$	31,289		$	46,580		$	395,482

A summary of net realized investment gains is as follows:


	Year Ended December 31,
	2011			2010		2009
	(Amounts in thousands)
Net realized gains from investments and other liabilities:
Fixed maturities	$	54,112		$	5,909	$	255,195
Equity securities		(4,854	)		46,547		83,452
Short-term investments		139			18		76
Option and short sale transactions		9,000			4,615		7,721

Total	$	58,397		$	57,089	$	346,444

Net realized gains from investments included gains of $49.4 million, $52.5 million and $338.7 million related to trading securities which were still held at December 31, 2011, 2010, and 2009, respectively.

Gross gains and losses realized on the sales of investments, excluding option and short sale transactions, are shown below:


	Year Ended December 31,
	2011								2010							2009
	(Amounts in thousands)
	Gross Realized Gains		Gross Realized Losses			Net			Gross Realized Gains		Gross Realized Losses			Net		Gross Realized Gains		Gross Realized Losses			Net
Fixed maturities	$	2,675	$	(10,712	)	$	(8,037	)	$	8,754	$	(3,812	)	$	4,942	$	1,918	$	(8,589	)	$	(6,671	)
Equity securities		41,872		(15,847	)		26,025			16,793		(15,905	)		888		20,558		(70,686	)		(50,128	)
Short-term investments		120		0			120			64		0			64		356		(3,902	)		(3,546	)

Contractual Maturity

At December 31, 2011, fixed maturity holdings rated below investment grade and non-rated comprised 3.7% of total investments at fair value. Additionally, the Company owns securities that are credit enhanced by financial guarantors that are subject to uncertainty related to market perception of the guarantors' ability to perform. Determining the estimated fair value of municipal bonds could become more difficult should markets for these securities become illiquid. The estimated fair values at December 31, 2011 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Estimated Fair Value
	(Amounts in thousands)
Fixed maturities:
Due in one year or less	$	30,756
Due after one year through five years		370,609
Due after five years through ten years		556,519
Due after ten years		1,450,334
Mortgage-backed securities		37,371

Total	$	2,445,589

Investment Income

A summary of net investment income is shown in the following table:


	Year Ended December 31,
	2011		2010		2009
	(Amounts in thousands)
Fixed maturities	$	130,895	$	136,345	$	137,607
Equity securities		10,869		8,435		8,558
Short-term investments		1,747		1,413		1,082

Total investment income	$	143,511	$	146,193	$	147,247
Less: Investment expense		2,564		2,379		2,298

Net investment income	$	140,947	$	143,814	$	144,949