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Investments
 6 Months Ended
Jun. 30, 2011
Investments [Abstract]  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
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

June 30,
 
Six Months Ended

June 30,
 
2011
 
2010
 
2011
 
2010
 
(In thousands)
 
 
 
 
 
 
 
 
Available for sale debt securities:
 
 
 
 
 
 
 
Realized gains on disposal
$
330


 
132


 
3,137


 
370


Realized losses on disposal
—


 
—


 
—


 
—


Held to maturity debt securities:
 
 
 


 
 
 
 


Realized gains on disposal
104


 
43


 
478


 
141


Realized losses on disposal
—


 
—


 
—


 
(6
)
Equity securities realized gains (losses)
56


 
(38
)
 
56


 
(16
)
Real estate write-down
—


 
—


 
(50
)
 
(174
)
Mortgage loans write-downs
—


 
—


 
(39
)
 
(385
)
Other
—


 
—


 
—


 
—


 
 
 
 
 
 
 
 
Totals
$
490


 
137


 
3,582


 
(70
)


The Company uses the specific identification method in computing realized gains and losses.


The table below presents net impairment losses recognized in earnings for the periods indicated.


 
Three Months Ended

June 30,
 
Six Months Ended

June 30,
 
2011
 
2010
 
2011
 
2010
 
(In thousands)
 
 
 
 
 
 
 
 
Total other-than-temporary impairment losses on debt securities
$
—


 
(86
)
 
—


 
(334
)
Portion of loss recognized in comprehensive income
—


 
—


 
—


 
26


 
 
 
 
 
 
 
 
Net impairment losses on debt securities recognized in earnings
—


 
(86
)
 
—


 
(308
)
Equity securities impairments
—


 
—


 
—


 
—


 
 
 
 
 
 
 
 
Totals
$
—


 
(86
)
 
—


 
(308
)


For the six months ended June 30, 2011, the Company did not recognize any other-than-temporary impairments.


The table below presents a roll forward of credit losses on securities for which the Company also recorded non-credit other-than-temporary impairments under FAS 115-2 and FAS 124-2 in other comprehensive loss.


 
Three Months
 Ended

June 30,

2011
 
Six Months
 Ended

June 30,

2011
 
Twelve Months

Ended

December 31,

2010
 
 
 
(In thousands)


 
 
 
 
 
 
 
 
Beginning balance, cumulative credit losses related to other-than-temporary impairments
$
997


 
997


 
327


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


 
—


 
670


 
 
 
 
 
 
Ending balance, cumulative credit losses related to other-than-temporary impairment
$
997


 
997


 
997




(B)
Debt and Equity Securities


The table below presents amortized costs and fair values of securities held to maturity at June 30, 2011.


 
Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. agencies
$
228,876


 
3,226


 
(2,260
)
 
229,842


U.S. Treasury
1,936


 
460


 
—


 
2,396


States and political subdivisions
340,743


 
7,758


 
(4,303
)
 
344,198


Foreign governments
9,975


 
1,074


 
—


 
11,049


Public utilities
707,792


 
58,268


 
(4,365
)
 
761,695


Corporate
1,932,748


 
149,917


 
(8,006
)
 
2,074,659


Mortgage-backed
2,038,765


 
137,817


 
(5,905
)
 
2,170,677


Home equity
24,699


 
541


 
(1,928
)
 
23,312


Manufactured housing
17,332


 
1,000


 
(74
)
 
18,258


 
 
 
 
 
 
 
 
Totals
$
5,302,866


 
360,061


 
(26,841
)
 
5,636,086




The table below presents amortized costs and fair values of securities available for sale at June 30, 2011.


 
Securities Available for Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
States and political subdivisions
$
3,980


 
—


 
(360
)
 
3,620


Foreign governments
10,263


 
442


 
—


 
10,705


Public utilities
327,794


 
31,010


 
(110
)
 
358,694


Corporate
1,748,559


 
138,500


 
(2,361
)
 
1,884,698


Mortgage-backed
187,062


 
13,262


 
(328
)
 
199,996


Home equity
12,535


 
—


 
(3,379
)
 
9,156


Manufactured housing
8,499


 
1,075


 
—


 
9,574


 
2,298,692


 
184,289


 
(6,538
)
 
2,476,443


 
 
 
 
 
 
 
 
Equity private
195


 
7,923


 
—


 
8,118


Equity public
6,026


 
2,663


 
(87
)
 
8,602


 
 
 
 
 
 
 
 
Totals
$
2,304,913


 
194,875


 
(6,625
)
 
2,493,163




The table below presents amortized costs and fair values of securities held to maturity at December 31, 2010.


 
Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. agencies
$
154,265


 
2,955


 
(3,406
)
 
153,814


U.S. Treasury
1,909


 
436


 
—


 
2,345


States and political subdivisions
328,263


 
3,050


 
(10,538
)
 
320,775


Foreign governments
9,970


 
1,097


 
—


 
11,067


Public utilities
714,760


 
52,867


 
(6,311
)
 
761,316


Corporate
1,799,621


 
131,867


 
(12,300
)
 
1,919,188


Mortgage-backed
1,923,402


 
130,463


 
(8,250
)
 
2,045,615


Home equity
25,569


 
327


 
(1,265
)
 
24,631


Manufactured housing
19,757


 
911


 
(87
)
 
20,581


 
 
 
 
 
 
 
 
Totals
$
4,977,516


 
323,973


 
(42,157
)
 
5,259,332




The table below presents amortized costs and fair values of securities available for sale at December 31, 2010.


 
Securities Available for Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
States and political subdivisions
$
3,942


 
—


 
(474
)
 
3,468


Foreign governments
10,296


 
655


 
—


 
10,951


Public utilities
334,018


 
28,662


 
(126
)
 
362,554


Corporate
1,638,828


 
124,330


 
(3,271
)
 
1,759,887


Mortgage-backed
206,380


 
13,165


 
(1,080
)
 
218,465


Home equity
12,754


 
—


 
(3,545
)
 
9,209


Manufactured housing
9,306


 
1,037


 
—


 
10,343


 
2,215,524


 
167,849


 
(8,496
)
 
2,374,877


 
 
 
 
 
 
 
 
Equity private
195


 
7,370


 
—


 
7,565


Equity public
5,860


 
1,930


 
(125
)
 
7,665


 
 
 
 
 
 
 
 
Totals
$
2,221,579


 
177,149


 
(8,621
)
 
2,390,107




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 June 30, 2011.


 
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:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government agencies
$
152,917


 
(2,260
)
 
—


 
—


 
152,917




(2,260
)
U.S. Treasury
—


 
—


 
—


 
—


 
—


 
—


States and political subdivisions
131,496


 
(3,908
)
 
6,758


 
(395
)
 
138,254


 
(4,303
)
Foreign governments
—


 
—


 
—


 
—


 
—


 
—


Public utilities
126,200


 
(4,073
)
 
1,713


 
(292
)
 
127,913


 
(4,365
)
Corporate bonds
182,333


 
(4,216
)
 
58,715


 
(3,790
)
 
241,048


 
(8,006
)
Mortgage-backed
193,481


 
(5,905
)
 
—


 
—


 
193,481


 
(5,905
)
Home equity
5,228


 
(560
)
 
12,429


 
(1,368
)
 
17,657


 
(1,928
)
Manufactured housing
—


 
—


 
2,680


 
(74
)
 
2,680


 
(74
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
791,655


 
(20,922
)
 
82,295


 
(5,919
)
 
873,950


 
(26,841
)


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 the individual securities have been in a continuous unrealized loss position as of June 30, 2011.


 
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:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government agencies
$
—


 
—


 
—


 
—


 
—


 
—


U.S. Treasury
—


 
—


 
—


 
—


 
—


 
—


States and political subdivisions
1,570


 
(47
)
 
2,050


 
(313
)
 
3,620


 
(360
)
Foreign governments
—


 
—


 
—


 
—


 
—


 
—


Public utilities
1,888


 
(110
)
 
—


 
—


 
1,888


 
(110
)
Corporate bonds
127,133


 
(2,108
)
 
14,717


 
(253
)
 
141,850


 
(2,361
)
Mortgage-backed
4,295


 
(38
)
 
4,345


 
(290
)
 
8,640


 
(328
)
Home equity
—


 
—


 
9,156


 
(3,379
)
 
9,156


 
(3,379
)
Manufactured housing
—


 
—


 
—


 
—


 
—


 
—


 
134,886


 
(2,303
)
 
30,268


 
(4,235
)
 
165,154


 
(6,538
)
 
 
 
 
 
 
 
 
 
 
 
 
Equity public
374


 
(16
)
 
378


 
(71
)
 
752


 
(87
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
135,260


 
(2,319
)
 
30,646


 
(4,306
)
 
165,906


 
(6,625
)


Liquidity in the bond market improved in 2011 and 2010 as economic and market conditions started to stabilize. Although the unrealized losses declined substantially in 2010 and remained relatively level in the first and second quarter of 2011, there continues to be uncertainty in the bond markets regarding the economic recovery and some unrealized losses remain in the Company's portfolio. The Company does not consider these investments to be other-than-temporarily impaired because the Company does not intend to sell these securities until recovery in fair value or maturity and expects to receive all amounts due relative to principal and interest.


The Company does not consider securities to be other-than-temporarily impaired where the market decline is attributable to factors such as market volatility, liquidity, spread widening and credit quality where a recovery of all amounts due under the contractual terms of the security is anticipated and the Company has the intent and ability to hold until recovery or maturity. Based on the review in concert with the Company's ability and intent to hold these securities until maturity, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2011. 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.


Debt securities. The gross unrealized losses for debt securities are made up of 188 individual issues, or 17.5% of the total debt securities held by the Company. The market value of these bonds as a percent of amortized cost averages 96.9%. Of the 188 securities, 24, or approximately 12.8%, fall in the 12 months or greater aging category; and 178 were rated investment grade at June 30, 2011. Additional information on debt securities by investment category is summarized below.


U.S. Treasury. No securities had a gross unrealized loss.


U.S. Government agencies. 11 securities had unrealized losses. All are rated AAA.


State and political subdivisions. The unrealized losses on these investments are the result of holdings in 79 securities. Of these securities, all are rated A or above except 5 securities which are rated BBB, BBB+ or Baa. Based on these facts and the Company's intent to hold to maturity, no other-than-temporary loss was recognized as of June 30, 2011.


Foreign governments. No securities had a gross unrealized loss.


Public utilities. Of the 14 securities, all are rated BBB or above. At this time, the Company does not consider any of these unrealized losses as other-than-temporary.


Corporate bonds. Corporate securities with unrealized losses are reviewed based on monitoring procedures described previously. The review includes the amount of the unrealized loss, the length of time that the issue has been in an unrealized loss position, credit ratings, analyst reports, and recent issuer financial information. A total of 58 securities had unrealized losses; with 6 issues rated below investment grade. More extensive analysis was performed on these 6 issues. Based on the work performed, none of these securities are considered other-than-temporarily impaired at June 30, 2011.


Mortgage-backed securities. Of the 18 securities, all are rated AAA except 2, which are rated CCC. The Company generally purchases these investments at a discount relative to their face amount and it is expected that the securities will not be settled at a price less than the stated par. Because the decline in market value is attributable to the current illiquidity in the market and not credit quality, and because the Company has the ability and intent to hold these securities until a recovery of fair value, which may be maturity, and based on the lack of adverse changes in expected cash flows, the Company does not consider these AAA rated investments and 2 CCC rated investments to be other-than-temporarily impaired at June 30, 2011.


Home equity. Of the 7 securities, 5 are rated AAA, 1 is rated AA, and 1 is rated CC. The Company performs a quarterly cash flow analysis on asset-backed securities that are rated below AA. Based on the lack of adverse changes in expected cash flows, the 1 issue rated CC is not considered impaired.


Manufactured housing. 1 security had an unrealized loss. The security is rated Ba. Based on a lack of adverse changes in expected cash flows, this security is not considered other-than-temporarily impaired.


Equity securities. The gross unrealized losses for equity securities are made up of 18 individual issues. These holdings are reviewed for impairment quarterly. As of June 30, 2011, no equity security was other-than-temporarily impaired.


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, 2010.


 
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:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government agencies
$
112,150


 
(3,406
)
 
—


 
—


 
112,150


 
(3,406
)
U.S. Treasury
—


 
—


 
—


 
—


 
—


 
—


States and political subdivisions
215,435


 
(10,212
)
 
6,265


 
(326
)
 
221,700


 
(10,538
)
Foreign governments
—


 
—


 
—


 
—


 
—


 
—


Public utilities
124,965


 
(6,311
)
 
—


 
—


 
124,965


 
(6,311
)
Corporate bonds
265,409


 
(6,055
)
 
76,758


 
(6,245
)
 
342,167


 
(12,300
)
Mortgage-backed
175,261


 
(8,250
)
 
—


 
—


 
175,261


 
(8,250
)
Home equity
5,709


 
(66
)
 
13,207


 
(1,199
)
 
18,916


 
(1,265
)
Manufactured housing
1,607


 
—


 
2,927


 
(87
)
 
4,534


 
(87
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
900,536


 
(34,300
)
 
99,157


 
(7,857
)
 
999,693


 
(42,157
)




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 the individual securities have been in a continuous unrealized loss position at December 31, 2010.


 
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:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government agencies
$
—


 
—


 
—


 
—


 
—


 
—


U.S. Treasury
—


 
—


 
—


 
—


 
—


 
—


States and political subdivisions
1,527


 
(93
)
 
1,941


 
(381
)
 
3,468


 
(474
)
Foreign governments
—


 
—


 
—


 
—


 
—


 
—


Public utilities
1,872


 
(126
)
 
—


 
—


 
1,872


 
(126
)
Corporate bonds
141,542


 
(2,430
)
 
27,853


 
(841
)
 
169,395


 
(3,271
)
Mortgage-backed
1,005


 
(1
)
 
15,077


 
(1,079
)
 
16,082


 
(1,080
)
Home equity
—


 
—


 
9,209


 
(3,545
)
 
9,209


 
(3,545
)
Manufactured housing
—


 
—


 
—


 
—


 
—


 
—


 
 
 
 
 
 
 
 
 
 
 
 
 
145,946


 
(2,650
)
 
54,080


 
(5,846
)
 
200,026


 
(8,496
)
Equity public
325


 
(32
)
 
372


 
(93
)
 
697


 
(125
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
146,271


 
(2,682
)
 
54,452


 
(5,939
)
 
200,723


 
(8,621
)


(C)
 Transfer of Securities


During the six months ended June 30, 2010, the Company made transfers totaling $11.7 million, respectively, to the held to maturity category from securities available for sale. No bonds were transferred in between available for sale and held to maturity in 2011. Lower holdings of securities available for sale reduce the Company's exposure to market price volatility while still providing securities available for liquidity and asset/liability management purposes. The transfers of securities were recorded at fair value in accordance with GAAP, which requires that the $0.6 million unrealized holding loss at the date of the transfer continue to be reported in a separate component of stockholders' equity and be amortized over the remaining lives of the securities, as an adjustment of yield, in a manner consistent with the amortization of any premium or discount.


(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. Mortgage loans on real estate are the only financing receivables reported by National Western Life.


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 proven 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 Consolidated Statements of Income. 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 has no loans past due 90 days which are accruing interest.


The following table represents the loan-to-value ratio using the most recent appraised value.


 
June 30, 2011
 
December 31, 2010
 
Amount
 
%
 
Amount
 
%
 
(In thousands)
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
Mortgage Loans by Loan-to-Value Ratio:
 
 
 
 
 
 
 
Less than 50%
65,778


 
40.9


 
48,966


 
34.7


50% to 60%
30,563


 
19.0


 
29,746


 
21.0


60% to 70%
25,948


 
16.1


 
22,769


 
16.1


70% to 80%
11,692


 
7.3


 
1923


 
1.4


80% to 90%
—


 
—


 
—


 
—


Greater than 90%
26,916


 
16.7


 
37,843


 
26.8


 
 
 
 
 
 
 
 
Totals
160,897


 
100.0


 
141,247


 
100.0




The mortgage loans in the greater than 90% category relate to new loans made with a long standing borrower which are backed by the investment property, contracted leases and the guarantee of the borrower.


The Company does not consider its mortgage loans to be a separate portfolio segment. The Company considers its primary class to be property type and primarily uses loan-to-value as its credit risk quality indicator. All loans within the portfolio 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 would indicate a potential problem are: 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 capital gains (losses) in the consolidated statements of earnings.


The following table represents the mortgage loan allowance for the six months ended June 30, 2011 and the year ended December 31, 2010:
 
June 30

2011
 
December 31

2010
 
(In thousands)
 
 
 
 
Balance, beginning of period
$
3,962


 
5,033


Provision
39


 
385


Releases
—


 
(1,456
)
 
 
 
 
Balance, end of period
$
4,001


 
3,962