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Investments
 9 Months Ended
Sep. 30, 2012
Investments, Debt and Equity Securities [Abstract]  
Investments
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
September 30,
 
Nine Months Ended
September 30,
 
2012
 
2011
 
2012
 
2011
 
(In thousands)
 
 
 
 
 
 
 
 
Available for sale debt securities:
 
 
 
 
 
 
 
Realized gains on disposal
$
1,847

 
3,211

 
6,054

 
6,348

Realized losses on disposal
—

 
—

 
—

 
—

Held to maturity debt securities:


 


 


 


Realized gains on disposal
1,102

 
269

 
1,262

 
747

Realized losses on disposal
(267
)
 
(520
)
 
(680
)
 
(520
)
Equity securities realized gains (losses)
113

 
—

 
109

 
56

Real estate gains (losses)
2,644

 
—

 
2,485

 
(50
)
Mortgage loans write-downs
—

 
—

 
—

 
(39
)
Other
12

 
—

 
12

 
—

 
 
 
 
 
 
 
 
Totals
$
5,451

 
2,960

 
9,242

 
6,542



The Company uses the specific identification method in computing realized gains and losses. Approximately 77% of the gains on bonds are due to calls of securities rather than sales. This includes calls out of the Company's available for sale portfolio of debt securities. Real estate gains of $2.6 million in the third quarter of 2012 pertain to the sale of a New Orleans property previously impaired as a result of Hurricane Katrina.

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

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2012
 
2011
 
2012
 
2011
 
(In thousands)
 
 
 
 
 
 
 
 
Total other-than-temporary impairment gains (losses) on debt securities
$
1,267

 
(1,727
)
 
858

 
(1,727
)
Portion of loss (gain) recognized in comprehensive income
(1,761
)
 
1,719

 
(1,918
)
 
1,719

 
 
 
 
 
 
 
 
Net impairment losses (gains) on debt securities recognized in earnings
(494
)
 
(8
)
 
(1,060
)
 
(8
)
Equity securities impairments
(17
)
 
(14
)
 
(70
)
 
(14
)
 
 
 
 
 
 
 
 
Totals
$
(511
)
 
(22
)
 
(1,130
)
 
(22
)


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

 
Three Months Ended
September 30,
2012
 
Nine Months Ended
September 30,
2012
 
Twelve Months
Ended
December 31,
2011
 
 
 
(In thousands)

 
 
 
 
 
 
 
 
Beginning balance, cumulative credit losses related to other-than-temporary impairments
$
1,688

 
1,122

 
997

Additions for credit losses not previously recognized in other-than-temporary impairments
494

 
1,060

 
125

 
 
 
 
 
 
Ending balance, cumulative credit losses related to other-than-temporary impairment
$
2,182

 
2,182

 
1,122



(B)
Debt and Equity Securities

The table below presents amortized costs and fair values of securities held to maturity at September 30, 2012.

 
Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. agencies
$
48,120

 
3,029

 
—

 
51,149

U.S. Treasury
1,906

 
680

 
—

 
2,586

States and political subdivisions
390,745

 
42,014

 
(112
)
 
432,647

Foreign governments
9,985

 
729

 
—

 
10,714

Public utilities
743,038

 
88,341

 
(212
)
 
831,167

Corporate
2,710,117

 
280,836

 
(4,081
)
 
2,986,872

Mortgage-backed
1,911,975

 
149,410

 
—

 
2,061,385

Home equity
21,953

 
4,119

 
(590
)
 
25,482

Manufactured housing
12,077

 
783

 
(3
)
 
12,857

 
 
 
 
 
 
 
 
Totals
$
5,849,916

 
569,941

 
(4,998
)
 
6,414,859



The table below presents amortized costs and fair values of securities available for sale at September 30, 2012.

 
Securities Available for Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
States and political subdivisions
$
599

 
11

 
—

 
610

Foreign governments
15,136

 
965

 
—

 
16,101

Public utilities
258,889

 
27,574

 
—

 
286,463

Corporate
2,135,990

 
224,001

 
(2,644
)
 
2,357,347

Mortgage-backed
122,348

 
10,320

 
(251
)
 
132,417

Home equity
12,293

 
—

 
(1,821
)
 
10,472

Manufactured housing
5,410

 
242

 
—

 
5,652

 
2,550,665

 
263,113

 
(4,716
)
 
2,809,062

 
 
 
 
 
 
 
 
Equity public
9,560

 
2,818

 
(73
)
 
12,305

 
 
 
 
 
 
 
 
Totals
$
2,560,225

 
265,931

 
(4,789
)
 
2,821,367



The table below presents amortized costs and fair values of securities held to maturity at December 31, 2011.

 
Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. agencies
$
205,464

 
3,519

 
(330
)
 
208,653

U.S. Treasury
1,937

 
648

 
—

 
2,585

States and political subdivisions
358,364

 
27,338

 
(280
)
 
385,422

Foreign governments
9,979

 
927

 
—

 
10,906

Public utilities
685,989

 
77,060

 
(4,498
)
 
758,551

Corporate
2,258,640

 
195,551

 
(14,483
)
 
2,439,708

Mortgage-backed
2,082,650

 
155,413

 
(29
)
 
2,238,034

Home equity
23,815

 
439

 
(1,649
)
 
22,605

Manufactured housing
15,071

 
876

 
(81
)
 
15,866

 
 
 
 
 
 
 
 
Totals
$
5,641,909

 
461,771

 
(21,350
)
 
6,082,330



The table below presents amortized costs and fair values of securities available for sale at December 31, 2011.

 
Securities Available for Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
States and political subdivisions
$
4,042

 
16

 
(170
)
 
3,888

Foreign governments
20,145

 
588

 
—

 
20,733

Public utilities
327,794

 
32,511

 
(907
)
 
359,398

Corporate
1,881,735

 
155,144

 
(5,839
)
 
2,031,040

Mortgage-backed
163,856

 
12,389

 
(189
)
 
176,056

Home equity
10,887

 
30

 
(2,054
)
 
8,863

Manufactured housing
7,689

 
740

 
—

 
8,429

 
2,416,148

 
201,418

 
(9,159
)
 
2,608,407

 
 
 
 
 
 
 
 
Equity private
195

 
7,923

 
—

 
8,118

Equity public
6,307

 
2,266

 
(145
)
 
8,428

 
 
 
 
 
 
 
 
Totals
$
2,422,650

 
211,607

 
(9,304
)
 
2,624,953



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 September 30, 2012.

 
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. agencies
$
—

 
—

 
—

 
—

 
—


—

U.S. Treasury
—

 
—

 
—

 
—

 
—

 
—

States and political subdivisions
7,791

 
(113
)
 
—

 
—

 
7,791

 
(113
)
Foreign governments
—

 
—

 
—

 
—

 
—

 
—

Public utilities
15,973

 
(11
)
 
13,702

 
(201
)
 
29,675

 
(212
)
Corporate
136,726

 
(521
)
 
41,603

 
(3,559
)
 
178,329

 
(4,080
)
Mortgage-backed
—

 
—

 
—

 
—

 
—

 
—

Home equity
1,047

 
(128
)
 
12,410

 
(462
)
 
13,457

 
(590
)
Manufactured housing
825

 
(3
)
 
—

 
—

 
825

 
(3
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
162,362

 
(776
)
 
67,715

 
(4,222
)
 
230,077

 
(4,998
)


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 September 30, 2012.

 
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. agencies
$
—

 
—

 
—

 
—

 
—

 
—

U.S. Treasury
—

 
—

 
—

 
—

 
—

 
—

States and political subdivisions
—

 
—

 
—

 
—

 
—

 
—

Foreign governments
—

 
—

 
—

 
—

 
—

 
—

Public utilities
—

 
—

 
—

 
—

 
—

 
—

Corporate
34,346

 
(1,625
)
 
30,940

 
(1,019
)
 
65,286

 
(2,644
)
Mortgage-backed
7,872

 
(251
)
 
—

 
—

 
7,872

 
(251
)
Home equity
4,563

 
(358
)
 
5,909

 
(1,463
)
 
10,472

 
(1,821
)
Manufactured housing
—

 
—

 
—

 
—

 
—

 
—

 
46,781

 
(2,234
)
 
36,849

 
(2,482
)
 
83,630

 
(4,716
)
 
 
 
 
 
 
 
 
 
 
 
 
Equity public
2,635

 
(22
)
 
340

 
(51
)
 
2,975

 
(73
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
49,416

 
(2,256
)
 
37,189

 
(2,533
)
 
86,605

 
(4,789
)

Liquidity in the bond market improved in 2012 and 2011 as economic and market conditions stabilized. Although the unrealized losses declined substantially in 2011 and continued to decline through the first three quarters of 2012, 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 as the Company does not intend to sell these securities nor does it think it will be forced to sell 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 when the market decline is attributable to factors such as market volatility, liquidity, spread widening and credit quality and when recovery of all amounts due under the contractual terms of the security is anticipated. Based on the review and the Company's ability and intent not to sell these securities until maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2012. 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.

During the third quarter of 2012, the Company recorded an other-than-temporary impairment on five asset-backed securities. The securities had $0.5 million of credit impairment which is reported in the Condensed Consolidated Statements of Earnings and $1.2 million of liquidity gains which did not affect current earnings. The Company intends to hold the securities until recovery of fair market value or maturity.

Debt securities. The gross unrealized losses for debt securities are made up of 49 individual issues, or 4.0% of the total debt securities held by the Company. The market value of these bonds as a percent of amortized cost averages 97.0%. Of the 49 securities, 15, or approximately 30.6%, fall in the 12 months or greater aging category; and 38 were rated investment grade at September 30, 2012. Additional information on debt securities by investment category is summarized below.

U.S. Government agencies. No securities had an unrealized loss.

U.S. Treasury. No securities had an unrealized loss.

State and political subdivisions. The unrealized losses on these investments are the result of holdings in 5 securities. Of these securities, all are rated A- or above except 1 security which is rated BB. Based on these facts and the Company's intent to hold to maturity, no other-than-temporary loss was recognized as of September 30, 2012.

Foreign governments. No securities had an unrealized loss.

Public utilities. Of the 5 securities, all are rated BB+ 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 27 securities had unrealized losses; 5 issues were rated below investment grade. More extensive analysis was performed on these 5 issues. Based on the analysis performed, none of these securities are considered other-than-temporarily impaired at September 30, 2012.

Mortgage-backed securities. 2 securities had unrealized losses. Both are rated CCC and were impaired based on cash flow analysis. 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.

Home equity. Of the 8 securities, 5 are rated AAA, 2 are rated AA, and 1 is rated CC. The Company performs quarterly cash flow analysis on asset-backed securities. Based on cash flow analysis, other-than-temporary impairment losses were recognized on 2 of the securities as of September 30, 2012 .

Manufactured housing. Two securities had negligible unrealized losses. The securities are rated A and above and are not considered to be other-than-temporarily impaired.

Equity securities. The gross unrealized losses for equity securities are made up of 13 individual issues. These holdings are reviewed for impairment quarterly. As of September 30, 2012, 3 equity securities were 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, 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. agencies
$
24,985

 
(16
)
 
27,010

 
(314
)
 
51,995

 
(330
)
U.S. Treasury
—

 
—

 
—

 
—

 
—

 
—

States and political subdivisions
805

 
(82
)
 
17,117

 
(198
)
 
17,922

 
(280
)
Foreign governments
—

 
—

 
—

 
—

 
—

 
—

Public utilities
26,509

 
(1,388
)
 
17,242

 
(3,110
)
 
43,751

 
(4,498
)
Corporate
199,934

 
(7,215
)
 
95,975

 
(7,268
)
 
295,909

 
(14,483
)
Mortgage-backed
23,256

 
(29
)
 
—

 
—

 
23,256

 
(29
)
Home equity
—

 
—

 
11,660

 
(1,649
)
 
11,660

 
(1,649
)
Manufactured housing
—

 
—

 
2,436

 
(81
)
 
2,436

 
(81
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
275,489

 
(8,730
)
 
171,440

 
(12,620
)
 
446,929

 
(21,350
)



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, 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. agencies
$
—

 
—

 
—

 
—

 
—

 
—

U.S. Treasury
—

 
—

 
—

 
—

 
—

 
—

States and political subdivisions
—

 
—

 
2,257

 
(170
)
 
2,257

 
(170
)
Foreign governments
—

 
—

 
—

 
—

 
—

 
—

Public utilities
19,314

 
(907
)
 
—

 
—

 
19,314

 
(907
)
Corporate
100,584

 
(4,009
)
 
20,944

 
(1,830
)
 
121,528

 
(5,839
)
Mortgage-backed
3,950

 
(189
)
 
—

 
—

 
3,950

 
(189
)
Home equity
—

 
—

 
5,351

 
(2,054
)
 
5,351

 
(2,054
)
Manufactured housing
—

 
—

 
—

 
—

 
—

 
—

 
123,848

 
(5,105
)
 
28,552

 
(4,054
)
 
152,400

 
(9,159
)
 
 
 
 
 
 
 
 
 
 
 
 
Equity public
722

 
(84
)
 
299

 
(61
)
 
1,021

 
(145
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
124,570

 
(5,189
)
 
28,851

 
(4,115
)
 
153,421

 
(9,304
)


(C)
 Transfer of Securities

During the nine months ended September 30, 2012 and 2011, the Company made no transfers to the held to maturity category from securities available for sale. Lower holdings of securities available for sale reduces the Company's exposure to market price volatility while still providing securities available for liquidity and asset/liability management purposes.

(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, equity, participation and mezzanine loans on real estate are considered financing receivables reported by the Company.

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 Condensed Consolidated Statements of Earnings. 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.

 
September 30, 2012
 
December 31, 2011
 
Amount
 
%
 
Amount
 
%
 
(In thousands)
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
Mortgage Loans by Loan-to-Value Ratio (1):
 
 
 
 
 
 
 
Less than 50%
58,307

 
42.9
%
 
68,048

 
43.2
%
50% to 60%
17,719

 
13.1
%
 
32,091

 
20.4
%
60% to 70%
27,685

 
20.4
%
 
25,692

 
16.3
%
70% to 80%
8,659

 
6.4
%
 
5,505

 
3.5
%
80% to 90%
—

 
—
%
 
—

 
—
%
Greater than 90%
23,406

 
17.2
%
 
26,124

 
16.6
%
 
 
 
 
 
 
 
 
Totals
135,776

 
100.0
%
 
157,460

 
100.0
%

(1) Loan-to-Value Ratio using the most recent appraised value.

The mortgage loans in the greater than 90% category relate to new loans made with a long standing borrower. The loans are backed by the investment property, contracted leases, as well as a separate and additional guarantee of the long standing 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 Condensed Consolidated Statements of Earnings.

The following table represents the mortgage loan allowance for the nine months ended September 30, 2012 and the year ended December 31, 2011:
 
September 30, 2012
 
December 31, 2011
 
(In thousands)
 
 
 
 
Balance, beginning of period
$
4,571

 
3,962

Provision
—

 
609

Releases
(4,571
)
 
—

 
 
 
 
Balance, end of period
$
—

 
4,571



The mortgage loan allowance released in the second quarter of 2012 pertained to a property forced into bankruptcy which the Company subsequently acquired in a bankruptcy auction. The mortgage loan was closed and the property reclassified as a real estate investment included in other long-term investments on the Company's balance sheet. The property was subsequently sold in the third quarter of 2012 for a net gain of $2.7 million.