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Investments
 3 Months Ended
Mar. 31, 2013
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 March 31,
 
2013
 
2012
 
(In thousands)
 
 
 
 
Available for sale debt securities:
 
 
 
Realized gains on disposal
$
1,796

 
1,628

Realized losses on disposal
—

 
—

Held to maturity debt securities:


 


Realized gains on disposal
329

 
116

Realized losses on disposal
(69
)
 
(374
)
Equity securities realized gains (losses)
318

 
(4
)
Real estate gains (losses)
—

 
—

Mortgage loans write-downs
—

 
—

Other
—

 
—

 
 
 
 
Totals
$
2,374

 
1,366



The Company uses the specific identification method in computing realized gains and losses. Approximately 15.5% 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.

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

 
Three Months Ended March 31,
 
2013
 
2012
 
(In thousands)
 
 
 
 
Total other-than-temporary impairment gains (losses) on debt securities
$
382

 
(253
)
Portion of loss (gain) recognized in comprehensive income
(443
)
 
78

 
 
 
 
Net impairment losses (gains) on debt securities recognized in earnings
(61
)
 
(175
)
Equity securities impairments
—

 
(24
)
 
 
 
 
Totals
$
(61
)
 
(199
)


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 March 31, 2013
 
Twelve Months
Ended
December 31,
2012
 
 
 
 
 
 
 
 
Beginning balance, cumulative credit losses related to other-than-temporary impairments
$
2,247

 
1,122

Reductions for securities sold during current period
$
—

 
(118
)
Additions for credit losses not previously recognized in other-than-temporary impairments
61

 
1,243

 
 
 
 
Ending balance, cumulative credit losses related to other-than-temporary impairment
$
2,308

 
2,247



(B)
Debt and Equity Securities

The table below presents amortized costs and fair values of securities held to maturity at March 31, 2013.

 
Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. agencies
$
23,107

 
2,551

 
—

 
25,658

U.S. Treasury
1,909

 
617

 
—

 
2,526

States and political subdivisions
415,553

 
40,932

 
(718
)
 
455,767

Foreign governments
9,990

 
507

 
—

 
10,497

Public utilities
778,321

 
86,375

 
(181
)
 
864,515

Corporate
3,052,451

 
260,064

 
(5,675
)
 
3,306,840

Mortgage-backed
1,766,021

 
121,769

 
(484
)
 
1,887,306

Home equity
21,057

 
4,556

 
(359
)
 
25,254

Manufactured housing
9,732

 
779

 
—

 
10,511

 
 
 
 
 
 
 
 
Totals
$
6,078,141

 
518,150

 
(7,417
)
 
6,588,874



The table below presents amortized costs and fair values of securities available for sale at March 31, 2013.

 
Securities Available for Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
States and political subdivisions
$
598

 
—

 
(32
)
 
566

Foreign governments
9,925

 
570

 
—

 
10,495

Public utilities
257,807

 
25,107

 
(9
)
 
282,905

Corporate
2,259,238

 
211,922

 
(1,915
)
 
2,469,245

Mortgage-backed
101,497

 
8,789

 
—

 
110,286

Home equity
12,222

 
17

 
(394
)
 
11,845

Manufactured housing
4,695

 
223

 
—

 
4,918

 
2,645,982

 
246,628

 
(2,350
)
 
2,890,260

 
 
 
 
 
 
 
 
Equity public
10,326

 
3,654

 
(38
)
 
13,942

 
 
 
 
 
 
 
 
Totals
$
2,656,308

 
250,282

 
(2,388
)
 
2,904,202



The table below presents amortized costs and fair values of securities held to maturity at December 31, 2012.

 
Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. agencies
$
23,114

 
2,748

 
—

 
25,862

U.S. Treasury
1,907

 
648

 
—

 
2,555

States and political subdivisions
391,062

 
41,150

 
(431
)
 
431,781

Foreign governments
9,988

 
616

 
—

 
10,604

Public utilities
781,239

 
89,162

 
(103
)
 
870,298

Corporate
2,887,572

 
273,431

 
(3,753
)
 
3,157,250

Mortgage-backed
1,835,051

 
133,684

 
(261
)
 
1,968,474

Home equity
21,545

 
4,443

 
(549
)
 
25,439

Manufactured housing
10,642

 
722

 
—

 
11,364

 
 
 
 
 
 
 
 
Totals
$
5,962,120

 
546,604

 
(5,097
)
 
6,503,627



The table below presents amortized costs and fair values of securities available for sale at December 31, 2012.

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

 
—

 
(28
)
 
571

Foreign governments
15,134

 
932

 
—

 
16,066

Public utilities
254,853

 
26,621

 
(47
)
 
281,427

Corporate
2,157,706

 
222,587

 
(2,981
)
 
2,377,312

Mortgage-backed
113,488

 
8,905

 
(64
)
 
122,329

Home equity
12,242

 
—

 
(1,483
)
 
10,759

Manufactured housing
5,030

 
240

 
—

 
5,270

 
2,559,052

 
259,285

 
(4,603
)
 
2,813,734

 
 
 
 
 
 
 
 
Equity public
9,460

 
2,865

 
(58
)
 
12,267

 
 
 
 
 
 
 
 
Totals
$
2,568,512

 
262,150

 
(4,661
)
 
2,826,001



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 March 31, 2013.

 
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
21,683

 
(712
)
 
579

 
(6
)
 
22,262

 
(718
)
Foreign governments
—

 
—

 
—

 
—

 
—

 
—

Public utilities
23,292

 
(181
)
 
—

 
—

 
23,292

 
(181
)
Corporate
381,377

 
(3,924
)
 
28,235

 
(1,751
)
 
409,612

 
(5,675
)
Mortgage-backed
30,917

 
(484
)
 
—

 
—

 
30,917

 
(484
)
Home equity
—

 
—

 
6,386

 
(359
)
 
6,386

 
(359
)
Manufactured housing
—

 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
457,269

 
(5,301
)
 
35,200

 
(2,116
)
 
492,469

 
(7,417
)


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 March 31, 2013.

 
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
566

 
(32
)
 
—

 
—

 
566

 
(32
)
Foreign governments
—

 
—

 
—

 
—

 
—

 
—

Public utilities
1,008

 
(9
)
 
—

 
—

 
1,008

 
(9
)
Corporate
116,702

 
(1,428
)
 
14,475

 
(487
)
 
131,177

 
(1,915
)
Mortgage-backed
—

 
—

 
—

 
—

 
—

 
—

Home equity
—

 
—

 
6,913

 
(394
)
 
6,913

 
(394
)
Manufactured housing
—

 
—

 
—

 
—

 
—

 
—

 
118,276

 
(1,469
)
 
21,388

 
(881
)
 
139,664

 
(2,350
)
 
 
 
 
 
 
 
 
 
 
 
 
Equity public
214

 
(21
)
 
159

 
(17
)
 
373

 
(38
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
118,490

 
(1,490
)
 
21,547

 
(898
)
 
140,037

 
(2,388
)

Liquidity in the bond market improved in 2012 and 2013 as economic and market conditions stabilized. Although the unrealized losses declined substantially in 2012 and held at the 2012 level through the first quarter of 2013, 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 March 31, 2013. 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 first quarter of 2013, the Company recorded an other-than-temporary impairment on two asset-backed securities. The securities had $0.1 million of credit impairment which is reported in the Condensed Consolidated Statements of Earnings and $0.4 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 96 individual issues, or 7.6% of the total debt securities held by the Company. The market value of these bonds as a percent of amortized cost averages 98.5%. Of the 96 securities, 10, or approximately 10.3%, fall in the 12 months or greater aging category; and 91 were rated investment grade at March 31, 2013. 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.  No securities had a gross unrealized loss.  

State and political subdivisions.  The unrealized losses on these investments are the result of holdings in 14 securities.  Of these securities, all are rated A or above except 1 which is rated BBB+ and 1 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 March 31, 2013.

Foreign governments.  No securities had a gross unrealized loss.

Public utilities.  Of the 3 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. Corporate securities with unrealized losses are reviewed based on monitoring procedures described previously, including review of 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 70 securities had unrealized losses, with 2 issues rated below investment grade. More extensive analysis was performed on these 2 issues.  Based on the analysis performed, none of these securities are considered other-than-temporarily impaired at March 31, 2013.

Mortgage-backed securities. Of the 4 securities, all are rated AA+.  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.  Based on cash flow analysis, none of the unrealized losses are considered other-than-temporary at March 31, 2013.

Home equity. Of the 5 securities, all are rated B or above except 1 which is rated CC.  The Company performs a quarterly cash flow analysis on asset-backed securities that are rated below AA.  Based on cash flow analysis, 1 security was other-than-temporarily impaired at March 31, 2013.

Manufactured housing.  No securities had a gross unrealized loss.

Equity securities.  The gross unrealized losses for equity securities are made up of 9 individual issues.  These holdings are reviewed quarterly for impairment.  None of the equity securities were considered other-than-temporarily impaired at March 31, 2013, in accordance with Company policy.  


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, 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
19,745

 
(401
)
 
1,470

 
(31
)
 
21,215

 
(432
)
Foreign governments
—

 
—

 
—

 
—

 
—

 
—

Public utilities
24,271

 
(80
)
 
1,982

 
(23
)
 
26,253

 
(103
)
Corporate
303,645

 
(1,776
)
 
38,078

 
(1,977
)
 
341,723

 
(3,753
)
Mortgage-backed
15,010

 
(261
)
 
—

 
—

 
15,010

 
(261
)
Home equity
—

 
—

 
6,435

 
(548
)
 
6,435

 
(548
)
Manufactured housing
—

 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
362,671

 
(2,518
)
 
47,965

 
(2,579
)
 
410,636

 
(5,097
)



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 that the individual securities have been in a continuous unrealized loss position at December 31, 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
571

 
(28
)
 
—

 
—

 
571

 
(28
)
Foreign governments
—

 
—

 
—

 
—

 
—

 
—

Public utilities
10,949

 
(47
)
 
—

 
—

 
10,949

 
(47
)
Corporate
64,383

 
(713
)
 
14,713

 
(2,268
)
 
79,096

 
(2,981
)
Mortgage-backed
3,839

 
(64
)
 
—

 
—

 
3,839

 
(64
)
Home equity
4,698

 
(216
)
 
6,062

 
(1,267
)
 
10,760

 
(1,483
)
Manufactured housing
—

 
—

 
—

 
—

 
—

 
—

 
84,440

 
(1,068
)
 
20,775

 
(3,535
)
 
105,215

 
(4,603
)
 
 
 
 
 
 
 
 
 
 
 
 
Equity public
756

 
(8
)
 
295

 
(50
)
 
1,051

 
(58
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
85,196

 
(1,076
)
 
21,070

 
(3,585
)
 
106,266

 
(4,661
)


(C)
 Transfer of Securities

During the three months ended March 31, 2013 and 2012, 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.

 
March 31, 2013
 
December 31, 2012
 
Amount
 
%
 
Amount
 
%
 
(In thousands)
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
Mortgage Loans by Loan-to-Value Ratio (1):
 
 
 
 
 
 
 
Less than 50%
$
51,365

 
40.7
 %
 
$
58,754

 
41.1
 %
50% to 60%
20,133

 
16.0
 %
 
27,832

 
19.5
 %
60% to 70%
22,912

 
18.2
 %
 
23,518

 
16.5
 %
70% to 80%
8,619

 
6.8
 %
 
9,431

 
6.6
 %
80% to 90%
—

 
—
 %
 
—

 
—
 %
Greater than 90%
23,160

 
18.3
 %
 
23,285

 
16.3
 %
Gross balance
126,189

 
100.0
 %
 
142,820

 
100
 %
 
 
 
 
 
 
 
 
Allowance for possible losses
(650
)
 
(0.5
)%
 
(650
)
 
(0.5
)%
 
 
 
 
 
 
 
 
Totals
$
125,539

 
99.5
 %
 
$
142,170

 
99.5
 %

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

The mortgage loans in the greater than 90% category relate to 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 three months ended March 31, 2013 and the year ended December 31, 2012:
 
March 31, 2013
 
December 31, 2012
 
(In thousands)
 
 
 
 
Balance, beginning of period
$
650

 
4,571

Provision
—

 
650

Releases
—

 
(4,571
)
 
 
 
 
Balance, end of period
$
650

 
650



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.