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Investments
 6 Months Ended
Jun. 30, 2014
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 June 30,
 
Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
 
(In thousands)
 
 
 
 
 
 
 
 
Available for sale debt securities:
 
 
 
 
 
 
 
Realized gains on disposal
$
2,985

 
1,528

 
3,677

 
3,324

Realized losses on disposal
(14
)
 
—

 
(22
)
 
—

Held to maturity debt securities:


 


 


 


Realized gains on disposal
32

 
61

 
814

 
390

Realized losses on disposal
(6
)
 
(3
)
 
(17
)
 
(72
)
Equity securities realized gains (losses)
23

 
193

 
27

 
511

Real estate gains (losses)
45

 
—

 
134

 
—

Mortgage loans write-downs
—

 
—

 
—

 
—

Other
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
Totals
$
3,065

 
1,779

 
4,613

 
4,153



The Company uses the specific identification method in computing realized gains and losses. Approximately 96% 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
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2014
 
2013
 
2014
 
2013
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
Total other-than-temporary impairment gains (losses) on debt securities
 
$
—

 
(58
)
 
(4
)
 
324

Portion of loss (gain) recognized in comprehensive income
 
—

 
(106
)
 
(3
)
 
(549
)
 
 
 
 
 
 
 
 
 
Net impairment losses on debt securities recognized in earnings
 
—

 
(164
)
 
(7
)
 
(225
)
Equity securities impairments
 
—

 
(14
)
 
(28
)
 
(14
)
 
 
 
 
 
 
 
 
 
Totals
 
$
—

 
(178
)
 
(35
)
 
(239
)



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 June 30, 2014
 
Six months ended June 30, 2014
 
Twelve Months
Ended
December 31,
2013
 
 
 
(In thousands)

 
 
 
 
 
 
 
 
Beginning balance, cumulative credit losses related to other-than-temporary impairments
$
2,479

 
2,472

 
2,247

Reductions for securities sold during current period
—

 
—

 
(17
)
Additions for credit losses not previously recognized in other-than-temporary impairments
—

 
7

 
242

 
 
 
 
 
 
Ending balance, cumulative credit losses related to other-than-temporary impairments
$
2,479

 
2,479

 
2,472



(B)
Debt and Equity Securities

The table below presents amortized costs and fair values of securities held to maturity at June 30, 2014.

 
Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. agencies
$
23,075

 
1,177

 
—

 
24,252

U.S. Treasury
1,917

 
436

 
—

 
2,353

States and political subdivisions
431,661

 
25,868

 
(2,165
)
 
455,364

Foreign governments
—

 
—

 
—

 
—

Public utilities
862,772

 
67,976

 
(1,040
)
 
929,708

Corporate
3,595,636

 
206,319

 
(19,883
)
 
3,782,072

Mortgage-backed
1,700,161

 
67,049

 
(12,735
)
 
1,754,475

Home equity
19,762

 
4,907

 
—

 
24,669

Manufactured housing
6,099

 
353

 
—

 
6,452

 
 
 
 
 
 
 
 
Totals
$
6,641,083

 
374,085

 
(35,823
)
 
6,979,345



The table below presents amortized costs and fair values of securities available for sale at June 30, 2014.

 
Securities Available for Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
States and political subdivisions
$
592

 
—

 
(40
)
 
552

Foreign governments
9,935

 
370

 
—

 
10,305

Public utilities
230,681

 
14,459

 
(456
)
 
244,684

Corporate
2,302,436

 
155,856

 
(6,476
)
 
2,451,816

Mortgage-backed
55,750

 
4,400

 
—

 
60,150

Home equity
11,906

 
253

 
(10
)
 
12,149

Manufactured housing
3,193

 
100

 
—

 
3,293

 
2,614,493

 
175,438

 
(6,982
)
 
2,782,949

 
 
 
 
 
 
 
 
Equity public
11,183

 
5,584

 
(266
)
 
16,501

 
 
 
 
 
 
 
 
Totals
$
2,625,676

 
181,022

 
(7,248
)
 
2,799,450



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

 
Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. agencies
$
23,088

 
1,700

 
—

 
24,788

U.S. Treasury
1,913

 
434

 
—

 
2,347

States and political subdivisions
423,286

 
13,433

 
(10,944
)
 
425,775

Foreign governments
9,997

 
159

 
—

 
10,156

Public utilities
864,324

 
53,222

 
(9,687
)
 
907,859

Corporate
3,463,521

 
153,442

 
(81,760
)
 
3,535,203

Mortgage-backed
1,696,887

 
54,035

 
(33,376
)
 
1,717,546

Home equity
20,179

 
4,738

 
(32
)
 
24,885

Manufactured housing
7,125

 
460

 
—

 
7,585

 
 
 
 
 
 
 
 
Totals
$
6,510,320

 
281,623

 
(135,799
)
 
6,656,144



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

 
Securities Available for Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
States and political subdivisions
$
594

 
—

 
(110
)
 
484

Foreign governments
9,931

 
—

 
(156
)
 
9,775

Public utilities
233,788

 
15,014

 
(1,397
)
 
247,405

Corporate
2,195,124

 
124,519

 
(30,732
)
 
2,288,911

Mortgage-backed
68,799

 
5,040

 
—

 
73,839

Home equity
12,079

 
245

 
(7
)
 
12,317

Manufactured housing
3,803

 
132

 
—

 
3,935

 
2,524,118

 
144,950

 
(32,402
)
 
2,636,666

 
 
 
 
 
 
 
 
Equity public
11,146

 
4,489

 
(757
)
 
14,878

 
 
 
 
 
 
 
 
Totals
$
2,535,264

 
149,439

 
(33,159
)
 
2,651,544



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, 2014.

 
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:
 
 
 
 
 
 
 
 
 
 
 
States and political subdivisions
$
—

 
—

 
49,578

 
(2,165
)
 
49,578

 
(2,165
)
Public utilities
—

 
—

 
68,885

 
(1,040
)
 
68,885

 
(1,040
)
Corporate
67,941

 
(36
)
 
855,865

 
(19,847
)
 
923,806

 
(19,883
)
Mortgage-backed
76,145

 
(310
)
 
272,530

 
(12,425
)
 
348,675

 
(12,735
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
144,086

 
(346
)
 
1,246,858

 
(35,477
)
 
1,390,944

 
(35,823
)


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 June 30, 2014.
 
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:
 
 
 
 
 
 
 
 
 
 
 
States and political subdivisions
$
—

 
—

 
552

 
(40
)
 
552

 
(40
)
Public utilities
—

 
—

 
18,505

 
(456
)
 
18,505

 
(456
)
Corporate
35,561

 
(251
)
 
257,039

 
(6,225
)
 
292,600

 
(6,476
)
Home equity
—

 
—

 
4,825

 
(10
)
 
4,825

 
(10
)
 
35,561

 
(251
)
 
280,921

 
(6,731
)
 
316,482

 
(6,982
)
 
 
 
 
 
 
 
 
 
 
 
 
Equity public
202

 
(11
)
 
3,778

 
(255
)
 
3,980

 
(266
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
35,763

 
(262
)
 
284,699

 
(6,986
)
 
320,462

 
(7,248
)

Unrealized losses for securities held to maturity and securities available for sale decreased during the first six months of 2014 due primarily to the decline in market interest rates. The Company does not consider investments with unrealized losses to be other-than-temporarily impaired since it does not anticipate selling these securities prior to 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 interest rate movements, 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 June 30, 2014. 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 2014, the Company recorded an other-than-temporary impairment on one asset-backed security. The security had a $7 thousand credit impairment which is reported in the Condensed Consolidated Statements of Earnings and there were minimal liquidity gains which did not affect current earnings. The Company intends to hold the security until recovery of fair market value or maturity.

Debt securities. The gross unrealized losses for debt securities are made up of 219 individual issues, or 16.8% of the total debt securities held by the Company. The market value of these bonds as a percent of amortized cost averages 97.6%. Of the 219 securities, 201, or 91.8%, fall in the 12 months or greater aging category; and 214 were rated investment grade at June 30, 2014.

Equity securities.  The gross unrealized losses for equity securities are made up of 10 individual issues.  These holdings are reviewed quarterly for impairment.  One equity security was other-than-temporarily impaired during the six months ended June 30, 2014, 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, 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:
 
 
 
 
 
 
 
 
 
 
 
States and political subdivisions
$
128,711

 
(9,249
)
 
8,080

 
(1,695
)
 
136,791

 
(10,944
)
Public utilities
260,982

 
(8,998
)
 
7,821

 
(689
)
 
268,803

 
(9,687
)
Corporate
1,335,088

 
(71,330
)
 
117,179

 
(10,430
)
 
1,452,267

 
(81,760
)
Mortgage-backed
581,373

 
(32,043
)
 
13,861

 
(1,333
)
 
595,234

 
(33,376
)
Home equity
—

 
—

 
2,617

 
(32
)
 
2,617

 
(32
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
2,306,154

 
(121,620
)
 
149,558

 
(14,179
)
 
2,455,712

 
(135,799
)


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, 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:
 
 
 
 
 
 
 
 
 
 
 
States and political subdivisions
—

 
—

 
484

 
(110
)
 
484

 
(110
)
Foreign governments
$
9,775

 
(156
)
 
—

 
—

 
9,775

 
(156
)
Public utilities
20,090

 
(1,343
)
 
962

 
(54
)
 
21,052

 
(1,397
)
Corporate
532,310

 
(26,376
)
 
46,187

 
(4,356
)
 
578,497

 
(30,732
)
Home equity
4,833

 
(7
)
 
—

 
—

 
4,833

 
(7
)
 
567,008

 
(27,882
)
 
47,633

 
(4,520
)
 
614,641

 
(32,402
)
 
 
 
 
 
 
 
 
 
 
 
 
Equity public
3,707

 
(757
)
 
—

 
—

 
3,707

 
(757
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
570,715

 
(28,639
)
 
47,633

 
(4,520
)
 
618,348

 
(33,159
)


(C)
 Transfer of Securities

During the six months ended June 30, 2014 and 2013, the Company made no transfers to the held to maturity category from securities available for sale.

(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 had no mortgage loans past due 90 days or more at June 30, 2014 or 2013 and as a result all interest income was recognized at June 30, 2014 or 2013.

The following table represents the mortgage loan portfolio by loan-to-value ratio.

 
June 30, 2014
 
December 31, 2013
 
Amount
 
%
 
Amount
 
%
 
(In thousands)
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
Mortgage Loans by Loan-to-Value Ratio (1):
 
 
 
 
 
 
 
Less than 50%
$
51,827

 
33.9

 
$
57,445

 
43.0

50% to 60%
28,194

 
18.4

 
23,339

 
17.5

60% to 70%
44,263

 
29.0

 
20,120

 
15.1

70% to 80%
8,515

 
5.6

 
9,723

 
7.3

80% to 90%
—

 
—

 
—

 
—

Greater than 90%
20,059

 
13.1

 
22,788

 
17.1

Gross balance
152,858

 
100.0

 
133,415

 
100.0

 
 
 
 
 
 
 
 
Allowance for possible losses
(650
)
 
(0.4
)
 
(650
)
 
(0.5
)
 
 
 
 
 
 
 
 
Totals
$
152,208

 
99.6

 
$
132,765

 
99.5


(1) Loan-to-Value Ratio determined using the most recent appraised value. Appraisals are required at the time of funding and may be updated if a material change occurs from the original loan agreement.

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 investment gains (losses) in the Condensed Consolidated Statements of Earnings.

The following table represents the mortgage loan allowance at June 30, 2014 and December 31, 2013:
 
June 30, 2014
 
December 31, 2013
 
(In thousands)
 
 
 
 
Balance, beginning of period
$
650

 
650

Provision
—

 
—

Releases
—

 
—

 
 
 
 
Balance, end of period
$
650

 
650