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Investments
 9 Months Ended
Sep. 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 September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
 
(In thousands)
 
 
 
 
 
 
 
 
Available for sale debt securities:
 
 
 
 
 
 
 
Realized gains on disposal
$
1,467

 
415

 
5,144

 
3,739

Realized losses on disposal
—

 
(3
)
 
(22
)
 
(3
)
Held to maturity debt securities:


 


 


 


Realized gains on disposal
353

 
2,831

 
1,167

 
3,221

Realized losses on disposal
—

 
—

 
(17
)
 
(72
)
Equity securities realized gains (losses)
7

 
—

 
34

 
511

Real estate gains (losses)
820

 
55

 
954

 
55

Mortgage loans write-downs
—

 
—

 
—

 
—

Other
(478
)
 
—

 
(478
)
 
—

 
 
 
 
 
 
 
 
Totals
$
2,169

 
3,298

 
6,782

 
7,451



The Company uses the specific identification method in computing realized gains and losses. Approximately 87% 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
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2014
 
2013
 
2014
 
2013
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
Total other-than-temporary impairment gains (losses) on debt securities
 
$
—

 
214

 
(4
)
 
538

Portion of loss (gain) recognized in comprehensive income
 
—

 
(227
)
 
(3
)
 
(776
)
 
 
 
 
 
 
 
 
 
Net impairment losses on debt securities recognized in earnings
 
—

 
(13
)
 
(7
)
 
(238
)
Equity securities impairments
 
—

 
—

 
(28
)
 
(14
)
 
 
 
 
 
 
 
 
 
Totals
 
$
—

 
(13
)
 
(35
)
 
(252
)



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, 2014
 
Nine months ended September 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 September 30, 2014.

 
Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. agencies
$
23,069

 
913

 
—

 
23,982

U.S. Treasury
1,918

 
407

 
—

 
2,325

States and political subdivisions
430,243

 
27,854

 
(1,051
)
 
457,046

Foreign governments
—

 
—

 
—

 
—

Public utilities
915,761

 
63,842

 
(1,558
)
 
978,045

Corporate
3,834,631

 
181,422

 
(26,026
)
 
3,990,027

Mortgage-backed
1,667,528

 
59,881

 
(13,457
)
 
1,713,952

Home equity
19,348

 
4,841

 
—

 
24,189

Manufactured housing
5,540

 
335

 
—

 
5,875

 
 
 
 
 
 
 
 
Totals
$
6,898,038

 
339,495

 
(42,092
)
 
7,195,441



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

 
Securities Available for Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
States and political subdivisions
$
591

 
—

 
(38
)
 
553

Foreign governments
9,937

 
313

 
—

 
10,250

Public utilities
189,636

 
11,994

 
(406
)
 
201,224

Corporate
2,296,848

 
135,520

 
(8,955
)
 
2,423,413

Mortgage-backed
52,270

 
4,541

 
—

 
56,811

Home equity
11,817

 
237

 
(3
)
 
12,051

Manufactured housing
2,877

 
86

 
—

 
2,963

 
2,563,976

 
152,691

 
(9,402
)
 
2,707,265

 
 
 
 
 
 
 
 
Equity public
12,829

 
5,215

 
(429
)
 
17,615

 
 
 
 
 
 
 
 
Totals
$
2,576,805

 
157,906

 
(9,831
)
 
2,724,880



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 September 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
$
—

 
—

 
33,440

 
(1,051
)
 
33,440

 
(1,051
)
Public utilities
73,039

 
(231
)
 
68,585

 
(1,327
)
 
141,624

 
(1,558
)
Corporate
328,940

 
(1,478
)
 
845,310

 
(24,548
)
 
1,174,250

 
(26,026
)
Mortgage-backed
67,440

 
(437
)
 
309,267

 
(13,020
)
 
376,707

 
(13,457
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
469,419

 
(2,146
)
 
1,256,602

 
(39,946
)
 
1,726,021

 
(42,092
)


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, 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
$
—

 
—

 
553

 
(38
)
 
553

 
(38
)
Public utilities
—

 
—

 
18,556

 
(406
)
 
18,556

 
(406
)
Corporate
180,872

 
(1,269
)
 
248,901

 
(7,686
)
 
429,773

 
(8,955
)
Home equity
—

 
—

 
4,832

 
(3
)
 
4,832

 
(3
)
 
180,872

 
(1,269
)
 
272,842

 
(8,133
)
 
453,714

 
(9,402
)
 
 
 
 
 
 
 
 
 
 
 
 
Equity public
1,997

 
(116
)
 
3,620

 
(313
)
 
5,617

 
(429
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
182,869

 
(1,385
)
 
276,462

 
(8,446
)
 
459,331

 
(9,831
)

Unrealized losses for securities held to maturity and securities available for sale decreased during the first nine 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 September 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 259 individual issues, or 19.7% of the total debt securities held by the Company. The market value of these bonds as a percent of amortized cost averages 97.7%. Of the 259 securities, 190, or 71.2%, fall in the 12 months or greater aging category; and 254 were rated investment grade at September 30, 2014.

Equity securities.  The gross unrealized losses for equity securities are made up of 17 individual issues.  These holdings are reviewed quarterly for impairment.  One equity security was other-than-temporarily impaired during the nine months ended September 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 nine months ended September 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 September 30, 2014 or 2013 and as a result all interest income was recognized at September 30, 2014 or 2013.

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

 
September 30, 2014
 
December 31, 2013
 
Amount
 
%
 
Amount
 
%
 
(In thousands)
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
Mortgage Loans by Loan-to-Value Ratio (1):
 
 
 
 
 
 
 
Less than 50%
$
49,514

 
32.3

 
$
57,445

 
43.0

50% to 60%
56,530

 
36.9

 
23,339

 
17.5

60% to 70%
18,932

 
12.3

 
20,120

 
15.1

70% to 80%
8,476

 
5.5

 
9,723

 
7.3

80% to 90%
—

 
—

 
—

 
—

Greater than 90%
19,938

 
13.0

 
22,788

 
17.1

Gross balance
153,390

 
100.0

 
133,415

 
100.0

 
 
 
 
 
 
 
 
Allowance for possible losses
(650
)
 
(0.4
)
 
(650
)
 
(0.5
)
 
 
 
 
 
 
 
 
Totals
$
152,740

 
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.
 
September 30, 2014
 
December 31, 2013
 
(In thousands)
 
 
 
 
Balance, beginning of period
$
650

 
650

Provision
—

 
—

Releases
—

 
—

 
 
 
 
Balance, end of period
$
650

 
650