Investments

6 Months Ended

Jun. 30, 2012

Investments [Abstract]

Investments

Note 2 – Investments

The amortized cost and estimated fair values of the Company’s available for sale investments at June 30, 2012 and December 31, 2011, are as follows (dollars in thousands):

June 30, 2012	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Fixed maturity securities:
U.S. Treasury securities and other government corporations and agencies	$	47,877	$	4,205	$	—		$	52,082
States of the U.S. and political subdivisions of the states		27,658		5,573		(9	)		33,222
Corporate securities		296,573		35,028		(205	)		331,396
Mortgage-backed securities		245,172		13,536		(115	)		258,593
Commercial mortgage-backed securities		58,812		4,695		(14	)		63,493
Asset-backed securities		55,939		1,701		(78	)		57,562
Total fixed maturities	$	732,031	$	64,738	$	(421	)	$	796,348
Common stock	$	6,926	$	—	$	(220	)	$	6,706
Preferred stock	$	2,789	$	329	$	(12	)	$	3,106
December 31, 2011	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Fixed maturity securities:
U.S. Treasury securities and other government corporations and agencies	$	58,814	$	4,315	$	(39	)	$	63,090
States of the U.S. and political subdivisions of the states		27,676		4,581		—			32,257
Corporate securities		298,452		29,601		(1,127	)		326,926
Mortgage-backed securities		257,864		12,973		(26	)		270,811
Commercial mortgage-backed securities		60,198		3,941		(178	)		63,961
Asset-backed securities		58,437		666		(149	)		58,954
Total fixed maturities	$	761,441	$	56,077	$	(1,519	)	$	815,999
Common stock	$	6,926	$	—	$	(175	)	$	6,751
Preferred stock	$	2,789	$	212	$	(69	)	$	2,932

During the six months ended June 30, 2012 and 2011, available-for-sale and trading fixed maturity securities were sold for total proceeds of $18.4 million and $154.5 million, respectively, resulting in gross realized gains to the Company. The gross realized gains on these sales totaled $0.05 million and $11.3 million in 2012 and 2011, respectively. For the purpose of determining gross realized gains, the cost of securities sold is based on specific identification.

Trading securities are reported at fair value, with unrealized holding gains and losses reported as part of net earnings. Net unrealized holding losses from trading securities totaled $0.01 million for the six months ended June 30, 2012. These holding losses are included in “net” realized gains and losses for the period. There were no trading securities within the portfolio prior to the second quarter of 2012.

The amortized cost and estimated fair value of fixed maturity securities at June 30, 2012, is shown below by contractual maturity.

	Amortized cost		Estimated fair value
	(dollars in thousands)
Due in one year or less	$	31,105	$	31,429
Due after one year through five years		107,180		114,638
Due after five years through ten years		160,483		178,648
Due after ten years		73,340		91,985
Mortgage and asset-backed securities		359,923		379,648
Total	$	732,031	$	796,348

The following tables summarize the gross unrealized losses of the Company's investment portfolio as of June 30, 2012 and December 31, 2011, by category and length of time that the securities have been in an unrealized loss position.

	Less than 12 months					12 months or longer					Total
June 30, 2012	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(dollars in thousands)
Fixed maturity securities:
U.S. Treasury securities and other government corporations and agencies	$	—	$	—		$	—	$	—		$	—	$	—
States of the U.S. and political subdivisions of the states		1,098		(9	)		—		—			1,098		(9	)
Corporate securities		2,916		(205	)		—		—			2,916		(205	)
Mortgage-backed securities		6,426		(115	)		—		—			6,426		(115	)
Commercial mortgage-backed securities		—		—			4,051		(14	)		4,051		(14	)
Asset-backed securities		4,492		(64	)		51		(14	)		4,543		(78	)
Subtotal, fixed maturity securities		14,932		(393	)		4,102		(28	)		19,034		(421	)
Common stock		6,706		(220	)		—		—			6,706		(220	)
Preferred stock		499		(1	)		516		(11	)		1,015		(12	)
Total temporarily impaired securities	$	22,137	$	(614	)	$	4,618	$	(39	)	$	26,755	$	(653	)

	Less than 12 months					12 months or longer					Total
December 31, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(dollars in thousands)
Fixed maturity securities:
U.S. Treasury securities and other government corporations and agencies	$	3,749	$	(39	)	$	—	$	—		$	3,749	$	(39	)
States of the U.S. and political subdivisions of the states		—		—			—		—			—		—
Corporate securities		31,808		(1,127	)		—		—			31,808		(1,127	)
Mortgage-backed securities		6,574		(26	)		—		—			6,574		(26	)
Commercial mortgage-backed securities		13,401		(135	)		5,432		(43	)		18,833		(178	)
Asset-backed securities		15,537		(149	)		—		—			15,537		(149	)
Subtotal, fixed maturity securities		71,069		(1,476	)		5,432		(43	)		76,501		(1,519	)
Common stock		6,751		(175	)		—		—			6,751		(175	)
Preferred stock		1,436		(50	)		509		(19	)		1,945		(69	)
Total temporarily impaired securities	$	79,256	$	(1,701	)	$	5,941	$	(62	)	$	85,197	$	(1,763	)

We hold a total of 1,436 available-for sale securities, of which 37 were in an unrealized loss position for less than twelve months and five were in an unrealized loss position for a period of twelve months or greater as of June 30, 2012. Unrealized losses greater than twelve months on fixed maturities were the result of increased credit spreads and higher market yields relative to the date the securities were purchased. We do not consider these investments to be other-than-temporary impaired at June 30, 2012.

We routinely review our investments that have experienced declines in fair value to determine if the decline is other than temporary. These reviews are performed with consideration of the facts and circumstances of an issuer in accordance with the Securities and Exchange Commission (“SEC”), Accounting for Non-Current Marketable Equity Securities; ASC-320-10-05, Accounting for Certain Investments in Debt and Equity Securities, and related guidance. The identification of distressed investments and the assessment of whether a decline is other-than-temporary involve significant management judgment and require evaluation of factors including but not limited to:

• percentage decline in value and the length of time during which the decline has occurred;

• recoverability of principal and interest;

• market conditions;

• ability and intent to hold the investment to recovery;

• a pattern of continuing operating losses of the issuer;

• rating agency actions that affect the issuer’s credit status;

• adverse changes in the issuer’s availability of production resources, revenue sources, technological conditions; and

• adverse changes in the issuer’s economic, regulatory, or political environment.

Additionally, credit analysis and/or credit rating issues related to specific investments may trigger more intensive monitoring to determine if a decline in market value is other than temporary (“OTTI”). For investments with a market value below cost, the process includes evaluating the length of time and the extent to which cost exceeds market value, the prospects and financial condition of the issuer, and evaluation for a potential recovery in market value, among other factors. This process is not exact and further requires consideration of risks such as credit risk and interest rate risk. Therefore, if an investment’s cost exceeds its market value solely due to changes in interest rates, recognizing impairment may not be appropriate. For the six months ended June 30, 2012 and 2011, the Company did not incur any OTTI losses.