Investments

6 Months Ended

Jun. 30, 2013

Investments [Abstract]

Investments

Note 2 – Investments

The amortized cost and estimated fair values of the Company’s available for sale investments at June 30, 2013 and December 31, 2012, are as follows (dollars in thousands):

June 30, 2013	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Fixed maturity securities:
U.S. Treasury securities and other government corporations and agencies	$	258,887	$	2,017	$	(3,951	)	$	256,953
States of the U.S. and political subdivisions of the states		4,516		92		(183	)		4,425
Corporate securities		30,401		5,074		(207	)		35,268
Mortgage-backed securities		4,978		90		(202	)		4,866
Commercial mortgage-backed securities		2,684		141		—			2,825
Asset-backed securities		6,304		686		(18	)		6,972
Total fixed maturities	$	307,770	$	8,100	$	(4,561	)	$	311,309
Common stock	$	6,926	$	—	$	(853	)	$	6,073
Preferred stock	$	—	$	39	$	—		$	39

December 31, 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	$	53,591	$	2,961	$	(11	)	$	56,541
States of the U.S. and political subdivisions of the states		40,100		6,064		—			46,164
Corporate securities		304,725		36,089		(85	)		340,729
Mortgage-backed securities		237,653		11,088		(501	)		248,240
Commercial mortgage-backed securities		57,521		5,694		—			63,215
Asset-backed securities		71,769		3,138		(219	)		74,688
Total fixed maturities	$	765,359	$	65,034	$	(816	)	$	829,577
Common stock	$	9,004	$	6	$	(234	)	$	8,776
Preferred stock	$	2,789	$	317	$	(25	)	$	3,081

During the six months ended June 30, 2013 and 2012, available-for-sale and trading fixed maturity securities were sold for total proceeds of $778.9 million and $18.4 million, respectively, resulting in gross realized gains and losses to the Company. The gross realized gains on these sales totaled $42.7 million and $0.05 million in 2013 and 2012, respectively. The gross realized losses on these sales totaled $4.9 million and $0.01 million in 2013 and 2012, respectively. During the six months ended June 30, 2013, available-for-sale and trading equity securities were sold for total proceeds of $11.3 million, compared to none in 2012, resulting in gross realized gains to the company of $1.1 million and $0.0 million. There were no gross realized losses tied to sales of equity securities in 2013 and 2012. Sales during the second quarter of 2013 were in compliance with the Merger Agreement. For the purpose of determining gross realized gains and losses, 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 $0.0 million and $0.01 million for the six months ended June 30, 2013 and 2012. These holding losses are included in net realized gains and losses for the period.

The amortized cost and estimated fair value of fixed maturity securities at June 30, 2013, is shown below by contractual maturity.

	Amortized cost		Estimated fair value
	(dollars in thousands)
Due in one year or less	$	4,026	$	4,056
Due after one year through five years		19,261		20,340
Due after five years through ten years		19,259		19,533
Due after ten years		251,258		252,717
Mortgage and asset-backed securities		13,966		14,663
Total	$	307,770	$	311,309

The following tables summarize the gross unrealized losses of the Company’s investment portfolio as of June 30, 2013 and December 31, 2012, 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
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2013	(dollars in thousands)
Fixed maturity securities:
U.S. Treasury securities and other government corporations and agencies	$	185,593	$	(3,951	)	$	—	$	—		$	185,593	$	(3,951	)
States of the U.S. and political subdivisions of the states		3,247		(183	)		—		—			3,247		(183	)
Corporate securities		3,100		(207	)		—		—			3,100		(207	)
Mortgage-backed securities		3,266		(202	)		—		—			3,266		(202	)
Commercial mortgage-backed securities		—		—			—		—			—		—
Asset-backed securities		—		—			48		(18	)		48		(18	)
Subtotal, fixed maturity securities		195,206		(4,543	)		48		(18	)		195,254		(4,561	)
Common stock		—		—			3,573		(853	)		3,573		(853	)
Preferred stock		—		—			—		—			—		—
Total temporarily impaired securities	$	195,206	$	(4,543	)	$	3,621	$	(871	)	$	198,827	$	(5,414	)

	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2012	(dollars in thousands)
Fixed maturity securities:
U.S. Treasury securities and other government corporations and agencies	$	4,985	$	(11	)	$	—	$	—		$	4,985	$	(11	)
States of the U.S. and political subdivisions of the states		—		—			—		—			—		—
Corporate securities		24,489		(85	)		—		—			24,489		(85	)
Mortgage-backed securities		36,345		(336	)		3,751		(165	)		40,096		(501	)
Commercial mortgage-backed securities		—		—			—		—			—		—
Asset-backed securities		7,536		(210	)		59		(9	)		7,595		(219	)
Subtotal, fixed maturity securities		73,355		(642	)		3,810		(174	)		77,165		(816	)
Common stock		1,067		(14	)		4,206		(220	)		5,273		(234	)
Preferred stock		490		(2	)		504		(23	)		994		(25	)
Total temporarily impaired securities	$	74,912	$	(658	)	$	8,520	$	(417	)	$	83,432	$	(1,075	)

We hold a total of 203 available-for sale securities, of which 67 were in an unrealized loss position for less than twelve months and two were in an unrealized loss position for a period of twelve months or greater as of June 30, 2013. 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, 2013.

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, 2013 and 2012, the Company did not incur any OTTI losses.