Investments (Tables)

9 Months Ended

Sep. 30, 2014

Cash and Investments Including Other-Than-Temporarily Impaired Securities Recognized within Accumulated Other Comprehensive Income

The table below includes other-than-temporarily impaired (“OTTI”) securities recognized within accumulated other comprehensive income (“AOCI”).

	September 30, 2014
In thousands	Fair Value		Gross Unrealized Gains		Gross Unrealized (Losses)			Cost or Amortized Cost
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	414,348	$	2,712	$	(6,215	)	$	417,851
States, municipalities and political subdivisions		550,327		16,585		(1,360	)		535,102
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		296,198		7,201		(2,363	)		291,360
Residential mortgage obligations		34,738		1,238		(133	)		33,633
Asset-backed securities		195,180		414		(519	)		195,285
Commercial mortgage-backed securities		210,712		6,244		(588	)		205,056
Subtotal	$	736,828	$	15,097	$	(3,603	)	$	725,334
Corporate bonds		608,692		11,945		(2,350	)		599,097
Total fixed maturities	$	2,310,195	$	46,339	$	(13,528	)	$	2,277,384
Equity securities - common stocks		113,250		26,251		(772	)		87,771
Equity securities - Preferred stocks		50,223		1,481		(249	)		48,991
Short-term investments		255,445		11		—			255,434
Cash		74,408		—		—			74,408
Total	$	2,803,521	$	74,082	$	(14,549	)	$	2,743,988

	December 31, 2013
In thousands	Fair Value		Gross Unrealized Gains		Gross Unrealized (Losses)			Cost or Amortized Cost
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	441,685	$	2,854	$	(8,855	)	$	447,686
States, municipalities and political subdivisions		460,422		9,298		(13,651	)		464,775
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		301,274		6,779		(6,016	)		300,511
Residential mortgage obligations		41,755		1,212		(161	)		40,704
Asset-backed securities		125,133		653		(480	)		124,960
Commercial mortgage-backed securities		172,750		7,656		(374	)		165,468
Subtotal	$	640,912	$	16,300	$	(7,031	)	$	631,643
Corporate bonds		504,854		15,402		(3,443	)		492,895
Total fixed maturities	$	2,047,873	$	43,854	$	(32,980	)	$	2,036,999
Equity securities - common stocks		143,954		25,700		(550	)		118,804
Short-term investments		296,250		—		—			296,250
Cash		86,509		—		—			86,509
Total	$	2,574,586	$	69,554	$	(33,530	)	$	2,538,562

Scheduled Maturity Dates for Fixed Maturity Securities by Number of Years Until Maturity

The contractual maturity dates for fixed maturities categorized by the number of years until maturity as of September 30, 2014 are shown in the following table:

	September 30, 2014
	Fair		Amortized
In thousands	Value		Cost
Due in one year or less	$	57,455	$	57,822
Due after one year through five years		768,839		761,771
Due after five years through ten years		376,070		370,373
Due after ten years		371,003		362,084
Mortgage- and asset-backed securities		736,828		725,334
Total	$	2,310,195	$	2,277,384

Amount and Percentage of Fixed Maturities by Rating

The following table shows the amount and percentage of the Company’s fixed maturities as of September 30, 2014 by S&P credit rating or, if an S&P rating is not available, the equivalent Moody’s Investor Services (“Moody’s”) rating. The table includes fixed maturities at fair value, and the total rating is the weighted average quality rating.

	September 30, 2014
In thousands	Rating	Fair Value		Percent of Total
Rating description:
Extremely strong	AAA	$	446,347		19	%
Very strong	AA		1,067,305		46	%
Strong	A		623,183		27	%
Adequate	BBB		159,354		7	%
Speculative	BB & Below		13,534		1	%
Not rated	NR		472		0	%
Total	AA	$	2,310,195		100	%

Summary of Aggregate Fair Value and Gross Unrealized Loss by Length of Time Securities had Continuously been in Gross Unrealized Loss Position as Well as Number of Securities

The following table summarizes all securities in a gross unrealized loss position as of September 30, 2014 and December 31, 2013, showing the aggregate fair value and gross unrealized loss by the length of time those securities had continuously been in a gross unrealized loss position as well as the relevant number of securities.

	September 30, 2014						December 31, 2013
In thousands, except # of securities	Number of Securities		Fair Value		Gross Unrealized Loss		Number of Securities		Fair Value		Gross Unrealized Loss
Fixed maturities:
U.S. Treasury bonds, agency bonds, and foreign government bonds
0-6 months		19	$	110,580	$	608		27	$	136,360	$	1,096
7-12 months		9		21,694		727		26		149,370		7,759
> 12 months		36		131,073		4,880		—		—		—
Subtotal		64	$	263,347	$	6,215		53	$	285,730	$	8,855
States, municipalities and political subdivisions
0-6 months		18	$	31,874	$	189		28	$	40,132	$	297
7-12 months		1		3,137		78		104		205,152		12,100
> 12 months		39		85,851		1,093		6		12,357		1,254
Subtotal		58	$	120,862	$	1,360		138	$	257,641	$	13,651
Agency mortgage-backed securities
0-6 months		5	$	42,373	$	230		39	$	39,458	$	434
7-12 months		2		1,636		12		64		77,860		3,768
> 12 months		61		74,476		2,121		9		22,784		1,814
Subtotal		68	$	118,485	$	2,363		112	$	140,102	$	6,016
Residential mortgage obligations
0-6 months		6	$	5,295	$	43		3	$	431	$	2
7-12 months		—		—		—		7		950		29
> 12 months		14		1,816		90		15		2,467		130
Subtotal		20	$	7,111	$	133		25	$	3,848	$	161
Asset-backed securities
0-6 months		16	$	93,871	$	200		14	$	75,887	$	479
7-12 months		3		9,930		28		1		203		1
> 12 months		2		31,663		291		—		—		—
Subtotal		21	$	135,464	$	519		15	$	76,090	$	480
Commercial mortgage-backed securities
0-6 months		9	$	48,884	$	408		4	$	6,712	$	31
7-12 months		—		—		—		2		15,098		322
> 12 months		4		15,539		180		4		774		21
Subtotal		13	$	64,423	$	588		10	$	22,584	$	374
Corporate bonds
0-6 months		59	$	218,185	$	1,016		34	$	93,591	$	717
7-12 months		6		8,006		124		18		55,021		2,726
> 12 months		11		36,689		1,210		—		—		—
Subtotal		76	$	262,880	$	2,350		52	$	148,612	$	3,443
Total fixed maturities		320	$	972,572	$	13,528		405	$	934,607	$	32,980
Equity securities - common stocks
0-6 months		5	$	15,496	$	309		5	$	7,387	$	422
7-12 months		1		3,940		433		2		3,538		128
> 12 months		1		214		30		—		—		—
Total common Stocks		7	$	19,650	$	772		7	$	10,925	$	550
Equity securities - preferred stocks
0-6 months		19	$	21,383	$	249		—	$	—	$	—
7-12 months		—		—		—		—		—		—
> 12 months		—		—		—		—		—		—
Total Preferred Stocks		19	$	21,383	$	249		—	$	—	$	—

Summary of Activity Related to Other-Than-Temporary Impairment Losses

The table below summarizes the Company’s activity related to OTTI losses for the periods indicated:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2014				2013				2014					2013
In thousands, except # of securities	Number of Securities		Amount		Number of Securities		Amount		Number of Securities		Amount			Number of Securities		Amount
Total OTTI losses:
Corporate and other bonds		—	$	—		1	$	1,821		—	$	—			1	$	1,821
Commercial mortgage-backed securities		—		—		—		—		—		—			—		—
Residential mortgage-backed securities		31		41		—		—		31		(158	)		—		—
Asset-backed securities		—		—		—		—		—		—			—		—
Equities		—		—		—		—		—		—			2		42
Total		31	$	41		1	$	1,821		31	$	(158	)		3	$	1,863
Less: Portion of loss in accumulated other comprehensive income (loss):
Corporate and other bonds			$	—			$	—			$	—				$	—
Commercial mortgage-backed securities				—				—				—					—
Residential mortgage-backed securities				41				—				(158	)				—
Asset-backed securities				—				—				—					—
Equities				—				—				—					—
Total			$	41			$	—			$	(158	)			$	—
Impairment losses recognized in earnings:
Corporate and other bonds			$	—			$	1,821			$	—				$	1,821
Commercial mortgage-backed securities				—				—				—					—
Residential mortgage-backed securities				—				—				—					—
Asset-backed securities				—				—				—					—
Equities				—				—				—					42
Total			$	—			$	1,821			$	—				$	1,863

Summary of Cumulative Amounts Related to Credit Loss Portion of Other-Than-Temporary Impairment Losses on Debt Securities

The following table summarizes the cumulative amounts related to the Company’s credit loss portion of the OTTI losses on fixed maturities for the three and nine months ended September 30, 2014 and 2013. The Company does not intend to sell and it is more likely than not that it will not be required to sell the securities, prior to recovery of the amortized cost basis and for which the non-credit loss portion is included in AOCI.

	Three Months Ended September 30,					Nine Months Ended September 30,
In thousands	2014			2013		2014			2013
Beginning balance	$	4,183		$	2,362	$	4,183		$	2,362
Additions for credit loss impairments recognized in the current period on securities not previously impaired		—			1,821		—			1,821
Additions for credit loss impairments recognized in the current period on securities previously impaired		—			—		—			—
Reductions for credit loss impairments previously recognized on securities sold during the period		(1,457	)		—		(1,457	)		—
Ending balance	$	2,726		$	4,183	$	2,726		$	4,183

Contractual Maturity by Number of Years Until Maturity for Fixed Maturity Securities with a Gross Unrealized Loss

The contractual maturity dates for fixed maturities categorized by the number of years until maturity, with a gross unrealized loss as of September 30, 2014 is presented in the following table:

	September 30, 2014
	Gross Unrealized Losses					Fair Value
In thousands	Amount		Percent of Total			Amount		Percent of Total
Due in one year or less	$	836		6	%	$	11,737		1	%
Due after one year through five years		4,374		32	%		370,199		38	%
Due after five years through ten years		3,723		28	%		162,429		17	%
Due after ten years		992		7	%		102,724		11	%
Mortgage- and asset-backed securities		3,603		27	%		325,483		33	%
Total	$	13,528		100	%	$	972,572		100	%

Net Investment Income

The Company’s net investment income was derived from the following sources:

	Three Months Ended September 30,						Nine Months Ended September 30,
In thousands	2014			2013			2014			2013
Fixed maturities	$	14,401		$	13,399		$	42,540		$	40,142
Equity securities		1,956			1,315			7,160			3,603
Short-term investments		225			187			686			575
Total investment income	$	16,582		$	14,901		$	50,386		$	44,320
Investment expenses		(743	)		(807	)		(2,289	)		(2,323	)
Net investment income	$	15,839		$	14,094		$	48,097		$	41,997

Change in Net Unrealized Gains/(Losses)

The change in net unrealized gains and losses, inclusive of the change in the non-credit portion of other-than-temporary impairment losses, consisted of:

	Nine Months Ended September 30,
In thousands	2014		2013
Fixed maturities	$	21,948	$	(63,771	)
Equity securities		1,561		11,551
Gross unrealized gains (losses)	$	23,509	$	(52,220	)
Deferred income tax		8,094		(18,296	)
Change in net unrealized gains (losses), net	$	15,415	$	(33,924	)

Realized Gains and Losses Excluding Net Other-Than-Temporary Impairment Losses Recognized in Earnings

Realized gains and losses, excluding net OTTI losses recognized in earnings, for the periods indicated were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
In thousands	2014			2013			2014			2013
Fixed maturities:
Gains	$	3,702		$	1,099		$	8,682		$	6,035
Losses		(1,645	)		(2,087	)		(3,752	)		(2,470	)
Fixed maturities, net	$	2,057		$	(988	)	$	4,930		$	3,565
Equity securities:
Gains	$	6,109		$	—		$	9,445		$	3,733
Losses		(1,448	)		—			(2,351	)		(127	)
Equity securities, net	$	4,661		$	—		$	7,094		$	3,606
Net realized gains (losses)	$	6,718		$	(988	)	$	12,024		$	7,171

Fixed Maturities and Equity Securities by Asset Class that are Measured at Fair Value

The following tables present, for each of the fair value hierarchy levels as defined by the accounting guidance for fair value measurements and described below, the Company’s fixed maturities and equity securities by asset class that are measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013:

	September 30, 2014
In thousands	Level 1		Level 2		Level 3		Total
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	177,933	$	236,415	$	—	$	414,348
States, municipalities and political subdivisions		—		550,327		—		550,327
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		—		296,198		—		296,198
Residential mortgage obligations		—		34,738		—		34,738
Asset-backed securities		—		195,180		—		195,180
Commercial mortgage-backed securities		—		210,712		—		210,712
Subtotal	$	—	$	736,828	$	—	$	736,828
Corporate bonds		—		608,692		—		608,692
Total fixed maturities	$	177,933	$	2,132,262	$	—	$	2,310,195
Equity securities - common stocks		113,250		—		—		113,250
Equity securities - preferred stocks		—		50,223		—		50,223
Total	$	291,183	$	2,182,485	$	—	$	2,473,668
	December 31, 2013
In thousands	Level 1		Level 2		Level 3		Total
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	242,379	$	199,306	$	—	$	441,685
States, municipalities and political subdivisions		—		460,422		—		460,422
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		—		301,274		—		301,274
Residential mortgage obligations		—		41,755		—		41,755
Asset-backed securities		—		125,133		—		125,133
Commercial mortgage-backed securities		—		172,750		—		172,750
Subtotal	$	—	$	640,912	$	—	$	640,912
Corporate bonds		—		500,447		4,407		504,854
Total fixed maturities	$	242,379	$	1,801,087	$	4,407	$	2,047,873
Equity securities - common stocks		143,954		—		—		143,954
Total	$	386,333	$	1,801,087	$	4,407	$	2,191,827

Reconciliation of Beginning and Ending Balances for All Investments Measured at Fair Value Using Level 3 Inputs

The following tables present a reconciliation of the beginning and ending balances of all investments measured at fair value using Level 3 inputs during the nine months ended September 30, 2014.

	Nine Months Ended September 30, 2014
In thousands	Beginning Balance		Realized Gains (Losses)		Unrealized Gains (Losses)		Purchases		Sales		Settlements		Transfers into Level 3		Transfers out of Level 3			Ending Balance
Assets:
Corporate Bonds	$	4,407	$	—	$	—	$	—	$	—	$	—	$	—	$	(4,407	)	$	—
Total assets	$	4,407	$	—	$	—	$	—	$	—	$	—	$	—	$	(4,407	)	$	—

The following tables present a reconciliation of the beginning and ending balances of all investments measured at fair value using Level 3 inputs during the three and nine months ended September 30, 2013.

	Three Months Ended September 30, 2013
In thousands	Beginning Balance		Realized Gains (Losses)		Unrealized Gains (Losses)			Purchases		Sales			Settlements		Transfers into Level 3		Transfers out of Level 3		Ending Balance
Assets:
Corporate Bonds	$	—	$	—	$	(15	)	$	4,661	$	(84	)	$	—	$	—	$	—	$	4,562
Total assets	$	—	$	—	$	(15	)	$	4,661	$	(84	)	$	—	$	—	$	—	$	4,562
	Nine Months Ended September 30, 2013
In thousands	Beginning Balance		Realized Gains (Losses)		Unrealized Gains (Losses)			Purchases		Sales			Settlements		Transfers into Level 3		Transfers out of Level 3		Ending Balance
Assets:
Corporate Bonds	$	—	$	—	$	(15	)	$	4,661	$	(84	)	$	—	$	—	$	—	$	4,562
Total assets	$	—	$	—	$	(15	)	$	4,661	$	(84	)	$	—	$	—	$	—	$	4,562