5. Investments

The amortized cost and estimated fair value of investments in debt and equity securities by category is as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
As of March 31, 2012	Cost		Gains		Losses			Value

U.S. Treasury securities and obligations of U.S. Government	$	11,124	$	16	$	(6	)	$	11,134
Corporate bonds		102,924		2,692		(1,478	)		104,138
Collateralized corporate bank loans		109,350		583		(813	)		109,120
Municipal bonds		173,156		3,900		(2,956	)		174,100
Mortgage-backed		3,822		86		(6	)		3,902
Total debt securities		400,376		7,277		(5,259	)		402,394

Financial services		11,619		3,346		(218	)		14,747
All other		18,757		10,600		(19	)		29,338
Total equity securities		30,376		13,946		(237	)		44,085

Total debt and equity securities	$	430,752	$	21,223	$	(5,496	)	$	446,479

As of December 31, 2011

U.S. Treasury securities and obligations of U.S. Government	$	11,152	$	24	$	-		$	11,176
Corporate bonds		93,272		2,305		(1,655	)		93,922
Collateralized corporate bank loans		94,638		175		(1,920	)		92,893
Municipal bonds		177,432		3,458		(2,549	)		178,341
Mortgage-backed		4,084		80		(27	)		4,137
Total debt securities		380,578		6,042		(6,151	)		380,469

Financial services		11,618		4,463		(260	)		15,821
All other		18,847		9,554		(63	)		28,338
Total equity securities		30,465		14,017		(323	)		44,159

Total debt and equity securities	$	411,043	$	20,059	$	(6,474	)	$	424,628

Major categories of net realized (losses) gains on investments are summarized as follows (in thousands):

	Three Months Ended
	March 31
	2012			2011

U.S. Treasury securities and obligations of U.S. Government	$	-		$	14
Corporate bonds		(114	)		-
Collateralized corporate bank loans		1			434
Municipal bonds		(80	)		(67	)
Equity securities-financial services		92			738
Equity securities-all other		-			-
(Loss) gain on investments		(101	)		1,119
Other-than-temporary impairments		(18	)		-
Net realized (losses) gains	$	(119	)	$	1,119

We realized gross gains on investments of $0.1 million and $1.2 million during the three months ended March 31, 2012 and 2011, respectively. We realized gross losses on investments of $0.2 million and $0.1 million during the three months ended March 31, 2012 and 2011, respectively. We recorded proceeds from the sale of investment securities of $0.2 million and $32.7 million during the three months ended March 31, 2012 and 2011, respectively. Realized investment gains and losses are recognized in operations on the specific identification method.

The following schedules summarize the gross unrealized losses showing the length of time that investments have been continuously in an unrealized loss position as of March 31, 2012 and December 31, 2011 (in thousands):

	As of March 31, 2012
	12 months or less					Longer than 12 months					Total
			Unrealized					Unrealized					Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses

U.S. Treasury securities and obligations of U.S. Government	$	6,057	$	(6	)	$	-	$	-		$	6,057	$	(6	)
Corporate bonds		26,723		(594	)		2,262		(884	)		28,985		(1,478	)
Collateralized corporate bank loans		38,797		(805	)		1,883		(8	)		40,680		(813	)
Municipal bonds		27,285		(235	)		35,909		(2,721	)		63,194		(2,956	)
Mortgage-backed		832		(6	)		-		-			832		(6	)
Total debt securities		99,694		(1,646	)		40,054		(3,613	)		139,748		(5,259	)

Financial services		377		(21	)		1,453		(197	)		1,830		(218	)
All other		665		(19	)		-		-			665		(19	)
Total equity securities		1,042		(40	)		1,453		(197	)		2,495		(237	)

Total debt and equity securities	$	100,736	$	(1,686	)	$	41,507	$	(3,810	)	$	142,243	$	(5,496	)

	As of December 31, 2011
	12 months or less					Longer than 12 months					Total
			Unrealized					Unrealized					Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses

U.S. Treasury securities and obligations of U.S. Government	$	-	$	-		$	-	$	-		$	-	$	-
Corporate bonds		21,752		(869	)		2,366		(786	)		24,118		(1,655	)
Collateralized corporate bank loans		69,717		(1,917	)		19		(3	)		69,736		(1,920	)
Municipal bonds		26,780		(196	)		39,741		(2,353	)		66,521		(2,549	)
Municipal bonds		740		(27	)		-		-			740		(27	)
Total debt securities		118,989		(3,009	)		42,126		(3,142	)		161,115		(6,151	)

Financial services		1,789		(260	)		-		-			1,789		(260	)
All other		2,959		(63	)		-		-			2,959		(63	)
Equity securities		4,748		(323	)		-		-			4,748		(323	)
Total debt and equity securities	$	123,737	$	(3,332	)	$	42,126	$	(3,142	)	$	165,863	$	(6,474	)

At March 31, 2012, the gross unrealized losses more than twelve months old were attributable to 30 debt security positions and 1 equity security position. At December 31, 2011, the gross unrealized losses more than twelve months old were attributable to 25 debt security positions. We consider these losses as a temporary decline in value as they are predominately on bonds that we do not intend to sell and do not believe we will be required to sell prior to recovery of our amortized cost basis. We see no indications that the decline in values of these securities is other-than-temporary.

Based on evidence gathered through our normal credit evaluation process, we presently expect that all debt securities held in our investment portfolio will be paid in accordance with their contractual terms. Nonetheless, it is at least reasonably possible that the performance of certain issuers of these debt securities will be worse than currently expected resulting in additional future write-downs within our portfolio of debt securities.

Also, as a result of the challenging market conditions, we expect the volatility in the valuation of our equity securities to continue in the foreseeable future. This volatility may lead to additional impairments on our equity securities portfolio or changes regarding retention strategies for certain equity securities.

We complete a detailed analysis each quarter to assess whether any decline in the fair value of any investment below cost is deemed other-than-temporary. All securities with an unrealized loss are reviewed. We recognize an impairment loss when an investment's value declines below cost, adjusted for accretion, amortization and previous other-than-temporary impairments and it is determined that the decline is other-than-temporary.

Debt Investments: We assess whether we intend to sell, or it is more likely than not that we will be required to sell, a fixed maturity investment before recovery of its amortized cost basis less any current period credit losses. For fixed maturity investments that are considered other-than-temporarily impaired and that we do not intend to sell and will not be required to sell, we separate the amount of the impairment into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings and is the difference between the investment’s amortized cost basis and the present value of its expected future cash flows. The remaining difference between the investment’s fair value and the present value of future expected cash flows is recognized in other comprehensive income.

Equity Investments: Some of the factors considered in evaluating whether a decline in fair value for an equity investment is other-than-temporary include: (1) our ability and intent to retain the investment for a period of time sufficient to allow for an anticipated recovery in value; (2) the recoverability of cost; (3) the length of time and extent to which the fair value has been less than cost; and (4) the financial condition and near-term and long-term prospects for the issuer, including the relevant industry conditions and trends, and implications of rating agency actions and offering prices. When it is determined that an equity investment is other-than-temporarily impaired, the security is written down to fair value, and the amount of the impairment is included in earnings as a realized investment loss. The fair value then becomes the new cost basis of the investment, and any subsequent recoveries in fair value are recognized at disposition. We recognize a realized loss when impairment is deemed to be other-than-temporary even if a decision to sell an equity investment has not been made. When we decide to sell a temporarily impaired available-for-sale equity investment and we do not expect the fair value of the equity investment to fully recover prior to the expected time of sale, the investment is deemed to be other-than-temporarily impaired in the period in which the decision to sell is made.

The amortized cost and estimated fair value of debt securities at March 31, 2012 by contractual maturity are as follows. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without penalties.

	Amortized		Fair
	Cost		Value
	(in thousands)

Due in one year or less	$	41,152	$	41,395
Due after one year through five years		184,783		188,122
Due after five years through ten years		118,366		117,994
Due after ten years		52,253		50,981
Mortgage-backed		3,822		3,902
	$	400,376	$	402,394