Discontinued Operations

9 Months Ended

Sep. 30, 2012

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

During 2012, the Company signed a stock purchase agreement for the sale of 100% of its wholly-owned insurance companies to White Mountains Solutions.  The sale is subject to approval by the California and Ohio departments of insurance. In conjunction with the sale, the Company also requested and received approval from the respective departments of insurance for pre-close dividends of $8 million from Citation Insurance and $25 million from Physicians Insurance Company which were paid as of September 30, 2012. We have also obtained approval for the sale transaction from the California Department of Insurance but still await and expect the Ohio Department to approve the change in ownership. We expect the transaction to close in the fourth quarter of 2012. The final sales price will be adjusted for any increases or decreases in statutory surplus of the insurance companies between September 30, 2012 and closing. 

The current sales price, which has been adjusted due primarily to the receipt of the pre-close dividends discussed above, is approximately $15.5 million, resulting in a loss on sale of $6 million before income taxes which has been recorded in the accompanying consolidated statement of operations for the nine months ended September 30, 2012.  The income tax benefit for the loss on sale is estimated to be $3.6 million. However, consistent with the Company's overall conclusion that it is not more likely than not that the Company will recognize the deferred tax assets, a full valuation allowance has been recorded on this benefit. 

As a result of the pending transaction, the assets and liabilities of the insurance segment qualify as held for sale at September 30, 2012 and have been classified as discontinued operations in the accompanying consolidated financial statements as of the earliest period presented.  Consequently, prior periods presented have been recast from amounts previously reported to reflect the insurance segment as discontinued operations. 

The net income or loss in each period, significant assets and liabilities are as follows (in thousands):

	Three months ended			Three months ended			Nine Months Ended			Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Net investment income	$	71		$	206		$	545		$	796
Net realized gain on investments	3,300			4,676			3,937			13,760
Other income	4			16			123			58
	3,375			4,898			4,605			14,614
Operating and other costs	(310		)	(430		)	(961		)	(1,232		)
Income before income taxes	3,065			4,468			3,644			13,382
Provision for income taxes	450			1,570			267			4,651
Income from operations	2,615			2,898			3,377			8,731
Loss on write down of assets to fair value	(676		)				(6,045		)
Net income (loss)	$	1,939		$	2,898		$	(2,668	)	$	8,731

	September 30, 2012			December 31, 2011
ASSETS
Available-for-sale investments	$	14,824		$	35,170
Cash and cash equivalents	14,179			25,998
Reinsurance receivables	15,127			15,475
Other assets	219			405
Less: write down of assets to fair value	(5,690		)
Total assets	38,659			77,048
LIABILITIES
Unpaid losses and loss adjustment expenses	22,495			23,292
Other liabilities	675			4,532
Total liabilities	23,170			27,824
Net carrying value	$	15,489		$	49,224