Investments (Tables)

12 Months Ended

Dec. 31, 2013

The components of net investment income for the following periods were:

	Year Ended December 31,
	2013		2012		2011

Fixed maturities	$	304,024	$	297,042	$	285,782
Equity securities		3,698		2,814		1,685
Short-term and other investments		8,242		8,109		7,891
Other invested assets (equity method investments)		5,902		5,892		-
Total investment income		321,866		313,857		295,358
Investment expenses		(8,256)		(7,854)		(7,047)
Net investment income	$	313,610	$	306,003	$	288,311

Summary of realized investment gains (losses)

Net realized investment gains (losses) for the following periods were:

	Year Ended December 31,
	2013			2012			2011

Fixed maturities		$	18,480		$	23,218		$	37,466
Equity securities			3,765			4,080			197
Short-term and other investments			-			-			-
Net realized investment gains		$	22,245		$	27,298		$	37,663

Unrealized gains and losses on fixed maturities and equity securities

The amortized cost or cost, unrealized investment gains and losses, fair values and other-than-temporary impairment (“OTTI”) included in accumulated other comprehensive income (loss) (“AOCI”) of all fixed maturities and equity securities in the portfolio were as follows:

	Amortized			Unrealized			Unrealized			Fair			OTTI in
	Cost or Cost			Gains			Losses			Value			AOCI (2)
December 31, 2013
Fixed maturity securities
U.S. Government and federally sponsored agency obligations (1):
Mortgage-backed securities		$	555,574		$	33,711		$	19,560		$	569,725		$	-
Other, including
U.S. Treasury securities			449,060			9,865			23,351			435,574			-
Municipal bonds			1,425,441			80,701			34,615			1,471,527			-
Foreign government bonds			50,641			4,700			390			54,951			-
Corporate bonds			2,457,727			188,832			32,150			2,614,409			-
Other mortgage-backed securities			845,762			26,477			8,852			863,387			2,812
Totals		$	5,784,205		$	344,286		$	118,918		$	6,009,573		$	2,812

Equity securities		$	84,754		$	10,723		$	3,619		$	91,858		$	-

December 31, 2012
Fixed maturity securities
U.S. Government and federally sponsored agency obligations (1):
Mortgage-backed securities		$	547,040		$	72,644		$	125		$	619,559		$	-
Other, including
U.S. Treasury securities			371,706			37,857			135			409,428			-
Municipal bonds			1,402,424			186,261			2,648			1,586,037			-
Foreign government bonds			48,476			9,393			-			57,869			-
Corporate bonds			2,258,554			313,430			4,950			2,567,034			-
Other mortgage-backed securities			683,257			41,080			2,032			722,305			3,214
Totals		$	5,311,457		$	660,665		$	9,890		$	5,962,232		$	3,214

Equity securities		$	52,396		$	2,397		$	1,290		$	53,503		$	-

(1)

Fair value includes securities issued by Federal National Mortgage Association (“FNMA”) of $336,193 and $375,111; Federal Home Loan Mortgage Corporation (“FHLMC”) of $427,172 and $418,174; and Government National Mortgage Association (“GNMA”) of $126,245 and $136,998 as of December 31, 2013 and 2012, respectively.

(2)

Represents the amount of other-than-temporary impairment losses in AOCI which, beginning April 1, 2009, was not included in earnings under current accounting guidance. Amounts also include unrealized gains/(losses) on impaired securities relating to changes in the fair value of such securities subsequent to the impairment measurement date.

Summary of fair value and gross unrealized losses of fixed maturity securities and equity securities in an unrealized loss position

Therefore, no impairment of these securities was recorded at December 31, 2013.

	12 months or less							More than 12 months							Total
					Gross							Gross							Gross
					Unrealized							Unrealized							Unrealized
	Fair Value				Losses			Fair Value				Losses			Fair Value				Losses
December 31, 2013
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities		$	150,602			$	19,145		$	1,383			$	415		$	151,985			$	19,560
Other			249,765				22,479			4,450				872			254,215				23,351
Municipal bonds			375,523				26,529			42,899				8,086			418,422				34,615
Foreign government bonds			6,738				390			-				-			6,738				390
Corporate bonds			582,849				28,634			12,948				3,516			595,797				32,150
Other mortgage-backed securities			274,983				8,300			20,008				552			294,991				8,852
Total fixed
maturity securities			1,640,460				105,477			81,688				13,441			1,722,148				118,918
Equity securities (1)			32,392				3,117			1,405				502			33,797				3,619
Combined totals		$	1,672,852			$	108,594		$	83,093			$	13,943		$	1,755,945			$	122,537

Number of positions with a
gross unrealized loss			534							46							580
Fair value as a percentage of
total fixed maturities and
equity securities fair value			27.4	%						1.4	%						28.8	%

December 31, 2012
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities		$	11,006			$	124		$	50			$	1		$	11,056			$	125
Other			9,944				135			-				-			9,944				135
Municipal bonds			108,578				2,605			3,990				43			112,568				2,648
Foreign government bonds			-				-			-				-			-				-
Corporate bonds			56,481				875			26,725				4,075			83,206				4,950
Other mortgage-backed securities			58,218				621			25,014				1,411			83,232				2,032
Total fixed
maturity securities			244,227				4,360			55,779				5,530			300,006				9,890
Equity securities (1)			19,344				1,288			9				2			19,353				1,290
Combined totals		$	263,571			$	5,648		$	55,788			$	5,532		$	319,359			$	11,180

Number of positions with a
gross unrealized loss			156							43							199
Fair value as a percentage of
total fixed maturities and
equity securities fair value			4.4	%						0.9	%						5.3	%

(1)

Includes nonredeemable (perpetual) preferred stocks and common stocks.

Summary of cumulative credit losses

The following table summarizes the cumulative amounts related to the Company’s credit loss component of the other-than-temporary impairment losses on fixed maturity securities held as of December 31, 2013 and 2012 that the Company did not intend to sell as of those dates, and it was not more likely than not that the Company would be required to sell the securities before the anticipated recovery of the amortized cost bases, for which the non-credit portions of the other-than-temporary impairment losses were recognized in other comprehensive income:

	Year Ended December 31,
		2013		2012
Cumulative credit loss (1)
Beginning of period		$	2,877	$	3,957
New credit losses (2)			1,220		-
Losses related to securities sold or paid down during the period			-		(1,080)
End of period		$	4,097	$	2,877

(1)

The cumulative credit loss amounts exclude other-than-temporary impairment losses on securities held as of the periods indicated that the Company intended to sell or it was more likely than not that the Company would be required to sell the security before the recovery of the amortized cost basis.

(2)

For 2013, the other-than-temporary impairment loss was recorded on a Detroit general obligation bond.

Distribution of the Company's fixed maturity portfolio by estimated expected maturity

For structured securities, including mortgage-backed securities and other asset-backed securities, estimated expected maturities consider broker-dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.

	December 31, 2013
							Percent of
	Amortized			Fair			Total Fair
	Cost			Value			Value
Estimated expected maturity:
Due in 1 year or less		$	234,952		$	244,106		4.1	%
Due after 1 year through 5 years			1,206,390			1,253,394		20.9
Due after 5 years through 10 years			2,227,741			2,314,540		38.4
Due after 10 years through 20 years			1,202,062			1,248,897		20.8
Due after 20 years			913,060			948,636		15.8
Total		$	5,784,205		$	6,009,573		100.0	%

Average option-adjusted duration, in years			6.3

Proceeds received from sales of fixed maturities and equity securities

Proceeds received from sales of fixed maturities and equity securities, each determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each year were:

		Year Ended December 31,
		2013		2012		2011
Fixed maturity securities
Proceeds received	$	298,045	$	576,708	$	587,909
Gross gains realized		17,177		32,532		39,463
Gross losses realized		(4,945)		(11,971)		(2,047)

Equity securities
Proceeds received	$	18,643	$	6,057	$	1,078
Gross gains realized		4,368		231		247
Gross losses realized		(616)		(438)		-

Reconciliation of net unrealized investment gains (losses) on fixed maturity securities and equity securities

The following table reconciles the net unrealized investment gains and losses, net of tax, included in accumulated other comprehensive income (loss), before the impact on deferred policy acquisition costs:

		Year Ended December 31,
		2013		2012		2011
Net unrealized investment gains (losses) on
fixed maturity securities, net of tax
Beginning of period	$	423,004	$	284,338	$	118,498
Change in unrealized investment gains and losses		(264,503)		153,758		190,193
Reclassification of net realized investment (gains)
losses to net income		(12,012)		(15,092)		(24,353)
End of period	$	146,489	$	423,004	$	284,338

Net unrealized investment gains (losses) on equity securities,
net of tax
Beginning of period	$	720	$	2,408	$	2,139
Change in unrealized investment gains and losses		6,345		964		397
Reclassification of net realized investment (gains)
losses to net income		(2,447)		(2,652)		(128)
End of period	$	4,618	$	720	$	2,408

- Definition

Tabular disclosure of investment income, including, but not limited to, interest and dividend income and amortization of discount (premium) derived from debt and equity securities. Excludes realized and unrealized gain (loss) on investments.

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- Definition

Tabular disclosure of the amount of other than temporary impairment (OTTI) related to credit losses recognized in earnings including: (a) the beginning balance of the amount related to credit losses on debt securities held by the investor at the beginning of the period for which a portion of an OTTI was recognized in other comprehensive income; (b) additions for the amount related to the credit loss for which an OTTI was not previously recognized; (c) reductions for securities sold during the period (realized); (d) reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the investor intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis; (e) additional increases to the amount related to the credit loss for which an OTTI was previously recognized when the investor does not intend to sell the security and it is not more likely than not that the investor will be required to sell the security before recovery of its amortized cost basis; (f) reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security; and (g) the ending balance of the amount related to credit losses on debt securities held by the entity at the end of the period for which a portion of an OTTI was recognized in other comprehensive income.

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