Investments (Tables)

9 Months Ended

Sep. 30, 2014

Investments, Debt and Equity Securities [Abstract]

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/Cost		Gains		Losses		Value		AOCI (2)
September 30, 2014
Fixed maturity securities
U.S. Government and federally sponsored agency obligations (1):
Mortgage-backed securities	$	494,650	$	44,197	$	4,334	$	534,513	$	-
Other, including
U.S. Treasury securities		490,611		20,583		7,482		503,712		-
Municipal bonds		1,460,938		162,032		5,865		1,617,105		-
Foreign government bonds		52,571		6,268		60		58,779		-
Corporate bonds		2,624,428		240,948		9,608		2,855,768		-
Other mortgage-backed securities		1,199,844		29,492		5,744		1,223,592		2,880
Totals	$	6,323,042	$	503,520	$	33,093	$	6,793,469	$	2,880

Equity securities	$	97,757	$	11,882	$	2,802	$	106,837	$	-

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	$	-

(1)

Fair value includes securities issued by Federal National Mortgage Association (“FNMA”) of $319,596 and $336,193; Federal Home Loan Mortgage Corporation (“FHLMC”) of $419,913 and $427,172; and Government National Mortgage Association (“GNMA”) of $136,379 and $126,245 as of September 30, 2014 and December 31, 2013, respectively.

(2)

Related to securities for which an unrealized loss was bifurcated to distinguish the credit related portion and the portion driven by other market factors. Represents the amount of other-than-temporary impairment losses in AOCI which was not included in earnings; amounts also include unrealized gains/(losses) on such impaired securities relating to changes in the fair value of those 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

	12 Months or Less					More than 12 Months					Total
				Gross					Gross					Gross
	Fair Value			Unrealized Losses		Fair Value			Unrealized Losses		Fair Value			Unrealized Losses
September 30, 2014
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	5,215		$	121	$	60,111		$	4,213	$	65,326		$	4,334
Other		39,248			195		127,454			7,287		166,702			7,482
Municipal bonds		50,593			223		75,448			5,642		126,041			5,865
Foreign government bonds		3,940			60		-			-		3,940			60
Corporate bonds		232,074			3,571		120,928			6,037		353,002			9,608
Other mortgage-backed securities		431,870			2,809		99,814			2,935		531,684			5,744
Total fixed maturity securities		762,940			6,979		483,755			26,114		1,246,695			33,093
Equity securities (1)		14,004			1,279		26,559			1,523		40,563			2,802
Combined totals	$	776,944		$	8,258	$	510,314		$	27,637	$	1,287,258		$	35,895

Number of positions with a gross unrealized loss		291					149					440
Fair value as a percentage of total fixed maturities and equity securities fair value		11.3	%				7.4	%				18.7	%

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	%

(1)	Includes nonredeemable (perpetual) preferred stocks, common stocks and closed-end funds.

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 September 30, 2014 and 2013 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 (loss):

		Nine Months Ended
		September 30,
		2014	2013
Cumulative credit loss (1)
Beginning of period	$	4,097	$	2,877
New credit losses		280		860
Losses related to securities sold or paid down during the period		-		-
End of period	$	4,377	$	3,737

(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.

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

The following table presents the distribution of the Company's fixed maturity securities portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers’ utilization of the right to call or prepay obligations with or without call or prepayment penalties. 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.

	Percent of Total Fair Value					September 30, 2014
	September 30,		December 31,			Fair		Amortized
	2014		2013			Value		Cost
Estimated expected maturity:
Due in 1 year or less	4.2	%	4.1	%	$	288,311	$	268,346
Due after 1 year through 5 years	23.9		20.9			1,626,049		1,513,450
Due after 5 years through 10 years	40.1		38.4			2,718,736		2,530,472
Due after 10 years through 20 years	19.0		20.8			1,291,192		1,201,781
Due after 20 years	12.8		15.8			869,181		808,993
Total	100.0	%	100.0	%	$	6,793,469	$	6,323,042

Average option-adjusted duration, in years	5.9		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 period were:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2014	2013			2014	2013
Fixed maturity securities
Proceeds received	$	98,942	$	56,343	$	198,191	$	270,329
Gross gains realized		5,871		1,807		9,998		16,197
Gross losses realized		(4,421)		(4,117)		(5,399)		(4,598)

Equity securities
Proceeds received	$	3,489	$	3,742	$	11,980	$	14,875
Gross gains realized		722		531		2,196		3,875
Gross losses realized		(86)		(103)		(267)		(490)

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:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2014	2013			2014	2013
Net unrealized investment gains (losses) on fixed maturity securities, net of tax
Beginning of period	$	317,791	$	220,668	$	146,489	$	423,004
Change in unrealized investment gains and losses		(10,189)		(41,288)		163,613		(231,116)
Reclassification of net realized investment (gains) losses to net income		(1,824)		1,193		(4,324)		(11,315)
End of period	$	305,778	$	180,573	$	305,778	$	180,573

Net unrealized investment gains (losses) on equity securities, net of tax
Beginning of period	$	7,955	$	3,266	$	4,618	$	720
Change in unrealized investment gains and losses		(1,594)		(679)		2,584		3,840
Reclassification of net realized investment (gains) losses to net income		(459)		(278)		(1,300)		(2,251)
End of period	$	5,902	$	2,309	$	5,902	$	2,309

Offsetting assets and liability

The following table presents the instruments that were subject to a master netting arrangement for the Company. No instruments were subject to master netting arrangements as of December 31, 2013.

Net Amounts

of Assets/

Gross

Liabilities

Gross Amounts Not Offset

Amounts

Presented

in the Consolidated

Offset in the

in the

Balance Sheet

Consolidated

Cash

Gross

Balance

Financial

Collateral

Net

Amounts

Sheet

Instruments

Received

Amount

September 30, 2014

Asset derivatives:

Free-standing derivatives

1,276

1,145

131

- 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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