(2) Investments:

The following is a summary of available-for-sale securities at September 30, 2011 and December 31, 2010:

										Net
			Cost or		Gross		Gross			Unrealized
	Fair		Amortized		Unrealized		Unrealized			Gains
	Value		Cost		Gains		Losses			(Losses)
September 30, 2011:
U.S. government obligations	$	66,227	$	66,117	$	148	$	(38	)	$	110
Government sponsored entities		350		345		5		-			5
Residential mortgage-backed securities		24,758		24,370		701		(313	)		388
Commercial mortgage-backed securities		15,366		15,729		154		(517	)		(363	)
States and political
subdivisions obligations		196,918		195,692		1,359		(133	)		1,226
Corporate securities		90,442		91,428		1,029		(2,015	)		(986	)
Foreign government obligations		21,795		22,198		245		(648	)		(403	)
Total fixed maturities		415,856		415,879		3,641		(3,664	)		(23	)
Equity securities:
Financial institutions		8,972		5,228		4,269		(525	)		3,744
Industrial & Miscellaneous		76,197		46,713		32,222		(2,738	)		29,484
Total equity securities		85,169		51,941		36,491		(3,263	)		33,228
Total available-for-sale securities	$	501,025	$	467,820	$	40,132	$	(6,927	)		33,205

							Applicable federal income taxes				(11,622	)

							Net unrealized gains - net of tax			$	21,583

December 31, 2010:
U.S. government obligations	$	62,998	$	62,882	$	150	$	(34	)	$	116
Government sponsored entities		3,324		3,325		7		(8	)		(1	)
Residential mortgage-backed securities		37,101		36,513		847		(259	)		588
Commercial mortgage-backed securities		14,714		14,417		405		(108	)		297
States and political
subdivisions obligations		192,706		192,236		1,006		(536	)		470
Corporate securities		84,417		83,121		1,931		(635	)		1,296
Foreign government obligations		20,294		20,095		354		(155	)		199
Total fixed maturities		415,554		412,589		4,700		(1,735	)		2,965
Equity securities:
Financial institutions		11,477		4,945		6,559		(27	)		6,532
Industrial & Miscellaneous		85,180		42,532		42,947		(299	)		42,648
Total equity securities		96,657		47,477		49,506		(326	)		49,180
Total available-for-sale securities	$	512,211	$	460,066	$	54,206	$	(2,061	)		52,145

							Applicable federal income taxes				(18,251	)

							Net unrealized gains - net of tax			$	33,894

The Company has two other-than-temporarily impaired fixed maturity securities at September 30, 2011. The Company had no other-than-temporary impairment losses relating to fixed maturity securities recognized in accumulated other comprehensive income as of September 30, 2011 and December 31, 2010.

The following table summarizes, for fixed maturity and equity security investments in an unrealized loss position at September 30, 2011 and December 31, 2010, respectively, the aggregate fair value and gross unrealized loss categorized by the duration those securities have been continuously in an unrealized loss position.

	September 30, 2011							December 31, 2010
	Number of Securities		Fair Value		Gross Unrealized Loss			Number of Securities		Fair Value		Gross Unrealized Loss
Fixed maturity securities:
12 months or less		235	$	108,401	$	(3,327	)		214	$	152,505	$	(1,525	)
Greater than 12 months		17		4,841		(337	)		16		5,460		(210	)
Total fixed maturities		252		113,242		(3,664	)		230		157,965		(1,735	)
Equity securities:
12 months or less		49		12,593		(2,614	)		3		1,676		(66	)
Greater than 12 months		17		2,986		(649	)		7		2,394		(260	)
Total equity securities		66		15,579		(3,263	)		10		4,070		(326	)
Total fixed maturity and equity securities		318	$	128,821	$	(6,927	)		240	$	162,035	$	(2,061	)

The fair value and the cost or amortized cost of fixed maturity investments, at September 30, 2011, by contractual maturity, are shown below. Actual maturities may ultimately differ from contractual maturities because borrowers have, in some cases, the right to call or prepay obligations with or without call or prepayment penalties. Pre-refunded municipal bonds are classified based on their pre-refunded call dates.

	Fair Value		Cost or Amortized Cost

One year or less	$	130,939	$	130,748
Excess of one year to five years		212,511		212,323
Excess of five years to ten years		26,028		26,374
Excess of ten years		6,254		6,336
Total maturities		375,732		375,781
Mortgage-backed securities		40,124		40,099
	$	415,856	$	415,879

Following is a summary of the components of net realized gains (losses) on investments for the periods presented in the accompanying statements of income.

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2011			2010			2011			2010
Fixed maturities:
Gross gains	$	1,572		$	1,311		$	3,730		$	3,151
Gross losses		(2,048	)		(293	)		(3,917	)		(976	)
Net gains (losses)		(476	)		1,018			(187	)		2,175

Equity securities:
Gross gains		272			3,339			2,501			5,569
Gross losses		(1,195	)		(365	)		(1,968	)		(1,080	)
Net gains (losses)		(923	)		2,974			533			4,489

Limited partnerships - net gain (loss)		(16,061	)		6,279			(21,238	)		3,939


Total net gains (losses)	$	(17,460	)	$	10,271		$	(20,892	)	$	10,603

Gain and loss activity for investments, as shown in the previous table, are further detailed as follows:

	Three Months Ended					Nine Months Ended
	September 30					September 30
	2011			2010		2011			2010

Realized net gains on the disposal of securities	$	1,312		$	3,466	$	3,356		$	6,153
Mark-to-market adjustment		(1,353	)		-		(1,998	)		-
Equity in (losses) of limited partnership
investments - realized and unrealized		(16,061	)		6,279		(21,238	)		3,939
Impairment:
Write-downs based upon objective criteria		(1,376	)		-		(1,494	)		(15	)
Recovery of prior write-downs
upon sale or disposal		18			526		482			526

Totals	$	(17,460	)	$	10,271	$	(20,892	)	$	10,603

The mark-to-market adjustments in the table above represent the changes in fair value of (1) options embedded in convertible debt securities and (2) insurance-linked securities held by the Company.

The net loss from limited partnerships for the quarter and year-to-date ending September 30, 2011 includes an estimated $15,857 and $23,056, respectively, of unrealized losses reported to the Company as part of the underlying assets of the various limited partnerships. The value of limited partnerships at September 30, 2011 includes approximately $6,651 of unrealized losses reported to the Company as part of the underlying assets of the various limited partnerships. Shareholders' equity at September 30, 2011 includes approximately $16,296, net of deferred federal income taxes, of earnings undistributed by limited partnerships.