Note 4. Investment Securities

3 Months Ended

Mar. 31, 2013

Notes

Note 4. Investment Securities

Note  4.                       Investment Securities

The cost (amortized cost with respect to certain fixed maturities), gross unrealized gains, gross unrealized losses and fair value of investment securities are as follows (in thousands):

		March 31, 2013
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	344,773	$	8,859	$	(1,147)	$	352,485
CMOs - residential (1)		9,225		5,826		(19)		15,032
CMOs - commercial		975		-		(399)		576
U.S. Government obligations		24,889		446		(18)		25,317
Agency MBS - residential (2)		333		26		-		359
GSEs (3)		35,894		626		(135)		36,385
States and political subdivisions		273,159		9,519		(938)		281,740
Foreign governments		44,454		831		(259)		45,026
Redeemable preferred stocks		6,323		2,018		-		8,341
Total fixed maturities	$	740,025	$	28,151	$	(2,915)	$	765,261

EQUITY SECURITIES
AVAILABLE-FOR-SALE:
Nonredeemable preferred stocks		7,967		321		-		8,288
Total equity securities	$	7,967	$	321	$	-	$	8,288

		December 31, 2012
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	343,529	$	11,247	$	(953)	$	353,823
CMOs - residential (1)		12,993		7,166		(65)		20,094
CMOs - commercial		975		-		(405)		570
U.S. Government obligations		18,376		492		(2)		18,866
Agency MBS - residential (2)		397		31		-		428
GSEs (3)		48,598		1,075		(67)		49,606
States and political subdivisions		260,086		9,134		(995)		268,225
Redeemable preferred stocks		6,323		1,667		-		7,990
Total fixed maturities	$	691,277	$	30,812	$	(2,487)	$	719,602

EQUITY SECURITIES
AVAILABLE-FOR-SALE:
Nonredeemable preferred stocks		15,355		253		(10)		15,598
Total equity securities	$	15,355	$	253	$	(10)	$	15,598

(1)         Collateralized mortgage obligations (“CMOs”).

(2)         Mortgage-backed securities (“MBS”).

(3)         Government-sponsored enterprises (“GSEs”) are private enterprises established and chartered by the Federal Government or its various insurance and lease programs which carry the full faith and credit obligation of the U.S. Government.

The amortized cost and fair value of fixed maturities available-for-sale at March 31, 2013, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. CMOs and MBSs are shown separately, as they are not due at a single maturity.

		AMORTIZED		FAIR
		COST		VALUE
Due in one year or less	$	8,852	$	8,981
Due after one year through five years		133,512		136,684
Due after five years through ten years		278,209		285,781
Due after ten years		273,027		281,465
CMOs and MBSs		46,425		52,350
	$	740,025	$	765,261

The following tables summarize, for all available-for-sale securities in an unrealized loss position at March 31, 2013 and December 31, 2012, respectively, the aggregate fair value and gross unrealized loss by length of time those securities that have continuously been in an unrealized loss position (in thousands):

		March 31, 2013
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	88,143	$	1,147	$	-	$	-	$	88,143	$	1,147
CMOs - residential		2,089		19		-		-		2,089		19
CMOs - commercial		-		-		576		399		576		399
U.S. Government obligations		7,004		18		-		-		7,004		18
GSEs		1,416		65		5,894		70		7,310		135
States and political subdivisions		42,289		460		22,117		478		64,406		938
Foreign governments		16,905		259		-		-		16,905		259
Total temporarily impaired
securities	$	157,846	$	1,968	$	28,587	$	947	$	186,433	$	2,915
Number of securities in an
unrealized loss position		53				17				70

		December 31, 2012
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	61,386	$	953	$	-	$	-	$	61,386	$	953
CMOs - residential		2,416		21		1,138		44		3,554		65
CMOs - commercial		-		-		570		405		570		405
U.S. Government obligations		5,667		2		-		-		5,667		2
GSEs		6,162		40		2,784		27		8,946		67
States and political subdivisions		53,036		657		17,707		338		70,743		995
Total fixed maturities		128,667		1,673		22,199		814		150,866		2,487
Nonredeemable preferred stocks		1,378		10		-		-		1,378		10
Total temporarily impaired
securities	$	130,045	$	1,683	$	22,199	$	814	$	152,244	$	2,497
Number of securities in an
unrealized loss position		45				23				68

Substantially all of the unrealized losses on fixed maturities available-for-sale at March 31, 2013 and December 31, 2012 relate to investment grade securities and are attributable to changes in market interest rates. Because the Company does not intend to sell, nor is it more likely than not that the Company will have to sell such investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2013.

Other-Than-Temporary Impairment Evaluations

We recognize an other-than-temporary impairment loss in earnings in the period that we determine: 1) we intend to sell the security; 2) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis; or 3) the security has a credit loss. Any non-credit portion of the other-than-temporary impairment loss is recognized in other comprehensive income (loss). See Note 1E(vi) to the Consolidated Financial Statements in the 2012 Annual Report for further discussion of the factors considered by management in its regular review to identify and recognize other-than-temporary impairments on available-for-sale securities. Our other-than-temporary impairment losses for the three months ended March 31, 2013 and 2012 were as follows (in thousands):

		2013		2012
Total other-than-temporary impairment losses	$	-	$	83
Portion of losses recognized in other comprehensive income (loss)		-		-
Net impairment losses recognized in earnings	$	-	$	83

Credit losses were recognized on certain fixed maturities for which each security also had an impairment loss recognized in other comprehensive income (loss). The rollforward of these credit losses for the three months ended March 31, 2013 and 2012 were as follows (in thousands):

		2013		2012
Balance at beginning of year	$	1,976	$	2,555
Additional credit losses for which an other-than-temporary
loss was previously recognized		-		-
Securities sold		-		(576)
Balance at end of period	$	1,976	$	1,979

The after-tax portion of other-than-temporary impairments included in accumulated other comprehensive income (loss) at March 31, 2013 and December 31, 2012 consists of $389,000 related to CMO securities; and $684,000 related to redeemable preferred stock.