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Investments
 6 Months Ended
Jun. 30, 2012
Investments, Debt and Equity Securities [Abstract]  
Investments
INVESTMENTS

(A)
Investment Gains and Losses

The table below presents realized investment gains and losses, excluding impairment losses, for the periods indicated.

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2012
 
2011
 
2012
 
2011
 
(In thousands)
 
 
 
 
 
 
 
 
Available for sale debt securities:
 
 
 
 
 
 
 
Realized gains on disposal
$
2,579

 
330

 
4,207

 
3,137

Realized losses on disposal
—

 
—

 
—

 
—

Held to maturity debt securities:


 
 

 


 


Realized gains on disposal
44

 
104

 
160

 
478

Realized losses on disposal
(39
)
 
—

 
(413
)
 
—

Equity securities realized gains (losses)
—

 
56

 
(4
)
 
56

Real estate write-down
(159
)
 
—

 
(159
)
 
(50
)
Mortgage loans write-downs
—

 
—

 
—

 
(39
)
Other
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
Totals
$
2,425

 
490

 
3,791

 
3,582



The Company uses the specific identification method in computing realized gains and losses. Substantially all of the gains on bonds above are due to calls of securities rather than sales. This includes calls out of the Company's available for sale securities.

The table below presents net impairment losses recognized in earnings for the periods indicated.

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2012
 
2011
 
2012
 
2011
 
(In thousands)
 
 
 
 
 
 
 
 
Total other-than-temporary impairment losses on debt securities
$
(156
)
 
—

 
(409
)
 
—

Portion of loss (gain) recognized in comprehensive income
(235
)
 
—

 
(157
)
 
—

 
 
 
 
 
 
 
 
Net impairment losses on debt securities recognized in earnings
(391
)
 
—

 
(566
)
 
—

Equity securities impairments
(29
)
 
—

 
(53
)
 


 
 
 
 
 
 
 
 
Totals
$
(420
)
 
—

 
(619
)
 
—




The table below presents a roll forward of credit losses on securities for which the Company also recorded non-credit other-than-temporary impairments in other comprehensive loss.

 
Three Months
 Ended
June 30,
2012
 
Six Months
 Ended
June 30,
2012
 
Twelve Months
Ended
December 31,
2011
 
 
 
(In thousands)

 
 
 
 
 
 
 
 
Beginning balance, cumulative credit losses related to other-than-temporary impairments
$
1,297

 
1,122

 
997

Additions for credit losses not previously recognized in other-than-temporary impairments
391

 
566

 
125

 
 
 
 
 
 
Ending balance, cumulative credit losses related to other-than-temporary impairment
$
1,688

 
1,688

 
1,122



(B)
Debt and Equity Securities

The table below presents amortized costs and fair values of securities held to maturity at June 30, 2012.

 
Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. agencies
$
48,126

 
3,230

 
—

 
51,356

U.S. Treasury
1,938

 
651

 
—

 
2,589

States and political subdivisions
375,771

 
38,491

 
(160
)
 
414,102

Foreign governments
9,983

 
813

 
—

 
10,796

Public utilities
699,854

 
80,557

 
(3,782
)
 
776,629

Corporate
2,588,950

 
231,034

 
(5,305
)
 
2,814,679

Mortgage-backed
1,978,293

 
158,406

 
(40
)
 
2,136,659

Home equity
22,824

 
3,466

 
(1,317
)
 
24,973

Manufactured housing
13,038

 
872

 
(6
)
 
13,904

 
 
 
 
 
 
 
 
Totals
$
5,738,777

 
517,520

 
(10,610
)
 
6,245,687



The table below presents amortized costs and fair values of securities available for sale at June 30, 2012.

 
Securities Available for Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
States and political subdivisions
$
4,080

 
22

 
(69
)
 
4,033

Foreign governments
15,138

 
789

 
—

 
15,927

Public utilities
309,684

 
30,600

 
(703
)
 
339,581

Corporate
2,045,526

 
182,476

 
(2,392
)
 
2,225,610

Mortgage-backed
132,199

 
11,616

 
(96
)
 
143,719

Home equity
10,891

 
132

 
(1,841
)
 
9,182

Manufactured housing
6,953

 
655

 
—

 
7,608

 
2,524,471

 
226,290

 
(5,101
)
 
2,745,660

 
 
 
 
 
 
 
 
Equity public
6,344

 
2,845

 
(90
)
 
9,099

 
 
 
 
 
 
 
 
Totals
$
2,530,815

 
229,135

 
(5,191
)
 
2,754,759



The table below presents amortized costs and fair values of securities held to maturity at December 31, 2011.

 
Securities Held to Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
U.S. agencies
$
205,464

 
3,519

 
(330
)
 
208,653

U.S. Treasury
1,937

 
648

 
—

 
2,585

States and political subdivisions
358,364

 
27,338

 
(280
)
 
385,422

Foreign governments
9,979

 
927

 
—

 
10,906

Public utilities
685,989

 
77,060

 
(4,498
)
 
758,551

Corporate
2,258,640

 
195,551

 
(14,483
)
 
2,439,708

Mortgage-backed
2,082,650

 
155,413

 
(29
)
 
2,238,034

Home equity
23,815

 
439

 
(1,649
)
 
22,605

Manufactured housing
15,071

 
876

 
(81
)
 
15,866

 
 
 
 
 
 
 
 
Totals
$
5,641,909

 
461,771

 
(21,350
)
 
6,082,330



The table below presents amortized costs and fair values of securities available for sale at December 31, 2011.

 
Securities Available for Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(In thousands)
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
States and political subdivisions
$
4,042

 
16

 
(170
)
 
3,888

Foreign governments
20,145

 
588

 
—

 
20,733

Public utilities
327,794

 
32,511

 
(907
)
 
359,398

Corporate
1,881,735

 
155,144

 
(5,839
)
 
2,031,040

Mortgage-backed
163,856

 
12,389

 
(189
)
 
176,056

Home equity
10,887

 
30

 
(2,054
)
 
8,863

Manufactured housing
7,689

 
740

 
—

 
8,429

 
2,416,148

 
201,418

 
(9,159
)
 
2,608,407

 
 
 
 
 
 
 
 
Equity private
195

 
7,923

 
—

 
8,118

Equity public
6,307

 
2,266

 
(145
)
 
8,428

 
 
 
 
 
 
 
 
Totals
$
2,422,650

 
211,607

 
(9,304
)
 
2,624,953



The following table shows the gross unrealized losses and fair values of the Company's held to maturity investments by investment category and length of time the individual securities have been in a continuous unrealized loss position at June 30, 2012.

 
Securities Held to Maturity
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. agencies
$
—

 
—

 
—

 
—

 
—


—

U.S. Treasury
—

 
—

 
—

 
—

 
—

 
—

States and political subdivisions
4,879

 
(157
)
 
370

 
(3
)
 
5,249

 
(160
)
Foreign governments
—

 
—

 
—

 
—

 
—

 
—

Public utilities
41,660

 
(909
)
 
17,477

 
(2,873
)
 
59,137

 
(3,782
)
Corporate
187,310

 
(2,526
)
 
44,267

 
(2,779
)
 
231,577

 
(5,305
)
Mortgage-backed
2,906

 
(40
)
 
—

 
—

 
2,906

 
(40
)
Home equity
744

 
(137
)
 
11,840

 
(1,180
)
 
12,584

 
(1,317
)
Manufactured housing
345

 
(6
)
 
—

 
—

 
345

 
(6
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
237,844

 
(3,775
)
 
73,954

 
(6,835
)
 
311,798

 
(10,610
)


The following table shows the gross unrealized losses and fair values of the Company's available for sale investments by investment category and length of time the individual securities have been in a continuous unrealized loss position as of June 30, 2012.

 
Securities Available for Sale
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. agencies
$
—

 
—

 
—

 
—

 
—

 
—

U.S. Treasury
—

 
—

 
—

 
—

 
—

 
—

States and political subdivisions
1,392

 
(69
)
 
—

 
—

 
1,392

 
(69
)
Foreign governments
—

 
—

 
—

 
—

 
—

 
—

Public utilities
8,449

 
(703
)
 
—

 
—

 
8,449

 
(703
)
Corporate
86,094

 
(517
)
 
30,082

 
(1,875
)
 
116,176

 
(2,392
)
Mortgage-backed
3,834

 
(96
)
 
—

 
—

 
3,834

 
(96
)
Home equity
—

 
—

 
5,564

 
(1,841
)
 
5,564

 
(1,841
)
Manufactured housing
—

 
—

 
—

 
—

 
—

 
—

 
99,769

 
(1,385
)
 
35,646

 
(3,716
)
 
135,415

 
(5,101
)
 
 
 
 
 
 
 
 
 
 
 
 
Equity public
357

 
(19
)
 
370

 
(71
)
 
727

 
(90
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
100,126

 
(1,404
)
 
36,016

 
(3,787
)
 
136,142

 
(5,191
)


Liquidity in the bond market improved in 2012 and 2011 as economic and market conditions started to stabilize. Although the unrealized losses declined substantially in 2011 and continued to decline in the first and second quarter of 2012, there continues to be uncertainty in the bond markets regarding the economic recovery and some unrealized losses remain in the Company's portfolio. The Company does not consider these investments to be other-than-temporarily impaired as the Company does not intend to sell these securities until recovery in fair value or maturity, and expects to receive all amounts due relative to principal and interest.

The Company does not consider securities to be other-than-temporarily impaired when the market decline is attributable to factors such as market volatility, liquidity, spread widening and credit quality and when recovery of all amounts due under the contractual terms of the security is anticipated. Based on the review in concert with the Company's ability and intent to hold these securities until maturity, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2012. The Company will monitor the investment portfolio for future changes in issuer facts and circumstances that could result in future impairments beyond those currently identified.

During the second quarter of 2012, the Company recorded an other-than-temporary impairment on one asset-backed security. The security had a $390,000 credit impairment which is reported in the Condensed Consolidated Statements of Earnings and a $235,000 liquidity gain which did not affect current earnings. The Company intends to hold the security until recovery of fair market value or maturity.

Debt securities. The gross unrealized losses for debt securities are made up of 83 individual issues, or 6.9% of the total debt securities held by the Company. The market value of these bonds as a percent of amortized cost averages 96.6%. Of the 83 securities, 17, or approximately 20.5%, fall in the 12 months or greater aging category; and 74 were rated investment grade at June 30, 2012. Additional information on debt securities by investment category is summarized below.

U.S. Treasury. No securities had an unrealized loss.

U.S. Government agencies. No securities had an unrealized loss.

State and political subdivisions. The unrealized losses on these investments are the result of holdings in 11 securities. Of these securities, all are rated A or above except 1 security which is rated BBB. Based on these facts and the Company's intent to hold to maturity, no other-than-temporary loss was recognized as of June 30, 2012.

Foreign governments. No securities had an unrealized loss.

Public utilities. Of the 10 securities, all are rated BB+ or above. At this time, the Company does not consider any of these unrealized losses as other-than-temporary.

Corporate bonds. Corporate securities with unrealized losses are reviewed based on monitoring procedures described previously. The review includes the amount of the unrealized loss, the length of time that the issue has been in an unrealized loss position, credit ratings, analyst reports, and recent issuer financial information. A total of 53 securities had unrealized losses; with 5 issues rated below investment grade. More extensive analysis was performed on these 5 issues. Based on the work performed, none of these securities are considered other-than-temporarily impaired at June 30, 2012.

Mortgage-backed securities. 2 securities had unrealized losses. 1 is rated AA+ and 1 is rated CCC. The Company generally purchases these investments at a discount relative to their face amount and it is expected that the securities will not be settled at a price less than the stated par. Because the decline in market value is attributable to the current illiquidity in the market and not credit quality, and because the Company has the ability and intent to hold these securities until a recovery of fair value, which may be maturity, and based on the lack of adverse changes in expected cash flows, the Company does not consider the investments to be other-than-temporarily impaired at June 30, 2012.

Home equity. Of the 6 securities, 3 are rated AAA, 2 are rated AA, and 1 is rated CC. The Company performs a quarterly cash flow analysis on asset-backed securities that are rated below AA. Based on cash flow analysis, no other-than-temporary impairment loss was recognized as of June 30, 2012 .

Manufactured housing. One security had a negligible unrealized loss. The security is rated A and is not considered to be other than temporarily impaired.

Equity securities. The gross unrealized losses for equity securities are made up of 17 individual issues. These holdings are reviewed for impairment quarterly. As of June 30, 2012, 2 equity securities were other-than-temporarily impaired.

The following table shows the gross unrealized losses and fair values of the Company's held to maturity investments by investment category and length of time the individual securities have been in a continuous unrealized loss position at December 31, 2011.

 
Securities Held to Maturity
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. agencies
$
24,985

 
(16
)
 
27,010

 
(314
)
 
51,995

 
(330
)
U.S. Treasury
—

 
—

 
—

 
—

 
—

 
—

States and political subdivisions
805

 
(82
)
 
17,117

 
(198
)
 
17,922

 
(280
)
Foreign governments
—

 
—

 
—

 
—

 
—

 
—

Public utilities
26,509

 
(1,388
)
 
17,242

 
(3,110
)
 
43,751

 
(4,498
)
Corporate
199,934

 
(7,215
)
 
95,975

 
(7,268
)
 
295,909

 
(14,483
)
Mortgage-backed
23,256

 
(29
)
 
—

 
—

 
23,256

 
(29
)
Home equity
—

 
—

 
11,660

 
(1,649
)
 
11,660

 
(1,649
)
Manufactured housing
—

 
—

 
2,436

 
(81
)
 
2,436

 
(81
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
275,489

 
(8,730
)
 
171,440

 
(12,620
)
 
446,929

 
(21,350
)



The following table shows the gross unrealized losses and fair values of the Company's available for sale investments by investment category and length of time the individual securities have been in a continuous unrealized loss position at December 31, 2011.

 
Securities Available for Sale
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. agencies
$
—

 
—

 
2,257

 
(170
)
 
2,257

 
(170
)
U.S. Treasury
—

 
—

 
—

 
—

 
—

 
—

States and political subdivisions
19,314

 
(907
)
 
—

 
—

 
19,314

 
(907
)
Foreign governments
—

 
—

 
—

 
—

 
—

 
—

Public utilities
—

 
—

 
—

 
—

 
—

 
—

Corporate
100,584

 
(4,009
)
 
20,944

 
(1,830
)
 
121,528

 
(5,839
)
Mortgage-backed
3,950

 
(189
)
 
—

 
—

 
3,950

 
(189
)
Home equity
—

 
—

 
5,351

 
(2,054
)
 
5,351

 
(2,054
)
Manufactured housing
—

 
—

 
—

 
—

 
—

 
—

 
123,848

 
(5,105
)
 
28,552

 
(4,054
)
 
152,400

 
(9,159
)
 
 
 
 
 
 
 
 
 
 
 
 
Equity public
722

 
(84
)
 
299

 
(61
)
 
1,021

 
(145
)
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
$
124,570

 
(5,189
)
 
28,851

 
(4,115
)
 
153,421

 
(9,304
)


(C)
 Transfer of Securities

During the six months ended June 30, 2012 and 2011, the Company made no transfers to the held to maturity category from securities available for sale. Lower holdings of securities available for sale reduces the Company's exposure to market price volatility while still providing securities available for liquidity and asset/liability management purposes.

(D) Mortgage Loans and Real Estate

A financing receivable is a contractual right to receive money on demand or on fixed or determinable dates that is recognized as an asset in a company's statement of financial position. Mortgage, equity, participation and mezzanine loans on real estate are considered financing receivables reported by the Company.

Credit and default risk is minimized through strict underwriting guidelines and diversification of underlying property types and geographic locations. In addition to being secured by the property, mortgage loans with leases on the underlying property are often guaranteed by the lease payments and also by the borrower. This approach has proven to result in quality mortgage loans with few defaults. Mortgage loan interest income is recognized on an accrual basis with any premium or discount amortized over the life of the loan. Prepayment and late fees are recorded on the date of collection.

Loans in foreclosure, loans considered impaired or loans past due 90 days or more are placed on a non-accrual status. If a mortgage loan is determined to be on non-accrual status, the mortgage loan does not accrue any revenue into the Condensed Consolidated Statements of Earnings. The loan is independently monitored and evaluated as to potential impairment or foreclosure. If delinquent payments are made and the loan is brought current, then the Company returns the loan to active status and accrues income accordingly. The Company has no loans past due 90 days which are accruing interest.

The following table represents the loan-to-value ratio using the most recent appraised value.

 
June 30, 2012
 
December 31, 2011
 
Amount
 
%
 
Amount
 
%
 
(In thousands)
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
Mortgage Loans by Loan-to-Value Ratio (1):
 
 
 
 
 
 
 
Less than 50%
62,711

 
47.3
%
 
68,048

 
43.2
%
50% to 60%
15,617

 
11.8
%
 
32,091

 
20.4
%
60% to 70%
25,787

 
19.4
%
 
25,692

 
16.3
%
70% to 80%
4,978

 
3.8
%
 
5,505

 
3.5
%
80% to 90%
—

 
—
%
 
—

 
—
%
Greater than 90%
23,521

 
17.7
%
 
26,124

 
16.6
%
 
 
 
 
 
 
 
 
Totals
132,614

 
100.0
%
 
157,460

 
100.0
%

(1) Loan-to-Value Ratio using the most recent appraised value.

The mortgage loans in the greater than 90% category relate to new loans made with a long standing borrower. The loans are backed by the investment property, contracted leases, as well as a separate and additional guarantee of the long standing borrower.

The Company does not consider its mortgage loans to be a separate portfolio segment. The Company considers its primary class to be property type and primarily uses loan-to-value as its credit risk quality indicator. All loans within the portfolio are analyzed quarterly in order to monitor the financial quality of these assets. Based on ongoing monitoring, mortgage loans with a likelihood of becoming delinquent are identified and placed on an internal “watch list”. Among the criteria that would indicate a potential problem are: major tenant vacancies or bankruptcies, late payments, and loan relief/restructuring requests. The mortgage loan portfolio is analyzed for the need for a valuation allowance on any loan that is on the internal watch list, in the process of foreclosure or that currently has a valuation allowance.

Mortgage loans are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. When it is determined that a loan is impaired, a loss is recognized for the difference between the carrying amount of the mortgage loan and the estimated value reduced by the cost to sell. Estimated value is typically based on the loan's observable market price or the fair value of the collateral less cost to sell. Impairments and changes in the valuation allowance are reported in net realized capital gains (losses) in the Condensed Consolidated Statements of Earnings.

The following table represents the mortgage loan allowance for the six months ended June 30, 2012 and the year ended December 31, 2011:
 
June 30, 2012
 
December 31, 2011
 
(In thousands)
 
 
 
 
Balance, beginning of period
$
4,571

 
3,962

Provision
—

 
609

Releases
(4,571
)
 
—

 
 
 
 
Balance, end of period
$
—

 
4,571



The mortgage loan allowance released in the second quarter of 2012 pertained to a property forced into bankruptcy which the Company subsequently acquired in a bankruptcy auction. The mortgage loan was closed and the property reclassified as a real estate investment included in other long-term investments on the Company's balance sheet at June 30, 2012.