INVESTMENTS

6 Months Ended

Jun. 30, 2011

INVESTMENTS

INVESTMENTS

2. INVESTMENTS

Our investments include fixed income debt securities and common stock equity securities.  As disclosed in our 2010 Annual Report on Form 10-K, we present our investments in these classes as available-for-sale, held-to-maturity, or trading securities.  When available, we obtain quoted market prices to determine fair value for our investments.  If a quoted market price is not available, fair value is estimated using a secondary pricing source or using quoted market prices of similar securities. We have no investment securities for which fair value is determined using Level 3 inputs as defined in note 3 to the unaudited condensed consolidated interim financial statements, “Fair Value Measurements.”

We conduct and document periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other-than-temporary.  The following tables are used as part of our impairment analysis and illustrate the total value of securities that were in an unrealized loss position as of June 30, 2011 and December 31, 2010. The tables segregate the securities based on type, noting the fair value, cost (or amortized cost), and unrealized loss on each category of investment as well as in total. The tables further classify the securities based on the length of time they have been in an unrealized loss position.  As of June 30, 2011 and December 31, 2010, unrealized losses, as shown in the following tables, were less than 1% of total invested assets.  Unrealized losses have decreased in 2011, as equity markets have improved and interest rates have decreased in 2011.

Investment Positions with Unrealized Losses

Segmented by Type and Period of Continuous

Unrealized Loss at June 30, 2011

(dollars in thousands)	< 12 Mos.			12 Mos. & Greater			Total
Treasuries
Fair value	$	4,816		$	—		$	4,816
Cost or Amortized Cost	4,899			—			4,899
Unrealized Loss	(83		)	—			(83		)
Agencies
Fair value	$	316,693		$	—		$	316,693
Cost or Amortized Cost	321,780			—			321,780
Unrealized Loss	(5,087		)	—			(5,087		)
Mortgage-backed
Fair value	$	48,778		$	—		$	48,778
Cost or Amortized Cost	49,296			—			49,296
Unrealized Loss	(518		)	—			(518		)
ABS/CMO*
Fair value	$	9,272		$	—		$	9,272
Cost or Amortized Cost	9,347			—			9,347
Unrealized Loss	(75		)	—			(75		)
Corporate
Fair value	$	87,985		$	—		$	87,985
Cost or Amortized Cost	90,514			—			90,514
Unrealized Loss	(2,529		)	—			(2,529		)
Municipals
Fair value	$	47,854		$	2,060		$	49,914
Cost or Amortized Cost	48,464			2,090			50,554
Unrealized Loss	(610		)	(30		)	(640		)
Subtotal, debt securities
Fair value	$	515,398		$	2,060		$	517,458
Cost or Amortized Cost	524,300			2,090			526,390
Unrealized Loss	(8,902		)	(30		)	(8,932		)
Common Stock
Fair value	$	14,712		$	—		$	14,712
Cost or Amortized Cost	16,337			—			16,337
Unrealized Loss	(1,625		)	—			(1,625		)
Total
Fair value	$	530,110		$	2,060		$	532,170
Cost or Amortized Cost	540,637			2,090			542,727
Unrealized Loss	(10,527		)	(30		)	(10,557		)

* Asset-backed & collateralized mortgage obligations.

This table excludes securities with a fair value of less than $0.1 million classified as trading.

Investment Positions with Unrealized Losses

Segmented by Type and Period of Continuous

Unrealized Loss at December 31, 2010

(dollars in thousands)	< 12 Mos.			12 Mos. & Greater			Total
Treasuries
Fair value	$	5,689		$	—		$	5,689
Cost or Amortized Cost	5,880			—			5,880
Unrealized Loss	(191		)	—			(191		)
Agencies
Fair value	$	295,897		$	—		$	295,897
Cost or Amortized Cost	304,374			—			304,374
Unrealized Loss	(8,477		)	—			(8,477		)
Mortgage-backed
Fair value	$	43,852		$	—		$	43,852
Cost or Amortized Cost	44,659			—			44,659
Unrealized Loss	(807		)	—			(807		)
ABS/CMO *
Fair value	$	2,160		$	—		$	2,160
Cost or Amortized Cost	2,196			—			2,196
Unrealized Loss	(36		)	—			(36		)
Corporate
Fair value	$	110,772		$	1,951		$	112,723
Cost or Amortized Cost	113,813			2,012			115,825
Unrealized Loss	(3,041		)	(61		)	(3,102		)
Municipals
Fair value	$	80,465		$	996		$	81,461
Cost or Amortized Cost	82,652			1,050			83,702
Unrealized Loss	(2,187		)	(54		)	(2,241		)
Subtotal, debt securities
Fair value	$	538,835		$	2,947		$	541,782
Cost or Amortized Cost	553,574			3,062			556,636
Unrealized Loss	(14,739		)	(115		)	(14,854		)
Common Stock
Fair value	$	6,078		$	—		$	6,078
Cost or Amortized Cost	6,372			—			6,372
Unrealized Loss	(294		)	—			(294		)
Total
Fair value	$	544,913		$	2,947		$	547,860
Cost or Amortized Cost	559,946			3,062			563,008
Unrealized Loss	(15,033		)	(115		)	(15,148		)

* Asset-backed & collateralized mortgage obligations.

This table excludes securities with a fair value of $0.1 million, classified as trading.

The following tables show the amortized cost, unrealized gains/losses, fair value and contractual maturities for our available-for-sale and held-to-maturity securities.

Available-for-Sale Securities

The amortized cost and fair value of securities available-for-sale at June 30, 2011 and December 31, 2010 were as follows:

Available-for-sale

(in thousands)

	6/30/2011
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Asset Class	Cost		Gains		Losses			Value
Agencies	$	145,588	$	624	$	(1,215	)	$	144,997
Corporates	381,778		24,406		(1,729		)	404,455
Mortgage-backed	249,128		12,554		(518		)	261,164
ABS/CMO*	67,558		2,172		(75		)	69,655
Treasuries	67,044		577		(83		)	67,538
Municipals	228,827		5,862		(640		)	234,049
Total Fixed Income	$	1,139,923	$	46,195	$	(4,260	)	$	1,181,858

Available-for-sale

(in thousands)

	12/31/2010
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Asset Class	Cost		Gains		Losses			Value
Agencies	$	103,133	$	869	$	(1,789	)	$	102,213
Corporates	449,651		26,259		(2,977		)	472,933
Mortgage-backed	243,364		11,584		(807		)	254,141
ABS/CMO*	47,494		2,457		(36		)	49,915
Treasuries	15,771		244		(191		)	15,824
Municipals	234,456		4,823		(2,241		)	237,038
Total Fixed Income	$	1,093,869	$	46,236	$	(8,041	)	$	1,132,064

*Asset-backed and collateralized mortgage obligations

The following table presents the amortized cost and fair value of available-for-sale debt securities by contractual maturity dates as of June 30, 2011, and December 31, 2010:

	6/30/2011				12/31/2010
AFS	Amortized		Fair		Amortized		Fair
(in thousands)	Cost		Value		Cost		Value
Agencies
Due within 1 year	$	1,909	$	1,909	$	2,004	$	2,021
After 1 but within 5 years	4,751		4,996		4,796		5,026
After 5 but within 10 years	78,540		78,094		39,988		39,712
After 10 years*	60,388		59,998		56,345		55,454
Total	145,588		144,997		103,133		102,213
Corporates
Due within 1 year	$	—	$	—	$	1,001	$	1,010
After 1 but within 5 years	92,687		99,542		96,768		101,864
After 5 but within 10 years	273,266		288,921		327,171		345,049
After 10 years	15,825		15,992		24,711		25,010
Total	381,778		404,455		449,651		472,933
Mortgage-backed
Due within 1 year	$	—	$	—	$	—	$	—
After 1 but within 5 years	—		—		—		—
After 5 but within 10 years	3,758		4,023		2,521		2,677
After 10 years*	245,370		257,141		240,843		251,464
Total	249,128		261,164		243,364		254,141
Asset-backed
Due within 1 year	$	—	$	—	$	—	$	—
After 1 but within 5 years	7,397		7,584		4,882		5,137
After 5 but within 10 years	4,099		4,567		4,099		4,567
After 10 years*	56,062		57,504		38,513		40,211
Total	67,558		69,655		47,494		49,915
Treasuries
Due within 1 year	$	16,790	$	16,803	$	3,865	$	3,915
After 1 but within 5 years	45,355		45,919		7,012		7,192
After 5 but within 10 years	4,899		4,816		4,894		4,717
After 10 years*	—		—		—		—
Total	67,044		67,538		15,771		15,824
Municipals
Due within 1 year	$	6,577	$	6,702	$	14,004	$	14,113
After 1 but within 5 years	21,928		22,545		25,177		26,303
After 5 but within 10 years	85,761		88,720		74,770		77,028
After 10 years*	114,561		116,082		120,505		119,594
Total	228,827		234,049		234,456		237,038
TOTAL	$	1,139,923	$	1,181,858	$	1,093,869	$	1,132,064

* Investments with no stated maturities are included as contractual maturities of greater than 10 years.  Actual maturities may differ due to call or prepayment rights.

Held-to-Maturity Debt Securities

The carrying value and fair value of held-to-maturity securities at June 30, 2011 and December 31, 2010 were as follows:

Held-to-maturity

(in thousands)

	6/30/2011
			Gross		Gross
	Amortized Cost/		Unrecognized		Unrecognized			Fair
Asset Class	Carrying Value**		Gains		Losses			Value
Agencies	$	266,649	$	439	$	(3,872	)	$	263,216
Corporates	15,000		—		(800		)	14,200
Mortgage-backed	—		—		—			—
ABS/CMO*	—		—		—			—
Treasuries	—		—		—			—
Municipals	3,874		177		—			4,051
Total Fixed Income	$	285,523	$	616	$	(4,672	)	$	281,467

Held-to-maturity

(in thousands)

	12/31/2010
			Gross		Gross
	Amortized Cost/		Unrecognized		Unrecognized			Fair
Asset Class	Carrying Value**		Gains		Losses			Value
Agencies	$	288,407	$	607	$	(6,688	)	$	282,326
Corporates	15,000		100		(125		)	14,975
Mortgage-backed	—		—		—			—
ABS/CMO*	—		—		—			—
Treasuries	—		—		—			—
Municipals	5,851		232		—			6,083
Total Fixed Income	$	309,258	$	939	$	(6,813	)	$	303,384

*Asset-backed and collateralized mortgage obligations

** Held-to-maturity securities are carried on the unaudited condensed consolidated balance sheets at amortized cost and changes in the fair value of these securities, other than impairment charges, are not reported on the financial statements.

The following table presents the carrying value and fair value of debt securities held-to-maturity by contractual maturity dates as of June 30, 2011 and December 31, 2010:

	6/30/2011				12/31/2010
HTM	Amortized		Fair		Amortized		Fair
(in thousands)	Cost		Value		Cost		Value
Agencies
Due within 1 year	$	—	$	—	$	4,086	$	4,117
After 1 but within 5 years	13,969		14,235		3,960		4,351
After 5 but within 10 years	25,780		25,616		18,994		18,812
After 10 years*	226,900		223,365		261,367		255,046
Total	266,649		263,216		288,407		282,326
Corporates
Due within 1 year	$	—	$	—	$	—	$	—
After 1 but within 5 years	—		—		—		—
After 5 but within 10 years	—		—		—		—
After 10 years	15,000		14,200		15,000		14,975
Total	15,000		14,200		15,000		14,975
Mortgage-backed
Due within 1 year	$	—	$	—	$	—	$	—
After 1 but within 5 years	—		—		—		—
After 5 but within 10 years	—		—		—		—
After 10 years*	—		—		—		—
Total	—		—		—		—
Asset-backed
Due within 1 year	$	—	$	—	$	—	$	—
After 1 but within 5 years	—		—		—		—
After 5 but within 10 years	—		—		—		—
After 10 years*	—		—		—		—
Total	—		—		—		—
Treasuries
Due within 1 year	$	—	$	—	$	—	$	—
After 1 but within 5 years	—		—		—		—
After 5 but within 10 years	—		—		—		—
After 10 years*	—		—		—		—
Total	—		—		—		—
Municipals
Due within 1 year	$	800	$	812	$	2,631	$	2,685
After 1 but within 5 years	3,074		3,239		3,220		3,398
After 5 but within 10 years	—		—		—		—
After 10 years*	—		—		—		—
Total	3,874		4,051		5,851		6,083
TOTAL	$	285,523	$	281,467	$	309,258	$	303,384

*Investments with no stated maturities are included as contractual maturities of greater than 10 years.  Actual maturities may differ due to call or prepayment rights.

The following table shows the composition of the fixed income securities in unrealized loss positions at June 30, 2011 by the National Association of Insurance Commissioners (NAIC) rating and the generally equivalent Standard & Poor’s (S&P) and Moody’s ratings.  The vast majority of the securities are rated by S&P and/or Moody’s.

	Equivalent	Equivalent	(dollars in thousands)
NAIC	S&P	Moody’s					Unrealized			Percent
Rating	Rating	Rating	Book Value		Fair Value		Loss			to Total
1	AAA/AA/A	Aaa/Aa/A	$	511,893	$	503,229	$	(8,664	)	97.0	%
2	BBB	Baa	14,497		14,229		(268		)	3.0	%
3	BB	Ba	—		—		—			—
4	B	B	—		—		—			—
5	CCC or lower	Caa or lower	—		—		—			—
6			—		—		—			—
		Total	$	526,390	$	517,458	$	(8,932	)	100.0	%

Evaluating Investments for OTTI

The fixed income portfolio contained 138 unrealized loss positions as of June 30, 2011. The $8.9 million in associated unrealized losses for these 138 securities represents 0.6% of the fixed income portfolio’s cost basis. Of these 138 securities, two have been in an unrealized loss position for 12 consecutive months or longer and these collectively represent less than $0.1 million in unrealized losses.  The unrealized losses on these two securities are due to changes in interest rates, and are not credit-specific issues.  All fixed income securities in the investment portfolio continue to pay the expected coupon payments under the contractual terms of the securities.  In 2009, we adopted GAAP guidance on the recognition and presentation of other-than-temporary impairment (OTTI). Accordingly, any credit-related impairment related to fixed income securities we do not plan to sell and for which we are not more-likely-than-not to be required to sell is recognized in net earnings, with the non-credit related impairment recognized in comprehensive earnings. Based on our analysis, our fixed income portfolio is of a high credit quality and we believe we will recover the amortized cost basis of our fixed income securities.  The fixed income unrealized losses can primarily be attributed to changes in interest rates.  We continually monitor the credit quality of our fixed income investments to assess if it is probable that we will receive our contractual or estimated cash flows in the form of principal and interest.  There were no OTTI losses recognized in net earnings or other comprehensive earnings in the periods presented.

As of June 30, 2011, we held 34 common stock positions that were in unrealized loss positions. Unrealized losses on these securities totaled $1.6 million. Based on our analysis, we believe these securities will recover in a reasonable period of time and we have the intent and ability to hold these securities until recovery.  Of the 34 common stock positions that were in an unrealized loss position, none have been in an unrealized loss position for 12 consecutive months or longer.

Through June 30, 2011, there were no impairment charges for equity securities. Comparatively, we did not recognize any OTTI losses on equity securities during the first six months of 2010.