INVESTMENTS

3 Months Ended

Mar. 31, 2012

INVESTMENTS

INVESTMENTS

2.  INVESTMENTS

Our investments include fixed income debt securities and common stock equity securities.  As disclosed in our 2011 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 March 31, 2012 and December 31, 2011. 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 March 31, 2012 and December 31, 2011, unrealized losses, as shown in the following tables, were less than 1% of total invested assets.  Unrealized losses have increased slightly in 2012, as the market value of fixed income securities have decreased as interest rates increased during the first quarter.

Investment Positions with Unrealized Losses

Segmented by Type and Period of Continuous

Unrealized Loss at March 31, 2012

(dollars in thousands)	< 12 Mos.			12 Mos. & Greater			Total
U.S. Government
Fair value	$	5,009		$	—		$	5,009
Cost or Amortized Cost	5,028			—			5,028
Unrealized Loss	(19		)	—			(19		)
U.S. Agency
Fair value	$	115,302		$	—		$	115,302
Cost or Amortized Cost	117,151			—			117,151
Unrealized Loss	(1,849		)	—			(1,849		)
Non-U.S. govt. & agency
Fair value	$	1,946		$	—		$	1,946
Cost or Amortized Cost	1,952			—			1,952
Unrealized Loss	(6		)	—			(6		)
Mortgage-backed
Fair value	$	—		$	—		$	—
Cost or Amortized Cost	—			—			—
Unrealized Loss	—			—			—
ABS/CMO*
Fair value	$	13,055		$	—		$	13,055
Cost or Amortized Cost	13,106			—			13,106
Unrealized Loss	(51		)	—			(51		)
Corporate
Fair value	$	102,435		$	21,273		$	123,708
Cost or Amortized Cost	104,539			22,040			126,579
Unrealized Loss	(2,104		)	(767		)	(2,871		)
States, political subdivisions and revenues
Fair value	$	49,916		$	1,066		$	50,982
Cost or Amortized Cost	51,130			1,067			52,197
Unrealized Loss	(1,214		)	(1		)	(1,215		)
Subtotal, debt securities
Fair value	$	287,663		$	22,339		$	310,002
Cost or Amortized Cost	292,906			23,107			316,013
Unrealized Loss	(5,243		)	(768		)	(6,011		)
Common Stock
Fair value	$	14,392		$	—		$	14,392
Cost or Amortized Cost	15,874			—			15,874
Unrealized Loss	(1,482		)	—			(1,482		)
Total
Fair value	$	302,055		$	22,339		$	324,394
Cost or Amortized Cost	308,780			23,107			331,887
Unrealized Loss	(6,725		)	(768		)	(7,493		)

* 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, 2011

(dollars in thousands)	< 12 Mos.			12 Mos. & Greater			Total
U.S. Government
Fair value	$	5,023		$	—		$	5,023
Cost or Amortized Cost	5,031			—			5,031
Unrealized Loss	(8		)	—			(8		)
U.S. Agency
Fair value	$	—		$	—		$	—
Cost or Amortized Cost	—			—			—
Unrealized Loss	—			—			—
Mortgage-backed
Fair value	$	—		$	—		$	—
Cost or Amortized Cost	—			—			—
Unrealized Loss	—			—			—
ABS/CMO *
Fair value	$	—		$	—		$	—
Cost or Amortized Cost	—			—			—
Unrealized Loss	—			—			—
Corporate
Fair value	$	49,464		$	28,698		$	78,162
Cost or Amortized Cost	51,894			30,351			82,245
Unrealized Loss	(2,430		)	(1,653		)	(4,083		)
States, political subdivisions and revenues
Fair value	$	—		$	1,050		$	1,050
Cost or Amortized Cost	—			1,068			1,068
Unrealized Loss	—			(18		)	(18		)
Subtotal, debt securities
Fair value	$	54,487		$	29,748		$	84,235
Cost or Amortized Cost	56,925			31,419			88,344
Unrealized Loss	(2,438		)	(1,671		)	(4,109		)
Common Stock
Fair value	$	25,952		$	—		$	25,952
Cost or Amortized Cost	28,496			—			28,496
Unrealized Loss	(2,544		)	—			(2,544		)
Total
Fair value	$	80,439		$	29,748		$	110,187
Cost or Amortized Cost	85,421			31,419			116,840
Unrealized Loss	(4,982		)	(1,671		)	(6,653		)

* 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 March 31, 2012 and December 31, 2011 were as follows:

Available-for-sale

(in thousands)

	3/31/2012
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Asset Class	Cost		Gains		Losses			Value
U.S. agencies	$	73,125	$	471	$	(165	)	$	73,431
Corporates	493,373		29,409		(2,382		)	520,400
Mortgage-backed	251,932		15,718		—			267,650
ABS/CMO*	71,770		2,677		(51		)	74,396
Non-U.S. govt. & agency	8,406		298		(6		)	8,698
U.S. government	15,712		381		(19		)	16,074
States, political subdivisions and revenues	279,811		12,206		(1,215		)	290,802
Total Fixed Income	$	1,194,129	$	61,160	$	(3,838	)	$	1,251,451

Available-for-sale

(in thousands)

	12/31/2011
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Asset Class	Cost		Gains		Losses			Value
U.S. agencies	$	112,975	$	844	$	—		$	113,819
Corporates	439,079		31,640		(3,619		)	467,100
Mortgage-backed	233,134		15,852		—			248,986
ABS/CMO*	54,325		2,628		—			56,953
Non-U.S. govt. & agency	6,403		294		—			6,697
U.S. government	15,721		459		(8		)	16,172
States, political subdivisions and revenues	224,091		12,517		(18		)	236,590
Total Fixed Income	$	1,085,728	$	64,234	$	(3,645	)	$	1,146,317

*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 March 31, 2012:

	3/31/2012
AFS	Amortized		Fair
(in thousands)	Cost		Value
Due in one year or less	$	7,792	$	7,892
Due after one year through five years	106,241		112,624
Due after five years through 10 years	565,573		594,238
Due after 10 years	190,821		194,651
Mtge/ABS/CMO*	323,702		342,046
Total available-for-sale	$	1,194,129	$	1,251,451

*Mortgage-backed, asset-backed & collateralized mortgage obligations

Held-to-Maturity Debt Securities

The carrying value and fair value of held-to-maturity securities at March 31, 2012 and December 31, 2011 were as follows:

Held-to-maturity

(in thousands)

	3/31/2012
			Gross		Gross
	Amortized Cost/		Unrecognized		Unrecognized			Fair
Asset Class	Carrying Value**		Gains		Losses			Value
U.S. agencies	$	145,102	$	271	$	(1,684	)	$	143,689
Corporates	15,000		—		(489		)	14,511
Mortgage-backed	—		—		—			—
ABS/CMO*	—		—		—			—
Non-U.S. govt. & agency	—		—		—			—
U.S. government	—		—		—			—
States, political subdivisions and revenues	1,654		121		—			1,775
Total Fixed Income	$	161,756	$	392	$	(2,173	)	$	159,975

Held-to-maturity

(in thousands)

	12/31/2011
			Gross		Gross
	Amortized Cost/		Unrecognized		Unrecognized			Fair
Asset Class	Carrying Value**		Gains		Losses			Value
U.S. agencies	$	243,571	$	1,085	$	—		$	244,656
Corporates	15,000		—		(464		)	14,536
Mortgage-backed	—		—		—			—
ABS/CMO*	—		—		—			—
U.S. government	—		—		—			—
States, political subdivisions and revenues	1,655		134		—			1,789
Total Fixed Income	$	260,226	$	1,219	$	(464	)	$	260,981

*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 March 31, 2012:

	3/31/2012
HTM	Amortized		Fair
(in thousands)	Cost		Value
Due in one year or less	$	4,984	$	5,182
Due after one year through five years	652		740
Due after five years through 10 years	—		—
Due after 10 years	156,120		154,053
Mtge/ABS/CMO*	—		—
Total held-to-maturity	$	161,756	$	159,975

*Mortgage-backed, asset-backed & collateralized mortgage obligations

The following table shows the composition of the fixed income securities in unrealized loss positions at March 31, 2012 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	$	300,444	$	294,680	$	(5,764	)	95.9	%
2	BBB	Baa	15,569		15,322		(247		)	4.1	%
3	BB	Ba	—		—		—			—
4	B	B	—		—		—			—
5	CCC or lower	Caa or lower	—		—		—			—
6			—		—		—			—
		Total	$	316,013	$	310,002	$	(6,011	)	100.0	%

Cash and Short-term Investments

Cash consists of uninvested balances in bank accounts.  We had a cash balance of $70.3 million at the end of the first quarter, compared to $81.2 million at the end of 2011. Short-term investments are carried at cost, which approximates fair value.  The balance at March 31, 2012 was $58.5 million compared to $23.9 million at December 31, 2011.

Evaluating Investments for OTTI

The fixed income portfolio contained 92 unrealized loss positions as of March 31, 2012. The $6.0 million in associated unrealized losses for these 92 securities represents 0.4% of the fixed income portfolio’s cost basis. Of these 92 securities, six have been in an unrealized loss position for 12 consecutive months or longer and these collectively represent $0.8 million in unrealized losses.  The unrealized losses on these six 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.  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 March 31, 2012, we held 20 common stock positions that were in unrealized loss positions. Unrealized losses on these securities totaled $1.5 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 20 common stock positions that were in an unrealized loss position, none have been in an unrealized loss position for 12 consecutive months or longer.

In the first quarter of 2012, we did not recognize any other-than-temporary impairment charges for equity securities. Comparatively, we did not recognize any OTTI losses on equity securities during the first three months of 2011.