2. INVESTMENTS

Our investments include fixed income debt securities and common stock equity securities. As disclosed in our 2012 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.”

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 available-for-sale securities at March 31, 2013 and December 31, 2012 were as follows:

Available-for-sale

(in thousands)

	3/31/2013
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Asset Class	Cost		Gains		Losses			Value
U.S. agency	$	11,585	$	118	$	—		$	11,703
Corporate	538,511		42,304		(632		)	580,183
Mortgage-backed	251,591		13,359		(177		)	264,773
ABS/CMO*	84,226		3,743		(193		)	87,776
Non-U.S. govt. & agency	8,411		833		—			9,244
U.S. government	16,997		330		—			17,327
Municipal	427,903		14,934		(273		)	442,564
Total Fixed Income	$	1,339,224	$	75,621	$	(1,275	)	$	1,413,570

Equity	$	235,195	$	172,775	$	(290	)	$	407,680

Available-for-sale

(in thousands)

	12/31/2012
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Asset Class	Cost		Gains		Losses			Value
U.S. agency	$	11,609	$	150	$	—		$	11,759
Corporate	535,437		45,497		(226		)	580,708
Mortgage-backed	234,629		15,758		—			250,387
ABS/CMO*	72,681		4,648		—			77,329
Non-U.S. govt. & agency	8,410		957		—			9,367
U.S. government	16,358		355		—			16,713
Municipal	415,226		17,250		(157		)	432,319
Total Fixed Income	$	1,294,350	$	84,615	$	(383	)	$	1,378,582

Equity	$	240,287	$	136,376	$	(875	)	$	375,788

*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, 2013:

	3/31/2013
AFS	Amortized		Fair
(in thousands)	Cost		Value
Due in one year or less	$	25,339	$	25,448
Due after one year through five years	140,966		150,519
Due after five years through 10 years	680,044		722,419
Due after 10 years	157,058		162,635
Mtge/ABS/CMO*	335,817		352,549
Total available-for-sale	$	1,339,224	$	1,413,570

*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, 2013 and December 31, 2012 were as follows:

Held-to-maturity

(in thousands)

	3/31/2013
			Gross		Gross
	Amortized Cost/		Unrecognized		Unrecognized		Fair
Asset Class	Carrying Value**		Gains		Losses		Value
U.S. agency	$	5,085	$	10	$	—	$	5,095
Corporate	—		—		—		—
Mortgage-backed	—		—		—		—
ABS/CMO*	—		—		—		—
Non-U.S. govt. & agency	—		—		—		—
U.S. government	—		—		—		—
Municipal	651		60		—		711
Total Fixed Income	$	5,736	$	70	$	—	$	5,806

Held-to-maturity

(in thousands)

	12/31/2012
			Gross		Gross
	Amortized Cost/		Unrecognized		Unrecognized		Fair
Asset Class	Carrying Value**		Gains		Losses		Value
U.S. agency	$	10,076	$	74	$	—	$	10,150
Corporate	—		—		—		—
Mortgage-backed	—		—		—		—
ABS/CMO*	—		—		—		—
U.S. government	—		—		—		—
Municipal	1,652		66		—		1,718
Total Fixed Income	$	11,728	$	140	$	—	$	11,868

*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, 2013:

	3/31/2013
HTM	Amortized		Fair
(in thousands)	Cost		Value
Due in one year or less	$	—	$	—
Due after one year through five years	651		711
Due after five years through 10 years	—		—
Due after 10 years	5,085		5,095
Mtge/ABS/CMO*	—		—
Total held-to-maturity	$	5,736	$	5,806

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

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, 2013 and December 31, 2012. 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, 2013 and December 31, 2012, unrealized losses, as shown in the following tables, were less than 1% of total invested assets. Unrealized losses have increased in 2013, as interest rates have increased during the first three months of the year.

Investment Positions with Unrealized Losses

Segmented by Type and Period of Continuous

Unrealized Loss at March 31, 2013

(in thousands)	< 12 Mos.			12 Mos. & Greater			Total

U.S. Government
Fair value	$	—		$	—		$	—
Cost or Amortized Cost	—			—			—
Unrealized Loss	—			—			—

U.S. Agency
Fair value	$	—		$	—		$	—
Cost or Amortized Cost	—			—			—
Unrealized Loss	—			—			—

Non-U.S. govt. & agency
Fair value	$	—		$	—		$	—
Cost or Amortized Cost	—			—			—
Unrealized Loss	—			—			—

Mortgage-backed
Fair value	$	28,234		$	—		$	28,234
Cost or Amortized Cost	28,411			—			28,411
Unrealized Loss	(177		)	—			(177		)

ABS/CMO*
Fair value	$	14,612		$	—		$	14,612
Cost or Amortized Cost	14,805			—			14,805
Unrealized Loss	(193		)	—			(193		)

Corporate
Fair value	$	68,943		$	976		$	69,919
Cost or Amortized Cost	69,558			993			70,551
Unrealized Loss	(615		)	(17		)	(632		)

Municipal
Fair value	$	52,178		$	—		$	52,178
Cost or Amortized Cost	52,451			—			52,451
Unrealized Loss	(273		)	—			(273		)

Subtotal, debt securities
Fair value	$	163,967		$	976		$	164,943
Cost or Amortized Cost	165,225			993			166,218
Unrealized Loss	(1,258		)	(17		)	(1,275		)

Equity securities
Fair value	$	2,379		$	—		$	2,379
Cost or Amortized Cost	2,669			—			2,669
Unrealized Loss	(290		)	—			(290		)

Total
Fair value	$	166,346		$	976		$	167,322
Cost or Amortized Cost	167,894			993			168,887
Unrealized Loss	(1,548		)	(17		)	(1,565		)

* 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, 2012

(in thousands)	< 12 Mos.			12 Mos. & Greater			Total

U.S. Government
Fair value	$	749		$	—		$	749
Cost or Amortized Cost	749			—			749
Unrealized Loss	—			—			—

U.S. Agency
Fair value	$	—		$	—		$	—
Cost or Amortized Cost	—			—			—
Unrealized Loss	—			—			—

Non-U.S. govt. & agency
Fair value	$	—		$	—		$	—
Cost or Amortized Cost	—			—			—
Unrealized Loss	—			—			—

Mortgage-backed
Fair value	$	—		$	—		$	—
Cost or Amortized Cost	—			—			—
Unrealized Loss	—			—			—

ABS/CMO *
Fair value	$	18		$	—		$	18
Cost or Amortized Cost	18			—			18
Unrealized Loss	—			—			—

Corporate
Fair value	$	35,969		$	960		$	36,929
Cost or Amortized Cost	36,162			993			37,155
Unrealized Loss	(193		)	(33		)	(226		)

Municipal
Fair value	$	35,064		$	—		$	35,064
Cost or Amortized Cost	35,221			—			35,221
Unrealized Loss	(157		)	—			(157		)

Subtotal, debt securities
Fair value	$	71,800		$	960		$	72,760
Cost or Amortized Cost	72,150			993			73,143
Unrealized Loss	(350		)	(33		)	(383		)

Equity securities
Fair value	$	16,207		$	—		$	16,207
Cost or Amortized Cost	17,082			—			17,082
Unrealized Loss	(875		)	—			(875		)

Total
Fair value	$	88,007		$	960		$	88,967
Cost or Amortized Cost	89,232			993			90,225
Unrealized Loss	(1,225		)	(33		)	(1,258		)

* Asset-backed & collateralized mortgage obligations.

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

The following table shows the composition of the fixed income securities in unrealized loss positions at March 31, 2013 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	Amortized				Unrealized			Percent
Rating	Rating	Rating	Cost		Fair Value		Loss			to Total
1	AAA/AA/A	Aaa/Aa/A	$	158,976	$	157,730	$	(1,246	)	97.7	%
2	BBB	Baa	7,242		7,213		(29		)	2.3	%
3	BB	Ba	—		—		—			—
4	B	B	—		—		—			—
5	CCC or lower	Caa or lower	—		—		—			—
6			—		—		—			—

		Total	$	166,218	$	164,943	$	(1,275	)	100.0	%

Cash and Short-term Investments

Cash consists of uninvested balances in bank accounts. We had a cash balance of $22.4 million at the end of the first quarter of 2013, compared to $44.3 million at the end of 2012. Short-term investments are carried at cost, which approximates fair value. The balance at March 31, 2013 was $3.5 million compared to $30.5 million at December 31, 2012.

Evaluating Investments for OTTI

The fixed income portfolio contained 69 securities in an unrealized loss position as of March 31, 2013. The $1.3 million in associated unrealized losses for these 69 securities represents less than 0.1% of the fixed income portfolio’s cost basis. Of these 69 securities, one has been in an unrealized loss position for 12 consecutive months or longer and represents less than $0.1 million in unrealized losses. We believe the amortized cost of this security is fully recoverable under current assumptions. All fixed income securities in the investment portfolio continue to pay the expected coupon payments under the contractual terms of the securities. 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 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 other-than-temporary impairment (OTTI) losses recognized in net earnings or other comprehensive earnings in the periods presented on the fixed income portfolio.

As of March 31, 2013, we held one common stock security that was in an unrealized loss position. The unrealized loss on this security was $0.3 million. Based on our analysis, we believe the security will recover in a reasonable period of time and we have the intent and ability to hold it until recovery. No equity securities have been in an unrealized loss position for 12 consecutive months or longer.

No securities were considered to be other-than-temporarily impaired during the first quarter of 2013 or 2012.