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 and held-to-maturity. 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 June 30, 2013 and December 31, 2012 were as follows:

Available-for-sale

(in thousands)

	6/30/2013
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Asset Class	Cost		Gains		Losses			Value
U.S. agency	$	8,561	$	80	$	(53	)	$	8,588
Corporate	493,568		23,612		(7,429		)	509,751
Mortgage-backed	257,996		8,640		(3,181		)	263,455
ABS/CMBS*	94,050		1,561		(2,190		)	93,421
Non-U.S. govt. & agency	8,412		437		—			8,849
U.S. government	16,994		263		(2		)	17,255
Municipal	501,193		8,237		(11,239		)	498,191
Total Fixed Income	$	1,380,774	$	42,830	$	(24,094	)	$	1,399,510

Equity	$	240,066	$	177,104	$	(356	)	$	416,814

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/CMBS*	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 commercial mortgage-backed

The following table presents the amortized cost and fair value of available-for-sale debt securities by contractual maturity dates as of June 30, 2013:

	6/30/2013
AFS	Amortized		Fair
(in thousands)	Cost		Value
Due in one year or less	$	7,482	$	7,598
Due after one year through five years	149,229		157,574
Due after five years through 10 years	639,502		649,586
Due after 10 years	232,515		227,876
Mtge/ABS/CMBS*	352,046		356,876
Total available-for-sale	$	1,380,774	$	1,399,510

*Mortgage-backed, asset-backed & commercial mortgage-backed

Held-to-Maturity Debt Securities

The carrying value and fair value of held-to-maturity securities at June 30, 2013 and December 31, 2012 were as follows:

Held-to-maturity

(in thousands)

	6/30/2013
			Gross		Gross
	Amortized Cost/		Unrecognized		Unrecognized		Fair
Asset Class	Carrying Value**		Gains		Losses		Value
U.S. agency	$	—	$	—	$	—	$	—
Corporate	—		—		—		—
Mortgage-backed	—		—		—		—
ABS/CMBS*	—		—		—		—
Non-U.S. govt. & agency	—		—		—		—
U.S. government	—		—		—		—
Municipal	651		50		—		701
Total Fixed Income	$	651	$	50	$	—	$	701

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/CMBS*	—		—		—		—
U.S. government	—		—		—		—
Municipal	1,652		66		—		1,718
Total Fixed Income	$	11,728	$	140	$	—	$	11,868

*Asset-backed and commercial mortgage-backed

** 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, 2013:

	6/30/2013
HTM	Amortized		Fair
(in thousands)	Cost		Value
Due in one year or less	$	—	$	—
Due after one year through five years	651		701
Due after five years through 10 years	—		—
Due after 10 years	—		—
Mtge/ABS/CMBS*	—		—
Total held-to-maturity	$	651	$	701

*Mortgage-backed, asset-backed & commercial mortgage-backed

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, 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 June 30, 2013 unrealized losses, as shown in the following tables, were 1.3% of total invested assets. Unrealized losses have increased in 2013, as interest rates increased sharply during the second quarter.

Investment Positions with Unrealized Losses

Segmented by Type and Period of Continuous

Unrealized Loss at June 30, 2013

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

U.S. Government
Fair value	$	2,244		$	—	$	2,244
Cost or Amortized Cost	2,246			—		2,246
Unrealized Loss	(2		)	—		(2		)

U.S. Agency
Fair value	$	3,943		$	—	$	3,943
Cost or Amortized Cost	3,996			—		3,996
Unrealized Loss	(53		)	—		(53		)

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

Mortgage-backed
Fair value	$	94,673		$	—	$	94,673
Cost or Amortized Cost	97,854			—		97,854
Unrealized Loss	(3,181		)	—		(3,181		)

ABS/CMBS*
Fair value	$	48,449		$	—	$	48,449
Cost or Amortized Cost	50,639			—		50,639
Unrealized Loss	(2,190		)	—		(2,190		)

Corporate
Fair value	$	184,781		$	—	$	184,781
Cost or Amortized Cost	192,210			—		192,210
Unrealized Loss	(7,429		)	—		(7,429		)

Municipal
Fair value	$	282,492		$	—	$	282,492
Cost or Amortized Cost	293,731			—		293,731
Unrealized Loss	(11,239		)	—		(11,239		)

Subtotal, debt securities
Fair value	$	616,582		$	—	$	616,582
Cost or Amortized Cost	640,676			—		640,676
Unrealized Loss	(24,094		)	—		(24,094		)

Equity securities
Fair value	$	2,313		$	—	$	2,313
Cost or Amortized Cost	2,669			—		2,669
Unrealized Loss	(356		)	—		(356		)

Total
Fair value	$	618,895		$	—	$	618,895
Cost or Amortized Cost	643,345			—		643,345
Unrealized Loss	(24,450		)	—		(24,450		)

* Asset-backed & commercial mortgage-backed.

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/CMBS*
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 & commercial mortgage-backed.

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 June 30, 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	$	618,529	$	595,416	$	(23,113	)	95.9	%
2	BBB	Baa	22,147		21,166		(981		)	4.1	%
3	BB	Ba	—		—		—			—
4	B	B	—		—		—			—
5	CCC or lower	Caa or lower	—		—		—			—
6			—		—		—			—

		Total	$	640,676	$	616,582	$	(24,094	)	100.0	%

Cash and Short-term Investments

Cash consists of uninvested balances in bank accounts. We had a cash balance of $12.8 million at the end of the second 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 June 30, 2013 was $10.8 million compared to $30.5 million at December 31, 2012.

Evaluating Investments for OTTI

The fixed income portfolio contained 283 securities in an unrealized loss position as of June 30, 2013. The $24.1 million in associated unrealized losses for these 283 securities represents 1.7% of the fixed income portfolio’s cost basis. Of these 283 securities, none have been in an unrealized loss position for 12 consecutive months or longer. 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 June 30, 2013, we held one common stock security that was in an unrealized loss position. The unrealized loss on this security was $0.4 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 half of 2013. During the second quarter of 2012, we recognized $1.2 million in other-than-temporary impairment charges for equity securities we no longer had the intent to hold until recovery.