2. INVESTMENTS

Our investments include fixed income debt securities and common stock equity securities. As disclosed in our 2013 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 March 31, 2014 and December 31, 2013 were as follows:

Available-for-sale

(in thousands)

	3/31/2014
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Asset Class	Cost		Gains		Losses			Value
U.S. agency	$	2,000	$	—	$	(3	)	$	1,997
Corporate	543,143		25,241		(2,803		)	565,581
Mtge/ABS/CMBS*	341,781		8,581		(5,408		)	344,954
Non-U.S. govt. & agency	13,852		736		—			14,588
U.S. government	18,205		190		—			18,395
Municipal	518,642		9,171		(6,046		)	521,767
Total Fixed Income	$	1,437,623	$	43,919	$	(14,260	)	$	1,467,282

Equity	$	220,292	$	206,744	$	(356	)	$	426,680

Available-for-sale

(in thousands)

	12/31/2013
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Asset Class	Cost		Gains		Losses			Value
U.S. agency	$	10,513	$	22	$	(237	)	$	10,298
Corporate	511,748		22,302		(8,012		)	526,038
Mtge/ABS/CMBS*	350,187		8,188		(7,650		)	350,725
Non-U.S. govt. & agency	13,306		437		(65		)	13,678
U.S. government	17,086		217		—			17,303
Municipal	528,209		6,495		(12,694		)	522,010
Total Fixed Income	$	1,431,049	$	37,661	$	(28,658	)	$	1,440,052

Equity	$	218,848	$	200,081	$	(275	)	$	418,654

*Mortgage-backed, 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 March 31, 2014:

	3/31/2014
AFS	Amortized		Fair
(in thousands)	Cost		Value
Due in one year or less	$	11,988	$	12,080
Due after one year through five years	176,091		184,885
Due after five years through 10 years	652,781		669,893
Due after 10 years	254,982		255,470
Mtge/ABS/CMBS*	341,781		344,954
Total available-for-sale	$	1,437,623	$	1,467,282

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

Held-to-Maturity Debt Securities

The carrying value and fair value of held-to-maturity securities was $0.7 million at March 31, 2014 and December 31, 2013. 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. Unrecognized gains on our held-to-maturity securities were less than $0.1 million at March 31, 2014 and December 31, 2013. As of March 31, 2014, the carrying value and fair value of all debt securities held-to-maturity have a contractual maturity date of one year or less.

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, 2014 and December 31, 2013. 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, 2014 unrealized losses, as shown in the following tables, were 0.8 percent of total invested assets. Unrealized losses decreased in 2014, as interest rates declined during the first quarter of the year.

	March 31, 2014									December 31, 2013
(in thousands)	< 12 Mos.			12 Mos. & Greater			Total			< 12 Mos.			12 Mos. & Greater			Total

U.S. Agency
Fair value	$	1,997		$	—		$	1,997		$	5,760		$	—		$	5,760
Cost or amortized cost	2,000			—			2,000			5,997			—			5,997
Unrealized Loss	$	(3	)	$	—		$	(3	)	$	(237	)	$	—		$	(237	)

Non-U.S. Government
Fair value	$	—		$	—		$	—		$	1,825		$	—		$	1,825
Cost or amortized cost	—			—			—			1,890			—			1,890
Unrealized Loss	$	—		$	—		$	—		$	(65	)	$	—		$	(65	)

Mortgage-backed
Fair value	$	98,902		$	7,737		$	106,639		$	118,283		$	—		$	118,283
Cost or amortized cost	102,619			8,199			110,818			124,034			—			124,034
Unrealized Loss	$	(3,717	)	$	(462	)	$	(4,179	)	$	(5,751	)	$	—		$	(5,751	)

ABS/CMBS*
Fair value	$	33,089		$	7,668		$	40,757		$	54,115		$	—		$	54,115
Cost or amortized cost	33,777			8,209			41,986			56,014			—			56,014
Unrealized Loss	$	(688	)	$	(541	)	$	(1,229	)	$	(1,899	)	$	—		$	(1,899	)

Corporate
Fair value	$	159,687		$	—		$	159,687		$	190,470		$	2,245		$	192,715
Cost or amortized cost	162,490			—			162,490			198,250			2,477			200,727
Unrealized Loss	$	(2,803	)	$	—		$	(2,803	)	$	(7,780	)	$	(232	)	$	(8,012	)

Municipal
Fair value	$	249,856		$	—		$	249,856		$	309,407		$	943		$	310,350
Cost or amortized cost	255,902			—			255,902			322,095			949			323,044
Unrealized Loss	$	(6,046	)	$	—		$	(6,046	)	$	(12,688	)	$	(6	)	$	(12,694	)

Subtotal, fixed income
Fair value	$	543,531		$	15,405		$	558,936		$	679,860		$	3,188		$	683,048
Cost or amortized cost	556,788			16,408			573,196			708,280			3,426			711,706
Unrealized Loss	$	(13,257	)	$	(1,003	)	$	(14,260	)	$	(28,420	)	$	(238	)	$	(28,658	)

Equity securities
Fair value	$	3,275		$	2,472		$	5,747		$	2,394		$	—		$	2,394
Cost or amortized cost	3,434			2,669			6,103			2,669			—			2,669
Unrealized Loss	$	(159	)	$	(197	)	$	(356	)	$	(275	)	$	—		$	(275	)

Total
Fair value	$	546,806		$	17,877		$	564,683		$	682,254		$	3,188		$	685,442
Cost or amortized cost	560,222			19,077			579,299			710,949			3,426			714,375
Unrealized Loss	$	(13,416	)	$	(1,200	)	$	(14,616	)	$	(28,695	)	$	(238	)	$	(28,933	)

*Asset-backed & commercial mortgage-backed

The following table shows the composition of the fixed income securities in unrealized loss positions at March 31, 2014 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	$	521,155	$	507,536	$	(13,619	)	95.6	%
2	BBB	Baa	24,881		24,418		(463		)	3.2	%
3	BB	Ba	20,571		20,427		(144		)	1.0	%
4	B	B	6,589		6,555		(34		)	0.2	%
5	CCC or lower	Caa or lower	—		—		—			—
6			—		—		—			—
		Total	$	573,196	$	558,936	$	(14,260	)	100.0	%

Cash and Short-term Investments

Cash consists of uninvested balances in bank accounts. We had a cash balance of $20.6 million at the end of the first quarter of 2014, compared to $39.5 million at the end of 2013. Short-term investments are carried at cost, which approximates fair value. The balance at March 31, 2014 was $37.0 million compared to $23.2 million at December 31, 2013.

Evaluating Investments for OTTI

The fixed income portfolio contained 306 securities in an unrealized loss position as of March 31, 2014. The $14.3 million in associated unrealized losses for these 306 securities represents 1.0 percent of the fixed income portfolio’s cost basis. Of these 306 securities, six 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 March 31, 2014, we held two common stock securities that were in an unrealized loss position. The unrealized loss on these securities was $0.4 million. Based on our analysis, we believe each security will recover in a reasonable period of time and we have the intent and ability to hold them until recovery. No equity securities have been in an unrealized loss position for 12 consecutive months or longer. There were no OTTI losses recognized in the periods presented on the equity portfolio.