6.	Investments

The amortized cost, gross unrealized gains and losses and fair value of the investment portfolio at December 31, 2012 and 2011 are shown below.

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
December 31, 2012	Cost		Gains		Losses (1)			Value
	(In thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	863,282	$	3,040	$	(71	)	$	866,251
Obligations of U.S. states and political subdivisions		795,935		16,965		(506	)		812,394
Corporate debt securities (2)		1,792,646		15,470		(2,739	)		1,805,377
Residential mortgage-backed securities		451,352		871		(1,314	)		450,909
Commercial mortgage-backed securities		150,232		524		(414	)		150,342
Debt securities issued by foreign sovereign governments		132,490		9,784		(208	)		142,066
Total debt securities		4,185,937		46,654		(5,252	)		4,227,339
Equity securities		2,797		139		-			2,936

Total investment portfolio	$	4,188,734	$	46,793	$	(5,252	)	$	4,230,275

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
December 31, 2011:	Cost		Gains		Losses (1)			Value
	(In thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	592,108	$	4,965	$	(36	)	$	597,037
Obligations of U.S. states and political subdivisions		2,255,192		74,918		(6,639	)		2,323,471
Corporate debt securities (2)		2,007,720		32,750		(7,619	)		2,032,851
Residential mortgage-backed securities		441,589		4,113		(285	)		445,417
Commercial mortgage-backed securities		257,530		7,404		-			264,934
Debt securities issued by foreign sovereign governments		146,755		10,441		(6	)		157,190
Total debt securities		5,700,894		134,591		(14,585	)		5,820,900
Equity securities		2,666		82		(1	)		2,747

Total investment portfolio	$	5,703,560	$	134,673	$	(14,586	)	$	5,823,647

(1)

There were no other-than-temporary impairment losses recorded in other comprehensive income at December 31, 2012 and 2011.

(2)

Includes investments in corporate asset-backed securities with a fair value of $324 million and $199 million at December 31, 2012 and 2011, respectively.

Our foreign investments primarily consist of the investment portfolio supporting our Australian domiciled subsidiary. This portfolio is comprised of Australian government and semi government securities, representing 88% of the market value of our foreign investments with the remaining 11% invested in corporate securities and 1% in cash equivalents. The The Australian portfolio is rated AAA, by one or more of the following major rating agencies: Moody's, Standard & Poor's and Fitch Ratings.

The amortized cost and fair values of debt securities at December 31, 2012, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most auction rate and mortgage-backed securities provide for periodic payments throughout their lives, they are listed below in separate categories.

	Amortized		Fair
December 31, 2012	Cost		Value
	(In thousands)

Due in one year or less	$	1,097,193	$	1,099,383
Due after one year through five years		1,673,962		1,696,376
Due after five years through ten years		480,319		491,933
Due after ten years		315,765		321,282
		3,567,239		3,608,974

Residential mortgage-backed securities		451,352		450,909
Commercial mortgage-backed securities		150,232		150,342
Auction rate securities (1)		17,114		17,114

Total at December 31, 2012	$	4,185,937	$	4,227,339

(1) At December 31, 2012, 100% of auction rate securities had a contractual maturity greater than 10 years.

At December 31, 2012 and 2011, the investment portfolio had gross unrealized losses of $5.3 million and $14.6 million, respectively. For those securities in an unrealized loss position, the length of time the securities were in such a position, as measured by their month-end fair values, is as follows:

	Less Than 12 Months						12 Months or Greater						Total
	Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
December 31, 2012	Value			Losses			Value			Losses			Value			Losses
	(In thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies		$	24,094		$	71		$	-		$	-		$	24,094		$	71
Obligations of U.S. states and political subdivisions			156,111			505			1,006			1			157,117			506
Corporate debt securities			310,440			2,737			3,353			2			313,793			2,739
Residential mortgage-backed securities			315,000			982			19,939			332			334,939			1,314
Commercial mortgage- backed securities			72,689			414			-			-			72,689			414
Debt securities issued by foreign sovereign governments			14,695			208			-			-			14,695			208
Total investment portfolio		$	893,029		$	4,917		$	24,298		$	335		$	917,327		$	5,252

	Less Than 12 Months						12 Months or Greater						Total
	Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
December 31, 2011	Value			Losses			Value			Losses			Value			Losses
	(In thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies		$	78,546		$	36		$	-		$	-		$	78,546		$	36
Obligations of U.S. states and political subdivisions			188,879			837			137,965			5,802			326,844			6,639
Corporate debt securities			689,396			6,709			28,174			910			717,570			7,619
Residential mortgage-backed securities			120,405			285			-			-			120,405			285
Debt securities issued by foreign sovereign governments			484			6			-			-			484			6
Equity securities			-			-			33			1			33			1
Total investment portfolio		$	1,077,710		$	7,873		$	166,172		$	6,713		$	1,243,882		$	14,586

The unrealized losses in all categories of our investments at December 31, 2012 were primarily caused by the difference in interest rates at December 31, 2012, compared to interest rates at the time of purchase. At December 31, 2011, the securities in an unrealized loss position for 12 months or greater are primarily auction rate securities ("ARS") backed by student loans. See further discussion of these securities below. The unrealized losses in all categories of our investments were primarily caused by the difference in interest rates at December 31, 2011, compared to the interest rates at the time of purchase as well as the liquidity discount rate applied in our auction rate securities discounted cash flow model.

The fair value of our ARS backed by student loans was approximately $17 million and $170 million at December 31, 2012 and 2011, respectively. The two ARS we hold are collateralized by portfolios of student loans, both of which are ultimately 97% guaranteed by the United States Department of Education. At December 31, 2012, our remaining ARS portfolio was 100% AAA/Aaa-rated by one or more of the major rating agencies.

Under the current guidance a debt security impairment is deemed other than temporary if we either intend to sell the security, or it is more likely than not that we will be required to sell the security before recovery or we do not expect to collect cash flows sufficient to recover the amortized cost basis of the security. During 2012 we recognized OTTI losses in earnings of $2.3 million, related to impairments on certain ARS, some of which were previously impaired in 2011. During 2011 we recognized OTTI losses in earnings of $0.7 million. During 2010 we recognized OTTI losses in earnings of $9.6 million. In 2010, our OTTI losses were primarily related to certain securities for which the expected cash flows are not sufficient to recover the amortized cost.

For the years ended December 31, 2012 and 2011, there were no credit losses recognized in earnings for which a portion of an OTTI loss was recognized in accumulated other comprehensive income (loss).

Net investment income is comprised of the following:

	2012			2011			2010
	(In thousands)

Fixed maturities	$	122,886		$	202,301		$	236,734
Equity securities		200			330			315
Cash equivalents		333			496			1,526
Interest on Sherman note		-			-			10,796
Other		782			926			1,081

Investment income		124,201			204,053			250,452
Investment expenses		(2,561	)		(2,783	)		(3,199	)

Net investment income	$	121,640		$	201,270		$	247,253

The net realized investment gains (losses), including impairment losses, and change in net unrealized appreciation (depreciation) of investments are as follows:

	2012			2011		2010
	(In thousands)
Net realized investment gains (losses) on investments:
Fixed maturities	$	195,652		$	142,284	$	93,017
Equity securities		487			330		151
Joint ventures		-			-		(466	)
Other		(730	)		101		235

Total net realized investment gains	$	195,409		$	142,715	$	92,937

Change in net unrealized appreciation (depreciation):
Fixed maturities	$	(78,604	)	$	31,576	$	(71,304	)
Equity securities		58			86		(4	)
Other		-			-		-
Total change in net unrealized appreciation (depreciation)	$	(78,546	)	$	31,662	$	(71,308	)

The gross realized gains, gross realized losses and impairment losses are as follows:

	2012			2011			2010
	(In thousands)


Gross realized gains	$	213,827		$	158,659		$	119,325
Gross realized losses		(16,108	)		(15,229	)		(16,278	)
Impairment losses		(2,310	)		(715	)		(9,644	)

Net realized gains on securities		195,409			142,715			93,403

Loss from joint ventures		-			-			(466	)
Total net realized gains	$	195,409		$	142,715		$	92,937

We had $21.4 million and $22.3 million of investments on deposit with various states at December 31, 2012 and 2011, respectively, due to regulatory requirements of those state insurance departments.