Note 7 – Investments

The amortized cost, gross unrealized gains and losses and fair value of the investment portfolio at September 30, 2013 and December 31, 2012 are shown below.

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
September 30, 2013	Cost		Gains		Losses (1)			Value
	(In thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	803,637	$	1,853	$	(18,723	)	$	786,767
Obligations of U.S. states and political subdivisions		920,006		7,294		(14,467	)		912,833
Corporate debt securities		2,180,842		8,884		(25,268	)		2,164,458
Asset-backed securities		340,273		1,049		(508	)		340,814
Residential mortgage-backed securities		395,664		162		(18,261	)		377,565
Commercial mortgage-backed securities		260,130		90		(6,413	)		253,807
Collateralized loan obligations		61,336		-		(831	)		60,505
Debt securities issued by foreign sovereign governments		116,344		5,162		(967	)		120,539
Total debt securities		5,078,232		24,494		(85,438	)		5,017,288
Equity securities		2,867		29		(12	)		2,884

Total investment portfolio	$	5,081,099	$	24,523	$	(85,450	)	$	5,020,172

			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		1,469,844		13,813		(2,716	)		1,480,941
Asset-backed securities		322,802		1,657		(23	)		324,436
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

(1) At September 30, 2013 and December 31, 2012, there were no other-than-temporary impairment losses recorded in other comprehensive income.

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 84% of the market value of our foreign investments with the remaining 12% invested in corporate securities and 4% in cash equivalents. Ninety-three percent of the Australian portfolio is rated AAA, by one or more of Moody’s, Standard & Poor’s and Fitch Ratings, and the remaining 7% is rated AA.

The amortized cost and fair values of debt securities at September 30, 2013, 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 asset-backed and mortgage-backed securities and collateralized loan obligations provide for periodic payments throughout their lives, they are listed below in separate categories.

	Amortized		Fair
September 30, 2013	Cost		Value
	(In thousands)

Due in one year or less	$	793,035	$	794,081
Due after one year through five years		1,876,491		1,881,820
Due after five years through ten years		870,872		846,993
Due after ten years		480,431		461,703

	$	4,020,829	$	3,984,597

Asset-backed securities		340,273		340,814
Residential mortgage-backed securities		395,664		377,565
Commercial mortgage-backed securities		260,130		253,807
Collateralized loan obligations		61,336		60,505

Total at September 30, 2013	$	5,078,232	$	5,017,288

At September 30, 2013 and December 31, 2012, the investment portfolio had gross unrealized losses of $85.5 million and $5.3 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
September 30, 2013	Value		Losses		Value		Losses		Value		Losses
	(In thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	466,889	$	18,723	$	-	$	-	$	466,889	$	18,723
Obligations of U.S. states and political subdivisions		450,898		14,426		1,726		41		452,624		14,467
Corporate debt securities		1,265,779		24,940		14,089		328		1,279,868		25,268
Asset-backed securities		84,000		508		-		-		84,000		508
Residential mortgage-backed securities		348,693		17,796		24,744		465		373,437		18,261
Commercial mortgage-backed securities		221,265		6,413		177		-		221,442		6,413
Collateralized loan obligations		60,505		831		-		-		60,505		831
Debt securities issued by foreign sovereign governments		25,461		777		7,037		190		32,498		967
Equity securities		977		12		-		-		977		12
Total investment portfolio	$	2,924,467	$	84,426	$	47,773	$	1,024	$	2,972,240	$	85,450

	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			280,765		2,714		3,353		2		284,118		2,716
Asset-backed securities			29,675		23		-		-		29,675		23
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

The unrealized losses in all categories of our investments at September 30, 2013 and December 31, 2012 were primarily caused by the difference in interest rates at September 30, 2013 and December 31, 2012, respectively, compared to interest rates at the time of purchase.

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 each of the first nine months of 2013 and 2012 there were other-than-temporary impairments (“OTTI”) recognized of $0.3 million.

The net realized investment gains (losses) and OTTI on the investment portfolio are as follows:

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2013			2012			2013		2012
	(In thousands)
Net realized investment gains (losses) and OTTI on investments:
Fixed maturities		$	(393	)	$	8,901		$	2,755	$	110,335
Equity securities			254			30			850		424
Other			-			(2,747	)		-		(742	)

		$	(139	)	$	6,184		$	3,605	$	110,017

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2013			2012			2013			2012
	(In thousands)
Net realized investment gains (losses) and OTTI on investments:
Gains on sales		$	391		$	10,559		$	5,352		$	118,599
Losses on sales			(202	)		(4,375	)		(1,419	)		(8,243	)
Impairment losses			(328	)		-			(328	)		(339	)

		$	(139	)	$	6,184		$	3,605		$	110,017