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Investments

9 Months Ended

Sep. 30, 2011

(3) Investments

Substantially all of our fixed income securities are investment grade. The cost or amortized cost, gross unrealized gain or loss, and fair value of our fixed income securities were as follows:

		Available for sale
		Cost or		Gross		Gross
		amortized		unrealized		unrealized
		cost		gain		loss		Fair value
September 30, 2011

U.S. government and government agency securities		$	281,758	$	11,587	$	(1)	$	293,344
Fixed income securities of states, municipalities and political
	subdivisions		1,005,837		74,210		(188)		1,079,859
Special purpose revenue bonds of states, municipalities and
	political subdivisions		1,717,307		99,279		(627)		1,815,959
Corporate fixed income securities			785,733		34,635		(6,762)		813,606
Residential mortgage-backed securities			1,045,247		69,261		(3,187)		1,111,321
Commercial mortgage-backed securities			245,651		9,180		(5,780)		249,051
Asset-backed securities			34,489		179		(51)		34,617
Foreign government securities			240,311		13,268		(147)		253,432
	Total fixed income securities - available for sale	$	5,356,333	$	311,599	$	(16,743)	$	5,651,189

		Available for sale
		Cost or		Gross		Gross
		amortized		unrealized		unrealized
		cost		gain		loss		Fair value
December 31, 2010

U.S. government and government agency securities		$	315,339	$	9,097	$	(169)	$	324,267
Fixed income securities of states, municipalities and political
	subdivisions		1,050,969		38,825		(7,737)		1,082,057
Special purpose revenue bonds of states, municipalities and
	political subdivisions		1,614,554		34,764		(21,259)		1,628,059
Corporate fixed income securities			545,883		26,436		(1,925)		570,394
Residential mortgage-backed securities			958,404		40,949		(4,245)		995,108
Commercial mortgage-backed securities			136,746		8,518		(36)		145,228
Asset-backed securities			12,563		78		(75)		12,566
Foreign government securities			230,348		11,537		(124)		241,761
	Total fixed income securities - available for sale	$	4,864,806	$	170,204	$	(35,570)	$	4,999,440

		Held to maturity
		Cost or		Gross		Gross
		amortized		unrealized		unrealized
		cost		gain		loss		Fair value
September 30, 2011

U.S. government securities		$	6,998	$	112	$	-	$	7,110
Corporate fixed income securities			113,015		1,552		(569)		113,998
Foreign government securities			48,601		896		(49)		49,448
	Total fixed income securities - held to maturity	$	168,614	$	2,560	$	(618)	$	170,556

December 31, 2010

U.S. government securities		$	12,993	$	264	$	-	$	13,257
Corporate fixed income securities			113,296		1,205		(277)		114,224
Foreign government securities			67,379		995		(44)		68,330
	Total fixed income securities - held to maturity	$	193,668	$	2,464	$	(321)	$	195,811

All fixed income securities were income producing in 2011. The following table displays the gross unrealized losses and fair value of all available for sale fixed income securities that were in a continuous unrealized loss position for the periods indicated.

		Less than 12 months				12 months or more				Total
				Unrealized				Unrealized				Unrealized
		Fair value		losses		Fair value		losses		Fair value		losses
September 30, 2011

U.S. government and government agency
	securities	$	2,250	$	(1)	$	0	$	0	$	2,250	$	(1)
Fixed income securities of states,
	municipalities and political subdivisions		15,360		(119)		1,476		(69)		16,836		(188)
Special purpose revenue bonds of states,
	municipalities and political subdivisions		73,022		(441)		29,074		(186)		102,096		(627)
Corporate fixed income securities			192,727		(6,322)		16,964		(440)		209,691		(6,762)
Residential mortgage-backed securities			50,867		(2,180)		8,031		(1,007)		58,898		(3,187)
Commercial mortgage-backed securities			94,516		(5,780)		0		0		94,516		(5,780)
Asset-backed securities			17,816		(51)		0		0		17,816		(51)
Foreign government securities			6,602		(147)		0		0		6,602		(147)
	Total	$	453,160	$	(15,041)	$	55,545	$	(1,702)	$	508,705	$	(16,743)

December 31, 2010

U.S. government and government agency
	securities	$	20,976	$	(169)	$	0	$	0	$	20,976	$	(169)
Fixed income securities of states,
	municipalities and political subdivisions		228,228		(7,621)		2,279		(116)		230,507		(7,737)
Special purpose revenue bonds of states,
	municipalities and political subdivisions		689,190		(21,156)		6,344		(103)		695,534		(21,259)
Corporate fixed income securities			66,029		(1,925)		0		0		66,029		(1,925)
Residential mortgage-backed securities			123,782		(3,081)		22,152		(1,164)		145,934		(4,245)
Commercial mortgage-backed securities			0		0		3,084		(36)		3,084		(36)
Asset-backed securities			9,174		(75)		0		0		9,174		(75)
Foreign government securities			10,699		(124)		0		0		10,699		(124)
	Total	$	1,148,078	$	(34,151)	$	33,859	$	(1,419)	$	1,181,937	$	(35,570)

A security has an impairment loss when its fair value is less than its cost or amortized cost at the balance sheet date. We evaluate the securities in our fixed income securities portfolio for possible other-than-temporary impairment losses at each quarter end. Our reviews cover all impaired securities where the loss exceeds $0.5 million and the loss either exceeds 10% of cost or the security had been in a loss position for longer than twelve consecutive months. For other-than-temporary impairment losses, we recognize an other-than-temporary impairment loss in earnings in the period that we determine: 1) we intend to sell the security, 2) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis or 3) the security has a credit loss. Any non-credit portion of the other-than-temporary impairment loss is recognized in shareholders' equity.

Our other-than-temporary impairment losses were as follows:

		Nine months ended September 30,				Three months ended September 30,
		2011		2010		2011		2010
Total other-than-temporary impairment loss		$	(4,677)	$	(316)	$	0	$	(316)
Portion recognized in other comprehensive income			1,198		16		0		16
	Net other-than-temporary impairment loss recognized
	in earnings	$	(3,479)	$	(300)	$	0	$	(300)

We have recognized credit losses on certain impaired fixed income securities, for which each security also had an impairment loss recorded in other comprehensive income. The rollforward of these credit losses was as follows:

	Nine months ended September 30,				Three months ended September 30,
	2011		2010		2011		2010
Balance at beginning of period	$	4,273	$	3,848	$	3,847	$	3,848
Credit losses recognized in earnings
Securities previously impaired		1,597		300		0		300
Securities previously not impaired		1,882		0		0		0
Securities sold		(3,905)		0		0		0
Balance at September 30	$	3,847	$	4,148	$	3,847	$	4,148

We had $1.2 million of after-tax other-than-temporary impairment losses, related to mortgage-backed securities, included in accumulated other comprehensive income within shareholders' equity at September 30, 2011. This amount includes the after-tax unrealized gains and losses on these impaired securities resulting from changes in their fair value subsequent to their initial other-than-temporary impairment measurement dates.

We do not consider the $16.7 million of gross unrealized losses in our fixed income securities portfolio at September 30, 2011 to be other-than-temporary impairments because: 1) we received substantially all contractual interest and principal payments on these securities as of September 30, 2011, 2) we do not intend to sell the securities, 3) it is more likely than not that we will not be required to sell the securities before recovery of their amortized cost bases and 4) the unrealized loss relates to non-credit factors, such as interest rate changes and market conditions.

The amortized cost and fair value of our fixed income securities at September 30, 2011, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The weighted-average life of our mortgage-backed and asset-backed securities was 4.3 years at September 30, 2011.

		Available for sale				Held to maturity
		Cost or amortized cost		Fair value		Amortized cost		Fair value
Due in 1 year or less		$	247,391	$	251,201	$	56,204	$	56,501
Due after 1 year through 5 years			1,084,679		1,135,759		111,560		113,123
Due after 5 years through 10 years			1,080,746		1,161,310		850		932
Due after 10 years through 15 years			740,889		791,922		0		0
Due after 15 years			877,241		916,008		0		0
	Securities with fixed maturities		4,030,946		4,256,200		168,614		170,556
Mortgage-backed and asset-backed securities			1,325,387		1,394,989		0		0
	Total fixed income securities	$	5,356,333	$	5,651,189	$	168,614	$	170,556

The sources of net investment income were as follows:

		Nine months ended September 30,				Three months ended September 30,
		2011		2010		2011		2010
Fixed income securities		$	158,941	$	150,001	$	54,896	$	50,921
Short-term investments			420		631		99		271
Other			2,992		3,053		962		1,011
	Total investment income		162,353		153,685		55,957		52,203
Investment expense			(3,571)		(3,082)		(1,192)		(1,066)
	Net investment income	$	158,782	$	150,603	$	54,765	$	51,137

Realized pretax gains (losses) on the sale of investments, which exclude other-than-temporary impairment credit losses, were as follows:

			Nine months ended September 30,				Three months ended September 30,
			2011		2010		2011		2010
Fixed income securities
	Gains		$	8,532	$	8,875	$	4,217	$	1,282
	Losses			(5,359)		(824)		(1,545)		(225)
		Net fixed income securities	$	3,173	$	8,051	$	2,672	$	1,057
Other investments
	Gains		$	6	$	2	$	2	$	0
	Losses			(10)		(156)		0		0
		Net other investments	$	(4)	$	(154)	$	2	$	0
Total
	Gains		$	8,538	$	8,877	$	4,219	$	1,282
	Losses			(5,369)		(980)		(1,545)		(225)
		Net realized investment gain	$	3,169	$	7,897	$	2,674	$	1,057

- Definition

Tabular disclosure of investments in certain debt and equity securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets).

+ References

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