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Investments
 6 Months Ended
Jun. 30, 2012
Investment [Abstract]  
Investments

(2)  Investments

On March 31, 2012, we reclassified our entire portfolio of fixed maturity securities classified as held to maturity, which consisted of corporate, U.S. government and foreign government securities, to fixed maturity securities classified as available for sale. Financial markets recently have been disrupted by several events, including the European debt crisis and the August 2011 downgrade of U.S. government debt by Standard & Poor's Corporation. Due to these market disruptions and our desire to maintain greater flexibility in managing our entire investment portfolio in an uncertain economy, we changed our prior intent to hold these securities to maturity. On the date of transfer, these securities had a fair value of $139.1 million and an amortized cost of $136.0 million. The securities' net unrealized appreciation, net of tax, increased our accumulated other comprehensive income and shareholders' equity by $2.0 million as of March 31, 2012.

 

During the second quarter of 2012, we began investing in equity securities, which we classified as available for sale and report at fair value.

 

The cost or amortized cost, gross unrealized gain or loss, and fair value of our fixed maturity and equity securities were as follows:

   Cost or Gross Gross    
   amortized unrealized unrealized    
   cost gain loss Fair value 
June 30, 2012            
               
Fixed maturity securities – available for sale            
 U.S. government and government agency securities $220,995 $7,991 $(15) $228,971 
 Fixed maturity securities of states, municipalities and political            
  subdivisions 982,569  91,307  (8)  1,073,868 
 Special purpose revenue bonds of states, municipalities and            
  political subdivisions 1,858,848  148,858  (158)  2,007,548 
 Corporate securities 1,088,342  46,363  (5,048)  1,129,657 
 Residential mortgage-backed securities  854,262  50,485  (1,915)  902,832 
 Commercial mortgage-backed securities  382,595  34,109  (4)  416,700 
 Asset-backed securities  45,954  237  (9)  46,182 
 Foreign government securities  279,325  13,109  (326)  292,108 
  Total fixed maturity securities – available for sale $5,712,890 $392,459 $(7,483) $6,097,866 
               
Equity securities – available for sale$92,580 $2,957 $(1,877) $93,660 

  Cost or Gross Gross    
  amortized unrealized unrealized    
  cost gain loss Fair value 
December 31, 2011            
              
U.S. government and government agency securities $285,166 $10,523 $(10) $295,679 
Fixed maturity securities of states, municipalities and political            
 subdivisions 999,940  85,528  (127)  1,085,341 
Special purpose revenue bonds of states, municipalities and            
 political subdivisions 1,741,297  122,746  (155)  1,863,888 
Corporate securities 817,886  35,221  (6,774)  846,333 
Residential mortgage-backed securities  1,036,436  65,771  (2,121)  1,100,086 
Commercial mortgage-backed securities  244,535  15,162  (3,573)  256,124 
Asset-backed securities  34,655  147  (56)  34,746 
Foreign government securities  225,517  11,203  (83)  236,637 
 Total fixed maturity securities – available for sale $5,385,432 $346,301 $(12,899) $5,718,834 

U.S. government securities $6,998 $ 69 $ - $7,067 
Corporate securities 110,284   1,814   (455)  111,643 
Foreign government securities  43,820   746   (140)  44,426 
 Total fixed maturity securities – held to maturity $161,102 $2,629 $(595) $163,136 

Substantially all of our fixed maturity securities are investment grade and only one security was non-income producing in 2012. The following table displays the gross unrealized losses and fair value of all available for sale 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 
June 30, 2012                  
                     
Fixed maturity securities                  
 U.S. government and government agency                   
  securities$34,791 $(15) $0 $0 $34,791 $(15) 
 Fixed maturity securities of states,                   
  municipalities and political subdivisions  2,177  (8)  0  0  2,177  (8) 
 Special purpose revenue bonds of states,                   
  municipalities and political subdivisions  36,514  (143)  1,288  (15)  37,802  (158) 
 Corporate securities 235,506  (5,048)  0  0  235,506  (5,048) 
 Residential mortgage-backed securities  18,221  (503)  7,747  (1,412)  25,968  (1,915) 
 Commercial mortgage-backed securities  10,844  (4)  0  0  10,844  (4) 
 Asset-backed securities  10,263  (9)  0  0  10,263  (9) 
 Foreign government securities  43,739  (326)  0  0  43,739  (326) 
Equity securities 32,880  (1,877)  0  0  32,880  (1,877) 
  Total $424,935 $(7,933) $9,035 $(1,427) $433,970 $(9,360) 

  Less than 12 months  12 months or more  Total  
    Unrealized   Unrealized   Unrealized 
   Fair value  losses Fair value  losses  Fair value  losses 
December 31, 2011                  
                    
U.S. government and government agency                   
 securities$13,984 $(10) $0 $0 $13,984 $(10) 
Fixed maturity securities of states,                   
 municipalities and political subdivisions  10,256  (107)  899  (20)  11,155  (127) 
Special purpose revenue bonds of states,                   
 municipalities and political subdivisions  21,856  (67)  6,796  (88)  28,652  (155) 
Corporate securities 154,856  (6,391)  18,005  (383)  172,861  (6,774) 
Residential mortgage-backed securities  32,430  (1,364)  7,582  (757)  40,012  (2,121) 
Commercial mortgage-backed securities  39,075  (3,573)  0  0  39,075  (3,573) 
Asset-backed securities  19,648  (56)  0  0  19,648  (56) 
Foreign government securities  4,198  (83)  0  0  4,198  (83) 
 Total $296,303 $(11,651) $33,282 $(1,248) $329,585 $(12,899) 

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 our securities 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:

   Six months ended June 30, Three months ended June 30, 
   2012 2011 2012 2011 
Total other-than-temporary impairment loss $(2,260) $(4,677) $(2,260) $(1,548) 
Portion recognized in other comprehensive income  1,863  1,198  1,863  1,198 
 Net other-than-temporary impairment loss recognized             
  in earnings $(397) $(3,479) $(397) $(350) 

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

 Six months ended June 30, Three months ended June 30, 
 2012 2011 2012 2011 
Balance at beginning of period$5,047 $4,273 $5,047 $6,685 
Credit losses recognized in earnings            
Securities previously impaired 268  1,597  268  350 
Securities not previously impaired 129  1,882  129  0 
Securities sold 0  (3,905)  0  (3,188) 
Balance at June 30$5,444 $3,847 $5,444 $3,847 

We had $1.2 million after-tax other-than-temporary impairment losses, related to mortgage-backed securities, included in accumulated other comprehensive income within shareholders' equity at June 30, 2012. 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 $9.4 million of gross unrealized losses on fixed maturity and equity securities in our portfolio at June 30, 2012 to be other-than-temporary impairments because: 1) as of June 30, 2012, we have received substantially all contractual interest and principal payments on the fixed maturity securities, 2) we do not intend to sell these securities, 3) it is more likely than not that we will not be required to sell the securities before recovery of their amortized cost or 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 maturity securities at June 30, 2012, 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 4.4 years at June 30, 2012.

   Cost or amortized cost Fair value  
Due in 1 year or less  $370,576 $374,881 
Due after 1 year through 5 years   1,049,481  1,097,141 
Due after 5 years through 10 years   1,244,147  1,352,001 
Due after 10 years through 15 years   831,135  906,673 
Due after 15 years   934,740  1,001,456 
 Securities with contractual maturities   4,430,079  4,732,152 
Mortgage-backed and asset-backed securities   1,282,811  1,365,714 
 Total fixed maturity securities  $5,712,890 $6,097,866 

The sources of net investment income were as follows:

   Six months ended June 30, Three months ended June 30, 
   2012 2011 2012 2011 
Fixed maturity securities             
Taxable $58,218 $54,219 $27,103 $27,124 
Exempt from U.S. income taxes  52,872  49,826  26,260  24,915 
  Total fixed maturity securities  111,090  104,045  53,363  52,039 
Equity securities  993  0  993  0 
Short-term investments  102  321  40  165 
Other investment income  868  2,030  401  1,388 
 Total investment income  113,053  106,396  54,797  53,592 
Investment expense  (2,753)  (2,379)  (1,507)  (1,170) 
 Net investment income $110,300 $104,017 $53,290 $52,422 

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

   Six months ended June 30, Three months ended June 30, 
   2012 2011 2012 2011 
               
Gains 8,127  4,319  7,913  4,099 
Losses (1,080)  (3,824)  (1,037)  (3,045) 
  Net realized investment gain (loss)$7,047 $495 $6,876 $1,054