On March 31, 2012, we reclassified our entire portfolio of fixed maturity securities classified as held to maturity to fixed maturity securities classified as available for sale. The European debt crisis and the August 2011 downgrade of U.S. government debt by Standard & Poor's Corporation had recently disrupted the financial markets. 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 the related deferred income tax effect, increased our accumulated other comprehensive income and shareholders' equity by $2.0 million as of March 31, 2012.

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

		Available for sale
		Cost or		Gross		Gross
		amortized		unrealized		unrealized
		cost		gain		loss		Fair value
December 31, 2012

U.S. government and government agency securities		$	195,049	$	4,560	$	(2)	$	199,607
Fixed maturity securities of states, municipalities and political
	subdivisions		969,966		96,027		(182)		1,065,811
Special purpose revenue bonds of states, municipalities and
	political subdivisions		2,033,947		168,772		(2,388)		2,200,331
Corporate securities			1,247,282		69,243		(1,355)		1,315,170
Residential mortgage-backed securities			632,665		32,560		(338)		664,887
Commercial mortgage-backed securities			482,808		41,748		(267)		524,289
Asset-backed securities			32,801		474		0		33,275
Foreign government securities			261,914		16,515		(18)		278,411
	Total fixed maturity securities - available for sale	$	5,856,432	$	429,899	$	(4,550)	$	6,281,781

Equity securities - available for sale		$	275,827	$	13,768	$	(4,956)	$	284,639

		Available for sale
		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. 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
December 31, 2012

Fixed maturity securities
	U.S. government and government agency
		securities		$	55,034	$	(2)	$	0	$	0	$	55,034	$	(2)
	Fixed maturity securities of states,
		municipalities and political subdivisions			14,162		(182)		0		0		14,162		(182)
	Special purpose revenue bonds of states,
		municipalities and political subdivisions			155,902		(2,388)		0		0		155,902		(2,388)
	Corporate securities				85,245		(1,220)		2,616		(135)		87,861		(1,355)
	Residential mortgage-backed securities				49,486		(338)		0		0		49,486		(338)
	Commercial mortgage-backed securities				26,263		(267)		0		0		26,263		(267)
	Foreign government securities				7,007		(18)		0		0		7,007		(18)
Equity securities					103,647		(4,956)		0		0		103,647		(4,956)
			Total	$	496,746	$	(9,371)	$	2,616	$	(135)	$	499,362	$	(9,506)

December 31, 2011

Fixed maturity securities
	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. During the past three years, our reviews covered all impaired securities where the loss exceeded $0.5 million and the loss either exceeded 10% of cost or the security had been in a loss position for longer than twelve consecutive months. Our reviews considered the factors described in the “Other-than-temporary Impairments” section in Note 1.

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:

		2012		2011		2010
Total other-than-temporary impairment loss		$	(2,069)	$	(6,922)	$	(378)
Portion recognized in other comprehensive income			1,041		2,243		(47)
	Net other-than-temporary impairment loss
	recognized in earnings	$	(1,028)	$	(4,679)	$	(425)

Certain of our securities with an other-than-temporary impairment loss have had both a credit loss and an impairment loss recorded in other comprehensive income. The rollforward of credit losses on these securities was as follows:

	2012		2011		2010
Balance at beginning of year	$	5,047	$	4,273	$	3,848
Credit losses recognized in earnings
Securities previously impaired		899		2,447		425
Securities previously not impaired		129		2,232		0
Securities sold		(5,450)		(3,905)		0
Balance at December 31	$	625	$	5,047	$	4,273

During the fourth quarter of 2012, we sold all but one of the securities for which we had previously recognized an other-than-temporary impairment. The remaining security had a $0.2 million after-tax unrealized gain included in accumulated other comprehensive income at December 31, 2012, related to changes in fair value after its initial impairment date.

We do not consider the $9.5 million of gross unrealized losses on fixed maturity and equity securities in our portfolio at December 31, 2012 to be other-than-temporary impairments because: 1) as of December 31, 2012, we have received substantially all contractual interest and principal payments on the fixed maturity securities, 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 or cost bases and 4) the unrealized loss relates to non-credit factors, such as interest rate changes and market conditions.

The change in our unrealized pretax net gains (losses) on investments during each year was as follows:

		2012		2011		2010

Available for sale fixed maturity securities		$	91,947	$	198,768	$	(21,677)
Equity securities			8,812		0		0
Other investments			4,867		(2,351)		20
	Change in net unrealized investment gains (losses)	$	105,626	$	196,417	$	(21,657)

The amortized cost and fair value of our fixed maturity securities at December 31, 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 5.5 years at December 31, 2012.

		Available for sale
		Cost or amortized cost		Fair value
Due in 1 year or less		$	300,842	$	305,382
Due after 1 year through 5 years			1,101,203		1,157,575
Due after 5 years through 10 years			1,411,731		1,541,532
Due after 10 years through 15 years			936,809		1,023,796
Due after 15 years			957,573		1,031,045
	Securities with contractual maturities		4,708,158		5,059,330
Mortgage-backed and asset-backed securities			1,148,274		1,222,451
	Total fixed maturity securities	$	5,856,432	$	6,281,781

At December 31, 2012, our domestic insurance companies had deposited fixed maturity securities of $44.2 million (amortized cost of $42.4 million) to meet the deposit requirements of various state insurance departments. There are withdrawal and other restrictions on these deposits, but we direct how the deposits are invested and we earn interest on the funds.

		2012		2011		2010
Fixed maturity securities
Taxable		$	114,047	$	113,293	$	110,517
Exempt from U.S. income taxes			107,488		98,729		92,297
	Total fixed maturity securities		221,535		212,022		202,814
Equity securities			3,959		0		0
Short-term investments			620		537		900
Other investment income			2,856		4,486		4,344
	Total investment income		228,970		217,045		208,058
Investment expense			(6,336)		(4,774)		(4,239)
	Net investment income	$	222,634	$	212,271	$	203,819

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

		2012		2011		2010
Gains
	Fixed maturity securities	$	32,644	$	10,045	$	14,207
	Equity securities		797		0		0
	Other investments		2,074		6		52
	Total gains		35,515		10,051		14,259

Losses
	Fixed maturity securities		(3,327)		(6,388)		(1,995)
	Equity securities		(1,039)		0		0
	Other investments		(1)		(10)		(160)
	Total losses		(4,367)		(6,398)		(2,155)

Net
	Fixed maturity securities		29,317		3,657		12,212
	Equity securities		(242)		0		0
	Other investments		2,073		(4)		(108)
	Net realized investment gain	$	31,148	$	3,653	$	12,104