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Investments | 6 Months Ended
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Jun. 30, 2012
Investments [Abstract] |
Investments | Investments (a) The amortized cost, carrying value, unrealized and unrecognized holding gains and losses, and fair values of held-to-maturity (“HTM”) fixed maturity securities were as follows:
June 30, 2012 |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Amortized Cost |  | Net Unrealized Gains (Losses) |  | Carrying Value |  | Unrecognized Holding Gains |  | Unrecognized Holding Losses |  | Fair Value
Foreign government |  | $ | 5,292 |  |  | 252 |  |  | 5,544 |  |  | — |  |  | (105 | ) |  | 5,439 |
Obligations of state and political subdivisions |  | 557,338 |  |  | 9,310 |  |  | 566,648 |  |  | 32,642 |  |  | (4 | ) |  | 599,286 |
Corporate securities |  | 57,947 |  |  | (1,299 | ) |  | 56,648 |  |  | 5,329 |  |  | — |  |  | 61,977 |
Asset-backed securities (“ABS”) |  | 7,579 |  |  | (1,265 | ) |  | 6,314 |  |  | 1,223 |  |  | — |  |  | 7,537 |
Commercial mortgage-backed securities (“CMBS”) |  | 9,699 |  |  | (1,352 | ) |  | 8,347 |  |  | 5,395 |  |  | — |  |  | 13,742 |
Total HTM fixed maturity securities |  | $ | 637,855 |  |  | 5,646 |  |  | 643,501 |  |  | 44,589 |  |  | (109 | ) |  | 687,981 |
December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Amortized Cost |  | Net Unrealized Gains (Losses) |  | Carrying Value |  | Unrecognized Holding Gains |  | Unrecognized Holding Losses |  | Fair Value
Foreign government |  | $ | 5,292 |  |  | 292 |  |  | 5,584 |  |  | — |  |  | (88 | ) |  | 5,496 |
Obligations of state and political subdivisions |  | 614,118 |  |  | 11,894 |  |  | 626,012 |  |  | 31,529 |  |  | (156 | ) |  | 657,385 |
Corporate securities |  | 64,840 |  |  | (2,189 | ) |  | 62,651 |  |  | 6,887 |  |  | — |  |  | 69,538 |
ABS |  | 8,077 |  |  | (1,469 | ) |  | 6,608 |  |  | 1,353 |  |  | (7 | ) |  | 7,954 |
CMBS |  | 14,455 |  |  | (2,962 | ) |  | 11,493 |  |  | 6,177 |  |  | — |  |  | 17,670 |
Total HTM fixed maturity securities |  | $ | 706,782 |  |  | 5,566 |  |  | 712,348 |  |  | 45,946 |  |  | (251 | ) |  | 758,043 |
Unrecognized holding gains/losses of HTM securities are not reflected in the Financial Statements, as they represent fair value fluctuations from the later of: (i) the date a security is designated as HTM; or (ii) the date that an other-than-temporary impairment (“OTTI”) charge is recognized on an HTM security, through the date of the balance sheet. Our HTM securities had an average duration of 2.8 years as of June 30, 2012. During Six Months 2012, five securities with a carrying value of $7.9 million and a net unrecognized gain position of $1.0 million were reclassified from an HTM designation to an available-for-sale (“AFS”) designation due to credit rating downgrades by Moody’s Investors Services ("Moody's") and Standard and Poor’s ("S&P") Financial Services. These unexpected rating downgrades raised significant concerns about the issuers’ credit worthiness, which changed our intention to hold these securities to maturity. (b) The cost/amortized cost, unrealized gains (losses), and fair value of AFS securities were as follows:
June 30, 2012 |  |  |  |  |  |  |  |
($ in thousands) |  | Cost/ Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
U.S. government and government agencies 1 |  | $ | 268,949 |  |  | 19,050 |  |  | (3 | ) |  | 287,996 |
Foreign government |  | 41,557 |  |  | 1,537 |  |  | (312 | ) |  | 42,782 |
Obligations of states and political subdivisions |  | 695,158 |  |  | 42,307 |  |  | (964 | ) |  | 736,501 |
Corporate securities |  | 1,283,114 |  |  | 66,588 |  |  | (955 | ) |  | 1,348,747 |
ABS |  | 93,031 |  |  | 1,785 |  |  | (7 | ) |  | 94,809 |
CMBS 2 |  | 115,965 |  |  | 4,882 |  |  | (2,804 | ) |  | 118,043 |
Residential mortgage-backed securities (“RMBS”)3 |  | 477,045 |  |  | 17,636 |  |  | (553 | ) |  | 494,128 |
AFS fixed maturity securities |  | 2,974,819 |  |  | 153,785 |  |  | (5,598 | ) |  | 3,123,006 |
AFS equity securities |  | 130,257 |  |  | 20,647 |  |  | (2,787 | ) |  | 148,117 |
Total AFS securities |  | $ | 3,105,076 |  |  | 174,432 |  |  | (8,385 | ) |  | 3,271,123 |
December 31, 2011 |  |  |  |  |  |  |  |
($ in thousands) |  | Cost/ Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
U.S. government and government agencies 1 |  | $ | 333,504 |  |  | 20,292 |  |  | — |  |  | 353,796 |
Foreign government |  | 33,687 |  |  | 1,042 |  |  | (556 | ) |  | 34,173 |
Obligations of states and political subdivisions |  | 578,214 |  |  | 44,491 |  |  | (46 | ) |  | 622,659 |
Corporate securities |  | 1,168,439 |  |  | 50,167 |  |  | (5,296 | ) |  | 1,213,310 |
ABS |  | 77,706 |  |  | 1,289 |  |  | (46 | ) |  | 78,949 |
CMBS 2 |  | 107,838 |  |  | 6,427 |  |  | (1,667 | ) |  | 112,598 |
RMBS 3 |  | 467,468 |  |  | 16,187 |  |  | (1,767 | ) |  | 481,888 |
AFS fixed maturity securities |  | 2,766,856 |  |  | 139,895 |  |  | (9,378 | ) |  | 2,897,373 |
AFS equity securities |  | 143,826 |  |  | 13,617 |  |  | (88 | ) |  | 157,355 |
Total AFS securities |  | $ | 2,910,682 |  |  | 153,512 |  |  | (9,466 | ) |  | 3,054,728 |
1 U.S. government includes corporate securities fully guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) with a fair value of $14.2 million at June 30, 2012 and $76.5 million at December 31, 2011. 2 CMBS includes government guaranteed agency securities with a fair value of $67.0 million at June 30, 2012 and $72.9 million at December 31, 2011. 3 RMBS includes government guaranteed agency securities with a fair value of $102.6 million at June 30, 2012 and $98.2 million at December 31, 2011. Unrealized gains/losses of AFS securities represent fair value fluctuations from the later of: (i) the date a security is designated as AFS; or (ii) the date that an OTTI charge is recognized on an AFS security, through the date of the balance sheet. These unrealized gains and losses are recorded in accumulated other comprehensive income (“AOCI”) on the Consolidated Balance Sheets. (c) The following tables summarize, for all securities in a net unrealized/unrecognized loss position at June 30, 2012 and December 31, 2011, the fair value and gross pre-tax net unrealized/unrecognized loss by asset class and by length of time those securities have been in a net loss position:
June 30, 2012 |  | Less than 12 months |  | 12 months or longer
($ in thousands) |  | Fair Value |  | Unrealized Losses 1 |  | Fair Value |  | Unrealized Losses 1
AFS securities |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 8,158 |  |  | (3 | ) |  | — |  |  | — |
Foreign government |  | 4,758 |  |  | (312 | ) |  | — |  |  | — |
Obligations of states and political subdivisions |  | 78,115 |  |  | (958 | ) |  | 511 |  |  | (6 | )
Corporate securities |  | 46,939 |  |  | (434 | ) |  | 13,924 |  |  | (521 | )
ABS |  | 2,000 |  |  | (2 | ) |  | 630 |  |  | (5 | )
CMBS |  | 9,353 |  |  | (39 | ) |  | 13,427 |  |  | (2,765 | )
RMBS |  | 3,183 |  |  | (9 | ) |  | 14,109 |  |  | (544 | )
Total fixed maturity securities |  | 152,506 |  |  | (1,757 | ) |  | 42,601 |  |  | (3,841 | )
Equity securities |  | 32,036 |  |  | (2,787 | ) |  | — |  |  | — |
Subtotal |  | $ | 184,542 |  |  | (4,544 | ) |  | 42,601 |  |  | (3,841 | )
|  | Less than 12 months |  | 12 months or longer
($ in thousands) |  | Fair Value |  | Unrealized Losses 1 |  | Unrecognized Gains 2 |  | Fair Value |  | Unrealized Losses 1 |  | Unrecognized Gains 2
HTM securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Obligations of states and political subdivisions |  | $ | 1,820 |  |  | (70 | ) |  | 63 |  |  | 4,033 |  |  | (283 | ) |  | 165 |
Corporate securities |  | 5,995 |  |  | (129 | ) |  | 120 |  |  | — |  |  | — |  |  | — |
ABS |  | — |  |  | — |  |  | — |  |  | 2,800 |  |  | (927 | ) |  | 707 |
Subtotal |  | $ | 7,815 |  |  | (199 | ) |  | 183 |  |  | 6,833 |  |  | (1,210 | ) |  | 872 |
Total AFS and HTM |  | $ | 192,357 |  |  | (4,743 | ) |  | 183 |  |  | 49,434 |  |  | (5,051 | ) |  | 872 |
December 31, 2011 |  | Less than 12 months |  | 12 months or longer
($ in thousands) |  | Fair Value |  | Unrealized Losses 1 |  | Fair Value |  | Unrealized Losses 1
AFS securities: |  |  |  |  |  |  |  |  |  |  |  |
Foreign government |  | $ | 8,299 |  |  | (556 | ) |  | — |  |  | — |
Obligations of states and political subdivisions |  | 517 |  |  | (1 | ) |  | 1,740 |  |  | (45 | )
Corporate securities |  | 157,510 |  |  | (4,415 | ) |  | 14,084 |  |  | (881 | )
ABS |  | 15,808 |  |  | (14 | ) |  | 702 |  |  | (32 | )
CMBS |  | 4,822 |  |  | (48 | ) |  | 14,564 |  |  | (1,619 | )
RMBS |  | 29,803 |  |  | (625 | ) |  | 15,007 |  |  | (1,142 | )
Total fixed maturity securities |  | 216,759 |  |  | (5,659 | ) |  | 46,097 |  |  | (3,719 | )
Equity securities |  | 743 |  |  | (88 | ) |  | — |  |  | — |
Subtotal |  | $ | 217,502 |  |  | (5,747 | ) |  | 46,097 |  |  | (3,719 | )
|  | Less than 12 months |  | 12 months or longer
($ in thousands) |  | Fair Value |  | Unrealized Losses 1 |  | Unrecognized Gains 2 |  | Fair Value |  | Unrealized Losses 1 |  | Unrecognized Gains 2
HTM securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Obligations of states and political subdivisions |  | $ | 7,244 |  |  | (94 | ) |  | 78 |  |  | 9,419 |  |  | (519 | ) |  | 324 |
ABS |  | — |  |  | — |  |  | — |  |  | 2,816 |  |  | (1,009 | ) |  | 737 |
CMBS |  | — |  |  | — |  |  | — |  |  | 2,794 |  |  | (1,447 | ) |  | 761 |
Subtotal |  | $ | 7,244 |  |  | (94 | ) |  | 78 |  |  | 15,029 |  |  | (2,975 | ) |  | 1,822 |
Total AFS and HTM |  | $ | 224,746 |  |  | (5,841 | ) |  | 78 |  |  | 61,126 |  |  | (6,694 | ) |  | 1,822 |
1 | Gross unrealized losses include non-OTTI unrealized amounts and OTTI losses recognized in AOCI. In addition, this column includes remaining unrealized gain or loss amounts on securities that were transferred to an HTM designation in the first quarter of 2009 for those securities that are in a net unrealized/unrecognized loss position.
2 | Unrecognized gains represent fair value fluctuations from the later of: (i) the date a security is designated as HTM; or (ii) the date that an OTTI charge is recognized on an HTM security.
As evidenced by the table below, our unrealized/unrecognized loss positions improved by $1.9 million as of June 30, 2012 compared to December 31, 2011 as follows:
($ in thousands) |  |
June 30, 2012 |  | December 31, 2011
Number of Issues | % of Market/Book | Unrealized Unrecognized Loss |  | Number of Issues | % of Market/Book | Unrealized Unrecognized Loss
141 |  | 80% - 99% | $ | 6,817 |  |  | 140 |  | 80% - 99% | $ | 10,166 |
4 |  | 60% - 79% | 1,580 |  |  | — |  | 60% - 79% | — |
1 |  | 40% - 59% | 342 |  |  | 1 |  | 40% - 59% | 469 |
— |  | 20% - 39% | — |  |  | — |  | 20% - 39% | — |
— |  | 0% - 19% | — |  |  | — |  | 0% - 19% | — |
|  |  | $ | 8,739 |  |  |  |  |  | $ | 10,635 |
We have reviewed the securities in the tables above in accordance with our OTTI policy, as described in Note 2. “Summary of Significant Accounting Policies” in Item 8. “Financial Statements and Supplementary Data.” of our 2011 Annual Report. At June 30, 2012, we had 146 securities in an aggregate unrealized/unrecognized loss position of $8.7 million, $4.2 million of which have been in a loss position for more than 12 months. Securities with non-credit OTTI impairments comprised $2.6 million of the $4.2 million balance, with the remainder related to securities that were, on average, 4% impaired compared to their amortized cost. Three of these securities are experiencing immaterial principal and interest shortfalls. At December 31, 2011, we had 141 securities in an aggregate unrealized/unrecognized loss position of $10.6 million, $4.9 million of which had been in a loss position for more than 12 months. Non-credit OTTI impairments comprised $2.1 million of the $4.9 million balance, with the remainder related to securities that were, on average, 6% impaired compared to their amortized cost. We do not have the intent to sell any securities in an unrealized/unrecognized loss position nor do we believe we will be required to sell these securities, and therefore we have concluded that they are temporarily impaired as of June 30, 2012. This conclusion reflects our current judgment as to the financial position and future prospects of the entity that issued the investment security and underlying collateral. If our judgment about an individual security changes in the future, we may ultimately record a credit loss after having originally concluded that one did not exist, which could have a material impact on our net income and financial position in future periods. (d) Fixed maturity securities at June 30, 2012, by contractual maturity, are shown below. Mortgage-backed securities are included in the maturity tables using the estimated average life of each security. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Listed below are HTM fixed maturity securities at June 30, 2012:
($ in thousands) |  | Carrying Value |  | Fair Value
Due in one year or less |  | $ | 98,022 |  |  | 103,123 |
Due after one year through five years |  | 464,672 |  |  | 494,584 |
Due after five years through 10 years |  | 73,941 |  |  | 82,051 |
Due after 10 years |  | 6,866 |  |  | 8,223 |
Total HTM fixed maturity securities |  | $ | 643,501 |  |  | 687,981 |
Listed below are AFS fixed maturity securities at June 30, 2012:
($ in thousands) |  | Fair Value
Due in one year or less |  | $ | 352,423 |
Due after one year through five years |  | 1,861,652 |
Due after five years through 10 years |  | 841,420 |
Due after 10 years |  | 67,511 |
Total AFS fixed maturity securities |  | $ | 3,123,006 |
(e) The following table outlines a summary of our other investment portfolio by strategy and the remaining commitment amount associated with each strategy:
Other Investments |  | Carrying Value |  | June 30, 2012
($ in thousands) |  | June 30, 2012 |  | December 31, 2011 |  | Remaining Commitment
Alternative Investments |  |  |  |  |  |  |  |  |
Secondary private equity |  | $ | 29,596 |  |  | 30,114 |  |  | 8,651 |
Private equity |  | 23,739 |  |  | 21,736 |  |  | 3,984 |
Energy/power generation |  | 21,578 |  |  | 25,913 |  |  | 10,383 |
Distressed debt |  | 14,702 |  |  | 16,953 |  |  | 2,986 |
Real estate |  | 12,961 |  |  | 13,767 |  |  | 10,473 |
Mezzanine financing |  | 11,146 |  |  | 8,817 |  |  | 23,435 |
Venture capital |  | 7,856 |  |  | 7,248 |  |  | 800 |
Total alternative investments |  | 121,578 |  |  | 124,548 |  |  | 60,712 |
Other securities |  | 3,962 |  |  | 3,753 |  |  | 1,494 |
Total other investments |  | $ | 125,540 |  |  | 128,301 |  |  | 62,206 |
The carrying value of our other investments decreased by $2.8 million compared to year end 2011. The carrying value was impacted by distributions of $13.9 million, partially offset by income of $5.0 million and additional contributions of $6.4 million. These contributions included $4.6 million under our previously existing commitments and $1.8 million under one of two new alternative investment limited partnerships that we entered into during Second Quarter 2012. The remaining commitment on these two new mezzanine financing limited partnerships amounted to $8.2 million at June 30, 2012. The two new investments contain redemption restrictions and fund liquidation characteristics that are consistent with our other alternative investments. For a description of our seven alternative investment strategies, as well as information regarding redemption, restrictions, and fund liquidations, refer to Note 5. “Investments” in Item 8. “Financial Statements and Supplementary Data.” of our 2011 Annual Report. The following table sets forth aggregated summarized financial information for the partnerships in our alternative investment portfolio. The last line of the table below reflects our share of the aggregate income, which is the portion included in our Financial Statements. As the majority of these investments report results to us on a quarter lag, the summarized financial statement information for the three and six-month periods ended March 31 is as follows:
Income Statement Information |  |  |  |  |  |  |  |
|  | Quarter ended March 31, |  | Six Months ended March 31,
($ in millions) |  | 2012 |  | 2011 |  | 2012 |  | 2011
Net investment income |  | $ | 54.0 |  |  | 132.6 |  |  | 90.1 |  |  | 286.8 |
Realized gains (losses) |  | 234.6 |  |  | 355.3 |  |  | 985.3 |  |  | 163.0 |
Net change in unrealized (depreciation) appreciation |  | 53.4 |  |  | 608.3 |  |  | (434.0 | ) |  | 2,072.5 |
Net income |  | $ | 342.0 |  |  | 1,096.2 |  |  | 641.4 |  |  | 2,522.3 |
Selective’s insurance subsidiaries’ other investments net income |  | $ | 3.0 |  |  | 7.9 |  |  | 5.0 |  |  | 19.5 |
(f) At June 30, 2012, we had 29 fixed maturity securities, with a carrying value of $63.4 million, pledged as collateral for our outstanding borrowing with the Federal Home Loan Bank of Indianapolis (“FHLBI”). This borrowing, which has an outstanding principal balance of $58.0 million, is included in “Notes payable” on our Consolidated Balance Sheets. In accordance with the terms of our agreement with the FHLBI, we retain all rights regarding the collateral securities, which are included in the “U.S. government and government agencies,” “RMBS,” and “CMBS” classifications of our AFS fixed maturity securities portfolio. (g) The components of net investment income earned were as follows:
|  | Quarter ended June 30, |  | Six Months ended June 30,
($ in thousands) |  | 2012 |  | 2011 |  | 2012 |  | 2011
Fixed maturity securities |  | $ | 31,759 |  |  | 32,752 |  |  | 63,109 |  |  | 65,875 |
Equity securities |  | 1,280 |  |  | 785 |  |  | 2,517 |  |  | 1,102 |
Short-term investments |  | 29 |  |  | 33 |  |  | 67 |  |  | 95 |
Other investments |  | 2,963 |  |  | 7,900 |  |  | 4,963 |  |  | 19,541 |
Miscellaneous income |  | 25 |  |  | 22 |  |  | 64 |  |  | 47 |
Investment expenses |  | (2,050 | ) |  | (2,147 | ) |  | (4,086 | ) |  | (3,842 | )
Net investment income earned |  | $ | 34,006 |  |  | 39,345 |  |  | 66,634 |  |  | 82,818 |
Net investment income earned, before tax, decreased by $5.3 million for Second Quarter 2012 compared to Second Quarter 2011, and decrease d by $16.2 million for Six Months 2012 compared to Six Months 2011. These decreases were primarily driven by lower income from alternative investments within our other investment portfolio of $4.7 million and $14.1 million in Second Quarter 2012 and Six Months 2012, respectively. Our alternative investments, which are accounted for under the equity method, primarily consist of investments in limited partnerships, the majority of which report results to us on a one quarter lag. (h) The following tables summarize OTTI by asset type for the periods indicated:
Second Quarter 2012 |  |  |  |  |  |
($ in thousands) |  | Gross |  | Included in Other Comprehensive Income (“OCI”) |  | Recognized in Earnings
Fixed maturity securities |  |  |  |  |  |  |  |  |
ABS |  | $ | 30 |  |  | — |  |  | 30 |
RMBS |  | 10 |  |  | (54 | ) |  | 64 |
OTTI losses |  | $ | 40 |  |  | (54 | ) |  | 94 |
Second Quarter 2011 |  |  |  |  |  |
($ in thousands) |  | Gross |  | Included in OCI |  | Recognized in Earnings
Fixed maturity securities |  |  |  |  |  |  |  |  |
CMBS |  | $ | (260 | ) |  | (402 | ) |  | 142 |
RMBS |  | 97 |  |  | 70 |  |  | 27 |
OTTI losses |  | $ | (163 | ) |  | (332 | ) |  | 169 |
Six Months 2012 |  |  |  |  |  |
($ in thousands) |  | Gross |  | Included in OCI |  | Recognized in Earnings
Fixed maturity securities |  |  |  |  |  |  |  |  |
ABS |  | $ | 62 |  |  | — |  |  | 62 |
CMBS |  | 108 |  |  | — |  |  | 108 |
RMBS |  | (44 | ) |  | (218 | ) |  | 174 |
Total fixed maturity securities |  | 126 |  |  | (218 | ) |  | 344 |
Equity securities |  | 171 |  |  | — |  |  | 171 |
OTTI losses |  | $ | 297 |  |  | (218 | ) |  | 515 |
Six Months 2011 |  |  |  |  |  |
($ in thousands) |  | Gross |  | Included in OCI |  | Recognized in Earnings
Fixed maturity securities |  |  |  |  |  |  |  |  |
Obligations of state and political subdivisions |  | $ | 17 |  |  | — |  |  | 17 |
Corporate securities |  | 244 |  |  | — |  |  | 244 |
CMBS |  | (186 | ) |  | (658 | ) |  | 472 |
RMBS |  | 294 |  |  | 228 |  |  | 66 |
OTTI losses |  | $ | 369 |  |  | (430 | ) |  | 799 |
The following tables set forth, for the periods indicated, credit loss impairments on fixed maturity securities for which a portion of the OTTI charge was recognized in OCI, and the corresponding changes in such amounts:
|  | Quarter ended June 30,
($ in thousands) |  | 2012 |  | 2011
Balance, beginning of period |  | $ | 6,711 |  |  | 14,368 |
Addition for the amount related to credit loss for which an OTTI was not previously recognized |  | — |  |  | — |
Reductions for securities sold during the period |  | — |  |  | — |
Reductions for securities for which the amount previously recognized in OCI was recognized in earnings because of intention or potential requirement to sell before recovery of amortized cost |  | — |  |  | — |
Reductions for securities for which the entire amount previously recognized in OCI was recognized in earnings due to a decrease in cash flows expected |  | — |  |  | (372 | )
Additional increases to the amount related to credit loss for which an OTTI was previously recognized |  | 64 |  |  | 28 |
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected |  | — |  |  | — |
Balance, end of period |  | $ | 6,775 |  |  | 14,024 |
|  | Six Months ended June 30,
($ in thousands) |  | 2012 |  | 2011
Balance, beginning of period |  | $ | 6,602 |  |  | 17,723 |
Addition for the amount related to credit loss for which an OTTI was not previously recognized |  | — |  |  | — |
Reductions for securities sold during the period |  | — |  |  | — |
Reductions for securities for which the amount previously recognized in OCI was recognized in earnings because of intention or potential requirement to sell before recovery of amortized cost |  | — |  |  | — |
Reductions for securities for which the entire amount previously recognized in OCI was recognized in earnings due to a decrease in cash flows expected |  | — |  |  | (3,954 | )
Additional increases to the amount related to credit loss for which an OTTI was previously recognized |  | 173 |  |  | 255 |
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected |  | — |  |  | — |
Balance, end of period |  | $ | 6,775 |  |  | 14,024 |
(i)The components of net realized gains, excluding OTTI charges, were as follows:
|  | Quarter ended June 30, |  | Six Months ended June 30,
($ in thousands) |  | 2012 |  | 2011 |  | 2012 |  | 2011
HTM fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |
Gains |  | $ | 2 |  |  | 8 |  |  | 155 |  |  | 9 |
Losses |  | (25 | ) |  | (108 | ) |  | (106 | ) |  | (322 | )
AFS fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |
Gains |  | 368 |  |  | 1,947 |  |  | 773 |  |  | 2,354 |
Losses |  | (74 | ) |  | — |  |  | (117 | ) |  | (7 | )
AFS equity securities |  |  |  |  |  |  |  |  |  |  |  |
Gains |  | — |  |  | 468 |  |  | 4,775 |  |  | 6,671 |
Losses |  | — |  |  | — |  |  | (428 | ) |  | — |
Short-term investments |  |  |  |  |  |  |  |  |  |  |  |
Losses |  | — |  |  | — |  |  | (2 | ) |  | — |
Other investments |  |  |  |  |  |  |  |
Gains |  | 1 |  |  | — |  |  | 1 |  |  | — |
Total other net realized investment gains |  | 272 |  |  | 2,315 |  |  | 5,051 |  |  | 8,705 |
Total OTTI charges recognized in earnings |  | (94 | ) |  | (169 | ) |  | (515 | ) |  | (799 | )
Total net realized gains |  | $ | 178 |  |  | 2,146 |  |  | 4,536 |  |  | 7,906 |
Realized gains and losses on the sale of investments are determined on the basis of the cost of the specific investments sold. Proceeds from the sale of AFS securities were $24.1 million in Second Quarter 2012 and $95.9 million in Six Months 2012. In addition to calls and maturities, the realized gain, excluding OTTI charges, in Six Months 2012 was driven primarily by the sale of AFS equity securities for proceeds of $57.5 million with net realized gains of $4.3 million due to a rebalancing of the equity securities portfolio. Proceeds from the sale of AFS securities were $52.1 million in Second Quarter 2011 and $123.8 million in Six Months 2011. In addition to calls and maturities and certain bond sales, Six Months 2011 net realized gains, excluding OTTI charges, were driven by the sale of AFS equity securities for proceeds of $59.7 million and realized gains of $6.7 million due to a reallocation of the equity portfolio to a high dividend yield strategy.

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