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Investments | 12 Months Ended
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Dec. 31, 2013
Investments [Abstract] |
Investments | Investments (a) Net unrealized gains on investments included in OCI by asset class were as follows for the years ended December 31, 2013, 2012, and 2011:
($ in thousands) |  | 2013 |  | 2012 |  | 2011
AFS securities: |  |  |  |  |  |  |  |  |
Fixed maturity securities |  | $ | 39,559 |  |  | 165,330 |  |  | 130,517 |
Equity securities |  | 37,421 |  |  | 18,941 |  |  | 13,529 |
Total AFS securities |  | 76,980 |  |  | 184,271 |  |  | 144,046 |
HTM securities: |  |  |  |  |  |  |  |  |
Fixed maturity securities |  | 2,257 |  |  | 3,926 |  |  | 5,566 |
Total HTM securities |  | 2,257 |  |  | 3,926 |  |  | 5,566 |
Total net unrealized gains |  | 79,237 |  |  | 188,197 |  |  | 149,612 |
Deferred income tax expense |  | (27,733 | ) |  | (65,869 | ) |  | (52,364 | )
Net unrealized gains, net of deferred income tax |  | 51,504 |  |  | 122,328 |  |  | 97,248 |
(Decrease) increase in net unrealized gains in OCI, net of deferred income tax |  | $ | (70,824 | ) |  | 25,080 |  |  | 43,380 |
(b) The amortized cost, net unrealized gains and losses, carrying value, unrecognized holding gains and losses, and fair value of HTM fixed maturity securities were as follows:
December 31, 2013 |  |  |  | Net |  |  |  |  |  |  |  |
|  |  |  | Unrealized |  |  |  | Unrecognized |  | Unrecognized |  |
|  | Amortized |  | Gains |  | Carrying |  | Holding |  | Holding |  | Fair
($ in thousands) |  | Cost |  | (Losses) |  | Value |  | Gains |  | Losses |  | Value
Foreign government |  | $ | 5,292 |  |  | 131 |  |  | 5,423 |  |  | 168 |  |  | — |  |  | 5,591 |
Obligations of state and political subdivisions |  | 348,109 |  |  | 4,013 |  |  | 352,122 |  |  | 17,634 |  |  | — |  |  | 369,756 |
Corporate securities |  | 28,174 |  |  | (346 | ) |  | 27,828 |  |  | 2,446 |  |  | — |  |  | 30,274 |
ABS |  | 3,413 |  |  | (655 | ) |  | 2,758 |  |  | 657 |  |  | — |  |  | 3,415 |
CMBS |  | 5,634 |  |  | (886 | ) |  | 4,748 |  |  | 3,197 |  |  | — |  |  | 7,945 |
Total HTM fixed maturity securities |  | $ | 390,622 |  |  | 2,257 |  |  | 392,879 |  |  | 24,102 |  |  | — |  |  | 416,981 |
December 31, 2012 |  |  |  | Net |  |  |  |  |  |  |  |
|  |  |  | Unrealized |  |  |  | Unrecognized |  | Unrecognized |  |
|  | Amortized |  | Gains |  | Carrying |  | Holding |  | Holding |  | Fair
($ in thousands) |  | Cost |  | (Losses) |  | Value |  | Gains |  | Losses |  | Value
Foreign government |  | $ | 5,292 |  |  | 212 |  |  | 5,504 |  |  | 367 |  |  | — |  |  | 5,871 |
Obligations of state and political subdivisions |  | 491,180 |  |  | 6,769 |  |  | 497,949 |  |  | 28,996 |  |  | (23 | ) |  | 526,922 |
Corporate securities |  | 38,285 |  |  | (812 | ) |  | 37,473 |  |  | 4,648 |  |  | — |  |  | 42,121 |
ABS |  | 6,980 |  |  | (1,052 | ) |  | 5,928 |  |  | 1,170 |  |  | — |  |  | 7,098 |
CMBS |  | 8,406 |  |  | (1,191 | ) |  | 7,215 |  |  | 5,434 |  |  | — |  |  | 12,649 |
Total HTM fixed maturity securities |  | $ | 550,143 |  |  | 3,926 |  |  | 554,069 |  |  | 40,615 |  |  | (23 | ) |  | 594,661 |
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 OTTI charge is recognized on an HTM security, through the date of the balance sheet. Our HTM securities had an average duration of 2.2 years as of December 31, 2013. During 2013, 16 securities with a carrying value of $39.6 million and a net unrecognized gain position of $1.4 million, were reclassified from an HTM designation to an AFS designation due to credit rating downgrades by Moody’s Investors Service (“Moody’s”) and/or Standard and Poor’s ("S&P") Financial Services. These unexpected rating downgrades indicated significant deterioration of credit worthiness, which changed our intention to hold these securities to maturity. (c) The cost/amortized cost, unrealized gains and losses, and fair value of AFS securities were as follows:
December 31, 2013 |  |  |  |  |  |  |  |
|  | Cost/ |  |  |  |  |  |
|  | Amortized |  | Unrealized |  | Unrealized |  | Fair
($ in thousands) |  | Cost |  | Gains |  | Losses |  | Value
U.S. government and government agencies |  | $ | 163,218 |  |  | 10,661 |  |  | (504 | ) |  | 173,375 |
Foreign government |  | 29,781 |  |  | 906 |  |  | (72 | ) |  | 30,615 |
Obligations of states and political subdivisions |  | 946,455 |  |  | 25,194 |  |  | (20,025 | ) |  | 951,624 |
Corporate securities |  | 1,707,928 |  |  | 44,004 |  |  | (17,049 | ) |  | 1,734,883 |
ABS |  | 140,430 |  |  | 934 |  |  | (468 | ) |  | 140,896 |
CMBS 1 |  | 172,288 |  |  | 2,462 |  |  | (3,466 | ) |  | 171,284 |
RMBS 2 |  | 515,877 |  |  | 7,273 |  |  | (10,291 | ) |  | 512,859 |
AFS fixed maturity securities |  | 3,675,977 |  |  | 91,434 |  |  | (51,875 | ) |  | 3,715,536 |
AFS equity securities |  | 155,350 |  |  | 37,517 |  |  | (96 | ) |  | 192,771 |
Total AFS securities |  | $ | 3,831,327 |  |  | 128,951 |  |  | (51,971 | ) |  | 3,908,307 |
December 31, 2012 |  |  |  |  |  |  |  |
|  | Cost/ |  |  |  |  |  |
|  | Amortized |  | Unrealized |  | Unrealized |  | Fair
($ in thousands) |  | Cost |  | Gains |  | Losses |  | Value
U.S. government and government agencies |  | $ | 241,874 |  |  | 17,219 |  |  | (1 | ) |  | 259,092 |
Foreign government |  | 28,813 |  |  | 1,540 |  |  | (124 | ) |  | 30,229 |
Obligations of states and political subdivisions |  | 773,953 |  |  | 44,398 |  |  | (327 | ) |  | 818,024 |
Corporate securities |  | 1,368,954 |  |  | 81,696 |  |  | (402 | ) |  | 1,450,248 |
ABS |  | 126,330 |  |  | 2,319 |  |  | (9 | ) |  | 128,640 |
CMBS 1 |  | 133,763 |  |  | 4,572 |  |  | (1,216 | ) |  | 137,119 |
RMBS 2 |  | 456,996 |  |  | 15,961 |  |  | (296 | ) |  | 472,661 |
AFS fixed maturity securities |  | 3,130,683 |  |  | 167,705 |  |  | (2,375 | ) |  | 3,296,013 |
AFS equity securities |  | 132,441 |  |  | 19,400 |  |  | (459 | ) |  | 151,382 |
Total AFS securities |  | $ | 3,263,124 |  |  | 187,105 |  |  | (2,834 | ) |  | 3,447,395 |
1 CMBS includes government guaranteed agency securities with a fair value of $30.0 million at December 31, 2013 and $48.9 million at December 31, 2012. 2 RMBS includes government guaranteed agency securities with a fair value of $55.2 million at December 31, 2013 and $91.0 million at December 31, 2012. Unrealized gains and losses of AFS securities represent fair value fluctuations from the later of: (i) the date a security is designated as AFS; or (ii) the date that an OTTI charge is recognized on an AFS security, through the date of the balance sheet. These unrealized gains and losses are recorded in AOCI on the Consolidated Balance Sheets. (d) The following tables summarize, for all securities in a net unrealized/unrecognized loss position at December 31, 2013 and December 31, 2012, the fair value and gross pre-tax net unrealized/unrecognized loss by asset class and by length of time those securities have been in a net loss position:
December 31, 2013 |  | Less than 12 months |  | 12 months or longer
($ in thousands) |  | Fair Value |  | Unrealized Losses 1 |  | Fair Value |  | Unrealized Losses 1
AFS securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 16,955 |  |  | (500 | ) |  | 507 |  |  | (4 | )
Foreign government |  | 2,029 |  |  | (30 | ) |  | 2,955 |  |  | (42 | )
Obligations of states and political subdivisions |  | 442,531 |  |  | (19,120 | ) |  | 13,530 |  |  | (905 | )
Corporate securities |  | 511,100 |  |  | (15,911 | ) |  | 14,771 |  |  | (1,138 | )
ABS |  | 68,725 |  |  | (468 | ) |  | — |  |  | — |
CMBS |  | 100,396 |  |  | (2,950 | ) |  | 6,298 |  |  | (516 | )
RMBS |  | 268,943 |  |  | (10,031 | ) |  | 2,670 |  |  | (260 | )
Total fixed maturity securities |  | 1,410,679 |  |  | (49,010 | ) |  | 40,731 |  |  | (2,865 | )
Equity securities |  | 1,124 |  |  | (96 | ) |  | — |  |  | — |
Subtotal |  | $ | 1,411,803 |  |  | (49,106 | ) |  | 40,731 |  |  | (2,865 | )
|  | 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 |  | $ | 65 |  |  | (5 | ) |  | 5 |  |  | 441 |  |  | (20 | ) |  | 14 |
ABS |  | — |  |  | — |  |  | — |  |  | 2,490 |  |  | (655 | ) |  | 621 |
Subtotal |  | $ | 65 |  |  | (5 | ) |  | 5 |  |  | 2,931 |  |  | (675 | ) |  | 635 |
Total AFS and HTM |  | $ | 1,411,868 |  |  | (49,111 | ) |  | 5 |  |  | 43,662 |  |  | (3,540 | ) |  | 635 |
December 31, 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 |  | $ | 518 |  |  | (1 | ) |  | — |  |  | — |
Foreign government |  | — |  |  | — |  |  | 2,871 |  |  | (124 | )
Obligations of states and political subdivisions |  | 32,383 |  |  | (327 | ) |  | — |  |  | — |
Corporate securities |  | 50,880 |  |  | (402 | ) |  | — |  |  | — |
ABS |  | 9,137 |  |  | (9 | ) |  | — |  |  | — |
CMBS |  | 7,637 |  |  | (19 | ) |  | 11,830 |  |  | (1,197 | )
RMBS |  | 8,710 |  |  | (59 | ) |  | 5,035 |  |  | (237 | )
Total fixed maturity securities |  | 109,265 |  |  | (817 | ) |  | 19,736 |  |  | (1,558 | )
Equity securities |  | 15,901 |  |  | (459 | ) |  | — |  |  | — |
Subtotal |  | $ | 125,166 |  |  | (1,276 | ) |  | 19,736 |  |  | (1,558 | )
|  | 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 |  | $ | 1,218 |  |  | (33 | ) |  | 29 |  |  | 1,108 |  |  | (47 | ) |  | 38 |
ABS |  | — |  |  | — |  |  | — |  |  | 2,860 |  |  | (840 | ) |  | 753 |
Subtotal |  | $ | 1,218 |  |  | (33 | ) |  | 29 |  |  | 3,968 |  |  | (887 | ) |  | 791 |
Total AFS and HTM |  | $ | 126,384 |  |  | (1,309 | ) |  | 29 |  |  | 23,704 |  |  | (2,445 | ) |  | 791 |
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 holding 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 net unrealized/unrecognized loss positions increased by $49.1 million as of December 31, 2013 compared to the prior year as follows:
($ in thousands) |  |
December 31, 2013 |  | December 31, 2012
Number of Issues |  | % of Market/Book |  | Unrealized/Unrecognized Loss |  | Number of Issues |  | % of Market/Book |  | Unrealized/ Unrecognized Loss
556 |  |  | 80% - 99% |  | $ | 51,835 |  |  | 100 |  |  | 80% - 99% |  | $ | 2,701 |
1 |  |  | 60% - 79% |  | 176 |  |  | 1 |  |  | 60% - 79% |  | 233 |
— |  |  | 40% - 59% |  | — |  |  | — |  |  | 40% - 59% |  | — |
— |  |  | 20% - 39% |  | — |  |  | — |  |  | 20% - 39% |  | — |
— |  |  | 0% - 19% |  | — |  |  | — |  |  | 0% - 19% |  | — |
|  |  |  |  | $ | 52,011 |  |  |  |  |  |  |  | $ | 2,934 |
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” of this Form 10-K. At December 31, 2013, we had 557 securities in an aggregate unrealized/unrecognized loss position of $52.0 million, $2.9 million of which have been in a loss position for more than 12 months. At December 31, 2012, we had 101 securities in an aggregate unrealized/unrecognized loss position of $2.9 million, $1.7 million of which have been in a loss position for more than 12 months. During 2013, interest rates, other than short-term, generally rose. For example, the yield on the 10-year U.S. Treasury Note rose by 127 basis points. This interest rate movement has negatively impacted our fixed maturity securities portfolio's valuation, thus increasing the number of securities in a loss position and the corresponding dollar amount of unrealized losses. The increase in the unrealized losses does not correspond to any issuer specific credit concerns; however, it does reflect an expected reduction in market value due to higher market interest rates. If interest rates rise further, it is reasonable to expect downward pressure on the fair market values within our fixed maturity securities portfolio, potentially resulting in an increased number of securities in a loss position for an extended period of time, and a corresponding increase in the dollar amount of unrealized losses. For a discussion regarding the sensitivity of interest rate movements and the related impacts on the fixed maturity securities portfolio, refer to Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" of this Form 10-K. We do not intend 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 December 31, 2013. 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. (e) Fixed-maturity securities at December 31, 2013, by contractual maturity are shown below. Mortgage-backed securities ("MBS") 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 is a summary of HTM fixed maturity securities at December 31, 2013:
($ in thousands) |  | Carrying Value |  | Fair Value
Due in one year or less |  | $ | 67,784 |  |  | 70,422 |
Due after one year through five years |  | 293,947 |  |  | 312,109 |
Due after five years through 10 years |  | 31,148 |  |  | 34,450 |
Total HTM fixed maturity securities |  | $ | 392,879 |  |  | $ | 416,981 |
Listed below is a summary of AFS fixed maturity securities at December 31, 2013:
($ in thousands) |  | Fair Value
Due in one year or less |  | $ | 375,313 |
Due after one year through five years |  | 1,947,709 |
Due after five years through 10 years |  | 1,363,912 |
Due after 10 years |  | 28,602 |
Total AFS fixed maturity securities |  | $ | 3,715,536 |
(f) The following table summarizes our other investment portfolio by strategy and the remaining commitment amount associated with each strategy:
Other Investments |  | Carrying Value |  | 2013
|  | December 31, |  | December 31, |  | Remaining
($ in thousands) |  | 2013 |  | 2012 |  | Commitment
Alternative Investments |  |  |  |  |  |  |  |  |
Secondary private equity |  | $ | 25,618 |  |  | 28,032 |  |  | 7,739 |
Private equity |  | 20,192 |  |  | 18,344 |  |  | 9,998 |
Energy/power generation |  | 17,361 |  |  | 18,640 |  |  | 6,984 |
Mezzanine financing |  | 12,738 |  |  | 12,692 |  |  | 18,249 |
Real estate |  | 11,698 |  |  | 11,751 |  |  | 10,203 |
Distressed debt |  | 11,579 |  |  | 12,728 |  |  | 2,965 |
Venture capital |  | 7,025 |  |  | 7,477 |  |  | 400 |
Total alternative investments |  | 106,211 |  |  | 109,664 |  |  | 56,538 |
Other securities |  | 1,664 |  |  | 4,412 |  |  | — |
Total other investments |  | $ | 107,875 |  |  | 114,076 |  |  | 56,538 |
The following is a description of our alternative investment strategies: Secondary Private Equity This strategy purchases seasoned private equity funds from investors desiring liquidity prior to normal fund termination. Investments are made across all sectors of the private equity market, including leveraged buyouts, venture capital, distressed securities, mezzanine financing, real estate, and infrastructure. Private Equity This strategy makes private equity investments, primarily in established large and middle market companies across diverse industries globally. Energy/Power Generation This strategy invests primarily in cash flow generating assets in the coal, natural gas, power generation, and electric and gas transmission and distribution industries. Mezzanine Financing This strategy provides privately negotiated fixed income securities, generally with an equity component, to leveraged buyout (“LBO”) firms and private and publicly traded large, mid and small-cap companies to finance LBOs, recapitalizations, and acquisitions. Real Estate This strategy invests opportunistically in real estate in North America, Europe, and Asia via direct property ownership, joint ventures, mortgages, and investments in equity and debt instruments. Distressed Debt This strategy makes direct and indirect investments in debt and equity securities of companies that are experiencing financial and/or operational distress. Investments include buying indebtedness of bankrupt or financially troubled companies, small balance loan portfolios, special situations and capital structure arbitrage trades, commercial real estate mortgages and similar non-U.S. securities and debt obligations. This strategy also includes a fund of funds component. The fund of funds component of our distressed debt strategy, which makes up approximately $7.9 million of our distressed debt strategy, encompasses a number of strategies that generally fall into one of the following broad categories: Distressed Debt Funds – Trading-Focused These funds focus on buying and selling debt of distressed companies (“Distressed Debt”). Distressed Debt Funds – Restructuring-Focused These funds focus on acquiring Distressed Debt with the intent of converting it into equity in a restructuring and taking control of the company. Special Situations Funds These funds pursue strategies that seek to take advantage of dislocations or opportunities in the market that are often related to, or are derivatives of, distressed investing. Special situations are often event-driven and characterized by complexity, market inefficiency, and excess risk premiums. Private Equity Funds – Turnaround-Focused These funds are a subset of private equity funds focused on investing in under-performing or distressed companies. These funds generally create value by acquiring the equity of these companies, in certain cases out of bankruptcy, and effecting operational turnarounds or financial restructuring. Venture Capital In general, these investments are venture capital investments made principally by investing in equity securities of privately held corporations, for long-term capital appreciation. This strategy also makes private equity investments in growth equity and buyout partnerships. Our seven alternative investment strategies employ low or moderate levels of leverage and generally use hedging only to reduce foreign exchange or interest rate volatility. At this time, our alternative investment strategies do not include hedge funds. We cannot redeem our investments with the general partners of these investments; however, occasionally these partnerships can be traded on the secondary market. Once liquidation is triggered by clauses within the limited partnership agreements or at the funds’ stated end date, we will receive our final allocation of capital and any earned appreciation of the underlying investments, assuming we have not divested ourselves of our partnership interests prior to that time. We currently receive distributions from these alternative investments through the realization of the underlying investments in the limited partnerships. We anticipate that the general partners of these alternative investments will liquidate their underlying investment portfolios through 2026. The following tables set forth summarized financial information for our investments that are accounted for under the equity method, which are primarily alternative investments. This information is presented in the aggregate for our other investment portfolio. Since the majority of these investments report results to us on a quarter lag, the summarized financial statement information is as of, and for the 12-month period ended, September 30:
Balance Sheet Information |  |  |  |
September 30, |  |  |  |
($ in millions) |  | 2013 |  | 2012
Investments |  | $ | 11,020 |  |  | 12,214 |
Total assets |  | 11,727 |  |  | 12,912 |
Total liabilities |  | 573 |  |  | 657 |
Partners’ capital |  | 11,154 |  |  | 12,255 |
Income Statement Information |  |  |  |  |  |
12 months ended September 30, |  |  |  |  |  |
($ in millions) |  | 2013 |  | 2012 |  | 2011
Net investment income |  | $ | 406 |  |  | 226 |  |  | 564 |
Realized gains |  | 913 |  |  | 1,015 |  |  | 893 |
Net change in unrealized appreciation (depreciation) |  | 382 |  |  | (100 | ) |  | 1,485 |
Net income |  | $ | 1,701 |  |  | 1,141 |  |  | 2,942 |
Insurance Subsidiaries' other investments income |  | 15 |  |  | 9 |  |  | 21 |
(g) At December 31, 2013, we had fixed maturity securities, with a carrying value of $62.3 million, that were pledged as collateral for our outstanding borrowing of $58 million with the FHLBI. This outstanding borrowing 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 these securities, which are included in the “U.S. government and government agencies,” “RMBS,” and “CMBS” classifications of our AFS fixed maturity securities portfolio. Also at December 31, 2013, we had fixed maturity securities, with a carrying value of $22.1 million, and short-term investments with a carrying value of $0.7 million, that collateralize reinsurance obligations related to our 2011 acquisition of our E&S book of business. Similar to the FHLBI collateral discussion above, we retain all rights regarding these investments. The fixed maturity securities are included in the "Municipal," "Corporate," "U.S. government and government agencies," "RMBS," and "ABS" classifications of our AFS fixed maturity securities portfolio. In addition, certain bonds with a carrying value of $26.5 million were on deposit with various state and regulatory agencies to comply with insurance laws. We retain all rights regarding these securities, which are primarily included in the "U.S. government and government agencies" classification of our AFS fixed maturity securities portfolio. (h) The components of net investment income earned were as follows:
($ in thousands) |  | 2013 |  | 2012 |  | 2011
Fixed maturity securities |  | $ | 121,582 |  |  | 124,687 |  |  | 129,710 |
Equity securities, dividend income |  | 6,140 |  |  | 6,215 |  |  | 4,535 |
Short-term investments |  | 117 |  |  | 151 |  |  | 160 |
Other investments |  | 15,208 |  |  | 8,996 |  |  | 20,539 |
Miscellaneous income |  | — |  |  | — |  |  | 133 |
Investment expenses |  | (8,404 | ) |  | (8,172 | ) |  | (7,634 | )
Net investment income earned |  | $ | 134,643 |  |  | 131,877 |  |  | 147,443 |
(i) The following tables summarize OTTI by asset type for the periods indicated:
2013 |  |  |  |  |  | Recognized in
($ in thousands) |  | Gross |  | Included in OCI |  | Earnings
HTM fixed maturity securities: |  |  |  |  |  |  |  |  |
ABS |  | $ | (44 | ) |  | (47 | ) |  | 3 |
Total HTM fixed maturity securities |  | (44 | ) |  | (47 | ) |  | 3 |
AFS fixed maturity securities: |  |  |  |  |  |
RMBS |  | 16 |  |  | (30 | ) |  | 46 |
Total AFS fixed maturity securities |  | 16 |  |  | (30 | ) |  | 46 |
Equity securities |  | 3,747 |  |  | — |  |  | 3,747 |
Total AFS securities |  | 3,763 |  |  | (30 | ) |  | 3,793 |
Other investments |  | 1,847 |  |  | — |  |  | 1,847 |
OTTI losses |  | $ | 5,566 |  |  | $ | (77 | ) |  | $ | 5,643 |
2012 |  |  |  |  |  | Recognized in
($ in thousands) |  | Gross |  | Included in OCI |  | Earnings
AFS fixed maturity securities: |  |  |  |  |  |  |  |  |
ABS |  | 98 |  |  | — |  |  | 98 |
CMBS |  | (1,525 | ) |  | (2,335 | ) |  | 810 |
RMBS |  | (35 | ) |  | (218 | ) |  | 183 |
Total AFS fixed maturity securities |  | (1,462 | ) |  | (2,553 | ) |  | 1,091 |
Equity securities |  | 3,173 |  |  | — |  |  | 3,173 |
OTTI losses |  | $ | 1,711 |  |  | (2,553 | ) |  | 4,264 |
2011 |  |  |  |  |  | Recognized in
($ in thousands) |  | Gross |  | Included in OCI |  | Earnings
AFS fixed maturity securities |  |  |  |  |  |  |  |  |
Obligations of state and political subdivisions |  | $ | 17 |  |  | — |  |  | 17 |
Corporate securities |  | 244 |  |  | — |  |  | 244 |
ABS |  | 175 |  |  | (546 | ) |  | 721 |
CMBS |  | (149 | ) |  | (843 | ) |  | 694 |
RMBS |  | 346 |  |  | 201 |  |  | 145 |
Total AFS fixed maturity securities |  | 633 |  |  | (1,188 | ) |  | 1,821 |
Equity securities |  | 11,365 |  |  | — |  |  | 11,365 |
OTTI losses |  | $ | 11,998 |  |  | (1,188 | ) |  | 13,186 |
The majority of the OTTI charges in 2013, 2012, and 2011 were primarily comprised of charges on our equity portfolio. In 2013, $2.0 million related to securities that we did not believe would recover in the near term and $1.7 million related to securities for which we had the intent to sell. In 2012, $1.0 million related to securities that we did not believe would recover in the near term and $2.2 million related to securities for which we had the intent to sell. In 2011, $8.5 million related to securities that we did not believe would recover in the near term and $2.9 million related to securities for which we had the intent to sell. Also contributing to the OTTI charges in 2013 were $1.8 million of charges that relate to an investment in a limited liability company within our other investments portfolio that has sustained significant losses for which we do not anticipate recovery. The following table sets forth, for the periods indicated, credit loss impairments on fixed maturity securities for which a portion of the OTTI charge was recognized in OCI, and the corresponding changes in such amounts:
($ in thousands) |  | 2013 |  | 2012 |  | 2011
Balance, beginning of year |  | $ | 7,477 |  |  | 6,602 |  |  | 17,723 |
Credit losses remaining in retained earnings after adoption of OTTI accounting guidance |  | — |  |  | — |  |  | — |
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 |  | — |  |  | — |  |  | (11,672 | )
Additional increases to the amount related to credit loss for which an OTTI was previously recognized |  | 11 |  |  | 875 |  |  | 551 |
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected |  | — |  |  | — |  |  | — |
Balance, end of year |  | $ | 7,488 |  |  | 7,477 |  |  | 6,602 |
(j) The components of net realized gains (losses), excluding OTTI charges, were as follows:
($ in thousands) |  | 2013 |  | 2012 |  | 2011
HTM fixed maturity securities |  |  |  |  |  |  |  |  |
Gains |  | $ | 195 |  |  | 194 |  |  | 4 |
Losses |  | (95 | ) |  | (217 | ) |  | (564 | )
AFS fixed maturity securities |  |  |  |  |  |  |  |  |
Gains |  | 3,340 |  |  | 4,452 |  |  | 9,385 |
Losses |  | (373 | ) |  | (472 | ) |  | (70 | )
AFS equity securities |  |  |  |  |  |  |  |  |
Gains |  | 24,776 |  |  | 10,901 |  |  | 6,671 |
Losses |  | (408 | ) |  | (1,205 | ) |  | — |
Short-term investments |  |  |  |  |  |
Losses |  | — |  |  | (2 | ) |  | — |
Other investments |  |  |  |  |  |  |  |  |
Gains |  | — |  |  | 1 |  |  | — |
Losses |  | (1,060 | ) |  | (400 | ) |  | — |
Total other net realized investment gains |  | 26,375 |  |  | 13,252 |  |  | 15,426 |
Total OTTI charges recognized in earnings |  | (5,643 | ) |  | (4,264 | ) |  | (13,186 | )
Total net realized gains |  | $ | 20,732 |  |  | 8,988 |  |  | 2,240 |
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 $135.9 million in 2013, $205.3 million in 2012, and $206.5 million in 2011. Net realized gains in 2013, excluding OTTI charges, were driven by the sale of AFS equity securities due to the rebalancing of our high-dividend yield strategy holdings within our equity portfolio. Net realized gains in 2012, excluding OTTI charges, were driven by: (i) calls and maturities; and (ii) the sale of AFS equity securities related to rebalancing of our high-dividend yield strategy holdings within our equity portfolio. Net realized gains in 2011, excluding OTTI charges, were driven by: (i) calls and maturities; (ii) the sale of AFS fixed maturity securities, primarily corporate, municipal, and government holdings; and (iii) the sale of AFS equity securities to facilitate the reallocation of the equity portfolio to a high-dividend yield strategy.

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