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Investments
 6 Months Ended
Jun. 30, 2011
Investments  
Investments

Note 2 - Investments

Maturities/Sales of Fixed Maturity Securities

The following table presents the distribution of the Company's fixed maturity securities ("fixed maturities") portfolio by estimated expected maturity. Estimated expected maturities differ from contractual maturities, reflecting assumptions regarding borrowers' utilization of the right to call or prepay obligations with or without call or prepayment penalties. For structured securities, including mortgage-backed securities and other asset-backed securities, estimated expected maturities consider broker dealer survey prepayment assumptions and are verified for consistency with the interest rate and economic environments.

 

     Percent of Total Fair Value      June 30, 2011  
     June 30,
2011		      December 31,
2010		      Fair
Value		      Amortized
Cost		  

Due in 1 year or less

      3.7%               3.3%               $   189,179         $   179,757   

Due after 1 year through 5 years

      19.1                  20.5                  965,696         917,598   

Due after 5 years through 10 years

      31.9                  29.5                  1,616,576         1,536,062   

Due after 10 years through 20 years

      23.3                  22.7                  1,180,226         1,121,444   

Due after 20 years

        22.0                    24.0                    1,113,125           1,057,684   

    Total

      100.0%               100.0%               $5,064,802         $4,812,545   

The average option-adjusted duration for the Company's fixed maturity securities was 6.7 years at June 30, 2011 and 6.9 years at December 31, 2010.

 

Proceeds received from sales of fixed maturities, determined using the specific identification method, and gross gains and gross losses realized as a result of those sales for each period were:

 

     Three Months Ended
June 30,		     Six Months Ended
June 30,		  
       2011          2010         2011         2010    

Proceeds received

      $80,018        $272,792       $211,284       $362,594  

Gross gains realized

      5,139        13,217       9,682       16,780  

Gross losses realized

      -         (5,069 )      (83 )      (5,075 ) 

Unrealized Gains and Losses on Fixed Maturities and Equity Securities

The amortized cost or cost, unrealized investment gains and losses, fair values and other-than-temporary impairment ("OTTI") included in accumulated other comprehensive income (loss) ("AOCI") of all fixed maturities and equity securities in the portfolio as of June 30, 2011 and December 31, 2010 were as follows:

 

     Amortized
Cost/Cost		      Unrealized
Gains		      Unrealized
Losses		      Fair
Value		      OTTI in
AOCI (2)		  

June 30, 2011

               

  Fixed maturity securities

               

U.S. government and federally sponsored agency obligations (1)

               

          Mortgage-backed securities

    $ 440,319       $ 33,297       $ 805       $ 472,811       $ -   

          Other

      581,525         8,590         19,833         570,282         -   

    Municipal bonds

      1,123,833         49,605         5,964         1,167,474         -   

    Foreign government bonds

      42,961         4,272         -         47,233         -   

    Corporate bonds

      1,893,721         163,222         7,586         2,049,357         -   

    Other mortgage-backed securities

      730,186         37,324         9,865         757,645         2,257  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Totals

    $ 4,812,545       $ 296,310       $ 44,053       $ 5,064,802       $ 2,257  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

  Equity securities

    $ 20,694       $ 4,801       $ 362       $ 25,133       $ -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

December 31, 2010

               

  Fixed maturity securities

               

U.S. government and federally sponsored agency obligations (1)

               

          Mortgage-backed securities

    $ 442,969       $ 26,255       $ 1,180       $ 468,044       $ -   

          Other

      512,692         6,227         21,465         497,454         -   

    Municipal bonds

      1,080,324         27,782         19,399         1,088,707         -   

    Foreign government bonds

      42,982         2,554         -         45,536         -   

    Corporate bonds

      1,790,159         152,866         10,437         1,932,588         -   

    Other mortgage-backed securities

      664,107         34,746         15,645         683,208         1,401  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Totals

    $ 4,533,233       $ 250,430       $ 68,126       $ 4,715,537       $ 1,401  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

  Equity securities

    $ 20,765       $ 3,747       $ 456       $ 24,056       $ -   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

(1)

Fair value includes securities issued by Federal National Mortgage Association ("FNMA") of $497,634 and $431,635; Federal Home Loan Mortgage Association ("FHLMA") of $323,730 and $310,751; and Government National Mortgage Association ("GNMA") of $39,913 and $45,454 as of June 30, 2011 and December 31, 2010, respectively.

(2)

Represents the amount of other-than-temporary impairment losses in AOCI which, beginning April 1, 2009, was not included in earnings under current accounting guidance. Amounts also include unrealized gains and losses on impaired securities relating to changes in the fair value of such securities subsequent to the impairment measurement date.

 

Net unrealized gains and losses are computed as the difference between fair value and amortized cost for fixed maturities or cost for equity securities. The following table reconciles the net unrealized investment gains and losses, net of tax, included in accumulated other comprehensive income (loss), before the impact of deferred policy acquisition costs:

 

     Three Months Ended
June 30,		     Six Months Ended
June 30,		  
       2011          2010         2011          2010    

Net unrealized investment gains (losses) on fixed maturity securities, net of tax

     

Beginning of period

      $114,515        $  64,436       $118,498        $  24,599  

Change in unrealized investment gains and losses

      41,945        72,668       34,220        110,693  

Reclassification of net realized investment (gains) losses to net income

            7,507              7,410           11,249              9,222  

End of period

      $163,967        $144,514       $163,967        $144,514  

Net unrealized investment gains (losses) on equity securities, net of tax

           

Beginning of period

      $    2,497        $    1,667       $    2,139        $   (1,189 ) 

Change in unrealized investment gains and losses

      385        (1,451 )      743        1,191  

Reclassification of net realized investment (gains) losses to net income

                   3                   60                    3                 274  

End of period

      $    2,885        $       276       $    2,885        $       276  

Credit Losses

The following table summarizes the cumulative amounts related to the Company's credit loss component of the other-than-temporary impairment losses on fixed maturity securities held as of June 30, 2011 and 2010 that the Company did not intend to sell as of those dates, and it was not more likely than not that the Company would be required to sell the securities before the anticipated recovery of the amortized cost bases, for which the non-credit portions of the other-than-temporary impairment losses were recognized in other comprehensive income:

 

     Six Months Ended
June 30,		  
     2011     2010  

Cumulative credit loss (1)

     

  Beginning of period

      $4,518       $2,875  

    New credit losses

      -        647  

    Losses related to securities sold or paid down during the period

          (561 )                -   

  End of period

      $3,957       $3,522  

(1)

The cumulative credit loss amounts exclude other-than-temporary impairment losses on securities held as of the periods indicated that the Company intended to sell or it was more likely than not that the Company would be required to sell the security before the recovery of the amortized cost basis. The current definition, reporting and disclosure of "credit loss" was effective as of April 1, 2009.

 

Fixed Maturities and Equity Securities

At June 30, 2011, the gross unrealized loss in the fixed maturity and equity securities portfolio was $44,415 (257 positions, the fair value of which represented 17.9% of total fixed maturity and equity securities fair value). The following table presents the fair value and gross unrealized losses of fixed maturity securities and equity securities in an unrealized loss position at June 30, 2011 and December 31, 2010. The Company views the decrease in value of all of the securities with unrealized losses at June 30, 2011 — which was driven largely by spread widening and changes in interest rates from the date of acquisition — as temporary. For fixed maturity securities, management does not have the intent to sell the securities and it is not more likely than not the Company will be required to sell the securities before the anticipated recovery of the amortized cost bases. In addition, management expects to recover the entire cost basis of the fixed maturity securities. For equity securities, the Company has the ability and intent to hold the securities for the recovery of cost. Therefore, no impairment of these securities was recorded at June 30, 2011.

 

$1,053,018 $1,053,018 $1,053,018 $1,053,018 $1,053,018 $1,053,018
    12 Months or Less     More than 12 Months     Total  
     Fair Value      Gross
Unrealized
Losses		     Fair Value     Gross
 Unrealized 
Losses		     Fair Value     Gross
 Unrealized 
Losses		  

June 30, 2011

            

Fixed maturity securities

            

U.S. government and federally
sponsored agency obligations

            

Mortgage-backed securities

     $     23,787        $     796        $    1,712        $           9        $     25,499        $      805   

Other

     331,632        19,833        -        -        331,632        19,833   

Municipal bonds

     189,516        3,629        29,650        2,335        219,166        5,964   

Foreign government bonds

     -        -        -        -        -        -   

Corporate bonds

     171,783        3,415        25,241        4,171        197,024        7,586   

Other mortgage-backed
securities

            77,518            1,549            55,962              8,316             133,480            9,865   

Totals

     $   794,236        $29,222        $112,565        $  14,831        $   906,801        $44,053   

Equity securities (1)

     $          524        $       28        $    5,658        $       334        $       6,182        $     362   

December 31, 2010

            

Fixed maturity securities

            

U.S. government and federally
sponsored agency obligations

            

Mortgage-backed securities

     $     27,111        $  1,179        $    1,907        $           1        $     29,018        $  1,180   

Other

     312,750        21,465        -        -        312,750        21,465   

Municipal bonds

     416,216        14,520        34,825        4,879        451,041        19,399   

Foreign government bonds

     -        -        -        -        -        -   

Corporate bonds

     179,339        4,587        45,789        5,850        225,128        10,437   

Other mortgage-backed

securities

          117,602            2,932            68,921            12,713             186,523          15,645   

Totals

     $1,053,018        $44,683        $151,442        $  23,443        $1,204,460        $68,126   

Equity securities (1)

     $          938        $       49        $    5,822        $       407        $       6,760        $     456   

(1)

Includes primarily nonredeemable (perpetual) preferred stocks and also common stocks.

The Company's investment portfolio includes no free-standing derivative financial instruments (futures, forwards, swaps, option contracts or other financial instruments with similar characteristics).