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Investments | 6 Months Ended
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Jun. 30, 2012
Investments [Abstract] |
Investments | Note 2 - Investments The Company’s investment portfolio includes no free-standing derivative financial instruments (futures, forwards, swaps, option contracts or other financial instruments with similar characteristics). 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, 2012 |
|  | June 30, |  |  | December 31, |  |  | Fair |  |  | Amortized |
|  | 2012 |  |  | 2011 |  |  | Value |  |  | Cost |
Estimated expected maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Due in 1 year or less |  |  | 4.4 | % |  |  | 4.8 | % |  | $ | 251,582 |  |  | $ | 227,379 |
Due after 1 year through 5 years |  |  | 18.4 |  |  |  | 19.4 |  |  |  | 1,049,930 |  |  |  | 948,923 |
Due after 5 years through 10 years |  |  | 36.3 |  |  |  | 33.2 |  |  |  | 2,062,870 |  |  |  | 1,864,414 |
Due after 10 years through 20 years |  |  | 21.1 |  |  |  | 22.1 |  |  |  | 1,201,837 |  |  |  | 1,086,216 |
Due after 20 years |  |  | 19.8 |  |  |  | 20.5 |  |  |  | 1,128,507 |  |  |  | 1,019,941 |
Total |  |  | 100.0 | % |  |  | 100.0 | % |  | $ | 5,694,726 |  |  | $ | 5,146,873 |
Average option-adjusted duration, in years |  |  | 6.3 |  |  |  | 6.4 |  |  |  |  |  |  |  |  |
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 |  |  | Six Months Ended |
|  | June 30, |  |  | June 30, |
|  | 2012 |  |  | 2011 |  |  | 2012 |  |  | 2011 |
Proceeds received |  | $ | 121,228 |  |  | $ | 80,018 |  |  | $ | 279,529 |  |  | $ | 211,284 |
Gross gains realized |  |  | 8,461 |  |  |  | 5,139 |  |  |  | 17,362 |  |  |  | 9,682 |
Gross losses realized |  |  | (2,684 | ) |  |  | — |  |  |  | (11,829 | ) |  |  | (83 | )
Unrealized Gains and Losses on Fixed Maturities and Equity Securities Compared to December 31, 2011, the 2012 improvement in unrealized investment gains and losses was due to lower yields on U.S. Treasury securities and narrowing credit spreads across virtually all asset classes, the combination of which resulted in an increase in net unrealized gains for the Company’s holdings of municipal securities, corporate securities, U.S. government and agency securities and other mortgage-backed 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, 2012 and December 31, 2011 were as follows:
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |  |  | OTTI in |
|  | Cost/Cost |  |  | Gains |  |  | Losses |  |  | Value |  |  | AOCI (2) |
June 30, 2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and federally sponsored agency obligations (1) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 552,090 |  |  | $ | 77,445 |  |  | $ | 5 |  |  | $ | 629,530 |  |  | $ | — |
Other |  |  | 451,983 |  |  |  | 37,070 |  |  |  | 103 |  |  |  | 488,950 |  |  |  | — |
Municipal bonds |  |  | 1,349,819 |  |  |  | 162,108 |  |  |  | 2,419 |  |  |  | 1,509,508 |  |  |  | — |
Foreign government bonds |  |  | 48,503 |  |  |  | 7,103 |  |  |  | — |  |  |  | 55,606 |  |  |  | — |
Corporate bonds |  |  | 2,174,764 |  |  |  | 250,421 |  |  |  | 10,720 |  |  |  | 2,414,465 |  |  |  | — |
Other mortgage-backed securities |  |  | 569,714 |  |  |  | 29,943 |  |  |  | 2,990 |  |  |  | 596,667 |  |  |  | 2,435 |
Totals |  | $ | 5,146,873 |  |  | $ | 564,090 |  |  | $ | 16,237 |  |  | $ | 5,694,726 |  |  | $ | 2,435 |
Equity securities |  | $ | 37,199 |  |  | $ | 2,013 |  |  | $ | 1,177 |  |  | $ | 38,035 |  |  | $ | — |
December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and federally sponsored agency obligations (1) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 532,554 |  |  | $ | 71,402 |  |  | $ | 144 |  |  | $ | 603,812 |  |  | $ | — |
Other |  |  | 560,036 |  |  |  | 43,705 |  |  |  | — |  |  |  | 603,741 |  |  |  | — |
Municipal bonds |  |  | 1,291,281 |  |  |  | 122,857 |  |  |  | 1,020 |  |  |  | 1,413,118 |  |  |  | — |
Foreign government bonds |  |  | 44,529 |  |  |  | 5,095 |  |  |  | — |  |  |  | 49,624 |  |  |  | — |
Corporate bonds |  |  | 1,967,229 |  |  |  | 205,413 |  |  |  | 16,098 |  |  |  | 2,156,544 |  |  |  | — |
Other mortgage-backed securities |  |  | 588,760 |  |  |  | 22,024 |  |  |  | 15,791 |  |  |  | 594,993 |  |  |  | 2,136 |
Totals |  | $ | 4,984,389 |  |  | $ | 470,496 |  |  | $ | 33,053 |  |  | $ | 5,421,832 |  |  | $ | 2,136 |
Equity securities |  | $ | 23,070 |  |  | $ | 4,030 |  |  | $ | 326 |  |  | $ | 26,774 |  |  | $ | — |
(1) | Fair value includes securities issued by Federal National Mortgage Association (“FNMA”) of $469,909 and $547,521; Federal Home Loan Mortgage Corporation (“FHLMC”) of $402,031 and $374,361; and Government National Mortgage Association (“GNMA”) of $133,390 and $124,515 as of June 30, 2012 and December 31, 2011, 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 on deferred policy acquisition costs:
|  | Three Months Ended |  |  | Six Months Ended |
|  | June 30, |  |  | June 30, |
|  | 2012 |  |  | 2011 |  |  | 2012 |  |  | 2011 |
Net unrealized investment gains (losses) on fixed maturity securities, net of tax |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period |  | $ | 298,096 |  |  | $ | 114,515 |  |  | $ | 284,338 |  |  | $ | 118,498 |
Change in unrealized investment gains and losses |  |  | 61,869 |  |  |  | 53,217 |  |  |  | 75,867 |  |  |  | 52,976 |
Reclassification of net realized investment (gains) losses to net income |  |  | (3,861 | ) |  |  | (3,765 | ) |  |  | (4,101 | ) |  |  | (7,507 | )
End of period |  | $ | 356,104 |  |  | $ | 163,967 |  |  | $ | 356,104 |  |  | $ | 163,967 |
Net unrealized investment gains (losses) on equity securities, net of tax |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period |  | $ | 2,238 |  |  | $ | 2,497 |  |  | $ | 2,408 |  |  | $ | 2,139 |
Change in unrealized investment gains and losses |  |  | 882 |  |  |  | 391 |  |  |  | 727 |  |  |  | 749 |
Reclassification of net realized investment (gains) losses to net income |  |  | (2,577 | ) |  |  | (3 | ) |  |  | (2,592 | ) |  |  | (3 | )
End of period |  | $ | 543 |  |  | $ | 2,885 |  |  | $ | 543 |  |  | $ | 2,885 |
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, 2012 and 2011 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, |
|  | 2012 |  |  | 2011 |
Cumulative credit loss (1) |  |  |  |  |  |  |  |
Beginning of period |  | $ | 3,957 |  |  | $ | 4,518 |
New credit losses |  |  | — |  |  |  | — |
Losses related to securities sold or paid down during the period |  |  | — |  |  |  | (561 | )
End of period |  | $ | 3,957 |  |  | $ | 3,957 |
(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 definition, reporting and disclosure of “credit loss” was effective as of April 1, 2009.
Fixed Maturities and Equity Securities 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, 2012 and December 31, 2011, respectively. The Company views the decrease in value of all of the securities with unrealized losses at June 30, 2012 — which was driven largely by spread widening, financial market illiquidity, market volatility 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 and recovery of cost is expected within a reasonable period of time. Therefore, no impairment of these securities was recorded at June 30, 2012.
|  | 12 Months or Less |  |  | More than 12 Months |  |  | Total |
|  |  |  |  | Gross |  |  |  |  |  | Gross |  |  |  |  |  | Gross |
|  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |
June 30, 2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and federally sponsored agency obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 5,996 |  |  | $ | 1 |  |  | $ | 1,350 |  |  | $ | 4 |  |  | $ | 7,346 |  |  | $ | 5 |
Other |  |  | 26,947 |  |  |  | 103 |  |  |  | — |  |  |  | — |  |  |  | 26,947 |  |  |  | 103 |
Municipal bonds |  |  | 75,552 |  |  |  | 1,743 |  |  |  | 3,359 |  |  |  | 676 |  |  |  | 78,911 |  |  |  | 2,419 |
Foreign government bonds |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Corporate bonds |  |  | 99,779 |  |  |  | 4,315 |  |  |  | 30,434 |  |  |  | 6,405 |  |  |  | 130,213 |  |  |  | 10,720 |
Other mortgage-backed securities |  |  | 46,185 |  |  |  | 1,392 |  |  |  | 32,837 |  |  |  | 1,598 |  |  |  | 79,022 |  |  |  | 2,990 |
Total fixed maturity securities |  |  | 254,459 |  |  |  | 7,554 |  |  |  | 67,980 |  |  |  | 8,683 |  |  |  | 322,439 |  |  |  | 16,237 |
Equity securities (1) |  |  | 9,390 |  |  |  | 1,173 |  |  |  | 12 |  |  |  | 4 |  |  |  | 9,402 |  |  |  | 1,177 |
Combined totals |  | $ | 263,849 |  |  | $ | 8,727 |  |  | $ | 67,992 |  |  | $ | 8,687 |  |  | $ | 331,841 |  |  | $ | 17,414 |
Number of positions with a gross unrealized loss |  |  | 189 |  |  |  |  |  |  |  | 37 |  |  |  |  |  |  |  | 226 |  |  |  |  |
Fair value as a percentage of total fixed maturities and equity securities fair value |  |  | 4.6 | % |  |  |  |  |  |  | 1.2 | % |  |  |  |  |  |  | 5.8 | % |  |  |  |
December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and federally sponsored agency obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities |  | $ | 3,519 |  |  | $ | 133 |  |  | $ | 1,511 |  |  | $ | 11 |  |  | $ | 5,030 |  |  | $ | 144 |
Other |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Municipal bonds |  |  | 24,047 |  |  |  | 270 |  |  |  | 19,309 |  |  |  | 750 |  |  |  | 43,356 |  |  |  | 1,020 |
Foreign government bonds |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Corporate bonds |  |  | 273,209 |  |  |  | 9,752 |  |  |  | 26,977 |  |  |  | 6,346 |  |  |  | 300,186 |  |  |  | 16,098 |
Other mortgage-backed securities |  |  | 115,986 |  |  |  | 3,222 |  |  |  | 36,944 |  |  |  | 12,569 |  |  |  | 152,930 |  |  |  | 15,791 |
Total fixed maturity securities |  |  | 416,761 |  |  |  | 13,377 |  |  |  | 84,741 |  |  |  | 19,676 |  |  |  | 501,502 |  |  |  | 33,053 |
Equity securities (1) |  |  | — |  |  |  | — |  |  |  | 4,865 |  |  |  | 326 |  |  |  | 4,865 |  |  |  | 326 |
Combined totals |  | $ | 416,761 |  |  | $ | 13,377 |  |  | $ | 89,606 |  |  | $ | 20,002 |  |  | $ | 506,367 |  |  | $ | 33,379 |
Number of positions with a gross unrealized loss |  |  | 159 |  |  |  |  |  |  |  | 44 |  |  |  |  |  |  |  | 203 |  |  |  |  |
Fair value as a percentage of total fixed maturities and equity securities fair value |  |  | 7.7 | % |  |  |  |  |  |  | 1.6 | % |  |  |  |  |  |  | 9.3 | % |  |  |  |
(1) | Includes primarily nonredeemable (perpetual) preferred stocks and also common stocks.

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