Investments

(a) Available-for-Sale Securities

The amortized cost, estimated market value and gross unrealized appreciation and depreciation of available-for-sale securities as of March 31, 2012, are presented in the table below:

(Amounts in Thousands)	Original or amortized cost		Gross unrealized gains		Gross unrealized losses			Market value
Preferred stock	$	5,091	$	97	$	(408	)	$	4,780
Common stock		24,658		3,783		(2,469	)		25,972
U.S. treasury securities		50,086		2,729		(24	)		52,791
U.S. government agencies		60,126		515		(37	)		60,604
Municipal bonds		260,344		9,060		(354	)		269,050
Corporate bonds:
Finance		631,638		24,319		(14,674	)		641,283
Industrial		181,903		7,667		(1,192	)		188,378
Utilities		38,331		2,422		(1,199	)		39,554
Commercial mortgage backed securities		29,951		205		(283	)		29,873
Residential mortgage backed securities:
Agency backed		377,604		18,425		(55	)		395,974
Non-agency backed		7,887		—		(372	)		7,515
	$	1,667,619	$	69,222	$	(21,067	)	$	1,715,774

Proceeds from the sale of investments in available-for-sale securities during the three months ended March 31, 2012 and 2011 were approximately $203,183 and $286,240, respectively.

A summary of the Company’s available-for-sale fixed securities as of March 31, 2012, by contractual maturity, is 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.

(Amounts in Thousands)	Amortized Cost		Fair Value
Due in one year or less	$	11,470	$	11,556
Due after one through five years		311,083		309,337
Due after five through ten years		634,872		658,937
Due after ten years		264,988		271,830
Mortgage backed securities		415,457		433,362
Total fixed maturities	$	1,637,870	$	1,685,022

(b) Investment Income

Net investment income for the three months ended March 31, 2012 and 2011 was derived from the following sources:

(Amounts in Thousands)	2012		2011
Fixed maturity securities	$	13,529	$	13,674
Equity securities		398		166
Cash and short term investments		591		606
		14,518		14,446
Less:
Investment expenses and interest expense on securities sold under agreement to repurchase		—		254
	$	14,518	$	14,192

(c) Other-Than-Temporary Impairment

The table below summarizes the gross unrealized losses of our fixed maturity and equity securities by length of time the security has continuously been in an unrealized position as of March 31, 2012:

	Less Than 12 Months							12 Months or More							Total
(Amounts in Thousands)	Fair Market Value		Unrealized Losses			No. of Positions Held		Fair Market Value		Unrealized Losses			No. of Positions Held		Fair Market Value		Unrealized Losses
Common and preferred stock	$	5,174	$	(1,572	)		18	$	2,079	$	(1,305	)		4	$	7,253	$	(2,877	)
U.S. treasury securities		4,920		(24	)		11		—		—			—		4,920		(24	)
U.S. government agencies		45,275		(37	)		1									45,275		(37	)
Municipal bonds		39,003		(354	)		10		—		—			—		39,003		(354	)
Corporate bonds:
Finance		183,460		(4,490	)		54		92,554		(10,184	)		13		276,014		(14,674	)
Industrial		21,631		(1,192	)		5		1		—			2		21,632		(1,192	)
Utilities		10,918		(599	)		2		5,593		(600	)		1		16,511		(1,199	)
Commercial Mortgage backed securities		19,464		(283	)		1		—		—			—		19,464		(283	)
Residential mortgage backed securities:
Agency backed		30,231		(55	)		9		—		—			—		30,231		(55	)
Non-agency backed		7,491		(368	)		1		24		(4	)		1		7,515		(372	)
Total temporarily impaired securities	$	367,567	$	(8,974	)		112	$	100,251	$	(12,093	)		21	$	467,818	$	(21,067	)

There are 133 securities at March 31, 2012 that account for the gross unrealized loss, none of which is deemed by the Company to be OTTI. Significant factors influencing the Company’s determination that unrealized losses were temporary included the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and management’s intent not to sell these securities and it being not more likely than not that the Company will be required to sell these investments before anticipated recovery of fair value to the Company’s cost basis.

(d) Derivatives

The Company from time to time invests in a limited amount of derivatives and other financial instruments as part of its investment portfolio to manage interest rate changes or other exposures to a particular financial market. The Company records changes in valuation on its derivative positions not designated as a hedge as a component of net realized gains and losses.

The Company records changes in valuation on its hedge positions as a component of other comprehensive income. As of March 31, 2012, the Company had two interest rate swaps designated as a hedge and were recorded as a liability amount of $3,595 and were included as a component of accrued expenses and other liabilities.

The followingtable presents the notional amounts by remaining maturity of the Company’s interest rate swaps as of March 31, 2012:

	Remaining Life of Notional Amount ⁽¹⁾
(Amounts in Thousands)	One Year		Two Through Five Years		Six Through Ten Years		After Ten years		Total
Interest rate swaps	$	—	$	30,000	$	40,000	$	—	$	70,000

⁽¹⁾

Notional amount is not representative of either market risk or credit risk and is not recorded in the consolidated balance sheet.

(e) Restricted Cash and Investments

The Company, in order to conduct business in certain states, is required to maintain letters of credit or assets on deposit to support state mandated regulatory requirements and certain third party agreements. The Company also utilizes trust accounts to collateralize business with its reinsurance counterparties. These assets held are primarily in the form of cash or certain high grade securities. The fair values of our restricted assets as of March 31, 2012 and December 31, 2011 are as follows:

(Amounts in Thousands)	2012		2011
Restricted cash	$	59,236	$	23,104
Restricted investments		182,446		187,227
Total restricted cash and investments	$	241,682	$	210,331

(f) Other

Securities sold but not yet purchased represent obligations of the Company to deliver the specified security at the contracted price and, thereby, create a liability to purchase the security in the market at prevailing prices. The Company’s liability for securities to be delivered is measured at their fair value and as of March 31, 2012 was $54,420 for corporate bonds and $87 for equity securities. These transactions result in off-balance sheet risk, as the Company’s ultimate cost to satisfy the delivery of securities sold but not yet purchased may exceed the amount reflected at March 31, 2012. Subject to certain limitations, all securities owned, to the extent required to cover the Company’s obligations to sell or repledge the securities to others, are pledged to the clearing broker.

The Company enters into repurchase agreements, which are accounted for as collateralized borrowing transactions and are recorded at contract amounts. The Company receives cash or securities that it invests or holds in short term or fixed income securities. As of March 31, 2012, there were $200,915 principal amount outstanding at interest rates between 0.4% and 0.45%. Interest expense associated with these repurchase agreements for the three months ended March 31, 2012 and 2011 was $0 and $254, respectively, of which $0 was accrued as of March 31, 2012. The Company has approximately $214,219 of collateral pledged in support of these agreements. Additionally, during the three months ended March 31, 2012, the Company entered into a reverse repurchase agreement in the amount of $56,187 that is included in short term investments as of March 31, 2012. The Company retains collateral of $54,420 related to this agreement.