Michigan
|
|
38-2626206
|
(State of Incorporation)
|
|
(IRS Employer Identification No.)
|
|
|
Page
|
|
|
|
PART I – FINANCIAL INFORMATION
|
||
|
|
|
ITEM 1 –
|
2-7
|
|
|
2-3
|
|
|
4
|
|
|
5
|
|
|
6
|
|
|
7
|
|
|
8-26
|
|
|
|
|
ITEM 2 –
|
27-41
|
|
|
|
|
ITEM 3 –
|
41-42
|
|
|
|
|
ITEM 4 –
|
43
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|
|
|
|
PART II – OTHER INFORMATION
|
||
|
|
|
ITEM 1 –
|
44 | |
|
|
|
ITEM 1A –
|
44
|
|
|
|
|
ITEM 2 –
|
44
|
|
|
|
|
ITEM 3 –
|
44
|
|
|
|
|
ITEM 4 –
|
44
|
|
|
|
|
ITEM 5 –
|
44
|
|
|
|
|
ITEM 6 –
|
45
|
|
|
|
|
46
|
|
2013
|
2012
|
||||||
|
(Unaudited)
|
|||||||
|
(In thousands, except share data)
|
|||||||
Revenues
|
||||||||
Premiums earned
|
||||||||
Gross
|
$
|
260,273
|
$
|
265,619
|
||||
Ceded
|
(79,217
|
)
|
(42,212
|
)
|
||||
Net earned premiums
|
181,056
|
223,407
|
||||||
Net commissions and fees
|
10,458
|
7,410
|
||||||
Net investment income
|
11,695
|
13,815
|
||||||
Realized gains:
|
||||||||
Total other-than-temporary impairments on securities
|
-
|
-
|
||||||
Portion of loss recognized in other comprehensive income
|
-
|
-
|
||||||
Net other-than-temporary impairments on securities recognized in earnings
|
-
|
-
|
||||||
Net realized gains excluding other-than-temporary impairments on securities
|
675
|
902
|
||||||
Net realized gains
|
675
|
902
|
||||||
Total revenues
|
203,884
|
245,534
|
||||||
|
||||||||
Expenses
|
||||||||
Losses and loss adjustment expenses
|
197,314
|
242,847
|
||||||
Reinsurance recoveries
|
(65,067
|
)
|
(30,149
|
)
|
||||
Net losses and loss adjustment expenses
|
132,247
|
212,698
|
||||||
Policy acquisition and other underwriting expenses
|
54,228
|
71,373
|
||||||
General, selling and administrative expenses
|
7,026
|
5,745
|
||||||
General corporate expenses
|
1,025
|
717
|
||||||
Amortization expense
|
1,037
|
1,372
|
||||||
Interest expense
|
3,581
|
2,372
|
||||||
Total expenses
|
199,144
|
294,277
|
||||||
Income (loss) before taxes and equity earnings
|
4,740
|
(48,743
|
)
|
|||||
Federal and state income tax expense (benefit)
|
356
|
(21,357
|
)
|
|||||
Equity earnings of affiliates, net of tax
|
1,164
|
791
|
||||||
Equity losses of unconsolidated subsidiaries, net of tax
|
(32
|
)
|
(15
|
)
|
||||
Net income (loss)
|
$
|
5,516
|
$
|
(26,610
|
)
|
|||
|
||||||||
Earnings (Losses) Per Share
|
||||||||
Basic
|
$
|
0.11
|
$
|
(0.53
|
)
|
|||
Diluted
|
$
|
0.11
|
$
|
(0.53
|
)
|
|||
|
||||||||
Weighted average number of common shares
|
||||||||
Basic
|
49,887,200
|
49,776,011
|
||||||
Diluted
|
49,933,540
|
49,776,011
|
||||||
|
||||||||
Dividends paid per common share
|
$
|
0.02
|
$
|
0.05
|
|
2013
|
2012
|
||||||
|
(Unaudited)
|
|||||||
|
(In thousands, except share data)
|
|||||||
Revenues
|
||||||||
Premiums earned
|
||||||||
Gross
|
$
|
789,468
|
$
|
741,646
|
||||
Ceded
|
(262,043
|
)
|
(114,121
|
)
|
||||
Net earned premiums
|
527,425
|
627,525
|
||||||
Net commissions and fees
|
28,631
|
24,927
|
||||||
Net investment income
|
34,603
|
41,230
|
||||||
Realized gains:
|
||||||||
Total other-than-temporary impairments on securities
|
-
|
-
|
||||||
Portion of loss recognized in other comprehensive income
|
-
|
-
|
||||||
Net other-than-temporary impairments on securities recognized in earnings
|
-
|
-
|
||||||
Net realized gains excluding other-than-temporary impairments on securities
|
3,860
|
3,201
|
||||||
Net realized gains
|
3,860
|
3,201
|
||||||
Total revenues
|
594,519
|
696,883
|
||||||
|
||||||||
Expenses
|
||||||||
Losses and loss adjustment expenses
|
590,095
|
601,342
|
||||||
Reinsurance recoveries
|
(190,661
|
)
|
(90,139
|
)
|
||||
Net losses and loss adjustment expenses
|
399,434
|
511,203
|
||||||
Policy acquisition and other underwriting expenses
|
163,283
|
203,479
|
||||||
General, selling and administrative expenses
|
18,950
|
18,411
|
||||||
General corporate expenses
|
3,301
|
2,848
|
||||||
Amortization expense
|
3,146
|
4,095
|
||||||
Goodwill impairment expense
|
115,397
|
-
|
||||||
Interest expense
|
9,431
|
6,382
|
||||||
Total expenses
|
712,942
|
746,418
|
||||||
Loss before taxes and equity earnings
|
(118,423
|
)
|
(49,535
|
)
|
||||
Federal and state income tax benefit
|
(15,412
|
)
|
(21,284
|
)
|
||||
Equity earnings of affiliates, net of tax
|
2,547
|
2,041
|
||||||
Equity income (losses) of unconsolidated subsidiaries, net of tax
|
4
|
(28
|
)
|
|||||
Net loss
|
$
|
(100,460
|
)
|
$
|
(26,238
|
)
|
||
|
||||||||
Losses Per Share
|
||||||||
Basic
|
$
|
(2.01
|
)
|
$
|
(0.52
|
)
|
||
Diluted
|
$
|
(2.01
|
)
|
$
|
(0.52
|
)
|
||
|
||||||||
Weighted average number of common shares
|
||||||||
Basic
|
49,866,326
|
50,312,285
|
||||||
Diluted
|
49,866,326
|
50,312,285
|
||||||
|
||||||||
Dividends paid per common share
|
$
|
0.06
|
$
|
0.15
|
|
2013
|
2012
|
||||||
|
(Unaudited)
|
|||||||
|
(In thousands)
|
|||||||
Net income (loss)
|
$
|
5,516
|
$
|
(26,610
|
)
|
|||
Other comprehensive income (loss), net of tax:
|
||||||||
Unrealized gains on securities
|
3,243
|
11,612
|
||||||
Unrealized (losses) gains in affiliates and unconsolidated subsidiaries
|
(316
|
)
|
57
|
|||||
Increase in non-credit other-than-temporary impairments on securities
|
-
|
271
|
||||||
Net deferred derivative gains (losses) - hedging activity
|
140
|
(72
|
)
|
|||||
Less reclassification adjustment for investment gains included in net income
|
(457
|
)
|
(571
|
)
|
||||
Other comprehensive gains, net of tax
|
2,610
|
11,297
|
||||||
Comprehensive income (loss)
|
$
|
8,126
|
$
|
(15,313
|
)
|
|
2013
|
2012
|
||||||
|
(Unaudited)
|
|||||||
|
(In thousands)
|
|||||||
Net loss
|
$
|
(100,460
|
)
|
$
|
(26,238
|
)
|
||
Other comprehensive (loss) income, net of tax:
|
||||||||
Unrealized (losses) gains on securities
|
(32,026
|
)
|
18,520
|
|||||
Unrealized (losses) gains in affiliates and unconsolidated subsidiaries
|
(254
|
)
|
222
|
|||||
Increase on non-credit other-than-temporary impairments on securities
|
-
|
563
|
||||||
Net deferred derivative gains (losses) - hedging activity
|
3,178
|
(185
|
)
|
|||||
Less reclassification adjustment for investment gains included in net income
|
(2,534
|
)
|
(2,103
|
)
|
||||
Other comprehensive (loss) gains, net of tax
|
(31,636
|
)
|
17,017
|
|||||
Comprehensive loss
|
$
|
(132,096
|
)
|
$
|
(9,221
|
)
|
|
September 30,
|
December 31,
|
||||||
|
2013
|
2012
|
||||||
|
(Unaudited)
|
|||||||
|
(In thousands, except share data)
|
|||||||
ASSETS
|
||||||||
Investments
|
||||||||
Debt securities available for sale, at fair value (amortized cost of $1,460,190 and $1,211,794)
|
$
|
1,474,735
|
$
|
1,286,807
|
||||
Equity securities available for sale, at fair value (cost of $102,981 and $20,389)
|
112,988
|
22,661
|
||||||
Cash and cash equivalents
|
103,433
|
342,124
|
||||||
Accrued investment income
|
15,118
|
11,167
|
||||||
Premiums and agent balances receivable, net
|
225,422
|
208,743
|
||||||
Reinsurance recoverable on:
|
||||||||
Paid losses
|
17,047
|
13,612
|
||||||
Unpaid losses
|
486,791
|
381,905
|
||||||
Prepaid reinsurance premiums
|
92,687
|
143,180
|
||||||
Deferred policy acquisition costs
|
60,232
|
45,417
|
||||||
Deferred income taxes, net
|
35,374
|
10,929
|
||||||
Goodwill
|
5,644
|
121,041
|
||||||
Other intangible assets
|
25,118
|
28,264
|
||||||
Other assets
|
134,748
|
97,424
|
||||||
Total assets
|
$
|
2,789,337
|
$
|
2,713,274
|
||||
|
||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Liabilities
|
||||||||
Losses and loss adjustment expenses
|
$
|
1,579,391
|
$
|
1,455,980
|
||||
Unearned premiums
|
408,728
|
439,418
|
||||||
Debt
|
161,842
|
78,500
|
||||||
Debentures
|
80,930
|
80,930
|
||||||
Accounts payable and accrued expenses
|
31,774
|
29,190
|
||||||
Funds held and reinsurance balances payable
|
37,777
|
49,622
|
||||||
Payable to insurance companies
|
31,740
|
5,641
|
||||||
Other liabilities
|
30,357
|
15,714
|
||||||
Total liabilities
|
2,362,539
|
2,154,995
|
||||||
|
||||||||
Shareholders' Equity
|
||||||||
Common stock, $0.01 par value; authorized 75,000,000 shares; 49,887,200 and 49,776,011 shares issued and outstanding
|
499
|
505
|
||||||
Additional paid-in capital
|
276,220
|
272,472
|
||||||
Retained earnings
|
133,742
|
237,351
|
||||||
Note receivable from officer
|
(715
|
)
|
(737
|
)
|
||||
Accumulated other comprehensive income
|
17,052
|
48,688
|
||||||
Total shareholders' equity
|
426,798
|
558,279
|
||||||
Total liabilities and shareholders' equity
|
$
|
2,789,337
|
$
|
2,713,274
|
|
Common
Stock
|
Additional
Paid-In
Capital
|
Retained
Earnings
|
Note
Receivable
from Officer
|
Accumulated
Other
Comprehensive
Income
|
Total
Shareholders'
Equity
|
||||||||||||||||||
|
(Unaudited, In thousands)
|
|||||||||||||||||||||||
Balances December 31, 2012
|
$
|
505
|
$
|
272,472
|
$
|
237,351
|
$
|
(737
|
)
|
$
|
48,688
|
$
|
558,279
|
|||||||||||
Net loss
|
-
|
-
|
(100,460
|
)
|
-
|
-
|
(100,460
|
)
|
||||||||||||||||
Dividends declared
|
-
|
-
|
(2,993
|
)
|
-
|
-
|
(2,993
|
)
|
||||||||||||||||
Change in unrealized gain or loss on available for sale securities, net of tax
|
-
|
-
|
-
|
-
|
(34,369
|
)
|
(34,369
|
)
|
||||||||||||||||
Change in valuation allowance on deferred tax assets
|
-
|
-
|
-
|
-
|
(191
|
)
|
(191
|
)
|
||||||||||||||||
Net deferred derivative gain - hedging activity
|
-
|
-
|
-
|
-
|
3,178
|
3,178
|
||||||||||||||||||
Stock award
|
1
|
274
|
-
|
-
|
-
|
275
|
||||||||||||||||||
Long term incentive plan; stock award for 2012 and 2013 plan years
|
-
|
324
|
-
|
-
|
-
|
324
|
||||||||||||||||||
Change in investment of affiliates, net of tax
|
-
|
-
|
-
|
-
|
(213
|
)
|
(213
|
)
|
||||||||||||||||
Change in investment of unconsolidated subsidiaries
|
-
|
-
|
-
|
-
|
(41
|
)
|
(41
|
)
|
||||||||||||||||
Stock warrant issuance
|
-
|
3,023
|
-
|
-
|
-
|
3,023
|
||||||||||||||||||
Other reclass
|
(7
|
)
|
127
|
(156
|
)
|
-
|
-
|
(36
|
)
|
|||||||||||||||
Note receivable from officer
|
-
|
-
|
-
|
22
|
-
|
22
|
||||||||||||||||||
Balances September 30, 2013
|
$
|
499
|
$
|
276,220
|
$
|
133,742
|
$
|
(715
|
)
|
$
|
17,052
|
$
|
426,798
|
|
2013
|
2012
|
||||||
|
(Unaudited)
|
|||||||
|
(In thousands)
|
|||||||
Cash Flows From Operating Activities
|
||||||||
Net loss
|
$
|
(100,460
|
)
|
$
|
(26,238
|
)
|
||
Adjustments to reconcile net loss to net cash provided by operating activities:
|
||||||||
Amortization of other intangible assets
|
3,146
|
4,095
|
||||||
Amortization of deferred debenture issuance costs
|
73
|
94
|
||||||
Impairment of goodwill
|
115,397
|
-
|
||||||
Depreciation of furniture, equipment, and building
|
3,479
|
3,916
|
||||||
Net amortization of discount and premiums on bonds
|
8,453
|
4,680
|
||||||
Accretion of issued debt/original issue discount
|
784
|
-
|
||||||
Amortization of capitalized convertible note fees
|
223
|
-
|
||||||
Gain on sale of investments
|
(3,898
|
)
|
(3,236
|
)
|
||||
Gain on sale of fixed assets
|
(66
|
)
|
(66
|
)
|
||||
Long-term incentive plan expense
|
324
|
159
|
||||||
Stock award
|
274
|
279
|
||||||
Equity earnings of affiliates, net of taxes
|
(2,547
|
)
|
(2,041
|
)
|
||||
Equity (earnings) losses of unconsolidated subsidiaries, net of tax
|
(4
|
)
|
28
|
|||||
Deferred income tax expense (benefit)
|
(7,870
|
)
|
(3,437
|
)
|
||||
Goodwill adjustment
|
-
|
(249
|
)
|
|||||
Write-off of book of business
|
-
|
123
|
||||||
Changes in operating assets and liabilities:
|
||||||||
(Increase) decrease in:
|
||||||||
Premiums and agent balances receivable
|
(16,679
|
)
|
(42,783
|
)
|
||||
Reinsurance recoverable on paid and unpaid losses
|
(108,321
|
)
|
(55,495
|
)
|
||||
Prepaid reinsurance premiums
|
50,493
|
(19,002
|
)
|
|||||
Deferred policy acquisition costs
|
(14,815
|
)
|
(9,905
|
)
|
||||
Other assets
|
(24,147
|
)
|
(3,773
|
)
|
||||
Increase (decrease) in:
|
||||||||
Losses and loss adjustment expenses
|
123,411
|
214,445
|
||||||
Unearned premiums
|
(30,690
|
)
|
78,326
|
|||||
Payable to insurance companies
|
26,099
|
(466
|
)
|
|||||
Funds held and reinsurance balances payable
|
(11,845
|
)
|
17,113
|
|||||
Other liabilities
|
8,122
|
(28,676
|
)
|
|||||
Total adjustments
|
119,396
|
154,129
|
||||||
Net cash (used in) provided by operating activities
|
18,936
|
127,891
|
||||||
Cash Flows From Investing Activities
|
||||||||
Purchase of debt securities available for sale
|
(400,212
|
)
|
(242,172
|
)
|
||||
Proceeds from sales and maturities of debt securities available for sale
|
145,606
|
103,529
|
||||||
Purchase of equity securities available for sale
|
(98,385
|
)
|
-
|
|||||
Proceeds from sales of equity securities available for sale
|
18,285
|
3,090
|
||||||
Capital expenditures
|
(1,363
|
)
|
(2,183
|
)
|
||||
Other investing activities
|
(680
|
)
|
(4,008
|
)
|
||||
Net cash used in investing activities
|
(336,749
|
)
|
(141,744
|
)
|
||||
Cash Flows From Financing Activities
|
||||||||
Proceeds from term loan
|
-
|
30,000
|
||||||
Proceeds from line of credit
|
-
|
20,000
|
||||||
Proceeds from FHLB advance
|
-
|
30,000
|
||||||
Payments on term loan
|
(4,500
|
)
|
(23,875
|
)
|
||||
Payments on line of credit
|
-
|
(14,500
|
)
|
|||||
Proceeds from convertible senior notes
|
96,324
|
-
|
||||||
Payments for convertible senior notes hedge
|
(12,942
|
)
|
-
|
|||||
Proceeds from issuance of warrants
|
3,023
|
-
|
||||||
Book overdrafts
|
188
|
656
|
||||||
Dividends paid on common stock
|
(2,993
|
)
|
(7,546
|
)
|
||||
Share repurchases
|
-
|
(11,517
|
)
|
|||||
Other financing activities
|
22
|
22
|
||||||
Net cash provided by financing activities
|
79,122
|
23,240
|
||||||
Net (decrease) increase in cash and cash equivalents
|
(238,691
|
)
|
9,387
|
|||||
Cash and cash equivalents, beginning of period
|
342,124
|
101,757
|
||||||
Cash and cash equivalents, end of period
|
$
|
103,433
|
$
|
111,144
|
||||
Supplemental Disclosure of Cash Flow Information:
|
||||||||
Interest paid
|
$
|
8,092
|
$
|
5,951
|
||||
Net income taxes paid (1)
|
$
|
1,165
|
$
|
3,510
|
||||
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
|
||||||||
Stock-based employee compensation
|
$
|
274
|
$
|
279
|
(1)
|
Tax return refunds were received in first quarter of 2013 and 2012 for $3,067 and $475, respectively.
|
|
September 30, 2013
|
|||||||||||||||||||
|
Cost or
|
Gross Unrealized
|
||||||||||||||||||
|
Amortized
|
Non-Credit
|
Estimated
|
|||||||||||||||||
|
Cost
|
Gains
|
Losses
|
OTTI
|
Fair Value
|
|||||||||||||||
Debt Securities:
|
||||||||||||||||||||
U.S. Government and agencies
|
$
|
25,701
|
$
|
651
|
$
|
(146
|
)
|
$
|
-
|
$
|
26,206
|
|||||||||
Obligations of states and political subs
|
743,216
|
27,265
|
(18,357
|
)
|
-
|
752,124
|
||||||||||||||
Corporate securities
|
515,684
|
16,325
|
(11,403
|
)
|
-
|
520,606
|
||||||||||||||
Redeemable preferred stocks
|
854
|
354
|
-
|
-
|
1,208
|
|||||||||||||||
Residential mortgage-backed securities
|
123,730
|
2,439
|
(3,278
|
)
|
-
|
122,891
|
||||||||||||||
Commercial mortgage-backed securities
|
30,474
|
823
|
(818
|
)
|
-
|
30,479
|
||||||||||||||
Other asset-backed securities
|
20,531
|
705
|
(15
|
)
|
-
|
21,221
|
||||||||||||||
Total debt securities available for sale
|
1,460,190
|
48,562
|
(34,017
|
)
|
-
|
1,474,735
|
||||||||||||||
Equity Securities:
|
||||||||||||||||||||
Perpetual preferred stock
|
6,007
|
1,224
|
-
|
-
|
7,231
|
|||||||||||||||
Common stock
|
96,974
|
10,120
|
(1,337
|
)
|
-
|
105,757
|
||||||||||||||
Total equity securities available for sale
|
102,981
|
11,344
|
(1,337
|
)
|
-
|
112,988
|
||||||||||||||
Total securities available for sale
|
$
|
1,563,171
|
$
|
59,906
|
$
|
(35,354
|
) |
$
|
-
|
$
|
1,587,723
|
|
December 31, 2012
|
|||||||||||||||||||
|
Cost or
|
Gross Unrealized
|
||||||||||||||||||
|
Amortized
|
Non-Credit
|
Estimated
|
|||||||||||||||||
|
Cost
|
Gains
|
Losses
|
OTTI
|
Fair Value
|
|||||||||||||||
Debt Securities:
|
||||||||||||||||||||
U.S. Government and agencies
|
$
|
26,788
|
$
|
918
|
$
|
(22
|
)
|
$
|
-
|
$
|
27,684
|
|||||||||
Obligations of states and political subs
|
587,276
|
43,124
|
(1,427
|
)
|
-
|
628,973
|
||||||||||||||
Corporate securities
|
482,290
|
25,569
|
(858
|
)
|
-
|
507,001
|
||||||||||||||
Redeemable preferred stocks
|
1,743
|
436
|
-
|
-
|
2,179
|
|||||||||||||||
Residential mortgage-backed securities
|
73,530
|
4,393
|
(41
|
)
|
-
|
77,882
|
||||||||||||||
Commercial mortgage-backed securities
|
33,732
|
1,800
|
-
|
-
|
35,532
|
|||||||||||||||
Other asset-backed securities
|
6,435
|
1,125
|
(4
|
)
|
-
|
7,556
|
||||||||||||||
Total debt securities available for sale
|
1,211,794
|
77,365
|
(2,352
|
)
|
-
|
1,286,807
|
||||||||||||||
Equity Securities:
|
||||||||||||||||||||
Perpetual preferred stock
|
6,930
|
1,578
|
-
|
-
|
8,508
|
|||||||||||||||
Common stock
|
13,459
|
901
|
(207
|
)
|
-
|
14,153
|
||||||||||||||
Total equity securities available for sale
|
20,389
|
2,479
|
(207
|
)
|
-
|
22,661
|
||||||||||||||
Total securities available for sale
|
$
|
1,232,183
|
$
|
79,844
|
$
|
(2,559
|
)
|
$
|
-
|
$
|
1,309,468
|
|
September 30,
2013
|
December 31,
2012
|
||||||
Unrealized gains
|
$
|
59,906
|
$
|
79,844
|
||||
Unrealized losses
|
(35,354
|
)
|
(2,559
|
)
|
||||
Non-credit OTTI
|
-
|
-
|
||||||
Net unrealized gains
|
24,552
|
77,285
|
||||||
Deferred federal income tax expense
|
(8,593
|
)
|
(26,957
|
)
|
||||
Net unrealized gains on investments, net of deferred federal income taxes
|
$
|
15,959
|
$
|
50,328
|
|
For the Three Months
Ended September 30,
|
For the Nine Months
Ended September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
Realized gains (losses):
|
||||||||||||||||
Debt securities:
|
||||||||||||||||
Gross realized gains
|
$
|
87
|
$
|
818
|
$
|
1,617
|
$
|
2,812
|
||||||||
Gross realized losses
|
(40
|
)
|
(16
|
)
|
(211
|
)
|
(49
|
)
|
||||||||
Total debt securities
|
47
|
802
|
1,406
|
2,763
|
||||||||||||
Equity securities:
|
||||||||||||||||
Gross realized gains
|
656
|
78
|
2,502
|
473
|
||||||||||||
Gross realized losses
|
-
|
-
|
(10
|
)
|
-
|
|||||||||||
Total equity securities
|
656
|
78
|
2,492
|
473
|
||||||||||||
Net realized gains
|
$
|
703
|
$
|
880
|
$
|
3,898
|
$
|
3,236
|
||||||||
|
||||||||||||||||
OTTI included in realized losses on securities above
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|
Available for Sale
|
|||||||
|
Amortized
Cost
|
Estimated
Fair Value
|
||||||
Due in one year or less
|
$
|
34,436
|
$
|
34,879
|
||||
Due after one year through five years
|
414,302
|
429,113
|
||||||
Due after five years through ten years
|
667,466
|
672,615
|
||||||
Due after ten years
|
169,251
|
163,537
|
||||||
Mortgage-backed securities, collateralized obligations and asset-backed securities
|
174,735
|
174,591
|
||||||
|
$
|
1,460,190
|
$
|
1,474,735
|
|
For the Three Months
Ended September 30,
|
For the Nine Months
Ended September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
Net Investment Income Earned From:
|
||||||||||||||||
Debt securities
|
$
|
10,888
|
$
|
13,544
|
$
|
32,593
|
$
|
40,348
|
||||||||
Equity securities
|
1,043
|
421
|
2,593
|
1,297
|
||||||||||||
Cash and cash equivalents
|
165
|
197
|
558
|
610
|
||||||||||||
Total gross investment income
|
12,096
|
14,162
|
35,744
|
42,255
|
||||||||||||
Less investment expenses
|
401
|
347
|
1,141
|
1,025
|
||||||||||||
Net investment income
|
$
|
11,695
|
$
|
13,815
|
$
|
34,603
|
$
|
41,230
|
· | Historical and implied volatility of the security; |
· | Length of time and extent to which the fair value has been less than amortized cost; |
· | Conditions specifically related to the security such as default rates, loss severities, loan to value ratios, current levels of subordination, third party guarantees, and vintage; |
· | Specific conditions in an industry or geographic area; |
· | Any changes to the rating of the security by a rating agency; |
· | Failure, if any, of the issuer of the security to make scheduled payments; and/or |
· | Recoveries or additional declines in fair value subsequent to the balance sheet date. |
|
September 30, 2013 | |||||||||||||||||||||||||||||||||||
|
Less than 12 months
|
Greater than 12 months
|
Total
|
|||||||||||||||||||||||||||||||||
|
Number of
Issues
|
Fair Value of Investments
with
Unrealized
Losses
|
Gross
Unrealized
Losses and
Non-Credit
OTTI
|
Number
of Issues
|
Fair Value of Investments
with
Unrealized
Losses
|
Gross
Unrealized
Losses and
Non-Credit
OTTI
|
Number
of Issues
|
Fair Value of Investments
with
Unrealized
Losses
|
Gross
Unrealized
Losses and
Non-Credit
OTTI
|
|||||||||||||||||||||||||||
Debt Securities:
|
||||||||||||||||||||||||||||||||||||
U.S. Government and agencies
|
7
|
$
|
7,334
|
$
|
(146
|
)
|
-
|
$
|
-
|
$
|
-
|
7
|
$
|
7,334
|
$
|
(146
|
)
|
|||||||||||||||||||
Obligations of states and political subs
|
112
|
324,676
|
(18,357
|
)
|
-
|
-
|
- |
112
|
324,676
|
(18,357
|
)
|
|||||||||||||||||||||||||
Corporate securities
|
126
|
265,822
|
(11,403
|
)
|
-
|
-
|
- |
126
|
265,822
|
(11,403
|
)
|
|||||||||||||||||||||||||
Redeemable preferred stocks
|
-
|
-
|
-
|
-
|
-
|
- |
-
|
-
|
-
|
|||||||||||||||||||||||||||
Residential mortgage-backed securities
|
11
|
82,127
|
(3,278
|
)
|
-
|
-
|
- |
11
|
82,127
|
(3,278
|
)
|
|||||||||||||||||||||||||
Commercial mortgage-backed securities
|
6
|
13,023
|
(818
|
)
|
-
|
-
|
- |
6
|
13,023
|
(818
|
)
|
|||||||||||||||||||||||||
Other asset-backed securities
|
2
|
8,789
|
(15
|
)
|
-
|
-
|
- |
2
|
8,789
|
(15
|
)
|
|||||||||||||||||||||||||
Total debt securities
|
264
|
701,771
|
(34,017
|
)
|
-
|
-
|
- |
264
|
701,771
|
(34,017
|
)
|
|||||||||||||||||||||||||
Equity Securities:
|
||||||||||||||||||||||||||||||||||||
Perpetual preferred stock
|
-
|
-
|
-
|
-
|
-
|
- |
-
|
-
|
-
|
|||||||||||||||||||||||||||
Common stock
|
19
|
18,985
|
(956
|
)
|
2
|
4,499
|
(381 | ) |
21
|
23,484
|
(1,337
|
)
|
||||||||||||||||||||||||
Total equity securities
|
19
|
18,985
|
(956
|
)
|
2
|
4,499
|
(381 | ) |
21
|
23,484
|
(1,337
|
)
|
||||||||||||||||||||||||
Total securities
|
283
|
$
|
720,756
|
$
|
(34,973
|
)
|
2
|
$
|
4,499
|
$
|
(381
|
)
|
285
|
$
|
725,255
|
$
|
(35,354
|
)
|
|
December 31, 2012
|
|||||||||||||||||||||||||||||||||||
|
Less than 12 months
|
Greater than 12 months
|
Total
|
|||||||||||||||||||||||||||||||||
|
Number
of Issues
|
Fair Value of Investments
with
Unrealized
Losses
|
Gross
Unrealized
Losses and
Non-Credit
OTTI
|
Number
of Issues
|
Fair Value of Investments
with
Unrealized
Losses
|
Gross
Unrealized
Losses and Non-
Credit
OTTI
|
Number
of Issues
|
Fair Value of Investments
with
Unrealized
Losses
|
Gross
Unrealized
Losses and
Non-Credit
OTTI
|
|||||||||||||||||||||||||||
Debt Securities:
|
||||||||||||||||||||||||||||||||||||
U.S. Government and agencies
|
5
|
$
|
7,063
|
$
|
(22
|
)
|
-
|
$
|
-
|
$
|
-
|
5
|
$
|
7,063
|
$
|
(22
|
)
|
|||||||||||||||||||
Obligations of states and political subs
|
23
|
69,016
|
(1,427
|
)
|
-
|
-
|
-
|
23
|
69,016
|
(1,427
|
)
|
|||||||||||||||||||||||||
Corporate securities
|
50
|
113,348
|
(858
|
)
|
-
|
-
|
-
|
50
|
113,348
|
(858
|
)
|
|||||||||||||||||||||||||
Redeemable preferred stocks
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
Residential mortgage-backed securities
|
1
|
10,219
|
(40
|
)
|
1
|
24
|
(1
|
)
|
2
|
10,243
|
(41
|
)
|
||||||||||||||||||||||||
Commercial mortgage-backed securities
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
Other asset-backed securities
|
2
|
463
|
(4
|
)
|
-
|
-
|
-
|
2
|
463
|
(4
|
)
|
|||||||||||||||||||||||||
Total debt securities
|
81
|
200,109
|
(2,351
|
)
|
1
|
24
|
(1
|
)
|
82
|
200,133
|
(2,352
|
)
|
||||||||||||||||||||||||
Equity Securities:
|
||||||||||||||||||||||||||||||||||||
Perpetual preferred stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
Common stock
|
-
|
-
|
-
|
2
|
4,583
|
(207
|
)
|
2
|
4,583
|
(207
|
)
|
|||||||||||||||||||||||||
Total equity securities
|
0
|
-
|
-
|
2
|
4,583
|
(207
|
)
|
2
|
4,583
|
(207
|
)
|
|||||||||||||||||||||||||
Total securities
|
81
|
$
|
200,109
|
$
|
(2,351
|
)
|
3
|
$
|
4,607
|
$
|
(208
|
)
|
84
|
$
|
204,716
|
$
|
(2,559
|
)
|
Balance as of December 31, 2012
|
$
|
(156
|
)
|
|
Additional credit impairments on:
|
||||
Previously impaired securities
|
-
|
|||
Securities for which an impairment was not previously recognized
|
-
|
|||
Reductions
|
156
|
|||
Balance as of September 30, 2013
|
$
|
-
|
|
Fair Value Measurements Using
|
|||||||||||||||
|
September 30,
2013
|
Quoted Prices
in Active
Markets for
Identical Assets
|
Significant
Other
Observable
Inputs
|
Significant
Unobservable
Inputs
|
||||||||||||
|
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Debt Securities:
|
||||||||||||||||
U.S. Government and agencies
|
$
|
26,206
|
$
|
-
|
$
|
26,206
|
$
|
-
|
||||||||
Obligations of states and political subs
|
752,124
|
-
|
752,124
|
-
|
||||||||||||
Corporate securities
|
520,606
|
-
|
519,668
|
938
|
||||||||||||
Redeemable preferred stocks
|
1,208
|
1,208
|
-
|
-
|
||||||||||||
Residential mortgage-backed securities
|
122,891
|
-
|
122,891
|
-
|
||||||||||||
Commercial mortgage-backed securities
|
30,479
|
-
|
30,307
|
172
|
||||||||||||
Other asset-backed securities
|
21,221
|
-
|
18,781
|
2,440
|
||||||||||||
Total debt securities available for sale
|
1,474,735
|
1,208
|
1,469,977
|
|
3,550
|
|||||||||||
Equity Securities:
|
||||||||||||||||
Perpetual preferred stock
|
7,231
|
7,013
|
218
|
-
|
||||||||||||
Common stock
|
105,757
|
105,757
|
-
|
-
|
||||||||||||
Total equity securities available for sale
|
112,988
|
112,770
|
218
|
-
|
||||||||||||
Total securities available for sale
|
$
|
1,587,723
|
$
|
113,978
|
$
|
1,470,195
|
$
|
3,550
|
||||||||
Derivatives:
|
||||||||||||||||
Derivatives - interest rate swaps
|
$
|
360
|
$
|
-
|
$
|
360
|
$
|
-
|
||||||||
Cash conversion feature of cash convertible notes
|
(15,144
|
)
|
-
|
-
|
(15,144
|
)
|
||||||||||
Purchased cash convertible note hedge
|
15,144
|
-
|
-
|
15,144
|
||||||||||||
Total derivatives
|
$
|
360
|
$
|
-
|
$
|
360
|
$
|
-
|
||||||||
|
||||||||||||||||
Total securities available for sale and derivatives
|
$
|
1,588,083
|
$
|
113,978
|
$
|
1,470,555
|
$
|
3,550
|
|
Fair Value
Measurement
Using Significant
Unobservable
Inputs - Level 3
|
|||
Balance as of December 31, 2012
|
$
|
5,444
|
||
|
||||
Total gains or losses (realized/unrealized):
|
||||
Included in earnings
|
748
|
|||
Included in other comprehensive income
|
(520
|
)
|
||
|
||||
Purchases
|
12,942
|
|||
Issuances
|
(12,942
|
)
|
||
Settlements
|
(2,122
|
)
|
||
|
||||
Transfers in and out of Level 3
|
-
|
|||
Balance as of September 30, 2013
|
$
|
3,550
|
Year of
Issuance
|
Description
|
Year
Callable
|
Year Due
|
Interest Rate Terms
|
Interest Rate
at September
30, 2013 (1)
|
Principal Amount
|
||||||
|
|
|
|
|
||||||||
2003
|
Junior subordinated debentures
|
2008
|
2033
|
Three-month LIBOR, plus 4.05%
|
4.30
|
%
|
$
|
10,310
|
||||
2004
|
Senior debentures
|
2009
|
2034
|
Three-month LIBOR, plus 4.00%
|
4.26
|
%
|
13,000
|
|||||
2004
|
Senior debentures
|
2009
|
2034
|
Three-month LIBOR, plus 4.20%
|
4.46
|
%
|
12,000
|
|||||
2005
|
Junior subordinated debentures
|
2010
|
2035
|
Three-month LIBOR, plus 3.58%
|
3.83
|
%
|
20,620
|
|||||
Junior subordinated debentures (2)
|
2007
|
2032
|
Three-month LIBOR, plus 4.00%
|
4.26
|
%
|
15,000
|
||||||
Junior subordinated debentures (2)
|
2008
|
2033
|
Three-month LIBOR, plus 4.10%
|
4.36
|
%
|
10,000
|
||||||
|
|
|
|
|
Total
|
$
|
80,930
|
Outstanding principal
|
$
|
100,000
|
||
Unamortized OID
|
(12,158
|
)
|
||
Total debt component
|
$
|
87,842
|
Effective
Date
|
Expiration
Date
|
Debt Instrument
|
Counter-party Interest Rate Terms
|
Fixed Rate
|
Fixed Amount
at September
30, 2013
|
||||||
|
|
|
|
||||||||
6/30/2013
|
6/30/2023
|
Junior subordinated debentures
|
Three-month LIBOR, plus 4.05%
|
6.340
|
%
|
$
|
10,000
|
||||
4/29/2013
|
4/29/2023
|
Senior debentures
|
Three-month LIBOR, plus 4.00%
|
6.250
|
%
|
13,000
|
|||||
9/28/2012
|
8/30/2016
|
Term loan (1)
|
Three-month LIBOR
|
0.714
|
%
|
24,000
|
|||||
8/15/2013
|
8/15/2023
|
Junior subordinated debentures (2)
|
Three-month LIBOR
|
2.180
|
%
|
10,000
|
|||||
9/4/2013
|
9/4/2023
|
Junior subordinated debentures (2)
|
Three-month LIBOR
|
2.270
|
%
|
15,000
|
|||||
9/8/2010
|
5/24/2016
|
Senior debentures
|
Three-month LIBOR, plus 4.20%
|
6.248
|
%
|
5,000
|
|||||
9/16/2010
|
9/15/2015
|
Junior subordinated debentures
|
Three-month LIBOR, plus 3.58%
|
6.160
|
%
|
10,000
|
|||||
9/16/2010
|
9/15/2015
|
Junior subordinated debentures
|
Three-month LIBOR, plus 3.58%
|
6.190
|
%
|
10,000
|
|||||
5/24/2011
|
5/24/2016
|
Senior debentures
|
Three-month LIBOR, plus 4.20%
|
6.472
|
%
|
7,000
|
|||||
|
|
|
|
Total
|
$
|
104,000
|
|
For the Three Months
Ended September 30,
|
For the Nine Months
Ended September 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
Net income (loss)
|
$
|
5,516
|
$
|
(26,610
|
)
|
$
|
(100,460
|
)
|
$
|
(26,238
|
)
|
|||||
|
||||||||||||||||
Common shares:
|
||||||||||||||||
Basic
|
||||||||||||||||
Weighted average shares outstanding
|
49,887,200
|
49,776,011
|
49,866,326
|
50,312,285
|
||||||||||||
|
||||||||||||||||
Diluted
|
||||||||||||||||
Weighted average shares outstanding
|
49,887,200
|
49,776,011
|
49,866,326
|
50,312,285
|
||||||||||||
Dilutive effect of:
|
||||||||||||||||
Share awards under long term incentive plan
|