Quarterly report pursuant to Section 13 or 15(d)

Investments And Restricted Deposits

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Investments And Restricted Deposits
9 Months Ended
Sep. 30, 2011
Investments And Restricted Deposits [Abstract]  
Investments And Restricted Deposits

3. Investments and Restricted Deposits

Short-term and long-term investments and restricted deposits by investment type consist of the following:

 

     September 30, 2011      December 31, 2010  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair
Value
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair
Value
 

U.S. Treasury securities and obligations of U.S. government corporations and agencies

   $ 29,045       $ 691       $ (2   $ 29,734       $ 28,665       $ 510       $ (140   $ 29,035   

Corporate securities

     189,380         3,825         (757     192,448         197,577         3,124         (586     200,115   

Restricted certificates of deposit

     5,890         —           —          5,890         6,814         —           —          6,814   

Restricted cash equivalents

     13,488         —           —          13,488         8,814         —           —          8,814   

Municipal securities:

                     

General obligation

     117,544         3,167         (57     120,654         109,866         3,601         (6     113,461   

Pre-refunded

     32,682         613         —          33,295         32,442         756         —          33,198   

Revenue

     114,675         2,768         (16     117,427         100,198         2,781         (15     102,964   

Variable rate demand notes

     108,723         —           —          108,723         106,540         —           —          106,540   

Asset backed securities

     18,714         492         —          19,206         17,391         243         (43     17,591   

Cost method investments and equity method securities

     8,076         —           —          8,076         7,060         —           —          7,060   

Life insurance contracts

     14,623         —           —          14,623         14,391         —           —          14,391   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 652,840       $ 11,556       $ (832   $ 663,564       $ 629,758       $ 11,015       $ (790   $ 639,983   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

The Company's investments are classified as available-for-sale with the exception of life insurance contracts and certain cost method and equity method investments. The Company's investment policies are designed to provide liquidity, preserve capital and maximize total return on invested assets with the focus on high credit quality securities. The Company limits the size of investment in any single issuer other than U.S. treasury securities and obligations of U.S. government corporations and agencies. As of September 30, 2011, 36% of the Company's investments in securities recorded at fair value that carry a rating by Moody's or S&P were rated AAA, 77% were rated AA- or higher, and 99% were rated A- or higher. At September 30, 2011, the Company held certificates of deposit, life insurance contracts and cost and equity method invesments which did not carry a credit rating.

The fair value of available-for-sale investments with gross unrealized losses by investment type and length of time that individual securities have been in a continuous unrealized loss position were as follows:

 

     September 30, 2011      December 31, 2010  
     Less Than 12 Months      12 Months or More      Less Than 12 Months      12 Months or More  
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
    Fair
Value
     Unrealized
Losses
     Fair
Value
 

U.S. Treasury securities and obligations of U.S. government corporations and agencies

   $ (2   $ 2,117       $ —         $ —         $ (140   $ 9,246       $ —         $ —     

Corporate securities

     (757     29,224         —           —           (586     40,341         —           —     

Municipal securities:

                     

General obligation

     (57     7,676         —           —           (6     1,131         —           —     

Revenue

     (16     7,039         —           —           (15     2,419         —           —     

Asset backed securities

     —          —           —           —           (43     5,276         —           —     
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

   $ (832   $ 46,056       $ —         $ —         $ (790   $ 58,413       $ —         $ —     
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

As of September 30, 2011, the gross unrealized losses were generated from 25 positions out of a total of 410 positions. The decline in fair value of fixed income securities is a result of movement in interest rates subsequent to the purchase of the security.

For each security in an unrealized loss position, the Company assesses whether it intends to sell the security or if it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If the security meets this criterion, the decline in fair value is other-than-temporary and is recorded in earnings. The Company does not intend to sell these securities prior to maturity and it is not likely that the Company will be required to sell these securities prior to maturity; therefore, there is no indication of other than temporary impairment for these securities.

The contractual maturities of short-term and long-term investments and restricted deposits are as follows:

 

     September 30, 2011      December 31, 2010  
     Investments      Restricted Deposits      Investments      Restricted Deposits  
     Amortized
Cost
     Fair
Value
     Amortized
Cost
     Fair
Value
     Amortized
Cost
     Fair
Value
     Amortized
Cost
     Fair
Value
 

One year or less

   $ 104,914       $ 106,344       $ 19,605       $ 19,606       $ 21,141       $ 21,346       $ 17,387       $ 17,392   

One year through five years

     391,281         400,055         7,092         7,162         464,270         474,255         5,368         5,366   

Five years through ten years

     35,748         35,748         —           —           39,732         39,731         —           —     

Greater than ten years

     94,200         94,649         —           —           81,860         81,893         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 626,143       $ 636,796       $ 26,697       $ 26,768       $ 607,003       $ 617,225       $ 22,755       $ 22,758   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Actual maturities may differ from contractual maturities due to call or prepayment options. Asset backed securities are included in the one year through five years category, while equity securities and life insurance contracts are included in the five years through ten years category. The Company has an option to redeem at amortized cost substantially all of the securities included in the greater than ten years category listed above.

 

Realized gains and losses are determined on the basis of specific identification or a first-in, first-out methodology, if specific identification is not practicable. The Company's gross recorded realized gains and losses on investments were as follows:

 

     Three Months  Ended
September 30,
    Nine Months  Ended
September 30,
 
     2011     2010     2011     2010  

Gains

   $ 107      $ 2,310     $ 240     $ 6,027  

Losses

     (1     (23     (27     (268

Impairment of investment

     —          (5,531     —          (5,531
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized (losses) gains

   $ 106      $ (3,244   $ 213     $ 228  
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized gains in the nine months ended September 30, 2010 included a net realized gain of $2,472 related to sales of fixed income investments and also included realized gains of $3,287 representing a distribution from the Reserve Primary fund in excess of our adjusted basis.

The Company continuously monitors investments for other-than-temporary impairment. Certain investments have experienced a decline in fair value due to changes in credit quality, market interest rates and/or general economic conditions. The Company recognizes an impairment loss for cost and equity method investments when evidence demonstrates that it is other-than-temporarily impaired. Evidence of a loss in value that is other than temporary may include the absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment.

During the quarter ended September 30, 2010, the Company determined it had an other-than-temporary impairment of a cost method investment in a start-up company that provides software to automate the clinical, administrative, and technical components of care management programs. As a result, the Company recorded an impairment charge of $5,531, including $3,531 of convertible promissory notes. The impairment charge is included in investment and other income for the quarter.

Investment amortization of $7,545 and $8,380 was recorded in the nine months ended September 30, 2011 and 2010, respectively.