The majority of the Company’s investment portfolio is invested in fixed maturity securities. The prolonged low interest rate environment has had a positive impact on the Company’s financial condition because the portfolio of fixed maturity securities available-for-sale had net unrealized holding gains of $11,968 at December 31, 2013, reflecting the fact that the average yield on the Company’s portfolio is higher than the yields currently available in the fixed maturity marketplace. However, proceeds from maturing securities and cash from operating activities are being invested at the current low yields, which has had a negative impact on investment income over the past several years. Interest rates increased approximately 100 basis points during 2013, which significantly reduced the amount of unrealized gains on the Company's fixed maturity portfolio, but allowed the Company to earn some additional investment income. If the current low interest rate environment continues, future growth in investment income will be negatively impacted. The Company targets a laddered fixed maturity portfolio with intermediate duration in order to lessen reinvestment risk.
Premiums earned increased 10.2 percent to $458,846 in 2012 from $416,402 in 2011. A number of factors contributed to the increase in premium income. In the property and casualty insurance segment, the majority of the increase was attributed to rate level increases, growth in insured exposures and an increase in retained policies. In the reinsurance segment, the increases were attributed to rate level increases and a new offshore energy and liability account. Premium rate levels improved in all lines of business, and were expected to continue to improve in 2013.
Employers Mutual contributed $14,000, $15,000 and $17,400 to its qualified pension plan in 2013, 2012 and 2011, respectively, and plans to contribute approximately $15,000 to the qualified pension plan in 2014. The Company reimbursed Employers Mutual $4,321, $4,589 and $5,348 for its share of the pension contributions in 2013, 2012 and 2011, respectively. Employers Mutual contributed $500, $1,500 and $8,000 to its postretirement benefit plans in 2013, 2012 and 2011, respectively, but does not expect to make any contributions to the postretirement benefit plans in 2014 due to the plan amendment that was announced during 2013. The Company reimbursed Employers Mutual $144, $434 and $2,244 for its share of the postretirement benefit plan contributions in 2013, 2012 and 2011, respectively.
The Company recorded “other-than-temporary” investment impairment losses totaling $64 on three equity securities during 2013, compared to $186 on four equity securities during 2012.
Following is a schedule of the length of time securities have continuously been in an unrealized loss position as of December 31, 2013.
The amortized cost and estimated fair value of securities available-for-sale as of December 31, 2013 and 2012 are as follows. All securities are classified as available-for-sale and are carried at fair value.
Gains and losses realized on the disposition of investments are included in net income. The cost of investments sold is determined on the specific identification method using the highest cost basis first. During the fourth quarter of 2011, the Company sold all of its held-to-maturity securities, which consisted solely of small balances remaining on Government National Mortgage Association (GNMA) securities. These securities were ultimately purchased by GNMA, who repackaged them into a single security and resold them through a broker to the Company on the same day. The transaction was conducted to improve administrative efficiency, increase liquidity and reduce custodial costs. The amounts reported as “other-than-temporary” impairments do not include any individually significant items.
The actual income tax expense (benefit) for the years ended December 31, 2013, 2012 and 2011 differed from the “expected” income tax expense (benefit) for those years (computed by applying the United States federal corporate tax rate of 35 percent to income (loss) before income tax expense (benefit)) as follows:
The Senior Executive Compensation and Stock Option Committee (the “Committee”) of Employers Mutual’s Board of Directors (the “Board”) grants the awards and is the administrator of the plans. The Company’s Compensation Committee must consider and approve all awards granted to the Company’s executive officers.
We have audited the consolidated financial statements of EMC Insurance Group Inc. and Subsidiaries (the Company) as of December 31, 2013 and 2012 , and for each of the three years in the period ended December 31, 2013, and have issued our report thereon dated March 12, 2014 (included elsewhere in this Form 10-K). Our audits also include the financial statement schedules listed in Item 15(a) 2 of this Form 10-K. These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits.