Note 4. Investments

The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as held-to-maturity at September 30, 2013 are summarized as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	388,694	$	20,250	$	(1,362	)	$	407,582
Corporate bonds		71,126		965		(19	)		72,072
Commercial mortgage-backed securities		51,414		3,861		—			55,275
U.S. agency-based mortgage-backed securities		23,876		1,966		—			25,842
U.S. Treasury securities and obligations of U.S. government agencies		11,522		1,130		—			12,652
Asset-backed securities		3,521		216		(171	)		3,566

Totals	$	550,153	$	28,388	$	(1,552	)	$	576,989

The gross unrealized gains and losses on, and the cost or amortized cost and fair value of, those investments classified as available-for-sale at September 30, 2013 are summarized as follows:


	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Fixed maturity:
States and political subdivisions	$	133,239	$	1,694	$	(4,375	)	$	130,558
Corporate bonds		63,876		471		(245	)		64,102
U.S. agency-based mortgage-backed securities		10,082		—		(2,041	)		8,041

Total fixed maturity		207,197		2,165		(6,661	)		202,701
Other investments		10,000		271		—			10,271
Equity securities		11,987		600		(327	)		12,260

Totals	$	229,184	$	3,036	$	(6,988	)	$	225,232

The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as held-to-maturity at December 31, 2012 are summarized as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	400,687	$	31,387	$	(106	)	$	431,968
Corporate bonds		82,824		1,565		(12	)		84,377
Commercial mortgage-backed securities		51,529		6,433		—			57,962
U.S. agency-based mortgage-backed securities		32,984		3,063		(5	)		36,042
U.S. Treasury securities and obligations of U.S. Government agencies		11,034		1,721		—			12,755
Asset-backed securities		4,229		192		(176	)		4,245

Totals	$	583,287	$	44,361	$	(299	)	$	627,349

The gross unrealized gains and losses on, and the cost or amortized cost and fair value of, those investments classified as available-for-sale at December 31, 2012 are summarized as follows:


	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Fixed maturity:
States and political subdivisions	$	93,362	$	5,022	$	(142	)	$	98,242
Corporate bonds		39,211		623		(24	)		39,810
U.S. agency-based mortgage-backed securities		11,941		5		(859	)		11,087

Total fixed maturity		144,514		5,650		(1,025	)		149,139
Equity securities		7,000		451		(685	)		6,766

Totals	$	151,514	$	6,101	$	(1,710	)	$	155,905

A summary of the cost and fair value of investments in fixed maturity securities, classified as held-to-maturity at September 30, 2013, by contractual maturity, is as follows:


Remaining Time to Maturity	Amortized Cost Basis		Fair Value
	(in thousands)
Less than one year	$	63,140	$	63,427
One to five years		145,838		153,601
Five to ten years		130,159		140,059
More than ten years		132,205		135,219
U.S. agency-based mortgage-backed securities		23,876		25,842
Commercial mortgage-backed securities		51,414		55,275
Asset-backed securities		3,521		3,566

Total	$	550,153	$	576,989

A summary of cost and fair value of investments in fixed maturity securities, classified as available-for-sale at September 30, 2013, by contractual maturity, is as follows:


Remaining Time to Maturity	Amortized Cost Basis		Fair Value
	(in thousands)
Less than one year	$	28,681	$	28,802
One to five years		28,734		28,993
Five to ten years		18,162		18,357
More than ten years		121,538		118,508
U.S. agency-based mortgage-backed securities		10,082		8,041

Total	$	207,197	$	202,701

The following table summarizes, as of September 30, 2013, gross unrealized losses on a total of 158 securities that were at a loss for either less than twelve months or twelve months or greater:


	As of September 30, 2013
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses
	(in thousands)
Held-to-Maturity
Fixed maturity securities:
Corporate bonds	$	16,397	$	17	$	2,271	$	2	$	18,668	$	19
States and political subdivisions		39,698		1,125		5,028		237		44,726		1,362
Asset-backed securities		—		—		1,962		171		1,962		171

Total held-to-maturity securities		56,095		1,142		9,261		410		65,356		1,552

Available-for-Sale
Fixed maturity securities:
Corporate bonds	$	18,101	$	245	$	—	$	—	$	18,101	$	245
States and political subdivisions		85,605		4,375		—		—		85,605		4,375
U.S. agency-based mortgage-backed securities		2,938		700		5,102		1,341		8,040		2,041
Equity securities		5,883		327		—		—		5,883		327

Total available-for-sale securities		112,527		5,647		5,102		1,341		117,629		6,988

Total	$	168,622	$	6,789	$	14,363	$	1,751	$	182,985	$	8,540

Amerisafe holds investments in a long/short equity fund, accounted for under the equity method. The carrying value of this investment is $10.3 million at September 30, 2013.

The following table summarizes, as of December 31, 2012, gross unrealized losses on a total of 49 securities that were at a loss for either less than twelve months or twelve months or greater:


	As of December 31, 2012
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses		Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses
	(in thousands)
Held-to-Maturity
Fixed maturity securities:
Corporate bonds	$	10,734	$	12	$	—	$	—	$	10,734	$	12
State and political subdivisions		11,913		106		—		—		11,913		106
U.S. agency-based mortgage-backed securities		117		—		68		5		185		5
Asset-backed securities		—		—		2,277		176		2,277		176

Total held-to-maturity securities		22,764		118		2,345		181		25,109		299

Available-for-Sale
Fixed maturity securities:
Corporate bonds	$	6,411	$	24	$	—	$	—	$	6,411	$	24
States and political subdivisions		6,281		142		—		—		6,281		142
U.S. agency-based mortgage-backed securities		10,919		859		—		—		10,919		859
Equity securities		4,186		685		—		—		4,186		685

Total available-for-sale securities		27,797		1,710		—		—		27,797		1,710

Total	$	50,561	$	1,828	$	2,345	$	181	$	52,906	$	2,009

We regularly review our investment portfolio to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of our investments. We consider various factors in determining if a decline in the fair value of an individual security is other-than-temporary. The key factors we consider are:

•

any reduction or elimination of dividends, or nonpayment of scheduled principal or interest payments;

•

the financial condition and near-term prospects of the issuer of the applicable security, including any specific events that may affect its operations or earnings;

•

how long and by how much the fair value of the security has been below its cost or amortized cost;

•

any downgrades of the security by a rating agency;

•

our intent not to sell the security for a sufficient time period for it to recover its value;

•

the likelihood of being forced to sell the security before the recovery of its value; and

•

an evaluation as to whether there are any credit losses on debt securities.

We reviewed all securities with unrealized losses in accordance with the impairment policy described above. We determined that the unrealized losses in the fixed maturity securities portfolios related primarily to changes in market interest rates since the date of purchase, current conditions in the capital markets and the impact of those conditions on market liquidity and prices generally. We expect to recover the carrying value of these securities since management does not intend to sell the securities and it is not more likely than not that we will be required to sell the security before the recovery of its amortized cost basis. In addition, none of the unrealized losses on debt securities are considered credit losses.

In the three months ended September 30, 2013, we sold equity securities classified as available-for-sale. The cost basis of these securities at disposal was $1.7 million with realized losses on the sale of these securities of $0.5 million. In the three months ended September 30, 2012, we sold equity and fixed maturity securities classified as available-for-sale. The cost basis of these securities at disposal was $11.1 million with realized gains on the sale of these securities of $0.9 million.

In the nine months ended September 30, 2013, we sold equity and fixed maturity securities classified as available-for-sale. The cost basis of these securities at disposal was $6.7 million with realized gains on the sale of these securities of $0.2 million. In the nine months ended September 30, 2012, we sold equity and fixed maturity securities classified as available-for-sale. The cost basis of these securities at disposal was $31.2 million with realized gains on the sale of these securities of $2.7 million

As a result of the review of our investment portfolio, there were impairment losses recognized for other-than-temporary declines in the fair value of three of our investments in equity securities in the nine months ended September 30, 2013. These charges are included in “Net realized gains/(losses) on investments” and total $2.2 million. No such impairment charges were taken for the nine months ended September 30, 2012.