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 March 31, 2015 are summarized as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	417,361	$	19,559	$	(46	)	$	436,874
Corporate bonds		191,594		812		(207	)		192,199
Commercial mortgage-backed securities		46,094		1,495		—			47,589
U.S. agency-based mortgage-backed securities		15,953		1,691		(2	)		17,642
U.S. Treasury securities and obligations of U.S. Government agencies		12,932		1,176		—			14,108
Asset-backed securities		2,684		246		(78	)		2,852

Totals	$	686,618	$	24,979	$	(333	)	$	711,264

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 March 31, 2015 are summarized as follows:


	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Fixed maturity:
States and political subdivisions	$	168,277	$	7,634	$	(2,189	)	$	173,722
Corporate bonds		179,275		1,026		(154	)		180,147
U.S. agency-based mortgage-backed securities		9,767		4		(836	)		8,935

Total fixed maturity		357,319		8,664		(3,179	)		362,804
Other investments		10,000		1,729		—			11,729
Equity securities		—		28		—			28

Totals	$	367,319	$	10,421	$	(3,179	)	$	374,561

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, 2014 are summarized as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	385,623	$	20,100	$	(58	)	$	405,665
Corporate bonds		176,880		374		(520	)		176,734
Commercial mortgage-backed securities		46,662		1,867		—			48,529
U.S. agency-based mortgage-backed securities		16,972		1,702		(2	)		18,672
U.S. Treasury securities and obligations of U.S. Government agencies		10,697		1,097		(2	)		11,792
Asset-backed securities		2,797		264		(82	)		2,979

Totals	$	639,631	$	25,404	$	(664	)	$	664,371

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, 2014 are summarized as follows:


	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Fixed maturity:
States and political subdivisions	$	151,744	$	7,302	$	(1,672	)	$	157,374
Corporate bonds		165,412		428		(470	)		165,370
U.S. agency-based mortgage-backed securities		9,848		2		(1,352	)		8,498

Total fixed maturity		327,004		7,732		(3,494	)		331,242
Other investments		10,000		1,748		—			11,748
Equity securities		—		28		—			28

Totals	$	337,004	$	9,508	$	(3,494	)	$	343,018

A summary of the cost and fair value of investments in fixed maturity securities, classified as held-to-maturity at March 31, 2015, by contractual maturity, is as follows:


Remaining Time to Maturity	Amortized Cost Basis		Fair Value
	(in thousands)
Within one year	$	142,860	$	143,563
After one year through five years		282,666		292,645
After five years through ten years		114,203		121,383
After ten years		82,158		85,590
U.S. agency-based mortgage-backed securities		15,953		17,642
Commercial mortgage-backed securities		46,094		47,589
Asset-backed securities		2,684		2,852

Total	$	686,618	$	711,264

A summary of cost and fair value of investments in fixed maturity securities, classified as available-for-sale at March 31, 2015, by contractual maturity, is as follows:


Remaining Time to Maturity	Amortized Cost Basis		Fair Value
	(in thousands)
Within one year	$	54,548	$	54,603
After one year through five years		145,418		146,672
After five years through ten years		17,163		17,429
After ten years		130,423		135,165
U.S. agency-based mortgage-backed securities		9,767		8,935

Total	$	357,319	$	362,804

The following table summarizes the fair value and gross unrealized losses on securities, aggregated by major investment category and length of time that the individual securities have been in a continuous unrealized loss position:


	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)
March 31, 2015
Held-to-Maturity
Fixed maturity securities:
Corporate bonds	$	76,863	$	200	$	4,280	$	7	$	81,143	$	207
States and political subdivisions		18,113		46		—		—		18,113		46
U.S. agency-based mortgage-backed securities		89		2		—		—		89		2
Asset-backed securities		—		—		1,613		78		1,613		78

Total held-to-maturity securities		95,065		248		5,893		85		100,958		333

Available-for Sale
Fixed maturity securities:
Corporate bonds	$	52,767	$	150	$	1,028	$	4	$	53,795	$	154
States and political subdivisions		4,200		22		9,888		2,167		14,088		2,189
U.S. agency-based mortgage-backed securities		—		—		8,827		836		8,827		836

Total available-for-sale securities		56,967		172		19,743		3,007		76,710		3,179

Total	$	152,032	$	420	$	25,636	$	3,092	$	177,668	$	3,512

December 31, 2014
Held-to-Maturity
Fixed maturity securities:
Corporate bonds	$	129,788	$	520	$	—	$	—	$	129,788	$	520
States and political subdivisions		16,896		58		—		—		16,896		58
U.S. Treasury securities and obligations of U.S. Government agencies		3,385		2		—		—		3,385		2
U.S. agency-based mortgage-backed securities		78		2		—		—		78		2
Asset-backed securities		—		—		1,662		82		1,662		82

Total held-to-maturity securities		150,147		582		1,662		82		151,809		664


Available-for Sale
Fixed maturity securities:
Corporate bonds	$	106,185	$	470	$	—	$	—	$	106,185	$	470
States and political subdivisions		3,810		6		10,347		1,666		14,157		1,672
U.S. agency-based mortgage-backed securities		627		11		7,757		1,341		8,384		1,352

Total available-for-sale securities		110,622		487		18,104		3,007		128,726		3,494

Total	$	260,769	$	1,069	$	19,766	$	3,089	$	280,535	$	4,158

At March 31, 2015, the Company held 112 individual fixed maturity securities that were in an unrealized loss position, of which 22 individual fixed maturity securities were in a continuous unrealized loss position for longer than 12 months.

The Company holds investments in a long/short equity fund, accounted for under the equity method. The carrying value of this investment is $11.7 million at March 31, 2015.

Investment income is recognized as it is earned. The discount or premium on fixed maturity securities is amortized using the “constant yield” method. Anticipated prepayments, where applicable, are considered when determining the amortization of premiums or discounts. Realized investment gains and losses are determined using the specific identification method.

We regularly review our investment portfolio to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of specific 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 preferred 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. The Company expects to hold investments in equity securities for a reasonable period of time sufficient for a recovery of fair value. The Company determined that the unrealized losses in the fixed maturity securities portfolio 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, and the transfer of the investments from the available-for-sale classification to the held-to-maturity classification in January 2004. We expect to recover the carrying value of these securities as it is not more likely than not that we will be required to sell the security before the recovery of its amortized cost basis.

Net realized gains in the three months ended March 31, 2015 were $0.1 million resulting from gains on called fixed maturity securities. Net realized gains on investments in the three months ended March 31, 2014 were $0.1 million resulting from gains on called fixed maturity securities and the sale of equity securities.