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, 2016 are summarized as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	420,800	$	16,561	$	(22	)	$	437,339
Corporate bonds		168,542		815		(315	)		169,042
Commercial mortgage-backed securities		22,855		104		(11	)		22,948
U.S. agency-based mortgage-backed securities		12,332		1,266		(1	)		13,597
U.S. Treasury securities and obligations of U.S. government agencies		12,913		1,039		—			13,952
Asset-backed securities		2,190		194		(90	)		2,294

Totals	$	639,632	$	19,979	$	(439	)	$	659,172

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, 2016 are summarized as follows:


	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Fixed maturity:
States and political subdivisions	$	165,016	$	7,752	$	(172	)	$	172,596
Corporate bonds		212,938		2,241		(723	)		214,456
U.S. agency-based mortgage-backed securities		13,009		3		(1130	)		11,882
U.S. Treasury securities and obligations of U.S. government agencies		17,401		233		—			17,634

Total fixed maturity		408,364		10,229		(2,025	)		416,568
Other investments		10,000		1,390		—			11,390
Equity securities		—		31		—			31

Totals	$	418,364	$	11,650	$	(2,025	)	$	427,989

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, 2015 are summarized as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	408,447	$	15,352	$	(45	)	$	423,754
Corporate bonds		171,224		159		(810	)		170,573
Commercial mortgage-backed securities		37,494		204		(15	)		37,683
U.S. agency-based mortgage-backed securities		13,223		1,249		(1	)		14,471
U.S. Treasury securities and obligations of U.S. government agencies		12,487		897		(4	)		13,380
Asset-backed securities		2,289		202		(76	)		2,415

Totals	$	645,164	$	18,063	$	(951	)	$	662,276

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, 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	$	164,684	$	6,942	$	(207	)	$	171,419
Corporate bonds		202,537		253		(1,486	)		201,304
U.S. agency-based mortgage-backed securities		8,888		4		(1,593	)		7,299

Total fixed maturity		376,109		7,199		(3,286	)		380,022
Other investments		10,000		2,217		—			12,217
Equity securities		—		31		—			31

Totals	$	386,109	$	9,447	$	(3,286	)	$	392,270

A summary of the cost and fair value of investments in fixed maturity securities, classified as held-to-maturity at March 31, 2016, by contractual maturity, is as follows:


Maturity:	Amortized Cost		Fair Value
	(in thousands)
Within one year	$	98,055	$	98,946
After one year through five years		305,347		313,740
After five years through ten years		113,508		118,689
After ten years		85,345		88,958
U.S. agency-based mortgage-backed securities		12,332		13,597
Commercial mortgage-backed securities		22,855		22,948
Asset-backed securities		2,190		2,294

Totals	$	639,632	$	659,172

A summary of the cost and fair value of investments in fixed maturity securities, classified as available-for-sale at March 31, 2016, by contractual maturity, is as follows:


Maturity	Amortized Cost		Fair Value
	(in thousands)
Within one year	$	50,609	$	50,899
After one year through five years		203,059		205,540
After five years through ten years		40,481		41,455
After ten years		101,206		106,792
U.S. agency-based mortgage-backed securities		13,009		11,882

Totals	$	408,364	$	416,568

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, 2016
Held-to-Maturity
Fixed maturity securities:
Corporate bonds	$	39,485	$	184	$	17,255	$	131	$	56,740	$	315
States and political subdivisions		11,130		22		—		—		11,130		22
U.S. agency-based mortgage-backed securities		—		—		33		1		33		1
Commercial mortgage-backed securities		3,083		11		—		—		3,083		11
Asset-backed securities		—		—		1,318		90		1,318		90

Total held-to-maturity securities		53,698		217		18,606		222		72,304		439

Available-for Sale
Fixed maturity securities:
Corporate bonds	$	43,457	$	688	$	3,197	$	35	$	46,654	$	723
States and political subdivisions		4,223		3		4,637		169		8,860		172
U.S. agency-based mortgage-backed securities		2,505		34		7,212		1,096		9,717		1,130

Total available-for-sale securities		50,185		725		15,046		1,300		65,231		2,025

Total	$	103,883	$	942	$	33,652	$	1,522	$	137,535	$	2,464


	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)
December 31, 2015
Held-to-Maturity
Fixed maturity securities:
Corporate bonds	$	128,436	$	687	$	18,139	$	123	$	146,575	$	810
States and political subdivisions		24,068		45		—		—		24,068		45
U.S. Treasury securities and obligations of U.S. government agencies		2,980		4		—		—		2,980		4
U.S. agency-based mortgage-backed securities		18		—		28		1		46		1
Commercial mortgage-backed securities		9,784		15		—		—		9,784		15
Asset-backed securities		—		—		1,389		76		1,389		76

Total held-to-maturity securities		165,286		751		19,556		200		184,842		951

Available-for Sale
Fixed maturity securities:
Corporate bonds	$	141,857	$	1.475	$	4,216	$	11	$	146,073	$	1,486
States and political subdivisions		6,560		9		4,439		198		10,999		207
U.S. agency-based mortgage-backed securities		434		37		6,794		1,556		7,228		1,593

Total available-for-sale securities		148,851		1,521		15,449		1,765		164,300		3,286

Total	$	314,137	$	2,272	$	35,005	$	1,965	$	349,142	$	4,237

At March 31, 2016, the Company held 85 individual fixed maturity securities that were in an unrealized loss position, of which 28 individual fixed maturity securities were in a continuous unrealized loss position for longer than 12 months.

The Company holds investments in a limited partnership hedge fund accounted for under the equity method. The carrying value of this investment is $11.4 million at March 31, 2016.

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 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 securities before the recovery of the amortized cost basis.

During the three months ended March 31, 2016 and 2015, there were no impairment losses recognized for other-than-temporary declines in the fair value of our investments.

Net realized gains in the three months ended March 31, 2016 were $0.2 million resulting from the sale of fixed maturity securities classified as available-for-sale. Net realized gains in the three months ended March 31, 2015 were $0.1 million resulting from gains on called fixed maturity securities.