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, 2017 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	430,470	$	10,348	$	(573	)	$	440,245
Corporate bonds		121,942		498		(192	)		122,248
U.S. agency-based mortgage-backed securities		10,928		750		(2	)		11,676
U.S. Treasury securities and obligations of U.S. government agencies		33,672		642		(94	)		34,220
Asset-backed securities		1,646		132		(16	)		1,762
Totals	$	598,658	$	12,370	$	(877	)	$	610,151

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, 2017 are summarized as follows:

	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Fixed maturity:
States and political subdivisions	$	236,666	$	6,229	$	(1,243	)	$	241,652
Corporate bonds		151,339		699		(54	)		151,984
U.S. agency-based mortgage-backed securities		13,408		8		(748	)		12,668
U.S. Treasury securities and obligations of U.S. government agencies		61,479		71		(598	)		60,952
Total fixed maturity		462,892		7,007		(2,643	)		467,256
Equity securities		7,499		302		—			7,801
Other investments		1,000		280		—			1,280
Totals	$	471,391	$	7,589	$	(2,643	)	$	476,337

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, 2016 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
States and political subdivisions	$	394,875	$	7,622	$	(3,014	)	$	399,483
Corporate bonds		143,858		423		(265	)		144,016
Commercial mortgage-backed securities		70		—		—			70
U.S. agency-based mortgage-backed securities		9,967		948		—			10,915
U.S. Treasury securities and obligations of U.S. government agencies		11,737		746		(67	)		12,416
Asset-backed securities		1,927		163		(59	)		2,031
Totals	$	562,434	$	9,902	$	(3,405	)	$	568,931

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, 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	$	231,168	$	4,340	$	(3,215	)	$	232,293
Corporate bonds		182,350		436		(271	)		182,515
U.S. agency-based mortgage-backed securities		10,428		17		(1,103	)		9,342
U.S. Treasury securities and obligations of U.S. government agencies		55,925		—		(978	)		54,947
Total fixed maturity		479,871		4,793		(5,567	)		479,097
Equity securities		—		33		—			33
Other investments		10,000		3,330		—			13,330
Totals	$	489,871	$	8,156	$	(5,567	)	$	492,460

A summary of the amortized cost and fair value of investments in fixed maturity securities, classified as held-to-maturity at September 30, 2017, by contractual maturity, is as follows:

	Amortized Cost		Fair Value
	(in thousands)
Maturity:
Within one year	$	113,488	$	113,988
After one year through five years		239,333		243,851
After five years through ten years		98,935		101,450
After ten years		134,328		137,424
U.S. agency-based mortgage-backed securities		10,928		11,676
Asset-backed securities		1,646		1,762
Totals	$	598,658	$	610,151

A summary of the amortized cost and fair value of investments in fixed maturity securities, classified as available-for-sale at September 30, 2017, by contractual maturity, is as follows:

	Amortized Cost		Fair Value
	(in thousands)
Maturity:
Within one year	$	85,898	$	86,051
After one year through five years		160,278		161,077
After five years through ten years		32,117		32,427
After ten years		171,191		175,033
U.S. agency-based mortgage-backed securities		13,408		12,668
Totals	$	462,892	$	467,256

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)
September 30, 2017
Held-to-Maturity
Fixed maturity securities:
States and political subdivisions	$	61,279	$	205	$	22,658	$	368	$	83,937	$	573
Corporate bonds		46,074		183		3,041		9		49,115		192
U.S. agency-based mortgage-backed securities		2,993		2		—		—		2,993		2
U.S. Treasury securities and obligations of U.S. government agencies		24,242		45		3,977		49		28,219		94
Asset-backed securities		—		—		1,023		16		1,023		16
Total held-to-maturity securities		134,588		435		30,699		442		165,287		877
Available-for Sale
Fixed maturity securities:
States and political subdivisions	$	16,373	$	101	$	26,213	$	1,142	$	42,586	$	1,243
Corporate bonds		15,357		35		4,845		19		20,202		54
U.S. agency-based mortgage-backed securities		5,359		19		3,497		729		8,856		748
U.S. Treasury securities and obligations of U.S. government agencies		51,182		550		4,002		48		55,184		598
Total available-for-sale securities		88,271		705		38,557		1,938		126,828		2,643
Total	$	222,859	$	1,140	$	69,256	$	2,380	$	292,115	$	3,520

	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, 2016
Held-to-Maturity
Fixed maturity securities:
States and political subdivisions	$	157,507	$	3,014	$	—	$	—	$	157,507	$	3,014
Corporate bonds		44,654		202		6,292		63		50,946		265
U.S. Treasury securities and obligations of U.S. government agencies		3,968		67		—		—		3,968		67
Asset-backed securities		—		—		1,173		59		1,173		59
Total held-to-maturity securities		206,129		3,283		7,465		122		213,594		3,405
Available-for Sale
Fixed maturity securities:
States and political subdivisions	$	73,505	$	2,976	$	4,523	$	239	$	78,028	$	3,215
Corporate bonds		41,419		111		7,922		160		49,341		271
U.S. agency-based mortgage-backed securities		3,702		48		3,607		1,055		7,309		1,103
U.S. Treasury securities and obligations of U.S. government agencies		54,947		978		—		—		54,947		978
Total available-for-sale securities		173,573		4,113		16,052		1,454		189,625		5,567
Total	$	379,702	$	7,396	$	23,517	$	1,576	$	403,219	$	8,972

At September 30, 2017, the Company held 169 individual fixed maturity securities that were in an unrealized loss position, of which 48 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 $1.3 million at September 30, 2017.

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. 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 nine months ended September 30, 2017 and 2016, there were no impairment losses recognized for other-than-temporary declines in the fair value of our investments

Net realized losses in the nine months ended September 30, 2017 were $0.8 million resulting from called fixed maturity securities. Net realized gains in the nine months ended September 30, 2016 were $1.0 million resulting from the sale of fixed maturity securities classified as available-for-sale.