(5)	Investments

FASB issued guidance addresses accounting and reporting for (a) investments in equity securities that have readily determinable fair values and (b) all investments in debt securities. We account for our investment securities consistent with FASB issued guidance that requires our securities to be classified into one of three categories: (i) held-to-maturity, (ii) trading securities or (iii) available-for-sale.

Investments classified as held-to-maturity include debt securities wherein the Company’s intent and ability are to hold the investment until maturity and are carried at amortized cost without consideration to unrealized gains or losses. Investments classified as trading securities include debt and equity securities bought and held primarily for sale in the near term and are carried at fair value with unrealized holding gains and losses included in current period operations. Investments classified as available-for-sale include debt and equity securities that are not classified as held-to-maturity or as trading security investments and are carried at fair value with unrealized holding gains and losses excluded from earnings and reported as a separate component of shareholders’ equity, namely “Other Comprehensive Income.”

Total investments increased $35.2 million, or 10.7%, to $366.0 million as of June 30, 2015, compared with $330.8 million as of December 31, 2014.

The debt and equity securities that are available-for-sale and carried at fair value represent 98% of total investments as of June 30, 2015 and December 31, 2014.

We did not hold any trading investment securities during the six months ended June 30, 2015.

The FASB issued guidance also addresses the determination as to when an investment is considered impaired, whether that impairment is other-than temporary, and the measurement of an impairment loss. The Company’s policy for the valuation of temporarily impaired securities is to determine impairment based on the analysis of the following factors.

rating downgrade or other credit event (eg., failure to pay interest when due);

length of time and the extent to which the fair value has been less than amortized cost;

financial condition and near term prospects of the issuer, including any specific events which may influence the operations of the issuer such as changes in technology or discontinuance of a business segment;

prospects for the issuer’s industry segment;

intent and ability of the Company to retain the investment for a period of time sufficient to allow for anticipated recovery in market value;

historical volatility of the fair value of the security.

Pursuant to FASB issued guidance, the Company records the unrealized losses, net of estimated income taxes that are associated with that part of our portfolio classified as available-for-sale through the shareholders' equity account titled “Other Comprehensive Income”. Management periodically reviews the individual investments that comprise our portfolio in order to determine whether a decline in fair value below our cost either is other-than temporarily or permanently impaired. Factors used in such consideration include, but are not limited to, the extent and length of time over which the market value has been less than cost, the financial condition and near-term prospects of the issuer and our ability and intent to keep the investment for a period sufficient to allow for an anticipated recovery in market value.

In reaching a conclusion that a security is either other-than-temporarily or permanently impaired we consider such factors as the timeliness and completeness of expected dividends, principal and interest payments, ratings from nationally recognized statistical rating organizations such as Standard and Poor’s (“S&P”) and Moody’s Investors Service, Inc. (“Moody’s”), as well as information released via the general media channels. During the six months ended June 30, 2015 and 2014, respectively, in connection with the process, we have not charged operations with investment losses.

As of June 30, 2015 and December 31, 2014, respectively, all of our securities are in good standing and not impaired as defined by FASB issued guidance.

As of June 30, 2015 and December 31, 2014, our investments consisted primarily of corporate bonds held in various industries, municipal bonds and United States government bonds. As of June 30, 2015, 78% of our debt portfolio was in diverse industries and 22% was in United States government bonds. As of June 30, 2015, approximately 86% of our equity holdings were in equities related to diverse industries and 14% were in mutual funds. As of December 31, 2014, 77% of our debt portfolio was in diverse industries and 23% is in United States government bonds. As of December 31, 2014, approximately 88% of our equity holdings were in equities related to diverse industries and 12% were in mutual funds.

As of June 30, 2015 and December 31, 2014, we have classified $6.4 million and $7.4 million, respectively, of our bond portfolio as held-to-maturity. We classify bonds as held-to-maturity to support securitization of credit requirements.

During the six months ended June 30, 2015, we did re-classify approximate fair value of $1.0 million of our bond portfolio to available-for-sale from held-to-maturity. During the six months ended June 30, 2014, we did not re-classify any of our bond portfolio between available-for-sale and held-to-maturity.

(A) Debt and Equity Securities

The following table summarizes, by type, our investments as of June 30, 2015 and December 31, 2014.

	June 30, 2015					December 31, 2014
	Carrying Amount		Percent of Total			Carrying Amount		Percent of Total
	(Dollars in Thousands)
Debt securities, at market:
United States government obligations and authorities	$	67,829		18.53	%	$	62,323		18.84	%
Obligations of states and political subdivisions		100,284		27.40	%		91,614		27.70	%
Corporate		136,553		37.32	%		119,024		35.99	%
International		11,911		3.25	%		11,138		3.37	%
		316,577		86.50	%		284,099		85.90	%
Debt securities, at amortized cost:
United States government obligations and authorities		4,093		1.12	%		4,490		1.36	%
Corporate		2,219		0.61	%		2,681		0.81	%
International		125		0.03	%		246		0.07	%
		6,437		1.76	%		7,417		2.24	%
Total debt securities		323,014		88.26	%		291,516		88.14	%

Equity securities, at market:		43,003		11.74	%		39,247		11.86	%
Total investments	$	366,017		100.00	%	$	330,763		100.00	%

The following table shows the realized gains (losses) for debt and equity securities for the three months ended June 30, 2015 and 2014.

	Three Months Ended June 30,
	2015					2014
	Gains (Losses)			Fair Value at Sale		Gains (Losses)			Fair Value at Sale
	(Dollars in Thousands)

Debt securities	$	265		$	14,626	$	157		$	12,576
Equity securities		915			2,675		1,949			6,138
Total realized gains		1,180			17,301		2,106			18,714

Debt securities		(224	)		15,649		(28	)		3,007
Equity securities		(43	)		193		(22	)		183
Total realized losses		(267	)		15,842		(50	)		3,190

Net realized gains on investments	$	913		$	33,143	$	2,056		$	21,904

Net realized investment gains totaled $0.9 million for the three months ended June 30, 2015, compared with $2.1 million during the three months ended June 30, 2014. From time to time, our asset managers, at their discretion, make periodic sales from the portfolio and during the three months ended June 30, 2015, the majority of the realized gains were from equity sales.

The following table shows the realized gains (losses) for debt and equity securities for the six months ended June 30, 2015 and 2014.

	Six Months Ended June 30,
	2015					2014
	Gains (Losses)			Fair Value at Sale		Gains (Losses)			Fair Value at Sale
	(Dollars in Thousands)

Debt securities	$	746		$	49,932	$	292		$	22,244
Equity securities		2,342			5,759		3,560			10,953
Total realized gains		3,088			55,691		3,852			33,197

Debt securities		(326	)		30,275		(98	)		6,706
Equity securities		(145	)		653		(366	)		1,521
Total realized losses		(471	)		30,928		(464	)		8,227

Net realized gains on investments	$	2,617		$	86,619	$	3,388		$	41,424

Net realized investment gains totaled $2.6 million for the six months ended June 30, 2015, compared with $3.4 million during the six months ended June 30, 2014. During the six months ended June 30, 2015, the investment committee decided to increase the fixed income asset allocation by directing new invested dollars and reducing our exposure to equities.

A summary of the amortized cost, estimated fair value and gross unrealized gains and losses of debt and equity securities at June 30, 2015 and December 31, 2014 is as follows.

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(Dollars in Thousands)
June 30, 2015
Debt Securities - Available-For-Sale:
United States government obligations and authorities	$	67,495	$	752	$	418	$	67,829
Obligations of states and political subdivisions		99,800		739		255		100,284
Corporate		136,049		1,266		762		136,553
International		11,948		58		95		11,911
	$	315,292	$	2,815	$	1,530	$	316,577

Debt Securities - Held-To-Maturity:
United States government obligations and authorities	$	4,093	$	36	$	174	$	3,955
Corporate		2,219		25		4		2,240
International		125		1		1		125
	$	6,437	$	62	$	179	$	6,320

Equity securities - common stocks	$	33,882	$	10,111	$	989	$	43,004

December 31, 2014
Debt Securities - Available-For-Sale:
United States government obligations and authorities	$	61,376	$	1,022	$	75	$	62,323
Obligations of states and political subdivisions		90,728		956		70		91,614
Corporate		117,778		1,578		332		119,024
International		11,139		53		54		11,138
	$	281,021	$	3,609	$	531	$	284,099

Debt Securities - Held-To-Maturity:
United States government obligations and authorities	$	4,490	$	41	$	225	$	4,306
Corporate		2,681		31		5		2,707
International		246		1		1		246
	$	7,417	$	73	$	231	$	7,259

Equity securities - common stocks	$	29,908	$	9,836	$	497	$	39,247

The table below reflects our unrealized investment losses by investment class, aged for length of time in a continuous unrealized loss position as of June 30, 2015.

	Unrealized Losses		Less than 12 months		12 months or longer
	(Dollars in Thousands)
Debt securities:
United States government obligations and authorities	$	418	$	401	$	17
Obligations of states and political subdivisions		255		255		-
Corporate		762		738		24
International		95		95		-
		1,530		1,489		41
Equity securities:
Common stocks		989		866		123

Total debt and equity securities	$	2,519	$	2,355	$	164

The table below reflects our unrealized investment losses by investment class, aged for length of time in a continuous unrealized loss position as of December 31, 2014.

	Unrealized Losses		Less than 12 months		12 months or longer
	(Dollars in Thousands)
Debt securities:
United States government obligations and authorities	$	75	$	22	$	53
Obligations of states and political subdivisions		70		66		4
Corporate		332		260		72
International		54		54		-
		531		402		129
Equity securities:
Common stocks		497		461		36

Total debt and equity securities	$	1,028	$	863	$	165

Below is a summary of debt securities at June 30, 2015 and December 31, 2014, by contractual or expected maturity periods. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2015				December 31, 2014
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)

Due in one year or less	$	22,398	$	22,435	$	16,777	$	16,797
Due after one through five years		173,755		174,992		173,236		174,273
Due after five through ten years		123,587		123,471		98,404		100,259
Due after ten years		1,992		1,999		26		33

Total	$	321,732	$	322,897	$	288,443	$	291,362

United States Treasury notes with a book value of $60,940 and $2,191,594, maturing in 2016 and 2022, and a statutory deposit held in trust with a book value of $0.3 million, were on deposit with the Florida OIR as of June 30, 2015, as required by law for FNIC and MNIC, respectively, and are included with other investments held until maturity.

United States Treasury notes with a book value of $61,465 and $2,208,588, maturing in 2016 and 2022, respectively, were on deposit with the Florida OIR as of December 31, 2014, as required by law for FNIC, and are included with other investments held until maturity.

The table below sets forth investment results for the three months ended June 30, 2015 and 2014.

	Three Months Ended June 30,
	2015			2014
	(Dollars in Thousands)

Interest on debt securities	$	1,616		$	1,209
Dividends on equity securities		128			92
Interest on cash and cash equivalents		(43	)		1

Total investment income	$	1,701		$	1,302

Net realized gains	$	913		$	2,056

Proceeds from sales, pay downs and maturities of debt securities and proceeds from sales of equity securities during the three months ended June 30, 2015 and 2014, were approximately $36.1 million and $23.1 million, respectively.

The table below sets forth investment results for the six months ended June 30, 2015 and 2014.

	Six Months Ended June 30,
	2015		2014
	(Dollars in Thousands)

Interest on debt securities	$	2,959	$	2,104
Dividends on equity securities		234		203
Interest on cash and cash equivalents		55		1

Total investment income	$	3,248	$	2,308

Net realized gains	$	2,617	$	3,388

Proceeds from sales, pay downs and maturities of debt securities and proceeds from sales of equity securities during the six months ended June 30, 2015 and 2014, were approximately $92.4 million and $44.1 million, respectively.

The table below sets forth a summary of net realized investment gains during the three months ended June 30, 2015 and 2014.

	Three Months Ended June 30,
	2015		2014
	(Dollars in Thousands)
Net realized gains
Debt securities	$	41	$	129
Equity securities		872		1,927

Total	$	913	$	2,056

The table below sets forth a summary of net realized investment gains during the six months ended June 30, 2015 and 2014.

	Six Months Ended June 30,
	2015		2014
	(Dollars in Thousands)
Net realized gains
Debt securities	$	420	$	194
Equity securities		2,197		3,194

Total	$	2,617	$	3,388

The table below sets forth a summary of net unrealized investment gains as of June 30, 2015 and December 31, 2014.

	Unrealized Gains
	June 30, 2015		December 31, 2014
	(Dollars in Thousands)
Net unrealized gains
Debt securities	$	1,285	$	3,078
Equity securities		9,122		9,339

Total	$	10,407	$	12,417