Investments

Investments consist of available-for-sale securities and are recorded at fair value, which is based on quoted market prices. Unrealized gains and temporary losses on investments, net of tax, are recorded in Other comprehensive income (loss). Realized gains and losses are determined using the specific identification method. The amortized cost of debt securities are adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method. Such amortization is included in investment income, net.

At June 30, 2014 investments classified as available-for-sale securities were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities:
U.S. Treasury securities	$	524,663	$	151	$	—	$	524,814
Corporate debt securities	102,182		—		1,941		100,241
Preferred stock	3,270		217		—		3,487
	$	630,115	$	368	$	1,941	$	628,542

At December 31, 2013 investments classified as available-for-sale securities were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities:
U.S. Treasury securities	$	124,861	$	88	$	—	$	124,949
Corporate debt securities	24,236		—		2,213		22,023
	$	149,097	$	88	$	2,213	$	146,972

Fairholme Capital Management, L.L.C. (“Fairholme Capital”), serves as an investment adviser to the Company. As of June 30, 2014, funds managed by Fairholme Capital beneficially owned approximately 27.1% of the Company's common stock. Mr. Bruce Berkowitz is the Managing Member of Fairholme Capital and the Chairman of the Company's Board of Directors. Fairholme Capital receives no compensation for its services as the Company's investment advisor.

Pursuant to the terms of the Company's Investment Management Agreement as amended (the “Agreement”) with Fairholme Capital, Fairholme Capital agreed to supervise and direct the investments of an investment account established by the Company in accordance with the investment guidelines and restrictions approved by the Investment Committee of the Company’s Board of Directors. The investment guidelines are set forth in the Agreement and require that, as of the date of any investment: (i) at least 50% of the investment account be held in cash or cash equivalents, as defined in the Agreement, (ii) no more than 15% of the investment account may be invested in securities of any one issuer (excluding the U.S. Government) and (iii) any investment in any one issuer (excluding the U.S. Government) that exceeds 10%, but not 15%, requires the consent of at least two members of the Investment Committee. The investment account may not be invested in common stock securities. As of June 30, 2014, the investment account included $34.2 million of money market funds (all of which are classified within cash and cash equivalents), $524.8 million of U.S. Treasury securities (all of which are classified within investments), $100.2 million of corporate debt securities and $3.5 million of preferred stock. As of June 30, 2014, the Company's corporate debt securities were invested in one issuer who is a national retail chain and is non-investment grade.

During the three months ended June 30, 2014, realized losses from the sale of available-for-sale securities were $0.4 million, proceeds from the sale of available-for-sale securities were $5.6 million and proceeds from the maturity of available-for-sale securities were $35.0 million. During the six months ended June 30, 2014, realized losses from the sale of available-for-sale securities were $0.8 million, proceeds from the sale of available-for-sale securities were $8.2 million and proceeds from the maturity of available-for-sale securities were $60.0 million.

At June 30, 2014 and December 31, 2013, there were no U.S. Treasury securities or preferred stock with unrealized losses.

As of June 30, 2014, corporate debt securities that have been in an unrealized loss position for more than twelve months had a fair value of $11.1 million and had $0.8 million of unrealized losses, which were included in Accumulated other comprehensive income as of June 30, 2014. As of June 30, 2014, corporate debt securities that have been in an unrealized loss position for less than twelve months had a fair value of $89.1 million and had $1.1 million of unrealized losses, which were included in Accumulated other comprehensive income as of June 30, 2014.

At December 31, 2013, corporate debt securities that have been in a continuous unrealized loss position for less than twelve months had a fair value of $22.0 million and had $2.2 million of unrealized losses, which were included in Accumulated other comprehensive income as of December 31, 2013.

The Company evaluates investments with unrealized losses to determine if they experienced an other-than-temporary impairment. This evaluation is based on various factors, including length of time securities were in a loss position, ability and intent to hold investments until unrealized losses are recovered or maturity, investee's industry and amount of the unrealized loss. Based on these factors, at June 30, 2014 and December 31, 2013 the unrealized losses related to the corporate debt securities of $1.9 million and $2.2 million, respectively, were deemed temporary.

The net carrying value and estimated fair value of investments classified as available-for-sale at June 30, 2014, by contractual maturity are shown in the following table. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations.



	Amortized Cost		Fair Value
Due in one year or less	$	524,663	$	524,814
Due after one year through five years	102,182		100,241
	626,845		625,055
Preferred stock	3,270		3,487
	$	630,115	$	628,542