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. In addition, at March 31, 2015, the Company had investments in short term commercial paper that are classified as cash equivalents, since they had maturity dates of ninety days or less from the date of purchase.

At March 31, 2015 investments classified as available-for-sale securities were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities:
Commercial paper ⁽¹⁾	$	248,294	$	60	$	—	$	248,354
U.S. Treasury securities	259,923		6		—		259,929
Corporate debt securities	101,973		—		780		101,193
Preferred stock	23,694		564		—		24,258
	633,884		$	630	$	780	$	633,734



(1)	Recorded in Cash and cash equivalents on the Company’s Condensed Consolidated Balance Sheets.

At December 31, 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	$	509,783	$	32	$	—	$	509,815
Corporate debt securities	101,587		—		1,482		100,105
Preferred stock	26,963		—		5		26,958
	$	638,333	$	32	$	1,487	$	636,878

Fairholme Capital Management, L.L.C. (“Fairholme Capital”), serves as an investment advisor to the Company. As of March 31, 2015, 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 March 31, 2015, the investment account included $23.4 million of money market funds and $248.4 million of commercial paper (all of which are classified within cash and cash equivalents on the Company’s Condensed Consolidated Balance Sheets), $259.9 million of U.S. Treasury securities, $101.2 million of corporate debt securities and $24.3 million of preferred stock investments (all of which are classified within investments on the Company’s Condensed Consolidated Balance Sheets). As of March 31, 2015, the Company’s corporate debt securities were invested in one issuer that is a national retail chain that is non-investment grade and the Company’s preferred stock investments were invested in one issuer that is a financial services firm that is non-investment grade.

During the three months ended March 31, 2015, there were no realized losses from the sale of available-for-sale securities, proceeds from the sale of available-for-sale securities were $128.3 million and proceeds from the maturity of available-for-sale securities were $125.0 million. During the three months ended March 31, 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 $2.6 million and proceeds from the maturity of U.S. Treasury securities were $25.0 million.

At March 31, 2015 and December 31, 2014, there were no unrealized losses related to commercial paper, U.S. Treasury securities or preferred stock investments. As of March 31, 2015, corporate debt securities that have been in a continuous unrealized loss position for more than twelve months had a fair value of $49.1 million and had $0.4 million of unrealized losses. As of March 31, 2015, corporate debt securities that have been in a continuous unrealized loss position for less than twelve months had a fair value of $52.1 million and had $0.4 million of unrealized losses.

As of December 31, 2014, corporate debt securities that have been in a continuous unrealized loss position for more than twelve months had a fair value of $14.3 million and had $0.2 million of unrealized losses. As of December 31, 2014, corporate debt securities that have been in a continuous unrealized loss position for less than twelve months had a fair value of $85.8 million and had $1.3 million of unrealized losses.

The Company evaluates investments classified as available-for-sale with unrealized losses to determine if they are other-than-temporary impaired. This evaluation is based on various factors, including the financial condition, business prospects, industry and creditworthiness of the issuer, severity and length of time the securities were in a loss position, the Company’s ability and intent to hold investments until unrealized losses are recovered or until maturity and amount of the unrealized loss. If a decline in fair value is considered other-than-temporary, the decline is then bifurcated into its credit and non-credit related components. The amount of the credit-related component is recognized in earnings, and the amount of the non-credit related component is recognized in other comprehensive loss, unless the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security prior to its anticipated recovery.

During the third quarter of 2014, the Company determined that unrealized losses related to its corporate debt securities were other-than-temporary and the Company recorded $1.3 million related to credit-related losses. The credit-losses were measured as the difference between the present value of the expected cash flows of the corporate debt securities discounted using the effective interest rate at the date of purchase and the amortized cost of the corporate debt securities. The non-credit component was recorded in Accumulated other comprehensive loss as of March 31, 2015 and December 31, 2014.

The net carrying value and estimated fair value of investments classified as available-for-sale at March 31, 2015, 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	$	508,217	$	508,283
Due after one year through five years	101,973		101,193
	610,190		609,476
Preferred stock	23,694		24,258
	$	633,884	$	633,734