Investments

Investments and restricted 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 (loss) income. 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 December 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 December 31, 2015 investments and restricted 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	$	184,819	$	—	$	79	$	184,740
Corporate debt securities	7,273		—		981		6,292
Preferred stock	265		—		57		208
	192,357		—		1,117		191,240
Restricted investments:
Guaranteed income fund	7,072		—		—		7,072
	$	199,429	$	—	$	1,117	$	198,312

At December 31, 2014 investments and restricted 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
Restricted investments:
Guaranteed income fund	7,940		—		—		7,940
	$	646,273	$	32	$	1,487	$	644,818

Fairholme Capital has served as an investment advisor to the Company since April 2013. As of December 31, 2015, funds managed by Fairholme Capital beneficially owned approximately 32.5% 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 their 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 investment accounts 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.

During 2015, realized gains from the sale of available-for-sale securities were $5.3 million and proceeds from the sale of available-for-sale securities were $385.7 million and proceeds from the maturity of available-for-sale securities were $410.0 million. During 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 $83.2 million and proceeds from the maturity of available-for-sale securities were $150.0 million.

As of December 31, 2015, certain of the Company’s U.S. Treasuries, corporate debt securities and preferred stock had unrealized losses. As of December 31, 2014, certain of the Company’s corporate debt securities and preferred stock had unrealized losses. As of December 31, 2015, corporate debt securities that had been in a continuous unrealized loss position for less than twelve months, had a fair value of $6.3 million and had $1.0 million of unrealized losses. As of December 31, 2014, corporate debt securities that have been in an unrealized loss position for less than twelve months, had a fair value of $85.8 million and had $1.3 million of unrealized losses. Corporate debt securities that had been in an unrealized loss position for twelve months or greater had a fair value of $14.3 million and had $0.2 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.

At December 31, 2015, the unrealized losses related to the U.S. Treasury securities, corporate debt securities and preferred stock of $1.1 million were deemed temporary and included in Accumulated other comprehensive loss as of December 31, 2015. As of December 31, 2015, corporate debt securities had unrealized losses of $1.0 million, U.S. Treasury securities had unrealized losses of less than $0.1 million and preferred stock investments had unrealized losses of less than $0.1 million. As of December 31, 2014, certain of the Company’s U.S. Treasuries and preferred stock had immaterial unrealized losses. The Company previously reported in its Annual Report on Form 10-K that it had no continuous unrealized losses greater than twelve months as a result of recognizing a portion of the unrealized loss in earnings as of December 31, 2014. The Company has revised this disclosure in the following table that provides the corporate debt securities in continuous unrealized loss position and their related fair values:



	As of December 31, 2015								As of December 31, 2014
	Less Than 12 Months				12 Months or Greater				Less Than 12 Months				12 Months or Greater
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Debt securities:
U.S. Treasury securities	$	184,740	$	79	$	—	$	—	$	109,984	$	6	$	—	$	—
Corporate debt securities	6,292		981		—		—		85,845		1,294		14,260		188
Preferred stock	208		57		—		—		23,683		10		—		—
	$	191,240	$	1,117	$	—	$	—	$	219,512	$	1,310	$	14,260	$	188

The Company had unrealized losses of $1.1 million as of December 31, 2015 related to U.S. Treasury Securities, corporate debt securities and preferred stock. The Company’s unrealized losses as of December 31, 2014 relate primarily to investments in senior secured debt securities in one issuer that is a national retail chain that is non-investment grade. The Company purchased these investments between the second quarter of 2013 through the second quarter of 2014. During the third quarter of 2014, the Company determined that these investments were other-than-temporarily impaired and recorded $1.3 million related to credit-related losses in Investment income, net on the Company's Consolidated Statements of Operations. 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 of was recorded in Accumulated other comprehensive loss as of December 31, 2014. The Company sold these investments during 2015 and recorded a realized gain of $5.3 million.

As of December 31, 2015 and 2014, the Company did not intend to sell the investments with unrealized losses and it was not likely that the Company would have been required to sell the security prior to its anticipated recovery, which could have been maturity; therefore, the Company does not believe that its investment in the corporate debt securities was other-than-temporarily impaired at December 31, 2015 and 2014.

The net carrying value and estimated fair value of investments and restricted investments classified as available-for-sale at December 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.



	Cost		Fair Value
Due in one year or less	$	184,819	$	184,740
Due after one year through five years	7,175		6,205
Due after ten through fifteen years	98		87
	192,092		191,032
Preferred stock	265		208
Restricted investments	7,072		7,072
	$	199,429	$	198,312