
(4)	Investments


(a)	Debt Securities

Debt securities are classified as available-for-sale and carried at fair value. The Company evaluates whether debt securities are other-than-temporarily impaired (OTTI) based on criteria that include the extent to which the cost (cost of the debt security adjusted for amortization of premium or accretion of discount) exceeds market value, the duration of the market value decline, the credit rating of the issuer or security, the failure of the issuer to make scheduled principal or interest payments and the financial health and prospects of the issuer or security.

Declines in the fair value of debt securities determined to be OTTI are recognized in earnings and reported as OTTI losses. Debt securities with unrealized losses are considered OTTI if the Company intends to sell the debt security or if the Company will be required to sell the debt security prior to any anticipated recovery. If the Company determines that a debt security is OTTI under these circumstances, the impairment recognized in earnings is measured as the difference between the cost and the fair value. A debt security is also determined to be OTTI if the Company does not expect to recover the cost of the debt security. However, in this circumstance, if the Company does not intend to sell the debt security and will not be required to sell the debt security, the impairment recognized in earnings equals the estimated credit loss as measured by the difference between the present value of expected cash flows and the cost of the debt security. Expected cash flows are discounted using the debt security’s effective interest rate. Changes in the fair value of debt securities determined to be temporary are reported in other comprehensive earnings net of income taxes and included as a component of stockholders’ equity.

Following is a summary of debt securities as of March 31, 2018 and December 30, 2017:



	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Amounts are in thousands)
March 31, 2018
Tax exempt bonds	$	1,677,884		187		20,095	1,657,976
Taxable bonds	2,022,754			238		53,022	1,969,970
	$	3,700,638		425		73,117	3,627,946
December 30, 2017
Tax exempt bonds	$	1,811,523		602		16,420	1,795,705
Taxable bonds	2,115,174			695		25,443	2,090,426
	$	3,926,697		1,297		41,863	3,886,131

The cost and fair value of debt securities by expected maturity as of March 31, 2018 and December 30, 2017 are as follows:



	March 31, 2018			December 30, 2017
	Cost		Fair Value	Cost	Fair Value
	(Amounts are in thousands)
Due in one year or less	$	755,101	753,054	917,576	915,579
Due after one year through five years	2,712,787		2,646,338	2,794,099	2,757,504
Due after five years through ten years	195,028		190,699	205,792	203,533
Due after ten years	37,722		37,855	9,230	9,515
	$	3,700,638	3,627,946	3,926,697	3,886,131

Following is a summary of temporarily impaired debt securities by the time period impaired as of March 31, 2018 and December 30, 2017:



	Less Than 12 Months				12 Months or Longer			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(Amounts are in thousands)
March 31, 2018
Tax exempt bonds	$	1,506,384		17,243	131,685		2,852	1,638,069		20,095
Taxable bonds	884,032			17,522	1,046,755		35,500	1,930,787		53,022
	$	2,390,416		34,765	1,178,440		38,352	3,568,856		73,117
December 30, 2017
Tax exempt bonds	$	1,543,151		13,827	136,217		2,593	1,679,368		16,420
Taxable bonds	811,886			4,908	1,153,645		20,535	1,965,531		25,443
	$	2,355,037		18,735	1,289,862		23,128	3,644,899		41,863

There are 474 debt securities contributing to the total unrealized loss of $73,117,000 as of March 31, 2018. Unrealized losses related to debt securities are primarily due to increases in interest rates impacting the market value of certain bonds. The Company continues to receive scheduled principal and interest payments on these debt securities.


(b)	Equity Securities

In 2018, the Company adopted the ASU requiring equity securities be measured at fair value with net unrealized gains and losses from changes in the fair value recognized in earnings (fair value adjustment). The fair value adjustment also includes the cumulative effect of the ASU as of December 31, 2017 reclassified from accumulated other comprehensive earnings to retained earnings.

Prior to adoption of the ASU, changes in the fair value of equity securities were accounted for similar to changes in the fair value of debt securities. Equity securities were classified as available-for-sale and carried at fair value. Declines in the fair value of equity securities determined to be OTTI were recognized in earnings and reported as OTTI losses. An equity security was determined to be OTTI if the Company did not expect to recover the cost of the equity security. Changes in the fair value of equity securities determined to be temporary were reported in other comprehensive earnings net of income taxes and included as a component of stockholders’ equity.

Following is a summary of the fair value of equity securities as of March 31, 2018 and December 30, 2017:



	March 31, 2018			December 30, 2017
	(Amounts are in thousands)
Equity securities		$	2,725,368		2,383,095
Equity security - restricted		162,233			164,085
		$	2,887,601		2,547,180


(c)	Investment Income

Interest and dividend income, amortization of premiums, accretion of discounts and realized gains and losses from the sale of debt and equity securities are included in investment income. Interest income is accrued as earned. Dividend income is recognized as income on the ex-dividend date. The cost of debt and equity securities sold is based on the first-in, first-out method. With the adoption of the ASU, the fair value adjustment of equity securities held as of March 31, 2018 is also included in investment income.

In the following table, net realized gain on sale of investments represents the difference between the cost and the proceeds from the sale of debt and equity securities. For the three months ended March 31, 2018, the net realized gain on sale of investments excludes the net gain on sale of equity securities previously recognized through the fair value adjustment, which is presented separately.

Following is a summary of investment income for the three months ended March 31, 2018 and April 1, 2017:



		Three Months Ended
	March 31, 2018				April 1, 2017
		(Amounts are in thousands)
Interest income		$	18,494			21,139
Dividend income		10,599				8,342
Net realized gain on sale of investments		7,024				31,269
		36,117				60,750
Fair value adjustment (net unrealized loss) of equity securities held at end of period		(25,782		)		—
Net gain on sale of equity securities previously recognized through fair value adjustment		(6,197		)		—
		$	4,138			60,750