| Investments |
Investments
The amortized cost, gross unrealized gains and losses and fair value of the investment portfolio as of December 31, 2015 and 2014 are shown below: | | | | | | | | | | | | | | | | | | December 31, 2015 | (In thousands) | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses (1) | | Fair Value | U.S. Treasury securities and obligations of U.S. government corporations and agencies | | $ | 160,393 |
| | $ | 2,133 |
| | $ | (1,942 | ) | | $ | 160,584 |
| Obligations of U.S. states and political subdivisions | | 1,766,407 |
| | 33,410 |
| | (7,290 | ) | | 1,792,527 |
| Corporate debt securities | | 2,046,697 |
| | 2,836 |
| | (44,770 | ) | | 2,004,763 |
| Asset-backed securities | | 116,764 |
| | 56 |
| | (203 | ) | | 116,617 |
| Residential mortgage-backed securities | | 265,879 |
| | 161 |
| | (8,392 | ) | | 257,648 |
| Commercial mortgage-backed securities | | 237,304 |
| | 162 |
| | (3,975 | ) | | 233,491 |
| Collateralized loan obligations | | 61,345 |
| | 3 |
| | (1,148 | ) | | 60,200 |
| Debt securities issued by foreign sovereign governments | | 29,359 |
| | 2,474 |
| | (102 | ) | | 31,731 |
| Total debt securities | | 4,684,148 |
| | 41,235 |
| | (67,822 | ) | | 4,657,561 |
| Equity securities | | 5,625 |
| | 38 |
| | (18 | ) | | 5,645 |
| Total investment portfolio | | $ | 4,689,773 |
| | $ | 41,273 |
| | $ | (67,840 | ) | | $ | 4,663,206 |
|
| | | | | | | | | | | | | | | | | | December 31, 2014 | | | | | | | | | (In thousands) | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses (1) | | Fair Value | U.S. Treasury securities and obligations of U.S. government corporations and agencies | | $ | 349,153 |
| | $ | 2,752 |
| | $ | (5,130 | ) | | $ | 346,775 |
| Obligations of U.S. states and political subdivisions | | 844,942 |
| | 12,961 |
| | (2,761 | ) | | 855,142 |
| Corporate debt securities | | 2,418,991 |
| | 16,325 |
| | (10,035 | ) | | 2,425,281 |
| Asset-backed securities | | 286,260 |
| | 535 |
| | (140 | ) | | 286,655 |
| Residential mortgage-backed securities | | 329,983 |
| | 254 |
| | (9,000 | ) | | 321,237 |
| Commercial mortgage-backed securities | | 276,215 |
| | 1,221 |
| | (2,158 | ) | | 275,278 |
| Collateralized loan obligations | | 61,340 |
| | — |
| | (1,264 | ) | | 60,076 |
| Debt securities issued by foreign sovereign governments | | 35,630 |
| | 3,540 |
| | — |
| | 39,170 |
| Total debt securities | | 4,602,514 |
| | 37,588 |
| | (30,488 | ) | | 4,609,614 |
| Equity securities | | 3,003 |
| | 61 |
| | (9 | ) | | 3,055 |
| Total investment portfolio | | $ | 4,605,517 |
| | $ | 37,649 |
| | $ | (30,497 | ) | | $ | 4,612,669 |
|
| | (1) | There were no other-than-temporary impairment losses recorded in other comprehensive income (loss) as of December 31, 2015 and 2014. |
Our foreign investments primarily consist of the investment portfolio supporting our Australian domiciled subsidiary. The portfolio is comprised of Australian government and semi government securities, representing 87% of the market value of our foreign investments with the remaining 7% invested in corporate securities and 6% in cash equivalents. Eighty-nine percent of the Australian portfolio is rated AAA, by one or more of Moody’s, Standard & Poor’s and Fitch Ratings, and the remaining 11% is rated AA. As of December 31, 2015, the investment portfolio fair value in our Australian operations was approximately $34 million.
The amortized cost and fair values of debt securities as of December 31, 2015, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most asset-backed and mortgage-backed securities and collateralized loan obligations provide for periodic payments throughout their lives, they are listed below in separate categories. | | | | | | | | | | December 31, 2015 | | | | | (In thousands) | | Amortized Cost | | Fair Value | Due in one year or less | | $ | 280,697 |
| | $ | 281,063 |
| Due after one year through five years | | 1,450,854 |
| | 1,450,315 |
| Due after five years through ten years | | 1,207,011 |
| | 1,176,468 |
| Due after ten years | | 1,064,294 |
| | 1,081,759 |
| | | 4,002,856 |
| | 3,989,605 |
| | | | | | Asset-backed securities | | 116,764 |
| | 116,617 |
| Residential mortgage-backed securities | | 265,879 |
| | 257,648 |
| Commercial mortgage-backed securities | | 237,304 |
| | 233,491 |
| Collateralized loan obligations | | 61,345 |
| | 60,200 |
| Total as of December 31, 2015 | | $ | 4,684,148 |
| | $ | 4,657,561 |
|
At December 31, 2015 and 2014, the investment portfolio had gross unrealized losses of $67.8 million and $30.5 million, respectively. For those securities in an unrealized loss position, the length of time the securities were in such a position, as measured by their month-end fair values, is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2015 | | Less Than 12 Months | | 12 Months or Greater | | Total | (In thousands) | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | U.S. Treasury securities and obligations of U.S. government corporations and agencies | | $ | 60,548 |
| | $ | (1,467 | ) | | $ | 1,923 |
| | $ | (475 | ) | | $ | 62,471 |
| | $ | (1,942 | ) | Obligations of U.S. states and political subdivisions | | 417,615 |
| | (6,404 | ) | | 37,014 |
| | (886 | ) | | 454,629 |
| | (7,290 | ) | Corporate debt securities | | 1,470,628 |
| | (38,519 | ) | | 114,982 |
| | (6,251 | ) | | 1,585,610 |
| | (44,770 | ) | Asset-backed securities | | 86,604 |
| | (173 | ) | | 5,546 |
| | (30 | ) | | 92,150 |
| | (203 | ) | Residential mortgage-backed securities | | 35,064 |
| | (312 | ) | | 209,882 |
| | (8,080 | ) | | 244,946 |
| | (8,392 | ) | Commercial mortgage-backed securities | | 134,488 |
| | (2,361 | ) | | 69,927 |
| | (1,614 | ) | | 204,415 |
| | (3,975 | ) | Collateralized loan obligations | | — |
| | — |
| | 51,750 |
| | (1,148 | ) | | 51,750 |
| | (1,148 | ) | Debt securities issued by foreign sovereign governments | | 4,463 |
| | (102 | ) | | — |
| | — |
| | 4,463 |
| | (102 | ) | Equity securities | | 355 |
| | (8 | ) | | 171 |
| | (10 | ) | | 526 |
| | (18 | ) | Total investment portfolio | | $ | 2,209,765 |
| | $ | (49,346 | ) | | $ | 491,195 |
| | $ | (18,494 | ) | | $ | 2,700,960 |
| | $ | (67,840 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2014 | | Less Than 12 Months | | 12 Months or Greater | | Total | (In thousands) | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | U.S. Treasury securities and obligations of U.S. government corporations and agencies | | $ | 58,166 |
| | $ | (138 | ) | | $ | 232,351 |
| | $ | (4,992 | ) | | $ | 290,517 |
| | $ | (5,130 | ) | Obligations of U.S. states and political subdivisions | | 166,408 |
| | (1,066 | ) | | 114,465 |
| | (1,695 | ) | | 280,873 |
| | (2,761 | ) | Corporate debt securities | | 816,555 |
| | (5,259 | ) | | 243,208 |
| | (4,776 | ) | | 1,059,763 |
| | (10,035 | ) | Asset-backed securities | | 54,491 |
| | (80 | ) | | 11,895 |
| | (60 | ) | | 66,386 |
| | (140 | ) | Residential mortgage-backed securities | | 24,168 |
| | (34 | ) | | 263,002 |
| | (8,966 | ) | | 287,170 |
| | (9,000 | ) | Commercial mortgage-backed securities | | 89,301 |
| | (810 | ) | | 110,652 |
| | (1,348 | ) | | 199,953 |
| | (2,158 | ) | Collateralized loan obligations | | — |
| | — |
| | 60,076 |
| | (1,264 | ) | | 60,076 |
| | (1,264 | ) | Debt securities issued by foreign sovereign governments | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Equity securities | | 167 |
| | (1 | ) | | 235 |
| | (8 | ) | | 402 |
| | (9 | ) | Total investment portfolio | | $ | 1,209,256 |
| | $ | (7,388 | ) | | $ | 1,035,884 |
| | $ | (23,109 | ) | | $ | 2,245,140 |
| | $ | (30,497 | ) |
The unrealized losses in all categories of our investments as of December 31, 2015 were primarily caused by the difference in interest rates at December 31, 2015 compared to interest rates at the time of purchase. There were 303 and 423 securities in an unrealized loss position as of December 31, 2015 and 2014, respectively. As of December 31, 2015, the fair value as a percent of amortized cost of the securities in an unrealized loss position was 98% and approximately 15% of the securities in an unrealized loss position were backed by the U.S. Government.
There were no other-than-temporary impairment (“OTTI”) losses in earnings during 2015. We recognized OTTI losses of $0.1 million and $0.3 million during 2014 and 2013, respectively.
For the years ended December 31, 2015, 2014, and 2013, there were no credit losses recognized in earnings for which a portion of an OTTI loss was recognized in accumulated other comprehensive loss.
The source of net investment income is as follows: | | | | | | | | | | | | | | (In thousands) | | 2015 | | 2014 | | 2013 | Fixed maturities | | $ | 105,882 |
| | $ | 89,437 |
| | $ | 82,168 |
| Equity securities | | 208 |
| | 227 |
| | 229 |
| Cash equivalents | | 191 |
| | 179 |
| | 353 |
| Other | | 455 |
| | 711 |
| | 675 |
| Investment income | | 106,736 |
| | 90,554 |
| | 83,425 |
| Investment expenses | | (2,995 | ) | | (2,907 | ) | | (2,686 | ) | Net investment income | | $ | 103,741 |
| | $ | 87,647 |
| | $ | 80,739 |
|
The net realized investment gains, including impairment losses, and change in net unrealized gains (losses) of investments are as follows: | | | | | | | | | | | | | | (In thousands) | | 2015 | | 2014 | | 2013 | Net realized investment gains on investments: | | | | | | | Fixed maturities | | $ | 28,335 |
| | $ | 1,000 |
| | $ | 3,274 |
| Equity securities | | 26 |
| | 356 |
| | 1,068 |
| Other | | — |
| | 1 |
| | 1,389 |
| Total net realized investment gains | | $ | 28,361 |
| | $ | 1,357 |
| | $ | 5,731 |
| | | | | | | | Change in net unrealized gains (losses): | | | | | | | Fixed maturities | | $ | (33,687 | ) | | $ | 91,718 |
| | $ | (126,020 | ) | Equity securities | | (32 | ) | | 66 |
| | (153 | ) | Other | | — |
| | — |
| | — |
| Total (decrease) increase in net unrealized gains/losses | | $ | (33,719 | ) | | $ | 91,784 |
| | $ | (126,173 | ) |
The gross realized gains, gross realized losses and impairment losses are as follows: | | | | | | | | | | | | | | (In thousands) | | 2015 | | 2014 | | 2013 | Gross realized gains | | $ | 30,039 |
| | $ | 4,966 |
| | $ | 11,043 |
| Gross realized losses | | (1,678 | ) | | (3,465 | ) | | (4,984 | ) | Other-than-temporary-impairment losses | | — |
| | (144 | ) | | (328 | ) | Net realized gains on securities | | $ | 28,361 |
| | $ | 1,357 |
| | $ | 5,731 |
|
We had $18.9 million and $20.2 million of investments at fair value on deposit with various states as of December 31, 2015 and 2014, respectively, due to regulatory requirements of those state insurance departments. |