NOTE 3 – INVESTMENTS

Securities Available for Sale

The following table provides the cost or amortized cost and fair value of securities available for sale as of the dates presented (in thousands):

	December 31, 2014
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Fixed Maturities:
U.S. government obligations and agencies	$	120,627	$	38	$	(627	)	$	120,038
Corporate bonds		120,025		171		(364	)		119,832
Mortgage-backed and asset-backed securities		107,589		136		(502	)		107,223
Redeemable preferred stock		6,700		165		(9	)		6,856
Equity Securities:
Common stock		331		4		(65	)		270
Mutual funds		21,296		—		(1,924	)		19,372
Short-term investments		50,000		—		(10	)		49,990
Total	$	426,568	$	514	$	(3,501	)	$	423,581

	December 31, 2013
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Fixed Maturities:
U.S. government obligations and agencies	$	105,229	$	19	$	(1,033	)	$	104,215
Corporate bonds		94,708		265		(770	)		94,203
Mortgage-backed and asset-backed securities		91,502		75		(577	)		91,000
Equity Securities:
Common stock		8,500		916		(121	)		9,295
Mutual funds		55,113		2,266		(1,652	)		55,727
Total	$	355,052	$	3,541	$	(4,153	)	$	354,440

The Company has made an assessment of its invested assets for fair value measurement as further described in “NOTE 16 – Fair Value Measurements.”

The following table provides the credit quality of investments with contractual maturities as of the dates presented (in thousands):

December 31, 2014
Standard and Poor's			% of Total
Rating Services	Fair Value		Fair Value
AAA	$	31,783		7.9	%
AA		207,953		51.5	%
A		79,675		19.7	%
BBB		45,781		11.3	%
BB and Below (1)		2,677		0.7	%
No Rating Available (2)		36,070		8.9	%
Total	$	403,939		100.0	%

December 31, 2013
Standard and Poor's			% of Total
Rating Services	Fair Value		Fair Value
AAA	$	82,889		28.6	%
AA		120,976		41.8	%
A		46,689		16.1	%
BBB		38,114		13.2	%
No Rating Available		750		0.3	%
Total	$	289,418		100.0	%

(1)	As of December 31, 2014, $268 thousand of these investments were rated “Baa3” by Moody’s Investors Service, Inc.

(2)	As of December 31, 2014, $7.9 million of these investments were rated “Aaa” by Moody’s Investors Service, Inc.

The following table summarizes the cost or amortized cost and fair value of mortgage-backed and asset-backed securities as of the dates presented (in thousands):

	December 31, 2014				December 31, 2013
	Cost or				Cost or
	Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value
Mortgage-backed securities:
Agency	$	64,905	$	64,619	$	64,028	$	63,547
Non-agency		8,053		7,987		—		—
Asset-backed securities:
Auto loan receivables		16,551		16,556		14,816		14,841
Credit card receivables		13,481		13,457		11,478		11,425
Other receivables		4,599		4,604		1,180		1,187
Total	$	107,589	$	107,223	$	91,502	$	91,000

The following table summarizes the fair value and gross unrealized losses on securities available for sale, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position as of the dates presented (in thousands):

	December 31, 2014
	Less Than 12 Months							12 Months or Longer
	Number of				Unrealized			Number of				Unrealized
	Issues		Fair Value		Losses			Issues		Fair Value		Losses
Fixed maturities:
U.S. government obligations and agencies		3	$	27,341	$	(55	)		4	$	34,050	$	(572	)
Corporate bonds		67		58,271		(238	)		12		15,105		(126	)
Mortgage-backed and asset-backed securities		20		48,335		(273	)		5		16,842		(229	)
Redeemable preferred stock		12		1,153		(9	)		—		—		—
Equity securities:
Common stock		2		87		(20	)		2		117		(45	)
Mutual funds		2		10,514		(97	)		1		8,859		(1,827	)
Short-term investments		2		37,490		(10	)		—		—		—
Total		108	$	183,191	$	(702	)		24	$	74,973	$	(2,799	)

	December 31, 2013
	Less Than 12 Months							12 Months or Longer
	Number of				Unrealized			Number of				Unrealized
	Issues		Fair Value		Losses			Issues		Fair Value		Losses
Fixed maturities:
U.S. government obligations and agencies		6	$	71,042	$	(1,033	)		—	$	—	$	—
Corporate bonds		55		65,926		(770	)		—		—		—
Mortgage-backed and asset-backed securities		16		67,110		(577	)		—		—		—
Equity securities:
Common stock		13		3,517		(121	)		—		—		—
Mutual funds		5		19,646		(1,652	)		—		—		—
Total		95	$	227,241	$	(4,153	)		—	$	—	$	—

At December 31, 2014, we held fixed maturity and equity securities that were in an unrealized loss position as presented in the table above. For fixed maturity securities with significant declines in value, we perform quarterly fundamental credit analysis on a security-by-security basis, which includes consideration of credit quality and credit ratings, review of relevant industry analyst reports and other available market data. For fixed maturity and equity securities, the Company considers whether it has the intent and ability to hold the securities for a period of time sufficient to recover its cost basis. Where the Company lacks the intent and ability to hold to recovery, or believes the recovery period is extended, the security’s decline in fair value is considered other than temporary and is recorded in earnings. Based upon management’s intent and ability to hold the securities until recovery and its credit analysis of the individual issuers of the securities, management has no reason to believe the unrealized losses for securities available for sale at December 31, 2014 are other than temporary.

The following table presents the amortized cost and fair value of investments with contractual maturities as of the date presented (in thousands):

	December 31, 2014
	Cost or
	Amortized Cost		Fair Value
Due in one year or less	$	101,406	$	101,368
Due after one year through five years		185,184		184,457
Due after five years through ten years		3,067		3,057
Due after ten years		3,593		3,673
Mortgage-backed and asset-backed securities		107,589		107,223
Perpetual maturity securities		4,102		4,161
Total	$	404,941	$	403,939

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay with or without penalty.

The following table provides certain information related to securities available for sale during the periods presented (in thousands):

	Year Ended
	December 31,
	2014			2013
Sales proceeds (fair value)	$	181,134		$	15,542
Gross realized gains	$	6,205		$	1,301
Gross realized losses	$	(578	)	$	(4	)
Other than temporary impairment	$	—		$	—

The following table presents the components of net investment income, comprised primarily of interest and dividends, for the periods presented (in thousands):

	Year Ended December 31,
	2014			2013			2012
Cash and cash equivalents (1)	$	83		$	148		$	705
Fixed maturities		3,329			1,420			66
Equity securities		988			1,982			566
Short-term investments		46			—			—
Total investment income		4,446			3,550			1,337
Less: Investment expenses (2)		(2,071	)		(1,622	)		(896	)
Net investment (expense) income	$	2,375		$	1,928		$	441

(1)Includes interest earned on cash and cash equivalents and restricted cash and cash equivalents.

(2)Includes investment expenses related to cash and cash equivalents and restricted cash and cash equivalents.

Trading Portfolio

The Company liquidated its trading portfolio of equity securities and transferred the fixed maturities that were outstanding at December 31, 2012 into its portfolio of securities available for sale effective March 1, 2013. The unrealized gain (loss) associated with the fixed maturities trading portfolio was recognized in earnings up to the date of transfer.

The following table provides the effect of trading activities on the Company’s results of operations for the periods presented by type of instrument and by line item in the Consolidated Statements of Income (in thousands):

	Year Ended December 31,
	2013			2012
Realized gains (losses) on investments:
Equity securities	$	(15,969	)	$	(12,286	)
Derivatives (non-hedging instruments) (1)		(68	)		343
Total realized gains (losses) on trading portfolio		(16,037	)		(11,943	)
Change in unrealized gains (losses) on investments:
Fixed maturities		13			195
Equity securities		7,758			9,158
Derivatives (non-hedging instruments) (1)		89			145
Other		14			(55	)
Total change in unrealized gains (losses) on trading portfolio		7,874			9,443
Net gains (losses) recognized on trading portfolio	$	(8,163	)	$	(2,500	)

(1)	This table provides the alternative quantitative disclosures permitted for derivatives that are not used as hedging instruments and are included in the trading portfolio.

The Company liquidated its trading portfolio in March 2013; therefore, for periods subsequent to March 31, 2013 there was no effect of trading activities on the Company’s results of operations.