3. INVESTMENTS

The amortized cost, market value and gross unrealized appreciation and depreciation of available for sale, fixed maturity, equity security investments, carried at market value and other-than-temporary impairments ("OTTI") in accumulated other comprehensive income ("AOCI") are as follows for the periods indicated:


	At March 31, 2015
	Amortized		Unrealized		Unrealized			Market		OTTI in AOCI
(Dollars in thousands)	Cost		Appreciation		Depreciation			Value		(a)
Fixed maturity securities
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	174,065	$	3,541	$	(83	)	$	177,523	$	-
Obligations of U.S. states and political subdivisions		750,672		39,084		(914	)		788,842		-
Corporate securities		1,941,982		53,670		(24,416	)		1,971,236		-
Asset-backed securities		115,357		826		(96	)		116,087		-
Mortgage-backed securities
Commercial		55,527		2,752		-			58,279		-
Agency residential		568,152		8,658		(1,449	)		575,361		-
Non-agency residential		240		37		-			277		-
Foreign government securities		459,079		30,882		(7,684	)		482,277		-
Foreign corporate securities		1,043,011		41,601		(27,575	)		1,057,037		-
Total fixed maturity securities	$	5,108,085	$	181,051	$	(62,217	)	$	5,226,919	$	-
Equity securities	$	15	$	1	$	-		$	16	$	-


	At December 31, 2014
	Amortized		Unrealized		Unrealized			Market		OTTI in AOCI
(Dollars in thousands)	Cost		Appreciation		Depreciation			Value		(a)
Fixed maturity securities
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	135,724	$	1,416	$	(304	)	$	136,836	$	-
Obligations of U.S. states and political subdivisions		783,129		41,969		(626	)		824,472		-
Corporate securities		1,992,200		39,954		(53,219	)		1,978,935		(9,735	)
Asset-backed securities		94,470		727		(374	)		94,823		-
Mortgage-backed securities
Commercial		57,027		2,292		(51	)		59,268		-
Agency residential		596,140		6,697		(4,720	)		598,117		-
Non-agency residential		271		44		-			315		-
Foreign government securities		515,016		27,415		(5,344	)		537,087		-
Foreign corporate securities		1,061,546		27,832		(25,820	)		1,063,558		-
Total fixed maturity securities	$	5,235,523	$	148,346	$	(90,458	)	$	5,293,411	$	(9,735	)
Equity securities	$	15	$	1	$	-		$	16	$	-

(a) Represents the amount of OTTI recognized in AOCI. Amount includes unrealized gains and losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

The amortized cost and market value of fixed maturity securities are shown in the following table by contractual maturity. Mortgage-backed securities are generally more likely to be prepaid than other fixed maturity securities. As the stated maturity of such securities may not be indicative of actual maturities, the totals for mortgage-backed and asset-backed securities are shown separately.


	At March 31, 2015				At December 31, 2014
	Amortized		Market		Amortized		Market
(Dollars in thousands)	Cost		Value		Cost		Value
Fixed maturity securities – available for sale
Due in one year or less	$	353,025	$	352,544	$	385,721	$	384,022
Due after one year through five years		2,447,447		2,468,119		2,387,533		2,369,917
Due after five years through ten years		921,195		943,216		1,025,221		1,029,077
Due after ten years		647,142		713,036		689,140		757,872
Asset-backed securities		115,357		116,087		94,470		94,823
Mortgage-backed securities
Commercial		55,527		58,279		57,027		59,268
Agency residential		568,152		575,361		596,140		598,117
Non-agency residential		240		277		271		315
Total fixed maturity securities	$	5,108,085	$	5,226,919	$	5,235,523	$	5,293,411

The changes in net unrealized appreciation (depreciation) for the Company's investments are derived from the following sources for the periods as indicated:


	Three Months Ended
	March 31,
(Dollars in thousands)	2015			2014
Increase (decrease) during the period between the market value and cost
of investments carried at market value, and deferred taxes thereon:
Fixed maturity securities	$	51,211		$	33,993
Fixed maturity securities, other-than-temporary impairment		9,735			-
Change in unrealized appreciation (depreciation), pre-tax		60,946			33,993
Deferred tax benefit (expense)		(17,924	)		(11,898	)
Deferred tax benefit (expense), other-than-temporary impairment		(3,407	)		-
Change in unrealized appreciation (depreciation),
net of deferred taxes, included in stockholder's equity	$	39,615		$	22,095

The Company frequently reviews all of its fixed maturity, available for sale securities for declines in market value and focuses its attention on securities whose fair value has fallen below 80% of their amortized cost at the time of review. The Company then assesses whether the decline in value is temporary or other-than-temporary. In making its assessment, the Company evaluates the current market and interest rate environment as well as specific issuer information. Generally, a change in a security's value caused by a change in the market, interest rate or foreign exchange environment does not constitute an other-than-temporary impairment, but rather a temporary decline in market value. Temporary declines in market value are recorded as unrealized losses in accumulated other comprehensive income (loss). If the Company determines that the decline is other-than-temporary and the Company does not have the intent to sell the security; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, the carrying value of the investment is written down to fair value. The fair value adjustment that is credit or foreign exchange related is recorded in net realized capital gains (losses) in the Company's consolidated statements of operations and comprehensive income (loss). The fair value adjustment that is non-credit related is recorded as a component of other comprehensive income (loss), net of tax, and is included in accumulated other comprehensive income (loss) in the Company's consolidated balance sheets. The Company's assessments are based on the issuers current and expected future financial position, timeliness with respect to interest and/or principal payments, speed of repayments and any applicable credit enhancements or breakeven constant default rates on mortgage-backed and asset-backed securities, as well as relevant information provided by rating agencies, investment advisors and analysts.

The majority of the Company's equity securities available for sale at market value are primarily comprised of mutual fund investments whose underlying securities consist of fixed maturity securities. When a fund's value reflects an unrealized loss, the Company assesses whether the decline in value is temporary or other-than-temporary. In making its assessment, the Company considers the composition of its portfolios and their related markets, reports received from the portfolio managers and discussions with portfolio managers. If the Company determines that the declines are temporary and it has the ability and intent to continue to hold the investments, then the declines are recorded as unrealized losses in accumulated other comprehensive income (loss). If declines are deemed to be other-than-temporary, then the carrying value of the investment is written down to fair value and recorded in net realized capital gains (losses) in the Company's consolidated statements of operations and comprehensive income (loss).

Retrospective adjustments are employed to recalculate the values of asset-backed securities. All of the Company's asset-backed and mortgage-backed securities have a pass-through structure. Each acquisition lot is reviewed to recalculate the effective yield. The recalculated effective yield is used to derive a book value as if the new yield were applied at the time of acquisition. Outstanding principal factors from the time of acquisition to the adjustment date are used to calculate the prepayment history for all applicable securities. Conditional prepayment rates, computed with life to date factor histories and weighted average maturities, are used in the calculation of projected prepayments for pass-through security types.

The tables below display the aggregate market value and gross unrealized depreciation of fixed maturity and equity securities, by security type and contractual maturity, in each case subdivided according to length of time that individual securities had been in a continuous unrealized loss position for the periods indicated:


	Duration of Unrealized Loss at March 31, 2015 By Security Type
	Less than 12 months					Greater than 12 months					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
(Dollars in thousands)	Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	200	$	(1	)	$	2,043	$	(82	)	$	2,243	$	(83	)
Obligations of U.S. states and political subdivisions		26,973		(579	)		18,171		(335	)		45,144		(914	)
Corporate securities		362,527		(22,140	)		153,423		(2,276	)		515,950		(24,416	)
Asset-backed securities		43,245		(96	)		-		-			43,245		(96	)
Mortgage-backed securities
Commercial		-		-			-		-			-		-
Agency residential		10,595		(33	)		192,684		(1,416	)		203,279		(1,449	)
Non-agency residential		-		-			-		-			-		-
Foreign government securities		60,663		(3,273	)		46,741		(4,411	)		107,404		(7,684	)
Foreign corporate securities		133,917		(25,626	)		47,221		(1,949	)		181,138		(27,575	)
Total fixed maturity securities	$	638,120	$	(51,748	)	$	460,283	$	(10,469	)	$	1,098,403	$	(62,217	)
Equity securities		-		-			-		-			-		-
Total	$	638,120	$	(51,748	)	$	460,283	$	(10,469	)	$	1,098,403	$	(62,217	)


	Duration of Unrealized Loss at March 31, 2015 By Maturity
	Less than 12 months					Greater than 12 months					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
(Dollars in thousands)	Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation
Fixed maturity securities
Due in one year or less	$	19,187	$	(1,716	)	$	24,224	$	(2,820	)	$	43,411	$	(4,536	)
Due in one year through five years		307,725		(40,128	)		165,952		(4,376	)		473,677		(44,504	)
Due in five years through ten years		222,882		(9,192	)		56,606		(1,070	)		279,488		(10,262	)
Due after ten years		34,486		(583	)		20,817		(787	)		55,303		(1,370	)
Asset-backed securities		43,245		(96	)		-		-			43,245		(96	)
Mortgage-backed securities		10,595		(33	)		192,684		(1,416	)		203,279		(1,449	)
Total fixed maturity securities	$	638,120	$	(51,748	)	$	460,283	$	(10,469	)	$	1,098,403	$	(62,217	)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at March 31, 2015 were $1,098,403 thousand and $62,217 thousand, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at March 31, 2015, did not exceed 0.5% of the overall market value of the Company's fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $51,748 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were primarily comprised of foreign and domestic corporate securities and foreign government securities. The majority of these unrealized losses are attributable to unrealized losses in the energy sector, $36,644 thousand, as falling oil prices disrupted the market values for this sector, particularly for oil exploration, production and servicing companies and unrealized foreign exchange losses, $13,713 thousand, as the U.S. dollar has strengthened against other currencies. The $10,469 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to foreign government securities, domestic and foreign corporate securities and agency residential mortgage-backed securities. Of these unrealized losses, $9,180 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating organization. The Company did not have any sub-prime or alt-A loans with gross unrealized depreciation at March 31, 2015. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.

The Company, given the size of its investment portfolio and capital position, does not have the intent to sell these securities; and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis. In addition, all securities currently in an unrealized loss position are current with respect to principal and interest payments.


	Duration of Unrealized Loss at December 31, 2014 By Security Type
	Less than 12 months					Greater than 12 months					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
(Dollars in thousands)	Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation
Fixed maturity securities - available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	13,187	$	(20	)	$	26,897	$	(284	)	$	40,084	$	(304	)
Obligations of U.S. states and political subdivisions		20,428		(242	)		18,199		(384	)		38,627		(626	)
Corporate securities		830,928		(48,891	)		171,207		(4,328	)		1,002,135		(53,219	)
Asset-backed securities		62,451		(374	)		-		-			62,451		(374	)
Mortgage-backed securities
Commercial		11,742		(51	)		-		-			11,742		(51	)
Agency residential		24,230		(59	)		267,824		(4,661	)		292,054		(4,720	)
Non-agency residential		-		-			-		-			-		-
Foreign government securities		45,521		(913	)		53,086		(4,431	)		98,607		(5,344	)
Foreign corporate securities		228,733		(21,704	)		117,713		(4,116	)		346,446		(25,820	)
Total fixed maturity securities	$	1,237,220	$	(72,254	)	$	654,926	$	(18,204	)	$	1,892,146	$	(90,458	)
Equity securities		-		-			-		-			-		-
Total	$	1,237,220	$	(72,254	)	$	654,926	$	(18,204	)	$	1,892,146	$	(90,458	)


	Duration of Unrealized Loss at December 31, 2014 By Maturity
	Less than 12 months					Greater than 12 months					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
(Dollars in thousands)	Market Value		Depreciation			Market Value		Depreciation			Market Value		Depreciation
Fixed maturity securities
Due in one year or less	$	12,858	$	(550	)	$	53,528	$	(4,224	)	$	66,386	$	(4,774	)
Due in one year through five years		622,137		(51,262	)		243,192		(6,306	)		865,329		(57,568	)
Due in five years through ten years		467,187		(18,958	)		66,630		(2,018	)		533,817		(20,976	)
Due after ten years		36,615		(1,000	)		23,752		(995	)		60,367		(1,995	)
Asset-backed securities		62,451		(374	)		-		-			62,451		(374	)
Mortgage-backed securities		35,972		(110	)		267,824		(4,661	)		303,796		(4,771	)
Total fixed maturity securities	$	1,237,220	$	(72,254	)	$	654,926	$	(18,204	)	$	1,892,146	$	(90,458	)

The aggregate market value and gross unrealized losses related to investments in an unrealized loss position at December 31, 2014 were $1,892,146 thousand and $90,458 thousand, respectively. The market value of securities for the single issuer whose securities comprised the largest unrealized loss position at December 31, 2014, did not exceed 0.3% of the overall market value of the Company's fixed maturity securities. In addition, as indicated on the above table, there was no significant concentration of unrealized losses in any one market sector. The $72,254 thousand of unrealized losses related to fixed maturity securities that have been in an unrealized loss position for less than one year were primarily comprised of domestic and foreign corporate securities. The majority of these unrealized losses are attributable to unrealized losses in the energy sector, $53,772 thousand, as falling oil prices disrupted the market values for this sector, particularly for oil exploration, production and servicing companies during the fourth quarter of 2014 and unrealized foreign exchange losses, $7,298 thousand, as the U.S. dollar has strengthened against other currencies. The $18,204 thousand of unrealized losses related to fixed maturity securities in an unrealized loss position for more than one year related primarily to agency residential mortgage-backed securities, foreign and domestic corporate securities and foreign government securities. Of these unrealized losses, $16,680 thousand were related to securities that were rated investment grade by at least one nationally recognized statistical rating organization. The Company did not have any sub-prime or alt-A loans with gross unrealized depreciation at December 31, 2014. In all instances, there were no projected cash flow shortfalls to recover the full book value of the investments and the related interest obligations. The mortgage-backed securities still have excess credit coverage and are current on interest and principal payments.

Other invested assets, at fair value, are comprised of common shares of the Company's ultimate parent, Group. At March 31, 2015, the Company held 9,719,971 shares of Group representing 18.0% of the total outstanding shares.

The components of net investment income are presented in the table below for the periods indicated:


	Three Months Ended
	March 31,
(Dollars in thousands)	2015			2014
Fixed maturities	$	47,972		$	51,079
Equity securities		8,742			8,937
Short-term investments and cash		164			186
Other invested assets
Limited partnerships		7,379			(3,087	)
Dividends from Parent's shares		9,234			7,290
Other		625			2,021
Gross investment income before adjustments		74,116			66,426
Funds held interest income (expense)		2,521			2,109
Interest income from Parent		1,075			-
Gross investment income		77,712			68,535
Investment expenses		(5,131	)		(4,748	)
Net investment income	$	72,581		$	63,787

The Company records results from limited partnership investments on the equity method of accounting with changes in value reported through net investment income. Due to the timing of receiving financial information from these partnerships, the results are generally reported on a one month or quarter lag. If the Company determines there has been a significant decline in value of a limited partnership during this lag period, a loss will be recorded in the period in which the Company identifies the decline.

The Company had contractual commitments to invest up to an additional $237,637 thousand in limited partnerships at March 31, 2015. These commitments will be funded when called in accordance with the partnership agreements, which have investment periods that expire, unless extended, through 2020.

The components of net realized capital gains (losses) are presented in the table below for the periods indicated:


	Three Months Ended
	March 31,
(Dollars in thousands)	2015			2014
Fixed maturity securities, market value:
Other-than-temporary impairments	$	(24,121	)	$	-
Gains (losses) from sales		(11,518	)		(1,997	)
Fixed maturity securities, fair value:
Gains (losses) from sales		28			940
Gains (losses) from fair value adjustments		62			-
Equity securities, fair value:
Gains (losses) from sales		(65	)		(1,336	)
Gains (losses) from fair value adjustments		20,946			25,753
Other invested assets, fair value:
Gains (losses) from fair value adjustments		35,964			(27,410	)
Short-term investment gains (losses)		-			-
Total net realized capital gains (losses)	$	21,296		$	(4,050	)

The Company recorded as net realized capital gains (losses) in the consolidated statements of operations and comprehensive income (loss) both fair value re-measurements and write-downs in the value of securities deemed to be impaired on an other-than-temporary basis as displayed in the table above. The Company had no other-than-temporary impaired securities where the impairment had both a credit and non-credit component.

The proceeds and split between gross gains and losses, from sales of fixed maturity and equity securities, are presented in the table below for the periods indicated:


	Three Months Ended
	March 31,
(Dollars in thousands)	2015			2014
Proceeds from sales of fixed maturity securities	$	114,082		$	170,341
Gross gains from sales		2,542			2,475
Gross losses from sales		(14,032	)		(3,532	)

Proceeds from sales of equity securities	$	133,960		$	176,116
Gross gains from sales		5,142			6,588
Gross losses from sales		(5,207	)		(7,924	)