(2) Investments:

The following is a summary of available-for-sale securities at September 30, 2016 and December 31, 2015:

										Net
			Cost or		Gross		Gross			Unrealized
	Fair		Amortized		Unrealized		Unrealized			Gains
	Value		Cost		Gains		Losses			(Losses)
September 30, 2016
Fixed maturities
U.S. government obligations	$	96,573	$	96,209	$	366	$	(2	)	$	364
Residential mortgage-backed securities		5,608		5,433		221		(46	)		175
Commercial mortgage-backed securities		29,809		29,651		952		(794	)		158
States and municipal obligations		131,697		130,783		1,144		(230	)		914
Corporate securities		197,677		196,984		3,248		(2,555	)		693
Foreign government obligations		24,773		25,921		363		(1,511	)		(1,148	)
Total fixed maturities		486,137		484,981		6,294		(5,138	)		1,156
Equity securities:
Financial institutions		20,251		13,261		7,299		(309	)		6,990
Industrial & miscellaneous		114,203		64,795		51,066		(1,658	)		49,408
Total equity securities		134,454		78,056		58,365		(1,967	)		56,398

Total	$	620,591	$	563,037	$	64,659	$	(7,105	)		57,554

							Applicable federal income taxes				(20,144	)

							Net unrealized gains - net of tax			$	37,410

December 31, 2015
Fixed maturities
U.S. government obligations	$	103,245	$	103,448	$	56	$	(259	)	$	(203	)
Residential mortgage-backed securities		4,776		4,668		162		(54	)		108
Commercial mortgage-backed securities		30,595		30,977		247		(629	)		(382	)
State and municipal obligations		110,578		109,932		806		(160	)		646
Corporate securities		164,025		168,137		2,445		(6,557	)		(4,112	)
Foreign government obligations		23,965		25,416		404		(1,855	)		(1,451	)
Total fixed maturities		437,184		442,578		4,120		(9,514	)		(5,394	)
Equity securities:
Financial institutions		21,694		10,836		11,069		(211	)		10,858
Industrial & miscellaneous		123,804		69,385		59,338		(4,919	)		54,419
Total equity securities		145,498		80,221		70,407		(5,130	)		65,277

Total	$	582,682	$	522,799	$	74,527	$	(14,644	)		59,883

							Applicable federal income taxes				(20,959	)

							Net unrealized gains - net of tax			$	38,924

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

The following table summarizes, for fixed maturity and equity security investments in an unrealized loss position at September 30, 2016 and December 31, 2015, respectively, the aggregate fair value and gross unrealized loss categorized by the duration those securities have been continuously in an unrealized loss position.

	September 30, 2016							December 31, 2015
	Number of Securities		Fair Value		Gross Unrealized Loss			Number of Securities		Fair Value		Gross Unrealized Loss
Fixed maturity securities:
12 months or less		251	$	198,916	$	(2,882	)		328	$	205,475	$	(5,070	)
Greater than 12 months		54		19,596		(2,256	)		168		108,043		(4,444	)
Total fixed maturities		305		218,512		(5,138	)		496		313,518		(9,514	)

Equity securities:
12 months or less		58		30,629		(1,967	)		73		26,517		(5,130	)
Greater than 12 months		-		-		-			-		-		-
Total equity securities		58		30,629		(1,967	)		73		26,517		(5,130	)
Total fixed maturity and equity securities		363	$	249,141	$	(7,105	)		569	$	340,035	$	(14,644	)

The fair value and the cost or amortized costs of fixed maturity investments at September 30, 2016, by contractual maturity, are shown below. Actual maturities may ultimately differ from contractual maturities because borrowers have, in some cases, the right to call or prepay obligations with or without call or prepayment penalties. Pre-refunded municipal bonds are classified based on their pre-refunded call dates.

	Fair Value		Cost or Amortized Cost

One year or less	$	92,876	$	92,984
Excess of one year to five years		261,413		261,261
Excess of five years to ten years		43,440		42,700
Excess of ten years		3,907		3,595
Contractual maturities		401,636		400,540
Asset-backed securities		84,501		84,441
Total	$	486,137	$	484,981

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Following is a summary of the components of net realized gains (losses) on investments for the periods presented in the accompanying consolidated statements of income.

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2016			2015			2016			2015
Fixed maturities:
Gross gains	$	7,496		$	1,294		$	9,338		$	3,426
Gross losses		(8,434	)		(5,087	)		(12,470	)		(8,876	)
Net realized losses		(938	)		(3,793	)		(3,132	)		(5,450	)

Equity securities:
Gross gains		5,086			10,320			21,722			12,299
Gross losses		(819	)		(2,312	)		(4,767	)		(4,297	)
Net realized gains		4,267			8,008			16,955			8,002

Limited partnerships - net gain (loss)		4,403			(6,301	)		3,201			(2,061	)


Total net gains (losses)	$	7,732		$	(2,086	)	$	17,024		$	491

Net realized gains (losses) activity for investments, as shown in the previous table, are further detailed as follows:

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2016			2015			2016			2015

Realized net gains on the disposal of securities	$	3,482		$	7,957		$	10,649		$	7,544
Mark-to-market adjustment		108			(300	)		(326	)		(692	)
Equity in gains (losses) of limited partnership
investments - realized and unrealized		4,403			(6,301	)		3,201			(2,061	)
Impairment:
Write-downs based upon objective criteria		(1,844	)		(4,396	)		(4,999	)		(5,503	)
Recovery of prior write-downs
upon sale or disposal		1,583			954			8,499			1,203

Total net gains (losses)	$	7,732		$	(2,086	)	$	17,024		$	491

The mark-to-market adjustments in the table above represent the changes in fair value of (1) options embedded in convertible debt securities and (2) insurance-linked securities held by the Company.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Shareholders' equity at September 30, 2016 included approximately $28,606, net of federal income taxes, of reported earnings which remain undistributed by limited partnerships.

The Company's bridge loan investment program was terminated and the Company had no remaining committed funds related to bridge loan agreements as of September 30, 2016. The Company historically retained possession of these funds which were only loaned in the unlikely event that long-term financing was unavailable to the counter party in the market.

At September 30, 2016, limited partnership investments included approximately $46,855 consisting of two partnerships which are managed by organizations in which certain of the Company's directors are officers, directors, general partners or owners. Each of these investments contains profit sharing agreements, pursuant to which a portion of the gains will be paid to the affiliated organizations.

At September 30, 2016, invested assets other than limited partnerships included approximately $39,572 in portfolios managed by organizations in which certain of the Company's directors are officers, directors, general partners or owners.