Note 3 – Debt and Equity Securities

Investments in debt securities, classified as available-for-sale, are as follows:

(in thousands)	Amortized cost		Gross unrealized					Estimated fair value
(in thousands)	Amortized cost		Gains		Losses			Estimated fair value
September 30, 2016
U.S. Treasury bonds	$	148,808	$	2,089	$	(463	)	$	150,434
Municipal bonds		906,895		19,565		(2,223	)		924,237
Foreign government bonds		143,853		1,847		(342	)		145,358
Governmental agency bonds		192,430		2,870		(123	)		195,177
Governmental agency mortgage-backed securities		2,229,651		12,309		(6,163	)		2,235,797
U.S. corporate debt securities		674,651		17,722		(1,635	)		690,738
Foreign corporate debt securities		245,227		5,665		(463	)		250,429
	$	4,541,515	$	62,067	$	(11,412	)	$	4,592,170
December 31, 2015
U.S. Treasury bonds	$	130,252	$	421	$	(1,301	)	$	129,372
Municipal bonds		692,000		12,640		(845	)		703,795
Foreign government bonds		129,984		1,132		(1,015	)		130,101
Governmental agency bonds		419,869		1,023		(2,801	)		418,091
Governmental agency mortgage-backed securities		2,065,728		4,984		(15,039	)		2,055,673
U.S. corporate debt securities		642,869		4,297		(12,483	)		634,683
Foreign corporate debt securities		210,162		1,248		(3,778	)		207,632
	$	4,290,864	$	25,745	$	(37,262	)	$	4,279,347

Investments in equity securities, classified as available-for-sale, are as follows:

	Cost		Gross unrealized					Estimated fair value
(in thousands)	Cost		Gains		Losses			Estimated fair value
September 30, 2016
Preferred stocks	$	19,311	$	—	$	(4,092	)	$	15,219
Common stocks		351,841		24,742		(3,881	)		372,702
	$	371,152	$	24,742	$	(7,973	)	$	387,921
December 31, 2015
Preferred stocks	$	18,305	$	420	$	(3,258	)	$	15,467
Common stocks		307,429		13,103		(14,714	)		305,818
	$	325,734	$	13,523	$	(17,972	)	$	321,285

Sales of debt and equity securities resulted in realized gains of $8.9 million and $1.3 million and realized losses of $0.2 million and $1.6 million for the three months ended September 30, 2016 and 2015, respectively, and realized gains of $22.1 million and $6.5 million and realized losses of $7.2 million and $8.2 million for the nine months ended September 30, 2016 and 2015, respectively.

Gross unrealized losses on investments in debt and equity securities are as follows:

	Less than 12 months					12 months or longer					Total
(in thousands)	Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses
September 30, 2016
Debt securities:
U.S. Treasury bonds	$	55,705	$	(463	)	$	—	$	—		$	55,705	$	(463	)
Municipal bonds		223,714		(1,941	)		16,401		(282	)		240,115		(2,223	)
Foreign government bonds		32,714		(313	)		363		(29	)		33,077		(342	)
Governmental agency bonds		5,706		(123	)		—		—			5,706		(123	)
Governmental agency mortgage-backed securities		749,900		(2,654	)		339,896		(3,509	)		1,089,796		(6,163	)
U.S. corporate debt securities		50,855		(634	)		30,740		(1,001	)		81,595		(1,635	)
Foreign corporate debt securities		21,121		(181	)		9,990		(282	)		31,111		(463	)
Total debt securities		1,139,715		(6,309	)		397,390		(5,103	)		1,537,105		(11,412	)
Equity securities		7,716		(74	)		76,717		(7,899	)		84,433		(7,973	)
Total	$	1,147,431	$	(6,383	)	$	474,107	$	(13,002	)	$	1,621,538	$	(19,385	)
December 31, 2015
Debt securities:
U.S. Treasury bonds	$	105,701	$	(1,285	)	$	1,654	$	(16	)	$	107,355	$	(1,301	)
Municipal bonds		133,465		(733	)		13,190		(112	)		146,655		(845	)
Foreign government bonds		13,601		(890	)		267		(125	)		13,868		(1,015	)
Governmental agency bonds		191,035		(2,497	)		18,237		(304	)		209,272		(2,801	)
Governmental agency mortgage-backed securities		1,096,301		(9,424	)		213,020		(5,615	)		1,309,321		(15,039	)
U.S. corporate debt securities		361,842		(11,272	)		13,511		(1,211	)		375,353		(12,483	)
Foreign corporate debt securities		102,801		(2,725	)		11,246		(1,053	)		114,047		(3,778	)
Total debt securities		2,004,746		(28,826	)		271,125		(8,436	)		2,275,871		(37,262	)
Equity securities		191,248		(12,068	)		31,974		(5,904	)		223,222		(17,972	)
Total	$	2,195,994	$	(40,894	)	$	303,099	$	(14,340	)	$	2,499,093	$	(55,234	)

Investments in debt securities at September 30, 2016, by contractual maturities, are as follows:

(in thousands)	Due in one year or less		Due after one through five years		Due after five through ten years		Due after ten years		Total
U.S. Treasury bonds
Amortized cost	$	35,270	$	68,799	$	16,147	$	28,592	$	148,808
Estimated fair value	$	35,293	$	69,127	$	16,660	$	29,354	$	150,434
Municipal bonds
Amortized cost	$	47,544	$	331,550	$	214,529	$	313,272	$	906,895
Estimated fair value	$	47,615	$	337,258	$	221,613	$	317,751	$	924,237
Foreign government bonds
Amortized cost	$	4,447	$	107,304	$	11,240	$	20,862	$	143,853
Estimated fair value	$	4,482	$	108,323	$	11,702	$	20,851	$	145,358
Governmental agency bonds
Amortized cost	$	20,771	$	82,989	$	47,203	$	41,467	$	192,430
Estimated fair value	$	20,781	$	83,238	$	47,561	$	43,597	$	195,177
U.S. corporate debt securities
Amortized cost	$	15,513	$	318,116	$	274,598	$	66,424	$	674,651
Estimated fair value	$	15,578	$	324,386	$	281,216	$	69,558	$	690,738
Foreign corporate debt securities
Amortized cost	$	9,521	$	114,704	$	110,180	$	10,822	$	245,227
Estimated fair value	$	9,532	$	116,436	$	112,776	$	11,685	$	250,429
Total debt securities excluding mortgage-backed securities
Amortized cost	$	133,066	$	1,023,462	$	673,897	$	481,439	$	2,311,864
Estimated fair value	$	133,281	$	1,038,768	$	691,528	$	492,796	$	2,356,373
Total mortgage-backed securities
Amortized cost									$	2,229,651
Estimated fair value									$	2,235,797
Total debt securities
Amortized cost									$	4,541,515
Estimated fair value									$	4,592,170

Mortgage-backed securities, which include contractual terms to maturity, are not categorized by contractual maturity because borrowers may have the right to call or prepay obligations with, or without, call or prepayment penalties.

The composition of the investment portfolio at September 30, 2016, by credit rating, is as follows:


	A- Ratings or higher			BBB+ to BBB- Ratings			Non-Investment Grade			Total
(in thousands, except percentages)	Estimated fair value		Percentage	Estimated fair value		Percentage	Estimated fair value		Percentage	Estimated fair value		Percentage
September 30, 2016
Debt securities:
U.S. Treasury bonds	$	150,434	100.0	$	—	—	$	—	—	$	150,434	100.0
Municipal bonds		879,726	95.2		35,861	3.8		8,650	1.0		924,237	100.0
Foreign government bonds		121,153	83.4		22,003	15.1		2,202	1.5		145,358	100.0
Governmental agency bonds		195,177	100.0		—	—		—	—		195,177	100.0
Governmental agency mortgage- backed securities		2,235,797	100.0		—	—		—	—		2,235,797	100.0
U.S. corporate debt securities		237,952	34.5		222,588	32.2		230,198	33.3		690,738	100.0
Foreign corporate debt securities		114,882	45.9		87,352	34.9		48,195	19.2		250,429	100.0
Total debt securities		3,935,121	85.7		367,804	8.0		289,245	6.3		4,592,170	100.0
Preferred stocks		—	—		8,987	59.1		6,232	40.9		15,219	100.0
Total	$	3,935,121	85.4	$	376,791	8.2	$	295,477	6.4	$	4,607,389	100.0

As of September 30, 2016, the estimated fair value of total debt securities included $153.3 million of bank loans, of which $141.8 million was non-investment grade; $128.1 million of high yield corporate debt securities, all of which was non-investment grade; and $68.8 million of emerging market debt securities, of which $10.7 million was non-investment grade.

The composition of the investment portfolio in an unrealized loss position at September 30, 2016, by credit rating, is as follows:


	A- Ratings or higher			BBB+ to BBB- Ratings			Non-Investment Grade			Total
(in thousands, except percentages)	Estimated fair value		Percentage	Estimated fair value		Percentage	Estimated fair value		Percentage	Estimated fair value		Percentage
September 30, 2016
Debt securities:
U.S. Treasury bonds	$	55,705	100.0	$	—	—	$	—	—	$	55,705	100.0
Municipal bonds		233,406	97.2		5,332	2.2		1,377	0.6		240,115	100.0
Foreign government bonds		19,904	60.1		12,197	36.9		976	3.0		33,077	100.0
Governmental agency bonds		5,706	100.0		—	—		—	—		5,706	100.0
Governmental agency mortgage- backed securities		1,089,796	100.0		—	—		—	—		1,089,796	100.0
U.S. corporate debt securities		7,342	9.0		29,664	36.4		44,589	54.6		81,595	100.0
Foreign corporate debt securities		3,004	9.7		15,461	49.7		12,646	40.6		31,111	100.0
Total debt securities		1,414,863	92.0		62,654	4.1		59,588	3.9		1,537,105	100.0
Preferred stocks		—	—		8,987	59.1		6,232	40.9		15,219	100.0
Total	$	1,414,863	91.2	$	71,641	4.6	$	65,820	4.2	$	1,552,324	100.0

As of September 30, 2016, the estimated fair value of total debt securities in an unrealized loss position included $18.1 million of bank loans, of which $18.0 million was non-investment grade; $36.3 million of high yield corporate debt securities, all of which was non-investment grade; and $17.6 million of emerging market debt securities, of which $3.9 million was non-investment grade.

The credit ratings in the above tables reflect published ratings obtained from Standard & Poor’s Rating Services, DBRS, Inc., Fitch Ratings, Inc. and Moody’s Investor Services, Inc. If a security was rated differently among the rating agencies, the lowest rating was selected. Governmental agency mortgage-backed securities are not rated by any of the ratings agencies; however, these securities have been included in the above table in the A- Ratings or higher category because the payments of principal and interest are guaranteed by the governmental agency that issued the security.