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, 2017
U.S. Treasury bonds	$	145,396	$	1,484	$	(1,427	)	$	145,453
Municipal bonds		1,068,611		14,546		(10,795	)		1,072,362
Foreign government bonds		162,550		556		(1,457	)		161,649
Governmental agency bonds		223,546		1,063		(2,891	)		221,718
Governmental agency mortgage-backed securities		2,238,222		4,098		(16,400	)		2,225,920
U.S. corporate debt securities		716,299		13,400		(2,771	)		726,928
Foreign corporate debt securities		244,777		5,201		(524	)		249,454
	$	4,799,401	$	40,348	$	(36,265	)	$	4,803,484
December 31, 2016
U.S. Treasury bonds	$	155,441	$	416	$	(4,466	)	$	151,391
Municipal bonds		1,004,659		6,340		(26,666	)		984,333
Foreign government bonds		141,887		600		(2,439	)		140,048
Governmental agency bonds		197,343		691		(4,166	)		193,868
Governmental agency mortgage-backed securities		2,187,482		2,983		(26,792	)		2,163,673
U.S. corporate debt securities		675,683		8,282		(5,441	)		678,524
Foreign corporate debt securities		240,526		2,490		(1,490	)		241,526
	$	4,603,021	$	21,802	$	(71,460	)	$	4,553,363

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, 2017
Preferred stocks	$	19,269	$	202	$	(944	)	$	18,527
Common stocks		381,622		47,204		(1,168	)		427,658
	$	400,891	$	47,406	$	(2,112	)	$	446,185
December 31, 2016
Preferred stocks	$	18,926	$	—	$	(3,344	)	$	15,582
Common stocks		367,169		26,034		(4,700	)		388,503
	$	386,095	$	26,034	$	(8,044	)	$	404,085

Sales of debt and equity securities resulted in realized gains of $1.7 million and $8.9 million, and realized losses of $0.7 million and $0.2 million for the three months ended September 30, 2017 and 2016, respectively, and realized gains of $21.8 million and $22.1 million, and realized losses of $5.9 million and $7.2 million for the nine months ended September 30, 2017 and 2016, 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, 2017
Debt securities:
U.S. Treasury bonds	$	61,500	$	(584	)	$	20,177	$	(843	)	$	81,677	$	(1,427	)
Municipal bonds		124,976		(775	)		247,001		(10,020	)		371,977		(10,795	)
Foreign government bonds		97,341		(1,058	)		10,471		(399	)		107,812		(1,457	)
Governmental agency bonds		106,783		(778	)		81,053		(2,113	)		187,836		(2,891	)
Governmental agency mortgage-backed securities		686,814		(4,572	)		832,251		(11,828	)		1,519,065		(16,400	)
U.S. corporate debt securities		113,028		(1,484	)		50,152		(1,287	)		163,180		(2,771	)
Foreign corporate debt securities		62,671		(457	)		3,492		(67	)		66,163		(524	)
Total debt securities		1,253,113		(9,708	)		1,244,597		(26,557	)		2,497,710		(36,265	)
Equity securities		36,407		(485	)		28,115		(1,627	)		64,522		(2,112	)
Total	$	1,289,520	$	(10,193	)	$	1,272,712	$	(28,184	)	$	2,562,232	$	(38,377	)
December 31, 2016
Debt securities:
U.S. Treasury bonds	$	111,748	$	(4,466	)	$	—	$	—		$	111,748	$	(4,466	)
Municipal bonds		635,531		(26,317	)		16,485		(349	)		652,016		(26,666	)
Foreign government bonds		63,044		(2,371	)		324		(68	)		63,368		(2,439	)
Governmental agency bonds		148,112		(4,166	)		—		—			148,112		(4,166	)
Governmental agency mortgage-backed securities		1,295,790		(19,097	)		432,349		(7,695	)		1,728,139		(26,792	)
U.S. corporate debt securities		193,533		(4,560	)		24,499		(881	)		218,032		(5,441	)
Foreign corporate debt securities		78,658		(1,150	)		8,154		(340	)		86,812		(1,490	)
Total debt securities		2,526,416		(62,127	)		481,811		(9,333	)		3,008,227		(71,460	)
Equity securities		70,261		(1,173	)		59,019		(6,871	)		129,280		(8,044	)
Total	$	2,596,677	$	(63,300	)	$	540,830	$	(16,204	)	$	3,137,507	$	(79,504	)

Investments in debt securities at September 30, 2017, 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	$	24,966	$	48,269	$	28,318	$	43,843	$	145,396
Estimated fair value	$	24,937	$	48,104	$	28,338	$	44,074	$	145,453
Municipal bonds
Amortized cost	$	61,831	$	314,910	$	254,976	$	436,894	$	1,068,611
Estimated fair value	$	61,960	$	318,703	$	259,744	$	431,955	$	1,072,362
Foreign government bonds
Amortized cost	$	7,772	$	129,408	$	9,699	$	15,671	$	162,550
Estimated fair value	$	7,783	$	128,568	$	9,864	$	15,434	$	161,649
Governmental agency bonds
Amortized cost	$	15,430	$	106,826	$	55,085	$	46,205	$	223,546
Estimated fair value	$	15,415	$	105,946	$	54,607	$	45,750	$	221,718
U.S. corporate debt securities
Amortized cost	$	29,681	$	299,209	$	314,805	$	72,604	$	716,299
Estimated fair value	$	29,800	$	302,345	$	319,329	$	75,454	$	726,928
Foreign corporate debt securities
Amortized cost	$	14,843	$	120,804	$	93,769	$	15,361	$	244,777
Estimated fair value	$	14,869	$	121,807	$	96,350	$	16,428	$	249,454
Total debt securities excluding mortgage-backed securities
Amortized cost	$	154,523	$	1,019,426	$	756,652	$	630,578	$	2,561,179
Estimated fair value	$	154,764	$	1,025,473	$	768,232	$	629,095	$	2,577,564
Total mortgage-backed securities
Amortized cost									$	2,238,222
Estimated fair value									$	2,225,920
Total debt securities
Amortized cost									$	4,799,401
Estimated fair value									$	4,803,484

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, 2017, by credit rating, is as follows:

	A- or higher			BBB+ to BBB-			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, 2017
Debt securities:
U.S. Treasury bonds	$	145,453	100.0	$	—	—	$	—	—	$	145,453	100.0
Municipal bonds		999,995	93.2		54,521	5.1		17,846	1.7		1,072,362	100.0
Foreign government bonds		133,945	82.9		22,184	13.7		5,520	3.4		161,649	100.0
Governmental agency bonds		221,718	100.0		—	—		—	—		221,718	100.0
Governmental agency mortgage-backed securities		2,225,920	100.0		—	—		—	—		2,225,920	100.0
U.S. corporate debt securities		249,320	34.3		262,936	36.2		214,672	29.5		726,928	100.0
Foreign corporate debt securities		123,674	49.6		96,553	38.7		29,227	11.7		249,454	100.0
Total debt securities		4,100,025	85.3		436,194	9.1		267,265	5.6		4,803,484	100.0
Preferred stocks		—	—		13,616	73.5		4,911	26.5		18,527	100.0
Total	$	4,100,025	85.1	$	449,810	9.3	$	272,176	5.6	$	4,822,011	100.0

As of September 30, 2017, the estimated fair value of total debt securities included $144.3 million of bank loans, of which $133.7 million was non-investment grade; $106.7 million of high yield corporate debt securities, all of which was non-investment grade; and $74.3 million of emerging market debt securities, of which $9.0 million was non-investment grade.

The composition of the investment portfolio in an unrealized loss position at September 30, 2017, by credit rating, is as follows:

	A- or higher			BBB+ to BBB-			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, 2017
Debt securities:
U.S. Treasury bonds	$	81,677	100.0	$	—	—	$	—	—	$	81,677	100.0
Municipal bonds		355,301	95.6		15,057	4.0		1,619	0.4		371,977	100.0
Foreign government bonds		95,300	88.4		9,663	9.0		2,849	2.6		107,812	100.0
Governmental agency bonds		187,836	100.0		—	—		—	—		187,836	100.0
Governmental agency mortgage-backed securities		1,519,065	100.0		—	—		—	—		1,519,065	100.0
U.S. corporate debt securities		46,440	28.5		80,803	49.5		35,937	22.0		163,180	100.0
Foreign corporate debt securities		40,649	61.4		23,108	34.9		2,406	3.7		66,163	100.0
Total debt securities		2,326,268	93.1		128,631	5.1		42,811	1.8		2,497,710	100.0
Preferred stocks		—	—		7,990	66.3		4,063	33.7		12,053	100.0
Total	$	2,326,268	92.7	$	136,621	5.4	$	46,874	1.9	$	2,509,763	100.0

As of September 30, 2017, the estimated fair value of total debt securities in an unrealized loss position included $26.4 million of bank loans, of which $26.0 million was non-investment grade; $11.6 million of high yield corporate debt securities, all of which was non-investment grade; and $15.4 million of emerging market debt securities, of which $3.6 million was non-investment grade.

The credit ratings in the above tables reflect published ratings obtained from globally recognized securities rating agencies. 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- or higher” category because the payments of principal and interest are guaranteed by the governmental agency that issued the security.