Note 3. Investment Securities

6 Months Ended

Jun. 30, 2015

Notes

Note 3. Investment Securities

Note  3.                       Investment Securities

The cost (amortized cost with respect to certain fixed maturities), gross unrealized gains, gross unrealized losses and fair value of investment securities are as follows for the periods indicated (in thousands):

		June 30, 2015
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	168,186	$	423	$	(5,256)	$	163,353
CMOs - residential (1)		3,385		4		(19)		3,370
CMOs - commercial		975		258		-		1,233
U.S. Government obligations		221,768		415		(25)		222,158
Agency MBS - residential (2)		50		2		-		52
GSEs (3)		12,086		18		(64)		12,040
States and political subdivisions		200,708		1,887		(2,633)		199,962
Foreign government obligations		1,847		9		-		1,856
Redeemable preferred stocks		4,036		196		-		4,232
Total fixed maturities	$	613,041	$	3,212	$	(7,997)	$	608,256

EQUITY SECURITIES
AVAILABLE-FOR-SALE:
Common stocks	$	5,154	$	-	$	(263)	$	4,891
Nonredeemable preferred stocks		4,004		156		-		4,160
Total equity securities	$	9,158	$	156	$	(263)	$	9,051

		December 31, 2014
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	264,162	$	1,076	$	(3,314)	$	261,924
CMOs - residential (1)		5,073		55		(22)		5,106
CMOs - commercial		975		-		(22)		953
U.S. Government obligations		22,766		126		-		22,892
Agency MBS - residential (2)		65		4		-		69
GSEs (3)		14,706		36		(86)		14,656
States and political subdivisions		238,514		3,253		(2,386)		239,381
Foreign government obligations		34,863		136		(299)		34,700
Redeemable preferred stocks		4,036		163		-		4,199
Total fixed maturities	$	585,160	$	4,849	$	(6,129)	$	583,880

EQUITY SECURITIES
AVAILABLE-FOR-SALE:
Common stocks	$	8,452	$	1,452	$	(147)	$	9,757
Nonredeemable preferred stocks		4,004		134		-		4,138
Total equity securities	$	12,456	$	1,586	$	(147)	$	13,895

(1)         Collateralized mortgage obligations (“CMOs”).

(2)         Mortgage-backed securities (“MBS”).

(3)         Government-sponsored enterprises (“GSEs”) are private enterprises established and chartered by the Federal Government or its various insurance and lease programs which carry the full faith and credit obligation of the U.S. Government.

The amortized cost and fair value of fixed maturities available-for-sale at June 30, 2015, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or repayment penalties. CMOs and MBSs are shown separately, as they are not due at a single maturity.

		AMORTIZED		FAIR
		COST		VALUE
Due in one year or less	$	3,881	$	3,893
Due after one year through five years		275,912		275,874
Due after five years through ten years		97,880		96,774
Due after ten years		219,879		216,042
CMOs and MBSs		15,489		15,673
	$	613,041	$	608,256

The following tables summarize, for all available-for-sale securities in an unrealized loss position, the aggregate fair value and gross unrealized loss by length of time those securities that have continuously been in an unrealized loss position for the periods indicated (in thousands):

		June 30, 2015
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	98,506	$	3,527	$	32,146	$	1,729	$	130,652	$	5,256
CMOs - residential		2,030		19		-		-		2,030		19
U.S. Government obligations		196,800		25		-		-		196,800		25
GSEs		7,853		30		3,133		34		10,986		64
States and political subdivisions		87,890		1,081		42,539		1,552		130,429		2,633
Total fixed maturities		393,079		4,682		77,818		3,315		470,897		7,997
Common stocks		4,891		263		-		-		4,891		263
Total equity securities		4,891		263		-		-		4,891		263
Total temporarily impaired
securities	$	397,970	$	4,945	$	77,818	$	3,315	$	475,788	$	8,260
Number of securities in an
unrealized loss position		80				26				106

		December 31, 2014
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	77,868	$	1,473	$	69,498	$	1,841	$	147,366	$	3,314
CMO’s  - residential		2,062		16		1,562		6		3,624		22
CMOs - commercial		-		-		953		22		953		22
GSEs		-		-		9,581		86		9,581		86
States and political subdivisions		58,819		744		67,318		1,642		126,137		2,386
Foreign government obligations		21,148		171		12,229		128		33,377		299
Total fixed maturities		159,897		2,404		161,141		3,725		321,038		6,129
Common stocks		2,007		136		348		11		2,355		147
Total equity securities		2,007		136		348		11		2,355		147
Total temporarily impaired
securities	$	161,904	$	2,540	$	161,489	$	3,736	$	323,393	$	6,276
Number of securities in an
unrealized loss position		70				46				116

Substantially all of the unrealized losses on fixed maturities available-for-sale at June 30, 2015 and December 31, 2014 relate to investment grade securities and are attributable to changes in market interest rates. Because the Company does not intend to sell, nor is it more likely than not that the Company will have to sell such investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2015.

Net realized investment gains (losses) are as follows for periods indicated (in thousands):

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2015		2014		2015		2014
Available-for-sale securities:
Fixed maturities	$	2,114	$	4,014	$	3,414	$	5,491
Common stocks		-		-		1,465		-
Preferred stocks		-		(5)		-		(5)
Total  available-for-sale securities		2,114		4,009		4,879		5,486
Trading securities		86		25		(421)		30
Total realized gains (losses)		2,200		4,034		4,458		5,516
Unrealized gains (losses) on trading securities:
Change in unrealized gains (losses) on trading securities		(101)		483		(352)		552
Total unrealized gains (losses)  on trading securities		(101)		483		(352)		552
Gain (losses) on other investments		1		2		(6)		2
Net realized investment gains	$	2,100	$	4,519	$	4,100	$	6,070

For the three months and six months ended June 30, 2015, proceeds from sales of available-for-sale securities were $279,598,000 and $386,013,000, respectively, and the Company realized gross gains of $2,659,000 and $5,773,000, respectively, and gross losses of $460,000 and $642,000, respectively, as a result of those sales. For the three months and six months ended June 30, 2014, proceeds from sales of available-for-sale securities were $127,977,000 and $225,527,000, respectively, and the Company realized gross gains of $3,999,000 and $6,604,000, respectively, and gross losses of $122,000 and $541,000, respectively, as a result of those sales.

Other-Than-Temporary Impairment Evaluations

We recognize other-than-temporary impairment losses in earnings in the period that we determine: 1) we intend to sell the security; 2) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis; or 3) the security has a credit loss. Any non-credit portion of the other-than-temporary impairment loss is recognized in other comprehensive income (loss). See Note 1G(iv) to the Consolidated Financial Statements in the 2014 Annual Report for further discussion of the factors considered by management in its regular review to identify and recognize other-than-temporary impairments on available-for-sale securities. The Company did not recognize any other-than-temporary impairments on available-for-sale securities in 2015 or 2014.

Credit losses were recognized on certain fixed maturities for which each security also had an impairment loss recognized in other comprehensive income (loss). The rollforward of these credit losses were as follows for the periods indicated (in thousands):

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2015		2014		2015		2014
Balance at beginning of year	$	473	$	473	$	473	$	473
Additional credit losses for which an other-than-
temporary loss was previously recognized		-		-		-		-
Securities sold		-		-		-		-
Balance at end of period	$	473	$	473	$	473	$	473

The after-tax portion of other-than-temporary impairments included in accumulated other comprehensive income (loss) at both June 30, 2015 and December 31, 2014 consists of $335,000 related to CMO securities.