Note 4. Investment Securities

3 Months Ended

Mar. 31, 2016

Notes

Note 4. Investment Securities

Note  4.                       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):

		March 31, 2016
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	183,587	$	1,145	$	(4,844)	$	179,888
CMOs - residential (1)		2,986		63		-		3,049
U.S. Government obligations		124,898		421		(7)		125,312
Agency MBS - residential (2)		32		1		-		33
GSEs (3)		10,715		2		(208)		10,509
States and political subdivisions		192,965		3,675		(1,112)		195,528
Foreign government obligations		2,301		70		-		2,371
Redeemable preferred stocks		4,036		85		(173)		3,948
Total fixed maturities	$	521,520	$	5,462	$	(6,344)	$	520,638

EQUITY SECURITIES
AVAILABLE-FOR-SALE:
Common stocks	$	4,926	$	155	$	(24)	$	5,057
Nonredeemable preferred stocks		3,588		95		(26)		3,657
Total equity securities	$	8,514	$	250	$	(50)	$	8,714

		December 31, 2015
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	172,621	$	93	$	(5,868)	$	166,846
CMOs - residential (1)		3,068		2		(14)		3,056
CMOs - commercial		899		296		-		1,195
U.S. Government obligations		44,738		120		(64)		44,794
Agency MBS - residential (2)		34		1		-		35
GSEs (3)		11,814		2		(254)		11,562
States and political subdivisions		194,364		2,159		(1,857)		194,666
Foreign government obligations		2,318		12		(6)		2,324
Redeemable preferred stocks		4,036		101		(14)		4,123
Total fixed maturities	$	433,892	$	2,786	$	(8,077)	$	428,601

EQUITY SECURITIES
AVAILABLE-FOR-SALE:
Common stocks	$	4,926	$	-	$	(142)	$	4,784
Nonredeemable preferred stocks		3,588		56		(2)		3,642
Total equity securities	$	8,514	$	56	$	(144)	$	8,426

(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 March 31, 2016, 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 prepayment 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	$	23,979	$	23,519
Due after one year through five years		180,141		180,071
Due after five years through ten years		126,709		128,460
Due after ten years		176,959		174,997
CMOs and MBSs		13,732		13,591
	$	521,520	$	520,638

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):

		March 31, 2016
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	43,714	$	687	$	71,655	$	4,157	$	115,369	$	4,844
U.S. Government obligations		104,478		7		-		-		104,478		7
GSEs		3,578		66		6,907		142		10,485		208
States and political subdivisions		38,859		584		20,900		528		59,759		1,112
Redeemable preferred stocks		3,590		173		-		-		3,590		173
Total fixed maturities		194,219		1,517		99,462		4,827		293,681		6,344
Common stocks		478		24		-		-		478		24
Nonredeemable preferred stocks		-		-		1,301		26		1,301		26
Total equity securities		478		24		1,301		26		1,779		50
Total temporarily impaired
securities	$	194,697	$	1,541	$	100,763	$	4,853	$	295,460	$	6,394
Number of securities in an
unrealized loss position		80				30				110

		December 31, 2015
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	101,903	$	2,559	$	55,217	$	3,309	$	157,120	$	5,868
CMO’s - residential		2,867		14		-		-		2,867		14
U.S. Government obligations		19,809		64		-		-		19,809		64
GSEs		6,539		128		4,997		126		11,536		254
States and political subdivisions		68,898		780		31,351		1,077		100,249		1,857
Foreign government obligations		484		6		-		-		484		6
Redeemable preferred stocks		3,749		14		-		-		3,749		14
Total fixed maturities		204,249		3,565		91,565		4,512		295,814		8,077
Common stocks		4,784		142		-		-		4,784		142
Nonredeemable preferred stocks		1,324		2		-		-		1,324		2
Total equity securities		6,108		144		-		-		6,108		144
Total temporarily impaired
securities	$	210,357	$	3,709	$	91,565	$	4,512	$	301,922	$	8,221
Number of securities in an
unrealized loss position		99				31				130

Substantially all of the unrealized losses on fixed maturities available-for-sale at March 31, 2016 and December 31, 2015 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 March 31, 2016.

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

		Three Months Ended
		March 31,
		2016		2015
Available-for-sale securities:
Fixed maturities	$	628	$	1,300
Common stocks		-		1,465
Total sales of available-for-sale securities		628		2,765
Trading securities		-		(507)
Total realized gains		628		2,258
Unrealized gains (losses) on trading securities:
Change in unrealized gains (losses) on trading securities		(70)		(251)
Total unrealized gains (losses)  on trading securities		(70)		(251)
Gains (losses) on other investments		2		(7)
Net realized investment gains	$	560	$	2,000

For the three months ended March 31, 2016 and 2015, proceeds from sales of available-for-sale securities were $31,494,000 and $106,415,000, respectively, and the Company realized gross gains of $615,000 and $3,114,000, respectively, and gross losses of $17,000 and $182,000, respectively, on 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 1H(iv) to the Consolidated Financial Statements in the 2015 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 the first three months of 2016 or 2015.

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
		March 31,
		2016		2015
Balance at beginning of year	$	473	$	473
Securities sold		(473)		-
Balance at end of period	$	-	$	473