Note 4. Investment Securities

6 Months Ended

Jun. 30, 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):

		June 30, 2016
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	238,318	$	3,773	$	(3,218)	$	238,873
CMOs - residential (1)		2,820		78		-		2,898
U.S. Government obligations		76,216		538		(1)		76,753
Agency MBS - residential (2)		29		1		-		30
GSEs (3)		10,638		2		(162)		10,478
States and political subdivisions		208,894		6,310		(921)		214,283
Foreign government obligations		5,675		75		(42)		5,708
Redeemable preferred stocks		11,454		62		(404)		11,112
Total fixed maturities	$	554,044	$	10,839	$	(4,748)	$	560,135

EQUITY SECURITIES
AVAILABLE-FOR-SALE:
Common stocks	$	4,926	$	337	$	(1)	$	5,262
Nonredeemable preferred stocks		3,588		95		(4)		3,679
Total equity securities	$	8,514	$	432	$	(5)	$	8,941

		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 June 30, 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	$	12,176	$	12,085
Due after one year through five years		169,922		170,784
Due after five years through ten years		187,341		190,815
Due after ten years		171,118		173,045
CMOs and MBSs		13,487		13,406
	$	554,044	$	560,135

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, 2016
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	20,570	$	83	$	54,794	$	3,135	$	75,364	$	3,218
U.S. Government obligations		28,247		1		-		-		28,247		1
GSEs		-		-		10,520		162		10,520		162
States and political subdivisions		31,983		256		24,447		665		56,430		921
Foreign government obligations		3,253		42		-		-		3,253		42
Redeemable preferred stocks		3,358		404		-		-		3,358		404
Total fixed maturities		87,411		786		89,761		3,962		177,172		4,748
Common stocks		501		1		-		-		501		1
Nonredeemable preferred stocks		1,323		4		-		-		1,323		4
Total equity securities		1,824		5		-		-		1,824		5
Total temporarily impaired
securities	$	89,235	$	791	$	89,761	$	3,962	$	178,996	$	4,753
Number of securities in an
unrealized loss position		27				29				56

		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 June 30, 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 June 30, 2016.

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

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2016		2015		2016		2015
Available-for-sale securities:
Fixed maturities	$	993	$	2,114	$	1,621	$	3,414
Common stocks		-		-		-		1,465
Total sales of available-for-sale securities		993		2,114		1,621		4,879
Trading securities		-		86		-		(421)
Total realized gains		993		2,200		1,621		4,458
Unrealized gains (losses) on trading securities:
Change in unrealized gains (losses) on trading securities		26		(101)		(44)		(352)
Total unrealized gains (losses)  on trading securities		26		(101)		(44)		(352)
Gains (losses) on other investments		(1)		1		1		(6)
Net realized investment gains	$	1,018	$	2,100	$	1,578	$	4,100

For the three months and six months ended June 30, 2016, proceeds from sales of available-for-sale securities were $127,942,000 and $159,436,000, respectively, and the Company realized gross gains of $1,238,000 and $1,853,000, respectively, and gross losses of $164,000 and $181,000, respectively, on those sales. 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, 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 six 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				Six Months Ended
		June 30,				June 30,
		2016		2015		2016		2015
Balance at beginning of year	$	-	$	473	$	473	$	473
Securities sold		-		-		(473)		-
Balance at end of period	$	-	$	473	$	-	$	473