2.	Investments:

The amortized cost and estimated fair value of investments in debt and equity securities by category is as follows (in thousands):



As of December 31, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities and obligations of U.S. Government	$	93,280	$	29	$	(4)	$	93,305
Corporate bonds		28,643		884		(85)		29,442
Collateralized corporate bank loans		115,358		206		(1,915)		113,649
Municipal bonds		161,546		2,384		(1,601)		162,329
Mortgage-backed		51,943		487		(370)		52,060

Total debt securities		450,770		3,990		(3,975)		450,785

Total equity securities		25,360		31,086		(2)		56,444

Total debt and equity securities	$	476,130	$	35,076	$	(3,977)	$	507,229

As of December 31, 2013
U.S. Treasury securities and obligations of U.S. Government	$	78,894	$	24	$	(165)	$	78,753
Corporate bonds		42,946		1,379		(450)		43,875
Collateralized corporate bank loans		102,053		614		(489)		102,178
Municipal bonds		156,950		2,577		(1,975)		157,552
Mortgage-backed		27,784		460		(507)		27,737

Total debt securities		408,627		5,054		(3,586)		410,095

Total equity securities		24,902		26,642		(314)		51,230

Total debt and equity securities	$	433,529	$	31,696	$	(3,900)	$	461,325

Major categories of net investment income are summarized as follows (in thousands):



	Twelve Months Ended December 31
	2014		2013		2012
U.S. Treasury securities and obligations of U.S. Government	$	395	$	143	$	53
Corporate bonds		1,378		2,341		4,218
Collateralized corporate bank loans		4,400		4,653		5,261
Municipal bonds		5,232		5,245		5,616
Mortgage-backed		995		737		106
Equity securities		509		484		534
Cash and cash equivalents		230		157		246
		13,139		13,760		16,034
Investment expenses		(756)		(876)		(741)
Investment income, net of expenses	$	12,383	$	12,884	$	15,293

No investments in any entity or its affiliates exceeded 10% of stockholders’ equity at December 31, 2014 or 2013.

Major categories of net realized gains on investments are summarized as follows (in thousands):



	Twelve Months Ended December 31
	2014		2013		2012
U.S. Treasury securities and obligations of U.S. Government	$	-	$	-	$	-
Corporate bonds		263		853		13
Collateralized corporate bank loans		109		373		391
Municipal bonds		(140)		(156)		(441)
Mortgage-backed		32		-		-
Equity securities		144		9,470		2,226
Gain on investments		408		10,540		2,189
Other-than-temporary impairments		(274)		-		(246)
Net realized gain	$	134	$	10,540	$	1,943

We realized gross gains on investments of $0.6 million, $10.9 million, and $2.9 million during the years ended December 31, 2014, 2013 and 2012, respectively. We realized gross losses on investments of $0.2 million, $0.4 million and $0.7 million during the years ended December 31, 2014, 2013 and 2012, respectively. We recorded proceeds from the sale of investment securities of $15.3 million, $33.4 million and $12.4 million during the years ended December 31, 2014, 2013 and 2012, respectively. Realized investment gains and losses are recognized in operations on the specific identification method.

The following schedules summarize the gross unrealized losses showing the length of time that investments have been continuously in an unrealized loss position as of December 31, 2014 and December 31, 2013 (in thousands):



	As of December 31, 2014
	12 months or less				Longer than 12 months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of U.S. Government	$	15,005	$	(4)	$	-	$	-	$	15,005	$	(4)
Corporate bonds		7,552		(85)		-		-		7,552		(85)
Collateralized corporate bank loans		64,712		(824)		8,898		(1,091)		73,610		(1,915)
Municipal bonds		50,546		(945)		15,684		(656)		66,230		(1,601)
Mortgage-backed		20,469		(365)		2,966		(5)		23,435		(370)
Total debt securities		158,284		(2,223)		27,548		(1,752)		185,832		(3,975)

Total equity securities		129		(2)		-		-		129		(2)
Total debt and equity securities	$	158,413	$	(2,225)	$	27,548	$	(1,752)	$	185,961	$	(3,977)



	As of December 31, 2013
	12 months or less				Longer than 12 months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of U.S. Government	$	47,162	$	(165)	$	-	$	-	$	47,162	$	(165)
Corporate bonds		5,649		(56)		4,421		(394)		10,070		(450)
Collateralized corporate bank loans		23,026		(422)		6,968		(67)		29,994		(489)
Municipal bonds		35,719		(413)		34,684		(1,562)		70,403		(1,975)
Mortgage-backed		1,383		(229)		4,840		(278)		6,223		(507)
Total debt securities		112,939		(1,285)		50,913		(2,301)		163,852		(3,586)

Total equity securities		316		(2)		2,721		(312)		3,037		(314)
Total debt and equity securities	$	113,255	$	(1,287)	$	53,634	$	(2,613)	$	166,889	$	(3,900)

At December 31, 2014, the gross unrealized losses more than twelve months old were attributable to 24 debt security positions. At December 31, 2013, the gross unrealized losses more than twelve months old were attributable to 84 debt security positions. We consider these losses as a temporary decline in value as they are predominately on bonds that we do not intend to sell and do not believe we will be required to sell prior to recovery of our amortized cost basis. We see no other indications that the decline in values of these securities is other-than-temporary.

Based on evidence gathered through our normal credit evaluation process, we presently expect that all debt securities held in our investment portfolio will be paid in accordance with their contractual terms. Nonetheless, it is at least reasonably possible that the performance of certain issuers of these debt securities will be worse than currently expected resulting in future write-downs within our portfolio of debt securities.

Also, as a result of the challenging market conditions, we expect the volatility in the valuation of our equity securities to continue in the foreseeable future. This volatility may lead to impairments on our equity securities portfolio or changes regarding retention strategies for certain equity securities.

We complete a detailed analysis each quarter to assess whether any decline in the fair value of any investment below cost is deemed other-than-temporary. All securities with an unrealized loss are reviewed. We recognize an impairment loss when an investment's value declines below cost, adjusted for accretion, amortization and previous other-than-temporary impairments and it is determined that the decline is other-than-temporary. We recognized other-than-temporary losses on our debt securities portfolio of $0.3 million during 2014.

Debt Investments: We assess whether we intend to sell, or it is more likely than not that we will be required to sell, a fixed maturity investment before recovery of its amortized cost basis less any current period credit losses. For fixed maturity investments that are considered other-than-temporarily impaired and that we do not intend to sell and will not be required to sell, we separate the amount of the impairment into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings and is the difference between the investment’s amortized cost basis and the present value of its expected future cash flows. The remaining difference between the investment’s fair value and the present value of future expected cash flows is recognized in other comprehensive income.

Equity Investments: Some of the factors considered in evaluating whether a decline in fair value for an equity investment is other-than-temporary include: (1) our ability and intent to retain the investment for a period of time sufficient to allow for an anticipated recovery in value; (2) the recoverability of cost; (3) the length of time and extent to which the fair value has been less than cost; and (4) the financial condition and near-term and long-term prospects for the issuer, including the relevant industry conditions and trends, and implications of rating agency actions and offering prices. When it is determined that an equity investment is other-than-temporarily impaired, the security is written down to fair value, and the amount of the impairment is included in earnings as a realized investment loss. The fair value then becomes the new cost basis of the investment, and any subsequent recoveries in fair value are recognized at disposition. We recognize a realized loss when impairment is deemed to be other-than-temporary even if a decision to sell an equity investment has not been made. When we decide to sell a temporarily impaired available-for-sale equity investment and we do not expect the fair value of the equity investment to fully recover prior to the expected time of sale, the investment is deemed to be other-than-temporarily impaired in the period in which the decision to sell is made.

The amortized cost and estimated fair value of debt securities at December 31, 2014 by contractual maturity are as follows. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without penalties.



	Amortized Cost			Fair Value
	(in thousands)
Due in one year or less	$	49,977	$	50,329
Due after one year through five years		185,036		185,525
Due after five years through ten years		111,008		109,925
Due after ten years		52,806		52,946
Mortgage-backed		51,943		52,060
	$	450,770	$	450,785

We have certain of our securities pledged for the benefit of various state insurance departments and reinsurers. These securities are included with our available-for-sale debt securities because we have the ability to trade these securities. We retain the interest earned on these securities. These securities had a carrying value of $20.3 million at December 31, 2014 and a carrying value of $29.1 million at December 31, 2013.