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, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities and obligations of U.S. Government	$	41,976	$	66	$	(20)	$	42,022
Corporate bonds		224,915		1,722		(575)		226,062
Collateralized corporate bank loans		105,220		959		(170)		106,009
Municipal bonds		165,900		956		(2,961)		163,895
Mortgage-backed		59,773		49		(353)		59,469

Total debt securities		597,784		3,752		(4,079)		597,457

Total equity securities		31,449		21,052		(790)		51,711

Total other investments		3,763		1,188		-		4,951

Total investments	$	632,996	$	25,992	$	(4,869)	$	654,119

As of December 31, 2015
U.S. Treasury securities and obligations of U.S. Government	$	76,323	$	7	$	(61)	$	76,269
Corporate bonds		122,894		637		(1,822)		121,709
Collateralized corporate bank loans		83,434		44		(1,882)		81,596
Municipal bonds		196,446		1,888		(5,966)		192,368
Mortgage-backed		59,532		155		(304)		59,383

Total debt securities		538,629		2,731		(10,035)		531,325

Total equity securities		24,524		23,364		(838)		47,050

Total other investments		427		27		-		454

Total investments	$	563,580	$	26,122	$	(10,873)	$	578,829

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



	Twelve Months Ended December 31
	2016		2015		2014
U.S. Treasury securities and obligations of U.S. Government	$	594	$	670	$	395
Corporate bonds		5,573		1,435		1,378
Collateralized corporate bank loans		3,190		4,727		4,400
Municipal bonds		5,442		5,901		5,232
Mortgage-backed		1,320		1,288		995
Equity securities		638		673		509
Other investments		-		-		-
Cash and cash equivalents		277		148		230
		17,034		14,842		13,139
Investment expenses		(692)		(873)		(756)
Investment income, net of expenses	$	16,342	$	13,969	$	12,383

No investments in any entity or its affiliates exceeded 10% of stockholders’ equity at December 31, 2016 or 2015.

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



	Twelve Months Ended December 31
	2016		2015		2014
U.S. Treasury securities and obligations of U.S. Government	$	-	$	-	$	-
Corporate bonds		(264)		-		263
Collateralized corporate bank loans		(86)		126		109
Municipal bonds		(189)		(83)		(140)
Mortgage-backed		(1)		240		32
Equity securities		1,871		5,543		144
Gain on investments		1,331		5,826		408
Unrealized gain on other investments		1,188		-		-
Other-than-temporary impairments		(2,888)		(3,323)		(274)
Net realized (losses) gains	$	(369)	$	2,503	$	134

We realized gross gains on investments of $2.1 million, $6.7 million, and $0.6 million during the years ended December 31, 2016, 2015 and 2014, respectively. We realized gross losses on investments of $0.8 million, $0.9 million and $0.2 million during the years ended December 31, 2016, 2015 and 2014, respectively. We recorded proceeds from the sale of investment securities of $28.5 million, $51.7 million and $15.3 million during the years ended December 31, 2016, 2015 and 2014, 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, 2016 and December 31, 2015 (in thousands):



	As of December 31, 2016
	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	$	7,037	$	(20)	$	-	$	-	$	7,037	$	(20)
Corporate bonds		86,592		(575)		-		-		86,592		(575)
Collateralized corporate bank loans		2,637		(7)		8,314		(163)		10,951		(170)
Municipal bonds		70,633		(1,327)		13,574		(1,634)		84,207		(2,961)
Mortgage-backed		29,475		(348)		2,430		(5)		31,905		(353)
Total debt securities		196,374		(2,277)		24,318		(1,802)		220,692		(4,079)

Total equity securities		4,109		(483)		2,037		(307)		6,146		(790)

Total other investments		-		-		-		-		-		-

Total investments	$	200,483	$	(2,760)	$	26,355	$	(2,109)	$	226,838	$	(4,869)



	As of December 31, 2015
	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	$	41,428	$	(61)	$	-	$	-	$	41,428	$	(61)
Corporate bonds		96,475		(1,822)		-		-		96,475		(1,822)
Collateralized corporate bank loans		65,868		(1,758)		3,532		(124)		69,400		(1,882)
Municipal bonds		44,525		(488)		25,310		(5,478)		69,835		(5,966)
Mortgage-backed		36,251		(302)		48		(2)		36,299		(304)
Total debt securities		284,547		(4,431)		28,890		(5,604)		313,437		(10,035)

Total equity securities		6,584		(838)		-		-		6,584		(838)

Total other investments		-		-		-		-		-		-

Total investments	$	291,131	$	(5,269)	$	28,890	$	(5,604)	$	320,021	$	(10,873)

At December 31, 2016, the gross unrealized losses more than twelve months old were attributable to 28 debt security positions and one equity position. At December 31, 2015, the gross unrealized losses more than twelve months old were attributable to 39 debt security positions. We consider these losses as a temporary decline in value as they are predominately on securities 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 $2.9 million during 2016. Of the $2.9 million other-than-temporary impairments recorded for fiscal 2016, $2.6 million relate to credit losses on certain senior and subordinated municipal bonds. We utilized the most recent restructuring offer for each of the senior and subordinated bonds to estimate the credit loss portion of the other-than-temporary impairments.

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.

Details regarding the carrying value of the other invested assets portfolio as of December 31, 2016 and 2015 were as follows:



	2016		2015
Investment Type
Equity warrant	$	4,951	$	454
Total other investments	$	4,951	$	454

We acquired this equity warrant in an active market and it entitles us to buy the underlying common stock of a publicly traded company at a fixed exercise price until the expiration date of January 19, 2021.

The amortized cost and estimated fair value of debt securities at December 31, 2016 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	$	97,836	$	97,849
Due after one year through five years		272,190		272,168
Due after five years through ten years		114,461		115,248
Due after ten years		53,524		52,723
Mortgage-backed		59,773		59,469
	$	597,784	$	597,457

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 $21.1 million at December 31, 2016 and a carrying value of $17.6 million at December 31, 2015.