2. INVESTMENTS

Our investments include fixed income debt securities and common stock equity securities. As disclosed in our 2014 Annual Report on Form 10-K, we present all of our investments as available-for-sale, which are carried at fair value. During the fourth quarter of 2014, we sold our last remaining fixed income security that was classified as held-to-maturity. When available, we obtain quoted market prices to determine fair value for our investments. If a quoted market price is not available, fair value is estimated using a secondary pricing source or using quoted market prices of similar securities. We have no investment securities for which fair value is determined using Level 3 inputs as defined in note 3 to the unaudited condensed consolidated interim financial statements, “Fair Value Measurements.”

The following tables show the amortized cost, unrealized gains/losses, fair value and contractual maturities for our available-for-sale securities.

Available-for-Sale Securities

The amortized cost and fair value of available-for-sale securities at March 31, 2015 and December 31, 2014 were as follows:


Available-for-sale
(in thousands)
	3/31/2015
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Asset Class	Cost		Gains		Losses		Value
U.S. government	$	33,313	$	279	$	-	$	33,592
U.S. agency		13,498		554		-		14,052
Non-U.S. govt. & agency		1,892		125		-		2,017
Agency MBS		244,344		10,480		(510)		254,314
ABS/CMBS*		125,847		2,298		(223)		127,922
Corporate		593,814		25,378		(3,130)		616,062
Municipal		463,355		18,517		(272)		481,600
Total Fixed Income	$	1,476,063	$	57,631	$	(4,135)	$	1,529,559

Equity	$	191,993	$	200,630	$	(960)	$	391,663

Available-for-sale
(in thousands)
	12/31/2014
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
Asset Class	Cost		Gains		Losses		Value
U.S. government	$	33,668	$	131	$	(11)	$	33,788
U.S. agency		6,385		362		-		6,747
Non-U.S. govt. & agency		9,862		803		-		10,665
Agency MBS		256,443		9,401		(1,376)		264,468
ABS/CMBS*		133,894		1,821		(411)		135,304
Corporate		543,183		23,697		(4,190)		562,690
Municipal		464,769		16,789		(133)		481,425
Total Fixed Income	$	1,448,204	$	53,004	$	(6,121)	$	1,495,087

Equity	$	193,535	$	218,105	$	(998)	$	410,642

*Non-agency asset-backed and commercial mortgage-backed

The following table presents the amortized cost and fair value of available-for-sale debt securities by contractual maturity dates as of March 31, 2015:


	3/31/2015
AFS	Amortized		Fair
(in thousands)	Cost		Value
Due in one year or less	$	15,466	$	15,604
Due after one year through five years		240,318		249,737
Due after five years through 10 years		571,095		592,340
Due after 10 years		278,993		289,642
Mtge/ABS/CMBS*		370,191		382,236
Total available-for-sale	$	1,476,063	$	1,529,559

*Mortgage-backed, asset-backed and commercial mortgage-backed

Unrealized Losses

We conduct and document periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other-than-temporary. The following tables are used as part of our impairment analysis and illustrate the total value of securities that were in an unrealized loss position as of March 31, 2015 and December 31, 2014. The tables segregate the securities based on type, noting the fair value, cost (or amortized cost) and unrealized loss on each category of investment as well as in total. The tables further classify the securities based on the length of time they have been in an unrealized loss position. As of March 31, 2015 unrealized losses, as shown in the following tables, were 0.3 percent of total invested assets. Unrealized losses decreased in 2015, as interest rates declined during the first quarter of the year.


	March 31, 2015						December 31, 2014
(in thousands)	< 12 Mos.		12 Mos. & Greater		Total		< 12 Mos.		12 Mos. & Greater		Total

U.S. Government
Fair value	$	—	$	—	$	—	$	4,416	$	—	$	4,416
Cost or amortized cost		—		—		—		4,427		—		4,427
Unrealized Loss	$	—	$	—	$	—	$	(11)	$	—	$	(11)

Agency MBS
Fair value	$	15,867	$	15,778	$	31,645	$	12,840	$	61,534	$	74,374
Cost or amortized cost		15,976		16,179		32,155		12,947		62,803		75,750
Unrealized Loss	$	(109)	$	(401)	$	(510)	$	(107)	$	(1,269)	$	(1,376)

ABS/CMBS*
Fair value	$	33,838	$	11,464	$	45,302	$	63,782	$	11,616	$	75,398
Cost or amortized cost		34,014		11,511		45,525		64,084		11,725		75,809
Unrealized Loss	$	(176)	$	(47)	$	(223)	$	(302)	$	(109)	$	(411)

Corporate
Fair value	$	69,222	$	9,796	$	79,018	$	123,617	$	14,488	$	138,105
Cost or amortized cost		72,219		9,929		82,148		127,634		14,661		142,295
Unrealized Loss	$	(2,997)	$	(133)	$	(3,130)	$	(4,017)	$	(173)	$	(4,190)

Municipal
Fair value	$	22,189	$	—	$	22,189	$	12,382	$	19,019	$	31,401
Cost or amortized cost		22,461		—		22,461		12,411		19,123		31,534
Unrealized Loss	$	(272)	$	—	$	(272)	$	(29)	$	(104)	$	(133)

Subtotal, fixed income
Fair value	$	141,116	$	37,038	$	178,154	$	217,037	$	106,657	$	323,694
Cost or amortized cost		144,670		37,619		182,289		221,503		108,312		329,815
Unrealized Loss	$	(3,554)	$	(581)	$	(4,135)	$	(4,466)	$	(1,655)	$	(6,121)

Equity securities
Fair value	$	13,135	$	—	$	13,135	$	10,837	$	—	$	10,837
Cost or amortized cost		14,095		—		14,095		11,835		—		11,835
Unrealized Loss	$	(960)	$	—	$	(960)	$	(998)	$	—	$	(998)

Total
Fair value	$	154,251	$	37,038	$	191,289	$	227,874	$	106,657	$	334,531
Cost or amortized cost		158,765		37,619		196,384		233,338		108,312		341,650
Unrealized Loss	$	(4,514)	$	(581)	$	(5,095)	$	(5,464)	$	(1,655)	$	(7,119)

* Non-agency asset-backed and commercial mortgage-backed

The following table shows the composition of the fixed income securities in unrealized loss positions at March 31, 2015 by the National Association of Insurance Commissioners (NAIC) rating and the generally equivalent Standard & Poor’s (S&P) and Moody’s ratings. The vast majority of the securities are rated by S&P and/or Moody’s.


	Equivalent	Equivalent	(dollars in thousands)
NAIC	S&P	Moody’s	Amortized				Unrealized		Percent
Rating	Rating	Rating	Cost		Fair Value		Loss		to Total

1	AAA/AA/A	Aaa/Aa/A	$	128,145	$	126,749	$	(1,396)	33.8	%
2	BBB	Baa		17,721		16,908		(813)	19.7	%
3	BB	Ba		21,179		20,096		(1,083)	26.2	%
4	B	B		14,884		14,072		(812)	19.6	%
5	CCC or lower	Caa or lower		360		329		(31)	0.7	%
6				—		—		—	—
		Total	$	182,289	$	178,154	$	(4,135)	100.0	%

Evaluating Investments for OTTI

The fixed income portfolio contained 154 securities in an unrealized loss position as of March 31, 2015. The $4.1 million in associated unrealized losses for these 154 securities represents 0.3 percent of the fixed income portfolio’s cost basis. Of these 154 securities, 33 have been in an unrealized loss position for 12 consecutive months or longer. All fixed income securities in the investment portfolio continue to pay the expected coupon payments under the contractual terms of the securities. Any credit-related impairment related to fixed income securities we do not plan to sell and for which we are not more likely than not to be required to sell is recognized in net earnings, with the non-credit related impairment recognized in comprehensive earnings. Based on our analysis, our fixed income portfolio is of high credit quality and we believe we will recover the amortized cost basis of our fixed income securities. We continually monitor the credit quality of our fixed income investments to assess if it is probable that we will receive our contractual or estimated cash flows in the form of principal and interest. There were no other-than-temporary impairment (OTTI) losses recognized in net earnings or other comprehensive earnings in the periods presented on the fixed income portfolio.

As of March 31, 2015, we held four common stock securities that were in an unrealized loss position. The unrealized loss on these securities was $1.0 million. Based on our analysis, we believe each security will recover in a reasonable period of time and we have the intent and ability to hold them until recovery. No equity securities have been in an unrealized loss position for 12 consecutive months or longer. There were no OTTI losses recognized in the periods presented on the equity portfolio.

Other Invested Assets

Other invested assets include an investment in a low income housing tax credit partnership, carried at amortized cost, and membership in the Federal Home Loan Bank Chicago (FHLBC), carried at cost. Our interest in a low income housing tax credit partnership had a balance of $9.6 million at March 31, 2015 compared to $9.8 million at December 31, 2014 and recognized a total tax benefit of $0.3 million during the first quarter of 2015. Our investment in FHLBC stock totaled $1.8 million at March 31, 2015 and December 31, 2014.

Cash and Short-term Investments

Cash consists of uninvested balances in bank accounts. We had a cash balance of $31.5 million at the end of the first quarter of 2015, compared to $30.6 million at the end of 2014. Short-term investments are carried at cost, which approximates fair value. The balance at March 31, 2015 was $16.0 million compared to $16.3 million at December 31, 2014.