Investments

Our held to maturity and available for sale securities within our investment portfolio consisted of the following as of the dates indicated:



	December 31, 2014
(In thousands)	Amortized Cost		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses
Fixed-maturities available for sale:
U.S. government and agency securities	$	5,709	$	5,751	$	48	$	6
State and municipal obligations	17,727		18,910		1,183		—
Corporate bonds and notes	277,678		284,408		7,288		558
RMBS	41,467		42,520		1,053		—
CMBS	57,358		58,234		876		—
Other ABS	109,420		107,701		8		1,727
Foreign government and agency securities	19,301		19,366		307		242
	$	528,660	$	536,890	$	10,763	$	2,533
Equity securities available for sale (1)	$	76,900	$	143,368	$	66,468	$	—
Total debt and equity securities	$	605,560	$	680,258	$	77,231	$	2,533

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(1)	Comprising broadly diversified domestic equity mutual funds ($143.0 million fair value) and a preferred stock investment in Freddie Mac ($0.4 million fair value).



	December 31, 2013
(In thousands)	Amortized Cost		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses
Fixed-maturities held to maturity:
State and municipal obligations	$	358	$	351	$	—	$	7
	$	358	$	351	$	—	$	7
Fixed-maturities available for sale:
U.S. government and agency securities	$	5,636	$	5,697	$	97	$	36
State and municipal obligations	17,924		17,403		24		545
Corporate bonds and notes	11,951		12,045		578		484
	$	35,511	$	35,145	$	699	$	1,065
Equity securities available for sale (1)	$	76,900	$	129,161	$	52,261	$	—
Total debt and equity securities	$	112,769	$	164,657	$	52,960	$	1,072

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(1)	Comprising broadly diversified domestic equity mutual funds ($128.3 million fair value) and various preferred and common stocks invested across numerous companies and industries ($0.9 million fair value).

The trading securities within our investment portfolio, which are recorded at fair value, consisted of the following as of the dates indicated:



	December 31,
(In thousands)	2014		2013
Trading securities:
U.S. government and agency securities	$	134,530	$	240,860
State and municipal obligations	343,926		356,715
Corporate bonds and notes	708,361		868,403
RMBS	89,810		338,776
CMBS	188,615		209,191
Other ABS	77,755		121,399
Foreign government and agency securities	18,331		28,303
Equity securities	72,256		75,094
Total	$	1,633,584	$	2,238,741

For trading securities that were held at December 31, 2014 and 2013, we had net unrealized gains during 2014 and net unrealized losses during 2013 associated with those securities in the amount of $65.7 million and $88.4 million, respectively.

As of December 31, 2014 and 2013, our investment portfolio included no Sovereign securities of the Stressed European Countries (Greece, Spain, Italy, Hungary, Portugal and Ireland, collectively) which have Sovereign obligations that have been under particular stress due to economic uncertainty, potential restructuring and ratings downgrades, and included no securities of any other countries under similar stress.

For the years ended December 31, 2014, 2013 and 2012, we did not sell or transfer any fixed-maturity investments classified as held to maturity. For the years ended December 31, 2014, 2013 and 2012, we did not transfer any securities from the available for sale or trading categories.

Net investment income consisted of:



	Year Ended December 31,
(In thousands)	2014			2013			2012
Investment income:
Fixed-maturities	$	62,352		$	66,131		$	66,518
Equity securities	6,287			6,592			7,738
Short-term investments	246			255			304
Other	1,848			1,970			3,913
Gross investment income	70,733			74,948			78,473
Investment expenses	(5,078		)	(6,827		)	(5,794		)
Net investment income	$	65,655		$	68,121		$	72,679

Net realized and unrealized gains (losses) on investments consisted of:



	Year Ended December 31,
(In thousands)	2014			2013			2012
Net realized (losses) gains on investments:
Fixed-maturities held to maturity	$	(9	)	$	2		$	37
Fixed-maturities available for sale	(1,599		)	937			2,726
Equities available for sale	—			349			5,070
Trading securities	(6,996		)	7,997			142,502
Short-term investments	1			1			7
Other invested assets	—			8,841			375
Other gains	246			126			—
Net realized (losses) gains on investments	(8,357		)	18,253			150,717
Unrealized gains (losses) on trading securities	92,226			(117,198		)	(36,435		)
Total gains (losses) on investments	$	83,869		$	(98,945	)	$	114,282

The sources of our proceeds and related investment gains (losses) on our available for sale securities are as follows:



	Year Ended December 31,
(In thousands)	2014			2013			2012
Fixed-maturities available for sale:
Proceeds received from redemptions	$	4,985		$	538		$	5,815
Proceeds received from sales	19,672			17,185			30,966
Gross investment gains from sales and redemptions	99			1,078			3,018
Gross investment losses from sales and redemptions	(1,698		)	(141		)	(292		)
Equities available for sale:
Proceeds received from sales and redemptions	—			10,503			31,235
Gross investment gains from sales and redemptions	—			348			5,070

The change in unrealized gains (losses) recorded in accumulated other comprehensive income (loss) consisted of the following:



	Year Ended December 31,
(In thousands)	2014			2013			2012
Fixed-maturities:
Unrealized holding gains (losses) arising during the period, net of tax	$	4,531		$	(240	)	$	2,694
Less reclassification adjustment for net (losses) gains included in net income (loss), net of tax	(1,039		)	929			3,395
Net unrealized gains (losses) on investments, net of tax	$	5,570		$	(1,169	)	$	(701	)

Equities:
Unrealized holding gains arising during the period, net of tax	$	9,119		$	19,389		$	9,572
Less reclassification adjustment for net (losses) gains included in net income (loss), net of tax	—			(273		)	3,523
Net unrealized gains on investments, net of tax	$	9,119		$	19,662		$	6,049

The following tables show the gross unrealized losses and fair value of our securities deemed “available for sale” and “held to maturity,” aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of the dates indicated:



December 31, 2014: ($ in thousands) Description of Securities	Less Than 12 Months					12 Months or Greater					Total
	# of securities	Fair Value		Unrealized Losses		# of securities	Fair Value		Unrealized Losses		# of securities	Fair Value		Unrealized Losses
U.S. government and agency securities	—	$	—	$	—	1	$	3,455	$	6	1	$	3,455	$	6
Corporate bonds and notes	24	40,917		410		1	1,027		148		25	41,944		558
Other ABS	34	97,356		1,727		—	—		—		34	97,356		1,727
Foreign government and agency securities	4	6,353		242		—	—		—		4	6,353		242
Total	62	$	144,626	$	2,379	2	$	4,482	$	154	64	$	149,108	$	2,533



December 31, 2013: ($ in thousands) Description of Securities	Less Than 12 Months					12 Months or Greater					Total
	# of securities	Fair Value		Unrealized Losses		# of securities	Fair Value		Unrealized Losses		# of securities	Fair Value		Unrealized Losses
U.S. government and agency securities	1	$	3,413	$	36	—	$	—	$	—	1	$	3,413	$	36
State and municipal obligations	2	5,961		18		2	5,514		534		4	11,475		552
Corporate bonds and notes	—	—		—		2	2,966		484		2	2,966		484
Total	3	$	9,374	$	54	4	$	8,480	$	1,018	7	$	17,854	$	1,072

There were no credit losses recognized in earnings in 2014, 2013 or 2012.

Impairments due to credit deterioration that result in a conclusion that the present value of cash flows expected to be collected will not be sufficient to recover the amortized cost basis of the security are considered other-than-temporary. Other declines in fair value (for example, due to interest rate changes, sector credit rating changes or company-specific rating changes) that result in a conclusion that the present value of cash flows expected to be collected will not be sufficient to recover the amortized cost basis of the security also may serve as a basis to conclude that an other-than-temporary impairment has occurred. To the extent we determine that a security is deemed to have had an other-than-temporary impairment, an impairment loss is recognized.

We had securities in an unrealized loss position that we did not consider to be other-than-temporarily impaired as of December 31, 2014. For all investment categories, the unrealized losses of 12 months or greater duration as of December 31, 2014, were generally caused by interest rate or credit spread movements since the purchase date, and as such, we expect the present value of cash flows to be collected from these securities to be sufficient to recover the amortized cost basis of these securities. As of December 31, 2014, we did not have the intent to sell any debt securities in an unrealized loss position and we determined that it is more likely than not that we will not be required to sell the securities before recovery of their cost basis, which may be at maturity; therefore, we did not consider these investments to be other-than-temporarily impaired at December 31, 2014.

The contractual maturities of fixed-maturity investments are as follows:



	December 31, 2014
	Available for Sale
(In thousands)	Amortized Cost		Fair Value
Due in one year or less (1)	$	2,247	$	2,295
Due after one year through five years (1)	39,483		39,420
Due after five years through ten years (1)	154,234		155,790
Due after ten years (1)	124,451		130,930
RMBS (2)	41,467		42,520
CMBS (2)	57,358		58,234
Other ABS (2)	109,420		107,701
Total	$	528,660	$	536,890

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(1)	Actual maturities may differ as a result of calls before scheduled maturity.


(2)	RMBS, CMBS, and Other ABS are shown separately, as they are not due at a single maturity date.

As of December 31, 2014, we did not have any investment in any person and its affiliates that exceeded 10% of our total stockholders’ equity.

Securities on deposit with various state insurance commissioners amounted to $12.1 million at both December 31, 2014 and 2013.

As part of the Freddie Mac Agreement, Radian Guaranty had $209.3 million and $206.8 million at December 31, 2014 and 2013, respectively, in a collateral account currently invested primarily in trading securities, which is pledged to cover Loss Mitigation Activity on the loans subject to the agreement. Subject to certain conditions in the Freddie Mac Agreement, amounts in the collateral account may be released to Radian Guaranty over time to the extent that Loss Mitigation Activity becomes final in accordance with the terms of the Freddie Mac Agreement. However, if the amount of Loss Mitigation Activity that becomes final in accordance with the Freddie Mac Agreement after the collateral account was established is less than $205 million prior to the termination of the Freddie Mac Agreement, then any shortfall will be paid to Freddie Mac from the funds in the collateral account.