INVESTMENTS

The following tables show the cost or amortized cost, gross unrealized gains and losses, fair value and other-than-temporary impairment ("OTTI") of the Company's fixed maturity and equity securities as of the dates indicated:



	December 31, 2015
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		OTTI in AOCI (a)
Fixed maturity securities:
United States Government and government agencies and authorities	$	646	$	167	$	—		$	813	$	—
States, municipalities and political subdivisions	24,128		1,547		(1		)	25,674		—
Foreign governments	255		114		—			369		—
Commercial mortgage-backed	385		6		—			391		—
Residential mortgage-backed	6,356		925		(9		)	7,272		438
Corporate	45,323		6,111		(205		)	51,229		(79		)
Total fixed maturity securities	$	77,093	$	8,870	$	(215	)	$	85,748	$	359
Equity securities:
Non-redeemable preferred stocks	$	6,932	$	611	$	(124	)	$	7,419	$	—
	December 31, 2014
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		OTTI in AOCI (a)
Fixed maturity securities:
United States Government and government agencies and authorities	$	608	$	189	$	—		$	797	$	—
States, municipalities and political subdivisions	26,614		2,304		—			28,918		—
Foreign governments	255		121		—			376		—
Commercial mortgage-backed	470		29		—			499		—
Residential mortgage-backed	6,653		1,059		(11		)	7,701		481
Corporate	50,962		8,343		(127		)	59,178		—
Total fixed maturity securities	$	85,562	$	12,045	$	(138	)	$	97,469	$	481
Equity securities:
Non-redeemable preferred stocks	$	7,333	$	678	$	(43	)	$	7,968	$	—

(a) Represents the amount of OTTI recognized in accumulated other comprehensive income ("AOCI"). Amount includes unrealized gains and losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

The Company's states, municipalities and political subdivisions holdings are highly diversified across the United States, with no individual state's exposure (including both general obligation and revenue securities) exceeding 4% of the overall investment portfolio as of December 31, 2015 and 2014. At December 31, 2015 and 2014, the securities include general obligation and revenue bonds issued by states, cities, counties, school districts and similar issuers, including $13,820 and $13,075, respectively, of advance refunded or escrowed-to-maturity bonds (collectively referred to as "pre-refunded bonds"), which are bonds for which an irrevocable trust has been established to fund the remaining payments of principal and interest. As of December 31, 2015 and 2014, revenue bonds account for 55% of the holdings. Excluding pre-refunded revenue bonds, the activities supporting the income streams of the Company's revenue bonds are across a broad range of sectors, primarily higher education, highway, water, transit, specifically pledged tax revenues, and other miscellaneous sources such as bond banks, finance authorities and appropriations.

The Company has European investment exposure in its corporate fixed maturity and equity securities of $4,852 with a net unrealized gain of $501 at December 31, 2015 and $5,833 with a net unrealized gain of $711 at December 31, 2014. Approximately 3% of the corporate European exposure is held in the financial industry at December 31, 2015. The Company's largest European country exposure represented approximately 6% of the fair value of the Company's corporate securities as of December 31, 2015 and 2014. All the European investments are denominated in U.S. dollars. The Company's international investments are managed as part of our overall portfolio with the same approach to risk management and focus on diversification.

The Company has exposure to the energy sector in its corporate fixed maturity securities of $5,285 with a net unrealized gain of $387 at December 31, 2015 and $7,852 with a net unrealized gain of $968 at December 31, 2014. Approximately 96% and 97% of the energy exposure is rated as investment grade as of December 31, 2015 and 2014, respectively.

The cost or amortized cost and fair value of fixed maturity securities at December 31, 2015 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.



	Cost or Amortized Cost		Fair Value
Due in one year or less	$	4,193	$	4,285
Due after one year through five years	11,517		12,468
Due after five years through ten years	21,678		23,514
Due after ten years	32,964		37,818
Total	70,352		78,085
Commercial mortgage-backed	385		391
Residential mortgage-backed	6,356		7,272
Total	$	77,093	$	85,748

Major categories of net investment income were as follows:



	Years Ended December 31,
	2015			2014			2013
Fixed maturity securities	$	4,444		$	4,892		$	5,251
Equity securities	460			477			462
Commercial mortgage loans on real estate	1,252			1,681			1,496
Policy loans	11			12			16
Other investments	8			20			31
Total investment income	6,175			7,082			7,256
Investment expenses	(210		)	(248		)	(256		)
Net investment income	$	5,965		$	6,834		$	7,000

No material investments of the Company were non-income producing for the years ended December 31, 2015, 2014, and 2013.

The following table summarizes the proceeds from sales of available-for-sale securities and the gross realized gains and gross realized losses that have been included in earnings as a result of those sales.



	For the Years Ended December 31,
	2015		2014		2013
Proceeds from sales	$	3,062	$	6,303	$	15,065
Gross realized gains	416		404		929
Gross realized losses	27		106		264

For securities sold at a loss during 2015, the average period of time these securities were trading continuously at a price below book value was approximately 9 months.

The following table sets forth the net realized gains (losses), including other-than-temporary impairments, recognized in the statement of operations as follows:



	Years Ended December 31,
	2015			2014		2013
Net realized gains related to sales and other:
Fixed maturity securities	$	354		$	248	$	430
Equity securities	4			3		295
Commercial mortgage loans on real estate	266			12		113
Total net realized gains related to sales and other	624			263		838
Net realized losses related to other-than-temporary impairments:
Fixed maturity securities	(94		)	—		—
Total net realized gains	$	530		$	263	$	838

Other-Than-Temporary Impairments

The Company follows the OTTI guidance, which requires entities to separate an OTTI of a debt security into two components when there are credit related losses associated with the impaired debt security for which the Company asserts that it does not have the intent to sell, and it is more likely than not that it will not be required to sell before recovery of its cost basis. Under the OTTI guidance, the amount of the OTTI related to a credit loss is recognized in earnings, and the amount of the OTTI related to other, non-credit factors (e.g., interest rates, market conditions, etc.) is recorded as a component of other comprehensive income. In instances where no credit loss exists but the Company intends to sell the security or it is more likely than not that the Company will have to sell the debt security prior to the anticipated recovery, the decline in market value below amortized cost is recognized as an OTTI in earnings. In periods after the recognition of an OTTI on debt securities, the Company accounts for such securities as if they had been purchased on the measurement date of the OTTI at an amortized cost basis equal to the previous amortized cost basis less the OTTI recognized in earnings. For debt securities for which OTTI was recognized in earnings, the difference between the new amortized cost basis and the cash flows expected to be collected will be accreted or amortized into net investment income.

For the twelve months ended December 31, 2015, the Company recorded $186 of OTTI, of which $94 was related to credit losses and recorded as net OTTI losses recognized in earnings, with the remaining amount of $92, related to all other factors and was recorded as an unrealized loss component of AOCI. For the twelve months ended December 31, 2014, no OTTI was recorded.

The following table sets forth the amount of credit loss impairments recognized within the results of operations on fixed maturity securities held by the Company as of the dates indicated, for which a portion of the OTTI loss was recognized in AOCI, and the corresponding changes in such amounts.



	Years Ended December 31,
	2015			2014			2013
Balance, beginning of year	$	552		$	446		$	1,496
Additions for credit loss impairments recognized in the current period on securities not previously impaired	94			—			—
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	(68		)	(132		)	(11		)
Reductions for credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period	(27		)	238			(1,039		)
Balance, end of year	$	551		$	552		$	446

The Company regularly monitors its investment portfolio to ensure investments that may be other-than-temporarily impaired are timely identified, properly valued, and charged against earnings in the proper period. The determination that a security has incurred an other-than-temporary decline in value requires the judgment of management. Assessment factors include, but are not limited to, the length of time and the extent to which the market value has been less than cost, the financial condition and rating of the issuer, whether any collateral is held, the intent and ability of the Company to retain the investment for a period of time sufficient to allow for recovery for equity securities and the intent to sell or whether it is more likely than not that the Company will be required to sell for fixed maturity securities. Inherently, there are risks and uncertainties involved in making these judgments. Changes in circumstances and critical assumptions such as a continued weak economy, a more pronounced economic downturn or unforeseen events which affect one or more companies, industry sectors, or countries could result in additional impairments in future periods for other-than-temporary declines in value. Any equity security whose price decline is deemed other-than-temporary is written down to its then current market value with the amount of the impairment reported as a realized loss in that period. The impairment of a fixed maturity security that the Company has the intent to sell or that it is more likely than not that the Company will be required to sell is deemed other-than-temporary and is written down to its market value at the balance sheet date with the amount of the impairment reported as a realized loss in that period. For all other-than-temporarily impaired fixed maturity securities that do not meet either of these two criteria, the Company is required to analyze its ability to recover the amortized cost of the security by calculating the net present value of projected future cash flows. For these other-than-temporarily impaired fixed maturity securities, the net amount recognized in earnings is equal to the difference between the amortized cost of the fixed maturity security and its net present value.

The Company considers different factors to determine the amount of projected future cash flows and discounting methods for corporate debt and residential and commercial mortgage-backed securities. For corporate debt securities, the split between the credit and non-credit losses is driven principally by assumptions regarding the amount and timing of projected future cash flows. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the security at the date of acquisition. For residential and commercial mortgage-backed securities, cash flow estimates, including prepayment assumptions, are based on data from widely accepted third-party data sources or internal estimates. In addition to prepayment assumptions, cash flow estimates vary based on assumptions regarding the underlying collateral including default rates, recoveries and changes in value. The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the fixed maturity security prior to impairment at the balance sheet date. The discounted cash flows become the new amortized cost basis of the fixed maturity security.

In periods subsequent to the recognition of an OTTI, the Company generally accretes the discount (or amortizes the reduced premium) into net investment income, up to the non-discounted amount of projected future cash flows, resulting from the reduction in cost basis, based upon the amount and timing of the expected future cash flows over the estimated period of cash flows.

The investment category and duration of the Company's gross unrealized losses on fixed maturity securities and equity securities at December 31, 2015 and 2014 were as follows:



	December 31, 2015
	Less than 12 months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Fixed maturity securities:
States, municipalities and political subdivisions	$	101	$	(1	)	$	—	$	—		$	101	$	(1	)
Residential mortgage-backed	—		—			522		(9		)	522		(9		)
Corporate	1,688		(100		)	395		(105		)	2,083		(205		)
Total fixed maturity securities	$	1,789	$	(101	)	$	917	$	(114	)	$	2,706	$	(215	)
Equity securities:
Non-redeemable preferred stocks	$	2,561	$	(81	)	$	385	$	(43	)	$	2,946	$	(124	)



	December 31, 2014
	Less than 12 months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Fixed maturity securities:
Residential mortgage-backed	$	—	$	—		$	526	$	(11	)	$	526	$	(11	)
Corporate	683		(39		)	697		(88		)	1,380		(127		)
Total fixed maturity securities	$	683	$	(39	)	$	1,223	$	(99	)	$	1,906	$	(138	)
Equity securities:
Non-redeemable preferred stocks	$	615	$	(28	)	$	235	$	(15	)	$	850	$	(43	)

Total gross unrealized losses represent approximately 6% and 7% of the aggregate fair value of the related securities at December 31, 2015 and 2014, respectively. Approximately 54% and 37% of these gross unrealized losses have been in a continuous loss position for less than twelve months at December 31, 2015 and 2014, respectively. The total gross unrealized losses are comprised of 15 and 9 individual securities at December 31, 2015 and 2014, respectively. In accordance with its policy described above, the Company concluded that for these securities an adjustment to its results of operations for other-than-temporary impairments of the gross unrealized losses was not warranted at December 31, 2015 and 2014. These conclusions were based on a detailed analysis of the underlying credit and expected cash flows of each security. As of December 31, 2015, the gross unrealized losses that have been in a continuous loss position for twelve months or more were concentrated in the Company’s corporate fixed maturity securities and in non-redeemable preferred stocks. The non-redeemable preferred stocks are perpetual preferred securities that have characteristics of both debt and equity securities. To evaluate these securities, the Company applies an impairment model similar to that used for the Company’s fixed maturity securities. As of December 31, 2015, the Company did not intend to sell these securities and it was not more likely than not that the Company would be required to sell them and no underlying cash flow issues were noted. Therefore, the Company did not recognize an OTTI on those perpetual preferred securities that had been in a continuous unrealized loss position for twelve months or more. As of December 31, 2015, the Company did not intend to sell the fixed maturity securities and it was not more likely than not that the Company would be required to sell the securities before the anticipated recovery of their amortized cost basis. The gross unrealized losses are primarily attributable to widening credit spreads associated with an underlying shift in overall credit risk premium.

The cost or amortized cost and fair value of available-for-sale fixed maturity securities in an unrealized loss position at December 31, 2015, by contractual maturity, is shown below.



	Cost or Amortized Cost		Fair Value
Due after one year through five years	$	376	$	370
Due after ten years	2,014		1,814
Total	$	2,390	$	2,184
Residential mortgage-backed	531		522
Total	$	2,921	$	2,706

The Company has exposure to sub-prime and related mortgages within the Company's fixed maturity security portfolio. At December 31, 2015, approximately 9% of the residential mortgage-backed holdings had exposure to sub-prime mortgage collateral. This represented less than 1% of the total fixed income portfolio and approximately 5% of the total unrealized gain position. The one security with sub-prime exposure is below investment grade. All residential mortgage-backed securities, including those with sub-prime exposure, are reviewed as part of the ongoing other-than-temporary impairment monitoring process.

The Company has entered into commercial mortgage loans, collateralized by the underlying real estate, on properties located throughout the United States. At December 31, 2015, approximately 52% of the outstanding principal balance of commercial mortgage loans was concentrated in the states of Colorado, California and Texas. Although the Company has a diversified loan portfolio, an economic downturn could have an adverse impact on the ability of its debtors to repay their loans. The outstanding balance of commercial mortgage loans range in size from $340 to $1,832 at December 31, 2015 and from $373 to $1,880 at December 31, 2014.

Credit quality indicators for commercial mortgage loans are loan-to-value and debt-service coverage ratios. Loan-to-value and debt-service coverage ratios are measures commonly used to assess the credit quality of commercial mortgage loans. The loan-to-value ratio compares the principal amount of the loan to the fair value of the underlying property collateralizing the loan, and is commonly expressed as a percentage. The debt-service coverage ratio compares a property’s net operating income to its debt-service payments and is commonly expressed as a ratio. The loan-to-value and debt-service coverage ratios are generally updated annually in the third quarter.

The following summarizes the Company's loan-to-value and average debt-service coverage ratios as of the dates indicated:



	December 31, 2015
Loan-to-Value	Carrying Value			% of Gross Mortgage Loans		Debt- Service Coverage Ratio
70% and less	$	12,682		82.2	%	2.39
71 - 80%	2,749			17.8	%	1.17
Gross commercial mortgage loans on real estate	15,431			100.0	%	2.17
Less valuation allowance	(120		)
Net commercial mortgage loans on real estate	$	15,311



	December 31, 2014
Loan-to-Value	Carrying Value			% of Gross Mortgage Loans		Debt- Service Coverage Ratio
70% and less	$	15,073		74.8	%	2.28
71 - 80%	2,266			11.2	%	1.15
81 - 95%	2,819			14.0	%	1.15
Gross commercial mortgage loans on real estate	20,158			100.0	%	2.00
Less valuation allowance	(386		)
Net commercial mortgage loans on real estate	$	19,772

All commercial mortgage loans that are individually impaired have an established mortgage loan valuation allowance for losses. An additional valuation allowance is established for incurred, but not specifically identified impairments. Changing economic conditions affect the Company’s valuation of commercial mortgage loans. Changing vacancies and rents are incorporated into the discounted cash flow analysis that the Company performs for monitored loans and may contribute to the establishment of (or an increase or decrease in) a commercial mortgage loan valuation allowance for losses. In addition, the Company continues to monitor the entire commercial mortgage loan portfolio to identify risk. Areas of emphasis are properties that have exposure to specific geographic events, have deteriorating credits or have experienced a reduction in debt-service coverage ratio. Where warranted, the Company has established or increased a valuation allowance based upon this analysis.

The commercial mortgage loan valuation allowance for losses was $120 and $386 at December 31, 2015 and 2014, respectively. In 2015 and 2014, the loan valuation allowance was decreased $266 and $12, respectively, due to changing economic conditions and geographic concentrations.

The Company has fixed maturity securities of $813 and $797 at December 31, 2015 and 2014, respectively, on deposit with governmental authorities as required by law.