Note B - Investments

The following is a summary of available for sale securities at December 31:

										Net
			Cost or		Gross		Gross			Unrealized
	Fair		Amortized		Unrealized		Unrealized			Gains
	Value		Cost		Gains		Losses			(Losses)
2014:
Fixed maturities:
U.S. government obligations	$	101,094	$	101,058	$	108	$	(72	)	$	36
Residential mortgage-backed securities		6,066		5,830		273		(37	)		236
Commercial mortgage-backed securities		36,440		36,210		630		(400	)		230
State and municipal obligations		113,777		113,133		784		(140	)		644
Corporate securities		166,966		170,822		2,005		(5,861	)		(3,856	)
Foreign government obligations		27,466		28,332		114		(980	)		(866	)
Total fixed maturities		451,809		455,385		3,914		(7,490	)		(3,576	)
Equity securities:
Financial institutions		25,343		10,100		15,303		(60	)		15,243
Industrial & miscellaneous		136,764		68,678		70,260		(2,174	)		68,086
Total equity securities		162,107		78,778		85,563		(2,234	)		83,329
Total	$	613,916	$	534,163	$	89,477	$	(9,724	)		79,753

							Applicable federal income taxes				(27,913	)

							Net unrealized gains - net of tax			$	51,840

2013:
Fixed maturities:
U.S. government obligations	$	113,389	$	113,348	$	81	$	(40	)	$	41
Residential mortgage-backed securities		13,252		12,058		1,334		(140	)		1,194
Commercial mortgage-backed securities		28,565		28,406		308		(149	)		159
State and municipal obligations		115,250		115,278		407		(435	)		(28	)
Corporate securities		137,215		136,991		3,207		(2,983	)		224
Foreign government obligations		23,879		23,689		588		(398	)		190
Total fixed maturities		431,550		429,770		5,925		(4,145	)		1,780
Equity securities:
Financial institutions		18,850		7,780		11,171		(101	)		11,070
Industrial & miscellaneous		126,978		64,307		63,009		(338	)		62,671
Total equity securities		145,828		72,087		74,180		(439	)		73,741
Total	$	577,378	$	501,857	$	80,105	$	(4,584	)		75,521

							Applicable federal income taxes				(26,432	)

							Net unrealized gains - net of tax			$	49,089

The following table summarizes, for fixed maturity and equity security investments in an unrealized loss position at December 31, the aggregate fair value and gross unrealized loss categorized by the duration those securities have been continuously in an unrealized loss position.

	2014							2013
	Number of Securities		Fair Value		Gross Unrealized Loss			Number of Securities		Fair Value		Gross Unrealized Loss
Fixed maturity securities:
12 months or less		591	$	176,756	$	(6,083	)		451	$	123,145	$	(3,105	)
Greater than 12 months		140		27,667		(1,407	)		53		18,249		(1,040	)
Total fixed maturities		731		204,423		(7,490	)		504		141,394		(4,145	)
Equity securities:
12 months or less		33		13,538		(2,170	)		10		1,682		(204	)
Greater than 12 months		3		686		(64	)		2		1,980		(235	)
Total equity securities		36		14,224		(2,234	)		12		3,662		(439	)
Total		767	$	218,647	$	(9,724	)		516	$	145,056	$	(4,584	)

Unrealized losses in the Company’s fixed maturity portfolio are generally the result of interest rate or foreign currency fluctuations as well as the disruption of credit markets occasioned by financial market turmoil such as that associated with recent oil price declines. The average unrealized loss for all fixed maturity securities in a loss position at December 31, 2014 is approximately 4% of original or adjusted cost. The Company does not intend to sell any fixed maturity securities and it is not more likely than not that the Company will have to sell any fixed maturity security before recovery of its amortized cost basis. For equity securities, the Company has evaluated the near-term prospects of the investments in relation to the severity and duration of the impairment and based on that evaluation the Company has the ability and intent to hold these investments for a period sufficient to allow for recovery of fair value. Therefore, the Company does not believe the unrealized losses represent an other-than-temporary impairment as of December 31, 2014.

The fair value and the cost or amortized cost of fixed maturity investments at December 31, 2014, by contractual maturity, is shown below. Actual maturities may differ from contractual maturities because borrowers have, in some cases, the right to call or prepay obligations with or without call or prepayment penalties. Pre-refunded municipal bonds are classified based on their pre-refunded call dates.

	Fair Value				Cost or Amortized Cost

One year or less	$	130,407	28.9	%	$	130,322	28.6	%
Excess of one year to five years		189,182	41.9			192,990	42.4
Excess of five years to ten years		47,209	10.4			48,176	10.6
Excess of ten years		9,377	2.1			8,744	1.9
Total maturities		376,175	83.3			380,232	83.5
Asset-backed securities		75,634	16.7			75,153	16.5
	$	451,809	100.0	%	$	455,385	100.0	%

Major categories of investment income for the years ended December 31 are summarized as follows:

		2014			2013			2012
Interest on fixed maturities		$	8,806		$	9,023		$	10,052
Dividends on equity securities			2,693			2,166			2,121
Money market funds, Short-term and other			37			49			43
			11,536			11,238			12,216
Investment expenses			(2,481	)		(2,468	)		(2,286	)
	Net investment income	$	9,055		$	8,770		$	9,930

Gains and losses on investments, including equity method earnings from limited partnerships, for the years ended December 31 are summarized below:

	2014			2013			2012
Fixed maturities:
Gross gains	$	6,480		$	7,235		$	3,860
Gross losses		(4,596	)		(4,371	)		(3,961	)
Net gains (losses)		1,884			2,864			(101	)

Equity securities:
Gross gains		7,467			15,374			3,191
Gross losses		(1,529	)		(2,718	)		(1,131	)
Net gains		5,938			12,656			2,060

Limited partnerships - net gain		7,108			7,995			7,052


Total net gains	$	14,930		$	23,515		$	9,011

Shareholders' equity includes approximately $28,596, net of deferred federal income taxes, of undistributed earnings from limited partnerships as of December 31, 2014.

Gain and loss activity for fixed maturity and equity security investments, as shown in the previous table, include adjustments for other-than-temporary impairment for the years ended December 31 summarized as follows:

	2014			2013			2012

Cumulative charges to income at beginning of year	$	6,770		$	7,773		$	8,178

Writedowns based on objective and subjective criteria		689			742			888
Recovery of prior writedowns upon sale or disposal		(291	)		(1,745	)		(1,293	)
Net pre-tax realized gain (loss)		(398	)		1,003			405

Cumulative charges to income at end of year	$	7,168		$	6,770		$	7,773

Addition (reduction) to earnings per share from net
after-tax OTI gain (loss)	$	(.02	)	$	.04		$	.02

Unrealized gain on investments previously
written down at end of the year - see note below	$	17,127		$	13,129		$	8,158

Note: Recovery in market value of an investment which has previously been adjusted for other-than-temporary impairment is treated as an unrealized gain until the investment matures or is sold.

There is no primary or secondary market for the Company’s investments in limited partnerships and, in most cases, the Company is prohibited from disposing of its limited partnership interests for some period of time and generally must seek approval from the general partner for any such disposal. Distributions of earnings from these partnerships are largely at the sole discretion of the general partners and distributions are generally not received by the Company for many years after the earnings have been reported. The Company has commitments to contribute an additional $2,868 to various limited partnerships as of December 31, 2014.

The Company has invested a total of $23,000 in two limited partnerships, with an aggregate estimated value of $46,987 at December 31, 2014, that are managed by organizations in which four directors of the Company are executive officers, directors or owners. The Company’s ownership interest in these limited partnerships ranges from 5% to 16%. These limited partnerships added $7,088, $1,154 and $2,485, net of fees, to investment gains in 2014, 2013 and 2012, respectively. During 2014, 2013 and 2012, the Company has recorded management fees of $697, $640 and $650, respectively, and performance-based fees of $0, $18 and $0, respectively, to these organizations for management of these limited partnerships. The Company has been informed that the fee rates applied to its investments in these limited partnerships are the same as, or lower than, the fee rates charged to unaffiliated customers for similar investments.

The Company utilized the services of a broker-dealer firm of which two directors of the Company are employees or partial owners. This broker-dealer serves as agent for purchases and sales of securities and manages an equity securities portfolio and fixed maturity portfolio with market values of approximately $3,334 and $19,822, respectively, at December 31, 2014. The Company has been informed that commission and management rates charged by this broker-dealer to the Company are commensurate with rates charged to non-affiliated customers for similar investments. Total commissions and net fees earned by the broker-dealer and affiliates on these transactions and for advice and consulting were approximately $212, $239 and $186 during 2014, 2013 and 2012, respectively.

The Company’s limited partnerships include one significant investment which invests in public and private equity markets in India. This limited partnership investment’s value as of December 31, 2014 and 2013 was $29,868 and $22,692, respectively. At December 31, 2014, the Company’s estimated ownership interest in this limited partnership investment was approximately 5%. The Company's share of earnings (losses) from this limited partnership investment was $7,176, ($3,176) and $2,404 in 2014, 2013 and 2012, respectively. The summarized financial information of the significant limited partnership investment as of and for the years ended December 31 is as follows:

	2014		2013			2012
Total assets	$	565,500	$	493,028		$	641,071
Total partners' capital		542,700		444,337			559,745
Net increase (decrease) in partners' capital resulting from operations		125,700		(64,550	)		60,734

The fair value of regulatory deposits with various insurance departments in the United States and Canada totaled $76,406 and $63,447 at December 31, 2014 and 2013, respectively.

Short-term investments at December 31, 2014 include $2,966 in time certificates of deposit issued by a Bermuda bank.

The Company’s fixed maturities are over 85% invested in investment grade fixed maturity investments. The Company has a total of $15,430, representing five different investments, of fixed maturity investments which were originally issued with guarantees by two different third party insurance companies, with the largest exposure to a single investment being $5,150. The average S&P credit rating of such investments, with consideration of the guarantee, is AA. The average S&P underlying credit rating of such investments, without consideration of the guarantee, would remain AA. The Company does not have any direct exposure to any guarantor.

Approximately $66,817 of fixed maturity investments (8.8% of total invested assets) consists of bonds rated as less than investment grade at year end. These investments include a diversified portfolio of over 40 investments and have a $3,188 net unrealized loss position at December 31, 2014.

As of December 31, 2014, the Company had committed funds totaling $7,850 related to two bridge loan agreements. The Company retains possession of these funds which will only be loaned in the unlikely event that long-term financing is unavailable to the counter party in the market.