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Investments | 9 Months Ended
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Sep. 30, 2015
Investments [Abstract] |
Investments | Investments (a) The amortized cost, net unrealized gains and losses, carrying value, unrecognized holding gains and losses, and fair value of HTM fixed income securities as of September 30, 2015 and December 31, 2014 were as follows:
September 30, 2015 |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Amortized Cost |  | Net Unrealized Gains (Losses) |  | Carrying Value |  | Unrecognized Holding Gains |  | Unrecognized Holding Losses |  | Fair Value
Obligations of states and political subdivisions |  | $ | 205,443 |  |  | 1,108 |  |  | 206,551 |  |  | 7,423 |  |  | — |  |  | 213,974 |
Corporate securities |  | 18,147 |  |  | (241 | ) |  | 17,906 |  |  | 2,467 |  |  | — |  |  | 20,373 |
Asset-backed securities (“ABS”) |  | 1,209 |  |  | (157 | ) |  | 1,052 |  |  | 158 |  |  | — |  |  | 1,210 |
Commercial mortgage-backed securities (“CMBS”) |  | 4,656 |  |  | (296 | ) |  | 4,360 |  |  | 471 |  |  | — |  |  | 4,831 |
Total HTM fixed income securities |  | $ | 229,455 |  |  | 414 |  |  | 229,869 |  |  | 10,519 |  |  | — |  |  | 240,388 |
December 31, 2014 |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Amortized Cost |  | Net Unrealized Gains (Losses) |  | Carrying Value |  | Unrecognized Holding Gains |  | Unrecognized Holding Losses |  | Fair Value
Foreign government |  | $ | 5,292 |  |  | 47 |  |  | 5,339 |  |  | 55 |  |  | — |  |  | 5,394 |
Obligations of states and political subdivisions |  | 285,301 |  |  | 2,071 |  |  | 287,372 |  |  | 11,760 |  |  | — |  |  | 299,132 |
Corporate securities |  | 18,899 |  |  | (273 | ) |  | 18,626 |  |  | 2,796 |  |  | — |  |  | 21,422 |
ABS |  | 2,818 |  |  | (455 | ) |  | 2,363 |  |  | 460 |  |  | — |  |  | 2,823 |
CMBS |  | 4,869 |  |  | (432 | ) |  | 4,437 |  |  | 753 |  |  | — |  |  | 5,190 |
Total HTM fixed income securities |  | $ | 317,179 |  |  | 958 |  |  | 318,137 |  |  | 15,824 |  |  | — |  |  | 333,961 |
Unrecognized holding gains and losses of HTM securities are not reflected in the Financial Statements, as they represent fair value fluctuations from the later of: (i) the date a security is designated as HTM; or (ii) the date that an other-than-temporary impairment (“OTTI”) charge is recognized on an HTM security, through the date of the balance sheet. Our HTM securities had an average duration of 1.5 years as of September 30, 2015. (b) The cost/amortized cost, unrealized gains and losses, and fair value of AFS securities as of September 30, 2015 and December 31, 2014 were as follows:
September 30, 2015 |  |  |  |  |  |  |  |
($ in thousands) |  | Cost/ Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
AFS fixed income securities: |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 109,062 |  |  | 6,069 |  |  | (1 | ) |  | 115,130 |
Foreign government |  | 19,030 |  |  | 657 |  |  | — |  |  | 19,687 |
Obligations of states and political subdivisions |  | 1,303,188 |  |  | 35,552 |  |  | (545 | ) |  | 1,338,195 |
Corporate securities |  | 1,859,834 |  |  | 35,222 |  |  | (8,882 | ) |  | 1,886,174 |
ABS |  | 255,716 |  |  | 1,312 |  |  | (105 | ) |  | 256,923 |
CMBS 1 |  | 220,009 |  |  | 2,450 |  |  | (457 | ) |  | 222,002 |
Residential mortgage-backed securities (“RMBS”)2 |  | 506,932 |  |  | 7,400 |  |  | (1,397 | ) |  | 512,935 |
Total AFS fixed income securities |  | 4,273,771 |  |  | 88,662 |  |  | (11,387 | ) |  | 4,351,046 |
AFS equity securities: |  |  |  |  |  |  |  |
Common stock |  | 208,995 |  |  | 13,542 |  |  | (12,340 | ) |  | 210,197 |
Preferred stock |  | 11,825 |  |  | 46 |  |  | (117 | ) |  | 11,754 |
Total AFS equity securities |  | 220,820 |  |  | 13,588 |  |  | (12,457 | ) |  | 221,951 |
Total AFS securities |  | $ | 4,494,591 |  |  | 102,250 |  |  | (23,844 | ) |  | 4,572,997 |
December 31, 2014 |  |  |  |  |  |  |  |
($ in thousands) |  | Cost/ Amortized Cost |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
AFS fixed income securities: |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 116,666 |  |  | 7,592 |  |  | (128 | ) |  | 124,130 |
Foreign government |  | 27,035 |  |  | 796 |  |  | — |  |  | 27,831 |
Obligations of states and political subdivisions |  | 1,208,776 |  |  | 38,217 |  |  | (729 | ) |  | 1,246,264 |
Corporate securities |  | 1,763,427 |  |  | 42,188 |  |  | (5,809 | ) |  | 1,799,806 |
ABS |  | 176,837 |  |  | 760 |  |  | (373 | ) |  | 177,224 |
CMBS 1 |  | 177,932 |  |  | 2,438 |  |  | (777 | ) |  | 179,593 |
RMBS 2 |  | 505,113 |  |  | 8,587 |  |  | (2,426 | ) |  | 511,274 |
Total AFS fixed income securities |  | 3,975,786 |  |  | 100,578 |  |  | (10,242 | ) |  | 4,066,122 |
AFS equity securities: |  |  |  |  |  |  |  |
Common stock |  | 159,011 |  |  | 32,725 |  |  | (336 | ) |  | 191,400 |
Total AFS equity securities |  | 159,011 |  |  | 32,725 |  |  | (336 | ) |  | 191,400 |
Total AFS securities |  | $ | 4,134,797 |  |  | 133,303 |  |  | (10,578 | ) |  | 4,257,522 |
1 CMBS includes government guaranteed agency securities with a fair value of $7.4 million at September 30, 2015 and $13.2 million at December 31, 2014. 2 RMBS includes government guaranteed agency securities with a fair value of $22.5 million at September 30, 2015 and $32.4 million at December 31, 2014. Unrealized gains and losses of AFS securities represent fair value fluctuations from the later of: (i) the date a security is designated as AFS; or (ii) the date that an OTTI charge is recognized on an AFS security, through the date of the balance sheet. These unrealized gains and losses are recorded in Accumulated other comprehensive (loss) income ("AOCI") on the Consolidated Balance Sheets. (c) The following tables summarize, for all securities in a net unrealized/unrecognized loss position at September 30, 2015 and December 31, 2014, the fair value and pre-tax net unrealized/unrecognized loss by asset class and by length of time those securities have been in a net loss position:
September 30, 2015 |  | Less than 12 months |  | 12 months or longer
($ in thousands) |  | Fair Value |  | Unrealized Losses 1 |  | Fair Value |  | Unrealized Losses 1
AFS fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | — |  |  | — |  |  | 399 |  |  | (1 | )
Obligations of states and political subdivisions |  | 96,861 |  |  | (545 | ) |  | — |  |  | — |
Corporate securities |  | 430,481 |  |  | (7,187 | ) |  | 50,552 |  |  | (1,695 | )
ABS |  | 55,856 |  |  | (71 | ) |  | 12,530 |  |  | (34 | )
CMBS |  | 59,004 |  |  | (367 | ) |  | 15,561 |  |  | (90 | )
RMBS |  | 95,254 |  |  | (457 | ) |  | 65,417 |  |  | (940 | )
Total AFS fixed income securities |  | 737,456 |  |  | (8,627 | ) |  | 144,459 |  |  | (2,760 | )
AFS equity securities: |  |  |  |  |  |  |  |
Common stock |  | 133,601 |  |  | (12,340 | ) |  | — |  |  | — |
Preferred stock |  | 8,562 |  |  | (117 | ) |  | — |  |  | — |
Total AFS equity securities |  | 142,163 |  |  | (12,457 | ) |  | — |  |  | — |
Subtotal |  | $ | 879,619 |  |  | (21,084 | ) |  | 144,459 |  |  | (2,760 | )
|  | Less than 12 months |  | 12 months or longer
($ in thousands) |  | Fair Value |  | Unrealized Losses 1 |  | Unrecognized Gains 2 |  | Fair Value |  | Unrealized Losses 1 |  | Unrecognized Gains 2
HTM securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ABS |  | $ | — |  |  | — |  |  | — |  |  | 942 |  |  | (157 | ) |  | 153 |
Subtotal |  | $ | — |  |  | — |  |  | — |  |  | 942 |  |  | (157 | ) |  | 153 |
Total AFS and HTM |  | $ | 879,619 |  |  | (21,084 | ) |  | — |  |  | 145,401 |  |  | (2,917 | ) |  | 153 |
December 31, 2014 |  | Less than 12 months |  | 12 months or longer
($ in thousands) |  | Fair Value |  | Unrealized Losses 1 |  | Fair Value |  | Unrealized Losses 1
AFS fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 7,567 |  |  | (13 | ) |  | 10,866 |  |  | (115 | )
Obligations of states and political subdivisions |  | 47,510 |  |  | (105 | ) |  | 64,018 |  |  | (624 | )
Corporate securities |  | 276,648 |  |  | (1,734 | ) |  | 153,613 |  |  | (4,075 | )
ABS |  | 113,202 |  |  | (178 | ) |  | 15,618 |  |  | (195 | )
CMBS |  | 12,799 |  |  | (34 | ) |  | 59,219 |  |  | (743 | )
RMBS |  | 3,399 |  |  | (8 | ) |  | 138,724 |  |  | (2,418 | )
Total AFS fixed income securities |  | 461,125 |  |  | (2,072 | ) |  | 442,058 |  |  | (8,170 | )
AFS equity securities: |  |  |  |  |  |  |  |
Common stock |  | 5,262 |  |  | (336 | ) |  | — |  |  | — |
Total AFS equity securities |  | 5,262 |  |  | (336 | ) |  | — |  |  | — |
Subtotal |  | $ | 466,387 |  |  | (2,408 | ) |  | 442,058 |  |  | (8,170 | )
|  | Less than 12 months |  | 12 months or longer
($ in thousands) |  | Fair Value |  | Unrealized Losses 1 |  | Unrecognized Gains 2 |  | Fair Value |  | Unrealized Losses 1 |  | Unrecognized Gains 2
HTM securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Obligations of states and political subdivisions |  | $ | 196 |  |  | (3 | ) |  | 1 |  |  | — |  |  | — |  |  | — |
ABS |  | — |  |  | — |  |  | — |  |  | 2,235 |  |  | (455 | ) |  | 439 |
Subtotal |  | 196 |  |  | (3 | ) |  | 1 |  |  | 2,235 |  |  | (455 | ) |  | 439 |
Total AFS and HTM |  | $ | 466,583 |  |  | (2,411 | ) |  | 1 |  |  | 444,293 |  |  | (8,625 | ) |  | 439 |
1 Gross unrealized losses include non-OTTI unrealized amounts and OTTI losses recognized in AOCI. In addition, this column includes remaining unrealized gain or loss amounts on securities that were transferred to an HTM designation in the first quarter of 2009 for those securities that are in a net unrealized/unrecognized loss position. 2 Unrecognized gains represent fair value fluctuations from the later of: (i) the date a security is designated as HTM; or (ii) the date that an OTTI charge is recognized on an HTM security. The table below provides our net unrealized/unrecognized loss positions by impairment severity as of September 30, 2015 compared with December 31, 2014:
($ in thousands) |  |
September 30, 2015 |  | December 31, 2014
Number of Issues | % of Market/Book | Unrealized/ Unrecognized Loss |  | Number of Issues | % of Market/Book | Unrealized/ Unrecognized Loss
389 |  | 80% - 99% | $ | 21,841 |  |  | 350 |  | 80% - 99% | $ | 10,596 |
4 |  | 60% - 79% | 2,007 |  |  | — |  | 60% - 79% | — |
— |  | 40% - 59% | — |  |  | — |  | 40% - 59% | — |
— |  | 20% - 39% | — |  |  | — |  | 20% - 39% | — |
— |  | 0% - 19% | — |  |  | — |  | 0% - 19% | — |
|  |  | $ | 23,848 |  |  |  |  |  | $ | 10,596 |
We do not intend to sell any of the securities in the tables above, nor do we believe we will be required to sell any of these securities. We have also reviewed these securities under our OTTI policy, as described in Note 2. “Summary of Significant Accounting Policies” within Item 8. “Financial Statements and Supplementary Data.” of our 2014 Annual Report, and have concluded that they are temporarily impaired. This conclusion reflects our current judgment as to the financial position and future prospects of the entity that issued the investment security and underlying collateral. If our judgment about an individual security changes in the future, we may ultimately record a credit loss after having originally concluded that one did not exist, which could have a material impact on our net income and financial position in future periods. (d) Fixed income securities at September 30, 2015, by contractual maturity, are shown below. Mortgage-backed securities ("MBS") are included in the maturity tables using the estimated average life of each security. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations, with or without call or prepayment penalties. Listed below are the contractual maturities of HTM fixed income securities at September 30, 2015:
($ in thousands) |  | Carrying Value |  | Fair Value
Due in one year or less |  | $ | 102,507 |  |  | 103,945 |
Due after one year through five years |  | 116,833 |  |  | 123,960 |
Due after five years through 10 years |  | 10,529 |  |  | 12,483 |
Total HTM fixed income securities |  | $ | 229,869 |  |  | 240,388 |
Listed below are the contractual maturities of AFS fixed income securities at September 30, 2015:
($ in thousands) |  | Fair Value
Due in one year or less |  | $ | 501,398 |
Due after one year through five years |  | 2,180,671 |
Due after five years through 10 years |  | 1,589,038 |
Due after 10 years |  | 79,939 |
Total AFS fixed income securities |  | $ | 4,351,046 |
(e) The following table summarizes our other investment portfolio by strategy and the remaining commitment amount associated with each strategy:
Other Investments |  | Carrying Value |  | September 30, 2015
($ in thousands) |  | September 30, 2015 |  | December 31, 2014 |  | Remaining Commitment
Alternative Investments |  |  |  |  |  |  |  |  |
Secondary private equity |  | $ | 17,503 |  |  | 21,807 |  |  | 7,095 |
Private equity |  | 15,792 |  |  | 20,126 |  |  | 23,826 |
Energy/power generation |  | 11,643 |  |  | 14,445 |  |  | 16,857 |
Real estate |  | 8,854 |  |  | 11,452 |  |  | 9,919 |
Mezzanine financing |  | 6,948 |  |  | 9,853 |  |  | 13,383 |
Distressed debt |  | 6,889 |  |  | 8,679 |  |  | 3,048 |
Venture capital |  | 6,539 |  |  | 6,606 |  |  | 150 |
Total alternative investments |  | 74,168 |  |  | 92,968 |  |  | 74,278 |
Other securities |  | 10,978 |  |  | 6,235 |  |  | 2,269 |
Total other investments |  | $ | 85,146 |  |  | 99,203 |  |  | 76,547 |
For a full description of our seven alternative investment strategies, as well as information regarding redemption, restrictions, and fund liquidations, refer to Note 5. “Investments” in Item 8. “Financial Statements and Supplementary Data.” of our 2014 Annual Report. The following table sets forth gross summarized financial information for our other investments portfolio, including the portion not owned by us. The investments are carried under the equity method of accounting. The last line of the table below reflects our share of the aggregate income, which is the portion included in our Financial Statements. As the majority of these investments report results to us on a one quarter lag, the summarized financial statement information for the three and nine-month periods ended June 30 is as follows:
Income Statement Information |  | Quarter ended June 30, |  | Nine months ended June 30,
($ in millions) |  | 2015 |  | 2014 |  | 2015 |  | 2014
Net investment income |  | $ | 44.1 |  |  | 81.3 |  |  | $ | 139.6 |  |  | 167.0 |
Realized gains (losses) |  | 385.2 |  |  | (26.1 | ) |  | 977.7 |  |  | 171.5 |
Net change in unrealized (depreciation) appreciation |  | (222.2 | ) |  | 628.6 |  |  | (1,089.0 | ) |  | 1,471.0 |
Net income |  | $ | 207.1 |  |  | 683.8 |  |  | $ | 28.3 |  |  | 1,809.5 |
Selective’s insurance subsidiaries’ other investments income (loss) |  | $ | 1.3 |  |  | 3.9 |  |  | $ | (0.8 | ) |  | 12.7 |
(f) We have pledged certain AFS fixed income securities as collateral related to our: (i) outstanding borrowing of $60 million with the Federal Home Loan Bank of Indianapolis ("FHLBI"); and (ii) reinsurance obligations related to our 2011 acquisition of our excess and surplus lines ("E&S") book of business. In addition, certain securities were on deposit with various state and regulatory agencies to comply with insurance laws. We retain all rights regarding all securities pledged as collateral. The following table summarizes the market value of these securities at September 30, 2015:
($ in millions) |  | FHLBI Collateral |  | Reinsurance Collateral |  | State and Regulatory Deposits |  | Total
U.S. government and government agencies |  | $ | 7.7 |  |  | — |  |  | 24.4 |  |  | 32.1 |
Obligations of states and political subdivisions |  | — |  |  | 5.0 |  |  | — |  |  | 5.0 |
Corporate securities |  | — |  |  | 4.8 |  |  | — |  |  | 4.8 |
CMBS |  | 1.4 |  |  | — |  |  | — |  |  | 1.4 |
RMBS |  | 55.5 |  |  | 1.9 |  |  | — |  |  | 57.4 |
Total pledged as collateral |  | $ | 64.6 |  |  | 11.7 |  |  | 24.4 |  |  | 100.7 |
(g) The Company did not have exposure to any credit concentration risk of a single issuer greater than 10% of the Company's stockholders' equity, other than certain U.S. government agencies, as of September 30, 2015 or December 31, 2014. (h) The components of pre-tax net investment income earned for the periods indicated were as follows:
|  | Quarter ended September 30, |  | Nine Months ended September 30,
($ in thousands) |  | 2015 |  | 2014 |  | 2015 |  | 2014
Fixed income securities |  | $ | 30,601 |  |  | 30,706 |  |  | $ | 92,227 |  |  | 95,515 |
Equity securities |  | 2,370 |  |  | 1,909 |  |  | 6,546 |  |  | 5,094 |
Short-term investments |  | 24 |  |  | 15 |  |  | 72 |  |  | 48 |
Other investments |  | 1,337 |  |  | 3,906 |  |  | (781 | ) |  | 12,677 |
Investment expenses |  | (2,271 | ) |  | (2,244 | ) |  | (6,856 | ) |  | (6,734 | )
Net investment income earned |  | $ | 32,061 |  |  | 34,292 |  |  | $ | 91,208 |  |  | 106,600 |
(i) The following tables summarize OTTI by asset type for the periods indicated. We had no OTTI charges in Third Quarter 2014:
Third Quarter 2015 |  | Gross |  | Included in Other Comprehensive Income ("OCI") |  | Recognized in Earnings
($ in thousands) |  |  |
AFS fixed income securities: |  |  |  |  |  |
Corporate securities |  | $ | 253 |  |  | — |  |  | 253 |
Total AFS fixed income securities |  | 253 |  |  | — |  |  | 253 |
AFS equity securities: |  |  |  |  |  |
Common stock |  | 1,029 |  |  | — |  |  | 1,029 |
Total AFS equity securities |  | 1,029 |  |  | — |  |  | 1,029 |
Total OTTI losses |  | $ | 1,282 |  |  | — |  |  | 1,282 |
Nine Months 2015 |  | Gross |  | Included in OCI |  | Recognized in Earnings
($ in thousands) |  |  |
AFS fixed income securities: |  |  |  |  |  |
Corporate securities |  | $ | 1,445 |  |  | — |  |  | 1,445 |
RMBS |  | 1 |  |  | — |  |  | 1 |
Total AFS fixed income securities |  | 1,446 |  |  | — |  |  | 1,446 |
AFS equity securities: |  |  |  |  |  |
Common stock |  | 6,201 |  |  | — |  |  | 6,201 |
Preferred stock |  | 180 |  |  | — |  |  | 180 |
Total AFS equity securities |  | 6,381 |  |  | — |  |  | 6,381 |
Total OTTI losses |  | $ | 7,827 |  |  | — |  |  | 7,827 |
Nine Months 2014 |  | Gross |  | Included in OCI |  | Recognized in Earnings
($ in thousands) |  |  |
AFS equity securities: |  |  |  |  |  |  |  |  |
Common stock |  | $ | 1,382 |  |  | — |  |  | 1,382 |
Total OTTI losses |  | $ | 1,382 |  |  | — |  |  | 1,382 |
For a discussion of our evaluation for OTTI of fixed income securities, short-term investments, equity securities, and other investments, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2014 Annual Report. The following tables set forth, for the periods indicated, credit loss impairments on fixed income securities for which a portion of the OTTI charge was recognized in OCI, and the corresponding changes in such amounts:
|  | Quarter ended September 30,
($ in thousands) |  | 2015 |  | 2014
Balance, beginning of period |  | $ | 1,013 |  |  | 5,534 |
Addition for the amount related to credit loss for which an OTTI was not previously recognized |  | — |  |  | — |
Reductions for securities sold during the period |  | — |  |  | (90 | )
Reductions for securities for which the amount previously recognized in OCI was recognized in earnings because of intention or potential requirement to sell before recovery of amortized cost |  | — |  |  | — |
Additional increases to the amount related to credit loss for which an OTTI was previously recognized |  | — |  |  | — |
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected |  | — |  |  | — |
Balance, end of period |  | $ | 1,013 |  |  | 5,444 |
|  | Nine Months ended September 30,
($ in thousands) |  | 2015 |  | 2014
Balance, beginning of period |  | $ | 5,444 |  |  | 7,488 |
Addition for the amount related to credit loss for which an OTTI was not previously recognized |  | — |  |  | — |
Reductions for securities sold during the period |  | (4,431 | ) |  | (2,044 | )
Reductions for securities for which the amount previously recognized in OCI was recognized in earnings because of intention or potential requirement to sell before recovery of amortized cost |  | — |  |  | — |
Additional increases to the amount related to credit loss for which an OTTI was previously recognized |  | — |  |  | — |
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected |  | — |  |  | — |
Balance, end of period |  | $ | 1,013 |  |  | 5,444 |
(j) The components of net realized gains, excluding OTTI charges, for the periods indicated were as follows:
|  | Quarter ended September 30, |  | Nine Months ended September 30,
($ in thousands) |  | 2015 |  | 2014 |  | 2015 |  | 2014
HTM fixed income securities |  |  |  |  |  |  |  |
Gains |  | $ | 3 |  |  | — |  |  | 5 |  |  | 3 |
Losses |  | — |  |  | (4 | ) |  | (1 | ) |  | (18 | )
AFS fixed income securities |  |  |  |  |  |  |  |  |  |  |  |
Gains |  | 169 |  |  | 695 |  |  | 2,158 |  |  | 1,633 |
Losses |  | — |  |  | (29 | ) |  | (130 | ) |  | (172 | )
AFS equity securities |  |  |  |  |  |  |  |  |  |  |  |
Gains |  | 1,419 |  |  | 14,576 |  |  | 23,567 |  |  | 27,255 |
Losses |  | (1 | ) |  | (8 | ) |  | (1,347 | ) |  | (332 | )
Other investments |  |  |  |  |  |  |  |
Gains |  | — |  |  | 1 |  |  | — |  |  | 1 |
Losses |  | — |  |  | — |  |  | (654 | ) |  | — |
Total net realized gains (excluding OTTI charges) |  | $ | 1,590 |  |  | 15,231 |  |  | 23,598 |  |  | 28,370 |
Realized gains and losses on the sale of investments are determined on the basis of the cost of the specific investments sold. Proceeds from the sale of AFS securities were $12.7 million and $170.6 million in Third Quarter and Nine Months 2015, respectively. The $23.6 million in net realized gains for Nine Months 2015 was primarily related to the sale of AFS equity securities due to a change in our dividend equity strategy from a quantitative, model-driven stock selection strategy to a fundamentally-based stock selection approach that incorporates an assessment of the sustainability and growth rate of a company’s dividends and future cash flow. The $15.2 million and $28.4 million in net realized gains in Third Quarter and Nine Months 2014, respectively, were primarily related to the sale of AFS equity securities due to the quantitative rebalancing of our dividend yield strategy holdings within our equity portfolio.

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