Investments

(a) Information regarding our held-to-maturity ("HTM") fixed income securities as of March 31, 2017 and December 31, 2016 was as follows:



March 31, 2017
($ in thousands)	Amortized Cost		Net Unrealized Gains (Losses)		Carrying Value	Unrecognized Holding Gains	Unrecognized Holding Losses		Fair Value
Obligations of states and political subdivisions	$	62,534	245		62,779	1,981	—		64,760
Corporate securities	22,194		(137	)	22,057	1,614	(92	)	23,579
Total HTM fixed income securities	$	84,728	108		84,836	3,595	(92	)	88,339



December 31, 2016
($ in thousands)	Amortized Cost		Net Unrealized Gains (Losses)		Carrying Value	Unrecognized Holding Gains	Unrecognized Holding Losses		Fair Value
Obligations of states and political subdivisions	$	77,466	317		77,783	2,133	—		79,916
Corporate securities	22,711		(143	)	22,568	1,665	(158	)	24,075
Commercial mortgage-backed securities ("CMBS")	1,220		(15	)	1,205	15	—		1,220
Total HTM fixed income securities	$	101,397	159		101,556	3,813	(158	)	105,211

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.

(b) Information regarding our AFS securities as of March 31, 2017 and December 31, 2016 was as follows:



March 31, 2017
($ in thousands)	Cost/ Amortized Cost		Unrealized Gains	Unrealized Losses		Fair Value
AFS fixed income securities:
U.S. government and government agencies	$	86,816	1,566	(44	)	88,338
Foreign government	31,965		628	—		32,593
Obligations of states and political subdivisions	1,261,191		28,923	(2,948	)	1,287,166
Corporate securities	1,799,706		30,493	(2,073	)	1,828,126
Collateralized loan obligations and other asset-backed securities ("CLO and other ABS")	675,838		2,998	(401	)	678,435
CMBS	263,217		1,314	(775	)	263,756
Residential mortgage-backed securities (“RMBS”)	686,635		3,623	(1,667	)	688,591
Total AFS fixed income securities	4,805,368		69,545	(7,908	)	4,867,005
AFS equity securities:
Common stock	108,466		30,150	(285	)	138,331
Preferred stock	16,148		480	(41	)	16,587
Total AFS equity securities	124,614		30,630	(326	)	154,918
Total AFS securities	$	4,929,982	100,175	(8,234	)	5,021,923



December 31, 2016
($ in thousands)	Cost/ Amortized Cost		Unrealized Gains	Unrealized Losses		Fair Value
AFS fixed income securities:
U.S. government and government agencies	$	75,139	2,230	(36	)	77,333
Foreign government	26,559		322	(16	)	26,865
Obligations of states and political subdivisions	1,366,287		18,610	(5,304	)	1,379,593
Corporate securities	1,976,556		27,057	(5,860	)	1,997,753
CLO and other ABS	527,876		1,439	(355	)	528,960
CMBS	256,356		1,514	(1,028	)	256,842
RMBS	524,986		3,006	(2,798	)	525,194
Total AFS fixed income securities	4,753,759		54,178	(15,397	)	4,792,540
AFS equity securities:
Common stock	104,663		26,250	(305	)	130,608
Preferred stock	16,226		274	(355	)	16,145
Total AFS equity securities	120,889		26,524	(660	)	146,753
Total AFS securities	$	4,874,648	80,702	(16,057	)	4,939,293

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 income (loss)" ("AOCI") on the Consolidated Balance Sheets.

(c) The table below provides our net unrealized/unrecognized loss positions by impairment severity for both AFS and HTM securities as of March 31, 2017 compared to December 31, 2016.



($ in thousands)
March 31, 2017				December 31, 2016
Number of Issues	% of Market/Book	Unrealized/ Unrecognized Loss		Number of Issues	% of Market/Book	Unrealized/ Unrecognized Loss
304	80% - 99%	$	8,326	456	80% - 99%	$	16,215
—	60% - 79%	—		—	60% - 79%	—
—	40% - 59%	—		—	40% - 59%	—
—	20% - 39%	—		—	20% - 39%	—
—	0% - 19%	—		—	0% - 19%	—
		$	8,326			$	16,215

The severity of impairment on the securities in the table above averaged 1% of amortized cost at March 31, 2017 and December 31, 2016. Quantitative information regarding unrealized losses on our AFS portfolio is provided below. Our HTM portfolio had $0.1 million in unrealized/unrecognized losses at March 31, 2017 and $0.2 million in unrealized/unrecognized losses at December 31, 2016.



March 31, 2017	Less than 12 months				12 months or longer			Total
($ in thousands)	Fair Value		Unrealized Losses¹		Fair Value	Unrealized Losses¹		Fair Value	Unrealized Losses¹
AFS fixed income securities:
U.S. government and government agencies	$	9,012	(44	)	—	—		9,012	(44	)
Obligations of states and political subdivisions	114,632		(2,948	)	—	—		114,632	(2,948	)
Corporate securities	229,836		(2,068	)	244	(5	)	230,080	(2,073	)
CLO and other ABS	137,388		(400	)	310	(1	)	137,698	(401	)
CMBS	80,494		(775	)	—	—		80,494	(775	)
RMBS	212,486		(1,588	)	2,246	(79	)	214,732	(1,667	)
Total AFS fixed income securities	783,848		(7,823	)	2,800	(85	)	786,648	(7,908	)
AFS equity securities:
Common stock	10,088		(285	)	—	—		10,088	(285	)
Preferred stock	1,527		(41	)	—	—		1,527	(41	)
Total AFS equity securities	11,615		(326	)	—	—		11,615	(326	)
Total AFS	$	795,463	(8,149	)	2,800	(85	)	798,263	(8,234	)



December 31, 2016	Less than 12 months				12 months or longer			Total
($ in thousands)	Fair Value		Unrealized Losses¹		Fair Value	Unrealized Losses¹		Fair Value	Unrealized Losses¹
AFS fixed income securities:
U.S. government and government agencies	$	6,419	(36	)	—	—		6,419	(36	)
Foreign government	13,075		(16	)	—	—		13,075	(16	)
Obligations of states and political subdivisions	306,509		(5,304	)	—	—		306,509	(5,304	)
Corporate securities	462,902		(5,771	)	4,913	(89	)	467,815	(5,860	)
CLO and other ABS	189,795		(354	)	319	(1	)	190,114	(355	)
CMBS	82,492		(1,021	)	1,645	(7	)	84,137	(1,028	)
RMBS	279,480		(2,489	)	8,749	(309	)	288,229	(2,798	)
Total AFS fixed income securities	1,340,672		(14,991	)	15,626	(406	)	1,356,298	(15,397	)
AFS equity securities:
Common stock	11,271		(305	)	—	—		11,271	(305	)
Preferred stock	6,168		(355	)	—	—		6,168	(355	)
Total AFS equity securities	17,439		(660	)	—	—		17,439	(660	)
Total AFS	$	1,358,111	(15,651	)	15,626	(406	)	1,373,737	(16,057	)

¹Gross unrealized losses include non-OTTI unrealized amounts and OTTI losses recognized in AOCI.

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 2016 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. Additionally, changes in market value due to interest rate fluctuations are considered temporary. 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 March 31, 2017, 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 March 31, 2017:



($ in thousands)	Carrying Value		Fair Value
Due in one year or less	$	39,376	39,876
Due after one year through five years	37,028		39,365
Due after five years through 10 years	8,432		9,098
Total HTM fixed income securities	$	84,836	88,339

Listed below are the contractual maturities of AFS fixed income securities at March 31, 2017:



($ in thousands)	Fair Value
Due in one year or less	$	331,997
Due after one year through five years	1,989,887
Due after five years through 10 years	2,294,091
Due after 10 years	251,030
Total AFS fixed income securities	$	4,867,005

(e) We evaluate the alternative investments and tax credit investments included in our other investments portfolio to determine whether those investments are VIEs and if so, whether consolidation is required. A VIE is an entity that either has equity investors that lack certain essential characteristics of a controlling financial interest or lacks sufficient funds to finance its own activities without financial support provided by other entities. We consider several significant factors in determining if our investments are VIEs and if we are the primary beneficiary, including whether we have: (i) the power to direct activities of the VIE; (ii) the ability to remove the decision maker of the VIE; (iii) the ability to participate in making decisions that are significant to the VIE; and (iv) the obligation to absorb losses and the right to receive benefits that could potentially be significant to the VIE. We have determined that the investments in our other investment portfolio are VIEs, but that we are not the primary beneficiary and therefore, consolidation is not required.

The following table summarizes our other investment portfolio by strategy:



Other Investments	March 31, 2017				December 31, 2016
($ in thousands)	Carrying Value		Remaining Commitment	Maximum Exposure to Loss¹	Carrying Value	Remaining Commitment	Maximum Exposure to Loss¹
Alternative Investments
Private equity	$	41,354	74,669	116,023	41,135	76,774	117,909
Private credit	31,026		40,745	71,771	28,193	40,613	68,806
Real assets	16,265		27,764	44,029	14,486	22,899	37,385
Total alternative investments	88,645		143,178	231,823	83,814	140,286	224,100
Other securities	18,151		267	18,418	18,583	3,400	21,983
Total other investments	$	106,796	143,445	250,241	102,397	143,686	246,083

¹The maximum exposure to loss includes both the carry value of these investments and the related unfunded commitments. In addition, tax credits that have been previously recognized in Other securities are subject to the risk of recapture, which we do not consider significant.

We do not have a future obligation to fund losses or debts on behalf of the investments above; however, we are contractually committed to make additional investments up to the remaining commitment outlined above. We have not provided any non-contractual financial support at any time during 2017 or 2016.

For a description of our 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 2016 Annual Report.

The following table sets forth gross summarized financial information for our other investments portfolio, including the portion not owned by us. The majority of these investments are carried under the equity method of accounting. The last line of the table below reflects our share of the aggregate income or loss, 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 month periods ended December 31 is as follows:



Income Statement Information	Quarter ended December 31,
($ in millions)	2016			2015
Net investment (loss) income	$	25.6		46.6
Realized gains	(235.1		)	752.5
Net change in unrealized depreciation	561.5			(883.2	)
Net gain	$	352.0		(84.1	)
Selective’s insurance subsidiaries’ other investments gain (loss)	$	1.6		(1.1	)

(f) We have pledged certain AFS fixed income securities as collateral related to our relationships with the Federal Home Loan Bank of Indianapolis ("FHLBI") and the Federal Home Loan Bank of New York ("FHLBNY"). In addition, certain securities were on deposit with various state and regulatory agencies at March 31, 2017 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 March 31, 2017:



($ in millions)	FHLBI Collateral		FHLBNY Collateral	State and Regulatory Deposits	Total
U.S. government and government agencies	$	4.3	—	24.4	28.7
CMBS	3.6		4.8	—	8.4
RMBS	60.4		53.9	—	114.3
Total pledged as collateral	$	68.3	58.7	24.4	151.4

(g) We did not have exposure to any credit concentration risk of a single issuer greater than 10% of our stockholders' equity, other than certain U.S. government-backed investments, as of March 31, 2017 or December 31, 2016.

(h) The components of pre-tax net investment income earned were as follows:



	Quarter ended March 31,
($ in thousands)	2017			2016
Fixed income securities	$	36,891		31,644
Equity securities	1,468			2,230
Short-term investments	250			159
Other investments	1,603			(1,066	)
Investment expenses	(2,793		)	(2,198	)
Net investment income earned	$	37,419		30,769

(i) The following tables summarize OTTI by asset type for the periods indicated:



First Quarter 2017	Gross		Included in Other Comprehensive Income ("OCI")	Recognized in Earnings
($ in thousands)	Gross		Included in Other Comprehensive Income ("OCI")	Recognized in Earnings
AFS fixed income securities:
U.S. government and government agencies	29		—	29
Obligations of states and political subdivisions	373		—	373
Corporate securities	194		—	194
CLO and other ABS	23		—	23
CMBS	450		—	450
RMBS	1,092		—	1,092
Total AFS fixed income securities	2,161		—	2,161
AFS equity securities:
Common stock	$	1,314	—	1,314
Total AFS equity securities	1,314		—	1,314
Total OTTI losses	$	3,475	—	3,475



First Quarter 2016	Gross		Included in OCI	Recognized in Earnings
($ in thousands)	Gross		Included in OCI	Recognized in Earnings
AFS fixed income securities:
Corporate securities	$	973	—	973
Total AFS fixed income securities	973		—	973
AFS equity securities:
Common stock	2,617		—	2,617
Preferred stock	3		—	3
Total AFS equity securities	2,620		—	2,620
Total OTTI losses	$	3,593	—	3,593

For a discussion of our evaluation for OTTI refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2016 Annual Report.

(j) The components of net realized gains, excluding OTTI charges, for the periods indicated were as follows:



	Quarter ended March 31,
($ in thousands)	2017			2016
HTM fixed income securities
Gains	$	—		—
Losses	(1		)	(1	)
AFS fixed income securities
Gains	3,552			620
Losses	(1,587		)	(36	)
AFS equity securities
Gains	—			330
Losses	—			(20	)
Other investments
Gains	480			—
Losses	(14		)	(4	)
Total net realized gains (excluding OTTI charges)	$	2,430		889

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 $600.3 million and $17.2 million in First Quarter 2017 and First Quarter 2016, respectively. This increase was driven by higher trading volume in our fixed income securities portfolio related to the recent hiring of new external investment managers.