Investments

The Company liquidated its trading portfolio of equity securities and transferred the fixed maturities that were outstanding at December 31, 2012 into its portfolio of securities available for sale effective March 1, 2013. The unrealized gain (loss) associated with the fixed maturities trading portfolio was recognized in earnings up to the date of transfer.

The following table presents the Company’s investment holdings by type of instrument as of the dates presented (in thousands):


	June 30, 2014						December 31, 2013
	Cost or						Cost or
	Amortized				Carrying		Amortized				Carrying
	Cost		Fair Value		Value		Cost		Fair Value		Value
Cash and cash equivalents (1)	$	201,357	$	201,357	$	201,357	$	117,275	$	117,275	$	117,275
Restricted cash and cash equivalents		2,635		2,635		2,635		2,600		2,600		2,600
Fixed maturities:
U.S. government obligations and agencies		116,931		116,422		116,422		105,229		104,215		104,215
Corporate bonds		106,450		106,745		106,745		94,708		94,203		94,203
Mortgage-backed and asset-backed securities		95,054		94,908		94,908		91,502		91,000		91,000
Redeemable preferred stock		4,990		5,070		5,070		—		—		—
Equity securities:
Common stock		652		590		590		8,500		9,295		9,295
Mutual funds		12,502		11,830		11,830		55,113		55,727		55,727

Total investments		336,579		335,565		335,565		355,052		354,440		354,440

Total	$	540,571	$	539,557	$	539,557	$	474,927	$	474,315	$	474,315

(1)	Cash and cash equivalents include short-term debt securities consisting of direct obligations of the U.S. Treasury and/or money-market accounts that invest in or are collateralized by direct obligations of the U.S. Treasury and other U.S. government guaranteed securities.

The Company has made an assessment of its invested assets for fair value measurement as further described in “— Note 13 (Fair Value Measurements)”.

The following table presents the components of net investment income, comprised primarily of interest and dividends, for the periods presented (in thousands):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
Cash and cash equivalents (1)	$	9		$	122		$	21		$	242
Fixed maturities		783			(30	)		1,511			(30	)
Equity securities		152			279			454			367

Total investment income		944			371			1,986			579
Less investment expenses		(532	)		(234	)		(1,056	)		(430	)

Net investment (expense) income	$	412		$	137		$	930		$	149

(1)

Includes interest earned on restricted cash and cash equivalents.

Securities Available for Sale

The following table provides the cost or amortized cost and fair value of securities available for sale as of the dates presented (in thousands):


	June 30, 2014
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed Maturities:
U.S. government obligations and agencies	$	116,931	$	77	$	(586	)	$	116,422
Corporate bonds		106,450		443		(148	)		106,745
Mortgage-backed and asset-backed securities		95,054		204		(350	)		94,908
Redeemable preferred stock		4,990		82		(2	)		5,070
Equity Securities:
Common stock		652		3		(65	)		590
Mutual funds		12,502		19		(691	)		11,830

Total	$	336,579	$	828	$	(1,842	)	$	335,565


	December 31, 2013
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed Maturities:
U.S. government obligations and agencies	$	105,229	$	19	$	(1,033	)	$	104,215
Corporate bonds		94,708		265		(770	)		94,203
Mortgage-backed and asset-backed securities		91,502		75		(577	)		91,000
Equity Securities:
Common stock		8,500		916		(121	)		9,295
Mutual funds		55,113		2,266		(1,652	)		55,727

Total	$	355,052	$	3,541	$	(4,153	)	$	354,440

The following table provides the credit quality of fixed maturities as of the dates presented (in thousands):


June 30, 2014
Standard and Poor’s Rating Services	Fair Value		% of Total Fair Value
AAA	$	30,547		9.5	%
AA		191,775		59.3	%
A		49,930		15.5	%
BBB		41,812		12.9	%
BB and Below		1,504		0.5	%
No Rating Available		7,577		2.3	%

Total	$	323,145		100.0	%


December 31, 2013
Standard and Poor’s Rating Services	Fair Value		% of Total Fair Value
AAA	$	82,889		28.6	%
AA		120,976		41.8	%
A		46,689		16.1	%
BBB		38,114		13.2	%
No Rating Available		750		0.3	%

Total	$	289,418		100.0	%

The following table summarizes the cost or amortized cost and fair value of mortgage-backed and asset-backed securities as of the dates presented (in thousands):


	June 30, 2014				December 31, 2013
	Cost or Amortized				Cost or Amortized
	Cost		Fair Value		Cost		Fair Value
Mortgage-backed securities:
Agency	$	57,935	$	57,737	$	64,028	$	63,547
Non-agency		2,184		2,169		—		—
Asset-backed securities:
Auto loan receivables		16,858		16,907		14,816		14,841
Credit card receivables		13,478		13,479		11,478		11,425
Other receivables		4,599		4,616		1,180		1,187

Total	$	95,054	$	94,908	$	91,502	$	91,000

The following table summarizes the fair value and gross unrealized losses on securities available for sale, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position as of the dates presented (in thousands):


	June 30, 2014
	Less Than 12 Months							12 Months or Longer
	Number of Issues		Fair Value		Unrealized Losses			Number of Issues		Fair Value		Unrealized Losses
Fixed maturities:
U.S. government obligations and agencies		2	$	17,604	$	(79	)		4	$	34,152	$	(507	)
Corporate bonds		9		5,954		(28	)		14		17,905		(120	)
Mortgage-backed and asset-backed securities		8		27,200		(106	)		5		19,175		(244	)
Redeemable preferred stock		9		1,080		(2	)		—		—		—
Equity securities:
Common stock		5		228		(23	)		5		282		(42	)
Mutual funds		1		1,159		(76	)		1		10,071		(615	)

Total		34	$	53,225	$	(314	)		29	$	81,585	$	(1,528	)


	December 31, 2013
	Less Than 12 Months							12 Months or Longer
	Number of Issues		Fair Value		Unrealized Losses			Number of Issues		Fair Value		Unrealized Losses
Fixed maturities:
U.S. government obligations and agencies		6	$	71,042	$	(1,033	)		—	$	—	$	—
Corporate bonds		55		65,926		(770	)		—		—		—
Mortgage-backed and asset-backed securities		16		67,110		(577	)		—		—		—
Equity securities:
Common stock		13		3,517		(121	)		—		—		—
Mutual funds		5		19,646		(1,652	)		—		—		—

Total		95	$	227,241	$	(4,153	)		—	$	—	$	—

At June 30, 2014, we held fixed maturity and equity securities that were in an unrealized loss position as presented in the table above. For fixed maturity securities with significant declines in value, we perform quarterly fundamental credit analysis on a security-by-security basis, which includes consideration of credit quality and credit ratings, review of relevant industry analyst reports and other available market data. For fixed maturity and equity securities, the Company considers whether it has the intent and ability to hold the securities for a period of time sufficient to recover its cost basis. Where the Company lacks the intent and ability to hold to recovery, or believes the recovery period is extended, the security’s decline in fair value is considered other than temporary and is recorded in earnings. Based upon management’s intent and ability to hold the securities until recovery and its credit analysis of the individual issuers of the securities, management has no reason to believe the unrealized losses for securities available for sale at June 30, 2014 are other than temporary.

The following table presents the amortized cost and fair value of fixed maturities available for sale by contractual maturity as of the date presented (in thousands):


	June 30, 2014
	Amortized Cost		Fair Value
Due in one year or less	$	52,364	$	52,346
Due after one year through five years		165,335		165,278
Due after five years through ten years		5,094		4,970
Due after ten years		2,636		2,678
Mortgage-backed and asset-backed securities		95,054		94,908
Perpetual maturity securities		2,942		2,965

Total	$	323,425	$	323,145

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay with or without penalty.

The following table provides certain information related to securities available for sale during the period presented (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Sales proceeds (fair value)	$	58,347		$	14		$	72,788		$	14
Gross realized gains	$	4,189		$	—		$	5,188		$	—
Gross realized losses	$	(239	)	$	(1	)	$	(336	)	$	(1	)
Other than temporary losses	$	—		$	—		$	—		$	—

Trading Portfolio

The following table provides the effect of trading activities on the Company’s results of operations for the period presented by type of instrument and by line item in the Condensed Consolidated Statements of Income (in thousands):


	Six Months Ended June 30, 2013
Realized gains (losses) on investments:
Equity securities	$	(15,969	)
Derivatives (non-hedging instruments) (1)		(68	)

Total realized gains (losses) on trading portfolio		(16,037	)
Change in unrealized gains (losses) on investments:
Fixed maturities		13
Equity securities		7,758
Derivatives (non-hedging instruments) (1)		89
Other		14

Total change in unrealized gains (losses) on trading portfolio		7,874

Net gains (losses) recognized on trading portfolio	$	(8,163	)

(1)	This table provides the alternative quantitative disclosures permitted for derivatives that are not used as hedging instruments and are included in the trading portfolio.

The Company liquidated its trading portfolio in March 2013; therefore, for periods subsequent to March 31, 2013 there was no effect of trading activities on the Company’s results of operations.