3. Investments

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):

	September 30, 2015
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Fixed Maturities:
U.S. government obligations and agencies	$	135,774	$	517	$	(201	)	$	136,090
Corporate bonds		128,357		412		(649	)		128,120
Mortgage-backed and asset-backed securities		138,482		527		(324	)		138,685
Redeemable preferred stock		9,734		201		(65	)		9,870
Other		5,000		4		—			5,004
Equity Securities:
Common stock		16,545		472		(1,274	)		15,743
Mutual funds		34,599		—		(3,715	)		30,884
Short-term investments		75,022		3		(2	)		75,023
Total	$	543,513	$	2,136	$	(6,230	)	$	539,419

	December 31, 2014
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Fixed Maturities:
U.S. government obligations and agencies	$	120,627	$	38	$	(627	)	$	120,038
Corporate bonds		120,025		171		(364	)		119,832
Mortgage-backed and asset-backed securities		107,589		136		(502	)		107,223
Redeemable preferred stock		6,700		165		(9	)		6,856
Equity Securities:
Common stock		331		4		(65	)		270
Mutual funds		21,296		—		(1,924	)		19,372
Short-term investments		50,000		—		(10	)		49,990
Total	$	426,568	$	514	$	(3,501	)	$	423,581

The following table provides the credit quality of investment securities with contractual maturities or the issuer of such securities as of the dates presented (in thousands):

September 30, 2015
			% of Total
Comparable Ratings	Fair Value		Fair Value
AAA	$	87,860		17.8	%
AA		193,220		39.2	%
A		140,092		28.4	%
BBB		47,219		9.6	%
BB+ and Below		3,768		0.8	%
No Rating Available		20,633		4.2	%
Total	$	492,792		100.0	%

December 31, 2014 (1)
			% of Total
Comparable Ratings	Fair Value		Fair Value
AAA	$	39,657		9.8	%
AA		220,693		54.8	%
A		83,734		20.7	%
BBB		47,003		11.6	%
BB+ and Below		3,401		0.8	%
No Rating Available		9,451		2.3	%
Total	$	403,939		100.0	%

(1)

The credit ratings in the table above have been reclassified from the prior periods’ consolidated financial statements to conform to the current periods’ presentation. For investment securities where no credit rating was previously available, the credit rating of the issuer of such security is disclosed in the table above, where applicable.

The tables above include comparable credit quality ratings by Standard and Poor’s Rating Services, Inc., Moody’s Investors Service, Inc. and Fitch Ratings, Inc.

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):

	September 30, 2015				December 31, 2014
	Cost or				Cost or
	Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value
Mortgage-backed securities:
Agency	$	76,428	$	76,610	$	64,905	$	64,619
Non-agency		10,454		10,389		8,053		7,987
Asset-backed securities:
Auto loan receivables		18,423		18,488		16,551		16,556
Credit card receivables		28,578		28,588		13,481		13,457
Other receivables		4,599		4,610		4,599		4,604
Total	$	138,482	$	138,685	$	107,589	$	107,223

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):

	September 30, 2015
	Less Than 12 Months							12 Months or Longer
	Number of				Unrealized			Number of				Unrealized
	Issues		Fair Value		Losses			Issues		Fair Value		Losses
Fixed maturities:
U.S. government obligations and agencies		—	$	—	$	—			2	$	3,470	$	(201	)
Corporate bonds		58		52,340		(608	)		4		3,952		(41	)
Mortgage-backed and asset-backed securities		14		30,805		(117	)		6		15,504		(207	)
Redeemable preferred stock		30		3,789		(65	)		—		—		—
Equity securities:
Common stock		3		8,161		(1,168	)		2		83		(106	)
Mutual funds		4		22,971		(725	)		1		7,912		(2,990	)
Short-term investments		76		52,514		(2	)		—		—		—
Total		185	$	170,580	$	(2,685	)		15	$	30,921	$	(3,545	)

	December 31, 2014
	Less Than 12 Months							12 Months or Longer
	Number of				Unrealized			Number of				Unrealized
	Issues		Fair Value		Losses			Issues		Fair Value		Losses
Fixed maturities:
U.S. government obligations and agencies		3	$	27,341	$	(55	)		4	$	34,050	$	(572	)
Corporate bonds		67		58,271		(238	)		12		15,105		(126	)
Mortgage-backed and asset-backed securities		20		48,335		(273	)		5		16,842		(229	)
Redeemable preferred stock		12		1,153		(9	)		—		—		—
Equity securities:
Common stock		2		87		(20	)		2		117		(45	)
Mutual funds		2		10,514		(97	)		1		8,859		(1,827	)
Short-term investments		2		37,490		(10	)		—		—		—
Total		108	$	183,191	$	(702	)		24	$	74,973	$	(2,799	)

At September 30, 2015, we held fixed maturity, equity securities and short-term investments 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, equity securities and short-term investments, 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 September 30, 2015 are other than temporary.

The following table presents the amortized cost and fair value of investments with contractual maturities as of the date presented (in thousands):

	September 30, 2015
	Cost or
	Amortized Cost		Fair Value
Due in one year or less	$	119,008	$	119,037
Due after one year through five years		222,690		222,847
Due after five years through ten years		1,465		1,427
Due after ten years		4,121		4,172
Mortgage-backed and asset-backed securities		138,482		138,685
Perpetual maturity securities		6,603		6,624
Total	$	492,369	$	492,792

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 periods presented (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Sales proceeds (fair value)	$	12,014		$	53,961		$	56,066		$	126,748
Gross realized gains	$	12		$	742		$	308		$	5,930
Gross realized losses	$	(1	)	$	(241	)	$	(16	)	$	(577	)

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						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Fixed maturities	$	1,479		$	884		$	4,001		$	2,394
Equity securities		277			182			540			636
Short-term investments		89			11			194			11
Other (1)		102			26			247			47
Total investment income		1,947			1,103			4,982			3,088
Less: Investment expenses (2)		(640	)		(459	)		(1,606	)		(1,514	)
Net investment (expense) income	$	1,307		$	644		$	3,376		$	1,574

(1)	Includes interest earned on cash and cash equivalents and restricted cash and cash equivalents. Also includes investment income earned on real estate investments.

(2)	Includes bank fees, investment accounting and advisory fees, and expenses associated with real estate investments.

Investment Real Estate

Investment real estate consisted of the following as of the dates presented (in thousands):

	September 30, 2015			December 31, 2014
Investment real estate	$	5,888		$	—
Less: Accumulated depreciation		(68	)		—
Investment real estate, net	$	5,820		$	—