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, 2016
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Fixed Maturities:
U.S. government obligations and agencies	$	77,076	$	618	$	(63	)	$	77,631
Corporate bonds		191,342		2,485		(125	)		193,702
Mortgage-backed and asset-backed securities		224,423		1,830		(182	)		226,071
Municipal bonds		77,135		270		(224	)		77,181
Redeemable preferred stock		9,095		607		(13	)		9,689
Equity Securities:
Common stock		11,210		—		(374	)		10,836
Mutual funds		35,644		266		(2,506	)		33,404
Short-term investments		5,000		3		—			5,003
Total	$	630,925	$	6,079	$	(3,487	)	$	633,517

	December 31, 2015
	Cost or		Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Fixed Maturities:
U.S. government obligations and agencies	$	126,209	$	—	$	(867	)	$	125,342
Corporate bonds		126,421		137		(1,041	)		125,517
Mortgage-backed and asset-backed securities		151,328		97		(1,265	)		150,160
Redeemable preferred stock		9,665		429		(29	)		10,065
Other		5,000		—		(1	)		4,999
Equity Securities:
Common stock		10,991		15		(244	)		10,762
Mutual funds		35,221		5		(3,774	)		31,452
Short-term investments		25,011		10		—			25,021
Total	$	489,846	$	693	$	(7,221	)	$	483,318

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, 2016					December 31, 2015
			% of Total					% of Total
Comparable Ratings	Fair Value		Fair Value			Fair Value		Fair Value
AAA	$	129,018		21.9	%	$	103,097		23.4	%
AA		278,611		47.3	%		189,600		43.0	%
A		110,310		18.7	%		83,850		19.0	%
BBB		66,025		11.2	%		41,408		9.4	%
BB+ and Below		3,817		0.6	%		4,261		1.0	%
No Rating Available		1,496		0.3	%		18,888		4.2	%
Total	$	589,277		100.0	%	$	441,104		100.0	%

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, 2016				December 31, 2015
	Cost or				Cost or
	Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value
Mortgage-backed securities:
Agency	$	116,085	$	116,947	$	74,353	$	73,854
Non-agency		19,614		19,779		10,430		10,183
Asset-backed securities:
Auto loan receivables		38,886		39,187		29,883		29,712
Credit card receivables		38,663		38,880		32,225		31,985
Other receivables		11,175		11,278		4,437		4,426
Total	$	224,423	$	226,071	$	151,328	$	150,160

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, 2016
	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		1	$	922	$	(6	)		2	$	3,518	$	(57	)
Corporate bonds		18		13,627		(23	)		6		5,362		(102	)
Mortgage-backed and asset-backed securities		12		25,089		(96	)		4		6,858		(86	)
Municipal bonds		25		32,976		(224	)		—		—		—
Redeemable preferred stock		5		479		(13	)		—		—		—
Equity securities:
Common stock		3		10,754		(265	)		2		81		(109	)
Mutual funds		1		9,991		(49	)		2		11,895		(2,457	)
Total		65	$	93,838	$	(676	)		16	$	27,714	$	(2,811	)

	December 31, 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		10	$	121,912	$	(690	)		2	$	3,429	$	(177	)
Corporate bonds		101		90,717		(927	)		6		4,789		(114	)
Mortgage-backed and asset-backed securities		51		118,743		(974	)		6		13,902		(291	)
Redeemable preferred stock		5		764		(29	)		—		—		—
Other		1		4,999		(1	)		—		—		—
Equity securities:
Common stock		3		8,690		(148	)		2		93		(96	)
Mutual funds		3		13,192		(374	)		1		7,867		(3,400	)
Total		174	$	359,017	$	(3,143	)		17	$	30,080	$	(4,078	)

Evaluating Investments for OTTI

At September 30, 2016, the Company 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, the Company performs 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 on our analysis, our fixed income portfolio is of high quality and we believe we will recover the amortized cost basis of our fixed income securities. We continually monitor the credit quality of our fixed income investments to assess if it is probable that we will receive our contractual or estimated cash flows in the form of principal and interest. Additionally, the Company considers management’s intent and ability to hold the securities until recovery and its credit analysis of the individual issuers of the securities. Based on this process and analysis, management has no reason to believe the unrealized losses for securities available for sale at September 30, 2016 are other than temporary.

As of September 30, 2016, we held approximately $12 million equity securities that were in an unrealized loss position twelve months or longer. The unrealized loss on these securities was $2.6 million. Based on our analysis, we believe each security will recover in a reasonable period of time and we have the intent and ability to hold them until recovery. There were no OTTI losses recognized in the periods presented on the equity portfolio.

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

	September 30, 2016
	Cost or
	Amortized Cost		Fair Value
Due in one year or less	$	48,716	$	48,738
Due after one year through five years		225,404		228,062
Due after five years through ten years		22,056		22,408
Due after ten years		54,377		54,309
Mortgage-backed and asset-backed securities		224,423		226,071
Perpetual maturity securities		9,095		9,689
Total	$	584,071	$	589,277

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,
	2016			2015			2016			2015
Sales proceeds (fair value)	$	8,111		$	12,014		$	125,785		$	56,066
Gross realized gains	$	107		$	12		$	1,369		$	308
Gross realized losses	$	(6	)	$	(1	)	$	(25	)	$	(16	)

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,
	2016			2015			2016			2015
Fixed maturities	$	2,456		$	1,479		$	6,447		$	4,001
Equity securities		223			277			666			540
Short-term investments		15			89			60			194
Other (1)		166			102			603			247
Total investment income		2,860			1,947			7,776			4,982
Less: Investment expenses (2)		(556	)		(640	)		(1,725	)		(1,606	)
Net investment (expense) income	$	2,304		$	1,307		$	6,051		$	3,376

(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, 2016			December 31, 2015
Investment real estate	$	10,620		$	6,220
Less: Accumulated depreciation		(236	)		(103	)
Investment real estate, net	$	10,384		$	6,117