3. Investments

The amortized cost and estimated fair value of investments were as follows as of June 30, 2015 and December 31, 2014:


(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Other than temporary impairments recognized in AOCI (1)
As of June 30, 2015
Fixed maturities:
U.S. treasury and agency obligations	$	88,489	$	1,811	$	(44	)	$	90,256	$	—
Obligations of states and political subdivisions		230,355		3,027		(850	)		232,532		—
Mortgage-backed securities		201,267		3,193		(480	)		203,980		—
Asset-backed securities		257,401		963		(193	)		258,171		(11	)
Commercial mortgage-backed securities		171,467		115		(614	)		170,968		—
Corporate bonds		453,473		2,838		(463	)		455,848		—
Foreign corporate bonds		138,832		660		(625	)		138,867		—

Total fixed maturities		1,541,284		12,607		(3,269	)		1,550,622		(11	)
Common stock		103,019		20,496		(2,277	)		121,238		—
Other invested assets		28,887		2,289		—			31,176		—

Total	$	1,673,190	$	35,392	$	(5,546	)	$	1,703,036	$	(11	)

(1)

Represents the total amount of other than temporary impairment losses relating to factors other than credit losses recognized in accumulated other comprehensive income (“AOCI”).


(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Other than temporary impairments recognized in AOCI (2)
As of December 31, 2014
Fixed maturities:
U.S. treasury and agency obligations	$	78,569	$	2,281	$	(83	)	$	80,767	$	—
Obligations of states and political subdivisions		188,452		3,718		(697	)		191,473		—
Mortgage-backed securities		205,814		3,709		(764	)		208,759		(4	)
Asset-backed securities		177,853		713		(303	)		178,263		(13	)
Commercial mortgage-backed securities		133,984		21		(847	)		133,158		—
Corporate bonds		380,704		3,421		(709	)		383,416		—
Foreign corporate bonds		107,572		625		(558	)		107,639		—

Total fixed maturities		1,272,948		14,488		(3,961	)		1,283,475		(17	)
Common stock		99,297		25,689		(2,938	)		122,048		—
Other invested assets		33,174		489		—			33,663		—

Total	$	1,405,419	$	40,666	$	(6,899	)	$	1,439,186	$	(17	)

(2)

Represents the total amount of other than temporary impairment losses relating to factors other than credit losses recognized in accumulated other comprehensive income (“AOCI”).

Excluding U.S. treasuries and agency bonds, the Company did not hold any debt or equity investments in a single issuer that was in excess of 4% of shareholders’ equity at June 30, 2015 or December 31, 2014.

The amortized cost and estimated fair value of the Company’s fixed maturities portfolio classified as available for sale at June 30, 2015, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


(Dollars in thousands)	Amortized Cost		Estimated Fair Value
Due in one year or less	$	112,314	$	113,541
Due in one year through five years		704,693		708,465
Due in five years through ten years		67,546		68,320
Due in ten years through fifteen years		8,818		9,246
Due after fifteen years		17,778		17,931
Mortgage-backed securities		201,267		203,980
Asset-backed securities		257,401		258,171
Commercial mortgage-backed securities		171,467		170,968

Total	$	1,541,284	$	1,550,622

The following table contains an analysis of the Company’s securities with gross unrealized losses, categorized by the period that the securities were in a continuous loss position as of June 30, 2015:


	Less than 12 months					12 months or longer (1)					Total
(Dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities:
U.S. treasury and agency obligations	$	504	$	—		$	3,376	$	(44	)	$	3,880	$	(44	)
Obligations of states and political subdivisions		41,091		(716	)		10,266		(134	)		51,357		(850	)
Mortgage-backed securities		62,327		(357	)		11,650		(123	)		73,977		(480	)
Asset-backed securities		62,664		(193	)		—		—			62,664		(193	)
Commercial mortgage-backed securities		96,171		(448	)		14,862		(166	)		111,033		(614	)
Corporate bonds		130,759		(446	)		2,978		(17	)		133,737		(463	)
Foreign corporate bonds		62,754		(625	)		—		—			62,754		(625	)

Total fixed maturities		456,270		(2,785	)		43,132		(484	)		499,402		(3,269	)
Common stock		32,507		(2,277	)		—		—			32,507		(2,277	)

Total	$	488,777	$	(5,062	)	$	43,132	$	(484	)	$	531,909	$	(5,546	)

(1)

Fixed maturities in a gross unrealized loss position for twelve months or longer are primarily comprised of non-credit losses on investment grade securities where management does not intend to sell, and it is more likely than not that the Company will not be forced to sell the security before recovery. The Company has analyzed these securities and has determined that they are not other than temporarily impaired.


	Less than 12 months					12 months or longer (2)					Total
(Dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities:
U.S. treasury and agency obligations	$	11,728	$	(9	)	$	3,343	$	(74	)	$	15,071	$	(83	)
Obligations of states and political subdivisions		28,684		(314	)		28,061		(383	)		56,745		(697	)
Mortgage-backed securities		2,818		(7	)		51,203		(757	)		54,021		(764	)
Asset-backed securities		92,123		(283	)		1,683		(20	)		93,806		(303	)
Commercial mortgage-backed securities		92,664		(525	)		26,280		(322	)		118,944		(847	)
Corporate bonds		144,505		(656	)		3,216		(53	)		147,721		(709	)
Foreign corporate bonds		60,518		(558	)		—		—			60,518		(558	)

Total fixed maturities		433,040		(2,352	)		113,786		(1,609	)		546,826		(3,961	)
Common stock		20,002		(2,808	)		1,577		(130	)		21,579		(2,938	)

Total	$	453,042	$	(5,160	)	$	115,363	$	(1,739	)	$	568,405	$	(6,899	)

(2)

The Company regularly performs various analytical valuation procedures with respect to its investments, including reviewing each fixed maturity security in an unrealized loss position to assess whether the security is a candidate for credit loss. Specifically, the Company considers credit rating, market price, and issuer specific financial information, among other factors, to assess the likelihood of collection of all principal and interest as contractually due. Securities for which the Company determines that a credit loss is likely are subjected to further analysis through discounted cash flow testing to estimate the credit loss to be recognized in earnings, if any. The specific methodologies and significant assumptions used by asset class are discussed below. Upon identification of such securities and periodically thereafter, a detailed review is performed to determine whether the decline is considered other than temporary. This review includes an analysis of several factors, including but not limited to, the credit ratings and cash flows of the securities and the magnitude and length of time that the fair value of such securities is below cost.

For fixed maturities, the factors considered in reaching the conclusion that a decline below cost is other than temporary include, among others, whether:

(1)

the issuer is in financial distress;

(2)

the investment is secured;

(3)

a significant credit rating action occurred;

(4)

scheduled interest payments were delayed or missed;

(5)

changes in laws or regulations have affected an issuer or industry;

(6)

the investment has an unrealized loss and was identified by the Company’s investment manager as an investment to be sold before recovery or maturity; and

(7)

the investment failed cash flow projection testing to determine if anticipated principal and interest payments will be realized.

According to accounting guidance for debt securities in an unrealized loss position, the Company is required to assess whether it has the intent to sell the debt security or more likely than not will be required to sell the debt security before the anticipated recovery. If either of these conditions is met, the Company must recognize an other than temporary impairment with the entire unrealized loss being recorded through earnings. For debt securities in an unrealized loss position not meeting these conditions, the Company assesses whether the impairment of a security is other than temporary. If the impairment is deemed to be other than temporary, the Company must separate the other than temporary impairment into two components: the amount representing the credit loss and the amount related to all other factors, such as changes in interest rates. The credit loss represents the portion of the amortized book value in excess of the net present value of the projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. The credit loss component of the other than temporary impairment is recorded through earnings, whereas the amount relating to factors other than credit losses is recorded in other comprehensive income, net of taxes.

For equity securities, management carefully reviews all securities with unrealized losses to determine if a security should be impaired and further focuses on securities that have either:

(1)

persisted with unrealized losses for more than twelve consecutive months or

(2)

the value of the investment has been 20% or more below cost for six continuous months or more.

The amount of any write-down, including those that are deemed to be other than temporary, is included in earnings as a realized loss in the period in which the impairment arose.

The following is a description, by asset type, of the methodology and significant inputs that the Company used to measure the amount of credit loss recognized in earnings, if any:

U.S. treasury and agency obligations – As of June 30, 2015, gross unrealized losses related to U.S. treasury and agency obligations were $0.044 million. With the exception of less than $0.001 million, all unrealized losses have been in an unrealized loss position for twelve months or greater and are rated AA+. Macroeconomic and market analysis is conducted in evaluating these securities. The analysis is driven by moderate interest rate anticipation, yield curve management, and security selection.

Obligations of states and political subdivisions – As of June 30, 2015, gross unrealized losses related to obligations of states and political subdivisions were $0.850 million. Of this amount, $0.134 million have been in an unrealized loss position for twelve months or greater and are rated A or better. All factors that influence performance of the municipal bond market are considered in evaluating these securities. The aforementioned factors include investor expectations, supply and demand patterns, and current versus historical yield and spread relationships. The analysis relies on the output of fixed income credit analysts, as well as dedicated municipal bond analysts who perform extensive in-house fundamental analysis on each issuer, regardless of their rating by the major agencies.

Mortgage-backed securities (“MBS”) – As of June 30, 2015, gross unrealized losses related to mortgage-backed securities were $0.480 million. Of this amount, $0.123 million have been in an unrealized loss position for twelve months or greater, of which, 97.6% are rated AA+. Mortgage-backed securities are modeled to project principal losses under downside, base, and upside scenarios for the economy and home prices. The primary assumption that drives the security and loan level modeling is the Home Price Index (“HPI”) projection. The model first projects HPI at the national level, then at the zip-code level based on the historical relationship between the individual zip code HPI and the national HPI. The model utilizes loan level data and borrower characteristics including FICO score, geographic location, original and current loan size, loan age, mortgage rate and type (fixed rate / interest-only / adjustable rate mortgage), issuer / originator, residential type (owner occupied / investor property), dwelling type (single family / multi-family), loan purpose, level of documentation, and delinquency status as inputs. The model also includes the explicit treatment of silent second liens, utilization of loan modification history, and the application of roll rate adjustments.

Asset-backed securities (“ABS”) – As of June 30, 2015, gross unrealized losses related to asset backed securities were $0.193 million. All unrealized losses have been in an unrealized loss position for less than 12 months and are rated A or better. The weighted average credit enhancement for the Company’s asset backed portfolio is 22.6. This represents the percentage of pool losses that can occur before an asset backed security will incur its first dollar of principal losses. Every ABS transaction is analyzed on a stand-alone basis. This analysis involves a thorough review of the collateral, prepayment, and structural risk in each transaction. Additionally, the analysis includes an in-depth credit analysis of the originator and servicer of the collateral. The analysis projects an expected loss for a deal given a set of assumptions specific to the asset type. These assumptions are used to calculate at what level of losses the deal will incur its first dollar of principal loss. The major assumptions used to calculate this ratio are loss severities, recovery lags, and no advances on principal and interest.

Commercial mortgage-backed securities (“CMBS”) – As of June 30, 2015, gross unrealized losses related to the CMBS portfolio were $0.614 million. Of this amount, $0.166 million have been in an unrealized loss position for twelve months or greater and are rated AA- or better. The weighted average credit enhancement for the Company’s CMBS portfolio is 38.2. This represents the percentage of pool losses that can occur before a mortgage-backed security will incur its first dollar of principal loss. For the Company’s CMBS portfolio, a loan level analysis is utilized where every underlying CMBS loan is re-underwritten based on a set of assumptions reflecting expectations for the future path of the economy. In the analysis, the focus is centered on stressing the significant variables that influence commercial loan defaults and collateral losses in CMBS deals. These variables include: (1) a projected drop in occupancies; (2) capitalization rates that vary by property type and are forecasted to return to more normalized levels as the capital markets repair and capital begins to flow again; and (3) property value stress testing using projected property performance and projected capitalization rates. Term risk is triggered if the projected debt service coverage rate falls below 1x. Balloon risk is triggered if a property’s projected performance does not satisfy new tighter mortgage standards.

Corporate bonds – As of June 30, 2015, gross unrealized losses related to corporate bonds were $0.463 million. Of this amount, $0.017 million have been in an unrealized loss position for twelve months or greater and are rated BBB or better. The analysis for this sector includes maintaining detailed financial models that include a projection of each issuer’s future financial performance, including prospective debt servicing capabilities, capital structure composition, and the value of the collateral. The analysis incorporates the macroeconomic environment, industry conditions in which the issuer operates, the issuer’s current competitive position, its vulnerability to changes in the competitive and regulatory environment, issuer liquidity, issuer commitment to bondholders, issuer creditworthiness, and asset protection. Part of the process also includes running downside scenarios to evaluate the expected likelihood of default as well as potential losses in the event of default.

Foreign bonds – As of June 30, 2015, gross unrealized losses related to foreign bonds were $0.625 million. All unrealized losses have been in an unrealized loss position for less than twelve months. 96.2% of the securities in an unrealized loss position are rated investment grade. For this sector, detailed financial models are maintained that include a projection of each issuer’s future financial performance, including prospective debt servicing capabilities, capital structure composition, and the value of the collateral. The analysis incorporates the macroeconomic environment, industry conditions in which the issuer operates, the issuer’s current competitive position, its vulnerability to changes in the competitive and regulatory environment, issuer liquidity, issuer commitment to bondholders, issuer creditworthiness, and asset protection. Part of the process also includes running downside scenarios to evaluate the expected likelihood of default as well as potential losses in the event of default.

Common stock – As of June 30, 2015, gross unrealized losses related to common stock were $2.277 million. All unrealized losses have been in an unrealized loss position for less than 12 months. To determine if an other than temporary impairment of an equity security has occurred, the Company considers, among other things, the severity and duration of the decline in fair value of the equity security. The Company also examines other factors to determine if the equity security could recover its value in a reasonable period of time.

The Company recorded the following other than temporary impairments (“OTTI”) on its investment portfolio for the quarters and six months ended June 30, 2015 and 2014:


	Quarters Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Fixed maturities:
OTTI losses, gross	$	(13	)	$	—		$	(23	)	$	(25	)
Portion of loss recognized in other comprehensive income (pre-tax)		—			—			—			—

Net impairment losses on fixed maturities recognized in earnings		(13	)		—			(23	)		(25	)
Equity securities		(1,885	)		(37	)		(2,215	)		(37	)

Total	$	(1,898	)	$	(37	)	$	(2,238	)	$	(62	)

The following table is an analysis of the credit losses recognized in earnings on fixed maturities held by the Company for the quarters and six months ended June 30, 2015 and 2014 for which a portion of the OTTI loss was recognized in other comprehensive income.


	Quarters Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Balance at beginning of period	$	50		$	54		$	50		$	54
Additions where no OTTI was previously recorded		—			—			—			—
Additions where an OTTI was previously recorded		—			—			—			—
Reductions for securities for which the company intends to sell or more likely than not will be required to sell before recovery		—			—			—			—
Reductions reflecting increases in expected cash flows to be collected		—			—			—			—
Reductions for securities sold during the period		(19	)		(4	)		(19	)		(4	)

Balance at end of period	$	31		$	50		$	31		$	50

Accumulated Other Comprehensive Income, Net of Tax

Accumulated other comprehensive income, net of tax, as of June 30, 2015 and December 31, 2014 was as follows:


(Dollars in thousands)	June 30, 2015			December 31, 2014
Net unrealized gains from:
Fixed maturities	$	9,338		$	10,527
Common stock		18,219			22,751
Other		935			369
Deferred taxes		(8,390	)		(10,263	)

Accumulated other comprehensive income, net of tax	$	20,102		$	23,384

The following tables present the changes in accumulated other comprehensive income, net of tax, by component for the quarters and six months ended June 30, 2015 and 2014:


Quarter Ended June 30, 2015 (Dollars in thousands)	Unrealized Gains and Losses on Available for Sale Securities, Net of Tax			Foreign Currency Items, Net of Tax			Accumulated Other Comprehensive Income, Net of Tax
Beginning balance	$	28,206		$	(501)		$	27,705
Other comprehensive income (loss) before reclassification		(6,845	)		159			(6,686	)
Amounts reclassified from accumulated other comprehensive income (loss)		(1,160	)		243			(917	)

Other comprehensive income (loss)		(8,005	)		402			(7,603	)

Ending balance	$	20,201		$	(99	)	$	20,102


Quarter Ended June 30, 2014 (Dollars in thousands)	Unrealized Gains and Losses on Available for Sale Securities, Net of Tax			Foreign Currency Items, Net of Tax			Accumulated Other Comprehensive Income, Net of Tax
Beginning balance	$	51,958		$	94		$	52,052
Other comprehensive income (loss) before reclassification		11,664			41			11,705
Amounts reclassified from accumulated other comprehensive income (loss)		(29,694	)		(62	)		(29,756	)

Other comprehensive income (loss)		(18,030	)		(21	)		(18,051	)

Ending balance	$	33,928		$	73		$	34,001


Six Months Ended June 30, 2015 (Dollars in thousands)	Unrealized Gains and Losses on Available for Sale Securities, Net of Tax			Foreign Currency Items, Net of Tax			Accumulated Other Comprehensive Income, Net of Tax
Beginning balance	$	23,647		$	(263	)	$	23,384
Other comprehensive income (loss) before reclassification		(404	)		(162	)		(566	)
Amounts reclassified from accumulated other comprehensive income (loss)		(3,042	)		326			(2,716	)

Other comprehensive income (loss)		(3,446	)		164			(3,282	)

Ending balance	$	20,201		$	(99	)	$	20,102


Six Months Ended June 30, 2014 (Dollars in thousands)	Unrealized Gains and Losses on Available for Sale Securities, Net of Tax			Foreign Currency Items, Net of Tax			Accumulated Other Comprehensive Income, Net of Tax
Beginning balance	$	53,950		$	78		$	54,028
Other comprehensive income (loss) before reclassification		13,691			70			13,761
Amounts reclassified from accumulated other comprehensive income (loss)		(33,713	)		(75	)		(33,788	)

Other comprehensive income (loss)		(20,022	)		(5	)		(20,027	)

Ending balance	$	33,928		$	73		$	34,001

The reclassifications out of accumulated other comprehensive income for the quarters and six months ended June 30, 2015 and 2014 were as follows:


		Amounts Reclassified from Accumulated Other Comprehensive Income
		Quarters Ended June 30,
(Dollars in thousands) Details about Accumulated Other Comprehensive Income Components	Affected Line Item in the Consolidated Statements of Operations	2015			2014
Unrealized gains and losses on available for sale securities	Other net realized investment gains	$	(3,745	)	$	(45,840	)
	Other than temporary impairment losses on investments		1,897			37

	Total before tax		(1,848	)		(45,803	)
	Income tax expense (benefit)		688			16,109

	Net of tax	$	(1,160	)	$	(29,694	)

Foreign Currency Items	Other net realized investment (gains) losses	$	373		$	(96	)
	Income tax expense (benefit)		(130	)		34

	Net of tax	$	243		$	(62	)

Total reclassifications	Net of tax	$	(917	)	$	(29,756	)


		Amounts Reclassified from Accumulated Other Comprehensive Income
		Six Months Ended June 30,
(Dollars in thousands) Details about Accumulated Other Comprehensive Income Components	Affected Line Item in the Consolidated Statements of Operations	2015			2014
Unrealized gains and losses on available for sale securities	Other net realized investment gains	$	(7,126	)	$	(51,374	)
	Other than temporary impairment losses on investments		2,238			62

	Total before tax		(4,888	)		(51,312	)
	Income tax expense (benefit)		1,846			17,599

	Net of tax	$	(3,042	)	$	(33,713	)

Foreign Currency Items	Other net realized investment (gains) losses	$	501		$	(116	)
	Income tax expense (benefit)		(175	)		41

	Net of tax	$	326		$	(75	)

Total reclassifications	Net of tax	$	(2,716	)	$	(33,788	)

Net Realized Investment Gains

The components of net realized investment gains for the quarters and six months ended June 30, 2015 and 2014 were as follows:


	Quarters Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Fixed maturities:
Gross realized gains	$	746		$	719		$	1,479		$	2,389
Gross realized losses		(110	)		(96	)		(241	)		(226	)

Net realized gains		636			623			1,238			2,163

Common stock:
Gross realized gains		3,371			45,868			5,923			49,875
Gross realized losses		(2,532	)		(592	)		(2,870	)		(610	)

Net realized gains		839			45,276			3,053			49,265

Preferred stock:
Gross realized gains		—			—			96			—
Gross realized losses		—			—			—			—

Net realized gains		—			—			96			—

Derivatives:
Gross realized gains		6,353			—			1,873			—
Gross realized losses		(1,296	)		(6,018	)		(2,698	)		(12,360	)

Net realized gains (losses)		5,057			(6,018	)		(825	)		(12,360	)

Total net realized investment gains	$	6,532		$	39,881		$	3,562		$	39,068

The proceeds from sales of available-for-sale securities resulting in net realized investment gains for the six months ended June 30, 2015 and 2014 were as follows:


	Six Months Ended June 30,
(Dollars in thousands)	2015		2014
Fixed maturities	$	211,542	$	219,195
Equity securities		22,327		35,837
Preferred stock		1,540		—

Net Investment Income

The sources of net investment income for the quarters and six months ended June 30, 2015 and 2014 were as follows:


	Quarters Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Fixed maturities	$	8,022		$	6,797		$	16,036		$	14,052
Equity securities		924			1,941			1,716			4,081
Cash and cash equivalents		9			10			27			28
Other invested assets		1,089			87			1,342			87

Total investment income		10,044			8,835			19,121			18,248
Investment expense		(903	)		(1,158	)		(1,739	)		(2,287	)

Net investment income	$	9,141		$	7,677		$	17,382		$	15,961

The Company’s total investment return on a pre-tax basis for the quarters and six months ended June 30, 2015 and 2014 were as follows:


	Quarters Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Net investment income	$	9,141		$	7,677		$	17,382		$	15,961

Net realized investment gains		6,532			39,881			3,562			39,068
Change in unrealized investment losses		(9,752	)		(29,203	)		(5,155	)		(31,774	)

Net realized and unrealized investment returns		(3,220	)		10,678			(1,593	)		7,294

Total investment return	$	5,921		$	18,355		$	15,789		$	23,255

Total investment return % (1)		0.3	%		1.2	%		0.9	%		1.5	%

Average investment portfolio (2)	$	1,776,326		$	1,577,630		$	1,758,103		$	1,585,304

(1)

Not annualized.

(2)

Average of total cash and invested assets, net of receivable/payable for securities purchased and sold, as of the beginning and end of the period.

Insurance Enhanced Asset Backed and Credit Securities

As of June 30, 2015, the Company held insurance enhanced asset backed and credit securities with a market value of approximately $41.1 million. Approximately $17.5 million of these securities were tax free municipal bonds, which represented approximately 1.0% of the Company’s total cash and invested assets, net of payable/receivable for securities purchased and sold. These securities had an average rating of “A+.” Approximately $6.5 million of these bonds are pre-refunded with U.S. treasury securities, of which $0.1 million are backed by financial guarantors, meaning that funds have been set aside in escrow to satisfy the future interest and principal obligations of the bond. Of the remaining $11.0 million of insurance enhanced municipal bonds, $0.5 million would have carried a lower credit rating had they not been insured. The following table provides a breakdown of the ratings for these municipal bonds with and without insurance.


(Dollars in thousands)	Ratings with		Ratings without
Rating	Insurance		Insurance
AA	$	515	$	—
BB		—		515

Total	$	515	$	515

A summary of the Company’s insurance enhanced municipal bonds that are backed by financial guarantors, including the pre-refunded bonds that are escrowed in U.S. government obligations, as of June 30, 2015, is as follows:


(Dollars in thousands) Financial Guarantor	Total		Pre-refunded Securities		Government Guaranteed Securities		Exposure Net of Pre-refunded & Government Guaranteed Securities
Ambac Financial Group	$	1,688	$	138	$	—	$	1,550
Assured Guaranty Corporation		3,692		—		—		3,692
Municipal Bond Insurance Association		5,159		—		—		5,159
Gov’t National Housing Association		552		—		552		—

Total backed by financial guarantors		11,091		138		552		10,401
Other credit enhanced municipal bonds		6,363		6,363		—		—

Total	$	17,454	$	6,501	$	552	$	10,401

In addition to the tax-free municipal bonds, the Company held $23.6 million of asset-backed and taxable municipal bonds, which represented approximately 1.3% of the Company’s total invested assets, net of receivable/payable for securities purchased and sold. The financial guarantors of the Company’s $23.6 million of insurance enhanced asset-backed and taxable municipal securities include Municipal Bond Insurance Association ($8.8 million), Ambac Financial Group ($1.5 million), Assured Guaranty Corporation ($11.0 million), Financial Guaranty Insurance Group ($0.3 million) and Build America Mutual ($2.0 million).

The Company had no direct investments in the entities that have provided financial guarantees or other credit support to any security held by the Company at June 30, 2015.

Bonds Held on Deposit

Certain cash balances, cash equivalents, equity securities and bonds available for sale were deposited with various governmental authorities in accordance with statutory requirements, were held as collateral pursuant to borrowing arrangements, or were held in trust pursuant to intercompany reinsurance agreements. The fair values were as follows as of June 30, 2015 and December 31, 2014:


	Estimated Fair Value
(Dollars in thousands)	June 30, 2015		December 31, 2014
On deposit with governmental authorities	$	39,965	$	32,790
Intercompany trusts held for the benefit of U.S. policyholders		548,038		495,301
Held in trust pursuant to third party requirements		93,053		95,828
Letter of credit held for third party requirements		6,112		9,340
Securities held as collateral for borrowing arrangements (1)		238,283		222,809

Total	$	925,451	$	856,068

(1)

Amount required to collateralize margin borrowing facilities.