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9
Investment Portfolio
The following table presents the composition of the Company’s total investment portfolio:
December 31,
2015 2014 2013
Cost(1) Fair Value Cost(1) Fair Value Cost(1) Fair Value
(Amounts in thousands)
Taxable bonds $ 426,905 $ 414,396 $ 350,343 $ 350,705 $ 329,521 $ 331,506
Tax-exempt state and municipal bonds 2,377,370 2,465,607 2,153,151 2,267,695 2,193,521 2,229,147
Total fixed maturities 2,804,275 2,880,003 2,503,494 2,618,400 2,523,042 2,560,653
Equity securities 313,528 315,362 387,851 412,880 223,933 281,883
Short-term investments 185,353 185,277 373,180 372,542 315,886 315,776
Total investments $ 3,303,156 $ 3,380,642 $ 3,264,525 $ 3,403,822 $ 3,062,861 $ 3,158,312
__________
(1) Fixed maturities and short-term bonds at amortized cost; and equities and other short-term investments at cost.
The Company applies the fair value option to all fixed maturity and equity securities and short-term investments at the time
the eligible item is first recognized. For more detailed discussion on the Company's investment portfolio, including credit ratings,
see "Liquidity and Capital Resources—Invested Assets" in "Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations" and Note 3. Investments, of the Notes to Consolidated Financial Statements in "Item 8. Financial
Statements and Supplementary Data."
Investment Results
The following table presents the investment results of the Company for the most recent five years:
Year Ended December 31,
2015 2014 2013 2012 2011
(Dollars in thousands)
Average invested assets at cost(1) (3) $ 3,293,948 $ 3,204,592 $ 3,028,198 $ 3,011,143 $ 3,004,588
Net investment income(2)
Before income taxes $ 126,299 $ 125,723 $ 124,538 $ 131,896 $ 140,947
After income taxes $ 110,382 $ 111,456 $ 109,506 $ 115,359 $ 124,708
Average annual yield on investments(2)
Before income taxes 3.8% 3.9% 4.1% 4.4% 4.7%
After income taxes 3.4% 3.5% 3.6% 3.8% 4.2%
Net realized investment gains (losses) after
income taxes $ (54,474) $ 52,770 $ (7,424) $ 43,147 $ 37,958
__________
(1) Fixed maturities and short-term bonds at amortized cost; and equities and other short-term investments at cost. Average
invested assets at cost are based on the monthly amortized cost of the invested assets for each respective period.
(2) For 2015, net investment income before income taxes increased slightly due to higher average invested asset balances. Net
investment income and average annual yields on investments after income taxes decreased slightly primarily due to the
maturity and replacement of higher yielding investments purchased when market interest rates were higher, with lower
yielding investments purchased during low interest rate environments, and a higher effective tax rate on investment income
due to a greater proportion of taxable investments in 2015 compared to 2014.
(3) At December 31, 2015, fixed maturity securities with call features totaled $2.9 billion and $2.8 billion at fair value and
amortized cost, respectively.
Competitive Conditions
The Company operates in the highly competitive property and casualty insurance industry subject to competition on pricing,
claims handling, consumer recognition, coverage offered and product features, customer service, and geographic coverage. Some