Investments | Investments (a) The amortized cost, net unrealized gains and losses, carrying value, unrecognized holding gains and losses, and fair value of HTM fixed income securities as of June 30, 2015 and December 31, 2014 were as follows: June 30, 2015 ($ in thousands) Amortized Cost Net Unrealized Gains (Losses) Carrying Value Unrecognized Holding Gains Unrecognized Holding Losses Fair Value Foreign government $ 5,292 3 5,295 — (3 ) 5,292 Obligations of states and political subdivisions 216,870 1,395 218,265 8,441 — 226,706 Corporate securities 18,532 (265 ) 18,267 2,565 — 20,832 Asset-backed securities (“ABS”) 1,976 (280 ) 1,696 285 — 1,981 Commercial mortgage-backed securities (“CMBS”) 4,676 (340 ) 4,336 555 — 4,891 Total HTM fixed income securities $ 247,346 513 247,859 11,846 (3 ) 259,702 December 31, 2014 ($ in thousands) Amortized Cost Net Unrealized Gains (Losses) Carrying Value Unrecognized Holding Gains Unrecognized Holding Losses Fair Value Foreign government $ 5,292 47 5,339 55 — 5,394 Obligations of states and political subdivisions 285,301 2,071 287,372 11,760 — 299,132 Corporate securities 18,899 (273 ) 18,626 2,796 — 21,422 ABS 2,818 (455 ) 2,363 460 — 2,823 CMBS 4,869 (432 ) 4,437 753 — 5,190 Total HTM fixed income securities $ 317,179 958 318,137 15,824 — 333,961 Unrecognized holding gains and losses of HTM securities are not reflected in the Financial Statements, as they represent fair value fluctuations from the later of: (i) the date a security is designated as HTM; or (ii) the date that an other-than-temporary impairment (“OTTI”) charge is recognized on an HTM security, through the date of the balance sheet. Our HTM securities had an average duration of 1.6 years as of June 30, 2015 . (b) The cost/amortized cost, unrealized gains and losses, and fair value of AFS securities as of June 30, 2015 and December 31, 2014 were as follows: June 30, 2015 ($ in thousands) Cost/ Amortized Cost Unrealized Gains Unrealized Losses Fair Value AFS fixed income securities: U.S. government and government agencies $ 109,506 6,420 (65 ) 115,861 Foreign government 22,026 693 — 22,719 Obligations of states and political subdivisions 1,277,635 23,242 (4,819 ) 1,296,058 Corporate securities 1,794,698 36,201 (6,324 ) 1,824,575 ABS 213,662 990 (155 ) 214,497 CMBS 1 213,497 1,861 (1,180 ) 214,178 Residential mortgage-backed securities (“RMBS”) 2 502,199 6,224 (3,493 ) 504,930 Total AFS fixed income securities 4,133,223 75,631 (16,036 ) 4,192,818 AFS equity securities: Common stock 200,150 15,159 (4,190 ) 211,119 Preferred stock 17,988 23 (247 ) 17,764 Total AFS equity securities 218,138 15,182 (4,437 ) 228,883 Total AFS securities $ 4,351,361 90,813 (20,473 ) 4,421,701 December 31, 2014 ($ in thousands) Cost/ Amortized Cost Unrealized Gains Unrealized Losses Fair Value AFS fixed income securities: U.S. government and government agencies $ 116,666 7,592 (128 ) 124,130 Foreign government 27,035 796 — 27,831 Obligations of states and political subdivisions 1,208,776 38,217 (729 ) 1,246,264 Corporate securities 1,763,427 42,188 (5,809 ) 1,799,806 ABS 176,837 760 (373 ) 177,224 CMBS 1 177,932 2,438 (777 ) 179,593 RMBS 2 505,113 8,587 (2,426 ) 511,274 Total AFS fixed income securities 3,975,786 100,578 (10,242 ) 4,066,122 AFS equity securities: Common stock 159,011 32,725 (336 ) 191,400 Total AFS equity securities 159,011 32,725 (336 ) 191,400 Total AFS securities $ 4,134,797 133,303 (10,578 ) 4,257,522 1 CMBS includes government guaranteed agency securities with a fair value of $10.2 million at June 30, 2015 and $13.2 million at December 31, 2014 . 2 RMBS includes government guaranteed agency securities with a fair value of $25.7 million at June 30, 2015 and $32.4 million at December 31, 2014 . Unrealized gains and losses of AFS securities represent fair value fluctuations from the later of: (i) the date a security is designated as AFS; or (ii) the date that an OTTI charge is recognized on an AFS security, through the date of the balance sheet. These unrealized gains and losses are recorded in Accumulated other comprehensive (loss) income ("AOCI") on the Consolidated Balance Sheets. (c) The following tables summarize, for all securities in a net unrealized/unrecognized loss position at June 30, 2015 and December 31, 2014 , the fair value and pre-tax net unrealized/unrecognized loss by asset class and by length of time those securities have been in a net loss position: June 30, 2015 Less than 12 months 12 months or longer ($ in thousands) Fair Value Unrealized Losses 1 Fair Value Unrealized Losses 1 AFS fixed income securities: U.S. government and government agencies $ 7,513 (62 ) 398 (3 ) Obligations of states and political subdivisions 398,429 (4,819 ) — — Corporate securities 440,510 (4,939 ) 50,187 (1,385 ) ABS 40,185 (40 ) 15,071 (115 ) CMBS 80,860 (1,057 ) 15,579 (123 ) RMBS 172,482 (1,763 ) 67,336 (1,730 ) Total AFS fixed income securities 1,139,979 (12,680 ) 148,571 (3,356 ) AFS equity securities: Common stock 103,352 (4,190 ) — — Preferred stock 8,432 (247 ) — — Total AFS equity securities 111,784 (4,437 ) — — Subtotal $ 1,251,763 (17,117 ) 148,571 (3,356 ) Less than 12 months 12 months or longer ($ in thousands) Fair Value Unrealized Losses 1 Unrecognized Gains 2 Fair Value Unrealized Losses 1 Unrecognized Gains 2 HTM securities: Obligations of states and political subdivisions 180 (2 ) — — — — ABS — — — 1,540 (280 ) 272 Subtotal $ 180 (2 ) — 1,540 (280 ) 272 Total AFS and HTM $ 1,251,943 (17,119 ) — 150,111 (3,636 ) 272 December 31, 2014 Less than 12 months 12 months or longer ($ in thousands) Fair Value Unrealized Losses 1 Fair Value Unrealized Losses 1 AFS fixed income securities: U.S. government and government agencies $ 7,567 (13 ) 10,866 (115 ) Obligations of states and political subdivisions 47,510 (105 ) 64,018 (624 ) Corporate securities 276,648 (1,734 ) 153,613 (4,075 ) ABS 113,202 (178 ) 15,618 (195 ) CMBS 12,799 (34 ) 59,219 (743 ) RMBS 3,399 (8 ) 138,724 (2,418 ) Total AFS fixed income securities 461,125 (2,072 ) 442,058 (8,170 ) AFS equity securities: Common stock 5,262 (336 ) — — Total AFS equity securities 5,262 (336 ) — — Subtotal $ 466,387 (2,408 ) 442,058 (8,170 ) Less than 12 months 12 months or longer ($ in thousands) Fair Value Unrealized Losses 1 Unrecognized Gains 2 Fair Value Unrealized Losses 1 Unrecognized Gains 2 HTM securities: Obligations of states and political subdivisions $ 196 (3 ) 1 — — — ABS — — — 2,235 (455 ) 439 Subtotal 196 (3 ) 1 2,235 (455 ) 439 Total AFS and HTM $ 466,583 (2,411 ) 1 444,293 (8,625 ) 439 1 Gross unrealized losses include non-OTTI unrealized amounts and OTTI losses recognized in AOCI. In addition, this column includes remaining unrealized gain or loss amounts on securities that were transferred to an HTM designation in the first quarter of 2009 for those securities that are in a net unrealized/unrecognized loss position. 2 Unrecognized gains represent fair value fluctuations from the later of: (i) the date a security is designated as HTM; or (ii) the date that an OTTI charge is recognized on an HTM security. The table below provides our net unrealized/unrecognized loss positions by impairment severity as of June 30, 2015 compared to December 31, 2014 : ($ in thousands) June 30, 2015 December 31, 2014 Number of Issues % of Market/Book Unrealized/ Unrecognized Loss Number of Issues % of Market/Book Unrealized/ Unrecognized Loss 495 80% - 99% $ 20,483 350 80% - 99% $ 10,596 — 60% - 79% — — 60% - 79% — — 40% - 59% — — 40% - 59% — — 20% - 39% — — 20% - 39% — — 0% - 19% — — 0% - 19% — $ 20,483 $ 10,596 The increase in the number of securities in a loss position in our portfolio as of June 30, 2015 compared to December 31, 2014, and the related loss amounts were mainly driven by a higher interest rate environment. During Six Months 2015 , interest rates on the 10-year U.S. Treasury Note rose by 18 basis points. This interest rate movement had a negative impact on the valuation of our fixed income securities portfolio, thus increasing the number of securities in a loss position and the corresponding dollar amount of unrealized losses. In addition, unrealized losses on our equity portfolio increased to $4.4 million . These unrealized losses are related to 27 securities with an average impairment severity of 4% of cost, which reflects a temporary dislocation in market values that are expected to recover in the near term. We do not intend to sell any of the securities in the tables above, nor do we believe we will be required to sell any of these securities. We have also reviewed these securities under our OTTI policy, as described in Note 2. “Summary of Significant Accounting Policies” within Item 8. “Financial Statements and Supplementary Data.” of our 2014 Annual Report , and have concluded that they are temporarily impaired. This conclusion reflects our current judgment as to the financial position and future prospects of the entity that issued the investment security and underlying collateral. If our judgment about an individual security changes in the future, we may ultimately record a credit loss after having originally concluded that one did not exist, which could have a material impact on our net income and financial position in future periods. (d) Fixed income securities at June 30, 2015 , by contractual maturity, are shown below. Mortgage-backed securities ("MBS") are included in the maturity tables using the estimated average life of each security. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations, with or without call or prepayment penalties. Listed below are the contractual maturities of HTM fixed income securities at June 30, 2015 : ($ in thousands) Carrying Value Fair Value Due in one year or less $ 87,104 88,688 Due after one year through five years 149,865 158,092 Due after five years through 10 years 10,890 12,922 Total HTM fixed income securities $ 247,859 259,702 Listed below are the contractual maturities of AFS fixed income securities at June 30, 2015 : ($ in thousands) Fair Value Due in one year or less $ 447,462 Due after one year through five years 2,146,816 Due after five years through 10 years 1,504,185 Due after 10 years 94,355 Total AFS fixed income securities $ 4,192,818 (e) The following table summarizes our other investment portfolio by strategy and the remaining commitment amount associated with each strategy: Other Investments Carrying Value June 30, 2015 ($ in thousands) June 30, December 31, Remaining Commitment Alternative Investments Secondary private equity $ 18,997 21,807 7,072 Private equity 16,027 20,126 8,823 Energy/power generation 9,662 14,445 19,610 Real estate 8,242 11,452 9,975 Mezzanine financing 7,563 9,853 13,383 Distressed debt 7,000 8,679 3,048 Venture capital 6,697 6,606 350 Total alternative investments 74,188 92,968 62,261 Other securities 11,232 6,235 2,269 Total other investments $ 85,420 99,203 64,530 For a description of our seven alternative investment strategies, as well as information regarding redemption, restrictions, and fund liquidations, refer to Note 5. “Investments” in Item 8. “Financial Statements and Supplementary Data.” of our 2014 Annual Report . The following table sets forth gross summarized financial information for our other investments portfolio, including the portion not owned by us. The investments are carried under the equity method of accounting. The last line of the table below reflects our share of the aggregate income, which is the portion included in our Financial Statements. As the majority of these investments report results to us on a one quarter lag, the summarized financial statement information for the three and six-month periods ended March 31 is as follows: Income Statement Information Quarter ended March 31, Six Months ended March 31, ($ in millions) 2015 2014 2015 2014 Net investment income $ 8.5 22.8 $ 95.6 85.7 Realized gains 279.4 74.2 592.5 197.6 Net change in unrealized (depreciation) appreciation (223.4 ) 207.6 (866.9 ) 842.4 Net (loss) income $ 64.5 304.6 $ (178.8 ) 1,125.7 Selective’s insurance subsidiaries’ other investments income (loss) $ 1.4 3.6 $ (2.1 ) 8.8 (f) We have pledged certain AFS fixed income securities as collateral related to: (i) our outstanding borrowing of $60 million with the Federal Home Loan Bank of Indianapolis ("FHLBI"); and (ii) our reinsurance obligations related to our 2011 acquisition of our excess and surplus lines ("E&S") book of business. In addition, certain securities were on deposit with various state and regulatory agencies to comply with insurance laws. We retain all rights regarding all securities pledged as collateral. The following table summarizes the market value of these securities at June 30, 2015 : ($ in millions) FHLBI Collateral Reinsurance Collateral State and Regulatory Deposits Total U.S. government and government agencies $ 7.7 — 24.7 32.4 Obligations of states and political subdivisions — 4.9 — 4.9 Corporate securities — 4.8 — 4.8 CMBS 1.5 — — 1.5 RMBS 54.5 2.0 — 56.5 Total pledged as collateral $ 63.7 11.7 24.7 100.1 (g) The Company did not have exposure to any credit concentration risk of a single issuer greater than 10% of the Company's stockholders' equity, other than certain U.S. government agencies, as of June 30, 2015 or December 31, 2014 . (h) The components of pre-tax net investment income earned for the periods indicated were as follows: Quarter ended June 30, Six Months ended June 30, ($ in thousands) 2015 2014 2015 2014 Fixed income securities $ 30,659 33,781 $ 61,626 $ 64,809 Equity securities 2,384 1,736 4,176 3,185 Short-term investments 23 14 48 33 Other investments 1,422 3,553 (2,118 ) 8,771 Investment expenses (2,258 ) (2,310 ) (4,585 ) (4,490 ) Net investment income earned $ 32,230 36,774 59,147 72,308 (i) The following tables summarize OTTI by asset type for the periods indicated: Second Quarter 2015 Gross Included in Other Comprehensive Income ("OCI") Recognized in ($ in thousands) AFS fixed income securities: Corporate securities $ 183 — 183 Total AFS fixed income securities 183 — 183 AFS equity securities: Common stock 4,088 — 4,088 Preferred stock 180 — 180 Total AFS equity securities 4,268 — 4,268 Total OTTI losses $ 4,451 — 4,451 Second Quarter 2014 Gross Included in OCI Recognized in Earnings ($ in thousands) AFS equity securities: Common stock $ 419 — 419 Total OTTI losses $ 419 — 419 Six Months 2015 Gross Included in Other Comprehensive Income ("OCI") Recognized in ($ in thousands) AFS fixed income securities: Corporate securities $ 1,192 — 1,192 RMBS 1 — 1 Total AFS fixed income securities 1,193 — 1,193 AFS equity securities: Common stock 5,172 — 5,172 Preferred stock 180 — 180 Total AFS equity securities 5,352 — 5,352 Total OTTI losses $ 6,545 — 6,545 Six Months 2014 Gross Included in OCI Recognized in Earnings ($ in thousands) AFS equity securities: Common stock $ 1,382 — 1,382 Total OTTI losses $ 1,382 — 1,382 For a discussion of our evaluation for OTTI of fixed income securities, short-term investments, equity securities, and other investments, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2014 Annual Report. The following tables set forth, for the periods indicated, credit loss impairments on fixed income securities for which a portion of the OTTI charge was recognized in OCI, and the corresponding changes in such amounts: Quarter ended June 30, ($ in thousands) 2015 2014 Balance, beginning of period $ 1,013 7,488 Addition for the amount related to credit loss for which an OTTI was not previously recognized — — Reductions for securities sold during the period — (1,954 ) Reductions for securities for which the amount previously recognized in OCI was recognized in earnings because of intention or potential requirement to sell before recovery of amortized cost — — Additional increases to the amount related to credit loss for which an OTTI was previously recognized — — Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected — — Balance, end of period $ 1,013 5,534 Six Months ended June 30, ($ in thousands) 2015 2014 Balance, beginning of period $ 5,444 7,488 Addition for the amount related to credit loss for which an OTTI was not previously recognized — — Reductions for securities sold during the period (4,431 ) (1,954 ) Reductions for securities for which the amount previously recognized in OCI was recognized in earnings because of intention or potential requirement to sell before recovery of amortized cost — — Additional increases to the amount related to credit loss for which an OTTI was previously recognized — — Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected — — Balance, end of period $ 1,013 5,534 (j) The components of net realized gains, excluding OTTI charges, for the periods indicated were as follows: Quarter ended June 30, Six Months ended June 30, ($ in thousands) 2015 2014 2015 2014 HTM fixed income securities Gains $ 2 3 2 3 Losses — (3 ) (1 ) (14 ) AFS fixed income securities Gains 487 780 1,989 938 Losses (18 ) (31 ) (130 ) (143 ) AFS equity securities Gains 830 4,362 22,148 12,679 Losses (270 ) (153 ) (1,346 ) (324 ) Other investments Gains — — — — Losses — — (654 ) — Total net realized gains (excluding OTTI charges) $ 1,031 4,958 22,008 13,139 Realized gains and losses on the sale of investments are determined on the basis of the cost of the specific investments sold. Proceeds from the sale of AFS securities were $19.5 million and $157.9 million in Second Quarter and Six Months 2015 , respectively. The $22.0 million in net realized gains for Six Months 2015 was primarily related to the sale of AFS equity securities due to a change in our dividend equity strategy from a quantitative, model-driven stock selection strategy to a fundamentally-based stock selection approach that incorporates an assessment of the sustainability and growth rate of a company’s dividends and future cash flow. The $5.0 million and $13.1 million in net realized gains in Second Quarter and Six Months 2014 , respectively, were primarily related to the sale of AFS equity securities due to the quantitative rebalancing of our dividend yield strategy holdings within our equity portfolio. |