Investments

6 Months Ended

Jun. 30, 2023

INVESTMENTS

Money Market Investments. As of June 30, 2023 and December 31, 2022, the Company had money market investments of $6.0 million and $7.7 million, respectively, that are classified as cash and cash equivalents in the Company’s Condensed Consolidated Balance Sheets.

Investments in Marketable Equity Securities. Investments in marketable equity securities consist of the following:


	As of
	June 30, 2023		December 31, 2022
(in thousands)
Total cost	$	225,971	$	270,764
Gross unrealized gains	422,785		363,147
Gross unrealized losses	—		(23,990)
Total Fair Value	$	648,756	$	609,921

At June 30, 2023 and December 31, 2022, the Company owned 55,430 shares in Markel Group Inc. (Markel) valued at $76.7 million and $73.0 million, respectively. The Chief Executive Officer of Markel, Mr. Thomas S. Gayner, is a member of the Company’s Board of Directors. As of June 30, 2023, the Company owned 422 Class A and 482,945 Class B shares in Berkshire Hathaway valued at $383.2 million, which exceeded 5% of the Company’s total assets.

The Company purchased $4.6 million of marketable equity securities during the first six months of 2023. The Company purchased $31.5 million of marketable equity securities during the first six months of 2022.

During the first six months of 2023, the gross cumulative realized net gains from the sales of marketable equity securities were $13.0 million. The total proceeds from such sales were $62.0 million. During the first six months of 2022, the gross cumulative realized gains from the sales of marketable equity securities were $39.1 million. The total proceeds from such sales were $74.2 million.

The net gain (loss) on marketable equity securities comprised the following:


	Three Months Ended June 30				Six Months Ended June 30
(in thousands)	2023		2022		2023		2022
Gain (loss) on marketable equity securities, net	$	78,648	$	(165,540)	$	96,670	$	(118,628)
Less: Net (gains) losses in earnings from marketable equity securities sold and donated	(9,132)		4,838		(5,475)		10,605
Net unrealized gains (losses) in earnings from marketable equity securities still held at the end of the period	$	69,516	$	(160,702)	$	91,195	$	(108,023)

Investments in Affiliates. In June 2023, the Company entered into an agreement to merge the Pinna business with Realm in return for an additional noncontrolling financial interest in Realm. The Company held an equity interest in Realm prior to the merger transaction, which was accounted for under the equity method. Following the merger transaction, the Company’s convertible note in Realm converted into equity and the Company also made an additional investment in Realm. As of June 30, 2023, the Company held a 42.2% interest in Realm on a fully diluted basis, and continues to account for its investment under the equity method.

As of June 30, 2023, the Company held a 49.9% interest in N2K Networks on a fully diluted basis, and accounts for its investment under the equity method. The Company holds two of the five seats of N2K Networks’ governing board with the other shareholders retaining substantive participation rights to control the financial and operating decisions of N2K Networks through representation on the board.

As of June 30, 2023, the Company held an approximate 18% interest in Intersection Holdings, LLC (Intersection), and accounts for its investment under the equity method. The Company holds two of the ten seats of Intersection’s governing board, which allows the Company to exercise significant influence over Intersection. In April 2023, the Company entered into a term note agreement to loan Intersection $30.0 million at an interest rate of 9% per annum. The principal and interest on the note are payable in monthly installments over 5 years with the final payment due by May 2028. The outstanding balance on this loan was $29.7 million as of June 30, 2023.

As of June 30, 2023, the Company also held investments in several other affiliates; GHG held a 40% interest in Residential Home Health Illinois, a 40% interest in Residential Hospice Illinois, a 40% interest in the joint venture formed between GHG and a Michigan hospital, and a 40% interest in the joint venture formed between GHG and Allegheny Health Network (AHN). During the first quarter of 2022, GHG invested an additional $18.5 million in the Residential Home Health Illinois and Residential Hospice Illinois affiliates to fund their acquisition of certain home health and hospice assets of the NorthShore University HealthSystem. The transaction diluted GHG’s interest in Residential Hospice Illinois resulting in a $0.6 million gain on the sale of investment in affiliate (see Note 12). For the three and six months ended June 30, 2023, the Company recorded $3.9 million and $7.4 million, respectively, in revenue for services provided to the affiliates of GHG. For the three and six months ended June 30, 2022, the Company recorded $3.7 million and $7.0 million, respectively, in revenue for services provided to the affiliates of GHG.

The Company had $42.6 million and $49.1 million in its investment account that represents cumulative undistributed income in its investments in affiliates as of June 30, 2023 and December 31, 2022, respectively.

Additionally, Kaplan International Holdings Limited (KIHL) held a 45% interest in a joint venture formed with University of York. KIHL loaned the joint venture £22 million, which loan is repayable over 25 years at an interest rate of 7% and guaranteed by the University of York. The outstanding balance on this loan was £20.4 million as of June 30, 2023. The loan is repayable by December 2041.

Cost Method Investments. The Company held investments without readily determinable fair values in a number of equity securities that are accounted for as cost method investments, which are recorded at cost, less impairment, and adjusted for observable price changes for identical or similar investments of the same issuer. The carrying value of these investments was $73.4 million and $66.7 million as of June 30, 2023 and December 31, 2022, respectively. During the three and six months ended June 30, 2023, the Company recorded gains of $1.3 million and $3.1 million, respectively, to those equity securities based on observable transactions.