4. INVESTMENTS

Unrealized Gains and Losses

The difference between amortized cost or cost and estimated fair value and gross unrealized gains and losses, by major investment category, consisted of the following:

໿



	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized
	or Cost		Gains		Losses		Fair Value
	(In thousands)
December 31, 2018
Debt securities - available-for-sale:
United States government obligations and authorities	$	127,928	$	1,091	$	1,151	$	127,868
Obligations of states and political subdivisions	9,870		27		130		9,767
Corporate	273,192		510		4,971		268,731
International	22,674		12		411		22,275
	433,664		1,640		6,663		428,641

Debt securities - held-to-maturity:
United States government obligations and authorities	4,085		1		158		3,928
Corporate	986		2		6		982
International	55		—		1		54
	5,126		3		165		4,964
Total investments, excluding equity securities (1)	$	438,790	$	1,643	$	6,828	$	433,605


(1)	As a result of the adoption of ASU 2016-01 on January 1, 2018 (see additional details in Note 2 above) for our equity securities we now recongnize changes in unrealized gains or losses within our statements of operations; therefore they are not included as of December 31, 2018.



	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized
	or Cost		Gains		Losses		Fair Value
	(In thousands)
December 31, 2017
Debt securities - available-for-sale:
United States government obligations and authorities	$	98,739	$	244	$	846	$	98,137
Obligations of states and political subdivisions	66,319		325		378		66,266
Corporate	239,435		2,233		749		240,919
International	17,807		136		27		17,916
	422,300		2,938		2,000		423,238

Debt securities - held-to-maturity:
United States government obligations and authorities	$	4,160	$	9	$	106	$	4,063
Corporate	1,123		21		—		1,144
International	66		1		—		67
	5,349		31		106		5,274
Equity securities	14,085		1,628		279		15,434
Total investments	$	441,734	$	4,597	$	2,385	$	443,946

Net Realized and Unrealized Gains and Losses

The Company calculates the gain or loss realized on the sale of investments by comparing the sales price (fair value) to the cost or amortized cost of the security sold. Net realized gains and losses on investments are determined in accordance with the specific identification method.

Net realized and unrealized gains (losses), by major investment category, consisted of the following:

໿



	Year Ended December 31,
	2018			2017			2016
	(In thousands)
Gross realized and unrealized gains:
Debt securities	$	423		$	1,814		$	3,208
Equity securities	2,374			9,944			4,264
Total gross realized and unrealized gains	2,797			11,758			7,472

Gross realized and unrealized losses:
Debt securities	(3,990		)	(1,671		)	(1,614		)
Equity securities	(2,951		)	(1,539		)	(2,813		)
Total gross realized and unrealized losses	(6,941		)	(3,210		)	(4,427		)
Net realized and unrealized gains (losses) on investments	$	(4,144	)	$	8,548		$	3,045

The above line item, net realized and unrealized gains (losses) on investments, includes $(1.2) million of net unrealized gains (losses) on equity securities for the year ended December 31, 2018.

Contractual Maturity

Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations.

Amortized cost and estimated fair value of debt securities, by contractual maturity, consisted of the following:



	December 31, 2018
	Amortized
	Cost		Fair Value
	(In thousands)
Securities with Maturity Dates
Debt securities, available-for-sale:
One year or less	$	20,349	$	20,285
Over one through five years	194,166		192,491
Over five through ten years	216,543		213,427
Over ten years	2,606		2,438
	433,664		428,641
Debt securities, held-to-maturity:
One year or less	650		650
Over one through five years	4,088		3,935
Over five through ten years	388		379
	5,126		4,964
Total	$	438,790	$	433,605

Net Investment Income

Net investment income consisted of the following: ໿



	Year Ended December 31,
	2018		2017		2016
	(In thousands)
Interest income	$	12,253	$	9,776	$	7,920
Dividends income	207		478		1,143
Net investment income	$	12,460	$	10,254	$	9,063

Aging of Gross Unrealized Losses

Gross unrealized losses and related fair values for debt securities (and equity securities as of December 31, 2017), grouped by duration of time in a continuous unrealized loss position, consisted of the following:



	Less than 12 months				12 months or longer				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
					(In thousands)
December 31, 2018
Debt securities - available-for-sale:
United States government obligations and authorities	$	22,673	$	246	$	29,727	$	905	$	52,400	$	1,151
Obligations of states and political subdivisions	3,254		18		4,786		112		8,040		130
Corporate	160,361		3,058		53,232		1,913		213,593		4,971
International	15,608		217		4,678		194		20,286		411
	201,896		3,539		92,423		3,124		294,319		6,663

Debt securities, held-to-maturity:
United States government obligations and authorities	229		1		3,113		157		3,342		158
Corporate	591		6		90		—		681		6
International	54		1		—		—		54		1
	874		8		3,203		157		4,077		165

	$	202,770	$	3,547	$	95,626	$	3,281	$	298,396	$	6,828



	Less than 12 months				12 months or longer				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
					(In thousands)
December 31, 2017
Debt securities - available-for-sale:
United States government obligations and authorities	$	52,368	$	517	$	19,287	$	329	$	71,655	$	846
Obligations of states and political subdivisions	32,030		221		5,676		157		37,706		378
Corporate	109,780		625		6,452		124		116,232		749
International	8,935		27		25		—		8,960		27
	203,113		1,390		31,440		610		234,553		2,000

Debt securities, held-to-maturity:
United States government obligations and authorities	523		4		2,730		102		3,253		106
Corporate	211		—		—		—		211		—
	734		4		2,730		102		3,464		106

Equity securities	4,312		279		—		—		4,312		279

	$	208,159	$	1,673	$	34,170	$	712	$	242,329	$	2,385

As of December 31, 2018, the Company held a total of 1,222 debt securities that were in an unrealized loss position, of which 371 securities were in an unrealized loss position continuously for 12 months or more. As of December 31, 2017, the Company held a total of 804 debt and equity securities that were in an unrealized loss position, of which 81 securities were in an unrealized loss position continuously for 12 months or more. The unrealized losses associated with these securities consisted primarily of losses related to corporate securities.

The Company holds some of its debt securities as available-for-sale and as such, these securities are recorded at fair value. The Company continually monitors the difference between cost and the estimated fair value of its investments, which involves uncertainty as to whether declines in value are temporary in nature. If the decline of a particular investment is deemed temporary, the Company records the decline as an unrealized loss in shareholders’ equity. If the decline is deemed to be other than temporary, the Company will write the security’s cost-basis or amortized cost-basis down to the fair value of the investment and recognizes an OTTI loss in the Company’s consolidated statement of operations. Additionally, any portion of such decline related to debt securities that is believed to arise from factors other than credit will be recorded as a component of other comprehensive income rather than charged against income.

As discussed in Note 2 above, beginning January 1, 2018, the Company’s equity investments are measured at fair value through net income. Prior to January 1, 2018, the Company’s assessment of equity securities initially involved an evaluation of all securities that are in an unrealized loss position, regardless of the duration or severity of the loss, as of the applicable balance sheet date. Such initial review consisted primarily of assessing whether: (i) there had been a negative credit or news event with respect to the issuer that could indicate the existence of an OTTI; and (ii) the Company had the ability and intent to hold an equity security for a period of time sufficient to allow for an anticipated recovery (generally considered to be one year from the balance sheet date).

To the extent that an equity security in an unrealized loss position is not impaired based on the initial review described previously, the Company then evaluates such equity security by considering qualitative and quantitative factors. These factors include but are not limited to facts and circumstances specific to individual securities, asset classes, the financial condition of the issuer, changes in dividend payment, the length of time fair value had been less than cost, the severity of the decline in fair value below cost, industry outlook and the Company’s ability and intent to hold each position until its forecasted recovery.

The determination that unrealized losses on such securities were other-than-temporary was primarily based on the duration of the decline in the fair value of such securities relative to their cost as of the balance sheet date. OTTI losses were $0.0 million, $0.0 million and $0.3 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Collateral Deposits

Cash and cash equivalents and investments, the majority of which are debt securities, with fair values of $10.3 million and $12.9 million as of December 31, 2018 and 2017, respectively, were deposited with governmental authorities and into custodial bank accounts as required by law or contractual obligations.