INVESTMENTS

The following table details fixed-maturity available-for-sale securities, by major investment category, at June 30, 2019 and December 31, 2018:



	Cost or Adjusted/Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2019
U.S. government and agency securities	$	117,728	$	648	$	368	$	118,008
Foreign government	3,984		84		2		4,066
States, municipalities and political subdivisions	134,428		2,393		98		136,723
Public utilities	24,394		472		62		24,804
Corporate securities	280,304		5,076		242		285,138
Mortgage-backed securities	238,472		4,354		576		242,250
Asset backed securities	51,088		568		15		51,641
Redeemable preferred stocks	1,854		12		107		1,759
Total fixed maturities	$	852,252	$	13,607	$	1,470	$	864,389

December 31, 2018
U.S. government and agency securities	$	100,240	$	50	$	1,315	$	98,975
Foreign government	3,993		5		16		3,982
States, municipalities and political subdivisions	145,415		354		1,301		144,468
Public utilities	24,560		11		681		23,890
Corporate securities	307,875		272		6,159		301,988
Mortgage-backed securities	227,004		333		3,483		223,854
Asset-backed securities	64,071		105		139		64,037
Redeemable preferred stocks	1,287		3		139		1,151
Total fixed maturities	$	874,445	$	1,133	$	13,233	$	862,345

Equity securities are summarized as follows:



	June 30, 2019				December 31, 2018
	Estimated Fair Value		Percent of Total		Estimated Fair Value		Percent of Total

Mutual funds	$	58,942	59.8	%	$	50,016	61.8	%
Public utilities	2,730		2.8	%	1,759		2.2
Other common stocks	35,310		35.8	%	27,198		33.6
Nonredeemable preferred stocks	1,606		1.6	%	2,005		2.4
Total equity securities	$	98,588	100.0	%	$	80,978	100.0	%

When we sell investments, we calculate the gain or loss realized on the sale by comparing the sales price (fair value) to the cost or adjusted/amortized cost of the security sold. We determine the cost or adjusted/amortized cost of the security sold using the specific-identification method. The following table details our realized gains (losses) by major investment category for the three and six months ended June 30, 2019 and 2018:



	2019					2018
	Gains (Losses)			Fair Value at Sale		Gains (Losses)			Fair Value at Sale
Three Months Ended June 30,
Fixed maturities	$	283		$	270,807	$	14		$	4,706
Equity securities	85			1,354		59			207
Total realized gains	368			272,161		73			4,913
Fixed maturities	(212		)	268,002		(511		)	38,091
Equity securities	(169		)	1,327		—			—
Total realized losses	(381		)	269,329		(511		)	38,091
Net realized investment gains (losses)	$	(13	)	$	541,490	$	(438	)	$	43,004

Six Months Ended June 30,
Fixed maturities	$	531		$	276,811	$	56		$	6,881
Equity securities	91			1,413		509			1,182
Total realized gains	622			278,224		565			8,063
Fixed maturities	(248		)	277,591		(792		)	70,319
Equity securities	(206		)	1,710		—			—
Total realized losses	(454		)	279,301		(792		)	70,319
Net realized investment gains (losses)	$	168		$	557,525	$	(227	)	$	78,382

The table below summarizes our fixed maturities at June 30, 2019 by contractual maturity periods. Actual results may differ as issuers may have the right to call or prepay obligations, with or without penalties, prior to the contractual maturities of those obligations.



	June 30, 2019
	Cost or Amortized Cost		Percent of Total		Fair Value		Percent of Total
Due in one year or less	$	91,314	10.7	%	$	91,261	10.6	%
Due after one year through five years	306,639		36.0	%	309,509		35.8	%
Due after five years through ten years	159,340		18.7	%	164,149		19.0	%
Due after ten years	5,399		0.6	%	5,579		0.6	%
Asset and mortgage backed securities	289,560		34.0	%	293,891		34.0	%
Total	$	852,252	100.0	%	$	864,389	100.0	%

The following table summarizes our net investment income by major investment category:



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Fixed maturities	$	5,560		$	5,392		$	11,622		$	10,204
Equity securities	622			467			1,114			930
Cash and cash equivalents	1,661			617			1,796			839
Other investments	(4		)	607			764			789
Other assets	9			8			97			15
Investment income	7,848			7,091			15,393			12,777
Investment expenses	(278		)	(246		)	(528		)	(489		)
Net investment income	$	7,570		$	6,845		$	14,865		$	12,288

Portfolio monitoring

We have a comprehensive portfolio monitoring process to identify and evaluate each fixed-income security whose carrying value may be other-than-temporarily impaired.

For each fixed-income security in an unrealized loss position, we determine if the loss is temporary or other-than-temporary. If our management decides to sell the security or determines that it is more likely than not that we will be required to sell the security before recovery of the cost or amortized cost basis for reasons such as liquidity needs, contractual or regulatory requirements, then the security's decline in fair value is considered other-than-temporary and is recorded in earnings.

If we have not made the decision to sell the fixed-income security and it is more likely than not that we will be required to sell the fixed-income security before recovery of its amortized cost basis, we evaluate whether we expect the security to receive cash flows sufficient to recover the entire cost or amortized cost basis of the security. We calculate the estimated recovery value by discounting the best estimate of future cash flows at the security's original or current effective rate, as appropriate, and compare this to the cost or amortized cost of the security. If we do not expect to receive cash flows sufficient to recover the entire cost or amortized cost basis of the fixed-income security, the credit loss component of the impairment is recorded in earnings, with the remaining amount of the unrealized loss related to other factors recognized in other comprehensive income.

Our portfolio monitoring process includes a quarterly review of all fixed-income securities to identify instances where the fair value of a security compared to its cost or amortized cost is below established thresholds. The process also includes the monitoring of other impairment indicators such as ratings, ratings downgrades and payment defaults. The securities identified, in addition to other securities for which we may have a concern, are evaluated for potential other-than-temporary impairment using information relevant to the collectability or recovery of the security that is reasonably available. Inherent in our evaluation of other-than-temporary impairment for these fixed-income securities are assumptions and estimates about the financial condition and future earnings potential of the issue or issuer. Some of the factors that may be considered in evaluating whether a decline in fair value is other-than-temporary are: (1) the financial condition, near-term and long-term prospects of the issue or issuer, including relevant industry specific market conditions and trends, geographic location and implications of rating agency actions and offering prices; (2) the specific reasons that a security is in an unrealized loss position, including overall market conditions which could affect liquidity; and (3) the length of time and extent to which the fair value has been less than amortized cost or cost.

The following table presents an aging of our unrealized investment losses by investment class:



	Less Than Twelve Months					Twelve Months or More
	Number of Securities⁽¹⁾	Gross Unrealized Losses		Fair Value		Number of Securities⁽¹⁾	Gross Unrealized Losses		Fair Value
June 30, 2019
U.S. government and agency securities	35	$	70	$	27,891	48	$	298	$	49,848
Foreign governments	—	—		—		2	2		600
States, municipalities and political subdivisions	5	4		4,306		30	94		24,353
Public utilities	3	1		187		8	61		3,972
Corporate securities	18	34		7,578		122	208		52,865
Mortgage-backed securities	31	252		32,054		89	324		26,915
Asset backed securities	2	11		1,994		9	4		3,084
Redeemable preferred stocks	4	38		1,174		2	69		203
Total fixed maturities	98	$	410	$	75,184	310	$	1,060	$	161,840

December 31, 2018
U.S. government and agency securities	45	$	111	$	28,464	55	$	1,204	$	61,264
Foreign governments	5	16		2,978		—	—		—
States, municipalities and political subdivisions	49	272		38,469		91	1,029		68,115
Public utilities	30	374		13,685		19	307		7,805
Corporate securities	351	3,149		144,769		208	3,010		117,351
Mortgage-backed securities	87	1,303		88,754		135	2,180		70,510
Asset-backed securities	67	136		41,871		7	3		1,372
Redeemable preferred stocks	8	62		711		2	77		8,377
Total fixed maturities	642	$	5,423	$	359,701	517	$	7,810	$	334,794

⁽¹⁾ This amount represents the actual number of discrete securities, not the number of shares or units of those securities. The numbers are not presented in thousands.

During our quarterly evaluations of our securities for impairment, we determined that none of our investments in fixed-income securities that reflected an unrealized loss position were other-than-temporarily impaired. The issuers of our debt security investments continue to make interest payments on a timely basis. We do not intend to sell nor is it likely that we would be required to sell the debt securities before we recover our amortized cost basis. Due to the adoption of ASU 2016-01 as of January 1, 2018, equity securities are reported at fair value with changes in fair value recognized in the valuation of equity investments and are no longer included in impairment write-downs, change in intent write-downs and sales. During the three and six months ended June 30, 2019 and 2018, we recorded no other-than-temporary impairment charges.

Fair value measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The hierarchy for inputs used in determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Assets and liabilities recorded on our Unaudited Condensed Consolidated Balance Sheets at fair value are categorized in the fair value hierarchy based on the observability of inputs to the valuation techniques as follows:

Level 1: Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we can access.

Level 2: Assets and liabilities whose values are based on the following:

(a) Quoted prices for similar assets or liabilities in active markets;

(b) Quoted prices for identical or similar assets or liabilities in markets that are not active; or

(c) Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Unobservable inputs reflect our estimates of the assumptions that market participants would use in valuing the assets and liabilities.

We estimate the fair value of our investments using the closing prices on the last business day of the reporting period, obtained from active markets such as the NYSE, Nasdaq and NYSE American. For securities for which quoted prices in active markets are unavailable, we use a third-party pricing service that utilizes quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs to estimate the fair value of those securities for which quoted prices are unavailable. Our estimates of fair value reflect the interest rate environment that existed as of the close of business on June 30, 2019 and December 31, 2018. Changes in interest rates subsequent to June 30, 2019 may affect the fair value of our investments.

The fair value of our fixed maturities is initially calculated by a third-party pricing service. Valuation service providers typically obtain data about market transactions and other key valuation model inputs from multiple sources and, through the use of proprietary models, produce valuation information in the form of a single fair value for individual fixed-income and other securities for which a fair value has been requested. The inputs used by the valuation service providers include, but are not limited to, market prices from recently completed transactions and transactions of comparable securities, interest rate yield curves, credit spreads, liquidity spreads, currency rates and other information, as applicable. Credit and liquidity spreads are typically implied from completed transactions and transactions of comparable securities. Valuation service providers also use proprietary discounted cash flow models that are widely accepted in the financial services industry and similar to those used by other market participants to value the same financial information. The valuation models take into account, among other things, market observable information as of the measurement date, as described above, as well as the specific attributes of the security being valued, including its term, interest rate, credit rating, industry sector and, where applicable, collateral quality and other issue or issuer specific information. Executing valuation models effectively requires seasoned professional judgment and experience.

Any change in the estimated fair value of our fixed-income securities would impact the amount of unrealized gain or loss we have recorded, which could change the amount we have recorded for our investments and other comprehensive income on our Unaudited Condensed Consolidated Balance Sheet as of June 30, 2019.

The following table presents the fair value of our financial instruments measured on a recurring basis by level at June 30, 2019 and December 31, 2018:



	Total		Level 1		Level 2		Level 3
June 30, 2019
U.S. government and agency securities	$	118,008	$	—	$	118,008	$	—
Foreign government	4,066		—		4,066		—
States, municipalities and political subdivisions	136,723		—		136,723		—
Public utilities	24,804		307		24,497		—
Corporate securities	285,138		—		285,138		—
Mortgage-backed securities	242,250		—		242,250		—
Asset-backed securities	51,641		—		51,641		—
Redeemable preferred stocks	1,759		273		1,486		—
Total fixed maturities	864,389		580		863,809		—
Mutual funds	58,942		55,699		3,243		—
Public utilities	2,730		2,730		—		—
Other common stocks	35,310		35,310		—		—
Non-redeemable preferred stocks	1,606		1,606		—		—
Total equity securities	98,588		95,345		3,243		—
Other long-term investments ⁽¹⁾	3,235		300		2,935
Total investments	$	966,212	$	96,225	$	869,987	$	—

December 31, 2018
U.S. government and agency securities	$	98,975	$	—	$	98,975	$	—
Foreign government	3,982		—		3,982		—
States, municipalities and political subdivisions	144,468		—		144,468		—
Public utilities	23,890		—		23,890		—
Corporate securities	301,988		—		301,988		—
Mortgage-backed securities	223,854		—		223,854		—
Asset-backed securities	64,037		—		64,037		—
Redeemable preferred stocks	1,151		790		361		—
Total fixed maturities	862,345		790		861,555		—
Mutual Funds	50,016		47,223		2,793		—
Public utilities	1,759		1,759		—		—
Other common stocks	27,198		27,198		—		—
Non-redeemable preferred stocks	2,005		2,005		—		—
Total equity securities	80,978		78,185		2,793		—
Other long-term investments ⁽¹⁾	300		300		—		—
Total investments	$	943,623	$	79,275	$	864,348	$	—

⁽¹⁾ Other long-term investments included in the fair value hierarchy exclude these limited partnership interests that are measured at estimated fair value using the net asset value per share (or its equivalent) practical expedient.

The carrying amounts for the following financial instrument categories approximate their fair values at June 30, 2019 and December 31, 2018, because of their short-term nature: cash and cash equivalents, accrued investment income, premiums receivable, reinsurance recoverable, reinsurance payable, other assets, and other liabilities. The carrying amount of the notes payable to the Florida State Board of Administration, the Branch Banking & Trust Corporation (BB&T) and our senior notes approximate fair value as the interest rates and terms are variable.

We are responsible for the determination of fair value and the supporting assumptions and methodologies. We have implemented a system of processes and controls designed to provide assurance that our assets and liabilities are appropriately valued. For fair values received from third parties, our processes are designed to provide assurance that the valuation methodologies and inputs are appropriate and consistently applied, the assumptions are reasonable and consistent with the objective of determining fair value, and the fair values are accurately recorded.

At the end of each quarter, we determine whether we need to transfer the fair values of any securities between levels of the fair value hierarchy and, if so, we report the transfer as of the end of the quarter. During the quarter ended June 30, 2019, we transferred no investments between levels.

For our investments in U.S. government securities that do not have prices in active markets, agency securities, state and municipal governments, and corporate bonds, we obtain the fair values from our investment custodians, which use a third-party valuation service. The valuation service calculates prices for our investments in the aforementioned security types on a month-end basis by using several matrix-pricing methodologies that incorporate inputs from various sources. The model the valuation service uses to price U.S. government securities and securities of states and municipalities incorporates inputs from active market makers and inter-dealer brokers. To price corporate bonds and agency securities, the valuation service calculates non-call yield spreads on all issuers, uses option-adjusted yield spreads to account for any early redemption features, and adds final spreads to the U.S. Treasury curve at 3 p.m. (ET) as of quarter end. Since the inputs the valuation service uses in its calculations are not quoted prices in active markets, but are observable inputs, they represent Level 2 inputs.

Other investments

Our investments in limited partnerships, recorded in the other investments line of our Unaudited Condensed Consolidated Balance Sheets, are accounted for at fair value utilizing a net asset value per share equivalent methodology. The estimated fair value of our investments in the limited partnership interests at June 30, 2019 was $9,139,000.

The information presented in the table below is as of June 30, 2019:



	Book Value		Unrealized Gain		Unrealized Loss		Fair Value
Limited partnership investments ⁽¹⁾	$	8,365	$	774	$	—	$	9,139
Certificates of deposit	300		—		—		300
Short-term investments	2,934		1		—		2,935
Total other investments	$	11,599	$	775	$	—	$	12,374

⁽¹⁾ Distributions will be generated from investment gains, from operating income, from underlying investments of funds, and from liquidation of the underlying assets of the funds. We estimate that the underlying assets of the funds will be liquidated over the next three months to 10 years.

Restricted Cash

We are required to maintain assets on deposit with various regulatory authorities to support our insurance operations. The cash on deposit with state regulators is available to settle insurance liabilities. We also hold funds in trust for certain reinsurance transactions.

The following table presents the components of restricted assets:



	June 30, 2019		December 31, 2018
Trust funds	$	85,843	$	70,208
Cash on deposit (regulatory deposits)	1,238		1,233
Total restricted cash	$	87,081	$	71,441