INVESTMENTS

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



	Cost or Adjusted/Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2019
U.S. government and agency securities	$	114,446	$	1,168	$	201	$	115,413
Foreign government	3,980		93		1		4,072
States, municipalities and political subdivisions	134,605		2,892		50		137,447
Public utilities	29,394		763		29		30,128
Corporate securities	289,456		7,155		118		296,493
Mortgage-backed securities	269,252		6,245		243		275,254
Asset backed securities	59,459		849		21		60,287
Redeemable preferred stocks	2,120		46		48		2,118
Total fixed maturities	$	902,712	$	19,211	$	711	$	921,212

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:



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

Mutual funds	$	60,137	57.5	%	$	50,016	61.8	%
Public utilities	2,917		2.8	%	1,759		2.2
Other common stocks	39,774		38.0	%	27,198		33.6
Nonredeemable preferred stocks	1,801		1.7	%	2,005		2.4
Total equity securities	$	104,629	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 nine months ended September 30, 2019 and 2018:



	2019					2018
	Gains (Losses)			Fair Value at Sale		Gains (Losses)			Fair Value at Sale
Three Months Ended September 30,
Fixed maturities	$	66		$	34,282	$	12		$	4,864
Equity securities	3			272		8			411
Short-term investments	—			2,511		—			—
Total realized gains	69			37,065		20			5,275
Fixed maturities	(48		)	2,033		(441		)	46,268
Equity securities	(3		)	14		(26		)	387
Short-term investments	—			10		—			—
Total realized losses	(51		)	2,057		(467		)	46,655
Net realized investment gains (losses)	$	18		$	39,122	$	(447	)	$	51,930

Nine Months Ended September 30,
Fixed maturities	$	597		$	129,364	$	68		$	11,745
Equity securities	94			814		517			1,593
Short-term investments	—			3,571		—			—
Total realized gains	691			133,749		585			13,338
Fixed maturities	(287		)	36,661		(1,233		)	116,587
Equity securities	(217		)	1,163		(26		)	387
Short-term investments	(1		)	1,035		—			—
Total realized losses	(505		)	38,859		(1,259		)	116,974
Net realized investment gains (losses)	$	186		$	172,608	$	(674	)	$	130,312

The table below summarizes our fixed maturities at September 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.



	September 30, 2019
	Cost or Amortized Cost		Percent of Total		Fair Value		Percent of Total
Due in one year or less	$	101,063	11.2	%	$	101,143	11.0	%
Due after one year through five years	297,049		32.9	%	301,240		32.7	%
Due after five years through ten years	168,910		18.7	%	175,932		19.1	%
Due after ten years	6,979		0.8	%	7,356		0.8	%
Asset and mortgage backed securities	328,711		36.4	%	335,541		36.4	%
Total	$	902,712	100.0	%	$	921,212	100.0	%

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Fixed maturities	$	5,757		$	5,725		$	17,379		$	15,929
Equity securities	614			525			1,728			1,455
Cash and cash equivalents	1,611			588			3,407			1,427
Other investments	83			41			847			830
Other assets	11			9			108			24
Investment income	8,076			6,888			23,469			19,665
Investment expenses	(273		)	(267		)	(801		)	(756		)
Net investment income	$	7,803		$	6,621		$	22,668		$	18,909

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 (loss).

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
September 30, 2019
U.S. government and agency securities	20	$	50	$	18,550	40	$	151	$	34,669
Foreign governments	—	—		—		2	1		600
States, municipalities and political subdivisions	24	40		21,349		4	10		3,188
Public utilities	9	28		4,634		2	1		250
Corporate securities	49	62		21,686		45	56		18,617
Mortgage-backed securities	52	84		25,835		56	159		16,691
Asset backed securities	14	12		7,466		6	9		2,260
Redeemable preferred stocks	3	12		1,104		2	36		199
Total fixed maturities	171	$	288	$	100,624	157	$	423	$	76,474

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 nine months ended September 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 September 30, 2019 and December 31, 2018. Changes in interest rates subsequent to September 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 (loss) on our Unaudited Condensed Consolidated Balance Sheet as of September 30, 2019.

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



	Total		Level 1		Level 2		Level 3
September 30, 2019
U.S. government and agency securities	$	115,413	$	—	$	115,413	$	—
Foreign government	4,072		—		4,072		—
States, municipalities and political subdivisions	137,447		—		137,447		—
Public utilities	30,128		—		30,128		—
Corporate securities	296,493		—		296,493		—
Mortgage-backed securities	275,254		—		275,254		—
Asset-backed securities	60,287		—		60,287		—
Redeemable preferred stocks	2,118		594		1,524		—
Total fixed maturities	921,212		594		920,618		—
Mutual funds	60,137		56,730		3,407		—
Public utilities	2,917		2,917		—		—
Other common stocks	39,774		39,774		—		—
Non-redeemable preferred stocks	1,801		1,801		—		—
Total equity securities	104,629		101,222		3,407		—
Other investments ⁽¹⁾	763		300		463		—
Total investments	$	1,026,604	$	102,116	$	924,488	$	—

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 investments ⁽¹⁾	300		300		—		—
Total investments	$	943,623	$	79,275	$	864,348	$	—

⁽¹⁾ Other 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 September 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 September 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 September 30, 2019 was $9,261,000.

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



	Book Value		Unrealized Gain		Unrealized Loss		Fair Value
Limited partnership investments ⁽¹⁾	$	8,482	$	779	$	—	$	9,261
Certificates of deposit	300		—		—		300
Short-term investments	463		—		—		463
Total other investments	$	9,245	$	779	$	—	$	10,024

⁽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 two to ten 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:



	September 30, 2019		December 31, 2018
Trust funds	$	73,607	$	70,208
Cash on deposit (regulatory deposits)	1,242		1,233
Total restricted cash	$	74,849	$	71,441