INVESTMENTS

The following table details fixed-maturity available-for-sale securities, by major investment category, at March 31, 2020 and December 31, 2019:



	Cost or Adjusted/Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2020
U.S. government and agency securities	$	104,530	$	5,034	$	44	$	109,520
Foreign government	3,721		70		1		3,790
States, municipalities and political subdivisions	126,962		2,885		38		129,809
Public utilities	27,125		479		313		27,291
Corporate securities	285,633		4,087		7,025		282,695
Mortgage-backed securities	255,523		8,872		1,541		262,854
Asset-backed securities	52,181		282		849		51,614
Redeemable preferred stocks	6,890		—		677		6,213
Total fixed maturities	$	862,565	$	21,709	$	10,488	$	873,786

December 31, 2019
U.S. government and agency securities	$	120,260	$	749	$	193	$	120,816
Foreign government	3,975		97		1		4,071
States, municipalities and political subdivisions	131,203		2,611		63		133,751
Public utilities	24,660		700		26		25,334
Corporate securities	281,892		7,123		143		288,872
Mortgage-backed securities	248,206		4,174		477		251,903
Asset-backed securities	56,487		683		41		57,129
Redeemable preferred stocks	2,915		72		2		2,985
Total fixed maturities	$	869,598	$	16,209	$	946	$	884,861

Equity securities are summarized as follows:



	March 31, 2020				December 31, 2019
	Estimated Fair Value		Percent of Total		Estimated Fair Value		Percent of Total

Mutual funds	$	52,492	46.9	%	$	65,453	56.1	%
Public utilities	6,255		5.6		3,663		3.1
Other common stocks	45,801		40.9		44,492		38.2
Nonredeemable preferred stocks	7,367		6.6		3,002		2.6
Total equity securities	$	111,915	100.0	%	$	116,610	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 months ended March 31, 2020 and 2019:



	2020					2019
	Gains (Losses)			Fair Value at Sale		Gains (Losses)			Fair Value at Sale
Three Months Ended March 31,
Fixed maturities	$	345		$	59,225	$	248		$	6,004
Equity securities	12			280		6			59
Short-term investments	—			35		—			—
Total realized gains	357			59,540		254			6,063
Fixed maturities	(337		)	4,518		(36		)	9,589
Equity securities	(88		)	953		(37		)	383
Short-term investments	—			128		—			—
Total realized losses	(425		)	5,599		(73		)	9,972
Net realized investment gains (losses)	$	(68	)	$	65,139	$	181		$	16,035

The table below summarizes our fixed maturities at March 31, 2020 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.



	March 31, 2020
	Cost or Amortized Cost		Percent of Total		Fair Value		Percent of Total
Due in one year or less	$	81,916	9.5	%	$	81,888	9.4	%
Due after one year through five years	266,843		30.9		269,289		30.8
Due after five years through ten years	194,258		22.5		196,540		22.5
Due after ten years	11,844		1.4		11,601		1.3
Asset and mortgage backed securities	307,704		35.7		314,468		36.0
Total	$	862,565	100.0	%	$	873,786	100.0	%

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



	Three Months Ended March 31,
	2020			2019
Fixed maturities	$	5,470		$	6,062
Equity securities	771			492
Cash and cash equivalents	671			135
Other investments	266			768
Other assets	9			88
Investment income	7,187			7,545
Investment expenses	(270		)	(250		)
Net investment income	$	6,917		$	7,295

Portfolio monitoring

We have a quarterly portfolio monitoring process to identify and evaluate each fixed-income security whose carrying value may be impaired as the result of a credit loss. For each fixed-income security in an unrealized loss position, if we determine that we intend to sell the security or 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. The security's entire decline in fair value is recorded in earnings.

If our management decides not to sell the fixed-income security and it is more likely than not that we will not be required to sell the fixed-income security before recovery of its amortized cost basis, we evaluate whether the decline in fair value has resulted from credit losses or other factors. This is typically indicated by a change in the rating of the security assigned by a rating agency, and any adverse conditions specifically related to the security or industry, among other factors. If the assessment indicates that a credit loss may exist, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses will be recorded in earnings. Credit loss is limited to the difference between a security's amortized cost basis and its fair value. Any additional impairment not recorded through an allowance for credit losses is recognized in other comprehensive income (loss).

During the three months ended March 31, 2020, we determined that none of our fixed-income securities shown in the table below that are in an unrealized loss position, have declines in fair value that are reflected as a result of credit losses. Therefore, no credit loss allowance was recorded at March 31, 2020. 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. Equity securities are reported at fair value with changes in fair value recognized in the valuation of equity investments.

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
March 31, 2020
U.S. government and agency securities	3	$	2	$	2,467	22	$	42	$	13,125
Foreign governments	—	—		—		1	1		350
States, municipalities and political subdivisions	19	38		13,084		—	—		—
Public utilities	31	313		14,960		—	—		—
Corporate securities	300	6,948		134,296		10	77		2,792
Mortgage-backed securities	93	1,304		53,126		10	237		3,904
Asset-backed securities	57	843		23,749		1	6		994
Redeemable preferred stocks	66	677		6,116		—	—		—
Total fixed maturities	569	$	10,125	$	247,798	44	$	363	$	21,165

December 31, 2019
U.S. government and agency securities	37	$	89	$	26,372	39	$	104	$	31,364
Foreign governments	—	—		—		2	1		600
States, municipalities and political subdivisions	31	61		14,508		2	2		1,262
Public utilities	9	25		4,626		2	1		250
Corporate securities	42	124		22,435		27	19		9,605
Mortgage-backed securities	89	322		59,101		50	155		12,738
Asset-backed securities	15	34		8,447		5	7		1,259
Redeemable preferred stocks	—	—		—		1	2		97
Total fixed maturities	223	$	655	$	135,489	128	$	291	$	57,175

⁽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.

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 March 31, 2020 and December 31, 2019. Changes in interest rates subsequent to March 31, 2020 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 March 31, 2020.

The following table presents the fair value of our financial instruments measured on a recurring basis by level at March 31, 2020 and December 31, 2019:



	Total		Level 1		Level 2		Level 3
March 31, 2020
U.S. government and agency securities	$	109,520	$	—	$	109,520	$	—
Foreign government	3,790		—		3,790		—
States, municipalities and political subdivisions	129,809		—		129,809		—
Public utilities	27,291		—		27,291		—
Corporate securities	282,695		—		282,695		—
Mortgage-backed securities	262,854		—		262,854		—
Asset-backed securities	51,614		—		51,614		—
Redeemable preferred stocks	6,213		1,815		4,398		—
Total fixed maturities	873,786		1,815		871,971		—
Mutual funds	52,492		52,492		—		—
Public utilities	6,255		6,255		—		—
Other common stocks	45,801		45,801		—		—
Non-redeemable preferred stocks	7,367		7,367		—		—
Total equity securities	111,915		111,915		—		—
Other investments ⁽¹⁾	1,590		300		1,290		—
Total investments	$	987,291	$	114,030	$	873,261	$	—

December 31, 2019
U.S. government and agency securities	$	120,816	$	—	$	120,816	$	—
Foreign government	4,071		—		4,071		—
States, municipalities and political subdivisions	133,751		—		133,751		—
Public utilities	25,334		—		25,334		—
Corporate securities	288,872		—		288,872		—
Mortgage-backed securities	251,903		—		251,903		—
Asset-backed securities	57,129		—		57,129		—
Redeemable preferred stocks	2,985		747		2,238		—
Total fixed maturities	884,861		747		884,114		—
Mutual Funds	65,453		65,453		—		—
Public utilities	3,663		3,663		—		—
Other common stocks	44,492		44,492		—		—
Non-redeemable preferred stocks	3,002		3,002		—		—
Total equity securities	116,610		116,610		—		—
Other investments ⁽¹⁾	499		300		199		—
Total investments	$	1,001,970	$	117,657	$	884,313	$	—

⁽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 March 31, 2020 and December 31, 2019, 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 March 31, 2020, 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

We acquired investments in limited partnerships, recorded in the other investments line of our Unaudited Condensed Consolidated Balance Sheets, and we currently account for these investments at fair value utilizing a net asset value per share equivalent methodology.

The information presented in the table below is as of March 31, 2020:



	Book Value		Unrealized Gain		Unrealized Loss		Fair Value
Limited partnership investments ⁽¹⁾	$	7,746	$	321	$	92	$	7,975
Certificates of deposit	300		—		—		300
Short-term investments	1,290		—		—		1,290
Total other investments	$	9,336	$	321	$	92	$	9,565

⁽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 use trust funds in certain reinsurance transactions.

The following table presents the components of restricted assets:



	March 31, 2020		December 31, 2019
Trust funds	$	63,134	$	70,668
Cash on deposit (regulatory deposits)	924		920
Total restricted cash	$	64,058	$	71,588