Investments

6 Months Ended

Jun. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Investments

4. Investments

A summary of the amortized cost, estimated fair value, and gross unrealized gains and losses on the Company’s investments in fixed income and equity securities at June 30, 2017 and December 31, 2016 is as follows.

As of June 30, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Fixed income securities:
U.S. government	$	1,997	$	7	$	(14	)	$	1,990
State municipalities and political subdivisions		4,776		18		(26	)		4,768
Asset-backed securities and collateralized mortgage obligations		15,133		25		(116	)		15,042
Corporate		18,366		85		(48	)		18,403
Total fixed income securities		40,272		135		(204	)		40,203
Equity securities:
Common stock		1,118		26		(36	)		1,108
Warrants to purchase common stock		35		90		(2	)		123
Rights to purchase common stock		29		1		(3	)		27
Total equity securities		1,182		117		(41	)		1,258
Total fixed income and equity securities	$	41,454	$	252	$	(245	)	$	41,461
As of December 31, 2016
Fixed income securities:
U.S. government	$	1,623	$	1	$	(20	)	$	1,604
State municipalities and political subdivisions		2,271		2		(27	)		2,246
Asset-backed securities and collateralized mortgage obligations		12,095		9		(136	)		11,968
Corporate		10,804		28		(91	)		10,741
Total fixed income securities		26,793		40		(274	)		26,559
Equity securities:
Common stock		1,000		136		—			1,136
Total equity securities		1,000		136		—			1,136
Total fixed income and equity securities	$	27,793	$	176	$	(274	)	$	27,695

The table below summarizes the Company’s fixed income securities at June 30, 2017 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 maturity of these obligations.

Matures in:	Amortized Cost		Estimated Fair Value
One year or less	$	1,329	$	1,915
More than one to five years		15,541		17,197
More than five to ten years		12,178		10,483
More than ten years		11,224		10,608
Total	$	40,272	$	40,203

The following table highlights, by loss position and security type, those fixed income and equity securities in unrealized loss positions as of June 30, 2017 and December 31, 2016. The tables segregate the holdings based on the period of time the investments have been continuously held in unrealized loss positions. There were 141 and 122 fixed income investments that were in unrealized loss positions as of June 30, 2017 and December 31, 2016, respectively. The Company held 4 equity investments in unrealized loss positions as of June 30, 2017. 

	Less than 12 Months					Greater than 12 Months					Total
As of June 30, 2017	Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss			Estimated Fair Value		Unrealized Loss
Fixed income securities:
U.S. government	$	1,306	$	(14	)	$	—	$	—		$	1,306	$	(14	)
State municipalities and political subdivisions		2,363		(26	)		—		—			2,363		(26	)
Asset-backed securities and collateralized mortgage obligations		11,408		(115	)		126		(1	)		11,534		(116	)
Corporate		6,733		(48	)		—		—			6,733		(48	)
Total fixed income securities		21,810		(203	)		126		(1	)		21,936		(204	)
Equity securities:
Common stock		226		(36	)		—		—			226		(36	)
Warrants to purchase common stock		13		(2	)		—		—			13		(2	)
Rights to purchase common stock		18		(3	)		—		—			18		(3	)
Total equity securities		257		(41	)		—		—			257		(41	)
Total fixed income and equity securities	$	22,067	$	(244	)	$	126	$	(1	)	$	22,193	$	(245	)
As of December 31, 2016
Fixed income securities:
U.S. government	$	1,303	$	(20	)	$	—	$	—		$	1,303	$	(20	)
State municipalities and political subdivisions		1,537		(27	)		—		—			1,537		(27	)
Asset-backed securities and collateralized mortgage obligations		9,552		(133	)		460		(3	)		10,012		(136	)
Corporate		5,952		(91	)		—		—			5,952		(91	)
Total fixed income securities	$	18,344	$	(271	)	$	460	$	(3	)	$	18,804	$	(274	)

Under the terms of the certificate of authority granted to Maison by the Texas Department of Insurance, Maison is required to pledge securities totaling at least $2,000 with the State of Texas. Maison deposited the required securities with the State of Texas on May 13, 2015. These securities consist of various fixed income securities listed in the preceding tables which have an amortized cost basis of $2,001 and estimated fair value of $2,000 as of June 30, 2017.

The Company’s other investments are comprised of investments in two limited partnerships which seek to provide equity and asset-backed debt investment in a variety of privately-owned companies. The Company has committed to a total investment of $1,000, of which the limited partnerships have drawn down approximately $645 through June 30, 2017. One of these limited partnerships is managed by Argo Management Group, LLC, an entity which, as of April 21, 2016 is wholly owned by KFSI (see Note 12 – Related Party Transactions). The Company has accounted for its investments under the cost method as the instruments do not have readily determinable fair values and the Company does not exercise significant influence over the operations of the limited partnerships or the underlying privately-owned companies.

Also included in other investments is a $300 certificate of deposit with an original term of 18 months deposited with the State of Florida pursuant to the terms of the certificate of authority issued to Maison from the FL OIR.

Other-than-Temporary Impairment:

The establishment of an other-than-temporary impairment on an investment requires a number of judgments and estimates. The Company performs a quarterly analysis of the individual investments to determine if declines in market value are other-than-temporary. The analysis includes some or all of the following procedures as deemed appropriate by the Company:

● considering the extent and length of time during which the market value has been below cost;

● identifying any circumstances which management believes may impact the recoverability of the unrealized loss positions;

● obtaining a valuation analysis from a third-party investment manager regarding the intrinsic value of these investments based upon their knowledge and experience combined with market-based valuation techniques;

● reviewing the historical trading volatility and trading range of the investment and certain other similar investments;

● assessing if declines in market value are other-than-temporary for debt instruments based upon the investment grade credit ratings from third-party credit rating agencies;

● assessing the timeliness and completeness of principal and interest payment due from the investee; and

● assessing the Company’s ability and intent to hold these investments until the impairment may be recovered.

The risks and uncertainties inherent in the assessment methodology used to determine declines in market value that are other-than-temporary include, but may not be limited to, the following:

● the opinions of professional investment managers could be incorrect;

● the past trading patterns of investments may not reflect their future valuation trends;

● the credit ratings assigned by credit rating agencies may be incorrect due to unforeseen events or unknown facts related to the investee company’s financial situation; and

● the historical debt service record of an investment may not be indicative of future performance and may not reflect a company’s unknown underlying financial problems.

The Company has reviewed currently available information regarding the investments it holds which have estimated fair values that are less than their carrying amounts and believes that these unrealized losses are primarily due to temporary market and sector-related factors rather than to issuer-specific factors. The Company does not intend to sell these investments in the short term, and it is not likely that it will be required to sell these investments before the recovery of their amortized cost.

Accordingly, all of the Company’s investments were in good standing and there were no write-downs for other-than-temporary impairments on the Company’s investments for the six months ended June 30, 2017 and 2016.

The Company does not have any exposure to subprime mortgage-backed investments. Net investment income for the three and six months ended June 30, 2017 and 2016 was as follows:

	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
Investment income:
Interest on fixed income securities	$	185		$	109		$	317		$	209
Interest on cash and cash equivalents		49			28			96			55
Realized gain upon sale of securities		64			—			64			—
Other		—			2			—			2
Gross investment income		298			139			477			266
Investment expenses		(14	)		(12	)		(25	)		(24	)
Net investment income	$	284		$	127		$	452		$	242