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Investments (Tables)

6 Months Ended

Jun. 30, 2020

Schedule of summary of available-for-sale investments

The Company’s available-for-sale fixed maturity securities are summarized as follows:


	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
June 30, 2020
Fixed maturity securities:
State and municipal	$	254,226	$	15,714	$	(18)	$	269,922
Residential mortgage-backed	282,396		8,853		(61)		291,188
Corporate	707,203		47,479		(240)		754,442
Commercial mortgage and asset-backed	303,161		10,802		(2,782)		311,181

U.S. Treasury securities and obligations guaranteed by the U.S. government	115,371		3,309		—		118,680
Redeemable preferred stock	2,025		—		(34)		1,991
Total fixed maturity securities, available-for-sale	$	1,664,382	$	86,157	$	(3,135)	$	1,747,404
December 31, 2019
Fixed maturity securities:
State and municipal	$	159,894	$	7,949	$	(742)	$	167,101
Residential mortgage-backed	261,524		3,244		(622)		264,146
Corporate	611,304		21,306		(389)		632,221
Commercial mortgage and asset-backed	249,309		3,954		(806)		252,457

U.S. Treasury securities and obligations guaranteed by the U.S. government	114,477		1,229		(39)		115,667
Redeemable preferred stock	2,025		9		—		2,034
Total fixed maturity securities, available-for-sale	$	1,398,533	$	37,691	$	(2,598)	$	1,433,626

Schedule of summary of available-for-sale investments by contractual maturity

The amortized cost and fair value of available-for-sale investments in fixed maturity securities at June 30, 2020 are summarized, by contractual maturity, as follows:


	Cost or Amortized Cost		Fair Value
	(in thousands)
One year or less	$	103,318	$	104,395
After one year through five years	472,778		498,541
After five years through ten years	293,830		316,790
After ten years	206,874		223,318
Residential mortgage-backed	282,396		291,188
Commercial mortgage and asset-backed	303,161		311,181
Redeemable preferred stock	2,025		1,991
Total	$	1,664,382	$	1,747,404

Schedule of gross unrealized losses and fair value for available-for-sale securities

The following table shows the Company’s gross unrealized losses and fair value for available-for-sale securities aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:


	Less Than 12 Months						12 Months or More						Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
June 30, 2020
Fixed maturity securities:
State and municipal	$	13,729	$	(18)	$	—	$	—	$	13,729	$	(18)
Residential mortgage-backed	6,578		(61)		—		—		6,578		(61)
Corporate	23,050		(240)		—		—		23,050		(240)
Commercial mortgage and asset-backed	27,017		(1,663)		37,182		(1,119)		64,199		(2,782)


Redeemable preferred stock	1,991		(34)		—		—		1,991		(34)
Total fixed maturity securities, available-for-sale	$	72,365	$	(2,016)	$	37,182	$	(1,119)	$	109,547	$	(3,135)
December 31, 2019
Fixed maturity securities:
State and municipal	$	30,028	$	(741)	$	667	$	(1)	$	30,695	$	(742)
Residential mortgage-backed	23,632		(78)		37,363		(544)		60,995		(622)
Corporate	45,550		(365)		9,933		(24)		55,483		(389)
Commercial mortgage and asset-backed	46,434		(406)		56,720		(400)		103,154		(806)

U.S. Treasury securities and obligations guaranteed by the U.S. government	8,474		(22)		7,168		(17)		15,642		(39)

Total fixed maturity securities, available-for-sale	$	154,118	$	(1,612)	$	111,851	$	(986)	$	265,969	$	(2,598)

Summary of net realized gains and losses on investments

The Company’s net realized and unrealized gains and losses on investments are summarized as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands)
Fixed maturity securities:
Gross realized gains	$	305	$	411	$	521	$	588
Gross realized losses	—		(80)		(1)		(485)
	305		331		520		103
Bank loan participations:
Gross realized gains	230		137		332		150
Gross realized losses	(9,669)		(1,308)		(10,978)		(3,000)
Changes in fair values of bank loan participations	26,570		—		(17,377)		—
	17,131		(1,171)		(28,023)		(2,850)
Equity securities:
Gross realized gains	—		—		—		—
Gross realized losses	—		—		(170)		(18)
Changes in fair values of equity securities	4,046		1,900		(9,269)		5,449
	4,046		1,900		(9,439)		5,431
Short-term investments and other:
Gross realized gains	31		3		50		4
Gross realized losses	—		—		(2)		—
Changes in fair values of short-term investments and other	80		—		80		—
	111		3		128		4
Total	$	21,593	$	1,063	$	(36,814)	$	2,688

Summary of net unrealized gains and losses on investments

The Company’s net realized and unrealized gains and losses on investments are summarized as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands)
Fixed maturity securities:
Gross realized gains	$	305	$	411	$	521	$	588
Gross realized losses	—		(80)		(1)		(485)
	305		331		520		103
Bank loan participations:
Gross realized gains	230		137		332		150
Gross realized losses	(9,669)		(1,308)		(10,978)		(3,000)
Changes in fair values of bank loan participations	26,570		—		(17,377)		—
	17,131		(1,171)		(28,023)		(2,850)
Equity securities:
Gross realized gains	—		—		—		—
Gross realized losses	—		—		(170)		(18)
Changes in fair values of equity securities	4,046		1,900		(9,269)		5,449
	4,046		1,900		(9,439)		5,431
Short-term investments and other:
Gross realized gains	31		3		50		4
Gross realized losses	—		—		(2)		—
Changes in fair values of short-term investments and other	80		—		80		—
	111		3		128		4
Total	$	21,593	$	1,063	$	(36,814)	$	2,688

Schedule of other invested assets

The Company invests selectively in private debt and equity opportunities. These investments, which together comprise the Company’s other invested assets, are primarily focused in renewable energy, limited partnerships, and bank holding companies.



	Carrying Value						Investment Income
	June 30,		December 31,		Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019		2020		2019
	(in thousands)
Renewable energy LLCs (a)	$	31,318	$	31,219	$	12	$	(13)	$	846	$	908
Renewable energy notes receivable (b)	2,680		8,750		101		328		267		656
Limited partnerships (c)	8,965		16,741		245		728		(324)		2,797
Bank holding companies (d)	4,500		4,500		86		86		172		172
Total other invested assets	$	47,463	$	61,210	$	444	$	1,129	$	961	$	4,533

(a)The Company’s Corporate and Other segment owns equity interests ranging from 2.6% to 32.6% in various LLCs whose principal objective is capital appreciation and income generation from owning and operating renewable energy production facilities (wind and solar). The LLCs are managed by an entity for which two former directors served as officers, and the Company’s Chairman and Chief Executive Officer ("CEO") has invested in certain of these LLCs. The equity method is used to account for the Company’s LLC investments. Income for the LLCs primarily reflects adjustments to the carrying values of investments in renewable energy projects to their determined fair values. The fair value adjustments are included in revenues for the LLCs. Expenses for the LLCs are not significant and are comprised of administrative and interest expenses. The Company received cash distributions from these investments totaling $747,000 and $253,000 in the six months ended June 30, 2020 and 2019, respectively.

(b)The Company's Corporate and Other segment has invested in notes receivable for renewable energy projects. At December 31, 2019, the Company held an $8.8 million note issued by an entity for which two of our former directors serve as officers. During the three months ended March 31, 2020, the Company received repayment of $6.1 million of the original note principal. Interest on the note, which matures in 2021, is fixed at 15.0%. Interest income on the note was $101,000 and $267,000 for the three and six months ended June 30, 2020, respectively ($328,000 and $656,000 for the three and six months ended June 30, 2019, respectively).

(c)The Company owns investments in limited partnerships that invest in concentrated portfolios including publicly-traded small cap equities, loans of middle market private equity sponsored companies, and tranches of distressed home loans. Income from the partnerships is recognized under the equity method of accounting. The Company’s Corporate and Other segment held an investment in a limited partnership with a carrying value of $3.2 million at June 30, 2020. The Company recognized investment losses of $201,000 and investment income of $480,000 on the investment for the six months ended June 30, 2020, and 2019 respectively. The Company’s Excess and Surplus Lines segment holds investments in limited partnerships of $5.8 million at June 30, 2020. Investment losses of $123,000 and investment income of $2.3 million was recognized on the investments for the six months ended June 30, 2020 and 2019, respectively.

(d)The Company's Corporate and Other segment holds $4.5 million of subordinated notes issued by a bank holding company for which the Company’s Chairman and CEO was previously the Lead Independent Director and an investor and for which one of the Company’s directors was an investor and is currently a holder of the subordinated notes (the "Bank Holding Company"). Interest on the notes, which mature on August 12, 2023, is fixed at 7.6% per annum. Interest income on the notes was $172,000 for both six month periods ended June 30, 2020 and 2019, respectively.