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Investments (Tables)

9 Months Ended

Sep. 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)
September 30, 2020
Fixed maturity securities:
State and municipal	$	271,218	$	17,484	$	(106)	$	288,596
Residential mortgage-backed	297,932		8,591		(54)		306,469
Corporate	727,678		50,067		(790)		776,955
Commercial mortgage and asset-backed	324,966		12,535		(1,667)		335,834

U.S. Treasury securities and obligations guaranteed by the U.S. government	100,742		2,852		—		103,594
Redeemable preferred stock	2,025		—		(2)		2,023
Total fixed maturity securities, available-for-sale	$	1,724,561	$	91,529	$	(2,619)	$	1,813,471
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 September 30, 2020 are summarized, by contractual maturity, as follows:


	Cost or Amortized Cost		Fair Value
	(in thousands)
One year or less	$	104,099	$	105,328
After one year through five years	456,660		483,155
After five years through ten years	306,679		330,510
After ten years	232,200		250,152
Residential mortgage-backed	297,932		306,469
Commercial mortgage and asset-backed	324,966		335,834
Redeemable preferred stock	2,025		2,023
Total	$	1,724,561	$	1,813,471

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)
September 30, 2020
Fixed maturity securities:
State and municipal	$	17,967	$	(106)	$	—	$	—	$	17,967	$	(106)
Residential mortgage-backed	14,601		(54)		—		—		14,601		(54)
Corporate	41,182		(790)		—		—		41,182		(790)
Commercial mortgage and asset-backed	23,964		(1,118)		38,344		(549)		62,308		(1,667)


Redeemable preferred stock	2,023		(2)		—		—		2,023		(2)
Total fixed maturity securities, available-for-sale	$	99,737	$	(2,070)	$	38,344	$	(549)	$	138,081	$	(2,619)
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 September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Fixed maturity securities:
Gross realized gains	$	386	$	445	$	906	$	1,033
Gross realized losses	—		(9)		(1)		(494)
	386		436		905		539
Bank loan participations:
Gross realized gains	24		79		357		229
Gross realized losses	(3,506)		(6,056)		(14,484)		(9,056)
Changes in fair values of bank loan participations	9,741		—		(7,636)		—
	6,259		(5,977)		(21,763)		(8,827)
Equity securities:
Gross realized gains	13		11		13		11
Gross realized losses	—		(78)		(170)		(96)
Changes in fair values of equity securities	2,374		3,251		(6,895)		8,700
	2,387		3,184		(7,052)		8,615
Short-term investments and other:
Gross realized gains	27		1		76		5
Gross realized losses	—		(1)		(1)		(1)
Changes in fair values of short-term investments and other	(130)		—		(50)		—
	(103)		—		25		4
Total	$	8,929	$	(2,357)	$	(27,885)	$	331

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 September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Fixed maturity securities:
Gross realized gains	$	386	$	445	$	906	$	1,033
Gross realized losses	—		(9)		(1)		(494)
	386		436		905		539
Bank loan participations:
Gross realized gains	24		79		357		229
Gross realized losses	(3,506)		(6,056)		(14,484)		(9,056)
Changes in fair values of bank loan participations	9,741		—		(7,636)		—
	6,259		(5,977)		(21,763)		(8,827)
Equity securities:
Gross realized gains	13		11		13		11
Gross realized losses	—		(78)		(170)		(96)
Changes in fair values of equity securities	2,374		3,251		(6,895)		8,700
	2,387		3,184		(7,052)		8,615
Short-term investments and other:
Gross realized gains	27		1		76		5
Gross realized losses	—		(1)		(1)		(1)
Changes in fair values of short-term investments and other	(130)		—		(50)		—
	(103)		—		25		4
Total	$	8,929	$	(2,357)	$	(27,885)	$	331

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
	September 30,		December 31,		Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019		2020		2019
	(in thousands)
Renewable energy LLCs (a)	$	30,520	$	31,219	$	(526)	$	1,602	$	320	$	2,510
Renewable energy notes receivable (b)	—		8,750		547		328		814		984
Limited partnerships (c)	10,601		16,741		426		(631)		102		2,166
Bank holding companies (d)	4,500		4,500		86		85		258		257
Total other invested assets	$	45,621	$	61,210	$	533	$	1,384	$	1,494	$	5,917

(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 $1.0 million and $687,000 in the nine months ended September 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 nine months ended September 30, 2020, the Company received the total principal balance of $8.8 million for the note issued. Interest on the note was fixed at 15.0%. Interest income on the note was $547,000 and $814,000 for the three and nine months ended September 30, 2020, respectively ($328,000 and $984,000 for the three and nine months ended September 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 $3.5 million at September 30, 2020. The Company recognized investment income of $100,000 and $182,000 on the investment for the nine months ended September 30, 2020 and 2019, respectively. The Company’s Excess and Surplus Lines segment holds investments in limited partnerships of $7.1 million at September 30, 2020. Investment income of $2,000 and $2.0 million was recognized on the investments for the nine months ended September 30, 2020 and 2019, respectively. At September 30, 2020, the Company’s Excess and Surplus Lines segment has outstanding commitments to invest another $3.9 million in these limited partnerships.

(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 $257,000 for both nine month periods ended September 30, 2020 and 2019, respectively.