Investments

Available-for-sale investments

The following tables summarize the available-for-sale investments at March 31, 2018 and December 31, 2017:



	March 31, 2018
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Estimated Fair Value
	(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	608	$	2	$	(4	)	$	606
Obligations of states, municipalities and political subdivisions	158,889		1,858		(2,032		)	158,715
Corporate and other securities	93,807		435		(578		)	93,664
Asset-backed securities	123,397		221		(681		)	122,937
Residential mortgage-backed securities	89,043		396		(2,827		)	86,612
Total available-for-sale investments	$	465,744	$	2,912	$	(6,122	)	$	462,534



	December 31, 2017
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Estimated Fair Value
	(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	9,108	$	4	$	(14	)	$	9,098
Obligations of states, municipalities and political subdivisions	161,012		3,726		(412		)	164,326
Corporate and other securities	71,224		579		(172		)	71,631
Asset-backed securities	95,223		405		(268		)	95,360
Residential mortgage-backed securities	85,688		466		(1,378		)	84,776
Total fixed-maturity securities	422,255		5,180		(2,244		)	425,191

Equity securities:
Exchange traded funds	26,041		8,339		—			34,380
Nonredeemable preferred stock	19,875		108		(231		)	19,752
Total equity securities	45,916		8,447		(231		)	54,132
Total available-for-sale investments	$	468,171	$	13,627	$	(2,475	)	$	479,323

Available-for-sale securities in a loss position

The Company regularly reviews all available-for-sale securities with unrealized losses to assess whether the decline in the securities’ fair value is deemed to be an other-than-temporary impairment ("OTTI"). The Company considers a number of factors in completing its OTTI review, including the length of time and the extent to which fair value has been below cost and the financial condition of an issuer. In addition to specific issuer information, the Company also evaluates the current market and interest rate environment. Generally, a change in a security’s value caused by a change in the market or interest rate environment does not constitute an OTTI, but rather a temporary decline in fair value.

For fixed maturities, the Company considers whether it intends to sell the security or if it is more likely than not that it will be required to sell the security before recovery, the credit quality of the issuer and the ability to recover all amounts outstanding when contractually due. When assessing whether it intends to sell a fixed maturity or if it is likely to be required to sell a fixed maturity before recovery of its amortized cost, the Company evaluates facts and circumstances including, but not limited to, decisions to reposition the investment portfolio, potential sales of investments to meet cash flow needs and potential sales of investments to capitalize on favorable pricing. For equity securities prior to the adoption of ASU 2016-01, "Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01"), the Company considered the near-term prospects of an issuer and its ability and intent to hold the security for a period of time sufficient to allow for anticipated recovery.

For fixed maturities where a decline in fair value is considered to be other-than-temporary and the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost, an impairment is recognized in net income based on the fair value of the security at the time of assessment, resulting in a new cost basis for the security. If the decline in fair value of a fixed maturity security below its amortized cost is considered to be other-than-temporary based upon other considerations, the Company compares the estimated present value of the cash flows expected to be collected to the amortized cost of the security. The extent to which the estimated present value of the cash flows expected to be collected is less than the amortized cost of the security represents the credit-related portion of the OTTI, which is recognized in net income, resulting in a new cost basis for the security. Any remaining decline in fair value represents the noncredit portion of the OTTI, which is recognized in other comprehensive income. For equity securities prior to the adoption of ASU 2016-01, a decline in fair value that was considered to be other-than-temporary was recognized in net income based on the fair value of the security at the time of assessment, resulting in a new cost basis for the security.

The following tables summarize gross unrealized losses and fair value for available-for-sale securities by length of time that the securities have continuously been in an unrealized loss position:



	March 31, 2018
	Less than 12 Months					12 Months or Longer					Total
	Estimated Fair Value		Gross Unrealized Holding Losses			Estimated Fair Value		Gross Unrealized Holding Losses			Estimated Fair Value		Gross Unrealized Holding Losses
	(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	—	$	—		$	494	$	(4	)	$	494	$	(4	)
Obligations of states, municipalities and political subdivisions	56,436		(849		)	37,173		(1,183		)	93,609		(2,032		)
Corporate and other securities	50,879		(461		)	10,643		(117		)	61,522		(578		)
Asset-backed securities	41,534		(419		)	10,006		(262		)	51,540		(681		)
Residential mortgage-backed securities	20,500		(304		)	54,166		(2,523		)	74,666		(2,827		)
Total fixed-maturity securities	$	169,349	$	(2,033	)	$	112,482	$	(4,089	)	$	281,831	$	(6,122	)

At March 31, 2018, the Company held 306 fixed maturity securities in an unrealized loss position with a total estimated fair value of $281.8 million and gross unrealized losses of $6.1 million. Of these securities, 124 were in a continuous unrealized loss position for greater than one year. As discussed above, the Company regularly reviews all fixed-maturity securities within its investment portfolio to determine whether any impairment has occurred. Unrealized losses were caused by interest rate changes or other market factors and were not credit specific issues. At March 31, 2018, 89.5% of the Company’s fixed-maturity securities were rated "A-" or better and all of the Company’s fixed-maturity securities made expected coupon payments under the contractual terms of the securities. Management concluded that there were no other-than-temporary impairments from fixed-maturity securities with unrealized losses for the three months ended March 31, 2018.



	December 31, 2017
	Less than 12 Months					12 Months or Longer					Total
	Estimated Fair Value		Gross Unrealized Holding Losses			Estimated Fair Value		Gross Unrealized Holding Losses			Estimated Fair Value		Gross Unrealized Holding Losses
	(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	3,497	$	(2	)	$	5,488	$	(12	)	$	8,985	$	(14	)
Obligations of states, municipalities and political subdivisions	7,258		(36		)	38,143		(376		)	45,401		(412		)
Corporate and other securities	30,944		(98		)	13,444		(74		)	44,388		(172		)
Asset-backed securities	27,609		(108		)	10,706		(160		)	38,315		(268		)
Residential mortgage-backed securities	9,081		(83		)	57,262		(1,295		)	66,343		(1,378		)
Total fixed-maturity securities	78,389		(327		)	125,043		(1,917		)	203,432		(2,244		)

Equity securities:
Exchange traded funds	130		—			—		—			130		—
Nonredeemable preferred stocks	10,649		(231		)	—		—			10,649		(231		)
Total equity securities	10,779		(231		)	—		—			10,779		(231		)
Total investments available for sale	$	89,168	$	(558	)	$	125,043	$	(1,917	)	$	214,211	$	(2,475	)

At December 31, 2017, the Company held 195 fixed-maturity securities in an unrealized loss position with a total estimated fair value of $203.4 million and gross unrealized losses of $2.2 million. Of those securities, 126 were in a continuous unrealized loss position for greater than one year. Unrealized losses were caused by interest rate changes or other market factors and were not credit specific issues. At December 31, 2017, 91.1% of the Company’s fixed maturity securities were rated "A-" or better and all of the Company’s fixed maturity securities made expected coupon payments under the contractual terms of the securities. At December 31, 2017, the Company held 13 securities in its equity portfolio with a total estimated fair value of $10.8 million and gross unrealized losses of $0.2 million. None of these securities were in a continuous unrealized loss position for greater than one year. Based on its review, the Company concluded that were no other-than-temporary impairments from fixed-maturity or equity securities with unrealized losses for the year ended December 31, 2017.

Contractual maturities of available-for-sale fixed-maturity securities

The amortized cost and estimated fair value of available-for-sale fixed-maturity securities at March 31, 2018 are summarized, by contractual maturity, as follows:



	March 31, 2018
	Amortized		Estimated
	Cost		Fair Value
	(in thousands)
Due in one year or less	$	33,012	$	32,899
Due after one year through five years	47,430		47,494
Due after five years through ten years	38,633		39,111
Due after ten years	134,229		133,481
Asset-backed securities	123,397		122,937
Residential mortgage-backed securities	89,043		86,612
Total fixed maturities	$	465,744	$	462,534

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, and the lenders may have the right to put the securities back to the borrower.

Net investment income

The following table presents the components of net investment income for the three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
	2018			2017
	(in thousands)
Interest:
Taxable bonds	$	1,761		$	1,537
Tax exempt municipal bonds	1,085			794
Cash equivalents and short-term investments	260			87
Dividends on equity securities	412			110
Gross investment income	3,518			2,528
Investment expenses	(289		)	(242		)
Net investment income	$	3,229		$	2,286

Realized investment gains and losses

The following table presents realized investment gains and losses for the three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
	2018		2017
	(in thousands)
Realized gains:
Sales of fixed maturities	$	55	$	—
Sales of equity securities	57		—
Total realized gains	112		—

Realized losses:
Sales of fixed maturities	—		(32		)
Total realized losses	—		(32		)
Net realized investment gains (losses)	$	112	$	(32	)

Change in net unrealized gains (losses) on investments

For the three months ended March 31, 2018, the change in net unrealized losses for fixed-maturity securities was $6.1 million. For the three months ended March 31, 2017, the change in net unrealized gains for fixed-maturity securities was $0.7 million and the change in net unrealized gains for equity securities was $0.9 million.

Insurance – statutory deposits

The Company had invested assets with a carrying value of $6.9 million and $7.1 million on deposit with state regulatory authorities at March 31, 2018 and December 31, 2017, respectively.

Payable for investments purchased

The Company recorded a payable for investments purchased, not yet settled, of $1.8 million at March 31, 2018 and $1.0 million at December 31, 2017. The payable balances were included in the "other liabilities" line item of the balance sheet and treated as non-cash transactions for purposes of cash flow presentation.