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Investments
 9 Months Ended
Sep. 30, 2019
Investments [Abstract]  
Investments Investments
Available-for-sale investments
The following tables summarize the available-for-sale investments at September 30, 2019 and December 31, 2018:
 
 
September 30, 2019
 
 
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
 
$
110

 
$
2

 
$
—

 
$
112

Obligations of states, municipalities and political subdivisions
 
145,834

 
7,990

 
(189
)
 
153,635

Corporate and other securities
 
177,927

 
4,631

 
(194
)
 
182,364

Commercial mortgage and asset-backed securities
 
190,472

 
3,912

 
(478
)
 
193,906

Residential mortgage-backed securities
 
185,298

 
1,960

 
(636
)
 
186,622

Total available-for-sale investments
 
$
699,641

 
$
18,495

 
$
(1,497
)
 
$
716,639

 
 
December 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
 
$
610

 
$
2

 
$
(1
)
 
$
611

Obligations of states, municipalities and political subdivisions
 
153,884

 
2,010

 
(1,294
)
 
154,600

Corporate and other securities
 
97,889

 
264

 
(1,401
)
 
96,752

Commercial mortgage and asset-backed securities
 
151,137

 
252

 
(1,522
)
 
149,867

Residential mortgage-backed securities
 
110,717

 
354

 
(2,650
)
 
108,421

Total available-for-sale investments
 
$
514,237

 
$
2,882

 
$
(6,868
)
 
$
510,251


Available-for-sale securities in a loss position
The Company regularly reviews all its available-for-sale investments 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 a security's 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-maturity securities, the Company also 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 and the ability to recover all amounts outstanding when contractually due. When assessing whether it intends to sell a fixed-maturity security or if it is likely to be required to sell a fixed-maturity security 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 fixed-maturity securities 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.
The following tables summarize gross unrealized losses and fair value for available-for-sale investments by length of time that the securities have continuously been in an unrealized loss position:
 
 
September 30, 2019
 
 
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:
 
 
 
 
 
 
 
 
 
 
 
 
Obligations of states, municipalities and political subdivisions
 
$
12,993

 
$
(188
)
 
$
256

 
$
(1
)
 
$
13,249

 
$
(189
)
Corporate and other securities
 
22,122

 
(126
)
 
5,232

 
(68
)
 
27,354

 
(194
)
Commercial mortgage and asset-backed securities
 
35,140

 
(130
)
 
31,802

 
(348
)
 
66,942

 
(478
)
Residential mortgage-backed securities
 
41,691

 
(130
)
 
37,776

 
(506
)
 
79,467

 
(636
)
Total available-for-sale investments
 
$
111,946

 
$
(574
)
 
$
75,066

 
$
(923
)
 
$
187,012

 
$
(1,497
)

At September 30, 2019, the Company held 120 fixed-maturity securities in an unrealized loss position with a total estimated fair value of $187.0 million and gross unrealized losses of $1.5 million. Of these securities, 65 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 other-than-temporary impairment has occurred. Based on the Company's review as of September 30, 2019, unrealized losses were caused by interest rate changes or other market factors and were not credit-specific issues. At September 30, 2019, 87.9% 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. For the nine months ended September 30, 2019, the Company concluded that there were no other-than-temporary impairments from fixed-maturity securities with unrealized losses.
 
 
December 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
 
$
—

 
$
—

 
$
499

 
$
(1
)
 
$
499

 
$
(1
)
Obligations of states, municipalities and political subdivisions
 
42,718

 
(440
)
 
34,326

 
(854
)
 
77,044

 
(1,294
)
Corporate and other securities
 
62,045

 
(890
)
 
12,092

 
(511
)
 
74,137

 
(1,401
)
Commercial mortgage and asset-backed securities
 
93,247

 
(1,017
)
 
25,746

 
(505
)
 
118,993

 
(1,522
)
Residential mortgage-backed securities
 
24,571

 
(155
)
 
55,638

 
(2,495
)
 
80,209

 
(2,650
)
Total available-for-sale investments
 
$
222,581

 
$
(2,502
)
 
$
128,301

 
$
(4,366
)
 
$
350,882

 
$
(6,868
)

At December 31, 2018, the Company held 317 fixed-maturity securities in an unrealized loss position with a total estimated fair value of $350.9 million and gross unrealized losses of $6.9 million. Of those securities, 158 were in a continuous unrealized loss position for greater than one year. Based on the Company's review as of December 31, 2018, unrealized losses were caused by interest rate changes or other market factors and were not credit-specific issues. At December 31, 2018, 86.4% 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. For the year ended December 31, 2018, the Company concluded that there were no other-than-temporary impairments from fixed-maturity securities with unrealized losses.
Contractual maturities of available-for-sale fixed-maturity securities
The amortized cost and estimated fair value of available-for-sale fixed-maturity securities at September 30, 2019 are summarized, by contractual maturity, as follows:
 
 
September 30, 2019
 
 
Amortized
 
Estimated
 
 
Cost
 
Fair Value
 
 
(in thousands)
Due in one year or less
 
$
12,905

 
$
12,990

Due after one year through five years
 
110,503

 
113,402

Due after five years through ten years
 
78,077

 
81,102

Due after ten years
 
122,386

 
128,617

Commercial mortgage and asset-backed securities
 
190,472

 
193,906

Residential mortgage-backed securities
 
185,298

 
186,622

Total fixed maturity securities
 
$
699,641

 
$
716,639


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 and nine months ended September 30, 2019 and 2018:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(in thousands)
Interest:
 
 
 
 
 
 
 
 
Taxable bonds
 
$
4,050

 
$
2,548

 
$
10,593

 
$
6,548

Tax exempt municipal bonds
 
887

 
1,068

 
2,783

 
3,236

Cash equivalents and short-term investments
 
266

 
327

 
667

 
804

Dividends on equity securities
 
406

 
445

 
1,493

 
1,369

Gross investment income
 
5,609

 
4,388

 
15,536

 
11,957

Investment expenses
 
(344
)
 
(303
)
 
(950
)
 
(861
)
Net investment income
 
$
5,265

 
$
4,085

 
$
14,586

 
$
11,096


Realized investment gains and losses
The following table presents realized investment gains and losses for the three and nine months ended September 30, 2019 and 2018:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(in thousands)
Fixed-maturity securities:
 
 
 
 
 
 
 
 
Realized gains
 
$
61

 
$
—

 
$
457

 
$
244

Realized losses
 
—

 
(6
)
 
(79
)
 
(10
)
Net realized gains (losses) from fixed-maturity securities
 
61

 
(6
)
 
378

 
234

 
 
 
 
 
 
 
 
 
Equity securities:
 
 
 
 
 
 
 
 
Realized gains
 
505

 
—

 
539

 
57

Realized losses
 
(381
)
 
—

 
(687
)
 
(11
)
Net realized gains (losses) from equity securities
 
124

 
—

 
(148
)
 
46

Net realized investment gains (losses)
 
$
185

 
$
(6
)
 
$
230

 
$
280


Change in net unrealized gains (losses) on fixed-maturity securities
For the three and nine months ended September 30, 2019, the changes in net unrealized gains for fixed-maturity securities were $4.1 million and $21.0 million, respectively. For the three and nine months ended September 30, 2018, the changes in net unrealized losses for fixed-maturity securities were $2.5 million and $9.9 million, respectively.
Insurance – statutory deposits
The Company had invested assets with a carrying value of $6.9 million on deposit with state regulatory authorities at September 30, 2019 and December 31, 2018.
Payable for investments purchased
The Company recorded a payable for investments purchased, not yet settled, of $18.4 million at September 30, 2019. The payable balance was included in the "other liabilities" line item of the balance sheet and treated as a non-cash transaction for purposes of cash flow presentation.