Investments

9 Months Ended

Sep. 30, 2021

Investments

Investments

2. Investments

The Company’s available-for-sale investments are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
September 30, 2021	Cost or Cost		Gains		Losses		Value
	(in thousands)
Fixed maturities:
U.S. Governments	$	18,965	$	461	$	(115)	$	19,311
States, territories, and possessions		6,171		348		(118)		6,401
Political subdivisions		1,494		94		—		1,588
Special revenue excluding mortgage/asset-backed securities		43,376		1,228		(174)		44,430
Corporate and other		248,480		7,751		(1,131)		255,100
Mortgage/asset-backed securities		79,469		1,849		(102)		81,216
Total available-for-sale investments	$	397,955	$	11,731	$	(1,640)	$	408,046

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2020	Cost or Cost		Gains		Losses		Value
	(in thousands)
Fixed maturities:
U.S. Governments	$	16,308	$	756	$	(5)	$	17,059
States, territories, and possessions		6,208		428		—		6,636
Political subdivisions		2,027		125		—		2,152
Special revenue excluding mortgage/asset-backed securities		39,704		1,525		(2)		41,227
Corporate and other		234,049		11,602		(291)		245,360
Mortgage/asset-backed securities		82,983		2,785		(215)		85,553
Total available-for-sale investments	$	381,279	$	17,221	$	(513)	$	397,987

Security holdings in an unrealized loss position

As of September 30, 2021, the Company held 153 fixed maturity securities in an unrealized loss position with a total estimated fair value of $112.3 million and total gross unrealized losses of $1.6 million. As of December 31, 2020, the Company held 90 fixed maturity securities in an unrealized loss position with a total estimated fair value of $41.5 million and total gross unrealized losses of $0.5 million.

The aggregate fair value and gross unrealized losses of the Company’s investments aggregated by investment category and the length of time these individual securities have been in a continuous unrealized loss position as of September 30, 2021 and December 31, 2020, are as follows:

	Less Than 12 Months				More Than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
September 30, 2021	Value		Losses		Value		Losses		Value		Losses
	(in thousands)
Fixed maturity securities:
U.S. Governments	$	7,018	$	(105)	$	490	$	(10)	$	7,508	$	(115)
States, territories, and possessions		3,236		(118)		—		—		3,236		(118)
Political subdivisions		—		—		—		—		—		—
Special revenue excluding mortgage/asset-backed securities		13,593		(174)		—		—		13,593		(174)
Corporate and other		70,182		(799)		5,688		(332)		75,870		(1,131)
Mortgage/asset-backed securities		9,628		(79)		2,443		(23)		12,071		(102)
Total	$	103,657	$	(1,275)	$	8,621	$	(365)	$	112,278	$	(1,640)

	Less Than 12 Months				More Than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2020	Value		Losses		Value		Losses		Value		Losses
	(in thousands)
Fixed maturity securities:
U.S. Governments	$	1,496	$	(5)	$	—	$	—	$	1,496	$	(5)
States, territories, and possessions		—		—		—		—		—		—
Political subdivisions		—		—		—		—		—		—
Special revenue excluding mortgage/asset-backed securities		520		(2)		—		—		520		(2)
Corporate and other		22,718		(234)		203		(57)		22,921		(291)
Mortgage/asset-backed securities		16,092		(211)		496		(4)		16,588		(215)
Total	$	40,826	$	(452)	$	699	$	(61)	$	41,525	$	(513)

The Company reviews all securities with unrealized losses on a quarterly basis to assess whether the decline in the securities fair value necessitates the recognition of an allowance for credit losses. The Company considers numerous factors in its review as described in Footnote 1 of the Notes to the Consolidated Financial Statements in the 2020 Annual Report on Form 10-K.

The Company recorded an immaterial allowance for credit losses during the second quarter of 2021 pertaining to one investment security. Based on the Company’s reviews as of September 30, 2021, for the remainder of securities, the Company determined that the fixed maturity securities’ unrealized losses were primarily the result of the interest rate environment and not the credit quality of the issuers. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before the recovery of their amortized cost basis.

Contractual maturities of available-for-sale fixed maturity securities

The amortized cost and fair value of fixed maturity securities at September 30, 2021, by contractual maturity, are shown below.

	Amortized		Fair
	Cost		Value
	(in thousands)
Due within one year	$	27,733	$	27,927
Due after one year through five years		134,550		137,757
Due after five years through ten years		112,259		116,275
Due after ten years		43,944		44,871
Mortgage and asset-backed securities		79,469		81,216
	$	397,955	$	408,046

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations.

Net investment income summary

Net investment income is summarized as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
	(in thousands)				(in thousands)
Interest income	$	2,254	$	2,149	$	6,755	$	6,242
Dividend income		104		109		261		354
Investment expense		(122)		(120)		(367)		(309)
Net investment income	$	2,236	$	2,138	$	6,649	$	6,287

Net realized and unrealized investment gains and losses

The following table presents net realized and unrealized investment gains and losses:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
		(in thousands)				(in thousands)
Realized gains:
Gains on sales of fixed maturity securities	$	117	$	66	$	335	$	256
Gains on sales of equity securities		188		59		1,416		57
Total realized gains		305		125		1,751		313
Realized losses:
Losses on sales of fixed maturity securities		—		—		(1)		(44)
Losses on sales of equity securities		—		—		—		—
Total realized losses		—		—		(1)		(44)
Net realized investment gains		305		125		1,750		269
Net unrealized gains (losses) on equity securities		(618)		(101)		(2,502)		974
Net realized and unrealized gains (losses) on investments	$	(313)	$	24	$	(752)	$	1,243

Realized gains and losses on disposition of investments are based on specific identification of the investments sold on the settlement date.

Proceeds from the sale of fixed maturity securities were $12.1 million and $29.2 million for the nine months ended September 30, 2021 and 2020, respectively.

The Company places securities on statutory deposit with certain state agencies to retain the right to do business in those states. These securities are included in available-for-sale investments on the balance sheet. At both September 30, 2021 and December 31, 2020, the carrying value of securities on deposit with state regulatory authorities was $7.5 million.