Investments

9 Months Ended

Sep. 30, 2023

5 -	Investments

The amortized cost and estimated fair values of our fixed maturities at September 30, 2023 were as follows:

	Carrying Value		Allowance for Credit Losses		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
					(in thousands)
Held to Maturity
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	91,484	$	55		$	91,539		$	—		$	12,921		$	78,618
Obligations of states and political subdivisions		379,764		298			380,062			454			75,269			305,247
Corporate securities		202,797		1,000			203,797			—			24,284			179,513
Mortgage-backed securities		9,867		6			9,873			—			748			9,125
Totals	$	683,912	$	1,359		$	685,271		$	454		$	113,222		$	572,503

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Available for Sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	88,636	$	—	$	6,485	$	82,151
Obligations of states and political subdivisions		42,173		7		6,634		35,546
Corporate securities		212,323		—		19,300		193,023
Mortgage-backed securities		285,619		—		29,799		255,820
Totals	$	628,751	$	7	$	62,218	$	566,540

At September 30, 2023, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $225.4 million and an amortized cost of $280.9 million. Our holdings at September 30, 2023 also included special revenue bonds with an aggregate fair value of $115.4 million and an amortized cost of $141.3 million. With respect to both categories of those bonds at September 30, 2023, we held no securities of any issuer that comprised more than 10% of our holdings of either bond category. Education bonds and water and sewer utility bonds represented 47% and 36%, respectively, of our total investments in special revenue bonds based on the carrying values of these investments at September 30, 2023. Many of the issuers of the special revenue bonds we held at September 30, 2023 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held are similar to general obligation bonds.

The amortized cost and estimated fair values of our fixed maturities at December 31, 2022 were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Held to Maturity
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	103,362	$	1	$	10,566	$	92,797
Obligations of states and political subdivisions		382,097		1,810		60,494		323,413
Corporate securities		190,949		—		20,510		170,439
Mortgage-backed securities		12,031		—		635		11,396
Totals	$	688,439	$	1,811	$	92,205	$	598,045

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Available for Sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	68,538	$	109	$	5,125	$	63,522
Obligations of states and political subdivisions		45,448		34		5,326		40,156
Corporate securities		218,041		8		15,211		202,838
Mortgage-backed securities		239,886		155		22,765		217,276
Totals	$	571,913	$	306	$	48,427	$	523,792

At December 31, 2022, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $240.7 million and an amortized cost of $283.5 million. Our holdings also included special revenue bonds with an aggregate fair value of $122.9 million and an amortized cost of $144.0 million. With respect to both categories of bonds, we held no securities of any issuer that comprised more than 10% of that category at December 31, 2022. Education bonds and water and sewer utility bonds represented 48% and 35%, respectively, of our total investments in special revenue bonds based on their carrying values at December 31, 2022. Many of the issuers of the special revenue bonds we held at December 31, 2022 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held are similar to general obligation bonds.

We have segregated within accumulated other comprehensive loss the net unrealized losses of $15.1 million arising prior to the November 30, 2013 reclassification date for fixed maturities reclassified from available for sale to held to maturity. We are amortizing this balance over the remaining life of the related securities as an adjustment of yield in a manner consistent with the accretion of discount on the same fixed maturities. We recorded amortization of $ 225,070 and $415,153 in other comprehensive loss during the nine months ended September 30, 2023 and 2022, respectively. At September 30, 2023 and December 31, 2022, net unrealized losses of $1.5 million and $4.7 million, respectively, remained within accumulated other comprehensive loss.

We show below the amortized cost and estimated fair value of our fixed maturities at September 30, 2023 by contractual maturity. Expected maturities may differ from contractual maturities because issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Estimated Fair Value
	(in thousands)
Held to maturity
Due in one year or less	$	22,133	$	22,012
Due after one year through five years		106,022		98,950
Due after five years through ten years		251,366		217,144
Due after ten years		295,877		225,272
Mortgage-backed securities		9,873		9,125
Total held to maturity	$	685,271	$	572,503

Available for sale
Due in one year or less	$	40,101	$	39,458
Due after one year through five years		175,077		161,274
Due after five years through ten years		102,498		89,399
Due after ten years		25,456		20,589
Mortgage-backed securities		285,619		255,820
Total available for sale	$	628,751	$	566,540

The cost and estimated fair values of our equity securities at September 30, 2023 were as follows:

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	27,953	$	8,014	$	503	$	35,464

The cost and estimated fair values of our equity securities at December 31, 2022 were as follows:

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	30,771	$	5,666	$	1,332	$	35,105

We present below gross gains and losses from investments and the change in the difference between fair value and cost of investments:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
	(in thousands)						(in thousands)
Gross realized gains:
Fixed maturities	$	—		$	326		$	295		$	998
Equity securities		108			400			393			1,243
Real estate		—			—			—			477
		108			726			688			2,718
Gross realized losses:
Fixed maturities		237			73			2,585			173
Equity securities		424			249			475			1,073
		661			322			3,060			1,246
Net realized (losses) gains		(553	)		404			(2,372	)		1,472
Gross unrealized gains on equity securities		(735	)		117			3,940			123
Gross unrealized losses on equity securities		80			(2,879	)		(547	)		(12,406	)
Fixed maturities - credit impairment charges		(35	)		—			(91	)		—
Net investment (losses) gains	$	(1,243	)	$	(2,358	)	$	930		$	(10,811	)

We held fixed maturities with unrealized losses representing declines that we considered temporary at September 30, 2023 as follows:

	Less Than 12 Months				More Than 12 Months
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	51,076	$	1,224	$	109,693	$	18,182
Obligations of states and political subdivisions		38,870		1,965		281,436		79,938
Corporate securities		33,707		2,325		338,829		41,259
Mortgage-backed securities		89,676		3,221		175,269		27,326
Totals	$	213,329	$	8,735	$	905,227	$	166,705

We held fixed maturities with unrealized losses representing declines that we considered temporary at December 31, 2022 as follows:

	Less Than 12 Months				More Than 12 Months
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	90,245	$	5,327	$	47,238	$	10,364
Obligations of states and political subdivisions		261,465		49,327		47,945		16,493
Corporate securities		298,706		22,272		72,959		13,449
Mortgage-backed securities		143,886		10,941		69,879		12,459
Totals	$	794,302	$	87,867	$	238,021	$	52,765

We make estimates concerning the valuation of our investments and, as applicable, the recognition of declines in the value of our investments. For equity securities, we measure investments at fair value, and we recognize changes in fair value in our results of operations. With respect to an available-for-sale debt security that is in an unrealized loss position, we first assess if we intend to sell the debt security. If we determine we intend to sell the debt security, we recognize the impairment loss in our results of operations. If we do not intend to sell the debt security, we determine whether it is more likely than not that we will be required to sell the debt security prior to recovery. If we determine it is more likely than not that we will be required to sell the debt security prior to recovery, we recognize the impairment loss in our results of operations. If we determine it is more likely than not that we will not be required to sell the debt security prior to recovery, we then evaluate whether a credit loss has occurred with respect to that security. We determine whether a credit loss has occurred by comparing the amortized cost of the debt security to the present value of the cash flows we expect to collect. If we expect a cash flow shortfall, we consider that a credit loss has occurred. If we determine that a credit loss has occurred, we establish an allowance for credit loss. We then recognize the amount of the allowance in our results of operations, and we recognize the remaining portion of the impairment loss in our other comprehensive income, net of applicable taxes. We regularly review the allowance for credit losses and recognize changes in the allowance in our results of operations. In addition, we may write down securities in an unrealized loss position based on a number of other factors, including when the fair value of an investment is significantly below its cost, when the financial condition of the issuer of a security has deteriorated, the occurrence of industry, issuer or geographic events that have negatively impacted the value of a security and rating agency downgrades. For held-to-maturity debt securities, we make estimates concerning expected credit losses at an aggregated level rather that monitoring individual debt securities for credit losses. We establish an allowance for expected credit losses based on an ongoing review of securities held, historical loss data, changes in issuer credit standing and other relevant factors. We utilize a probability-of-default methodology, which reflects current and forecasted economic conditions, to estimate the allowance for expected credit losses and recognize changes to the allowance in our results of operations. We held 931 debt securities that were in an unrealized loss position at September 30, 2023. Based upon our analysis of general market conditions and underlying factors impacting these debt securities, we considered these declines in value to be temporary.

We amortize premiums and discounts on debt securities over the life of the security as an adjustment to yield using the effective interest method. We compute realized investment gains and losses using the specific identification method.

We amortize premiums and discounts on mortgage-backed debt securities using anticipated prepayments.