Note 2.

Investments

The following tables set forth the carrying value, gross unrealized gains, gross unrealized losses and cost or amortized cost of the Company’s investments, aggregated by type and industry, as of December 31, 2017 and December 31, 2016.

Investments were comprised of the following:

	2017
	Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Cost or Amortized Cost
Fixed maturities:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	31,155	$	149	$	511	$	31,517
Obligations of states and political subdivisions		10,809		630		1		10,180
Corporate securities:
Utilities and telecom		21,882		1,709		130		20,303
Financial services		53,686		2,049		453		52,090
Other business – diversified		44,184		1,024		1,349		44,509
Other consumer – diversified		53,200		924		1,477		53,753
Total corporate securities		172,952		5,706		3,409		170,655
Redeemable preferred stocks:
Other consumer – diversified		192		—		—		192
Total redeemable preferred stocks		192		—		—		192
Total fixed maturities		215,108		6,485		3,921		212,544
Equity securities:
Common and non-redeemable preferred stocks:
Utilities and telecom		1,588		624		—		964
Financial services		5,634		851		—		4,783
Other business – diversified		297		250		—		47
Other consumer – diversified		15,836		10,712		—		5,124
Total equity securities		23,355		12,437		—		10,918
Other invested assets		5,626		—		—		5,626
Policy loans		2,146		—		—		2,146
Real estate		38		—		—		38
Investments in unconsolidated trusts		1,238		—		—		1,238
Total investments	$	247,511	$	18,922	$	3,921	$	232,510

	2016
	Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Cost or Amortized Cost
Fixed maturities:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	31,102	$	197	$	553	$	31,458
Obligations of states and political subdivisions		17,572		625		308		17,255
Corporate securities:
Utilities and telecom		18,034		1,462		88		16,660
Financial services		57,282		1,880		911		56,313
Other business – diversified		57,419		1,071		2,337		58,685
Other consumer – diversified		29,069		471		1,344		29,942
Total corporate securities		161,804		4,884		4,680		161,600
Redeemable preferred stocks:
Other consumer – diversified		192		—		—		192
Total redeemable preferred stocks		192		—		—		192
Total fixed maturities		210,670		5,706		5,541		210,505
Equity securities:
Common and non-redeemable preferred stocks:
Utilities and telecom		1,601		637		—		964
Financial services		5,402		574		—		4,828
Other business – diversified		244		197		—		47
Other consumer – diversified		13,010		7,396		—		5,614
Total equity securities		20,257		8,804		—		11,453
Other invested assets		9,709		—		—		9,709
Policy loans		2,265		—		—		2,265
Real estate		38		—		—		38
Investments in unconsolidated trusts		1,238		—		—		1,238
Total investments	$	244,177	$	14,510	$	5,541	$	235,208

Bonds having an amortized cost of $11,178 and $11,435 and included in the tables above were on deposit with insurance regulatory authorities at December 31, 2017 and 2016, respectively, in accordance with statutory requirements.

The following table sets forth the carrying value, cost or amortized cost, and net unrealized gains (losses) of the Company’s investments aggregated by industry as of December 31, 2017 and 2016.

	2017							2016
	Carrying Value		Cost or Amortized Cost		Unrealized Gains (Losses)			Carrying Value		Cost or Amortized Cost		Unrealized Gains (Losses)
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	31,155	$	31,517	$	(362	)	$	31,102	$	31,458	$	(356	)
Obligations of states and political subdivisions		10,809		10,180		629			17,572		17,255		317
Utilities and telecom		23,470		21,267		2,203			19,635		17,624		2,011
Financial services		59,320		56,873		2,447			62,684		61,141		1,543
Other business – diversified		44,481		44,556		(75	)		57,663		58,732		(1,069	)
Other consumer – diversified		69,228		59,069		10,159			42,271		35,748		6,523
Other investments		9,048		9,048		—			13,250		13,250		—
Total investments	$	247,511	$	232,510	$	15,001		$	244,177	$	235,208	$	8,969

The following tables present the Company’s unrealized loss aging for securities by type and length of time the security was in a continuous unrealized loss position as of December 31, 2017 and 2016.

	2017
	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	12,175	$	162	$	12,737	$	349	$	24,912	$	511
Obligations of states and political subdivisions		999		1		—		—		999		1
Corporate securities		40,108		653		32,667		2,756		72,775		3,409
Total temporarily impaired securities	$	53,282	$	816	$	45,404	$	3,105	$	98,686	$	3,921

	2016
	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	23,494	$	553	$	—	$	—	$	23,494	$	553
Obligations of states and political subdivisions		8,747		308		—		—		8,747		308
Corporate securities		59,404		2,124		20,587		2,556		79,991		4,680
Total temporarily impaired securities	$	91,645	$	2,985	$	20,587	$	2,556	$	112,232	$	5,541

The evaluation for an other than temporary impairment is a quantitative and qualitative process, which is subject to risks and uncertainties in the determination of whether declines in the fair value of investments are other than temporary. Potential risks and uncertainties include, among other things, changes in general economic conditions, an issuer’s financial condition or near term recovery prospects and the effects of changes in interest rates. In evaluating a potential impairment, the Company considers, among other factors, management’s intent and ability to hold the securities until price recovery, the nature of the investment and the expectation of prospects for the issuer and its industry, the status of an issuer’s continued satisfaction of its obligations in accordance with their contractual terms, and management’s expectation as to the issuer’s ability and intent to continue to do so, as well as ratings actions that may affect the issuer’s credit status.

As of December 31, 2017 and 2016, there were sixty-nine and seventy-seven securities, respectively, in an unrealized loss position which primarily included certain of the Company’s investments in fixed maturities within the other diversified business and other diversified consumer sectors. Securities in an unrealized loss position reported in the other diversified business sector included gross unrealized losses of $906 related to investments in fixed maturities of four different issuers, all related to the oil and gas industry. These issuers represent a diversified group of businesses which include, among others, exploration and production, pipeline owners and operators, deep water offshore rig owners and operators, all of which we believe are in continuing stages of rationalizing their current operations, investments, future capital expenditures and carefully managing and modifying their capital and liquidity positions. Based on publicly available information, the companies are continuing to assess and revise short-term, intermediate and long-term business plans in response to the current trends in oil and gas markets. All of the investees have continued to make regular interest payments on their debt when and as due and the Company continues to perform in-depth analyses of the publicly available financial disclosures of each of the investees on a regular basis. The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position. Based upon the Company’s expected continuation of receipt of contractually required principal and interest payments and its intent and ability to retain the securities until price recovery, as well as the Company’s evaluation of other relevant factors, including those described above, the Company has deemed these securities to be temporarily impaired as of December 31, 2017.

The following describes the fair value hierarchy and provides information as to the extent to which the Company uses fair value to measure the value of its financial instruments and information about the inputs used to value those financial instruments. The fair value hierarchy prioritizes the inputs in the valuation techniques used to measure fair value into three broad levels.

Level 1

Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. The Company’s financial instruments valued using Level 1 criteria include cash equivalents and exchange traded common stocks.

Level 2

Observable inputs, other than quoted prices included in Level 1, for an asset or liability or prices for similar assets or liabilities. The Company’s financial instruments valued using Level 2 criteria include significantly all of its fixed maturities, which consist of U.S. Treasury securities and U.S. Government securities, obligations of states and political subdivisions, and certain corporate fixed maturities, as well as its non-redeemable preferred stocks. In determining fair value measurements of its fixed maturities and non-redeemable preferred stocks using Level 2 criteria, the Company utilizes data from outside sources, including nationally recognized pricing services and broker/dealers. Prices for the majority of the Company’s Level 2 fixed maturities and non-redeemable preferred stocks were determined using unadjusted prices received from pricing services that utilize a matrix pricing concept, which is a mathematical technique used widely in the industry to value debt securities based on various relationships to other benchmark quoted prices.

Level 3

Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk). Fair value is based on criteria that use assumptions or other data that are not readily observable from objective sources. The Company’s financial instruments valued using Level 3 criteria consist of a limited number of fixed maturities. As of December 31, 2017 and December 31, 2016, the value of the Company’s fixed maturities valued using Level 3 criteria was $1,369 and $1,264, respectively. The use of different criteria or assumptions regarding data may have yielded materially different valuations.

As of December 31, 2017, financial instruments carried at fair value were measured on a recurring basis as summarized below:

Assets:	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
Fixed maturities	$	—	$	213,739		$	1,369	⁽¹⁾	$	215,108
Equity securities		17,973		5,382	⁽¹⁾		—			23,355
Cash equivalents		13,855		—			—			13,855
Total	$	31,828	$	219,121		$	1,369		$	252,318

⁽¹⁾

All underlying securities are financial service industry related.

As of December 31, 2016, financial instruments carried at fair value were measured on a recurring basis as summarized below:

Assets:	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
Fixed maturities	$	—	$	209,406		$	1,264	⁽¹⁾	$	210,670
Equity securities		15,153		5,104	⁽¹⁾		—			20,257
Cash equivalents		9,811		—			—			9,811
Total	$	24,964	$	214,510		$	1,264		$	240,738

⁽¹⁾

All underlying securities are financial service industry related.

The following is a roll-forward of the Company’s financial instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) from January 1, 2016 to December 31, 2017.

	Fixed Maturities
Balance, January 1, 2016	$	2,237
Total realized gains included in earnings		57
Total unrealized losses included in other comprehensive income		(30	)
Settlements		(1,000	)
Balance, December 31, 2016		1,264
Total unrealized gains included in other comprehensive income		105
Balance, December 31, 2017	$	1,369

The Company’s fixed maturities valued using Level 3 inputs consist solely of issuances of pooled debt obligations of multiple, smaller financial services companies. They are not actively traded and valuation techniques used to measure fair value are based on future estimated cash flows (based on current cash flows) discounted at reasonable estimated rates of interest. There are no assumed prepayments and/or default probability assumptions as a majority of these instruments contain certain U.S. government agency strips to support repayment of the principal. Other qualitative and quantitative information received from the original underwriter of the pooled offerings is also considered, as applicable.

The carrying value and amortized cost of the Company’s investments in fixed maturities at December 31, 2017 and 2016 by contractual maturity were as follows. Actual maturities may differ from contractual maturities because issuers may call or prepay obligations with or without call or prepayment penalties.

	2017				2016
	Carrying Value		Amortized Cost		Carrying Value		Amortized Cost
Due in one year or less	$	1,653	$	1,655	$	2,544	$	2,507
Due after one year through five years		13,738		14,056		20,278		20,038
Due after five years through ten years		112,847		112,116		90,667		90,926
Due after ten years		67,328		64,928		80,099		79,627
Varying maturities		19,542		19,789		17,082		17,407
Totals	$	215,108	$	212,544	$	210,670	$	210,505

Investment income was earned from the following sources:

	2017			2016
Fixed maturities	$	8,297		$	9,122
Equity securities		467			491
Other		(268	)		271
Total investment income		8,496			9,884
Less investment expenses, included in other expenses		(789	)		(577	)
Net investment income	$	7,707		$	9,307

A summary of realized investment gains (losses) follows:

	2017
	Fixed Maturities			Equity Securities		Other Invested Assets		Total
Gains	$	2,226		$	1,044	$	6,040	$	9,310
Losses		(142	)		—		—		(142	)
Realized investment gains, net	$	2,084		$	1,044	$	6,040	$	9,168

	2016
	Fixed Maturities			Equity Securities		Other Invested Assets		Total
Gains	$	1,119		$	—	$	1,565	$	2,684
Losses		(89	)		—		—		(89	)
Realized investment gains, net	$	1,030		$	—	$	1,565	$	2,595

Proceeds from the sales of investments were as follows:

	2017		2016
Fixed maturities	$	72,760	$	59,072
Equity securities		1,579		—
Other investments		9,653		3,289
Total proceeds	$	83,992	$	62,361

The Company’s bond portfolio included 92% investment grade securities, as defined by the NAIC, at December 31, 2017.