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Investments
 9 Months Ended
Sep. 30, 2018
Investments [Abstract]  
Investments

4. Investments



The amortized cost and estimated fair value of investments in debt and equity securities by category is as follows (in thousands):





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

Gross

 

Gross

 

 



 

Amortized

 

Unrealized

 

Unrealized

 

Fair

As of September 30, 2018

 

Cost

 

Gains

 

Losses

 

Value

U.S. Treasury securities and obligations of U.S. Government

 

$

 48,730 

 

$

 -

 

$

 (864)

 

$

 47,866 

Corporate bonds

 

 

 250,739 

 

 

 403 

 

 

 (1,640)

 

 

 249,502 

Collateralized corporate bank loans

 

 

 134,807 

 

 

 642 

 

 

 (140)

 

 

 135,309 

Municipal bonds

 

 

 122,053 

 

 

 6,126 

 

 

 (1,135)

 

 

 127,044 

Mortgage-backed

 

 

 15,328 

 

 

 13 

 

 

 (592)

 

 

 14,749 



 

 

 

 

 

 

 

 

 

 

 

 

 Total debt securities

 

 

 571,657 

 

 

 7,184 

 

 

 (4,371)

 

 

 574,470 



 

 

 

 

 

 

 

 

 

 

 

 

      Total equity securities

 

 

 45,426 

 

 

 28,116 

 

 

 (3,390)

 

 

 70,152 



 

 

 

 

 

 

 

 

 

 

 

 

      Total other investments

 

 

 3,763 

 

 

 -

 

 

 (678)

 

 

 3,085 



 

 

 

 

 

 

 

 

 

 

 

 

Total investments

 

$

 620,846 

 

$

 35,300 

 

$

 (8,439)

 

$

 647,707 



 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of U.S. Government

 

$

 50,088 

 

$

 7 

 

$

 (148)

 

$

 49,947 

Corporate bonds

 

 

 278,611 

 

 

 1,204 

 

 

 (742)

 

 

 279,073 

Collateralized corporate bank loans

 

 

 125,536 

 

 

 702 

 

 

 (301)

 

 

 125,937 

Municipal bonds

 

 

 134,052 

 

 

 709 

 

 

 (505)

 

 

 134,256 

Mortgage-backed

 

 

 16,712 

 

 

 37 

 

 

 (216)

 

 

 16,533 



 

 

 

 

 

 

 

 

 

 

 

 

 Total debt securities

 

 

 604,999 

 

 

 2,659 

 

 

 (1,912)

 

 

 605,746 



 

 

 

 

 

 

 

 

 

 

 

 

      Total equity securities

 

 

 30,253 

 

 

 23,014 

 

 

 (1,504)

 

 

 51,763 



 

 

 

 

 

 

 

 

 

 

 

 

      Total other investments

 

 

 3,763 

 

 

 61 

 

 

 -

 

 

 3,824 



 

 

 

 

 

 

 

 

 

 

 

 

Total investments

 

$

 639,015 

 

$

 25,734 

 

$

 (3,416)

 

$

 661,333 

Major categories of net investment gains (losses) on investments are summarized as follows (in thousands):





 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended September 30,

 

Nine Months Ended September 30,



 

2018

 

2017

 

2018

 

2017



 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of U.S. Government

 

$

 -

 

$

-

 

$

-

 

$

-

Corporate bonds

 

 

 (44)

 

 

 (107)

 

 

 (66)

 

 

 (125)

Collateralized corporate bank loans

 

 

 23 

 

 

 8 

 

 

 70 

 

 

 56 

Municipal bonds

 

 

 (145)

 

 

 120 

 

 

 (164)

 

 

 204 

Mortgage-backed

 

 

 -

 

 

 (1)

 

 

 1 

 

 

 (1)

Realized (losses) gains on fixed maturities

 

 

 (166)

 

 

 20 

 

 

 (159)

 

 

 134 

Realized gains on equity securities

 

 

 -

 

 

 3,168 

 

 

 359 

 

 

 5,545 

Realized (losses) gains on other investments

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Total realized (losses) gains on investments

 

 

 (166)

 

 

 3,188 

 

 

 200 

 

 

 5,679 

Other-than-temporary impairments

 

 

 -

 

 

 (850)

 

 

 -

 

 

 (4,257)

Unrealized gains (losses) on other investments

 

 

 25 

 

 

 (228)

 

 

 (739)

 

 

 (731)

Unrealized gains (losses) on equity investments

 

 

 7,121 

 

 

 -

 

 

 3,217 

 

 

 -

Investment gains (losses), net

 

$

 6,980 

 

$

 2,110 

 

$

 2,678 

 

$

 691 



We realized gross gains on investments of $0.3 million and $3.4 million during the three months ended September 30, 2018 and 2017, respectively, and $0.9 million and $6.4 million for the nine months ended September 30, 2018 and 2017, respectively.  We realized gross losses on investments of $0.5 million and $0.2 million for the three months ended September 30, 2018 and 2017, respectively, and $0.7 million and $0.7 million for the nine months ended September 30, 2018 and 2017, respectively. We recorded proceeds from the sale of investment securities of $0.4 million and $11.4 million during the three months ended September 30, 2018 and 2017, respectively, and $14.6 million and $19.4 million for the nine months ended September 30, 2018 and 2017, respectively.  Realized investment gains and losses are recognized in operations on the first in-first out method.

 



The following schedules summarize the gross unrealized losses showing the length of time that investments have been continuously in an unrealized loss position as of September 30, 2018 and December 31, 2017 (in thousands):







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of September 30, 2018



 

12 months or less

 

Longer than 12 months

 

Total



 

 

 

Unrealized

 

 

 

Unrealized

 

 

 

Unrealized



 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Fair Value

 

Losses



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of U.S. Government

 

$

 46,868 

 

$

 (864)

 

$

 -

 

$

 -

 

$

 46,868 

 

$

 (864)

Corporate bonds

 

 

 181,467 

 

 

 (1,313)

 

 

 47,968 

 

 

 (327)

 

 

 229,435 

 

 

 (1,640)

Collateralized corporate bank loans

 

 

 18,794 

 

 

 (117)

 

 

 6,064 

 

 

 (23)

 

 

 24,858 

 

 

 (140)

Municipal bonds

 

 

 38,292 

 

 

 (638)

 

 

 11,924 

 

 

 (497)

 

 

 50,216 

 

 

 (1,135)

Mortgage-backed

 

 

 5,862 

 

 

 (63)

 

 

 5,454 

 

 

 (529)

 

 

 11,316 

 

 

 (592)

    Total debt securities

 

 

 291,283 

 

 

 (2,995)

 

 

 71,410 

 

 

 (1,376)

 

 

 362,693 

 

 

 (4,371)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Total equity securities

 

 

 3,017 

 

 

 (2,654)

 

 

 3,359 

 

 

 (736)

 

 

 6,376 

 

 

 (3,390)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Total other investments

 

 

 3,085 

 

 

 (678)

 

 

 -

 

 

 -

 

 

 3,085 

 

 

 (678)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investments

 

$

 297,385 

 

$

 (6,327)

 

$

 74,769 

 

$

 (2,112)

 

$

 372,154 

 

$

 (8,439)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of December 31, 2017



 

12 months or less

 

Longer than 12 months

 

Total



 

 

 

Unrealized

 

 

 

Unrealized

 

 

 

Unrealized



 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Fair Value

 

Losses

U.S. Treasury securities and obligations of U.S. Government

 

$

 28,825 

 

$

 (145)

 

$

 1,997 

 

$

 (3)

 

$

 30,822 

 

$

 (148)

Corporate bonds

 

 

 176,061 

 

 

 (736)

 

 

 2,378 

 

 

 (6)

 

 

 178,439 

 

 

 (742)

Collateralized corporate bank loans

 

 

 30,008 

 

 

 (280)

 

 

 2,517 

 

 

 (21)

 

 

 32,525 

 

 

 (301)

Municipal bonds

 

 

 35,200 

 

 

 (370)

 

 

 8,917 

 

 

 (135)

 

 

 44,117 

 

 

 (505)

Mortgage-backed

 

 

 6,419 

 

 

 (127)

 

 

 1,415 

 

 

 (89)

 

 

 7,834 

 

 

 (216)

    Total debt securities

 

 

 276,513 

 

 

 (1,658)

 

 

 17,224 

 

 

 (254)

 

 

 293,737 

 

 

 (1,912)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Total equity securities

 

 

 8,375 

 

 

 (1,504)

 

 

 -

 

 

 -

 

 

 8,375 

 

 

 (1,504)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Total other investments

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investments

 

$

 284,888 

 

$

 (3,162)

 

$

 17,224 

 

$

 (254)

 

$

 302,112 

 

$

 (3,416)



At September 30, 2018, the gross unrealized losses more than twelve months old were attributable to 64 debt security positions and two equity securities.  At December 31, 2017, the gross unrealized losses more than twelve months old were attributable to 25 debt security positions. We consider these losses as a temporary decline in value as they are predominately on securities that we do not intend to sell and do not believe we will be required to sell prior to recovery of our amortized cost basis.  We see no other indications that the decline in values of these securities is other-than-temporary.



We complete a detailed analysis each quarter to assess whether any decline in the fair value of any fixed maturity investment below cost is deemed other-than-temporary. All fixed maturity investments with an unrealized loss are reviewed.  We recognize an impairment loss when an investment's value declines below cost, adjusted for accretion, amortization and previous other-than-temporary impairments, and it is determined that the decline is other-than-temporary. 



We assess whether we intend to sell, or it is more likely than not that we will be required to sell, a fixed maturity investment before recovery of its amortized cost basis less any current period credit losses.  For fixed maturity investments that are considered other-than-temporarily impaired and that we do not intend to sell and will not be required to sell, we separate the amount of the impairment into the amount that is credit related (credit loss component) and the amount due to all other factors.  The credit loss component is recognized in earnings and is the difference between the investment’s amortized cost basis and the present value of its expected future cash flows.  The remaining difference between the investment’s fair value and the present value of future expected cash flows is recognized in other comprehensive income.

 

Details regarding the carrying value of the other investments portfolio as of September 30, 2018 and December 31, 2017 are as follows (in thousands):







 

 

 

 

 

 



 

September 30,

 

December 31,



 

2018

 

2017

Investment Type

 

 

 

 

 

 

Equity warrant

 

$

 3,085 

 

$

 3,824 

Total other investments

 

$

 3,085 

 

$

 3,824 



We acquired this warrant in an active market.  The warrant entitles us to buy the underlying common stock of a publicly traded company at a fixed price until the expiration date of January 19, 2021.



The amortized cost and estimated fair value of debt securities at September 30, 2018 by contractual maturity are as follows. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without penalties.







 

 

 

 

 

 



 

 

 

 

 

 



 

Amortized

 

Fair



 

Cost

 

Value



 

(in thousands)

Due in one year or less

 

$

 120,070 

 

$

 120,698 

Due after one year through five years

 

 

 287,661 

 

 

 291,063 

Due after five years through ten years

 

 

 121,834 

 

 

 122,121 

Due after ten years

 

 

 26,764 

 

 

 25,839 

Mortgage-backed

 

 

 15,328 

 

 

 14,749 



 

$

 571,657 

 

$

 574,470