Investments

12 Months Ended

Dec. 31, 2021

Investments [Abstract]

Investments

2. Investments:

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

			Gross		Gross
		Cost/Amortized	Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
As of December 31, 2021
U.S. Treasury securities and obligations of U.S. Government	$	63,098	$	56	$	(170)	$	62,984
Corporate bonds		103,515		2,115		(49)		105,581
Corporate bank loans		81,570		84		(465)		81,189
Municipal bonds		38,162		372		(70)		38,464
Mortgage-backed		1,830		29		(4)		1,855
Total debt securities		288,175		2,656		(758)		290,073
Total equity securities		42,120		9,355		(2,780)		48,695
Total investments	$	330,295	$	12,011	$	(3,538)	$	338,768
As of December 31, 2020
U.S. Treasury securities and obligations of U.S. Government	$	179,259	$	487	$	-	$	179,746
Corporate bonds		214,666		5,086		(384)		219,368
Corporate bank loans		53,650		3		(871)		52,782
Municipal bonds		49,833		756		(50)		50,539
Mortgage-backed		4,759		114		(29)		4,844
Total debt securities		502,167		6,446		(1,334)		507,279
Total equity securities		26,988		5,648		(3,248)		29,388
Total investments	$	529,155	$	12,094	$	(4,582)	$	536,667

The Company’s sources of net investment income are summarized as follows (in thousands):

	Twelve Months Ended December 31,
	2021		2020
U.S. Treasury securities and obligations of U.S. Government	$	578	$	885
Corporate bonds		4,371		7,223
Corporate bank loans		1,427		1,688
Municipal bonds		1,713		2,347
Mortgage-backed		80		192
Equity securities		2,404		1,369
Cash and cash equivalents		13		—
		10,586		13,704
Investment expenses		(871)		(784)
Investment income, net of expenses	$	9,715	$	12,920

No investments in any entity or its affiliates exceeded 10% of stockholders’ equity at December 31, 2021 or 2020.

The Company’s sources of net investment gains (losses) on investments are summarized as follows (in thousands):

	Year Ended December 31,
	2021		2020
U.S. Treasury securities and obligations of U.S. Government	$	—	$	(3)
Corporate bonds		494		959
Corporate bank loans		124		40
Municipal bonds		(25)		1,397
Mortgage-backed		—		—
Equity securities		5,453		3,472
Other investments		—		(3,740)
Gain on investments		6,046		2,125
Other-than-temporary impairments		—		(1,692)
Unrealized gains (losses) on equity securities		4,176		(24,921)
Unrealized gains on other investments		—		1,594
Investment gains (losses), net	$	10,222	$	(22,894)

We realized gross gains on investments of $6.7 million and $22.8 million during the years ended December 31, 2021 and 2020, respectively, of which $5.9 million and $21.0 million were from the sales of securities during the years ended December 31, 2021 and 2020, respectively. We realized gross losses on investments of $0.7 million and $20.7 million during the years ended December 31, 2021 and 2020, respectively, of which $0.5 million and $20.2 million was from the sale of securities during the years ended December 31, 2021 and 2020, respectively. We recorded proceeds from the sale of investment securities of $23.1 million and $155.0 million during the years ended December 31, 2021 and 2020, 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 December 31, 2021 and December 31, 2020 (in thousands):

	As of December 31, 2021
	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	$	43,273	$	(170)	$	—	$	—	$	43,273	$	(170)
Corporate bonds		-		-		2,245		(49)		2,245		(49)
Corporate bank loans		42,256		(177)		16,763		(288)		59,019		(465)
Municipal bonds		3,321		(58)		1,038		(12)		4,359		(70)
Mortgage-backed		-		-		10		(4)		10		(4)
Total debt securities		88,850		(405)		20,056		(353)		108,906		(758)
Total equity securities		6,221		(710)		5,055		(2,070)		11,276		(2,780)
Total investments	$	95,071	$	(1,115)	$	25,111	$	(2,423)	$	120,182	$	(3,538)

	As of December 31, 2020
	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	$	—	$	—	$	—	$	—	$	—	$	—
Corporate bonds		7,801		(186)		3,556		(198)		11,357		(384)
Corporate bank loans		45,233		(559)		4,144		(312)		49,377		(871)
Municipal bonds		2,859		(33)		1,154		(17)		4,013		(50)
Mortgage-backed		635		(25)		14		(4)		649		(29)
Total debt securities		56,528		(803)		8,868		(531)		65,396		(1,334)
Total equity securities		9,572		(1,610)		1,848		(1,638)		11,420		(3,248)
Total investments	$	66,100	$	(2,413)	$	10,716	$	(2,169)	$	76,816	$	(4,582)

We held a total of 100 debt securities with an unrealized loss, of which 74 were in an unrealized loss position for less than one year and 26 were in an unrealized loss position for a period of one year or greater, as of December 31, 2021. We held a total of 81 debt securities with an unrealized loss, of which 64 were in an unrealized loss position for less than one year and 17 were in an unrealized loss position for a period of one year or greater, as of December 31, 2020. We held a total of 14 equity securities with an unrealized loss, of which ten were in an unrealized loss position for less than one year and four were in an unrealized loss position for a period of one year or greater, as of December 31, 2021. We held a total of 13 equity securities with an unrealized loss, of which six were in an unrealized loss position for less than one year and seven were in an unrealized loss position for a period of one year or greater, as of December 31, 2020. We consider these losses as a temporary decline in value as they are 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. The gross unrealized losses on the debt security positions at December 31, 2021 were due predominately to normal market and interest rate fluctuations and we see no other indications that the decline in values of these securities is other-than-temporary.

Based on evidence gathered through our normal credit evaluation process, we presently expect that all debt securities held in our investment portfolio will be paid in accordance with their contractual terms. Nonetheless, it is at least reasonably possible that the performance of certain issuers of these debt securities will be worse than currently expected resulting in future write-downs within our portfolio of debt securities.

We complete a detailed analysis each quarter to assess whether any decline in the fair value of any debt security below cost is deemed other-than-temporary. All debt securities with an unrealized loss are reviewed. We recognize an impairment loss when a debt security’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 did not recognize an impairment loss during 2021. We recognized $1.7 million of other-than-temporary impairment on debt securities during 2020.

Debt Investments: 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.  During 2021 we did not dispose of any previously impaired securities.  During 2020 we disposed of one previously impaired security and recognized no gain or loss on disposal.

Equity Investments: Equity investments that are not consolidated or accounted for under the equity method of accounting are measured at fair value with changes in fair value recognized in net income each reporting period.  Equity securities with readily determinable fair values are not required to be evaluated for other-than-temporary-impairment.

The amortized cost and estimated fair value of debt securities at December 31, 2021 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 Cost		Fair Value
	(in thousands)
Due in one year or less	$	105,045	$	106,047
Due after one year through five years		108,438		109,195
Due after five years through ten years		65,005		64,926
Due after ten years		7,857		8,050
Mortgage-backed		1,830		1,855
	$	288,175	$	290,073

We have certain of our securities pledged for the benefit of various state insurance departments and reinsurers. These securities are included with our available-for-sale debt securities because we have the ability to trade these securities. We retain the interest earned on these securities. These securities had a carrying value of $30.0 million at December 31, 2021 and a carrying value of $29.7 million at December 31, 2020.