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Investments
 9 Months Ended
Sep. 30, 2017
Investments [Abstract]  
Investments
Note 5.  Investments
 
Available-for-sale securities
The following tables summarize the cost and fair value of our available-for-sale securities:
 
 
 
At September 30, 2017
 (in thousands)
 
Amortized
cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Estimated fair value
Available-for-sale securities:
 
 
 
 
 
 
 
 
U.S. treasury
 
$
11,878

 
$
0

 
$
44

 
$
11,834

States & political subdivisions
 
254,835

 
7,809

 
678

 
261,966

Foreign government securities
 
501

 
6

 
0

 
507

Corporate debt securities
 
345,003

 
2,201

 
832

 
346,372

Residential mortgage-backed securities
 
25,388

 
404

 
73

 
25,719

Commercial mortgage-backed securities
 
34,892

 
73

 
634

 
34,331

Collateralized debt obligations
 
62,193

 
207

 
19

 
62,381

Other debt securities
 
6,119

 
37

 
0

 
6,156

Total fixed maturities
 
740,809

 
10,737

 
2,280

 
749,266

Total available-for-sale securities
 
$
740,809

 
$
10,737

 
$
2,280

 
$
749,266

 

 
 
At December 31, 2016
(in thousands)
 
Amortized
cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Estimated fair value
Available-for-sale securities:
 
 
 
 
 
 
 
 
U.S. treasury
 
$
5,093

 
$
0

 
$
62

 
$
5,031

Government sponsored entities
 
2,004

 
22

 
0

 
2,026

States & political subdivisions
 
249,312

 
6,113

 
2,293

 
253,132

Corporate debt securities
 
321,041

 
3,293

 
1,386

 
322,948

Residential mortgage-backed securities
 
16,232

 
61

 
191

 
16,102

Commercial mortgage-backed securities
 
37,723

 
59

 
933

 
36,849

Collateralized debt obligations
 
68,998

 
351

 
96

 
69,253

Other debt securities
 
2,000

 
0

 
0

 
2,000

Total fixed maturities
 
702,403

 
9,899

 
4,961

 
707,341

Common stock
 
6,152

 
0

 
202

 
5,950

Total available-for-sale securities
 
$
708,555

 
$
9,899

 
$
5,163

 
$
713,291


 
The amortized cost and estimated fair value of fixed maturities at September 30, 2017 are shown below by remaining contractual term to maturity.  Mortgage-backed securities are allocated based upon their stated maturity dates.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
 
 
At September 30, 2017
(in thousands)
 
Amortized
 
Estimated
 
 
cost
 
fair value
Due in one year or less
 
$
65,085

 
$
65,208

Due after one year through five years
 
332,904

 
337,986

Due after five years through ten years
 
239,042

 
242,425

Due after ten years
 
103,778

 
103,647

Total fixed maturities
 
$
740,809

 
$
749,266




Available-for-sale securities in a gross unrealized loss position are as follows.  Data is provided by length of time for securities in a gross unrealized loss position.
 
 
 
At September 30, 2017
(in thousands)
 
Less than 12 months
 
12 months or longer
 
Total
 
 
Fair
value
 
Unrealized losses
 
Fair
value
 
Unrealized losses
 
Fair
 value
 
Unrealized losses
 
No. of holdings
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury
 
$
11,835

 
$
44

 
$
0

 
$
0

 
$
11,835

 
$
44

 
4

States & political subdivisions
 
49,278

 
449

 
7,280

 
229

 
56,558

 
678

 
26

Corporate debt securities
 
108,828

 
619

 
19,951

 
213

 
128,779

 
832

 
255

Residential mortgage-backed securities
 
5,553

 
19

 
5,771

 
54

 
11,324

 
73

 
10

Commercial mortgage-backed securities
 
12,793

 
106

 
11,019

 
528

 
23,812

 
634

 
21

Collateralized debt obligations
 
16,426

 
19

 
0

 
0

 
16,426

 
19

 
8

Total fixed maturities
 
204,713

 
1,256

 
44,021

 
1,024

 
248,734

 
2,280

 
324

Total available-for-sale securities
 
$
204,713

 
$
1,256

 
$
44,021

 
$
1,024

 
$
248,734

 
$
2,280

 
324

Quality breakdown of fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment grade
 
$
152,341

 
$
745

 
$
42,020

 
$
533

 
$
194,361

 
$
1,278

 
113

Non-investment grade
 
52,372

 
511

 
2,001

 
491

 
54,373

 
1,002

 
211

Total fixed maturities
 
$
204,713

 
$
1,256

 
$
44,021

 
$
1,024

 
$
248,734

 
$
2,280

 
324




 
 
At December 31, 2016
(in thousands)
 
Less than 12 months
 
12 months or longer
 
Total
 
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
No. of
holdings
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury
 
$
5,031

 
$
62

 
$
0

 
$
0

 
$
5,031

 
$
62

 
1

States & political subdivisions
 
84,611

 
2,293

 
0

 
0

 
84,611

 
2,293

 
40

Corporate debt securities
 
112,453

 
987

 
8,692

 
399

 
121,145

 
1,386

 
155

Residential mortgage-backed securities
 
7,451

 
60

 
4,974

 
131

 
12,425

 
191

 
13

Commercial mortgage-backed securities
 
26,509

 
437

 
4,319

 
496

 
30,828

 
933

 
28

Collateralized debt obligations
 
27,470

 
75

 
4,208

 
21

 
31,678

 
96

 
15

Total fixed maturities
 
263,525

 
3,914

 
22,193

 
1,047

 
285,718

 
4,961

 
252

Common stock
 
5,950

 
202

 
0

 
0

 
5,950

 
202

 
1

Total available-for-sale securities
 
$
269,475

 
$
4,116

 
$
22,193

 
$
1,047

 
$
291,668

 
$
5,163

 
253

Quality breakdown of fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment grade
 
$
239,041

 
$
3,605

 
$
16,061

 
$
399

 
$
255,102

 
$
4,004

 
136

Non-investment grade
 
24,484

 
309

 
6,132

 
648

 
30,616

 
957

 
116

Total fixed maturities
 
$
263,525

 
$
3,914

 
$
22,193

 
$
1,047

 
$
285,718

 
$
4,961

 
252


 
 
The above securities have been evaluated and determined to be temporary impairments for which we expect to recover our entire principal plus interest.  The primary components of this analysis include a general review of market conditions and financial performance of the issuer along with the extent and duration at which fair value is less than cost.  Any securities that we intend to sell or will more likely than not be required to sell before recovery are included in other-than-temporary impairments with the impairment charges recognized in earnings.

Net investment income
Interest and dividend income are recognized as earned and recorded to net investment income.  Investment income, net of expenses, was generated from the following portfolios:
(in thousands)
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Fixed maturities
 
$
4,234

 
$
5,245

 
$
16,358

 
$
14,629

Equity securities
 
0

 
50

 
49

 
132

Cash equivalents and other
 
1,936

 
366

 
2,852

 
1,011

Total investment income
 
6,170

 
5,661

 
19,259

 
15,772

Less: investment expenses
 
200

 
330

 
1,075

 
888

Net investment income
 
$
5,970

 
$
5,331

 
$
18,184

 
$
14,884


 
Realized investment gains (losses)
Realized gains and losses on sales of securities are recognized in income based upon the specific identification method. Realized gains (losses) on investments were as follows:
(in thousands)
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Available-for-sale securities:
 
 

 
 

 
 

 
 

Fixed maturities:
 
 

 
 

 
 

 
 

Gross realized gains
 
$
1,621

 
$
603

 
$
2,708

 
$
1,175

Gross realized losses
 
(722
)
 
(27
)
 
(1,116
)
 
(1,819
)
Net realized gains (losses)
 
899

 
576

 
1,592

 
(644
)
Equity securities:
 


 
 

 
 

 
 

Gross realized losses
 
0

 
0

 
(145
)
 
(34
)
Net realized losses
 
0

 
0

 
(145
)
 
(34
)
Trading securities:
 


 
 

 
 

 
 

Common stock:
 


 
 

 
 

 
 

Gross realized gains
 
0

 
121

 
0

 
707

Increases in fair value(1)
 
0

 
21

 
0

 
0

Net realized gains
 
0

 
142

 
0

 
707

Miscellaneous:
 


 


 


 


Gross realized gains
 
0

 
0

 
94

 
0

Gross realized losses
 
0

 
0

 
(2
)
 
0

Net realized gains
 
0

 
0

 
92

 
0

Net realized investment gains
 
$
899

 
$
718

 
$
1,539

 
$
29

 
(1)
The fair value of our common stocks is determined based upon exchange traded prices provided by a nationally recognized pricing service.
 
Net impairment losses
The components of other-than-temporary impairments on investments were as follows:
(in thousands)
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Fixed maturities
 
$
0


$
0

 
$
(182
)
 
$
(345
)
Total other-than-temporary impairments
 
0


0

 
(182
)
 
(345
)
Portion recognized in other comprehensive income
 
0


0

 
0

 
0

Net impairment losses recognized in earnings
 
$
0


$
0

 
$
(182
)
 
$
(345
)

 
In considering if fixed maturity securities were credit-impaired, some of the factors considered include: potential for the default of interest and/or principal, level of subordination, collateral of the issue, compliance with financial covenants, credit ratings and industry conditions.  We have the intent to sell all credit-impaired fixed maturity securities; therefore, the entire amount of the impairment charges were included in earnings and no non-credit impairments were recognized in other comprehensive income.

Limited partnerships
The majority of our limited partnership holdings are considered investment companies where the general partners record assets at fair value. These limited partnerships are recorded using the equity method of accounting and are generally reported on a one-quarter lag; therefore, our year-to-date limited partnership results through September 30, 2017 are comprised of partnership financial results for the fourth quarter of 2016 and the first two quarters of 2017.  Given the lag in reporting, our limited partnership results do not reflect the market conditions of the third quarter of 2017. We also own some real estate limited partnerships that do not meet the criteria of an investment company. These partnerships prepare audited financial statements on a cost basis. We have elected to report these limited partnerships under the fair value option, which is based on the NAV from our partner's capital statement reflecting the general partner's estimate of fair value for the fund's underlying assets. Fair value provides consistency in the evaluation and financial reporting for these limited partnerships and limited partnerships accounted for under the equity method. Cash contributions made to and distributions received from the partnerships are recorded in the period in which the transaction occurs.

Amounts included in equity in earnings of limited partnerships by method of accounting are included below:
 
(in thousands)
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Equity in earnings (losses) of limited partnerships accounted for under the equity method
 
$
1,305

 
$
(1,778
)
 
$
1,704

 
$
(436
)
Change in fair value of limited partnerships accounted for under the fair value option
 
232

 
55

 
195

 
157

Equity in earnings (losses) of limited partnerships
 
$
1,537

 
$
(1,723
)
 
$
1,899

 
$
(279
)


The following table summarizes limited partnership investments by sector:

(in thousands)
 
At September 30, 2017
 
At December 31, 2016
Private equity
 
$
33,478

 
$
35,228

Mezzanine debt
 
4,797

 
6,010

Real estate
 
6,838

 
12,509

Real estate - fair value option
 
4,338

 
4,412

Total limited partnership investments
 
$
49,451

 
$
58,159



See also Note 13, "Commitments and Contingencies" for investment commitments related to limited partnerships.