Investments (Tables)

3 Months Ended

Mar. 31, 2019

Schedule of Reconciliation of Cost to Fair Value of Available-For-Sale Securities

The following tables summarize the cost and fair value of our available-for-sale securities. See also Note 5, "Fair Value" for additional fair value disclosures.



	At March 31, 2019
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Available-for-sale securities:
U.S. Treasury ⁽¹⁾	$	279,553	$	503	$	100	$	279,956
States & political subdivisions ⁽¹⁾	26,931		521		0		27,452
Corporate debt securities	235,546		985		3,514		233,017
Residential mortgage-backed securities	6,513		67		9		6,571
Commercial mortgage-backed securities	48,120		273		249		48,144
Collateralized debt obligations	64,432		17		517		63,932
Other debt securities	15,752		95		0		15,847
Total available-for-sale securities	$	676,847	$	2,461	$	4,389	$	674,919



	At December 31, 2018
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Available-for-sale securities:
U.S. Treasury⁽¹⁾	$	208,610	$	18	$	216	$	208,412
States & political subdivisions ⁽¹⁾	157,003		2,020		0		159,023
Corporate debt securities	259,362		139		9,554		249,947
Residential mortgage-backed securities	4,603		38		32		4,609
Commercial mortgage-backed securities	47,022		80		587		46,515
Collateralized debt obligations	65,039		30		830		64,239
Other debt securities	15,756		33		11		15,778
Total available-for-sale securities	$	757,395	$	2,358	$	11,230	$	748,523


(1)	In the fourth quarter of 2018, we began selling off our municipal bonds as part of a portfolio rebalancing. We intend to sell the remaining municipal bonds in the second quarter of 2019. We have currently invested proceeds from these sales primarily in U.S. Treasuries.

Schedule of Amortized Cost and Estimated Fair Value of Available-For-Sale Securities by Remaining Contractual Term to Maturity

The amortized cost and estimated fair value of available-for-sale securities at March 31, 2019 are shown below by remaining contractual term to maturity. Mortgage-backed securities are allocated based upon 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 March 31, 2019
	Amortized		Estimated
(in thousands)	cost		fair value
Due in one year or less	$	123,334	$	123,200
Due after one year through five years	320,044		319,564
Due after five years through ten years	133,675		132,586
Due after ten years	99,794		99,569
Total available-for-sale securities ⁽¹⁾	$	676,847	$	674,919


(1)	The contractual maturities of our municipal bond portfolio are included in the table. However, given our intent to sell this portfolio, municipal bond securities are classified as current assets in our Statements of Financial Position.

Schedule of Available-For-Sale Securities in a Gross Unrealized Loss Position by Length of Time

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 March 31, 2019
	Less than 12 months				12 months or longer				Total
(dollars in thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses		No. of holdings
Available-for-sale securities:
U.S. Treasury	$	0	$	0	$	11,748	$	100	$	11,748	$	100	4
Corporate debt securities	82,879		1,647		94,393		1,867		177,272		3,514		471
Residential mortgage-backed securities	1,208		4		388		5		1,596		9		2
Commercial mortgage-backed securities	9,491		17		19,023		232		28,514		249		27
Collateralized debt obligations	59,394		468		3,231		49		62,625		517		45
Other debt securities	100		0		0		0		100		0		1
Total available-for-sale securities	$	153,072	$	2,136	$	128,783	$	2,253	$	281,855	$	4,389	550
Quality breakdown of available-for-sale securities:
Investment grade	$	77,871	$	534	$	94,217	$	807	$	172,088	$	1,341	124
Non-investment grade	75,201		1,602		34,566		1,446		109,767		3,048		426
Total available-for-sale securities	$	153,072	$	2,136	$	128,783	$	2,253	$	281,855	$	4,389	550



	At December 31, 2018
	Less than 12 months				12 months or longer				Total
(dollars in thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses		No. of holdings
Available-for-sale securities:
U.S. Treasury	$	129,474	$	19	$	11,656	$	197	$	141,130	$	216	7
Corporate debt securities	157,300		6,866		86,586		2,688		243,886		9,554		635
Residential mortgage-backed securities	777		6		1,618		26		2,395		32		3
Commercial mortgage-backed securities	17,624		175		16,997		412		34,621		587		30
Collateralized debt obligations	55,246		826		1,248		4		56,494		830		39
Other debt securities	8,213		11		0		0		8,213		11		7
Total available-for-sale securities	$	368,634	$	7,903	$	118,105	$	3,327	$	486,739	$	11,230	721
Quality breakdown of available-for-sale securities:
Investment grade	$	242,821	$	1,295	$	98,118	$	1,641	$	340,939	$	2,936	147
Non-investment grade	125,813		6,608		19,987		1,686		145,800		8,294		574
Total available-for-sale securities	$	368,634	$	7,903	$	118,105	$	3,327	$	486,739	$	11,230	721

Schedule of Investment Income, Net of Expenses, from Portfolios

Investment income, net of expenses, was generated from the following portfolios:



	Three months ended March 31,
(in thousands)	2019		2018
Fixed maturities ⁽¹⁾	$	6,161	$	6,110
Equity securities	141		142
Cash equivalents and other	2,465		1,008
Total investment income	8,767		7,260
Less: investment expenses	250		440
Investment income, net of expenses	$	8,517	$	6,820


(1)	Includes interest earned on note receivable from Erie Family Life Insurance Company of $0.4 million for the three months ended March 31, 2018. The note was repaid in full in December 2018.

Schedule of Realized Gains and Losses on Investments and Net Unrealized Gains and Losses Recognized during the Reporting Period Related to Equity Securities Held at the Reporting Date

Realized gains (losses) on investments were as follows:



	Three months ended March 31,
(in thousands)	2019			2018
Available-for-sale securities:
Gross realized gains	$	2,258		$	340
Gross realized losses	(340		)	(685		)
Net realized gains (losses) on available-for-sale securities	1,918			(345		)
Equity securities	585			(120		)
Net realized investment gains (losses)	$	2,503		$	(465	)

The portion of net unrealized gains and losses recognized during the reporting period, related to equity securities still held at the reporting date, is calculated as follows:



	Three months ended March 31,
(in thousands)	2019		2018
Equity securities:
Net gains (losses) recognized during the period	$	585	$	(120	)
Less: net losses recognized on securities sold	0		(34		)
Net unrealized gains (losses) recognized on securities held at reporting date	$	585	$	(86	)

Schedule of Limited Partnership Results, Generally Reported on a One Quarter Lag

Equity in losses of limited partnerships by method of accounting were as follows:



	Three months ended March 31,
(in thousands)	2019			2018
Equity in (losses) earnings of limited partnerships - equity method	$	(1,147	)	$	195
Change in fair value of limited partnerships - fair value option	0			(387		)
Equity in losses of limited partnerships	$	(1,147	)	$	(192	)

The following table summarizes limited partnership investments by sector:



(in thousands)	At March 31, 2019		At December 31, 2018
Private equity	$	26,691	$	28,271
Mezzanine debt	1,118		1,152
Real estate	2,229		2,192
Real estate - fair value option	0		3,206
Total limited partnership investments	$	30,038	$	34,821