Investments

3 Months Ended

Mar. 31, 2020

Available-for-sale securities

See Note 5, "Fair Value" for additional fair value disclosures. The following tables summarize the cost and fair value, net of credit loss allowance, of our available-for-sale securities as of:



	March 31, 2020
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses ⁽¹⁾		Estimated fair value
Corporate debt securities	$	460,508	$	1,954	$	23,165	$	439,297
Residential mortgage-backed securities	124,082		3,748		413		127,417
Commercial mortgage-backed securities	91,355		976		3,729		88,602
Collateralized debt obligations	94,210		40		6,635		87,615
Other debt securities	9,163		84		525		8,722
Total available-for-sale securities, net	$	779,318	$	6,802	$	34,467	$	751,653


(1)	The increase in gross unrealized losses in the first quarter of 2020 is primarily due to the financial market volatility resulting from the COVID-19 pandemic.



	December 31, 2019
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Corporate debt securities	$	450,295	$	6,289	$	1,704	$	454,880
Residential mortgage-backed securities	124,337		1,056		50		125,343
Commercial mortgage-backed securities	67,210		479		148		67,541
Collateralized debt obligations	78,059		44		247		77,856
Other debt securities	5,049		71		39		5,081
Total available-for-sale securities, net	$	724,950	$	7,939	$	2,188	$	730,701

The amortized cost and estimated fair value of available-for-sale securities at March 31, 2020 are shown below by remaining contractual term to maturity. 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.



	March 31, 2020
	Amortized		Estimated
(in thousands)	cost		fair value
Due in one year or less	$	27,108	$	26,764
Due after one year through five years	344,995		333,389
Due after five years through ten years	134,580		125,505
Due after ten years	272,635		265,995
Total available-for-sale securities ⁽¹⁾	$	779,318	$	751,653


(1)	The contractual maturities of our available-for-sale securities are included in the table. However, given our intent to sell certain impaired securities, these securities are classified as current assets in our Statements of Financial Position at March 31, 2020.

The below securities have been evaluated and determined to be temporary declines in fair value for which we expect to recover our entire principal plus interest. The following table presents available-for-sale securities based on length of time in a gross unrealized loss position as of:



	March 31, 2020
	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
Corporate debt securities	$	299,653	$	20,247	$	6,822	$	2,918	$	306,475	$	23,165	662
Residential mortgage-backed securities	2,798		413		0		0		2,798		413		4
Commercial mortgage-backed securities	59,786		3,729		0		0		59,786		3,729		73
Collateralized debt obligations	72,456		5,490		13,122		1,145		85,578		6,635		87
Other debt securities	6,358		525		0		0		6,358		525		15
Total available-for-sale securities	$	441,051	$	30,404	$	19,944	$	4,063	$	460,995	$	34,467	841
Quality breakdown of available-for-sale securities:
Investment grade	$	362,145	$	19,158	$	13,122	$	1,146	$	375,267	$	20,304	298
Non-investment grade	78,906		11,246		6,822		2,917		85,728		14,163		543
Total available-for-sale securities	$	441,051	$	30,404	$	19,944	$	4,063	$	460,995	$	34,467	841



	December 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
Corporate debt securities	$	25,804	$	342	$	15,699	$	1,362	$	41,503	$	1,704	158
Residential mortgage-backed securities	16,712		50		0		0		16,712		50		7
Commercial mortgage-backed securities	21,981		147		372		1		22,353		148		30
Collateralized debt obligations	20,889		33		41,010		214		61,899		247		49
Other debt securities	2,350		39		0		0		2,350		39		2
Total available-for-sale securities	$	87,736	$	611	$	57,081	$	1,577	$	144,817	$	2,188	246
Quality breakdown of available-for-sale securities:
Investment grade	$	76,315	$	287	$	46,390	$	218	$	122,705	$	505	100
Non-investment grade	11,421		324		10,691		1,359		22,112		1,683		146
Total available-for-sale securities	$	87,736	$	611	$	57,081	$	1,577	$	144,817	$	2,188	246

Credit loss allowance on investments

As of March 31, 2020, the current expected credit loss allowance on agent loans is $1.0 million and the credit loss allowance on available-for-sale securities is $0.6 million.

Net investment income

Investment income, net of expenses, was generated from the following portfolios for the three months ended March 31:



(in thousands)	2020		2019
Available-for sale securities	$	5,788	$	6,161
Equity securities	856		141
Cash equivalents and other	1,974		2,465
Total investment income	8,618		8,767
Less: investment expenses	249		250
Investment income, net of expenses	$	8,369	$	8,517

Realized investment (losses) gains

Realized (losses) gains on investments were as follows for the three months ended March 31:



(in thousands)	2020			2019
Available-for-sale securities:
Gross realized gains	$	1,074		$	2,258
Gross realized losses	(459		)	(340		)
Net realized gains on available-for-sale securities	615			1,918
Equity securities ⁽¹⁾	(11,422		)	585
Miscellaneous	1			—
Net realized investment (losses) gains	$	(10,806	)	$	2,503


(1)	The increase in net losses recognized on equity securities in the first quarter of 2020 is primarily due to the financial market volatility resulting from the COVID-19 pandemic.

The portion of net unrealized gains and losses recognized during the reporting period related to equity securities held at the reporting date is calculated as follows for the three months ended March 31:



(in thousands)	2020			2019
Equity securities:
Net (losses) gains recognized during the period ⁽¹⁾	$	(11,422	)	$	585
Less: net losses recognized on securities sold	(37		)	0
Net unrealized (losses) gains recognized on securities held at reporting date	$	(11,385	)	$	585


(1)	The increase in net losses recognized on equity securities in the first quarter of 2020 is primarily due to the financial market volatility resulting from the COVID-19 pandemic.

Net impairments losses recognized in earnings

Upon adoption of ASU 2016-13 on January 1, 2020, impairments on available-for-sale securities that are deemed to be credit related are recognized in earnings with a corresponding available-for-sale security allowance. All unrealized losses related to factors other than credit are recorded in other comprehensive (loss) income. Prior to January 1, 2020, we had the intent to sell all credit-impaired available-for-sale securities; therefore, the entire amount of the impairment charges was included in earnings and no impairments were recognized in other comprehensive (loss) income. See also Note 2, "Significant Accounting Policies".

Impairments on available-for-sale securities and agent loans were as follows for the three months ended March 31:



(in thousands)	2020		2019
Available-for-sale securities:
Intent to sell	$	2,242	$	78
Credit impaired	641		—
Total available-for-sale securities	2,883		78
Agent loans - expected credit losses	170		—
Net impairment losses recognized in earnings	$	3,053	$	78