Investments

6 Months Ended

Jun. 30, 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:



	June 30, 2020
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value







Corporate debt securities	$	461,398	$	14,508	$	6,251	$	469,655
Residential mortgage-backed securities	115,631		3,970		2		119,599
Commercial mortgage-backed securities	104,403		3,390		1,251		106,542
Collateralized debt obligations	98,603		281		2,596		96,288
Other debt securities	12,435		355		49		12,741



Total available-for-sale securities, net	$	792,470	$	22,504	$	10,149	$	804,825



	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 June 30, 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.



	June 30, 2020
	Amortized		Estimated
(in thousands)	cost		fair value

Due in one year or less	$	24,154	$	24,233
Due after one year through five years	362,607		372,299
Due after five years through ten years	129,547		128,334
Due after ten years	276,162		279,959
Total available-for-sale securities ⁽¹⁾	$	792,470	$	804,825

(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 June 30, 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:



	June 30, 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	$	81,468	$	4,358	$	8,058	$	1,893	$	89,526	$	6,251	494
Residential mortgage-backed securities	1,407		2		0		0		1,407		2		3
Commercial mortgage-backed securities	30,808		1,251		0		0		30,808		1,251		47
Collateralized debt obligations	75,876		2,070		13,721		526		89,597		2,596		92
Other debt securities	2,780		49		0		0		2,780		49		7



Total available-for-sale securities	$	192,339	$	7,730	$	21,779	$	2,419	$	214,118	$	10,149	643
Quality breakdown of available-for-sale securities:
Investment grade	$	135,419	$	3,849	$	13,721	$	526	$	149,140	$	4,375	170
Non-investment grade	56,920		3,881		8,058		1,893		64,978		5,774		473
Total available-for-sale securities	$	192,339	$	7,730	$	21,779	$	2,419	$	214,118	$	10,149	643



	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 June 30, 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 $0.4 million.

Net investment income

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



	Three months ended June 30,						Six months ended June 30,
(in thousands)	2020		2019		2020		2019

Available-for sale securities	$	5,670	$	5,488	$	11,458	$	11,649
Equity securities	901		141		1,757		282
Cash equivalents and other	1,115		2,660		3,089		5,125
Total investment income	7,686		8,289		16,304		17,056
Less: investment expenses	313		259		562		509
Investment income, net of expenses	$	7,373	$	8,030	$	15,742	$	16,547

Realized investment gains (losses)

Realized gains (losses) on investments were as follows:



	Three months ended June 30,						Six months ended June 30,
(in thousands)	2020		2019		2020		2019

Available-for-sale securities:

Gross realized gains	$	1,721	$	2,062	$	2,795	$	4,320
Gross realized losses	(1,366)		(823)		(1,825)		(1,163)
Net realized gains on available-for-sale securities	355		1,239		970		3,157




Equity securities ⁽¹⁾	6,170		63		(5,252)		648










Miscellaneous	1		0		2		0
Net realized investment gains (losses)	$	6,526	$	1,302	$	(4,280)	$	3,805

(1)While our investment portfolio was negatively impacted in the first quarter of 2020 primarily due to the financial market volatility resulting from the COVID-19 pandemic, market conditions partially recovered in the second quarter of 2020, resulting in significant gains in the three months ended June 30, 2020.

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:


	Three months ended June 30,						Six months ended June 30,
(in thousands)	2020		2019		2020		2019
Equity securities:
Net gains (losses) recognized during the period ⁽¹⁾	$	6,170	$	63	$	(5,252)	$	648
Less: net gains (losses) recognized on securities sold	1,357		0		(2,157)		0
Net unrealized gains (losses) recognized on securities held at reporting date	$	4,813	$	63	$	(3,095)	$	648

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 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 income. See also Note 2, "Significant Accounting Policies".

Impairments on available-for-sale securities and agent loans were as follows:



	Three months ended June 30,						Six months ended June 30,
(in thousands)	2020		2019		2020		2019
Available-for-sale securities:
Intent to sell	$	0	$	84	$	2,242	$	162
Credit impaired	17		—		658		—
Total available-for-sale securities	17		84		2,900		162
Agent loans - expected credit losses	0		—		170		—
Net impairment losses recognized in earnings	$	17	$	84	$	3,070	$	162