Investments

9 Months Ended

Sep. 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:



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







Corporate debt securities	$	534,902	$	16,904	$	3,929	$	547,877
Residential mortgage-backed securities	120,268		3,470		12		123,726
Commercial mortgage-backed securities	109,187		4,420		393		113,214
Collateralized debt obligations	107,787		373		1,239		106,921
Other debt securities	15,792		542		18		16,316



Total available-for-sale securities, net	$	887,936	$	25,709	$	5,591	$	908,054



	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 September 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.



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

Due in one year or less	$	13,157	$	13,229
Due after one year through five years	419,336		431,758
Due after five years through ten years	160,245		161,148
Due after ten years	295,198		301,919
Total available-for-sale securities (1)	$	887,936	$	908,054

(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 September 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:



	September 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	$	116,649	$	2,493	$	8,236	$	1,436	$	124,885	$	3,929	437
Residential mortgage-backed securities	17,274		12		0		0		17,274		12		11
Commercial mortgage-backed securities	19,076		393		0		0		19,076		393		29
Collateralized debt obligations	78,166		998		11,992		241		90,158		1,239		97
Other debt securities	1,057		18		0		0		1,057		18		4



Total available-for-sale securities	$	232,222	$	3,914	$	20,228	$	1,677	$	252,450	$	5,591	578
Quality breakdown of available-for-sale securities:
Investment grade	$	184,738	$	1,916	$	11,992	$	241	$	196,730	$	2,157	178
Non-investment grade	47,484		1,998		8,236		1,436		55,720		3,434		400
Total available-for-sale securities	$	232,222	$	3,914	$	20,228	$	1,677	$	252,450	$	5,591	578



	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 September 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 September 30,				Nine months ended September 30,
(in thousands)	2020		2019		2020		2019

Available-for sale securities	$	5,353	$	5,449	$	16,811	$	17,098
Equity securities	1,178		452		2,935		734
Cash equivalents and other	1,009		2,900		4,098		8,025
Total investment income	7,540		8,801		23,844		25,857
Less: investment expenses	510		149		1,072		658
Investment income, net of expenses	$	7,030	$	8,652	$	22,772	$	25,199

Realized investment gains (losses)

Realized gains (losses) on investments were as follows:



	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2020		2019		2020		2019

Available-for-sale securities:

Gross realized gains	$	604	$	1,320	$	3,399	$	5,640
Gross realized losses	(467)		(248)		(2,292)		(1,411)
Net realized gains on available-for-sale securities	137		1,072		1,107		4,229




Equity securities	5,777		624		525		1,272










Miscellaneous	1		0		3		0
Net realized investment gains	$	5,915	$	1,696	$	1,635	$	5,501

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 September 30,				Nine months ended September 30,
(in thousands)	2020		2019		2020		2019
Equity securities:
Net gains recognized during the period	$	5,777	$	624	$	525	$	1,272
Less: net gains (losses) recognized on securities sold	1,796		47		(1,009)		47
Net unrealized gains recognized on securities held at reporting date	$	3,981	$	577	$	1,534	$	1,225

Net impairment 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 September 30,				Nine months ended September 30,
(in thousands)	2020		2019		2020		2019
Available-for-sale securities:
Intent to sell	$	37	$	31	$	2,279	$	193
Credit impaired	85		—		743		—
Total available-for-sale securities	122		31		3,022		193
Agent loans - expected credit losses	0		—		170		—
Net impairment losses recognized in earnings	$	122	$	31	$	3,192	$	193