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Investments | 9 Months Ended
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Sep. 30, 2018
Investments Debt And Equity Securities [Abstract] |
Investments | 3. Investments Securities Available for Sale The following table provides the amortized cost and fair value of debt and short-term investment securities available for sale as of the dates presented (in thousands):
| September 30, 2018 |
|  |  |  |  | Gross |  |  | Gross |  |  |  |  |
| Amortized |  |  | Unrealized |  |  | Unrealized |  |  |  |  |
| Cost |  |  | Gains |  |  | Losses |  |  | Fair Value |
Debt Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government obligations and agencies | $ | 67,442 |  |  | $ | 15 |  |  | $ | (1,459 | ) |  | $ | 65,998 |
Corporate bonds |  | 415,600 |  |  |  | 532 |  |  |  | (6,165 | ) |  |  | 409,967 |
Mortgage-backed and asset-backed securities |  | 275,128 |  |  |  | 23 |  |  |  | (5,923 | ) |  |  | 269,228 |
Municipal bonds |  | 3,401 |  |  |  | — |  |  |  | (123 | ) |  |  | 3,278 |
Redeemable preferred stock |  | 11,922 |  |  |  | 206 |  |  |  | (191 | ) |  |  | 11,937 |
Total | $ | 773,493 |  |  | $ | 776 |  |  | $ | (13,861 | ) |  | $ | 760,408 |
| December 31, 2017 |
|  |  |  |  | Gross |  |  | Gross |  |  |  |  |
| Amortized |  |  | Unrealized |  |  | Unrealized |  |  |  |  |
| Cost |  |  | Gains |  |  | Losses |  |  | Fair Value |
Debt Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government obligations and agencies | $ | 60,481 |  |  | $ | — |  |  | $ | (877 | ) |  | $ | 59,604 |
Corporate bonds |  | 228,336 |  |  |  | 476 |  |  |  | (1,308 | ) |  |  | 227,504 |
Mortgage-backed and asset-backed securities |  | 221,956 |  |  |  | 19 |  |  |  | (2,523 | ) |  |  | 219,452 |
Municipal bonds |  | 120,883 |  |  |  | 599 |  |  |  | (1,187 | ) |  |  | 120,295 |
Redeemable preferred stock |  | 12,059 |  |  |  | 485 |  |  |  | (65 | ) |  |  | 12,479 |
Short-term investments |  | 10,000 |  |  |  | — |  |  |  | — |  |  |  | 10,000 |
Total | $ | 653,715 |  |  | $ | 1,579 |  |  | $ | (5,960 | ) |  | $ | 649,334 |
The following table provides the credit quality of available-for-sale debt securities with contractual maturities as of the dates presented (dollars in thousands):
|  | September 30, 2018 |  |  | December 31, 2017 (1) |
|  |  |  |  |  | % of Total |  |  |  |  |  |  | % of Total |
Average Credit Ratings |  | Fair Value |  |  | Fair Value |  |  | Fair Value |  |  | Fair Value |
AAA |  | $ | 344,801 |  |  |  | 45.3 | % |  | $ | 317,313 |  |  |  | 48.9 | %
AA |  |  | 92,411 |  |  |  | 12.2 | % |  |  | 129,573 |  |  |  | 20.0 | %
A |  |  | 216,074 |  |  |  | 28.4 | % |  |  | 146,749 |  |  |  | 22.6 | %
BBB |  |  | 103,427 |  |  |  | 13.6 | % |  |  | 51,020 |  |  |  | 7.8 | %
BB+ and Below |  |  | 117 |  |  |  | 0.0 | % |  |  | 1,569 |  |  |  | 0.2 | %
No Rating Available |  |  | 3,578 |  |  |  | 0.5 | % |  |  | 3,110 |  |  |  | 0.5 | %
Total |  | $ | 760,408 |  |  |  | 100.0 | % |  | $ | 649,334 |  |  |  | 100.0 | %
| (1) | The credit ratings in the table above have been reclassified from the prior periods’ consolidated financial statements to conform to the current periods’ presentation.
The table above includes credit quality ratings by Standard and Poor’s Rating Services, Inc., Moody’s Investors Service, Inc. and Fitch Ratings, Inc. The Company has presented the highest rating of the three rating agencies for each investment position. The following table summarizes the amortized cost and fair value of mortgage-backed and asset-backed securities as of the dates presented (in thousands):
|  | September 30, 2018 |  |  | December 31, 2017 |
|  | Amortized |  |  |  |  |  |  | Amortized |  |  |  |  |
|  | Cost |  |  | Fair Value |  |  | Cost |  |  | Fair Value |
Mortgage-backed Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Agency |  | $ | 152,068 |  |  | $ | 148,472 |  |  | $ | 118,014 |  |  | $ | 116,014 |
Non-agency |  |  | 44,509 |  |  |  | 44,005 |  |  |  | 17,676 |  |  |  | 17,488 |
Asset-backed Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Auto loan receivables |  |  | 28,983 |  |  |  | 28,649 |  |  |  | 35,105 |  |  |  | 34,962 |
Credit card receivables |  |  | 23,836 |  |  |  | 23,665 |  |  |  | 38,844 |  |  |  | 38,719 |
Other receivables |  |  | 25,732 |  |  |  | 24,437 |  |  |  | 12,317 |  |  |  | 12,269 |
Total |  | $ | 275,128 |  |  | $ | 269,228 |  |  | $ | 221,956 |  |  | $ | 219,452 |
The following table summarizes the fair value and gross unrealized losses on available-for-sale debt securities, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position as of the dates presented (dollars in thousands):
| September 30, 2018 |
| Less Than 12 Months |  |  | 12 Months or Longer |
| Number of |  |  |  |  |  |  | Unrealized |  |  | Number of |  |  |  |  |  |  | Unrealized |
| Issues |  |  | Fair Value |  |  | Losses |  |  | Issues |  |  | Fair Value |  |  | Losses |
Debt Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government obligations and agencies |  | 5 |  |  | $ | 15,734 |  |  | $ | (313 | ) |  |  | 11 |  |  | $ | 40,389 |  |  | $ | (1,146 | )
Corporate bonds |  | 413 |  |  |  | 316,750 |  |  |  | (4,599 | ) |  |  | 66 |  |  |  | 51,245 |  |  |  | (1,566 | )
Mortgage-backed and asset-backed securities |  | 86 |  |  |  | 135,530 |  |  |  | (1,643 | ) |  |  | 98 |  |  |  | 109,884 |  |  |  | (4,280 | )
Municipal bonds |  | 6 |  |  |  | 3,278 |  |  |  | (123 | ) |  |  | — |  |  |  | — |  |  |  | — |
Redeemable preferred stock |  | 98 |  |  |  | 4,739 |  |  |  | (154 | ) |  |  | 1 |  |  |  | 408 |  |  |  | (37 | )
Total |  | 608 |  |  | $ | 476,031 |  |  | $ | (6,832 | ) |  |  | 176 |  |  | $ | 201,926 |  |  | $ | (7,029 | )
| December 31, 2017 |
| Less Than 12 Months |  |  | 12 Months or Longer |
| Number of |  |  |  |  |  |  | Unrealized |  |  | Number of |  |  |  |  |  |  | Unrealized |
| Issues |  |  | Fair Value |  |  | Losses |  |  | Issues |  |  | Fair Value |  |  | Losses |
Debt Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government obligations and agencies |  | 7 |  |  | $ | 35,464 |  |  | $ | (301 | ) |  |  | 9 |  |  | $ | 24,140 |  |  | $ | (576 | )
Corporate bonds |  | 159 |  |  |  | 142,208 |  |  |  | (792 | ) |  |  | 39 |  |  |  | 29,796 |  |  |  | (516 | )
Mortgage-backed and asset-backed securities |  | 83 |  |  |  | 137,481 |  |  |  | (955 | ) |  |  | 37 |  |  |  | 70,218 |  |  |  | (1,568 | )
Municipal bonds |  | 36 |  |  |  | 28,265 |  |  |  | (246 | ) |  |  | 30 |  |  |  | 48,370 |  |  |  | (941 | )
Redeemable preferred stock |  | 21 |  |  |  | 2,464 |  |  |  | (65 | ) |  |  | — |  |  |  | — |  |  |  | — |
Total |  | 306 |  |  | $ | 345,882 |  |  | $ | (2,359 | ) |  |  | 115 |  |  | $ | 172,524 |  |  | $ | (3,601 | )
Evaluating Investments for Other Than Temporary Impairment (“OTTI”) As of September 30, 2018, the Company held available-for-sale debt securities that were in an unrealized loss position as presented in the table above. For available-for-sale debt securities with significant declines in value, the Company performs quarterly fundamental credit analysis on a security-by-security basis, which includes consideration of credit quality and credit ratings, review of relevant industry analyst reports and other available market data. For available-for-sale debt securities, the Company considers whether it has the intent and ability to hold the available-for-sale debt securities for a period of time sufficient to recover its cost basis. Where the Company lacks the intent and ability to hold to recovery, or believes the recovery period is extended, the security’s decline in fair value is considered other than temporary and is recorded in earnings. Based on our analysis, our fixed income portfolio is of high quality and we believe that we will recover the amortized cost basis of our available-for-sale debt securities. We continually monitor the credit quality of our investments in available-for-sale debt securities to assess if it is probable that we will receive our contractual or estimated cash flows in the form of principal and interest. Additionally, the Company considers management’s intent and ability to hold the available-for-sale debt securities until recovery and its credit analysis of the individual issuers of the securities. Based on this process and analysis, management has no reason to believe the unrealized losses of the available-for-sale debt securities as of September 30, 2018 are other than temporary. The following table presents the amortized cost and fair value of investments with contractual maturities as of the date presented (in thousands):
| September 30, 2018 |
| Amortized Cost |  |  | Fair Value |
Due in one year or less | $ | 65,340 |  |  | $ | 65,054 |
Due after one year through five years |  | 246,639 |  |  |  | 242,313 |
Due after five years through ten years |  | 158,771 |  |  |  | 156,385 |
Due after ten years |  | 15,693 |  |  |  | 15,491 |
Mortgage-backed and asset-backed securities |  | 275,128 |  |  |  | 269,228 |
Perpetual maturity securities |  | 11,922 |  |  |  | 11,937 |
Total | $ | 773,493 |  |  | $ | 760,408 |
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay with or without penalty. The following table provides certain information related to available-for-sale debt securities and equity securities during the periods presented (in thousands):
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Proceeds from sales and maturities (fair value): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale debt securities |  | $ | 32,287 |  |  | $ | 49,762 |  |  | $ | 225,989 |  |  | $ | 100,413 |
Equity securities |  | $ | 4,158 |  |  | $ | 18,056 |  |  | $ | 8,285 |  |  | $ | 75,027 |
Gross realized gains on sale of securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale debt securities |  | $ | 1 |  |  | $ | 302 |  |  | $ | 318 |  |  | $ | 330 |
Equity securities |  | $ | 413 |  |  | $ | 547 |  |  | $ | 714 |  |  | $ | 2,332 |
Gross realized losses on sale of securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale debt securities |  | $ | (11 | ) |  | $ | (19 | ) |  | $ | (3,125 | ) |  | $ | (59 | )
Equity securities |  | $ | — |  |  | $ | (27 | ) |  | $ | — |  |  | $ | (153 | )
The following table presents the components of net investment income, comprised primarily of interest and dividends, for the periods presented (in thousands):
| Three Months Ended |  |  | Nine Months Ended |
| September 30, |  |  | September 30, |
| 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Available-for-sale debt securities | $ | 4,595 |  |  | $ | 2,977 |  |  | $ | 12,390 |  |  | $ | 8,893 |
Equity securities |  | 722 |  |  |  | 348 |  |  |  | 2,016 |  |  |  | 1,068 |
Available-for-sale short-term investments |  | — |  |  |  | — |  |  |  | 145 |  |  |  | 22 |
Other (1) |  | 2,106 |  |  |  | 319 |  |  |  | 4,765 |  |  |  | 651 |
Total investment income |  | 7,423 |  |  |  | 3,644 |  |  |  | 19,316 |  |  |  | 10,634 |
Less: Investment expenses (2) |  | (781 | ) |  |  | (559 | ) |  |  | (2,103 | ) |  |  | (1,622 | )
Net investment (expense) income | $ | 6,642 |  |  | $ | 3,085 |  |  | $ | 17,213 |  |  | $ | 9,012 |
(1) | Includes interest earned on cash and cash equivalents and restricted cash and cash equivalents. Also includes investment income earned on real estate investments.
(2) | Includes custodial fees, investment accounting, advisory fees and expenses associated with real estate investments.
Equity Securities The following table provides details on the realized and unrealized gains and losses related to equity securities for the periods presented (in thousands):
| Three Months Ended |  |  | Nine Months Ended |
| September 30, |  |  | September 30, |
| 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Net gains and (losses) recognized during the period on equity securities | $ | (2,060 | ) |  | $ | 520 |  |  | $ | (8,389 | ) |  | $ | 2,179 |
Less: Net (gains) and losses recognized during the period on equity securities sold during the period |  | (413 | ) |  |  | (520 | ) |  |  | (714 | ) |  |  | (2,179 | )
Unrealized gains and (losses) recognized during the reporting period on equity securities still held at the reporting period | $ | (2,473 | ) |  | $ | — |  |  | $ | (9,103 | ) |  | $ | — |
Investment Real Estate Investment real estate consisted of the following as of the dates presented (in thousands):
| September 30, 2018 |  |  | December 31, 2017 |
Income Producing: |  |  |  |  |  |  |
Investment real estate (1) | $ | 14,619 |  |  | $ | 6,918 |
Less: Accumulated depreciation |  | (767 | ) |  |  | (460 | )
|  | 13,852 |  |  |  | 6,458 |
Non-Income Producing: |  |  |  |  |  |  |
Properties under development (1) |  | 9,868 |  |  |  | 12,016 |
Investment real estate, net | $ | 23,720 |  |  | $ | 18,474 |
(1) During the nine months ended September 30, 2018, the Company transferred $7.4 million from properties under development to investment real estate. Depreciation expense related to investment real estate for the periods presented (in thousands):
| Three Months Ended |  |  | Nine Months Ended |
| September 30, |  |  | September 30, |
| 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Depreciation expense on investment real estate | $ | 103 |  |  | $ | 45 |  |  | $ | 307 |  |  | $ | 134 |

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