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Investments

9 Months Ended

Sep. 30, 2020

Investments, Debt and Equity Securities [Abstract]

Investments

Investments

Results for reporting periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP.

Available-for-Sale Securities

The following table provides the amortized cost and fair value of available-for-sale debt securities as of the dates presented (in thousands):

			September 30, 2020
			Amortized Cost						Allowance for Expected Credit Losses						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
Debt Securities:
U.S. government obligations and agencies			$	135,087					$	—					$	247					$	(6)					$	135,328
Corporate bonds			436,033						(412)						2,014						(1,937)						435,698
Mortgage-backed and asset-backed securities			251,199						—						2,299						(496)						253,002
Municipal bonds			7,086						—						53						—						7,139
Redeemable preferred stock			11,241						(58)						301						(77)						11,407
Total			$	840,646					$	(470)					$	4,914					$	(2,516)					$	842,574

			December 31, 2019
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
Debt Securities:
U.S. government obligations and agencies			$	53,688					$	864					$	(188)					$	54,364
Corporate bonds			457,180						19,179						(141)						476,218
Mortgage-backed and asset-backed securities			304,285						7,400						(606)						311,079
Municipal bonds			3,397						103						(4)						3,496
Redeemable preferred stock			9,786						427						(86)						10,127
Total			$	828,336					$	27,973					$	(1,025)					$	855,284

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, 2020												December 31, 2019
Equivalent S&P Credit Ratings						Fair Value						% of Total Fair Value						Fair Value						% of Total Fair Value
AAA						$	368,845					43.8		%				$	372,442					43.6		%
AA						74,964						8.9		%				99,103						11.6		%
A						223,658						26.6		%				238,766						27.9		%
BBB						172,916						20.5		%				143,889						16.8		%
BB and Below						1,198						0.1		%				—						—
No Rating Available						993						0.1		%				1,084						0.1		%
Total						$	842,574					100.0		%				$	855,284					100.0		%

The table above includes credit quality ratings by Standard and Poor’s Rating Services, Inc. (“S&P”), 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, 2020												December 31, 2019
			Amortized Cost						Fair Value						Amortized Cost						Fair Value
Mortgage-backed Securities:
Agency			$	166,418					$	168,027					$	143,723					$	144,729
Non-agency			28,090						28,259						71,140						75,896
Asset-backed Securities:
Auto loan receivables			31,811						31,938						42,767						43,127
Credit card receivables			6,712						6,712						21,145						21,487
Other receivables			18,168						18,066						25,510						25,840
Total			$	251,199					$	253,002					$	304,285					$	311,079

The following tables summarize available-for-sale debt securities, aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position, for which no allowance for expected credit losses has been recorded as of the dates presented (in thousands):

			September 30, 2020
			Less Than 12 Months																		12 Months or Longer
			Number of Issues						Fair Value						Unrealized Losses						Number of Issues						Fair Value						Unrealized Losses
Debt Securities:
U.S. government obligations and agencies			5						$	32,211					$	(6)					—						$	—					$	—
Corporate bonds			120						223,864						(1,329)						—						—						—
Mortgage-backed and asset-backed securities			45						115,570						(495)						—						—						—
Municipal bonds			1						3,000						(1)						—						—						—
Redeemable preferred stock			—						—						—						—						—						—
Total			171						$	374,645					$	(1,831)					—						$	—					$	—

			December 31, 2019
			Less Than 12 Months																		12 Months or Longer
			Number of Issues						Fair Value						Unrealized Losses						Number of Issues						Fair Value						Unrealized Losses
Debt Securities:
U.S. government obligations and agencies			2						$	3,836					$	(108)					4						$	23,186					$	(80)
Corporate bonds			18						16,808						(107)						7						5,866						(34)
Mortgage-backed and asset-backed securities			42						58,023						(245)						26						34,985						(361)
Municipal bonds			—						—						—						1						276						(4)
Redeemable preferred stock			6						630						(8)						4						1,489						(78)
Total			68						$	79,297					$	(468)					42						$	65,802					$	(557)

Unrealized losses on available-for-sale debt securities in the above table as of September 30, 2020 have not been recognized into income as credit losses because the issuers are of high credit quality (rated AA or higher), management does not intend to sell and it is likely management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. There were no material factors impacting any one category or specific security requiring an accrual for credit loss. The issuers continue to make principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.

Results for reporting periods occurring before January 1, 2020 continue to be reported in accordance with previously applicable U.S. GAAP and not presented under ASC 326, which was adopted by the Company on January 1, 2020.

The following table presents a reconciliation of the beginning and ending balances for expected credit losses on available-for-sale debt securities (in thousands):

						Corporate Bonds						Redeemable Preferred Stock						Total
Balance, December 31, 2019						$	—					$	—					$	—
Cumulative effect adjustment as of January 1, 2020						665						126						791
Increase (decrease)						(253)						(68)						(321)
Balance, September 30, 2020						$	412					$	58					$	470

See “—Note 2 (Significant Accounting Policies — Recently Adopted Accounting Pronouncements)” for more information about the methodology and significant inputs used to measure the amount related to expected credit losses on available-for-sale debt securities.

The following table presents the amortized cost and fair value of investments with maturities as of the date presented (in thousands):

			September 30, 2020
			Amortized Cost						Fair Value
Due in one year or less			$	75,023					$	75,416
Due after one year through five years			469,895						471,884
Due after five years through ten years			235,351						235,383
Due after ten years			58,212						57,709
Perpetual maturity securities			2,165						2,182
Total			$	840,646					$	842,574

All securities, except those with perpetual maturities, were categorized in the table above utilizing years to effective maturity. Effective maturity takes into consideration all forms of potential prepayment, such as call features or prepayment schedules, that shorten the lifespan of contractual maturity dates.

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 September 30,												Nine Months Ended September 30,
			2020						2019						2020						2019
Proceeds from sales and maturities (fair value):
Available-for-sale debt securities			$	773,673					$	61,615					$	873,355					$	173,345
Equity securities			$	—					$	—					$	—					$	29,137
Gross realized gains on sale of securities:
Available-for-sale debt securities			$	53,893					$	65					$	54,779					$	364
Equity securities			$	—					$	—					$	—					$	335
Gross realized losses on sale of securities:
Available-for-sale debt securities			$	(66)					$	(87)					$	(485)					$	(277)
Equity securities			$	—					$	—					$	—					$	(14,787)
Realized gains on sales of investment real estate			$	—					$	—					$	—					$	1,213

In the third quarter, the Company took advantage of the market recovery and recognized $53.8 million of net realized gains on the sales of our available-for-sale debt securities that were in an unrealized gain position.

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 September 30,												Nine Months Ended September 30,
			2020						2019						2020						2019
Available-for-sale debt securities			$	4,394					$	6,316					$	16,425					$	18,508
Equity securities			583						487						1,732						2,091
Cash and cash equivalents (1)			49						1,374						935						4,066
Other (2)			268						243						782						754
Total investment income			5,294						8,420						19,874						25,419
Less: Investment expenses (3)			(737)						(807)						(2,304)						(2,254)
Net investment income			$	4,557					$	7,613					$	17,570					$	23,165

(1)						Includes interest earned on restricted cash and cash equivalents.
(2)						Includes investment income earned on real estate investments.
(3)						Includes custodial fees, investment accounting and advisory fees, and expenses associated with real estate investments.

Equity Securities

The following table provides the unrealized gains and losses recognized during the periods presented on equity securities still held at the end of the reported period (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2020						2019						2020						2019
Unrealized gains (losses) recognized during the reported period on equity securities still held at the end of the reported period			$	1,991					$	573					$	(2,162)					$	3,339

Investment Real Estate

Investment real estate consisted of the following as of the dates presented (in thousands):

			September 30,						December 31,
			2020						2019
Income Producing:
Investment real estate			$	14,685					$	14,679
Less: Accumulated depreciation			(1,595)						(1,284)
			13,090						13,395
Non-Income Producing:
Investment real estate			2,190						2,190
Investment real estate, net			$	15,280					$	15,585

During the nine months ended September 30, 2019, the Company completed the sale of an investment real estate property. The Company received net cash proceeds of approximately $10.5 million and recognized a pre-tax gain of approximately $1.2 million that is included in net realized gains (losses) on investments in the Condensed Consolidated Statements of Income for the nine months ended September 30, 2019.

Depreciation expense related to investment real estate for the periods presented (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2020						2019						2020						2019
Depreciation expense on investment real estate			$	103					$	104					$	311					$	311

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- Definition

The entire disclosure for investment.

+ References

Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 321
-URI http://asc.fasb.org/topic&trid=75115024

Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-URI http://asc.fasb.org/topic&trid=2196928

Reference 3: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 325
-URI http://asc.fasb.org/topic&trid=2197064

Reference 4: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 323
-URI http://asc.fasb.org/topic&trid=2196965

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- References

No definition available.

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