Investments

6 Months Ended

Jun. 30, 2021

Investments, Debt and Equity Securities [Abstract]

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):


	June 30, 2021
	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities:
U.S. government obligations and agencies	$	37,323	$	—	$	110	$	(279)	$	37,154
Corporate bonds	547,259		(89)		2,040		(5,944)		543,266
Mortgage-backed and asset-backed securities	321,322		—		656		(3,887)		318,091
Municipal bonds	14,925		(1)		12		(175)		14,761
Redeemable preferred stock	8,362		(28)		195		(1)		8,528
Total	$	929,191	$	(118)	$	3,013	$	(10,286)	$	921,800


	December 31, 2020
	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities:
U.S. government obligations and agencies	$	59,529	$	—	$	157	$	(55)	$	59,631
Corporate bonds	416,758		(148)		3,571		(337)		419,844
Mortgage-backed and asset-backed securities	319,377		—		1,175		(615)		319,937
Municipal bonds	11,990		—		138		—		12,128
Redeemable preferred stock	7,993		(38)		424		(58)		8,321
Total	$	815,647	$	(186)	$	5,465	$	(1,065)	$	819,861

The following table provides the credit quality of available-for-sale debt securities as of the dates presented (dollars in thousands):


	June 30, 2021				December 31, 2020
Equivalent S&P Credit Ratings	Fair Value		% of Total Fair Value		Fair Value		% of Total Fair Value
AAA	$	316,826	34.4	%	$	337,462	41.2	%
AA	130,445		14.1	%	89,681		10.9	%
A	275,345		29.9	%	230,290		28.1	%
BBB	197,939		21.5	%	160,662		19.6	%
BB and Below	—		—	%	233		—	%
No Rating Available	1,245		0.1	%	1,533		0.2	%
Total	$	921,800	100.0	%	$	819,861	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):


	June 30, 2021				December 31, 2020
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Mortgage-backed Securities:
Agency	$	153,303	$	150,677	$	153,937	$	153,758
Non-agency	58,051		57,250		54,231		54,666
Asset-backed Securities:
Auto loan receivables	67,907		67,984		68,188		68,440
Credit card receivables	4,771		4,771		7,878		7,891
Other receivables	37,290		37,409		35,143		35,182
Total	$	321,322	$	318,091	$	319,377	$	319,937

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):


	June 30, 2021
	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	8	$	34,227	$	(279)	—	$	—	$	—
Corporate bonds	178	255,550		(3,967)		1	1,099		(2)
Mortgage-backed and asset-backed securities	102	228,270		(3,885)		1	415		(2)
Municipal bonds	4	8,929		(152)		—	—		—
Redeemable preferred stock	—	—		—		—	—		—
Total	292	$	526,976	$	(8,283)	2	$	1,514	$	(4)


	December 31, 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	8	$	31,729	$	(55)	—	$	—	$	—
Corporate bonds	27	28,791		(162)		—	—		—
Mortgage-backed and asset-backed securities	42	112,462		(615)		—	—		—
Municipal bonds	—	—		—		—	—		—
Redeemable preferred stock	2	688		(12)		—	—		—
Total	79	$	173,670	$	(844)	—	$	—	$	—

Unrealized losses on available-for-sale debt securities in the above table as of June 30, 2021 have not been recognized into income as credit losses because the issuers are of high credit quality (investment grade securities), 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.

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		Municipal Bonds		Redeemable Preferred Stock		Total
Balance, December 31, 2019	$	—	$	—	$	—	$	—
Cumulative effect adjustment as of January 1, 2020	665		—		126		791
Increase (decrease)	(517)		—		(88)		(605)
Balance, December 31, 2020	148		—		38		186
Increase (decrease)	(59)		1		(10)		(68)
Balance, June 30, 2021	$	89	$	1	$	28	$	118

For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by rating agencies, market sentiment and trends and adverse conditions specifically related to the security, among other quantitative and qualitative factors utilized for establishing an estimate for credit losses. If the assessment indicates that a credit loss exists, the present values of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes an available-for-sale debt security is confirmed as uncollected or when either of the criteria regarding intent or requirement to sell is met.

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


	June 30, 2021
	Amortized Cost		Fair Value
Due in one year or less	$	13,195	$	13,319
Due after one year through five years	539,113		537,491
Due after five years through ten years	353,906		347,811
Due after ten years	22,812		22,967
Perpetual maturity securities	165		212
Total	$	929,191	$	921,800

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, equity securities and investment in real estate during the periods presented (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Proceeds from sales and maturities (fair value):
Available-for-sale debt securities	$	61,658	$	57,169	$	114,291	$	99,682
Equity securities	$	3,589	$	—	$	5,165	$	—
Gross realized gains on sale of securities:
Available-for-sale debt securities	$	895	$	540	$	1,017	$	886
Equity securities	$	741	$	—	$	1,084	$	—
Gross realized losses on sale of securities:
Available-for-sale debt securities	$	(1,140)	$	(372)	$	(1,464)	$	(419)
Equity securities	$	—	$	—	$	—	$	—
Realized gains on sales of investment real estate	$	—	$	—	$	401	$	—

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 June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Available-for-sale debt securities	$	2,765	$	6,016	$	5,594	$	12,031
Equity securities	652		604		1,243		1,149

Cash and cash equivalents (1)	15		95		26		886
Other (2)	267		260		535		514
Total investment income	3,699		6,975		7,398		14,580
Less: Investment expenses (3)	(841)		(796)		(1,554)		(1,567)
Net investment income	$	2,858	$	6,179	$	5,844	$	13,013


(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 for the periods presented on equity securities still held at the end of the reported period (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Unrealized gains (losses) recognized during the reported period on equity securities still held at the end of the reported period	$	1,546	$	3,871	$	1,027	$	(4,154)

Assets Held for Sale

The Company has committed to a plan of sale for various real estate properties previously included in Investment Real Estate. The real estate properties are located in Florida. Proceeds from the sale are expected to exceed the properties’ carrying value of $7.1 million and, accordingly, no impairment loss was recognized on the classification of this real estate property as held for sale.

Investment Real Estate

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


	June 30,		December 31,
	2021		2020
Income Producing:
Investment real estate	$	7,087	$	14,685
Less: Accumulated depreciation	(1,106)		(1,699)
	5,981		12,986
Non-Income Producing:
Investment real estate	—		2,190
Investment real estate, net	$	5,981	$	15,176

During the first quarter of 2021, the Company completed the sale of an investment real estate property. The Company received net cash proceeds of approximately $2.6 million and recognized a pre-tax gain of approximately $0.4 million that is included in net realized gains (losses) on investments in the Condensed Consolidated Statements of Income for the six months ended June 30, 2021.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Depreciation expense on investment real estate	$	46	$	104	$	92	$	208