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Investments | 9 Months Ended
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Sep. 30, 2021
Investments, Debt and Equity Securities [Abstract] |
Investments | Investments 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, 2021
| Amortized Cost |  | Allowance for Expected Credit Losses |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
Debt Securities: |  |  |  |  |  |  |  |  |
U.S. government obligations and agencies | $ | 37,291 |  |  | $ | — |  |  | $ | 102 |  |  | $ | (277) |  |  | $ | 37,116 |
Corporate bonds | 640,855 |  |  | (236) |  |  | 1,435 |  |  | (7,562) |  |  | 634,492 |
Mortgage-backed and asset-backed securities | 336,881 |  |  | — |  |  | 493 |  |  | (3,620) |  |  | 333,754 |
Municipal bonds | 14,925 |  |  | (1) |  |  | 1 |  |  | (244) |  |  | 14,681 |
Redeemable preferred stock | 9,090 |  |  | (53) |  |  | 90 |  |  | (13) |  |  | 9,114 |
Total | $ | 1,039,042 |  |  | $ | (290) |  |  | $ | 2,121 |  |  | $ | (11,716) |  |  | $ | 1,029,157 |
| 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):
|  | September 30, 2021 |  | December 31, 2020
Equivalent S&P Credit Ratings |  | Fair Value |  | % of Total Fair Value |  | Fair Value |  | % of Total Fair Value
AAA |  | $ | 330,344 |  |  | 32.1 | % |  | $ | 337,462 |  |  | 41.2 | %
AA |  | 143,806 |  |  | 14.0 | % |  | 89,681 |  |  | 10.9 | %
A |  | 315,761 |  |  | 30.7 | % |  | 230,290 |  |  | 28.1 | %
BBB |  | 229,208 |  |  | 22.2 | % |  | 160,662 |  |  | 19.6 | %
BB and Below |  | — |  |  | — | % |  | 233 |  |  | — | %
No Rating Available |  | 10,038 |  |  | 1.0 | % |  | 1,533 |  |  | 0.2 | %
Total |  | $ | 1,029,157 |  |  | 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):
| September 30, 2021 |  | December 31, 2020
| Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
Mortgage-backed Securities: |  |  |  |  |  |  |
Agency | $ | 149,850 |  |  | $ | 147,723 |  |  | $ | 153,937 |  |  | $ | 153,758 |
Non-agency | 68,025 |  |  | 66,940 |  |  | 54,231 |  |  | 54,666 |
Asset-backed Securities: |  |  |  |  |  |  |
Auto loan receivables | 71,716 |  |  | 71,764 |  |  | 68,188 |  |  | 68,440 |
Credit card receivables | 4,756 |  |  | 4,749 |  |  | 7,878 |  |  | 7,891 |
Other receivables | 42,534 |  |  | 42,578 |  |  | 35,143 |  |  | 35,182 |
Total | $ | 336,881 |  |  | $ | 333,754 |  |  | $ | 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):
| September 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 | 5 |  |  | $ | 21,069 |  |  | $ | (145) |  |  | 2 |  |  | $ | 1,981 |  |  | $ | (132) |
Corporate bonds | 216 |  |  | 304,464 |  |  | (4,143) |  |  | 7 |  |  | 12,896 |  |  | (339) |
Mortgage-backed and asset-backed securities | 108 |  |  | 232,904 |  |  | (3,425) |  |  | 5 |  |  | 5,320 |  |  | (195) |
Municipal bonds | 4 |  |  | 8,881 |  |  | (199) |  |  | — |  |  | — |  |  | — |
Redeemable preferred stock | 1 |  |  | 498 |  |  | (2) |  |  | — |  |  | — |  |  | — |
Total | 334 |  |  | $ | 567,816 |  |  | $ | (7,914) |  |  | 14 |  |  | $ | 20,197 |  |  | $ | (666) |
| 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 September 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) |  | 88 |  |  |  |  | 1 |  |  | 15 |  |  | 104 |
Balance, September 30, 2021 |  | $ | 236 |  |  |  |  | $ | 1 |  |  | $ | 53 |  |  | $ | 290 |
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):
| September 30, 2021
| Amortized Cost |  | Fair Value
Due in one year or less | $ | 31,202 |  |  | $ | 31,275 |
Due after one year through five years | 609,963 |  |  | 606,996 |
Due after five years through ten years | 370,677 |  |  | 363,943 |
Due after ten years | 26,301 |  |  | 26,046 |
Perpetual maturity securities | 899 |  |  | 897 |
Total | $ | 1,039,042 |  |  | $ | 1,029,157 |
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 September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Proceeds from sales and maturities (fair value): |  |  |  |  |  |  |
Available-for-sale debt securities (1) | $ | 32,320 |  |  | $ | 773,673 |  |  | $ | 146,611 |  |  | $ | 873,355 |
Equity securities | $ | 48,486 |  |  | $ | — |  |  | $ | 53,651 |  |  | $ | — |
Gross realized gains on sale of securities: |  |  |  |  |  |  |
Available-for-sale debt securities (1) | $ | 882 |  |  | $ | 53,893 |  |  | $ | 1,899 |  |  | $ | 54,779 |
Equity securities | $ | 1,315 |  |  | $ | — |  |  | $ | 2,399 |  |  | $ | — |
Gross realized losses on sale of securities: |  |  |  |  |  |  |
Available-for-sale debt securities (1) | $ | (192) |  |  | $ | (66) |  |  | $ | (1,656) |  |  | $ | (485) |
Equity securities | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Realized gains on sales of investment real estate (2) | $ | — |  |  | $ | — |  |  | $ | 401 |  |  | $ | — |
(1) |  |  | In the third quarter of 2020, the Company took advantage of the market recovery and recognized $53.8 million of net realized gains on the sale of our available-for-sale debt securities that were in an unrealized gain position.
(2) |  |  | See the discussion below for “Investment Real Estate” sold.
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,
| 2021 |  | 2020 |  | 2021 |  | 2020
Available-for-sale debt securities | $ | 2,799 |  |  | $ | 4,394 |  |  | $ | 8,393 |  |  | $ | 16,425 |
Equity securities | 544 |  |  | 583 |  |  | 1,787 |  |  | 1,732 |
Cash and cash equivalents (1) | 2 |  |  | 49 |  |  | 28 |  |  | 935 |
Other (2) | 274 |  |  | 268 |  |  | 809 |  |  | 782 |
Total investment income | 3,619 |  |  | 5,294 |  |  | 11,017 |  |  | 19,874 |
Less: Investment expenses (3) | (822) |  |  | (737) |  |  | (2,376) |  |  | (2,304) |
Net investment income | $ | 2,797 |  |  | $ | 4,557 |  |  | $ | 8,641 |  |  | $ | 17,570 |
(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 September 30, |  | Nine Months Ended September 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 | $ | (3,418) |  |  | $ | 1,991 |  |  | $ | (2,391) |  |  | $ | (2,162) |
Assets Held for Sale as of September 30, 2021 During the second quarter of 2021, the Company committed to a plan to actively market the sale of a real estate property previously included in property and equipment, net. The real estate property is located in Pompano Beach, Florida. Proceeds from the sale are expected to exceed the property’s carrying value of $0.3 million and, accordingly, no impairment loss was recognized on the classification of this real estate property as held for sale. During the first quarter of 2021, the Company committed to a plan to actively market an income-producing investment real estate property and classified the investment property to assets held for sale. On September 30, 2021, the Company completed the sale and received net cash proceeds of approximately $8.9 million and recognized a pre-tax gain of approximately $2.3 million that is included in net realized gains (losses) on investments in the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2021. Investment Real Estate Investment real estate consisted of the following as of the dates presented (in thousands):
| September 30, |  | December 31,
| 2021 |  | 2020
Income Producing: |  |  |
Investment real estate | $ | 7,087 |  |  | $ | 14,685 |
Less: Accumulated depreciation | (1,153) |  |  | (1,699) |
| 5,934 |  |  | 12,986 |
Non-Income Producing: |  |  |
Investment real estate | — |  |  | 2,190 |
Investment real estate, net | $ | 5,934 |  |  | $ | 15,176 |
During the first quarter of 2021, the Company completed the sale of a non-income producing 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 nine months ended September 30, 2021. Depreciation expense related to investment real estate for the periods presented (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Depreciation expense on investment real estate | $ | 47 |  |  | $ | 103 |  |  | $ | 139 |  |  | $ | 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 + Details
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