Investments

9 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

5 -

Investments

The amortized cost and estimated fair values of our fixed maturities at September 30, 2019 were as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Held to Maturity
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	91,485	$	2,336	$	47	$	93,774
Obligations of states and political subdivisions		181,575		15,124		86		196,613
Corporate securities		151,654		8,281		353		159,582
Mortgage-backed securities		34,175		623		25		34,773

Totals	$	458,889	$	26,364	$	511	$	484,742


Available for Sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	19,325	$	128	$	7	$	19,446
Obligations of states and political subdivisions		57,178		1,990		3		59,165
Corporate securities		146,644		4,295		158		150,781
Mortgage-backed securities		327,645		2,902		838		329,709

Totals	$	550,792	$	9,315	$	1,006	$	559,101

At September 30, 2019, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $170.9 million and an amortized cost of $160.4 million. Our holdings at September 30, 2019 also included special revenue bonds with an aggregate fair value of $84.9 million and an amortized cost of $78.4 million. With respect to both categories of those bonds at September 30, 2019, we held no securities of any issuer that comprised more than 10% of our holdings of either bond category. Education bonds and water and sewer utility bonds represented

% and 34%, respectively, of our total investments in special revenue bonds based on the carrying values of these investments at September 30, 2019. Many of the issuers of the special revenue bonds we held at September 30, 2019 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held at September 30, 2019 are similar to general obligation bonds.

The amortized cost and estimated fair values of our fixed maturities at December 31, 2018 were as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Held to Maturity
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	76,222	$	175	$	1,087	$	75,310
Obligations of states and political subdivisions		159,292		8,237		704		166,825
Corporate securities		127,010		396		4,391		123,015
Mortgage-backed securities		40,274		64		450		39,888

Totals	$	402,798	$	8,872	$	6,632	$	405,038


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Available for Sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	45,188	$	25	$	1,003	$	44,210
Obligations of states and political subdivisions		73,761		1,762		307		75,216
Corporate securities		140,689		203		3,059		137,833
Mortgage-backed securities		275,475		149		6,325		269,299

Totals	$	535,113	$	2,139	$	10,694	$	526,558

At December 31, 2018, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $157.7 million and an amortized cost of $152.2 million. Our holdings also included special revenue bonds with an aggregate fair value of $84.3 million and an amortized cost of $80.9 million. With respect to both categories of bonds, we held no securities of any issuer that comprised more than 10% of that category at December 31, 2018. Education bonds and water and sewer utility bonds represented 49% and 29%, respectively, of our total investments in special revenue bonds based on their carrying values at December 31, 2018. Many of the issuers of the special revenue bonds we held at December 31, 2018 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held are similar to general obligation bonds.

We made reclassifications from available for sale to held to maturity of certain fixed maturities at fair value on November 30, 2013. We segregated within accumulated other comprehensive loss the net unrealized losses of $15.1 million arising prior to the November 30, 2013 reclassifications. We are amortizing this balance over the remaining life of the related securities as an adjustment to yield in a manner consistent with the accretion of discount on the same fixed maturities. We recorded amortization of $

870,186

and $912,229 in other comprehensive income (loss) during the nine months ended September 30, 2019 and 2018, respectively. At September 30, 2019 and December 31, 2018, net unrealized losses of $7.8 million and $8.6 million, respectively, remained within accumulated other comprehensive

income (

loss

)

We show below the amortized cost and estimated fair value of our fixed maturities at September 30, 2019 by contractual maturity. Expected maturities may differ from contractual maturities because issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.


	Amortized Cost		Estimated Fair Value
	(in thousands)
Held to maturity
Due in one year or less	$	22,801	$	22,881
Due after one year through five years		72,894		75,680
Due after five years through ten years		179,648		189,376
Due after ten years		149,371		162,032
Mortgage-backed securities		34,175		34,773

Total held to maturity	$	458,889	$	484,742

Available for sale
Due in one year or less	$	16,975	$	17,152
Due after one year through five years		90,226		92,564
Due after five years through ten years		100,580		103,705
Due after ten years		15,366		15,971
Mortgage-backed securities		327,645		329,709

Total available for sale	$	550,792	$	559,101

The cost and estimated fair values of our equity securities at September 30, 2019 were as follows:


	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	43,407	$	10,078	$	1,386	$	52,099

The cost and estimated fair values of our equity securities at December 31, 2018 were as follows:


	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	40,943	$	4,818	$	2,094	$	43,667

Gross investment gains and losses before applicable income taxes for the three and nine months ended September 30, 2019 and 2018 were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019		2018
	(in thousands)						(in thousands)
Gross investment gains:
Fixed maturities	$	107		$	5		$	479	$	16
Equity securities		721			2,976			8,293		6,246
Investment in affiliate		—			—			12,662		—

		828			2,981			21,434		6,262

Gross investment losses:
Fixed maturities		4			25			324		70
Equity securities		1,193			(508	)		1,816		2,130

		1,197			(483	)		2,140		2,200

Net investment (losses) gains	$	(369	)	$	3,464		$	19,294	$	4,062

We recognized $6.7 million of gains and $1.2 million of losses on equity securities we held at September 30, 2019 in net investment gains for the nine months ended September 30, 2019. We recognized $3.9 million of gains and $1.6 million of losses on equity securities held at September 30, 2018 in net investment gains for the nine months ended September 30, 2018.

We held fixed maturities with unrealized losses representing declines that we considered temporary at September 30, 2019 as follows:


	Less Than 12 Months				More Than 12 Months
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	3,466	$	34	$	6,429	$	20
Obligations of states and political subdivisions		4,582		86		2,321		3
Corporate securities		14,152		179		25,113		332
Mortgage-backed securities		18,686		75		89,643		788

Totals	$	40,886	$	374	$	123,506	$	1,143

We held fixed maturities with unrealized losses representing declines that we considered temporary at December 31, 2018 as follows:


	Less Than 12 Months				More Than 12 Months
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	26,342	$	166	$	54,900	$	1,924
Obligations of states and political subdivisions		28,322		477		21,560		534
Corporate securities		149,270		4,483		59,397		2,968
Mortgage-backed securities		82,594		913		181,379		5,862

Totals	$	286,528	$	6,039	$	317,236	$	11,288

We make estimates concerning the valuation of our investments and the recognition of other-than-temporary declines in the value of our investments. For equity securities, we measure investments at fair value, and we recognize changes in fair value in our results of operations. With respect to a debt security that is in an unrealized loss position, we first assess if we intend to sell the debt security. If we determine we intend to sell the debt security, we recognize the impairment loss in our results of operations. If we do not intend to sell the debt security, we determine whether it is more likely than not that we will be required to sell the debt security prior to recovery. If we determine it is more likely than not that we will be required to sell the debt security prior to recovery, we recognize the impairment loss in our results of operations. If we determine it is more likely than not that we will not be required to sell the debt security prior to recovery, we then evaluate whether a credit loss has occurred with respect to that security. We determine whether a credit loss has occurred by comparing the amortized cost of the debt security to the present value of the cash flows we expect to collect. If we expect a cash flow shortfall, we consider that a credit loss has occurred. If we determine that a credit loss has occurred, we consider the impairment to be other than temporary. We then recognize the amount of the impairment loss related to the credit loss in our results of operations, and we recognize the remaining portion of the impairment loss in our other comprehensive income, net of applicable taxes. In addition, we may write down securities in an unrealized loss position based on a number of other factors, including when the fair value of an investment is significantly below its cost, when the financial condition of the issuer of a security has deteriorated, the occurrence of industry, issuer or geographic events that have negatively impacted the value of a security and rating agency downgrades. We held

131

debt securities that were in an unrealized loss position at September 30, 2019. Based upon our analysis of general market conditions and underlying factors impacting these debt securities, we considered these declines in value to be temporary.

We amortize premiums and discounts on debt securities over the life of the security as an adjustment to yield using the effective interest method. We compute realized investment gains and losses using the specific identification method.

We amortize premiums and discounts on mortgage-backed debt securities using anticipated prepayments.