XML 23 R10.htm IDEA: XBRL DOCUMENT v3.22.2.2
Investments
 9 Months Ended
Sep. 30, 2022
Investments, Debt and Equity Securities [Abstract]  
Investments INVESTMENTS
The following table details fixed-maturity available-for-sale securities, by major investment category, at September 30, 2022 and December 31, 2021:
Cost or Adjusted/Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
September 30, 2022
U.S. government and agency securities$39,516 $— $4,078 $35,438 
Foreign government3,373 — 44 3,329 
States, municipalities and political subdivisions65,759 1 7,594 58,166 
Public utilities21,467 — 2,459 19,008 
Corporate securities211,277 — 27,496 183,781 
Mortgage-backed securities153,223 14 20,653 132,584 
Asset-backed securities62,447 — 4,500 57,947 
Redeemable preferred stocks2,101 — 103 1,998 
Total fixed maturities$559,163 $15 $66,927 $492,251 
December 31, 2021
U.S. government and agency securities$50,373 $293 $1,326 $49,340 
Foreign government3,383 84 8 3,459 
States, municipalities and political subdivisions80,385 592 1,081 79,896 
Public utilities26,103 164 810 25,457 
Corporate securities246,933 2,303 4,793 244,443 
Mortgage-backed securities190,383 554 4,197 186,740 
Asset-backed securities70,569 116 523 70,162 
Redeemable preferred stocks4,010 106 11 4,105 
Total fixed maturities$672,139 $4,212 $12,749 $663,602 

Equity securities are summarized as follows:
September 30, 2022December 31, 2021
Estimated Fair ValuePercent of TotalEstimated Fair ValuePercent of Total
Mutual funds$32,137 88.0 %$33,064 87.1 %
Public utilities901 2.5 — — 
Nonredeemable preferred stocks3,457 9.5 4,894 12.9 
Total equity securities$36,495 100.0 %$37,958 100.0 %

    
When we sell investments, we calculate the gain or loss realized on the sale by comparing the sales price (fair value) to the cost or adjusted/amortized cost of the security sold. We determine the cost or adjusted/amortized cost of the security sold using the specific-identification method. The following table details our realized gains (losses) by major investment category for the three and nine months ended September 30, 2022 and 2021, respectively:

20222021
Gains
(Losses)		Fair Value at SaleGains
(Losses)		Fair Value at Sale
Three Months Ended September 30,
Fixed maturities$— $20,507 $293 $50,112 
Equity securities— — 5,505 10,512 
Short-term investments
— 57 — 14,655 
Total realized gains— 20,564 5,798 75,279 
Fixed maturities(9)245 (236)16,086 
Equity securities— — — 56 
Short-term investments
— — (25)23,974 
Total realized losses(9)245 (261)40,116 
Net realized investment gains (losses)$(9)$20,809 $5,537 $115,395 
Nine Months Ended September 30,
Fixed maturities$654 $82,348 $1,012 $161,314 
Equity securities— — 5,507 10,535 
Short-term investments
— 90 — 29,485 
Total realized gains654 82,438 6,519 201,334 
Fixed maturities(2,499)45,940 (544)47,707 
Equity securities(11)88 (18)575 
Short-term investments
— — (41)31,958 
Total realized losses(2,510)46,028 (603)80,240 
Net realized investment gains (losses)$(1,856)$128,466 $5,916 $281,574 

The table below summarizes our fixed maturities at September 30, 2022 by contractual maturity periods. Actual results may differ as issuers may have the right to call or prepay obligations, with or without penalties, prior to the contractual maturities of those obligations.
September 30, 2022
Cost or Amortized CostPercent of TotalFair ValuePercent of Total
Due in one year or less$25,360 4.5 %$25,200 5.1 %
Due after one year through five years184,937 33.1 169,320 34.5 
Due after five years through ten years121,858 21.8 98,100 19.9 
Due after ten years11,338 2.0 9,100 1.8 
Asset and mortgage-backed securities215,670 38.6 190,531 38.7 
Total$559,163 100.0 %$492,251 100.0 %
The following table summarizes our net investment income by major investment category:

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Fixed maturities$2,487 $3,091 $7,063 $10,113 
Equity securities268 184 658 512 
Cash and cash equivalents1,174 2 1,791 99 
Other investments496 558 971 843 
Other assets7 (92)16 20 
Investment income4,432 3,743 10,499 11,587 
Investment expenses(163)(272)(612)(850)
Net investment income$4,269 $3,471 $9,887 $10,737 


Portfolio monitoring

We have a quarterly portfolio monitoring process to identify and evaluate each fixed-income security whose carrying value may be impaired as the result of a credit loss. For each fixed-income security in an unrealized loss position, if we determine that we intend to sell the security or that it is more likely than not that we will be required to sell the security before recovery of the cost or amortized cost basis for reasons such as liquidity needs, contractual or regulatory requirements, the security's entire decline in fair value is recorded in earnings.

If our management decides not to sell the fixed-income security and it is more likely than not that we will not be required to sell the fixed-income security before recovery of its amortized cost basis, we evaluate whether the decline in fair value has resulted from credit losses or other factors. This is typically indicated by a change in the rating of the security assigned by a rating agency, and any adverse conditions specifically related to the security or industry, among other factors. If the assessment indicates that a credit loss may exist, the present value 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 will be recorded in earnings. Credit loss is limited to the difference between a security's amortized cost basis and its fair value. Any additional impairment not recorded through an allowance for credit losses is recognized in other comprehensive loss.

During the three and nine months ended September 30, 2022, we determined that none of our fixed-income securities shown in the table below that are in an unrealized loss position have declines in fair value that are reflected as a result of credit losses. Therefore, no credit loss allowance was recorded at September 30, 2022. The issuers of our debt security investments continue to make interest payments on a timely basis. We do not intend to sell, nor is it likely that we would be required to sell the debt securities before we recover our amortized cost basis. Equity securities are reported at fair value with changes in fair value recognized in the valuation of equity investments.
The following table presents an aging of our unrealized investment losses by investment class:

Less Than Twelve MonthsTwelve Months or More
Number of Securities(1)
Gross Unrealized LossesFair Value
Number of Securities(1)
Gross Unrealized LossesFair Value
September 30, 2022 
U.S. government and agency securities55 $331 $7,699 41 $3,747 $27,739 
Foreign governments3 37 1,322 1 7 2,007 
States, municipalities and political subdivisions66 2,303 25,930 49 5,291 31,260 
Public utilities33 510 5,737 18 1,949 13,271 
Corporate securities209 5,020 60,556 152 22,476 122,619 
Mortgage-backed securities122 2,912 38,867 128 17,741 93,152 
Asset-backed securities96 3,225 35,232 37 1,275 21,890 
Redeemable preferred stocks13 92 1,910 1 11 88 
Total fixed maturities597 $14,430 $177,253 427 $52,497 $312,026 
December 31, 2021
U.S. government and agency securities39 $971 $32,167 15 $355 $8,126 
Foreign governments1 8 2,010 — — — 
States, municipalities and political subdivisions63 761 41,670 8 320 11,423 
Public utilities14 346 12,719 7 464 7,708 
Corporate securities205 4,589 158,959 12 204 7,896 
Mortgage-backed securities138 2,638 111,636 37 1,559 41,786 
Asset-backed securities111 493 60,566 2 30 1,596 
Redeemable preferred stocks1 2 90 1 9 91 
Total fixed maturities572 $9,808 $419,817 82 $2,941 $78,626 
(1) This amount represents the actual number of discrete securities, not the number of shares or units of those securities. The numbers are not presented in thousands.

Fair value measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The hierarchy for inputs used in determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Assets and liabilities recorded on our Unaudited Condensed Consolidated Balance Sheets at fair value are categorized in the fair value hierarchy based on the observability of inputs to the valuation techniques as follows:

Level 1: Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we can access.

Level 2: Assets and liabilities whose values are based on the following:
    (a) Quoted prices for similar assets or liabilities in active markets;
    (b) Quoted prices for identical or similar assets or liabilities in markets that are not active; or
(c) Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Unobservable inputs reflect our estimates of the assumptions that market participants would use in valuing the assets and liabilities.

We estimate the fair value of our investments using the closing prices on the last business day of the reporting period, obtained from active markets such as the NYSE, Nasdaq and NYSE American. For securities for which quoted prices in active
markets are unavailable, we use a third-party pricing service that utilizes quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs to estimate the fair value of those securities for which quoted prices are unavailable. Our estimates of fair value reflect the interest rate environment that existed as of the close of business on September 30, 2022 and December 31, 2021. Changes in interest rates subsequent to September 30, 2022 may affect the fair value of our investments.

The fair value of our fixed maturities is initially calculated by a third-party pricing service. Valuation service providers typically obtain data about market transactions and other key valuation model inputs from multiple sources and, through the use of proprietary models, produce valuation information in the form of a single fair value for individual fixed-income and other securities for which a fair value has been requested. The inputs used by the valuation service providers include, but are not limited to, market prices from recently completed transactions and transactions of comparable securities, interest rate yield curves, credit spreads, liquidity spreads, currency rates and other information, as applicable. Credit and liquidity spreads are typically implied from completed transactions and transactions of comparable securities. Valuation service providers also use proprietary discounted cash flow models that are widely accepted in the financial services industry and similar to those used by other market participants to value the same financial information. The valuation models take into account, among other things, market observable information as of the measurement date, as described above, as well as the specific attributes of the security being valued, including its term, interest rate, credit rating, industry sector and, where applicable, collateral quality and other issue or issuer specific information. Executing valuation models effectively requires seasoned professional judgment and experience.

Any change in the estimated fair value of our fixed-income securities would impact the amount of unrealized gain or loss we have recorded, which could change the amount we have recorded for our investments and other comprehensive loss on our Unaudited Condensed Consolidated Balance Sheet as of September 30, 2022.
The following table presents the fair value of our financial instruments measured on a recurring basis by level at September 30, 2022 and December 31, 2021:

TotalLevel 1Level 2Level 3
September 30, 2022
U.S. government and agency securities$35,438 $— $35,438 $— 
Foreign government3,329 — 3,329 — 
States, municipalities and political subdivisions58,166 — 58,166 — 
Public utilities19,008 — 19,008 — 
Corporate securities183,781 — 183,781 — 
Mortgage-backed securities132,584 — 132,584 — 
Asset-backed securities57,947 — 57,947 — 
Redeemable preferred stocks1,998 468 1,530 — 
Total fixed maturities492,251 468 491,783 — 
Mutual funds32,137 18,785 13,352 — 
Public utilities901 901 — — 
Non-redeemable preferred stocks3,457 3,457 — — 
Total equity securities36,495 23,143 13,352 — 
Other investments (1)
454 300 154 — 
Total investments$529,200 $23,911 $505,289 $— 
December 31, 2021
U.S. government and agency securities$49,340 $— $49,340 $— 
Foreign government3,459 — 3,459 — 
States, municipalities and political subdivisions79,896 — 79,896 — 
Public utilities25,457 — 25,457 — 
Corporate securities244,443 — 244,443 — 
Mortgage-backed securities186,740 — 186,740 — 
Asset-backed securities70,162 — 70,162 — 
Redeemable preferred stocks4,105 535 3,570 — 
Total fixed maturities663,602 535 663,067 — 
Mutual Funds33,064 24,652 8,412 — 
Non-redeemable preferred stocks4,894 4,894 — — 
Total equity securities37,958 29,546 8,412 — 
Other investments (1)
381 300 81 — 
Total investments$701,941 $30,381 $671,560 $— 
(1) Other investments included in the fair value hierarchy exclude these limited partnership interests that are measured at estimated fair value using the net asset value per share (or its equivalent) practical expedient.

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis; this is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). There were no financial instruments measured on a non-recurring basis at September 30, 2022 and December 31, 2021.

The carrying amounts for the following financial instrument categories approximate their fair values at September 30, 2022 and December 31, 2021, because of their short-term nature: cash and cash equivalents, accrued investment income, premiums receivable, reinsurance recoverable, reinsurance payable, other assets, and other liabilities. The carrying amount of the notes payable to the Florida State Board of Administration and our senior notes approximate fair value as the interest rates and terms are variable.
We are responsible for the determination of fair value and the supporting assumptions and methodologies. We have implemented a system of processes and controls designed to provide assurance that our assets and liabilities are appropriately valued. For fair values received from third parties, our processes are designed to provide assurance that the valuation methodologies and inputs are appropriate and consistently applied, the assumptions are reasonable and consistent with the objective of determining fair value, and the fair values are accurately recorded.

At the end of each quarter, we determine whether we need to transfer the fair values of any securities between levels of the fair value hierarchy and, if so, we report the transfer as of the end of the quarter. During the quarter ended September 30, 2022, we transferred no investments between levels.

For our investments in U.S. government securities that do not have prices in active markets, agency securities, state and municipal governments, and corporate bonds, we obtain the fair values from our investment custodians, which use a third-party valuation service. The valuation service calculates prices for our investments in the aforementioned security types on a month-end basis by using several matrix-pricing methodologies that incorporate inputs from various sources. The model the valuation service uses to price U.S. government securities and securities of states and municipalities incorporates inputs from active market makers and inter-dealer brokers. To price corporate bonds and agency securities, the valuation service calculates non-call yield spreads on all issuers, uses option-adjusted yield spreads to account for any early redemption features, and adds final spreads to the U.S. Treasury curve at 3 p.m. (ET) as of quarter end. Since the inputs the valuation service uses in its calculations are not quoted prices in active markets, but are observable inputs, they represent Level 2 inputs.

Other investments

We acquired investments in limited partnerships, recorded in the other investments line of our Unaudited Condensed Consolidated Balance Sheets, and these investments are currently being measured at estimated fair value utilizing a net asset value per share (or its equivalent) practical expedient.

The information presented in the table below is as of September 30, 2022:

Book ValueUnrealized GainUnrealized LossFair Value
September 30, 2022
Limited partnership investments (1)
$16,325 $1,496 $1,666 $16,155 
Certificates of deposit300 — — 300 
 Short-term investments
155 — 1 154 
Total other investments$16,780 $1,496 $1,667 $16,609 
(1) Distributions will be generated from investment gains, from operating income, from underlying investments of funds, and from liquidation of the underlying assets of the funds. We estimate that the underlying assets of the funds will be liquidated over the next few months to six years.

Restricted Cash

We are required to maintain assets on deposit with various regulatory authorities to support our insurance operations. The cash on deposit with state regulators is available to settle insurance liabilities. We also use trust funds in certain reinsurance transactions.

The following table presents the components of restricted assets:
September 30, 2022December 31, 2021
Trust funds$36,954 $32,211 
Cash on deposit (regulatory deposits)5,346 1,043 
Total restricted cash$42,300 $33,254 
In addition to the cash held on deposit described above, we also have securities on deposit with regulators, which are presented within our Fixed Maturities or Other Investments lines on the Unaudited Condensed Balance Sheets, dependent upon if they are short-term or long-term in nature. The table below shows the carrying value of those securities held on deposit with regulators.
September 30, 2022December 31, 2021
Invested assets on deposit (regulatory deposits)$4,012 $2,885