Investments and Estimated Fair Value

Investments in Fixed Maturity Securities

The estimated fair value, gross unrealized holding gains, gross unrealized holding losses and amortized cost for fixed maturity securities by major classification are as follows:



As of March 31, 2020 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturity securities, available-for-sale, at fair value:
Government obligations	$	24,126	$	335	$	—	$	24,461
General obligations of U.S. states, territories and political subdivisions	18,565		835		—		19,400
Special revenue issuer obligations of U.S. states, territories and political subdivisions	50,758		2,455		12		53,201
Corporate debt securities	3,941		451		33		4,359
Total	$	97,390	$	4,076	$	45	$	101,421



As of December 31, 2019 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturity securities, available-for-sale, at fair value:
Government obligations	$	25,161	$	6	$	4	$	25,163
General obligations of U.S. states, territories and political subdivisions	18,887		843		—		19,730
Special revenue issuer obligations of U.S. states, territories and political subdivisions	51,188		2,530		20		53,698
Corporate debt securities	5,431		621		5		6,047
Total	$	100,667	$	4,000	$	29	$	104,638

The special revenue category for both periods presented includes approximately 50 individual fixed maturity securities with revenue sources from a variety of industry sectors.

The scheduled maturities of fixed maturity securities at March 31, 2020 are as follows:



	Available-for-Sale
(in thousands)	Amortized Cost		Estimated Fair Value
Due in one year or less	$	20,293	$	20,465
Due one year through five years	51,783		53,970
Due five years through ten years	24,501		25,772
Due after ten years	813		1,214
Total	$	97,390	$	101,421

Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties.

The following table presents the gross unrealized losses on fixed maturity securities and the estimated fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous loss position at March 31, 2020 and December 31, 2019:



	Less than 12 Months					12 Months or Longer					Total
As of March 31, 2020 (in thousands)	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
Special revenue issuer obligations of U.S. states, territories and political subdivisions	$	1,573	$	(10	)	$	1,114	$	(2	)	$	2,687	$	(12	)
Corporate debt securities	640		(33		)	—		—			640		(33		)
Total temporarily impaired securities	$	2,213	$	(43	)	$	1,114	$	(2	)	$	3,327	$	(45	)



	Less than 12 Months					12 Months or Longer					Total
As of December 31, 2019 (in thousands)	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
Government obligations	$	12,045	$	(4	)	$	—	$	—		$	12,045	$	(4	)
Special revenue issuer obligations of U.S. states, territories and political subdivisions	1,101		(17		)	1,118		(3		)	2,219		(20		)
Corporate debt securities	413		(5		)	—		—			413		(5		)
Total temporarily impaired securities	$	13,559	$	(26	)	$	1,118	$	(3	)	$	14,677	$	(29	)

The decline in estimated fair value of the fixed maturity securities can be attributed primarily to changes in market interest rates and changes in credit spreads over Treasury securities. Because the Company does not have the intent to sell these securities and will likely not be compelled to sell them before it can recover its cost basis, the Company does not consider these investments to be other-than-temporarily impaired.

Management evaluates available-for-sale fixed maturity securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to (1) the extent to which the fair value is less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.

Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been below cost, the financial condition and prospects of the issuer (including credit ratings and analyst reports) and macro-economic changes. A total of 9 and 6 fixed maturity securities had unrealized losses without an allowance for credit losses at March 31, 2020 and December 31, 2019, respectively. The Company does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. The Company believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in interest rates and other market conditions, and therefore the unrealized loss is recorded in accumulated other comprehensive income.

Reviews of the values of fixed maturity securities are inherently uncertain and the value of the investment may not fully recover, or may decline in future periods resulting in a realized loss. The Company recorded $482 thousand and $0 other-than-temporary impairment charges related to fixed maturity securities for the three-month periods ended March 31, 2020 and 2019, respectively. Expenses related to other-than-temporary impairments are recorded in net realized investment (losses) gains in the Consolidated Statements of Operations when recognized.

Investments in Equity Securities

The cost and estimated fair value of equity securities are as follows:



As of March 31, 2020 (in thousands)	Cost		Estimated Fair Value
Equity securities, at fair value:
Common stocks	$	34,903	$	47,983
Total	$	34,903	$	47,983



As of December 31, 2019 (in thousands)	Cost		Estimated Fair Value
Equity securities, at fair value:
Common stocks	$	33,570	$	61,108
Total	$	33,570	$	61,108

Unrealized holding gains and losses are reported in the Consolidated Statements of Operations as changes in the estimated fair value of equity security investments.

Net Realized Investment (Losses) Gains

Gross realized gains and losses on sales of investments for the three-month periods ended March 31 are summarized as follows:



(in thousands)	2020			2019
Gross realized gains from securities:
Corporate debt securities	$	30		$	—
Common stocks	747			831
Total	$	777		$	831
Gross realized losses from securities:
Common stocks	$	(722	)	$	(41	)
Other-than-temporary impairment of securities	(482		)	—
Total	$	(1,204	)	$	(41	)
Net realized (losses) gains from securities	$	(427	)	$	790
Net realized gains on other investments:
Gains on other investments	$	20		$	—
Net loss on other assets and investments	(5		)	—
Total	$	15		$	—
Net realized investment (losses) gains	$	(412	)	$	790

Realized gains and losses are determined on the specific identification method.

Variable Interest Entities

The Company holds investments in variable interest entities ("VIEs") that are not consolidated in the Company's financial statements as the Company is not the primary beneficiary. These entities are considered VIEs as the equity investors at risk, including the Company, do not have the power over the activities that most significantly impact the economic performance of the entities; this power resides with a third-party general partner or managing member that cannot be removed except for cause. The following table sets forth details about the Company's variable interest investments in VIEs, which are structured either as limited partnerships ("LPs") or limited liability companies ("LLCs"), as of March 31, 2020:



(in thousands)	Balance Sheet Classification	Carrying Value		Estimated Fair Value		Maximum Potential Loss (a)
Tax credit LPs	Other investments	$	223	$	223	$	1,768
Real estate LLCs or LPs	Other investments	5,390		6,231		6,675
Small business investment LPs	Other investments	6,516		6,311		8,955
Total		$	12,129	$	12,765	$	17,398



(a)		Maximum potential loss is calculated as the total investment in the LLC or LP, including any capital commitments that may have not yet been called. The Company is not exposed to any loss beyond the total commitment of its investment.

Valuation of Financial Assets

The FASB has established a valuation hierarchy for disclosure of the inputs used to measure estimated fair value of financial assets and liabilities, such as securities. This hierarchy categorizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.

A financial instrument’s classification within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement – consequently, if there are multiple significant valuation inputs that are categorized in different levels of the hierarchy, the instrument’s hierarchy level is the lowest level (with Level 3 being the lowest level) within which any significant input falls.

The Level 1 category includes equity securities and U.S. Treasury securities that are measured at estimated fair value using quoted active market prices.

The Level 2 category includes fixed maturity securities such as corporate debt securities, U.S. government obligations, and obligations of U.S. states, territories, and political subdivisions. Estimated fair value is principally based on market values obtained from a third-party pricing service. Factors that are used in determining estimated fair market value include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. The Company receives one quote per security from a third-party pricing service, although as discussed below, the Company does consult other pricing resources when confirming that the prices it obtains reflect the fair values of the instruments in accordance with Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures. Generally, quotes obtained from the pricing service for instruments classified as Level 2 are not adjusted and are not binding. As of March 31, 2020 and December 31, 2019, the Company did not adjust any Level 2 fair values.

A number of the Company’s investment grade corporate debt securities are frequently traded in active markets, and trading prices are consequently available for these securities. However, these securities are classified as Level 2 because the pricing service from which the Company has obtained estimated fair values for these instruments uses valuation models that use observable market inputs in addition to trading prices. Substantially all of the input assumptions used in the service’s model are observable in the marketplace or can be derived or supported by observable market data.

In the measurement of the estimated fair value of certain financial instruments, other valuation techniques were utilized if quoted market prices were not available. These derived fair value estimates are significantly affected by the assumptions used. Additionally, ASC 820 excludes from its scope certain financial instruments, including those related to insurance contracts, pension and other postretirement benefits, and equity method investments.

In estimating the fair value of the financial instruments presented, the Company used the following methods and assumptions:

Cash and cash equivalents

The carrying amount for cash and cash equivalents is a reasonable estimate of fair value due to the short-term maturity of these investments.

Measurement alternative equity investments

The measurement alternative method requires investments without readily determinable fair values to be recorded at cost, less impairments, and plus or minus any changes resulting from observable price changes. The Company monitors any events or changes in circumstances that may have had a significant adverse effect on the fair value of these investments and makes any necessary adjustments.

Accrued interest and dividends

The carrying amount for accrued interest and dividends is a reasonable estimate of fair value due to the short-term maturity of these assets.

The following table presents, by level, fixed maturity securities carried at estimated fair value as of March 31, 2020 and December 31, 2019:



As of March 31, 2020 (in thousands)	Level 1		Level 2		Level 3		Total
Fixed maturity securities:
Obligations of U.S. states, territories and political subdivisions*	$	24,461	$	72,601	$	—	$	97,062
Corporate debt securities*	—		4,359		—		4,359
Total	$	24,461	$	76,960	$	—	$	101,421



As of December 31, 2019 (in thousands)	Level 1		Level 2		Level 3		Total
Fixed maturity securities:
Obligations of U.S. states, territories and political subdivisions*	$	24,160	$	74,431	$	—	$	98,591
Corporate debt securities*	—		6,047		—		6,047
Total	$	24,160	$	80,478	$	—	$	104,638

*Denotes fair market value obtained from pricing services.

The following table presents, by level, estimated fair values of equity investments and other financial instruments as of March 31, 2020 and December 31, 2019:



As of March 31, 2020 (in thousands)	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	25,324	$	—	$	—	$	25,324
Accrued interest and dividends	1,243		—		—		1,243
Equity securities, at fair value:
Common stocks	47,983		—		—		47,983
Short-term investments:
Money market funds and certificates of deposit	15,641		—		—		15,641
Other investments:
Equity investments in unconsolidated affiliates, equity method	—		—		6,080		6,080
Equity investments in unconsolidated affiliates, measurement alternative	—		—		8,149		8,149
Total	$	90,191	$	—	$	14,229	$	104,420



As of December 31, 2019 (in thousands)	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	25,949	$	—	$	—	$	25,949
Accrued interest and dividends	1,033		—		—		1,033
Equity securities, at fair value:
Common stocks	61,108		—		—		61,108
Short-term investments:
Money market funds and certificates of deposit	13,134		—		—		13,134
Other investments:
Equity investments in unconsolidated affiliates, equity method	—		—		6,083		6,083
Equity investments in unconsolidated affiliates, measurement alternative	—		—		7,899		7,899
Total	$	101,224	$	—	$	13,982	$	115,206

The Company did not hold any Level 3 category debt or marketable equity investment securities as of March 31, 2020 or December 31, 2019.

There were no transfers into or out of Levels 1, 2 or 3 during the periods presented.

To help ensure that estimated fair value determinations are consistent with ASC 820, prices from our pricing services go through multiple review processes to ensure appropriate pricing. Pricing procedures and inputs used to price each security include, but are not limited to, the following: unadjusted quoted market prices for identical securities such as stock market closing prices; non-binding quoted prices for identical securities in markets that are not active; interest rates; yield curves observable at commonly quoted intervals; volatility; prepayment speeds; loss severity; credit risks; and default rates. The Company reviews the procedures and inputs used by its pricing services, and verifies a sample of the services’ quotes by comparing them to values obtained from other pricing resources. In the event the Company disagrees with a price provided by its pricing services, the respective service reevaluates the price to corroborate the market information and then reviews inputs to the evaluation in light of potentially new market data. The Company believes that these processes and inputs result in appropriate classifications and estimated fair values consistent with ASC 820.

Certain equity investments under the measurement alternative are measured at estimated fair value on a non-recurring basis and are reviewed for impairment quarterly. If any such investment is determined to be other-than-temporarily impaired, an impairment charge is recorded against such investment and reflected in the Consolidated Statements of Operations. There were no impairments of such investments made during the three-month period ended March 31, 2020 or the twelve-month period ended December 31, 2019. The following table presents a rollforward of equity investments under the measurement alternative as of March 31, 2020 and December 31, 2019:



(in thousands)	Balance, January 1, 2020		Amounts Impaired		Observable Changes		Purchases and Additional Commitments Paid		Sales, Returns of Capital and Other Reductions		Balance, March 31, 2020
Other investments:
Equity investments in unconsolidated affiliates, measurement alternative	$	7,899	$	—	$	—	$	250	$	—	$	8,149
Total	$	7,899	$	—	$	—	$	250	$	—	$	8,149



(in thousands)	Balance, January 1, 2019		Amounts Impaired		Observable Changes		Purchases and Additional Commitments Paid		Sales, Returns of Capital and Other Reductions			Balance, December 31, 2019
Other investments:
Equity investments in unconsolidated affiliates, measurement alternative	$	6,589	$	—	$	—	$	2,241	$	(931	)	$	7,899
Total	$	6,589	$	—	$	—	$	2,241	$	(931	)	$	7,899