XML 26 R15.htm IDEA: XBRL DOCUMENT

Note 6 - Investments

9 Months Ended

Sep. 30, 2024

NOTE 6 INVESTMENTS

The amortized cost, gross unrealized gains and losses included in accumulated other comprehensive loss, and estimated fair value of the Company's available-for-sale investments at September 30, 2024 and December 31, 2023 are summarized in the tables shown below:

(in thousands)	September 30, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturities:
U.S. government, government agencies and authorities	$	12,872	$	77	$	182	$	12,767
States, municipalities and political subdivisions		2,843		9		62		2,790
Mortgage-backed		10,010		59		322		9,747
Asset-backed		1,328		8		22		1,314
Corporate		10,582		46		390		10,238
Total fixed maturities	$	37,635	$	199	$	978	$	36,856

(in thousands)	December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturities:
U.S. government, government agencies and authorities	$	13,384	$	8	$	395	$	12,997
States, municipalities and political subdivisions		2,885		3		105		2,783
Mortgage-backed		9,724		23		494		9,253
Asset-backed		1,254		1		45		1,210
Corporate		10,860		18		648		10,230
Total fixed maturities	$	38,107	$	53	$	1,687	$	36,473

The table below summarizes the Company's fixed maturities at September 30, 2024 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 maturity of these obligations.

(in thousands)	September 30, 2024
	Amortized Cost		Estimated Fair Value
Due in one year or less	$	7,166	$	7,110
Due after one year through five years		24,885		24,442
Due after five years through ten years		1,458		1,440
Due after ten years		4,126		3,864
Total	$	37,635	$	36,856

The following tables highlight the aggregate unrealized loss position, by security type, of available-for-sale investments in unrealized loss positions where no credit loss allowance had been established as of September 30, 2024 and December 31, 2023. The tables segregate the holdings based on the period of time the investments have been continuously held in unrealized loss positions.

(in thousands)	September 30, 2024
	Less than 12 Months				Greater than 12 Months				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Fixed maturities:
U.S. government, government agencies and authorities	$	2,373	$	24	$	5,467	$	158	$	7,840	$	182
States, municipalities and political subdivisions		149		2		1,596		60		1,745		62
Mortgage-backed		857		4		4,891		318		5,748		322
Asset-backed		—		—		840		22		840		22
Corporate		350		1		7,649		389		7,999		390
Total fixed maturities	$	3,729	$	31	$	20,443	$	947	$	24,172	$	978

(in thousands)	December 31, 2023
	Less than 12 Months				Greater than 12 Months				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Fixed maturities:
U.S. government, government agencies and authorities	$	3,237	$	46	$	7,940	$	349	$	11,177	$	395
States, municipalities and political subdivisions		—		—		1,705		105		1,705		105
Mortgage-backed		737		11		6,067		483		6,804		494
Asset-backed		—		—		1,050		45		1,050		45
Corporate		937		11		8,013		637		8,950		648
Total fixed maturities	$	4,911	$	68	$	24,775	$	1,619	$	29,686	$	1,687

At September 30, 2024 and December 31, 2023, there are approximately 155 and 181 individual available-for-sale investments that were in unrealized loss positions, for which an allowance for credit losses has not been recorded. The Company did not have the intent to sell these investments, and it was not more likely than not that the Company would be required to sell these investments before recovery of its amortized cost. The Company evaluated these investments for credit losses at September 30, 2024 and December 31, 2023. The Company considers many factors in evaluating whether the unrealized losses were credit related including, but not limited to, the extent to which the fair value has been less than amortized cost, conditions related to the security, industry, or geographic area, payment structure of the investment and the likelihood of the issuer’s ability to make contractual cashflows, defaults or other collectability concerns related to the issuer, changes in the ratings assigned by a rating agency, and other credit enhancements that affect the investment’s expected performance. The Company determined that the unrealized losses on the fixed maturity investments were due to non-credit related factors at September 30, 2024 and December 31, 2023.

The Company did not record any write-downs for impairment related to available-for-sale fixed maturity investments for the three and nine months ended September 30, 2024 and September 30, 2023.

The Company does not have any exposure to subprime mortgage-backed investments.

Limited liability investments include investments in limited liability companies and limited partnerships. The Company's interests in these investments are not deemed minor and, therefore, are accounted for under the equity method of accounting. The most recently available financial statements are used in applying the equity method. The difference between the end of the reporting period of the limited liability entities and that of the Company is no more than three months. As of September 30, 2024 and December 31, 2023, the carrying value of limited liability investments totaled $0.7 million and $0.8 million, respectively. The Company recorded no impairments related to limited liability investments during the three and nine months ended September 30, 2024 ($0.1 million during the three and nine months ended September 30, 2023), which are included in impairment losses on investments in the consolidated statements of operations. Income or loss from limited liability investments is recognized based on the Company's share of the earnings of the limited liability entities and is included in net investment income in the consolidated statements of operations. At September 30, 2024, the Company had no unfunded commitments related to limited liability investments.

Limited liability investment, at fair value represents the underlying investments of the Company’s consolidated entity Argo Holdings Fund I, LLC ("Argo Holdings"). As of September 30, 2024 and December 31, 2023, the carrying value of the Company's limited liability investment, at fair value was $2.7 million and $3.5 million, respectively. At September 30, 2024, the Company had no unfunded commitments to fund limited liability investments, at fair value.

Prior to the second quarter of 2023, the Company's limited liability investments, at fair value included the underlying investments of the Company's consolidated entity, Net Lease Investment Grade Portfolio LLC ("Net Lease"). The Company consolidated the financial statements of Net Lease on a three-month lag. Net Lease owned investments in limited liability companies that held investment properties. During the fourth quarter of 2022, one of Net Lease's limited liability companies refinanced their existing debt. Debt proceeds of $5.2 million were distributed to Net Lease, which decreased Net Lease's investment in the limited liability company, which the Company recorded during the first quarter of 2023. During the first quarter of 2023, Net Lease sold its final investment property for $15.8 million. Net Lease received net proceeds of $8.1 million after the repayment of debt at the limited liability company and transaction expenses. Given the three-month reporting lag discussed above, the Company recorded this transaction in its second quarter 2023 financial statements. As a result of the sale and subsequent distribution of the net proceeds, the carrying value of Net Lease's investments in limited liability companies was zero at June 30, 2023.

Investments in private companies consist of convertible preferred stocks and notes in privately owned companies and investments in limited liability companies in which the Company’s interests are deemed minor. The Company's investments in private companies do not have readily determinable fair values. The Company has elected to record investments in private companies at cost, adjusted for observable price changes and impairments. As of September 30, 2024 and December 31, 2023, the carrying value of the Company's investments in private companies totaled $0.7 million and $0.9 million, respectively. For the three and nine months ended September 30, 2024, the Company did not record any adjustments to the carrying value of its investments in private companies for observable price changes (adjustment of $0.1 million for the three and nine months ended September 30, 2023 to increase the fair value of certain investments in private companies for observable price changes, which is included in net change in unrealized gain on private company investments in the consolidated statements of operations).

The Company performs a quarterly impairment analysis of its investments in private companies. As a result of the analysis performed, the Company did not record any impairments related to investments in private companies for the three and nine months ended September 30, 2024 and September 30, 2023.

Net investment income for the three and nine months ended September 30, 2024 and September 30, 2023 is comprised as follows:

(in thousands)	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
Investment income:
Interest from fixed maturities	$	331		$	264		$	968		$	736
Dividends		11			11			39			85
Income (loss) from limited liability investments		1			(8	)		(161	)		(41	)
Other		98			106			300			728
Gross investment income		441			373			1,146			1,508
Investment expenses		(38	)		(22	)		(109	)		(89	)
Net investment income	$	403		$	351		$	1,037		$	1,419

Net realized gains on investments for the three and nine months ended September 30, 2024 and September 30, 2023 are comprised as follows:

(in thousands)	Three months ended September 30,					Nine months ended September 30,
	2024		2023			2024		2023
Available-for-sale fixed maturities:
Gross realized gains	$	—	$	7		$	—	$	9
Gross realized losses		—		(7	)		—		(7	)
Net realized gains on available-for-sale fixed maturities		—		—			—		2
Limited liability investments		—		—			—		103
Limited liability investments, at fair value		874		191			1,260		407
Investments in private companies		84		15			99		27
Net realized gains	$	958	$	206		$	1,359	$	539

Net gain (loss) on equity investments for the three and nine months ended September 30, 2024 and September 30, 2023 is comprised as follows:

(in thousands)	Three months ended September 30,					Nine months ended September 30,
	2024		2023			2024			2023
Net gains (losses) recognized on equity investments sold during the period	$	—	$	3,322		$	(3	)	$	3,322
Change in net unrealized (losses) gains recognized on equity investments held at end of the period		—		(2,730	)		—			52
Net gain (loss) on equity investments	$	—	$	592		$	(3	)	$	3,374

Prior to the second quarter of 2023, the Company held 400,000 warrants in Limbach Holdings, Inc. ("Limbach"). During the first quarter of 2023, the underlying common stock price of Limbach increased, resulting in an increase in the fair value of the warrants held at March 31, 2023. During the second quarter of 2023, the Company completed a cashless exercise of its Limbach warrants and received 110,036 shares of Limbach common stock. During the third quarter of 2023, the Company sold all of its Limbach common shares. The Company recorded total gains related to Limbach of $3.3 million during the nine months ended September 30, 2023.