Investments

12 Months Ended

Dec. 31, 2022

Investments, Debt and Equity Securities [Abstract]

The Company invests primarily in fixed maturity securities, which totaled 86.5% of total cash and invested assets at December 31, 2022.


Carrying Value as of December 31, (In thousands, except for %)	2022		%		2021		%
Cash and invested assets
Fixed maturity securities	$	1,179,619	86.5	%	$	1,470,617	89.0	%
Equity securities	11,590		0.8		14,844		0.9
Policy loans	78,773		5.8		80,307		4.9
Other long-term investments	69,558		5.1		57,399		3.5
Short-term investments	1,241		0.1		—		—
Cash and cash equivalents	22,973		1.7		27,294		1.7
Total cash and invested assets	$	1,363,754	100.0	%	$	1,650,461	100.0	%

The following table represents the amortized cost, gross unrealized gains and losses and fair value of fixed maturity securities as of December 31, 2022 and 2021.


December 31, 2022 (In thousands)	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Fixed maturity securities:
Available-for-sale:
U.S. Treasury securities	$	9,425	152	9	9,568
U.S. Government-sponsored enterprises	3,434		277	1	3,710
States and political subdivisions	344,208		1,114	37,964	307,358
Corporate
Financial	243,758		512	42,383	201,887
Consumer	247,824		758	47,138	201,444
Utilities	115,738		39	23,790	91,987
Energy	76,065		—	11,395	64,670
All Other	184,022		683	29,048	155,657
Commercial mortgage-backed	171		—	2	169
Residential mortgage-backed	110,582		9	10,765	99,826
Asset-backed	45,991		18	2,767	43,242
Foreign governments	100		1	—	101
Total fixed maturity securities	$	1,381,318	3,563	205,262	1,179,619


December 31, 2021 (In thousands)	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Fixed maturity securities:
Available-for-sale:
U.S. Treasury securities	$	9,515	1,097	1	10,611
U.S. Government-sponsored enterprises	3,463		996	—	4,459
States and political subdivisions	356,594		28,056	692	383,958
Corporate
Financial	213,652		22,477	172	235,957
Consumer	219,223		23,658	900	241,981
Utilities	105,738		7,358	801	112,295
Energy	76,989		7,334	68	84,255
All Other	196,403		22,497	380	218,520

Residential mortgage-backed	117,755		16,046	6	133,795
Asset-backed	44,322		368	14	44,676
Foreign governments	101		9	—	110
Total fixed maturity securities	$	1,343,755	129,896	3,034	1,470,617

Most of the Company's equity securities are diversified stock and bond mutual funds.


Fair Value as of December 31, (In thousands)	2022		2021
Equity securities:
Stock mutual funds	$	2,615	3,571
Bond mutual funds	4,337		5,060
Common stock	857		990
Non-redeemable preferred stock	8		161
Non-redeemable preferred stock fund	3,773		5,062
Total equity securities	$	11,590	14,844

VALUATION OF INVESTMENTS

AFS fixed maturity securities are reported in the consolidated financial statements at fair value. Equity securities are measured at fair value with the change in fair value recorded through net income (loss). The Company recognized net realized losses of $2.7 million and net realized gains of $0.4 million on equity securities held for the years ended December 31, 2022 and 2021.

The Company monitors all AFS fixed maturity securities on an on-going basis relative to changes in credit ratings, market prices, earnings trends and financial performance, in addition to specific region or industry reviews. The Company evaluates whether a credit impairment exists for fixed maturity securities by considering primarily the following factors: (a) changes in the financial condition of the security's underlying collateral; (b) whether the issuer is current on contractually obligated interest and principal payments; (c) changes in the financial condition, credit rating and near-term prospects of the issuer; and (d) the payment structure of the security. The Company's best estimate of expected future cash flows used to determine the credit loss amount is a quantitative and qualitative process. Quantitative review includes information received from third-party sources such as financial statements, pricing and rating changes, liquidity and other statistical information. Qualitative factors include judgments related to business strategies, economic impacts on the issuer, overall judgment related to estimates and industry factors as well as the Company's intent to sell the security, or if it is more likely than not that the Company would be required to sell a security before recovery of its amortized cost.

The Company's best estimate of future cash flows involves assumptions including, but not limited to, various performance indicators, such as historical and projected default and recovery rates, credit ratings, and current delinquency rates. These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries, which may include estimating the underlying collateral value. In addition, projections of expected future fixed maturity security cash flows may change based upon new information regarding the performance of the issuer. Any credit losses are presented as an allowance rather than as a write-down on AFS fixed maturity securities management does not intend to sell or believes that it is more likely than not we will be required to sell.

The Company recorded no credit valuation losses on fixed maturity securities for the years ended December 31, 2022 and 2021.

For fixed maturity security investments that have unrealized losses as of December 31, 2022 and 2021, the gross unrealized losses that have been in a continuous unrealized loss position for less than 12 months, gross unrealized losses that have been in a continuous unrealized loss position for 12 months or longer and fair value are as follows.


December 31, 2022	Less than 12 months				Greater than 12 months			Total
(In thousands, except for # of securities)	Fair Value		Unrealized Losses	# of Securities	Fair Value	Unrealized Losses	# of Securities	Fair Value	Unrealized Losses	# of Securities
Fixed maturity securities:
Available-for-sale:
U.S. Treasury securities	$	—	—	—	64	9	2	64	9	2
U.S. Government-sponsored enterprises	223		1	1	—	—	—	223	1	1
States and political subdivisions	189,084		30,866	242	14,184	7,098	14	203,268	37,964	256
Corporate
Financial	182,447		39,122	237	6,144	3,261	16	188,591	42,383	253
Consumer	164,224		34,823	220	23,417	12,315	30	187,641	47,138	250
Utilities	73,483		15,959	152	16,413	7,831	18	89,896	23,790	170
Energy	59,053		9,601	75	5,617	1,794	8	64,670	11,395	83
All Other	140,955		25,337	171	7,910	3,711	15	148,865	29,048	186
Commercial mortgage-backed	168		2	2	—	—	—	168	2	2
Residential mortgage-backed	98,758		10,514	95	759	251	5	99,517	10,765	100
Asset-backed	37,067		2,485	41	4,264	282	9	41,331	2,767	50
Total fixed maturity securities	$	945,462	168,710	1,236	78,772	36,552	117	1,024,234	205,262	1,353


December 31, 2021	Less than 12 months				Greater than 12 months			Total
(In thousands, except for # of securities)	Fair Value		Unrealized Losses	# of Securities	Fair Value	Unrealized Losses	# of Securities	Fair Value	Unrealized Losses	# of Securities
Fixed maturity securities:
Available-for-sale:
U.S. Treasury securities	$	72	1	2	—	—	—	72	1	2
States and political subdivisions	21,715		692	15	—	—	—	21,715	692	15
Corporate
Financial	8,059		86	15	1,227	86	1	9,286	172	16
Consumer	29,494		777	28	2,419	123	1	31,913	900	29
Utilities	19,072		401	14	4,523	400	4	23,595	801	18
Energy	7,381		68	8	—	—	—	7,381	68	8
All Other	14,312		380	16	—	—	—	14,312	380	16

Residential mortgage-backed	1,084		6	6	—	—	—	1,084	6	6
Asset-backed	9,078		12	11	663	2	1	9,741	14	12
Total fixed maturity securities	$	110,267	2,423	115	8,832	611	7	119,099	3,034	122

In each category of our fixed maturity securities described below, we do not intend to sell our investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. At December 31, 2022 and 2021, 98.7% and 98.0%, respectively, of the fair value of our fixed maturity

securities portfolio was rated investment grade. While the losses are currently unrealized, we continue to monitor all fixed maturity securities on an on-going basis as future information may become available which could result in an allowance being recorded.

The unrealized losses on fixed maturity securities detailed in the previous tables are due to noncredit-related factors, including widening credit spreads and rising interest rates since purchase, which have little bearing on the recoverability of our investments, hence they are not recognized as credit losses. The fair value is expected to recover as the securities approach maturity or if market yields for such investments decline.

The amortized cost and fair value of fixed maturity securities at December 31, 2022 by contractual maturity are shown in the table below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date have been reflected based upon final stated maturity.


(In thousands)	Amortized Cost		Fair Value
Fixed maturity securities:
Due in one year or less	$	22,196	22,201
Due after one year through five years	115,395		113,416
Due after five years through ten years	247,611		235,011
Due after ten years	996,116		808,991
Total fixed maturity securities	$	1,381,318	1,179,619

There were no investments that were non-income producing for the years ended December 31, 2022 or 2021.

Major categories of net investment income are summarized as follows:


Years ended December 31, (In thousands)	2022		2021
Gross investment income:
Fixed maturity securities	$	58,400	55,579
Equity securities	650		1,024
Policy loans	6,189		6,420
Other long-term investments	2,535		809
Other	246		54
Total investment income	68,020		63,886
Investment expenses	(2,594)		(2,391)
Net investment income	$	65,426	61,495

The Company uses the specific identification method of the individual security to determine the cost basis used in the calculation of realized gains and losses related to security sales.


Years ended December 31, (In thousands)	2022		2021
Fixed maturity securities, available-for-sale:
Proceeds	$	33,914	8,238
Gross realized gains	120		189
Gross realized losses	112		1

Equity securities:
Proceeds	$	500	7,383
Gross realized gains	44		—
Gross realized losses	—		149

We sold 20 and 28 fixed maturity securities from our available-for-sale portfolio in 2022 and 2021, respectively. There was two sales of equity securities in 2022 and one sale in 2021.

Investment related gains (losses) are as follows:


Years ended December 31, (In thousands)	2022		2021
Investment related gains (losses):
Sales, calls and maturities:
Fixed maturity securities	$	(104)	243
Equity securities	62		(152)
Real estate	—		981
Property and equipment	—		13
Other long-term investments	2,320		1,892
Realized investment gains (losses)	2,278		2,977
Change in fair value of equity securities	(2,665)		376
Change in fair value of limited partnerships	(9,667)		7,452
Change in credit loss allowance	(237)		186




Net investment related gains (losses)	$	(10,291)	10,991

The Company sold its former training facility near Austin, Texas during 2021 for a gross sale price of $3.8 million, resulting in a gain on the sale of $1.0 million. The facility was owned by Citizens and was held in Other Non-Insurance Enterprises.