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Investments
 12 Months Ended
Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]  
Investments
4. Investments

Fixed Maturity and Equity Securities Available-for-Sale

The following tables provide information relating to investments in fixed maturity and equity securities (in thousands):
December 31, 2016
 
Amortized
 
Unrealized
 
Unrealized
 
Fair
 
Cost
 
Gains
 
Losses
 
Value
Fixed maturity securities
 
 
 
 
 
 
 
 
U.S. Government and government agencies
 
$
15,910

 
$
135

 
$
(95
)
 
$
15,950

States, municipalities and political subdivisions
 
374,527

 
4,408

 
(3,858
)
 
375,077

Foreign government
 
6,380

 
—

 
(402
)
 
5,978

Residential mortgage-backed securities
 
136,126

 
2,634

 
(564
)
 
138,196

Commercial mortgage-backed securities
 
48,715

 
427

 
(89
)
 
49,053

Asset-backed securities
 
76,303

 
1,934

 
(572
)
 
77,665

Corporate and other
 
600,458

 
23,635

 
(7,054
)
 
617,039

Total fixed maturity securities
 
$
1,258,419

 
$
33,173

 
$
(12,634
)
 
$
1,278,958

Equity securities
 
 
 
 
 
 
 
 
Common stocks
 
$
16,236

 
$
—

 
$
(1,371
)
 
$
14,865

Perpetual preferred stocks
 
37,041

 
191

 
(578
)
 
36,654

Total equity securities
 
$
53,277

 
$
191

 
$
(1,949
)
 
$
51,519

December 31, 2015
 
Amortized
 
Unrealized
 
Unrealized
 
Fair
 
Cost
 
Gains
 
Losses
 
Value
Fixed maturity securities
 
 
 
 
 
 
 
 
U.S. Government and government agencies
 
$
17,131

 
$
1

 
$
(49
)
 
$
17,083

States, municipalities and political subdivisions
 
387,427

 
60

 
(1,227
)
 
386,260

Foreign government
 
6,426

 
3

 
—

 
6,429

Residential mortgage-backed securities
 
166,324

 
579

 
(588
)
 
166,315

Commercial mortgage-backed securities
 
74,898

 
233

 
(96
)
 
75,035

Asset-backed securities
 
34,396

 
106

 
(51
)
 
34,451

Corporate and other
 
553,487

 
318

 
(7,537
)
 
546,268

Total fixed maturity securities
 
$
1,240,089

 
$
1,300

 
$
(9,548
)
 
$
1,231,841

Equity securities
 
 
 
 
 
 
 
 
Common stocks
 
$
19,935

 
$
1

 
$
(1,311
)
 
$
18,625

Perpetual preferred stocks
 
30,901

 
162

 
(6
)
 
31,057

Total equity securities
 
$
50,836

 
$
163

 
$
(1,317
)
 
$
49,682



The Company has investments in mortgage-backed securities ("MBS") that contain embedded derivatives (primarily interest-only MBS) that do not qualify for hedge accounting. The Company recorded the change in the fair value of these securities within Net realized losses on investments. These investments had a fair value of $15.2 million and $21.0 million as of December 31, 2016 and December 31, 2015, respectively. The change in fair value related to these securities resulted in a net loss of approximately $1.2 million for the year ended December 31, 2016 and $0.3 million for the year ended December 31, 2015.

Maturities of Fixed Maturity Securities Available-for-Sale

The amortized cost and fair value of fixed maturity securities available-for-sale as of December 31, 2016 are shown by contractual maturity in the table below (in thousands). Actual maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Asset and mortgage-backed securities are shown separately in the table below, as they are not due at a single maturity date:
 
 
Amortized
 
Fair
 
 
Cost
 
Value
Corporate, Municipal, U.S. Government and Other securities
 
 
 
 
Due in one year or less
 
$
48,194

 
$
44,237

Due after one year through five years
 
113,158

 
113,987

Due after five years through ten years
 
137,763

 
139,539

Due after ten years
 
698,160

 
716,281

Subtotal
 
997,275

 
1,014,044

Mortgage-backed securities
 
184,841

 
187,249

Asset-backed securities
 
76,303

 
77,665

Total
 
$
1,258,419

 
$
1,278,958



Corporate Fixed Maturity Securities

The tables below show the major industry types of the Company’s corporate and other fixed maturity securities (in thousands):
 
 
December 31, 2016
 
December 31, 2015
 
 
Amortized
 
Fair
 
% of
 
Amortized
 
Fair
 
% of
 
 
Cost
 
Value
 
Total
 
Cost
 
Value
 
Total
Finance, insurance, and real estate
 
$
214,911

 
$
211,834

 
34.3
%
 
$
223,144

 
$
217,377

 
39.8
%
Transportation, communication and other services
 
180,647

 
189,163

 
30.7
%
 
156,022

 
155,175

 
28.4
%
Manufacturing
 
112,644

 
118,440

 
19.2
%
 
95,138

 
94,792

 
17.4
%
Other
 
92,256

 
97,602

 
15.8
%
 
79,183

 
78,924

 
14.4
%
Total
 
$
600,458

 
$
617,039

 
100.0
%
 
$
553,487

 
$
546,268

 
100.0
%


Other-Than-Temporary Impairments - Fixed Maturity and Equity Securities

A portion of certain other-than-temporary impairment (“OTTI”) losses on fixed maturity securities is recognized in AOCI. For these securities the net amount recognized in the consolidated statements of operations (“credit loss impairments”) represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. Any remaining difference between the fair value and amortized cost is recognized in AOCI. The Company recorded impairments related to two fixed maturity securities for the year ended December 31, 2016. These were a $2.5 million impairment within Other income (expense), net and a $0.2 million impairment within Net realized gains on investments. The Company did not record any impairments on fixed maturity or equity securities during the years ended December 31, 2015 and 2014.

Unrealized Losses for Fixed Maturity and Equity Securities Available-for-Sale

The following table presents the total unrealized losses for the 269 and 528 fixed maturity and equity securities held by the Company as of December 31, 2016 and December 31, 2015, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (in thousands):
 
 
December 31, 2016
 
December 31, 2015
 
 
Unrealized
 
% of
 
Unrealized
 
% of
 
 
Losses
 
Total
 
Losses
 
Total
Fixed maturity and equity securities
 
 
 
 
 
 
 
 
Less than 20%
 
$
(10,069
)
 
69.0
%
 
$
(5,667
)
 
52.2
%
20% or more for less than six months
 
(482
)
 
3.3
%
 
—

 
—
%
20% or more for six months or greater
 
(4,032
)
 
27.6
%
 
(5,198
)
 
47.8
%
Total
 
$
(14,583
)
 
100.0
%
 
$
(10,865
)
 
100.0
%


The determination of whether unrealized losses are “other-than-temporary” requires judgment based on subjective as well as objective factors. Factors considered and resources used by management include (i) whether the unrealized loss is credit-driven or a result of changes in market interest rates (ii) the extent to which fair value is less than cost basis (iii) cash flow projections received from independent sources (iv) historical operating, balance sheet and cash flow data contained in issuer SEC filings and news releases (v) near-term prospects for improvement in the issuer and/or its industry (vi) third party research and communications with industry specialists (vii) financial models and forecasts (viii) the continuity of dividend payments, maintenance of investment grade ratings and hybrid nature of certain investments (ix) discussions with issuer management, and (x) ability and intent to hold the investment for a period of time sufficient to allow for anticipated recovery in fair value.

The Company analyzes its MBS for other-than-temporary impairment each quarter based upon expected future cash flows. Management estimates expected future cash flows based upon its knowledge of the MBS market, cash flow projections (which reflect loan-to-collateral values, subordination, vintage and geographic concentration) received from independent sources, implied cash flows inherent in security ratings and analysis of historical payment data.

The Company believes it will recover its cost basis in the non-impaired securities with unrealized losses and that the Company has the ability to hold the securities until they recover in value. The Company neither intends to sell nor does it expect to be required to sell the securities with unrealized losses as of December 31, 2016 and December 31, 2015, respectively. However, unforeseen facts and circumstances may cause the Company to sell fixed maturity and equity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality and liquidity guidelines.

The following tables present the estimated fair values and gross unrealized losses for the 269 and 528 fixed maturity and equity securities held by the Company that have estimated fair values below amortized cost as of December 31, 2016 and December 31, 2015, respectively. The Company does not have any OTTI losses reported in AOCI. These investments are presented by investment category and the length of time the related fair value has remained below amortized cost (in thousands):
December 31, 2016
 
Less than 12 months
 
12 months of greater
 
Total
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Value
 
Losses
 
Value
 
Losses
 
Value
 
Losses
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and government agencies
 
$
4,392

 
$
(95
)
 
$
—

 
$
—

 
$
4,392

 
$
(95
)
States, municipalities and political subdivisions
 
207,740

 
(3,858
)
 
—

 
—

 
207,740

 
(3,858
)
Foreign government
 
5,978

 
(402
)
 
—

 
—

 
5,978

 
(402
)
Residential mortgage-backed securities
 
54,385

 
(564
)
 
—

 
—

 
54,385

 
(564
)
Commercial mortgage-backed securities
 
13,159

 
(89
)
 
—

 
—

 
13,159

 
(89
)
Asset-backed securities
 
12,443

 
(572
)
 
—

 
—

 
12,443

 
(572
)
Corporate and other
 
147,653

 
(3,022
)
 
3,579

 
(4,032
)
 
151,232

 
(7,054
)
Total fixed maturity securities
 
$
445,750

 
$
(8,602
)
 
$
3,579

 
$
(4,032
)
 
$
449,329

 
$
(12,634
)
Equity securities
 
 
 
 
 
 
 
 
 
 
 
 
Common stocks
 
$
14,585

 
$
(1,371
)
 
$
—

 
$
—

 
$
14,585

 
$
(1,371
)
Perpetual preferred stocks
 
20,464

 
(578
)
 
—

 
—

 
20,464

 
(578
)
Total equity securities
 
$
35,049

 
$
(1,949
)
 
$
—

 
$
—

 
$
35,049

 
$
(1,949
)
December 31, 2015
 
Less than 12 months
 
12 months of greater
 
Total
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Value
 
Losses
 
Value
 
Losses
 
Value
 
Losses
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and government agencies
 
$
15,409

 
$
(49
)
 
$
—

 
$
—

 
$
15,409

 
$
(49
)
States, municipalities and political subdivisions
 
294,105

 
(1,227
)
 
—

 
—

 
294,105

 
(1,227
)
Residential mortgage-backed securities
 
77,695

 
(588
)
 
—

 
—

 
77,695

 
(588
)
Commercial mortgage-backed securities
 
44,618

 
(96
)
 
—

 
—

 
44,618

 
(96
)
Asset-backed securities
 
22,550

 
(51
)
 
—

 
—

 
22,550

 
(51
)
Corporate and other
 
466,293

 
(7,537
)
 
—

 
—

 
466,293

 
(7,537
)
Total fixed maturity securities
 
$
920,670

 
$
(9,548
)
 
$
—

 
$
—

 
$
920,670

 
$
(9,548
)
Equity securities
 
 
 
 
 
 
 
 
 
 
 
 
Common stocks
 
$
13,657

 
$
(1,311
)
 
$
—

 
$
—

 
$
13,657

 
$
(1,311
)
Perpetual preferred stocks
 
7,378

 
(6
)
 
—

 
—

 
7,378

 
(6
)
Total equity securities
 
$
21,035

 
$
(1,317
)
 
$
—

 
$
—

 
$
21,035

 
$
(1,317
)


At December 31, 2016, investment grade fixed maturity securities (as determined by nationally recognized rating agencies) represented approximately 54.5% of the gross unrealized loss and 83.0% of the fair value. At December 31, 2015, investment grade fixed maturity securities represented approximately 33.2% of the gross unrealized loss and 88.3% of the fair value.

Certain risks are inherent in connection with fixed maturity securities, including loss upon default, price volatility in reaction to changes in interest rates, and general market factors and risks associated with reinvestment of proceeds due to prepayments or redemptions in a period of declining interest rates.

Other Invested Assets

Carrying values of other invested assets accounted for under cost and equity method are as follows (in thousands):
 
 
December 31, 2016
 
December 31, 2015
 
 
Cost Method
 
Equity Method
 
Cost Method
 
Equity Method
Common Equity
 
$
138

 
$
1,047

 
$
249

 
$
6,475

Preferred Equity
 
2,484

 
9,971

 
1,655

 
7,522

Warrants
 
3,097

 
—

 
3,880

 
—

Limited Partnerships
 
—

 
1,116

 
—

 
1,171

Joint Ventures
 
—

 
40,697

 
—

 
27,324

Total
 
$
5,719

 
$
52,831

 
$
5,784

 
$
42,492


Additionally, other invested assets include common stock purchase warrants and call options accounted for under ASC 815, "Derivatives and Hedging" ("ASC 815") (in thousands):
December 31, 2016
 
Cost
 
Gains
 
Losses
 
Fair Value
Warrants
 
$
6,332

 
$
180

 
$
(2,919
)
 
$
3,593

Call Options
 
230

 
—

 
(10
)
 
220

Total
 
$
6,562

 
$
180

 
$
(2,929
)
 
$
3,813

December 31, 2015
 
Cost
 
Gains
 
Losses
 
Fair Value
Warrants
 
$
6,383

 
$
428

 
$
(2,600
)
 
$
4,211

Call Options
 
1,680

 
—

 
(1,048
)
 
632

Total
 
$
8,063

 
$
428

 
$
(3,648
)
 
$
4,843



Summarized information for the Company's equity method investments as of and for the years ended December 31, 2016, 2015 and 2014 (in thousands) is as follows (information for two of the investees is reported on a one month lag):
 
Years Ended December 31,
 
 
2016
 
2015
 
2014
Net revenue
 
$
558,180

 
$
502,122

 
$
151,594

Gross profit
 
$
164,853

 
$
103,236

 
$
35,783

Income (loss) from continuing operations
 
$
51,690

 
$
(18,743
)
 
$
5,142

Net income (loss)
 
$
(11,123
)
 
$
(36,873
)
 
$
5,142

 
 
 
 
 
 
 
Current assets
 
$
285,466

 
$
256,372

 
$
269,864

Noncurrent assets
 
$
278,766

 
$
219,434

 
$
149,995

Current liabilities
 
$
184,068

 
$
169,002

 
$
179,552

Noncurrent liabilities
 
$
131,587

 
$
132,934

 
$
18,063



Net Investment Income

The major sources of net investment income were as follows (in thousands):
 
 
Year ended December 31,
 
 
2016
 
2015
Fixed maturity securities, available-for-sale at fair value
 
$
54,685

 
$
964

Equity securities, available-for-sale at fair value
 
2,263

 
93

Mortgage loans
 
491

 
—

Policy loans
 
1,173

 
18

Other invested assets
 
321

 
—

Gross investment income
 
58,933

 
1,075

External investment expense
 
(901
)
 
(44
)
Net investment income
 
$
58,032

 
$
1,031



Net Realized Gains (Losses) on Investments

The major sources of net realized gains (losses) on investments were as follows (in thousands):
 
 
Year ended December 31,
 
 
2016
 
2015
Realized gains on fixed maturity securities
 
$
4,868

 
$
256

Realized losses on fixed maturity securities
 
(2,367
)
 
—

Realized gains on equity securities
 
4,525

 
—

Realized losses on equity securities
 
(352
)
 
—

Net realized gains (losses) on derivative instruments
 
(1,492
)
 
—

Impairment loss
 
(163
)
 
—

Net realized gains (losses)
 
$
5,019

 
$
256