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Investments | 9 Months Ended
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Sep. 30, 2017
Investments [Abstract] |
Investments |
Note 3. | Investments
The following tables set forth the carrying value, gross unrealized gains, gross unrealized losses and cost or amortized cost of the Company’s investments, aggregated by type and industry, as of September 30, 2017 and December 31, 2016.
|  | September 30, 2017 |
|  | Carrying Value |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Cost or Amortized Cost |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |
Bonds: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of U.S. Government agencies and authorities |  | $ | 32,426 |  |  | $ | 189 |  |  | $ | 414 |  |  | $ | 32,651 |
Obligations of states and political subdivisions |  |  | 17,882 |  |  |  | 696 |  |  |  | 54 |  |  |  | 17,240 |
Corporate securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Utilities and telecom |  |  | 20,463 |  |  |  | 1,636 |  |  |  | 76 |  |  |  | 18,903 |
Financial services |  |  | 51,927 |  |  |  | 2,161 |  |  |  | 411 |  |  |  | 50,177 |
Other business – diversified |  |  | 41,339 |  |  |  | 941 |  |  |  | 1,499 |  |  |  | 41,897 |
Other consumer – diversified |  |  | 53,770 |  |  |  | 910 |  |  |  | 1,321 |  |  |  | 54,181 |
Total corporate securities |  |  | 167,499 |  |  |  | 5,648 |  |  |  | 3,307 |  |  |  | 165,158 |
Redeemable preferred stocks: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other consumer – diversified |  |  | 192 |  |  |  | - |  |  |  | - |  |  |  | 192 |
Total redeemable preferred stocks |  |  | 192 |  |  |  | - |  |  |  | - |  |  |  | 192 |
Total fixed maturities |  |  | 217,999 |  |  |  | 6,533 |  |  |  | 3,775 |  |  |  | 215,241 |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common and non-redeemable preferred stocks: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Utilities and telecom |  |  | 1,484 |  |  |  | 520 |  |  |  | - |  |  |  | 964 |
Financial services |  |  | 5,579 |  |  |  | 796 |  |  |  | - |  |  |  | 4,783 |
Other business – diversified |  |  | 275 |  |  |  | 228 |  |  |  | - |  |  |  | 47 |
Other consumer – diversified |  |  | 14,244 |  |  |  | 9,120 |  |  |  | - |  |  |  | 5,124 |
Total equity securities |  |  | 21,582 |  |  |  | 10,664 |  |  |  | - |  |  |  | 10,918 |
Other invested assets |  |  | 9,167 |  |  |  | - |  |  |  | - |  |  |  | 9,167 |
Policy loans |  |  | 2,113 |  |  |  | - |  |  |  | - |  |  |  | 2,113 |
Real estate |  |  | 38 |  |  |  | - |  |  |  | - |  |  |  | 38 |
Investments in unconsolidated trusts |  |  | 1,238 |  |  |  | - |  |  |  | - |  |  |  | 1,238 |
Total investments |  | $ | 252,137 |  |  | $ | 17,197 |  |  | $ | 3,775 |  |  | $ | 238,715 |
|  | December 31, 2016 |
|  | Carrying Value |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Cost or Amortized Cost |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |
Bonds: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities and obligations of U.S. Government agencies and authorities |  | $ | 31,102 |  |  | $ | 197 |  |  | $ | 553 |  |  | $ | 31,458 |
Obligations of states and political subdivisions |  |  | 17,572 |  |  |  | 625 |  |  |  | 308 |  |  |  | 17,255 |
Corporate securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Utilities and telecom |  |  | 18,034 |  |  |  | 1,462 |  |  |  | 88 |  |  |  | 16,660 |
Financial services |  |  | 57,282 |  |  |  | 1,880 |  |  |  | 911 |  |  |  | 56,313 |
Other business – diversified |  |  | 57,419 |  |  |  | 1,071 |  |  |  | 2,337 |  |  |  | 58,685 |
Other consumer – diversified |  |  | 29,069 |  |  |  | 471 |  |  |  | 1,344 |  |  |  | 29,942 |
Total corporate securities |  |  | 161,804 |  |  |  | 4,884 |  |  |  | 4,680 |  |  |  | 161,600 |
Redeemable preferred stocks: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other consumer – diversified |  |  | 192 |  |  |  | - |  |  |  | - |  |  |  | 192 |
Total redeemable preferred stocks |  |  | 192 |  |  |  | - |  |  |  | - |  |  |  | 192 |
Total fixed maturities |  |  | 210,670 |  |  |  | 5,706 |  |  |  | 5,541 |  |  |  | 210,505 |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common and non-redeemable preferred stocks: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Utilities and telecom |  |  | 1,601 |  |  |  | 637 |  |  |  | - |  |  |  | 964 |
Financial services |  |  | 5,402 |  |  |  | 574 |  |  |  | - |  |  |  | 4,828 |
Other business – diversified |  |  | 244 |  |  |  | 197 |  |  |  | - |  |  |  | 47 |
Other consumer – diversified |  |  | 13,010 |  |  |  | 7,396 |  |  |  | - |  |  |  | 5,614 |
Total equity securities |  |  | 20,257 |  |  |  | 8,804 |  |  |  | - |  |  |  | 11,453 |
Other invested assets |  |  | 9,709 |  |  |  | - |  |  |  | - |  |  |  | 9,709 |
Policy loans |  |  | 2,265 |  |  |  | - |  |  |  | - |  |  |  | 2,265 |
Real estate |  |  | 38 |  |  |  | - |  |  |  | - |  |  |  | 38 |
Investments in unconsolidated trusts |  |  | 1,238 |  |  |  | - |  |  |  | - |  |  |  | 1,238 |
Total investments |  | $ | 244,177 |  |  | $ | 14,510 |  |  | $ | 5,541 |  |  | $ | 235,208 |
Bonds having an amortized cost of $11,219 and $11,435 and included in the tables above were on deposit with insurance regulatory authorities at September 30, 2017 and December 31, 2016, respectively, in accordance with statutory requirements. The carrying value and amortized cost of the Company’s investments in fixed maturities at September 30, 2017 and December 31, 2016 by contractual maturity were as follows. Actual maturities may differ from contractual maturities because issuers may call or prepay obligations with or without call or prepayment penalties.
|  | September 30, 2017 |  |  | December 31, 2016 |
|  | Carrying Value |  |  | Amortized Cost |  |  | Carrying Value |  |  | Amortized Cost |
Due in one year or less |  | $ | 1,415 |  |  | $ | 1,411 |  |  | $ | 2,544 |  |  | $ | 2,507 |
Due after one year through five years |  |  | 16,612 |  |  |  | 16,795 |  |  |  | 20,278 |  |  |  | 20,038 |
Due after five years through ten years |  |  | 104,519 |  |  |  | 103,571 |  |  |  | 90,667 |  |  |  | 90,926 |
Due after ten years |  |  | 75,117 |  |  |  | 72,923 |  |  |  | 80,099 |  |  |  | 79,627 |
Varying maturities |  |  | 20,336 |  |  |  | 20,541 |  |  |  | 17,082 |  |  |  | 17,407 |
Totals |  | $ | 217,999 |  |  | $ | 215,241 |  |  | $ | 210,670 |  |  | $ | 210,505 |
The following table sets forth the carrying value, cost or amortized cost, and net unrealized gains (losses) of the Company’s investments aggregated by industry as of September 30, 2017 and December 31, 2016.
|  | September 30, 2017 |  |  | December 31, 2016 |
|  | Carrying Value |  |  | Cost or Amortized Cost |  |  | Unrealized Gains (Losses) |  |  | Carrying Value |  |  | Cost or Amortized Cost |  |  | Unrealized Gains (Losses) |
U.S. Treasury securities and obligations of U.S. Government agencies and authorities |  | $ | 32,426 |  |  | $ | 32,651 |  |  | $ | (225 | ) |  | $ | 31,102 |  |  | $ | 31,458 |  |  | $ | (356 | )
Obligations of states and political subdivisions |  |  | 17,882 |  |  |  | 17,240 |  |  |  | 642 |  |  |  | 17,572 |  |  |  | 17,255 |  |  |  | 317 |
Utilities and telecom |  |  | 21,947 |  |  |  | 19,867 |  |  |  | 2,080 |  |  |  | 19,635 |  |  |  | 17,624 |  |  |  | 2,011 |
Financial services |  |  | 57,506 |  |  |  | 54,960 |  |  |  | 2,546 |  |  |  | 62,684 |  |  |  | 61,141 |  |  |  | 1,543 |
Other business – diversified |  |  | 41,614 |  |  |  | 41,944 |  |  |  | (330 | ) |  |  | 57,663 |  |  |  | 58,732 |  |  |  | (1,069 | )
Other consumer – diversified |  |  | 68,206 |  |  |  | 59,497 |  |  |  | 8,709 |  |  |  | 42,271 |  |  |  | 35,748 |  |  |  | 6,523 |
Other investments |  |  | 12,556 |  |  |  | 12,556 |  |  |  | - |  |  |  | 13,250 |  |  |  | 13,250 |  |  |  | - |
Investments |  | $ | 252,137 |  |  | $ | 238,715 |  |  | $ | 13,422 |  |  | $ | 244,177 |  |  | $ | 235,208 |  |  | $ | 8,969 |
The following tables present the Company’s unrealized loss aging for securities by type and length of time the security was in a continuous unrealized loss position as of September 30, 2017 and December 31, 2016.
|  | September 30, 2017 |
|  | Less than 12 months |  |  | 12 months or longer |  |  | Total |
|  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |
U.S. Treasury securities and obligations of U.S. Government agencies and authorities |  | $ | 15,900 |  |  | $ | 188 |  |  | $ | 9,016 |  |  | $ | 226 |  |  | $ | 24,916 |  |  | $ | 414 |
Obligations of states and political subdivisions |  |  | 2,994 |  |  |  | 17 |  |  |  | 1,978 |  |  |  | 37 |  |  |  | 4,972 |  |  |  | 54 |
Corporate securities |  |  | 30,340 |  |  |  | 451 |  |  |  | 33,204 |  |  |  | 2,856 |  |  |  | 63,544 |  |  |  | 3,307 |
Total temporarily impaired securities |  | $ | 49,234 |  |  | $ | 656 |  |  | $ | 44,198 |  |  | $ | 3,119 |  |  | $ | 93,432 |  |  | $ | 3,775 |
|  | December 31, 2016 |
|  | Less than 12 months |  |  | 12 months or longer |  |  | Total |
|  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |  |  | Fair Value |  |  | Unrealized Losses |
U.S. Treasury securities and obligations of U.S. Government agencies and authorities |  | $ | 23,494 |  |  | $ | 553 |  |  | $ | - |  |  | $ | - |  |  | $ | 23,494 |  |  | $ | 553 |
Obligations of states and political subdivisions |  |  | 8,747 |  |  |  | 308 |  |  |  | - |  |  |  | - |  |  |  | 8,747 |  |  |  | 308 |
Corporate securities |  |  | 59,404 |  |  |  | 2,124 |  |  |  | 20,587 |  |  |  | 2,556 |  |  |  | 79,991 |  |  |  | 4,680 |
Total temporarily impaired securities |  | $ | 91,645 |  |  | $ | 2,985 |  |  | $ | 20,587 |  |  | $ | 2,556 |  |  | $ | 112,232 |  |  | $ | 5,541 |
The evaluation for an other than temporary impairment is a quantitative and qualitative process, which is subject to risks and uncertainties in the determination of whether declines in the fair value of investments are other than temporary. Potential risks and uncertainties include, among other things, changes in general economic conditions, an issuer’s financial condition or near term recovery prospects and the effects of changes in interest rates. In evaluating a potential impairment, the Company considers, among other factors, management’s intent and ability to hold the securities until price recovery, the nature of the investment and the expectation of prospects for the issuer and its industry, the status of an issuer’s continued satisfaction of its obligations in accordance with their contractual terms, and management’s expectation as to the issuer’s ability and intent to continue to do so, as well as ratings actions that may affect the issuer’s credit status. As of September 30, 2017, there were sixty-three securities in an unrealized loss position which primarily included certain of the Company’s investments in fixed maturities within the other diversified business and other diversified consumer sectors. Securities in an unrealized loss position reported in the other diversified business sector included gross unrealized losses of $1,006 related to investments in fixed maturities of five different issuers, all related to the oil and gas industry. The oil and gas companies represent a diversified group of businesses which include, among others, exploration and production, pipeline owners and operators, deep water offshore rig owners and operators, all of which we believe are in continuing stages of rationalizing their current operations, investments, future capital expenditures and carefully managing and modifying their capital and liquidity positions. Based on publicly available information, the companies are continuing to assess and revise short-term, intermediate and long-term business plans in response to the current trends in oil and gas markets. While these companies have generally experienced credit downgrades or may be currently under credit rating review, the Company believes that many of the downgrades are in response to external market forces and not necessarily specific credit events of any obligor which would currently indicate that an other than temporary impairment need be recorded. All of the investees have continued to make regular interest payments on their debt when and as due and the Company continues to perform in-depth analyses of the publicly available financial disclosures of each of the investees on a regular basis. The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position. Based upon the Company’s expected continuation of receipt of contractually required principal and interest payments and its intent and ability to retain the securities until price recovery, as well as the Company’s evaluation of other relevant factors, including those described above, the Company has deemed these securities to be temporarily impaired as of September 30, 2017. The following describes the fair value hierarchy and provides information as to the extent to which the Company uses fair value to measure the value of its financial instruments and information about the inputs used to value those financial instruments. The fair value hierarchy prioritizes the inputs in the valuation techniques used to measure fair value into three broad levels.
Level 1 | Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. The Company’s financial instruments valued using Level 1 criteria include cash equivalents and exchange traded common stocks.
Level 2 | Observable inputs, other than quoted prices included in Level 1, for an asset or liability or prices for similar assets or liabilities. The Company’s financial instruments valued using Level 2 criteria include significantly all of its fixed maturities, which consist of U.S. Treasury securities and U.S. Government securities, obligations of states and political subdivisions, and certain corporate fixed maturities, as well as its non-redeemable preferred stocks. In determining fair value measurements of its fixed maturities and non-redeemable preferred stocks using Level 2 criteria, the Company utilizes data from outside sources, including nationally recognized pricing services and broker/dealers. Prices for the majority of the Company’s Level 2 fixed maturities and non-redeemable preferred stocks were determined using unadjusted prices received from pricing services that utilize a matrix pricing concept, which is a mathematical technique used widely in the industry to value debt securities based on various relationships to other benchmark quoted prices.
Level 3 | Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk). Fair value is based on criteria that use assumptions or other data that are not readily observable from objective sources. The Company’s financial instruments valued using Level 3 criteria consist of a limited number of fixed maturities. As of September 30, 2017 and December 31, 2016, the value of the Company’s fixed maturities valued using Level 3 criteria was $1,351 and $1,264, respectively. The use of different criteria or assumptions regarding data may have yielded materially different valuations.
As of September 30, 2017, financial instruments carried at fair value were measured on a recurring basis as summarized below:
|  | Quoted Prices in Active Markets for Identical Assets |  |  | Significant Other Observable Inputs |  |  | Significant Unobservable Inputs |  |  |  |
|  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities |  | $ | - |  |  | $ | 216,648 |  |  | $ | 1,351 | (1) |  | $ | 217,999 |
Equity securities |  |  | 16,233 |  |  |  | 5,349 | (1) |  |  | - |  |  |  | 21,582 |
Cash equivalents |  |  | 8,884 |  |  |  | - |  |  |  | - |  |  |  | 8,884 |
Total |  | $ | 25,117 |  |  | $ | 221,997 |  |  | $ | 1,351 |  |  | $ | 248,465 |
| (1) | All underlying securities are financial service industry related.
As of December 31, 2016, financial instruments carried at fair value were measured on a recurring basis as summarized below:
|  | Quoted Prices in Active Markets for Identical Assets |  |  | Significant Other Observable Inputs |  |  | Significant Unobservable Inputs |  |  |  |
|  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities |  | $ | - |  |  | $ | 209,406 |  |  | $ | 1,264 | (1) |  | $ | 210,670 |
Equity securities |  |  | 15,153 |  |  |  | 5,104 | (1) |  |  | - |  |  |  | 20,257 |
Cash equivalents |  |  | 9,811 |  |  |  | - |  |  |  | - |  |  |  | 9,811 |
Total |  | $ | 24,964 |  |  | $ | 214,510 |  |  | $ | 1,264 |  |  | $ | 240,738 |
| (1) | All underlying securities are financial service industry related.
The following tables provide a roll-forward of the Company’s financial instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three month and nine month periods ended September 30, 2017 and 2016.
|  | Fixed Maturities |
Balance, December 31, 2016 |  | $ | 1,264 |
Total unrealized gains included in other comprehensive income |  |  | 38 |
Balance, March 31, 2017 |  |  | 1,302 |
Total unrealized gains included in other comprehensive income |  |  | 30 |
Balance, June 30, 2017 |  |  | 1,332 |
Total unrealized gains included in other comprehensive income |  |  | 19 |
Balance, September 30, 2017 |  | $ | 1,351 |
|  | Fixed Maturities |
Balance, December 31, 2015 |  | $ | 2,237 |
Total unrealized gains included in other comprehensive income |  |  | 63 |
Balance, March 31, 2016 |  |  | 2,300 |
Total unrealized gains included in other comprehensive income |  |  | 68 |
Balance, June 30, 2016 |  |  | 2,368 |
Total realized gains included in earnings |  |  | 57 |
Total unrealized losses included in other comprehensive income |  |  | (61 | )
Settlements |  |  | (1,000 | )
Balance, September 30, 2016 |  | $ | 1,364 |
The Company’s fixed maturities valued using Level 3 inputs consist solely of issuances of pooled debt obligations of multiple, smaller financial services companies. They are not actively traded and valuation techniques used to measure fair value are based on future estimated cash flows (based on current cash flows) discounted at reasonable estimated rates of interest. There are no assumed prepayments and/or default probability assumptions as a majority of these instruments contain certain U.S. government agency strips to support repayment of the principal. Other qualitative and quantitative information received from the original underwriter of the pooled offerings is also considered, as applicable. The following table is a summary of realized investment gains (losses) for the three month and nine month periods ended September 30, 2017 and 2016.
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Gross gains |  | $ | 539 |  |  | $ | 543 |  |  | $ | 2,879 |  |  | $ | 1,497 |
Gross losses |  |  | - |  |  |  | (16 | ) |  |  | (61 | ) |  |  | (86 | )
Realized investment gains, net |  | $ | 539 |  |  | $ | 527 |  |  | $ | 2,818 |  |  | $ | 1,411 |

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