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Investments
 12 Months Ended
Dec. 31, 2018
Investments Debt And Equity Securities [Abstract]  
Investments

2.

Investments

 

Short-term investments held at December 31, 2018 include $ 13.4 million of corporate bonds and $0.8 million of obligations of states and political subdivisions.  Short-term investments held at December 31, 2017 include $25.8 million of U.S. Treasury securities and obligations of U.S. government agencies.

 

In 2017, AMERISAFE redeemed an investment in a limited partnership hedge fund accounted for under the equity method.  

 

The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as held-to-maturity at December 31, 2018 are summarized as follows:

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

 

 

(in thousands)

 

States and political subdivisions

 

$

445,922

 

 

$

5,109

 

 

$

(2,084

)

 

$

448,947

 

Corporate bonds

 

 

91,762

 

 

 

62

 

 

 

(455

)

 

 

91,369

 

U.S. agency-based mortgage-backed securities

 

 

8,102

 

 

 

327

 

 

 

(80

)

 

 

8,349

 

U.S. Treasury securities and obligations

   of U.S. government agencies

 

 

67,042

 

 

 

340

 

 

 

(339

)

 

 

67,043

 

Asset-backed securities

 

 

1,050

 

 

 

22

 

 

 

(8

)

 

 

1,064

 

Totals

 

$

613,878

 

 

$

5,860

 

 

$

(2,966

)

 

$

616,772

 

 

The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as available-for-sale at December 31, 2018 are summarized as follows:

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

 

 

(in thousands)

 

States and political subdivisions

 

$

231,848

 

 

$

3,515

 

 

$

(2,118

)

 

$

233,245

 

Corporate bonds

 

 

173,904

 

 

 

243

 

 

 

(933

)

 

 

173,214

 

U.S. agency-based mortgage-backed securities

 

 

12,835

 

 

 

—

 

 

 

(320

)

 

 

12,515

 

U.S. Treasury securities and obligations

   of U.S. government agencies

 

 

61,185

 

 

 

—

 

 

 

(1,429

)

 

 

59,756

 

Totals

 

$

479,772

 

 

$

3,758

 

 

$

(4,800

)

 

$

478,730

 

 

The gross unrealized gains and losses on, and the cost of equity securities at December 31, 2018 are summarized as follows:

 

 

 

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

 

 

(in thousands)

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic common stock

 

$

19,962

 

 

$

30

 

 

$

(1,341

)

 

$

18,651

 

Total equity securities

 

$

19,962

 

 

$

30

 

 

$

(1,341

)

 

$

18,651

 

 

 

The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as held-to-maturity at December 31, 2017 are summarized as follows:

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

 

 

(in thousands)

 

States and political subdivisions

 

$

460,428

 

 

$

9,628

 

 

$

(955

)

 

$

469,101

 

Corporate bonds

 

 

100,024

 

 

 

190

 

 

 

(167

)

 

 

100,047

 

U.S. agency-based mortgage-backed securities

 

 

10,260

 

 

 

625

 

 

 

(40

)

 

 

10,845

 

U.S. Treasury securities and obligations

   of U.S. government agencies

 

 

57,657

 

 

 

548

 

 

 

(198

)

 

 

58,007

 

Asset-backed securities

 

 

1,299

 

 

 

25

 

 

 

(15

)

 

 

1,309

 

Totals

 

$

629,668

 

 

$

11,016

 

 

$

(1,375

)

 

$

639,309

 

 

The gross unrealized gains and losses on, and the cost or amortized cost and fair value of, those investments classified as available-for-sale at December 31, 2017 are summarized as follows:

 

 

 

Cost or

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

 

 

(in thousands)

 

Fixed maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

States and political subdivisions

 

$

244,898

 

 

$

6,819

 

 

$

(577

)

 

$

251,140

 

Corporate bonds

 

 

130,210

 

 

 

224

 

 

 

(212

)

 

 

130,222

 

U.S. agency-based mortgage-backed securities

 

 

18,813

 

 

 

—

 

 

 

(799

)

 

 

18,014

 

U.S. Treasury securities and obligations

   of U.S. government agencies

 

 

67,315

 

 

 

29

 

 

 

(1,126

)

 

 

66,218

 

Total fixed maturity

 

 

461,236

 

 

 

7,072

 

 

 

(2,714

)

 

 

465,594

 

Equity securities

 

 

8,503

 

 

 

779

 

 

 

—

 

 

 

9,282

 

Totals

 

$

469,739

 

 

$

7,851

 

 

$

(2,714

)

 

$

474,876

 

 

A summary of the amortized cost and fair value of investments in fixed maturity securities, classified as held-to-maturity at December 31, 2018, by contractual maturity, is as follows:

 

 

 

Amortized

Cost

 

 

Fair

Value

 

 

 

(in thousands)

 

Maturity:

 

 

 

 

 

 

 

 

Within one year

 

$

76,875

 

 

$

76,861

 

After one year through five years

 

 

256,614

 

 

 

257,530

 

After five years through ten years

 

 

81,311

 

 

 

81,755

 

After ten years

 

 

189,926

 

 

 

191,213

 

U.S. agency-based mortgage-backed securities

 

 

8,102

 

 

 

8,349

 

Asset-backed securities

 

 

1,050

 

 

 

1,064

 

Totals

 

$

613,878

 

 

$

616,772

 

 

A summary of the amortized cost and fair value of investments in fixed maturity securities, classified as available-for-sale at December 31, 2018, by contractual maturity, is as follows:

 

  

 

Amortized

Cost

 

 

Fair

Value

 

 

 

(in thousands)

 

Maturity:

 

 

 

 

 

 

 

 

Within one year

 

$

61,650

 

 

$

61,435

 

After one year through five years

 

 

175,743

 

 

 

174,213

 

After five years through ten years

 

 

47,058

 

 

 

46,725

 

After ten years

 

 

182,486

 

 

 

183,842

 

U.S. agency-based mortgage-backed securities

 

 

12,835

 

 

 

12,515

 

Totals

 

$

479,772

 

 

$

478,730

 

 

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties.

At December 31, 2018, there were $16.1 million of held-to-maturity investments and $2.5 million of available-for-sale investments on deposit with regulatory agencies of states in which the Company does business.

 

A summary of the Company’s realized gains and losses on sales, calls or redemptions of investments for 2018, 2017 and 2016 is as follows:

 

 

 

Fixed Maturity

Securities

Available for Sale

 

 

Equity

Securities

 

 

Other

 

 

Total

 

 

 

(in thousands)

 

Year ended December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sales

 

$

15,025

 

 

$

3

 

 

$

—

 

 

$

15,028

 

Gross realized investment gains

 

$

238

 

 

$

1

 

 

$

—

 

 

$

239

 

Gross realized investment losses

 

 

(1,354

)

 

 

—

 

 

 

—

 

 

 

(1,354

)

Net realized investment gains (losses)

 

 

(1,116

)

 

 

1

 

 

 

—

 

 

 

(1,115

)

Other, including losses on calls and redemptions

 

 

(144

)

 

 

—

 

 

 

(277

)

 

 

(421

)

Net realized gains (losses) on investments

 

$

(1,260

)

 

$

1

 

 

$

(277

)

 

$

(1,536

)

Year ended December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sales

 

$

14,591

 

 

$

1

 

 

$

13,172

 

 

$

27,764

 

Gross realized investment gains

 

$

485

 

 

$

1

 

 

$

—

 

 

$

486

 

Gross realized investment losses

 

 

(5

)

 

 

—

 

 

 

—

 

 

 

(5

)

Net realized investment gains

 

 

480

 

 

 

1

 

 

 

—

 

 

 

481

 

Other, including losses on calls and redemptions

 

 

(520

)

 

 

—

 

 

 

(608

)

 

 

(1,128

)

Net realized gains (losses) on investments

 

$

(40

)

 

$

1

 

 

$

(608

)

 

$

(647

)

Year ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sales

 

$

54,730

 

 

$

—

 

 

$

4,609

 

 

$

59,339

 

Gross realized investment gains

 

$

823

 

 

$

—

 

 

$

68

 

 

$

891

 

Gross realized investment losses

 

 

(1,728

)

 

 

—

 

 

 

—

 

 

 

(1,728

)

Net realized investment gains (losses)

 

 

(905

)

 

 

—

 

 

 

68

 

 

 

(837

)

Other, including gains on calls and redemptions

 

 

274

 

 

 

—

 

 

 

69

 

 

 

343

 

Net realized gains (losses) on investments

 

$

(631

)

 

$

—

 

 

$

137

 

 

$

(494

)

 

In 2016, the Company sold $3.0 million in bonds that were classified as held-to-maturity.  In January 2016, Moody’s downgraded the bonds to B2 from B1 citing increasing liquidity concerns and also placed the bonds on negative outlook indicating the rating could be downgraded further.  Given the evidence of significant credit deterioration, the Company elected to sell the bonds for $3.0 million, recognizing a $0.1 million realized gain.

 

Major categories of the Company’s net investment income are summarized as follows:

 

  

 

Year Ended December 31,

 

 

 

2018

 

 

2017

 

 

2016

 

 

 

(in thousands)

 

Gross investment income:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities

 

$

28,762

 

 

$

28,961

 

 

$

27,837

 

Equity securities

 

 

448

 

 

 

201

 

 

 

—

 

Short-term investments and cash and cash equivalents

 

 

2,208

 

 

 

1,117

 

 

 

348

 

Other investments

 

 

—

 

 

 

104

 

 

 

1,568

 

Total gross investment income

 

 

31,418

 

 

 

30,383

 

 

 

29,753

 

Investment expenses

 

 

(966

)

 

 

(1,102

)

 

 

(1,647

)

Net investment income

 

$

30,452

 

 

$

29,281

 

 

$

28,106

 

 

The following table summarizes the fair value and gross unrealized losses on securities, aggregated by major investment category and length of time that the individual securities have been in a continuous unrealized loss position:

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Fair Value of

Investments

with

Unrealized

Losses

 

 

Gross

Unrealized

Losses

 

 

Fair Value of

Investments

with

Unrealized

Losses

 

 

Gross

Unrealized

Losses

 

 

Fair Value of

Investments

with

Unrealized

Losses

 

 

Gross

Unrealized

Losses

 

 

 

(in thousands)

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

States and political subdivisions

 

$

28,369

 

 

$

59

 

 

$

180,550

 

 

$

2,025

 

 

$

208,919

 

 

$

2,084

 

Corporate bonds

 

 

17,448

 

 

 

36

 

 

 

48,315

 

 

 

419

 

 

 

65,763

 

 

 

455

 

U.S. agency-based mortgage-backed securities

 

 

—

 

 

 

—

 

 

 

2,287

 

 

 

80

 

 

 

2,287

 

 

 

80

 

U.S. Treasury securities and obligations

   of U.S. government agencies

 

 

2,865

 

 

 

4

 

 

 

46,486

 

 

 

335

 

 

 

49,351

 

 

 

339

 

Asset-backed securities

 

 

—

 

 

 

—

 

 

 

525

 

 

 

8

 

 

 

525

 

 

 

8

 

Total held-to-maturity securities

 

 

48,682

 

 

 

99

 

 

 

278,163

 

 

 

2,867

 

 

 

326,845

 

 

 

2,966

 

Available-for-Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

States and political subdivisions

 

$

16,109

 

 

$

81

 

 

$

76,255

 

 

$

2,037

 

 

$

92,364

 

 

$

2,118

 

Corporate bonds

 

 

59,099

 

 

 

279

 

 

 

70,306

 

 

 

654

 

 

 

129,405

 

 

 

933

 

U.S. agency-based mortgage-backed securities

 

 

—

 

 

 

—

 

 

 

12,515

 

 

 

320

 

 

 

12,515

 

 

 

320

 

U.S. Treasury securities and obligations

   of U.S. government agencies

 

 

—

 

 

 

—

 

 

 

59,756

 

 

 

1,429

 

 

 

59,756

 

 

 

1,429

 

Total available-for-sale securities

 

 

75,208

 

 

 

360

 

 

 

218,832

 

 

 

4,440

 

 

 

294,040

 

 

 

4,800

 

Total

 

$

123,890

 

 

$

459

 

 

$

496,995

 

 

$

7,307

 

 

$

620,885

 

 

$

7,766

 

December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

States and political subdivisions

 

$

110,698

 

 

$

654

 

 

$

19,895

 

 

$

301

 

 

$

130,593

 

 

$

955

 

Corporate bonds

 

 

56,425

 

 

 

156

 

 

 

4,121

 

 

 

11

 

 

 

60,546

 

 

 

167

 

U.S. agency-based mortgage-backed securities

 

 

2,798

 

 

 

40

 

 

 

—

 

 

 

—

 

 

 

2,798

 

 

 

40

 

U.S. Treasury securities and obligations

   of U.S. government agencies

 

 

48,153

 

 

 

122

 

 

 

3,948

 

 

 

76

 

 

 

52,101

 

 

 

198

 

Asset-backed securities

 

 

—

 

 

 

—

 

 

 

967

 

 

 

15

 

 

 

967

 

 

 

15

 

Total held-to-maturity securities

 

 

218,074

 

 

 

972

 

 

 

28,931

 

 

 

403

 

 

 

247,005

 

 

 

1,375

 

Available-for-Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

States and political subdivisions

 

$

23,365

 

 

$

86

 

 

$

19,153

 

 

$

491

 

 

$

42,518

 

 

$

577

 

Corporate bonds

 

 

82,795

 

 

 

171

 

 

 

5,888

 

 

 

41

 

 

 

88,683

 

 

 

212

 

U.S. agency-based mortgage-backed securities

 

 

14,686

 

 

 

59

 

 

 

3,328

 

 

 

740

 

 

 

18,014

 

 

 

799

 

U.S. Treasury securities and obligations

   of U.S. government agencies

 

 

14,730

 

 

 

204

 

 

 

47,716

 

 

 

922

 

 

 

62,446

 

 

 

1,126

 

Total available-for-sale securities

 

 

135,576

 

 

 

520

 

 

 

76,085

 

 

 

2,194

 

 

 

211,661

 

 

 

2,714

 

Total

 

$

353,650

 

 

$

1,492

 

 

$

105,016

 

 

$

2,597

 

 

$

458,666

 

 

$

4,089

 

 

At December 31, 2018, the Company held 398 individual fixed maturity securities that were in an unrealized loss position, of which 323 were in a continuous unrealized loss position for longer than 12 months.

The Company regularly reviews its investment portfolio to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of our investments. The Company considers various factors in determining if a decline in the fair value of an individual security is other-than-temporary. The key factors considered are:

 

•

any reduction or elimination of preferred dividends, or nonpayment of scheduled principal or interest payments;

 

•

the financial condition and near-term prospects of the issuer of the applicable security, including any specific events that may affect its operations or earnings;

 

•

how long and by how much the fair value of the security has been below its cost or amortized cost;

 

•

any downgrades of the security by a rating agency;

 

•

our intent not to sell the security for a sufficient time period for it to recover its value;

 

•

the likelihood of being forced to sell the security before the recovery of its value; and

 

•

an evaluation as to whether there are any credit losses on debt securities.

We reviewed all securities with unrealized losses in accordance with the impairment policy described above. The Company determined that the unrealized losses in the fixed maturity securities portfolio related primarily to changes in market interest rates since the date of purchase, current conditions in the capital markets and the impact of those conditions on market liquidity and prices generally. We expect to recover the carrying value of these securities as it is not more likely than not that we will be required to sell the securities before the recovery of its amortized cost basis.

In 2018, 2017 and 2016, there were no impairment losses recognized for other-than-temporary declines in the fair value of our investments.