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INVESTMENTS
12 Months Ended
Dec. 31, 2016
INVESTMENTS [Abstract]  
INVESTMENTS

4. INVESTMENTS



Unrealized Gains and Losses



The amortized cost and the fair value of debt and equity securities as of December 31, 2016 and 2015 are summarized as follows:







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Amortized

 

Gross

 

Gross

 

 

 



 

Cost

 

Unrealized

 

Unrealized

 

 

 



 

or Cost

 

Gains

 

Losses

 

Fair Value



 

(in thousands)

December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities  - available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

United States government obligations and authorities

 

$

62,881 

 

$

177 

 

$

853 

 

$

62,205 

Obligations of states and political subdivisions

 

 

152,823 

 

 

427 

 

 

2,067 

 

 

151,183 

Corporate

 

 

149,053 

 

 

1,347 

 

 

895 

 

 

149,505 

International

 

 

11,887 

 

 

95 

 

 

119 

 

 

11,863 



 

 

376,644 

 

 

2,046 

 

 

3,934 

 

 

374,756 



 

 

 

 

 

 

 

 

 

 

 

 

Debt securities  - held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

United States government obligations and authorities

 

 

4,163 

 

 

22 

 

 

118 

 

 

4,067 

Corporate

 

 

1,317 

 

 

20 

 

 

 

 

1,335 

International

 

 

71 

 

 

 —

 

 

 —

 

 

71 



 

 

5,551 

 

 

42 

 

 

120 

 

 

5,473 

Equity securities

 

 

24,163 

 

 

5,500 

 

 

288 

 

 

29,375 

Total investments

 

$

406,358 

 

$

7,588 

 

$

4,342 

 

$

409,604 







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Amortized

 

Gross

 

Gross

 

 

 



 

Cost

 

Unrealized

 

Unrealized

 

 

 



 

or Cost

 

Gains

 

Losses

 

 

Fair Value



 

(in thousands)

December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities  - available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

United States government obligations and authorities

 

$

61,384 

 

$

489 

 

$

320 

 

$

61,553 

Obligations of states and political subdivisions

 

 

109,152 

 

 

1,590 

 

 

40 

 

 

110,702 

Corporate

 

 

154,957 

 

 

1,153 

 

 

1,490 

 

 

154,620 

International

 

 

12,528 

 

 

18 

 

 

243 

 

 

12,303 



 

 

338,021 

 

 

3,250 

 

 

2,093 

 

 

339,178 



 

 

 

 

 

 

 

 

 

 

 

 

Debt securities  - held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

United States government obligations and authorities

 

 

4,275 

 

 

30 

 

 

204 

 

 

4,101 

Corporate

 

 

2,253 

 

 

14 

 

 

20 

 

 

2,247 

International

 

 

91 

 

 

 —

 

 

 —

 

 

91 



 

 

6,619 

 

 

44 

 

 

224 

 

 

6,439 

Equity securities

 

 

33,581 

 

 

6,809 

 

 

1,856 

 

 

38,534 

Total investments

 

$

378,221 

 

$

10,103 

 

$

4,173 

 

$

384,151 



Net Realized Gains and Losses



The Company calculates the gain or loss realized on the sale of investments by comparing the sales price (fair value) to the cost or amortized cost of the security sold. Net realized gains and losses on investments are determined in accordance with the specific identification method. The following tables detail the Company’s net realized gains (losses) by major investment category for the years ended December 31, 2016, 2015 and 2014:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Year Ended



 

December 31,



 

2016

 

2015

 

2014



 

(in thousands)

Gross realized gains:

 

 

 

 

 

 

 

 

 

Debt securities

 

$

3,208 

 

$

1,272 

 

$

725 

Equity securities

 

 

4,264 

 

 

4,959 

 

 

4,489 

Total gross realized gains

 

 

7,472 

 

 

6,231 

 

 

5,214 



 

 

 

 

 

 

 

 

 

Gross realized losses:

 

 

 

 

 

 

 

 

 

Debt securities

 

 

(1,614)

 

 

(805)

 

 

(147)

Equity securities

 

 

(2,813)

 

 

(1,810)

 

 

(641)

Total gross realized losses

 

 

(4,427)

 

 

(2,615)

 

 

(788)

Net realized gains on investments

 

$

3,045 

 

$

3,616 

 

$

4,426 



During the years ended December 31, 2016,  2015 and 2014, the proceeds from sales of investment securities were $229.3 million, $157.2 million and $87.1 million, respectively.



Contractual Maturity



The amortized cost and estimated fair value of debt securities as of December 31, 2016 and 2015 by contractual maturity are shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

December 31, 2016

 

December 31, 2015



 

Amortized

 

 

 

 

Amortized

 

 

 



 

Cost

 

Fair Value

 

Cost

 

Fair Value

Securities with maturity dates:

 

(in thousands)

Debt securities, available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

One year or less

 

$

46,189 

 

$

46,231 

 

$

24,470 

 

$

24,488 

Over one through five years

 

 

177,982 

 

 

177,899 

 

 

170,797 

 

 

171,113 

Over five through ten years

 

 

150,557 

 

 

148,783 

 

 

142,728 

 

 

143,545 

Over ten years

 

 

1,916 

 

 

1,843 

 

 

26 

 

 

32 



 

 

376,644 

 

 

374,756 

 

 

338,021 

 

 

339,178 

Debt securities, held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

One year or less

 

 

170 

 

 

170 

 

 

486 

 

 

487 

Over one through five years

 

 

1,719 

 

 

1,750 

 

 

1,899 

 

 

1,915 

Over five through ten years

 

 

3,662 

 

 

3,553 

 

 

4,234 

 

 

4,037 



 

 

5,551 

 

 

5,473 

 

 

6,619 

 

 

6,439 

Total

 

$

382,195 

 

$

380,229 

 

$

344,640 

 

$

345,617 



Net Investment Income



The following table summarizes the Company’s net investment income for years ended December 31, 2016, 2015 and 2014:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Year Ended



 

December 31,



 

2016

 

2015

 

2014



 

(in thousands)

Interest income

 

$

7,920 

 

$

6,638 

 

$

4,832 

Dividends income

 

 

1,143 

 

 

588 

 

 

553 

Net investment income

 

$

9,063 

 

$

7,226 

 

$

5,385 



Aging of Gross Unrealized Losses



As of December 31, 2016 and 2015, gross unrealized losses and related fair values for debt and equity securities, grouped by duration of time in a continuous unrealized loss position, were as follows:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Less than 12 months

 

12 months or longer

 

Total



 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Gross



Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized



Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

December 31, 2016

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

Debt securities - available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States government obligations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and authorities

$

45,255 

 

$

850 

 

$

111 

 

$

 

$

45,366 

 

$

853 

Obligations of states and political subdivisions

 

103,724 

 

 

2,066 

 

 

1,007 

 

 

 

 

104,731 

 

 

2,067 

Corporate

 

59,970 

 

 

864 

 

 

2,427 

 

 

31 

 

 

62,397 

 

 

895 

International

 

5,925 

 

 

119 

 

 

 

 

 -

 

 

5,930 

 

 

119 



 

214,874 

 

 

3,899 

 

 

3,550 

 

 

35 

 

 

218,424 

 

 

3,934 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

4,701 

 

 

253 

 

 

434 

 

 

35 

 

 

5,135 

 

 

288 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investments

$

219,575 

 

$

4,152 

 

$

3,984 

 

$

70 

 

$

223,559 

 

$

4,222 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Less than 12 months

 

12 months or longer

 

Total



 

 

 

Gross

 

 

 

 

Gross

 

 

 

 

Gross



Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized



Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

December 31, 2015

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

Debt securities - available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States government obligations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and authorities

$

30,464 

 

$

303 

 

$

659 

 

$

17 

 

$

31,123 

 

$

320 

Obligations of states and political subdivisions

 

16,652 

 

 

40 

 

 

 —

 

 

 —

 

 

16,652 

 

 

40 

Corporate

 

87,176 

 

 

1,420 

 

 

3,590 

 

 

70 

 

 

90,766 

 

 

1,490 

International

 

8,660 

 

 

191 

 

 

281 

 

 

52 

 

 

8,941 

 

 

243 



 

142,952 

 

 

1,954 

 

 

4,530 

 

 

139 

 

 

147,482 

 

 

2,093 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

11,790 

 

 

1,850 

 

 

84 

 

 

 

 

11,874 

 

 

1,856 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investments

$

154,742 

 

$

3,804 

 

$

4,614 

 

$

145 

 

$

159,356 

 

$

3,949 



As of December 31, 2016, the Company held a total of 1,132 debt and equity securities that were in an unrealized loss position, of which 36 securities were in an unrealized loss position continuously for 12 months or more. As of December 31, 2015, the Company held a total of 676 debt and equity securities that were in an unrealized loss position, of which 22 securities were in an unrealized loss position continuously for 12 months or more. The unrealized losses associated with these securities consisted primarily of losses related to corporate securities.



The Company holds its equity securities and some of its debt securities as available-for-sale and as such, these securities are recorded at fair value. The Company continually monitors the difference between cost and the estimated fair value of its investments, which involves uncertainty as to whether declines in value are temporary in nature. If the decline of a particular investment is deemed temporary, the Company records the decline as an unrealized loss in shareholders’ equity. If the decline is deemed to be other than temporary, the Company will write the security’s cost-basis or amortized cost-basis down to the fair value of the investment and recognizes an other than temporary impairment (“OTTI”) loss in our consolidated statement of operations. Additionally, any portion of such decline related to debt securities that is believed to arise from factors other than credit will be recorded as a component of other comprehensive income rather than charged against income.



The Company’s assessment of equity securities initially involves an evaluation of all securities that are in an unrealized loss position, regardless of the duration or severity of the loss, as of the applicable balance sheet date. Such initial review consists primarily of assessing whether: (i) there has been a negative credit or news event with respect to the issuer that could indicate the existence of an OTTI; and (ii) the Company has the ability and intent to hold an equity security for a period of time sufficient to allow for an anticipated recovery (generally considered to be one year from the balance sheet date).

 

To the extent that an equity security in an unrealized loss position is not impaired based on the initial review described above, the Company then evaluates such equity security by considering qualitative and quantitative factors. These factors include but are not limited to facts and circumstances specific to individual securities, asset classes, the financial condition of the issuer, changes in dividend payment, the length of time fair value had been less than cost, the severity of the decline in fair value below cost, industry outlook and our ability and intent to hold each position until its forecasted recovery.



Debt securities classified as available-for-sale in a gross unrealized loss position for twelve months or longer are primarily comprised of non-credit losses on investment grade securities where management does not intend to sell, and it is not more than likely than not that the Company will not be required to sell the security before recovery. The Company has analyzed these securities and has determined that they are not other than temporarily impaired.



During the years ended December 31, 2016, 2015 and 2014, OTTI losses were $0.3 million, $0.4 million and $0, respectively.  The determination that unrealized losses on such securities were other-than-temporary was primarily based on the duration of the decline in the fair value of such securities relative to their cost as of the balance sheet date.



Statutory Deposits



As of December 31, 2016,  investments with fair values of approximately $7.9 million, the majority of which were debt securities, were deposited with governmental authorities and into custodial bank accounts as required by law or contractual obligations.