INVESTMENTS

As further discussed in Note 5, "Recently Issued Accounting Standards," effective January 1, 2018, the Company adopted ASU 2016-01. As a result of the adoption, equity investments are no longer classified as available-for-sale. Prior periods have not been restated to conform to the current presentation.

The amortized cost, gross unrealized gains and losses, and estimated fair value of the Company's available-for-sale investments at June 30, 2018 and December 31, 2017 are summarized in the tables shown below:



(in thousands)	June 30, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturities:
U.S. government, government agencies and authorities	$	5,503	$	—	$	76	$	5,427
States, municipalities and political subdivisions	624		—		19		605
Mortgage-backed	2,902		—		91		2,811
Corporate	2,576		—		58		2,518
Total fixed maturities	$	11,605	$	—	$	244	$	11,361



(in thousands)	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturities:
U.S. government, government agencies and authorities	$	5,671	$	—	$	59	$	5,612
States, municipalities and political subdivisions	639		—		13		626
Mortgage-backed	2,933		—		57		2,876
Corporate	5,464		—		37		5,427
Total fixed maturities	14,707		—		166		14,541
Equity investments:
Common stock	3,883		—		313		3,570
Warrants - publicly traded	25		146		—		171
Warrants - not publicly traded	960		173		285		848
Total equity investments	4,868		319		598		4,589
Total fixed maturities and equity investments	$	19,575	$	319	$	764	$	19,130

Net unrealized gains and losses in the tables above are reported as other comprehensive income (loss) with the exception of net unrealized losses of $0.1 million, at December 31, 2017, related to warrants - not publicly traded, which are reported in the consolidated statements of operations.

The table below summarizes the Company's fixed maturities at June 30, 2018 by contractual maturity periods. Actual results may differ as issuers may have the right to call or prepay obligations, with or without penalties, prior to the contractual maturity of these obligations.



(in thousands)	June 30, 2018
	Amortized Cost		Estimated Fair Value
Due in one year or less	$	4,924	$	4,899
Due after one year through five years	5,378		5,219
Due after five years through ten years	132		125
Due after ten years	1,171		1,118
Total	$	11,605	$	11,361

The following tables highlight the aggregate unrealized loss position, by security type, of available-for-sale investments in unrealized loss positions as of June 30, 2018 and December 31, 2017. The tables segregate the holdings based on the period of time the investments have been continuously held in unrealized loss positions.



(in thousands)									June 30, 2018
	Less than 12 Months				Greater than 12 Months				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Fixed maturities:
U.S. government, government agencies and authorities	$	3,502	$	34	$	1,925	$	42	$	5,427	$	76
States, municipalities and political subdivisions	86		2		519		17		605		19
Mortgage-backed	690		13		2,121		78		2,811		91
Corporate	410		5		2,108		53		2,518		58
Total fixed maturities	$	4,688	$	54	$	6,673	$	190	$	11,361	$	244



(in thousands)									December 31, 2017
	Less than 12 Months				Greater than 12 Months				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Fixed maturities:
U.S. government, government agencies and authorities	$	4,067	$	50	$	1,545	$	9	$	5,612	$	59
States, municipalities and political subdivisions	626		13		—		—		626		13
Mortgage-backed	2,876		57		—		—		2,876		57
Corporate	2,427		37		—		—		2,427		37
Total fixed maturities	9,996		157		1,545		9		11,541		166
Equity investments:
Common stock	3,570		313		—		—		3,570		313
Warrants	675		285		—		—		675		285
Total equity investments	4,245		598		—		—		4,245		598
Total	$	14,241	$	755	$	1,545	$	9	$	15,786	$	764

There are approximately 64 and 68 individual available-for-sale investments that were in unrealized loss positions as of June 30, 2018 and December 31, 2017, respectively.

The establishment of an other-than-temporary impairment on an available-for-sale investment or limited liability investment requires a number of judgments and estimates. The Company performs a quarterly analysis of the individual investments to determine if declines in market value are other-than-temporary. The analysis includes some or all of the following procedures as deemed appropriate by the Company:


•	identifying all unrealized loss positions that have existed for at least six months;


•	identifying other circumstances management believes may affect the recoverability of the unrealized loss positions;


•	obtaining a valuation analysis from third-party investment managers regarding the intrinsic value of these investments based on their knowledge and experience together with market-based valuation techniques;


•	reviewing the trading range of certain investments over the preceding calendar period;


•	assessing if declines in market value are other-than-temporary for debt instruments based on the investment grade credit ratings from third-party rating agencies;


•	assessing if declines in market value are other-than-temporary for any debt instrument with a non-investment grade credit rating based on the continuity of its debt service record;


•	determining the necessary provision for declines in market value that are considered other-than-temporary based on the analyses performed; and


•	assessing the Company's ability and intent to hold these investments at least until the investment impairment is recovered.

The risks and uncertainties inherent in the assessment methodology used to determine declines in market value that are other-than-temporary include, but may not be limited to, the following:


•	the opinions of professional investment managers could be incorrect;


•	the past trading patterns of individual investments may not reflect future valuation trends;


•	the credit ratings assigned by independent credit rating agencies may be incorrect due to unforeseen or unknown facts related to a company's financial situation; and


•	the debt service pattern of non-investment grade instruments may not reflect future debt service capabilities and may not reflect a company's unknown underlying financial problems.

As a result of the analysis performed by the Company to determine declines in market value that are other-than-temporary, there were no write-downs for other-than-temporary impairments related to available-for sale investments recorded for the three and six months ended June 30, 2018 and June 30, 2017.

The Company has reviewed currently available information regarding investments with estimated fair values less than their carrying amounts and believes these unrealized losses are not other-than-temporary and are primarily due to temporary market and sector-related factors rather than to issuer-specific factors. The Company does not intend to sell those investments, and it is not likely it will be required to sell those investments before recovery of its amortized cost.

The Company does not have any exposure to subprime mortgage-backed investments.

Limited liability investments include investments in limited liability companies and limited partnerships that primarily invest in income-producing real estate or real estate related investments. The Company's interests in these investments are not deemed minor and, therefore, are accounted for under the equity method of accounting. The most recently available financial statements are used in applying the equity method. The difference between the end of the reporting period of the limited liability entities and that of the Company is no more than three months. As of June 30, 2018 and December 31, 2017, the carrying value of limited liability investments totaled $7.1 million and $9.1 million, respectively. At June 30, 2018, the Company has unfunded commitments totaling $0.2 million to fund limited liability investments. Income or loss from limited liability investments is recognized based on the Company's share of the earnings of the limited liability entities and is included in net investment income.

Limited liability investments, at fair value represent the Company's investment in 26.7% of the outstanding units of 1347 Investors LLC ("1347 Investors") as well as the underlying investments of the Company’s consolidated entities Net Lease Investment Grade Portfolio LLC ("Net Lease") and Argo Holdings Fund I, LLC ("Argo Holdings"). As of June 30, 2018 and December 31, 2017, the carrying value of the Company's limited liability investments, at fair value was $31.4 million and $32.2 million, respectively. The Company recorded impairments related to limited liability investments, at fair value of zero and $0.0 million for the three months ended June 30, 2018 and June 30, 2017, respectively, ($0.0 million and $0.0 million for the six months ended June 30, 2018 and June 30, 2017, respectively), which are included in loss on change in fair value of limited liability investments, at fair value in the consolidated statements of operations. At June 30, 2018, the Company has unfunded commitments totaling $0.8 million to fund limited liability investments, at fair value.

Investments in private companies consist of common stock, preferred stock, notes receivable and derivative contracts in privately owned companies and investments in limited liability companies in which the Company’s interests are deemed minor. The Company's investments in private companies do not have readily determinable fair values. As further discussed in Note 5, "Recently Issued Accounting Standards," effective January 1, 2018, the Company adopted ASU 2016-01. As a result of the adoption, the Company has elected to record investments in private companies at cost, adjusted for observable price changes and impairments. For the three and six months ended June 30, 2018, the Company recorded adjustments of $0.2 million and $0.2 million, respectively, to decrease the fair value of certain investments in private companies for observable price changes, which are included in net change in unrealized loss on private company investments in the consolidated statements of operations.

The Company performs a quarterly impairment analysis of its investments in private companies. The analysis includes some or all of the following procedures as deemed appropriate by the Company:


•	the opinions of external investment and portfolio managers;


•	the financial condition and prospects of the investee;


•	recent operating trends and forecasted performance of the investee;


•	current market conditions in the geographic area or industry in which the investee operates;


•	changes in credit ratings; and


•	changes in the regulatory environment.

As a result of the analysis performed, the Company recorded impairments related to investments in private companies of zero and $1.5 million for the three months ended June 30, 2018 and June 30, 2017, respectively, (zero and $1.5 million for the six months ended June 30, 2018 and June 30, 2017, respectively), which are included in net change in unrealized loss on private company investments in the consolidated statements of operations.

As of June 30, 2018 and December 31, 2017, the carrying value of the Company's investments in private companies totaled $4.6 million and $4.9 million, respectively.

Real estate investments are reported at fair value. As of June 30, 2018 and December 31, 2017, the carrying value of the Company's real estate investments totaled $10.7 million and $10.7 million, respectively.

Other investments include collateral loans and are reported at their unpaid principal balance. As of June 30, 2018 and December 31, 2017, the carrying value of other investments totaled $3.3 million and $3.7 million, respectively.

The Company had previously entered into two separate performance share grant agreements with 1347 Property Insurance Holdings, Inc. ("PIH"), whereby the Company will be entitled to receive up to an aggregate of 475,000 shares of PIH common stock upon achievement of certain milestones for PIH’s stock price. Pursuant to the performance share grant agreements, if at any time the last sales price of PIH’s common stock equals or exceeds: (i) $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, the Company will receive 100,000 shares of PIH common stock; (ii) $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, the Company will receive 125,000 shares of PIH common stock (in addition to the 100,000 shares of common stock earned pursuant to clause (i) herein); (iii) $15.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, the Company will receive 125,000 shares of PIH common stock (in addition to the 225,000 shares of common stock earned pursuant to clauses (i) and (ii) herein); and (iv) $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, the Company will receive 125,000 shares of PIH common stock (in addition to the 350,000 shares of common stock earned pursuant to clauses (i), (ii) and (iii) herein). To the extent shares of PIH common stock are granted to the Company under either of the performance share grant agreements, they will be recorded at the time the shares are granted and will have a valuation equal to the last sales price of PIH common stock on the day prior to such grant.

During the first quarter of 2018, the Company entered into an agreement with PIH to cancel the $10.00 per share Performance Shares Grant Agreement in exchange for cash consideration of $0.3 million. For the six months ended June 30, 2018, the Company recorded a gain of $0.3 million related to this transaction which is included in gain on change in fair value of equity investments in the consolidated statements of operations. No shares were received by the Company under either of the performance share grant agreements as of June 30, 2018.

On July 24, 2018, the Company entered into an agreement with PIH to cancel the $12.00 per share, $15.00 per share and $18.00 per share Performance Shares Grant Agreements in exchange for cash consideration of $1.0 million. The Company will record this gain during the third quarter of 2018. Refer to Note 20, "Fair Value of Financial Instruments," for further details regarding the performance shares.

Net investment income for the three and six months ended June 30, 2018 and June 30, 2017 is comprised as follows:



(in thousands)	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Investment income:
Interest from fixed maturities	$	57		$	49		$	90		$	83
Dividends	82			113			156			218
Income from limited liability investments	189			365			181			600
Income from limited liability investments, at fair value	482			232			701			466
(Loss) gain on change in fair value of warrants - not publicly traded	—			(198		)	—			47
Income from real estate investments	200			200			400			400
Other	9			111			137			233
Gross investment income	1,019			872			1,665			2,047
Investment expenses	(9		)	(8		)	(17		)	(15		)
Net investment income	$	1,010		$	864		$	1,648		$	2,032

Gross realized gains and losses on available-for-sale investments and limited liability investments for the three and six months ended June 30, 2018 and June 30, 2017 are comprised as follows:



(in thousands)	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Gross realized gains	$	133		$	—		$	398		$	—
Gross realized losses	(1		)	(1		)	(1		)	(1		)
Net realized gains (losses)	$	132		$	(1	)	$	397		$	(1	)

(Loss) gain on change in fair value of equity investments for the three and six months ended June 30, 2018 and June 30, 2017 is comprised as follows:



(in thousands)	Three months ended June 30,					Six months ended June 30,
	2018			2017		2018		2017
Net (losses) gains recognized on equity investments sold during the period	$	(10	)	$	—	$	245	$	—
Change in unrealized (losses) gains on equity investments held at end of the period	(411		)	—		499		—
(Loss) gain on change in fair value of equity investments	$	(421	)	$	—	$	744	$	—

Fixed maturities and short-term investments with an estimated fair value of $0.2 million and $0.2 million at June 30, 2018 and December 31, 2017, respectively, were on deposit with state and provincial regulatory authorities. The Company also has restricted cash of $13.8 million and $15.0 million at June 30, 2018 and December 31, 2017, respectively. Included in restricted cash are (i) $11.0 million and $12.2 million at June 30, 2018 and December 31, 2017, respectively, held as deposits by IWS Acquisition Corporation ("IWS") and PWSC; (ii) $1.9 million and $1.9 million at June 30, 2018 and December 31, 2017, respectively, on deposit with state and provincial regulatory authorities; and (iii) $0.9 million and $0.9 million at June 30, 2018 and December 31, 2017, respectively, pledged to third-parties as deposits or to collateralize liabilities. Collateral pledging transactions are conducted under terms that are common and customary to standard collateral pledging and are subject to the Company's standard risk management controls.