Note 6 - Investments

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Investment [Text Block]

PWI, which was acquired by the Company in December 2020, began investing a substantial portion of its restricted cash during 2021.  Previously, PWI had not held a substantial amount of investments.

The amortized cost, gross unrealized gains and losses, and estimated fair value of the Company's available-for-sale investments at December 31, 2021 and December 31, 2020 are summarized in the tables shown below:

(in thousands)	December 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated Fair
	Cost		Gains		Losses		Value
Fixed maturities:
U.S. government, government agencies and authorities	$	16,276	$	31	$	84	$	16,223
States, municipalities and political subdivisions		1,880		3		5		1,878
Mortgage-backed		7,679		18		68		7,629
Asset-backed		449		—		4		445
Corporate		9,605		15		129		9,491
Total fixed maturities	$	35,889	$	67	$	290	$	35,666

(in thousands)	December 31, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated Fair
	Cost		Gains		Losses		Value
Fixed maturities:
U.S. government, government agencies and authorities	$	9,999	$	105	$	—	$	10,104
States, municipalities and political subdivisions		1,447		7		—		1,454
Mortgage-backed		5,334		66		6		5,394
Corporate		3,708		56		—		3,764
Total fixed maturities	$	20,488	$	234	$	6	$	20,716

The table below summarizes the Company's fixed maturities at December 31, 2021 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)	December 31, 2021
			Estimated Fair
	Amortized Cost		Value
Due in one year or less	$	8,424	$	8,450
Due after one year through five years		22,371		22,174
Due after five years through ten years		1,831		1,823
Due after ten years		3,263		3,219
Total	$	35,889	$	35,666

The following tables highlight the aggregate unrealized loss position, by security type, of available-for-sale investments in unrealized loss positions as of December 31, 2021 and December 31, 2020. The tables segregate the holdings based on the period of time the investments have been continuously held in unrealized loss positions.

(in thousands)									December 31, 2021
	Less than 12 Months				Greater than 12 Months				Total
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Loss		Fair Value		Loss		Fair Value		Loss
Fixed maturities:
U.S. government, government agencies and authorities	$	12,077	$	84	$	—	$	—	$	12,077	$	84
States, municipalities and political subdivisions		846		5		—		—		846		5
Mortgage-backed		5,388		68		—		—		5,388		68
Asset-backed		445		4		—		—		445		4
Corporate		7,542		129		—		—		7,542		129
Total fixed maturities	$	26,298	$	290	$	—	$	—	$	26,298	$	290

(in thousands)									December 31, 2020
	Less than 12 Months				Greater than 12 Months				Total
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Loss		Fair Value		Loss		Fair Value		Loss
Fixed maturities:
U.S. government, government agencies and authorities	$	511	$	—	$	—	$	—	$	511	$	—
Mortgage-backed		834		6		—		—		834		6
Total fixed maturities	$	1,345	$	6	$	—	$	—	$	1,345	$	6

There are approximately 138 and 5 individual available-for-sale investments that were in unrealized loss positions as of December 31, 2021 and December 31, 2020, respectively. 

The establishment of an other-than-temporary impairment on an 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. Refer to "Significant Accounting Policies and Critical Estimates" section of Management's Discussion & Analysis for further information regarding the Company's detailed analysis and factors considered in establishing an other-than-temporary impairment on an investment.

As a result of the analysis performed by the Company to determine declines in market value that are other-than-temporary, the Company recorded write downs for other-than-temporary impairment related to other investments of zero and $0.1 million for the years ended December 31, 2021 and December 31, 2020, respectively.  There were no write-downs recorded for other-than-temporary impairments related to available-for sale investments or limited liability investments for the years ended December 31, 2021 and December 31, 2020.

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.

As of December 31, 2021 and December 31, 2020, the carrying value of limited liability investments totaled $1.9 million and $3.7 million, respectively. At December 31, 2021, the Company has no unfunded commitments related to limited liability investments.  The decrease in the carrying value is primarily attributable to the sale of three limited liability company investments during 2021.

Limited liability investments, at fair value represents the underlying investments of Net Lease and Argo Holdings.  As of December 31, 2021 and December 31, 2020, the carrying value of the Company's limited liability investments, at fair value was $18.8 million and $32.8 million, respectively.  The decrease in the carrying value is primarily attributable to the sale of two of Net Lease's investment properties during 2021, as further discussed below.  The Company recorded impairments related to limited liability investments, at fair value of $0.1 million and $0.1 million for the years ended  December 31, 2021 and December 31, 2020, respectively, which are included in gain on change in fair value of limited liability investments, at fair value in the consolidated statements of operations. At  December 31, 2021, the Company has no unfunded commitments related to limited liability investments, at fair value.

The Company consolidates the financial statements of Net Lease on a three-month lag. Net Lease owns investments in limited liability companies that hold investment properties.  During 2021, one of Net Lease’s limited liability companies sold their investment property for $14.3 million.  A portion of the proceeds from the sale were distributed to Net Lease.  As a result of the distribution, Net Lease recorded a gain of $0.8 million related to its investment in the limited liability company, with an offsetting change in unrealized gain of $0.8 million, which collectively are included in net investment income in the consolidated statement of operations for the year ended December 31, 2021.  During the fourth quarter of 2020, one of Net Lease's limited liability companies sold their investment property.  As a result of the three-month lag, the Company recorded this transaction in its first quarter 2021 financial statements.  A portion of the proceeds from the sale were distributed to Net Lease who used them primarily to repay their $9.0 million mezzanine loan. As a result of the distribution, Net Lease recorded a gain of $1.2 million related to its investment in the limited liability company, with an offsetting change in unrealized gain of $1.2 million, which collectively are included in net investment income in the consolidated statement of operations for the for the year ended December 31, 2021.

As of December 31, 2021 and December 31, 2020, the carrying value of the Company's investments in private companies totaled $0.8 million. For the years ended December 31, 2021 and December 31, 2020, the Company did not record any adjustments to the fair value of its investments in private companies for observable price changes.

The Company performs a quarterly impairment analysis of its investments in private companies. As a result of the analysis performed, the Company recorded impairments related to investments in private companies of zero and $0.7 million for the years ended December 31, 2021 and December 31, 2020, respectively, which are included in net change in unrealized loss on private company investments in the consolidated statements of operations. The impairments recorded for the year ended December 31, 2020 are a result of the impact of the COVID-19 pandemic on the investments' underlying business.

The Company previously had issued promissory notes (the "Notes") to five former employees (the "Debtors"), which were recorded as other investments in the consolidated balance sheets prior to December 31, 2020.  During the third and fourth quarters of 2020, the Company agreed to accept partial payment from the Debtors as full satisfaction of the Debtors' obligations under the Notes and recognized a loss of $0.2 million for the year ended December 31, 2020, which is included in net realized gains in the consolidated statements of operations. During the year ended  December 31, 2020, the Company recorded a write-down of $0.1 million for other-than-temporary impairment related to the Notes for one of the Debtors. The remaining principal amount outstanding on the Notes was zero as of December 31, 2021 and December 31, 2020.

Net investment income for the years ended December 31, 2021 and December 31, 2020, respectively, is comprised as follows:

(in thousands)	Years ended December 31,
	2021			2020
Investment income
Interest from fixed maturities	$	242		$	310
Dividends		125			153
Income from limited liability investments		27			30
Income from limited liability investments, at fair value		106			937
Income from real estate investments		800			800
Other		364			461
Gross investment income		1,664			2,691
Investment expenses		(89	)		(66	)
Net investment income	$	1,575		$	2,625

Gross realized gains and losses on available-for-sale investments, limited liability investments, limited liability investments, at fair value and investments in private companies for the years ended December 31, 2021 and December 31, 2020 is comprised as follows:

(in thousands)	Years ended December 31,
	2021			2020
Gross realized gains	$	1,917		$	806
Gross realized losses		(108	)		(226	)
Net realized gains	$	1,809		$	580

(Loss) gain on change in fair value of equity investments for the years ended December 31, 2021 and December 31, 2020 is comprised as follows:

(in thousands)	Years ended December 31,
	2021			2020
Net gain recognized on equity investments sold during the period	$	13		$	1,506
Change in unrealized losses on equity investments held at end of the period		(255	)		(239	)
(Loss) gain on change in fair value of equity investments	$	(242	)	$	1,267

Impact of the COVID-19 Pandemic on Investments

The Company continues to assess the impact that the COVID-19 pandemic may have on the value of its various investments, which could result in future material decreases in the underlying investment values. Such decreases may be considered temporary or could be deemed to be other-than-temporary, and management may be required to record write-downs of the related investments in future reporting periods.