Note 4 — Investments

a) Available-for-Sale Securities

The Company holds investments in fixed-maturity securities and equity securities that are classified as available-for-sale. At December 31, 2017 and 2016, the cost or amortized cost, gross unrealized gains and losses, and estimated fair value of the Company’s available-for-sale securities by security type were as follows:


	Cost or Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
*As of December 31, 2017*
Fixed-maturity securities
U.S. Treasury and U.S. government agencies	$	42,313	$	1	$	(287	)	$	42,027
Corporate bonds		106,897		1,110		(904	)		107,103
State, municipalities, and political subdivisions		78,954		1,816		(75	)		80,695
Exchange-traded debt		7,666		197		(204	)		7,659

Total		235,830		3,124		(1,470	)		237,484
Equity securities		53,132		6,280		(501	)		58,911

Total available-for-sale securities	$	288,962	$	9,404	$	(1,971	)	$	296,395

*As of December 31, 2016*
Fixed-maturity securities
U.S. Treasury and U.S. government agencies	$	1,975	$	—	$	(36	)	$	1,939
Corporate bonds		75,538		607		(1,641	)		74,504
State, municipalities, and political subdivisions		78,018		776		(488	)		78,306
Exchange-traded debt		11,463		36		(237	)		11,262
Redeemable preferred stock		237		3		(3	)		237

Total		167,231		1,422		(2,405	)		166,248
Equity securities		47,750		5,769		(484	)		53,035

Total available-for-sale securities	$	214,981	$	7,191	$	(2,889	)	$	219,283

At December 31, 2017, fixed-maturity securities included $249 of U.S. Treasury securities related to a statutory deposit held in trust for the South Carolina Director of Insurance.

Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties. The scheduled contractual maturities of fixed-maturity securities at December 31, 2017 and 2016 are as follows:


	December 31,
	2017				2016
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Available-for-sale
Due in one year or less	$	35,386	$	35,364	$	2,656	$	2,662
Due after one year through five years		116,575		115,766		49,915		50,023
Due after five years through ten years		57,415		58,984		90,360		89,332
Due after ten years		26,454		27,370		24,300		24,231

	$235,830		$237,484		$167,231		$166,248

Sales of Available-for-Sale Securities

Proceeds received, and the gross realized gains and losses from sales of available-for-sale securities, for the years ended December 31, 2017, 2016 and 2015 were as follows:


	Proceeds		Gross Realized Gains		Gross Realized Losses
Year ended December 31, 2017
Fixed-maturity securities	$	31,759	$	2,176	$	(181	)

Equity securities	$	42,657	$	3,882	$	(1,565	)

Year ended December 31, 2016
Fixed-maturity securities	$	40,454	$	604	$	(79	)

Equity securities	$	23,127	$	2,656	$	(580	)

Year ended December 31, 2015
Fixed-maturity securities	$	53,711	$	253	$	(470	)

Equity securities	$	25,695	$	1,327	$	(1,718	)

Other-than-temporary Impairment

The Company regularly reviews its individual investment securities for other-than-temporary impairment. The Company considers various factors in determining whether each individual security is other-than-temporarily impaired, including-

•

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

•

the length of time and the extent to which the market value of the security has been below its cost or amortized cost;

•

general market conditions and industry or sector specific factors and other qualitative factors;

•

nonpayment by the issuer of its contractually obligated interest and principal payments; and

•

the Company’s intent and ability to hold the investment for a period of time sufficient to allow for the recovery of costs.

Fixed-maturity Securities

For the year ended December 31, 2017, the Company recognized impairment losses of $428 related to the sale of four intent-to-sell fixed-maturity securities in the consolidated statement of income. For the year ended December 31, 2016, the Company recognized $1,565 of impairment losses on four fixed-maturity securities, representing $1,335 of additional losses recorded during the period and $230 of the net change recorded in other comprehensive income. For the year ended December 31, 2015, the Company recorded $705 of impairment losses on two fixed-maturity securities, of which $111 was considered other-than-temporarily impaired due to credit related losses, with the remaining amount of $594 related to non-credit factors.

The following table presents a rollforward of the cumulative credit losses in other-than-temporary impairments recognized in income for available for sale fixed-maturity securities:


	2017			2016			2015
Balance at January 1	$	475		$	111		$	—
Credit impairments on impaired securities		—			475			111
Additional credit impairments on previously impaired securities		—			293			—
Credit impaired security fully disposed of for which there was no prior intent or requirement to sell		(475	)		(385	)		—
Reduction due to increase in expected cash flows recognized over the remaining life of the previously impaired security		—			(19	)		—

Balance at December 31	$	—		$	475		$	111

During 2017, the Company sold two fixed-maturity securities with cumulative credit losses totaling $475. The decision to sell these securities before their maturity was primarily driven by the impact of the Tax Cut and Jobs Act signed into law in 2017. Of two fixed-maturity securities with credit related losses existing at December 31, 2015, one matured with full payment of principal and interest and one was sold due to uncertainties surrounding the issuer’s restructuring plan during 2016.

Equity Securities

In determining whether equity securities are other than temporarily impaired, the Company considers its intent and ability to hold a security for a period of time sufficient to allow for the recovery of cost, the length of time each security has been in an unrealized loss position, the extent of the decline and the near term prospect for recovery. At December 31, 2017, the Company had one equity security that was other-than-temporarily impaired. This compared with nine and 17 equity securities that were other-than-temporarily impaired at December 31, 2016 and 2015, respectively. The Company recognized impairment losses of $1,039, $917 and $4,570 in the consolidated statement of income for the years ended December 31, 2017, 2016 and 2015, respectively.

Securities with gross unrealized loss positions at December 31, 2017 and 2016, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows:


	Less Than Twelve Months					Twelve Months or Longer					Total
As of December 31, 2017	Gross Unrealized Loss			Estimated Fair Value		Gross Unrealized Loss			Estimated Fair Value		Gross Unrealized Loss			Estimated Fair Value
Fixed-maturity securities
U.S. Treasury and U.S. government agencies	$	(246	)	$	40,587	$	(41	)	$	1,938	$	(287	)	$	42,525
Corporate bonds		(174	)		40,627		(730	)		30,563		(904	)		71,190
State, municipalities, and political subdivisions		(30	)		9,775		(45	)		2,297		(75	)		12,072
Exchange-traded debt		(203	)		2,481		(1	)		36		(204	)		2,517

Total fixed-maturity securities		(653	)		93,470		(817	)		34,834		(1,470	)		128,304
Equity securities		(449	)		12,812		(52	)		1,440		(501	)		14,252

Total available-for-sale securities	$	(1,102	)	$	106,282	$	(869	)	$	36,274	$	(1,971	)	$	142,556

At December 31, 2017, there were 135 securities in an unrealized loss position. Of these securities, 22 securities had been in an unrealized loss position for 12 months or longer.


	Less Than Twelve Months					Twelve Months or Longer					Total
As of December 31, 2016	Gross Unrealized Loss			Estimated Fair Value		Gross Unrealized Loss			Estimated Fair Value		Gross Unrealized Loss			Estimated Fair Value
Fixed-maturity securities
U.S. Treasury and U.S. government agencies	$	(36	)	$	1,939	$	—		$	—	$	(36	)	$	1,939
Corporate bonds		(1,546	)		43,859		(95	)		2,814		(1,641	)		46,673
State, municipalities, and political subdivisions		(441	)		26,029		(47	)		3,036		(488	)		29,065
Exchange-traded debt		(191	)		4,980		(46	)		1,954		(237	)		6,934
Redeemable preferred stock		(3	)		47		—			—		(3	)		47

Total fixed-maturity securities		(2,217	)		76,854		(188	)		7,804		(2,405	)		84,658
Equity securities		(293	)		10,042		(191	)		3,209		(484	)		13,251

Total available-for-sale securities	$	(2,510	)	$	86,896	$	(379	)	$	11,013	$	(2,889	)	$	97,909

At December 31, 2016, there were 134 securities in an unrealized loss position. Of these securities, 20 securities had been in an unrealized loss position for 12 months or longer. The gross unrealized loss of corporate bonds in an unrealized loss position for twelve months or more included $76 of other-than-temporary impairment losses related to non-credit factors.

b) Trading Securities

At December 31, 2017, the cost, net unrealized gains, and estimated fair value of the Company’s trading equity securities were $953, $92, and $1,045, respectively. There were no investments in trading equity securities at December 31, 2016.

Sales of Trading Securities

Proceeds received, and the gross realized gains and losses from sales of trading equity securities, for the year ended December 31, 2017 were as follows:


	Proceeds		Gross Realized Gains		Gross Realized Losses
Year ended December 31, 2017
Equity securities	$	2,625	$	111	$	(77	)

The Company did not hold any trading equity securities during 2016.

c) Limited Partnership Investments

The Company has interests in limited partnerships that are not registered or readily tradeable on a securities exchange. These partnerships are private equity funds managed by general partners who make decisions with regard to financial policies and operations. As such, the Company is not the primary beneficiary and does not consolidate these partnerships. In August 2017, the Company entered into a subscription agreement with another limited partnership. The following table provides information related to the Company’s investments in limited partnerships:


	December 31, 2017						December 31, 2016
Investment Strategy	Carrying Value		Unfunded Balance		(%)(a)		Carrying Value		Unfunded Balance		(%)(a)
Primarily in senior secured loans and, to a limited extent, in other debt and equity securities of private U.S. lower-middle-market companies. (b)(c)(e)	$	7,276	$	5,505		15.37	$	6,246	$	6,428		16.50
Value creation through active distressed debt investing primarily in bank loans, public and private corporate bonds, asset-backed securities, and equity securities received in connection with debt restructuring. (b)(d)(e)		7,951		1,745		1.76		7,358		1,360		1.76
Maximum long-term capital appreciation through long and short positions in equity and/or debt securities of publicly traded U.S. and non-U.S. issuers, derivative instruments and certain other financial instruments. (f)		—		—		—		11,333		—		66.58
High returns and long-term capital appreciation through investments in the power, utility and energy industries, and in the infrastructure sector. (b)(g)(h)		7,509		2,512		0.18		4,326		5,766		0.18
Value-oriented investments in less liquid and mispriced senior and junior debts of private equity-backed companies. (b)(i)(j)		448		4,566		0.47		—		—		—

Total	$	23,184	$	14,328			$	29,263	$	13,554

(a)	Represents the Company’s percentage investment in the fund at each balance sheet date.

(b)	Except under certain circumstances, withdrawals from the funds or any assignments are not permitted. Distributions, except income from late admission of a new limited partner, will be received when underlying investments of the funds are liquidated.

(c)	Expected to have a 10-year term and the capital commitment is expected to expire on September 3, 2019.

(d)	Expected to have a three-year term from the end of the capital commitment period, which is March 31, 2018.

(e)	At the fund manager’s discretion, the term of the fund may be extended for up to two additional one-year periods.

(f)	The withdrawal was effective on February 15, 2017. As a result, the Company’s investment in this limited partnership was terminated.

(g)	Expected to have a 10-year term and the capital commitment is expected to expire on June 30, 2020.

(h)	With the consent of a super majority of partners, the term of the fund may be extended for up to three additional one-year periods.

(i)	Expected to have a six-year term from the commencement date, which can be extended for up to two additional one-year periods with the consent of either the advisory committee or a majority of limited partners.

(j)	Unless extended or terminated for reasons specified in the agreement, the capital commitment is expected to expire on December 1, 2018.

The following is the aggregated summarized unaudited financial information of limited partnerships included in the investment strategy table above, which in certain cases is presented on a three-month lag due to the unavailability of information at the Company’s respective balance sheet dates. In applying the equity method of accounting, the Company uses the most recently available financial information provided by the general partner of each of these partnerships. The financial statements of these limited partnerships are audited annually.


	Years Ended December 31,
	2017		2016		2015
Operating results:
Total income	$	409,169	$	310,998	$	4,350
Total expenses		105,281		185,126		77,508

Net income (loss)	$	303,888	$	125,872	$	(73,158	)


	December 31,
	2017		2016
Balance Sheet:
Total assets	$	4,381,321	$	2,956,327
Total liabilities	$	382,310	$	63,813

For the years ended December 31, 2017 and 2016, the Company recognized net investment income of $2,334 and $1,207, respectively, for these investments. For the year ended December 31, 2015, the Company recognized net investment loss of $3,244. At December 31, 2017 and 2016, the Company’s cumulative contributed capital to the partnerships existing at each respective balance sheet date totaled $21,172 and $31,946, respectively, and the Company’s maximum exposure to loss aggregated $23,184 and $29,263, respectively.

During the year ended December 31, 2017, the Company received total cash distributions of $12,639, representing $11,758 of returned capital and $881 of return on investment. Included in the return of capital was $11,626 from one limited partnership the Company withdrew from in February 2017. During the year ended December 31, 2016, the Company received in cash $544 of return on investment. There was a return on investment of $12 received by the Company during the year ended December 31, 2015.

For the years ended December 31, 2017, 2016 and 2015, the Company recognized its share of earnings or losses based on the respective partnership’s statement of income. The carrying value of these investments approximates the amount the Company expected to recover at December 31, 2017 and 2016.

d) Investment in Unconsolidated Joint Venture

Melbourne FMA, LLC, a wholly owned subsidiary, currently has a 90% equity interest in FMKT Mel JV, LLC (“FMJV”), a Florida limited liability company treated as a joint venture under U.S. GAAP. FMJV is deemed a variable interest entity due to its lack of sufficient equity to finance its operations without direct or indirect additional financial support from parties to the joint venture. Although Melbourne FMA holds a majority interest in FMJV, certain major economic decisions specified in the agreement are not under Melbourne FMA’s control. As a result, Melbourne FMA is not the primary beneficiary and is not required to consolidate FMJV.

In January 2016, FMJV sold a portion of its outparcel land for gross proceeds of $829, of which $515 was used to repay a portion of the construction loan obtained for its real estate development project. FMJV recognized a $404 gain on the outparcel sale of which $383 was allocated to the Company in accordance with the profit allocation specified in the operating agreement. On December 15, 2016, FMJV distributed its entire equity interest in FMKT Mel Manager, LLC (“FMKT MGA”),

its wholly owned subsidiary, to Melbourne FMA and the other member, each of which received 90% and 10%, respectively. In addition to operating a retail shopping center business, FMKT MGA owned land which included two outparcels. Melbourne FMA accounted for this transaction as a business step acquisition using the fair value method and, as a result, recognized a $4,005 gain on remeasurement of previously held interest. The gain represented the difference between the fair value of the 90% equity interest and its carrying value under the equity method. The fair value of the equity interest was comprised of the fair value of FMKT MGA’s underlying assets primarily determined by an independent appraiser offset by the fair value of liabilities assumed on the date of distribution. Inputs used by the appraiser included, but were not limited to, information about market and surrounding environments, demographics, and the sale or rent of similar types of property within the vicinity. Due to their short-term nature, the carrying value of current assets and assumed liabilities, including a variable interest rate revolving credit line, approximated fair value. See Pineda Landings - Melbourne, Florida in Note 6 — “Business Acquisitions” for additional information.

In March 2017, FMJV sold a portion of its outparcel land for gross proceeds of $825 and recognized a $331 gain on sale of which $199 was allocated to the Company in accordance with the profit allocation specified in the operating agreement. During 2017, FMKT MGA was merged with Melbourne FMA, LLC.

At December 31, 2017 and 2016, the Company’s maximum exposure to loss relating to the variable interest entity was $1,304 and $2,102, respectively, representing the carrying value of the investment. At December 31, 2017, there was $0 of undistributed income from this equity method investment as compared with an undistributed loss, after an equity distribution, of $25 at December 31, 2016, the amounts of which were included in the Company’s consolidated retained income.

For the year ended December 31, 2017, the Company received a cash distribution of $564, representing a combined distribution of $147 in earnings and $417 in capital. The limited liability company members received no cash distributions during 2016 and 2015. The following tables provide FMJV’s summarized unaudited financial results and the unaudited financial positions:


	Years Ended December 31,
	2017			2016		2015
Operating results:
Total revenues	$	331		$	—	$	118
Total expenses		483			—		257

Net loss	$	(152	)	$	—	$	(139	)

The Company’s share of net loss (a)	$	(234	)	$	—	$	(125	)

(a)	Included in net investment income in the Company’s consolidated statements of income. Gain from the sale of the outparcel during 2017 was allocated in accordance with the method specified in the operating agreement.


	December 31,
	2017		2016
Balance Sheet:
Construction in progress—real estate	$	27	$	334
Property and equipment, net		1,199		1,654
Cash		236		179
Other		5		180

Total assets	$	1,467	$	2,347

Accounts payable	$		$	11
Other liabilities		18		—
Members’ capital		1,449		2,336

Total liabilities and members’ capital	$	1,467	$	2,347

Investment in unconsolidated joint venture, at equity*	$	1,304	$	2,102

*	Included the 90% share of FMKT Mel JV’s operating results.

FMJV’s assets at December 31, 2017 and 2016 included primarily three outparcels for sale or lease which have increased in value since the adjacent retail shopping center was completed. The Company determined that there was no impairment loss associated with these assets for the years ended December 31, 2017 and 2016. In the fourth quarter of 2017, FMJV decided to terminate its development plan for nearby land, thereby expensing $382 of deferred costs associated with the land feasibility study. The 2015 results reflected expenses incurred during the initial development stage. Because the Company expected to incur such expenses during development of the property and prior to its occupancy, the Company determined there was no impairment loss for the year ended December 31, 2015.

e) Real Estate Investments

Real estate investments include buildings with office and retail space for lease, outparcels, wet and dry boat storage, one restaurant, and two marinas. Real estate investments consist of the following as of December 31, 2017 and 2016:


	December 31,
	2017			2016
Land	$	26,315		$	17,592
Land improvements		9,904			9,336
Building		21,284			16,154
Tenant and leasehold improvements		1,204			872
Construction in progress*		—			3,404
Other		3,050			2,683

Total, at cost		61,757			50,041
Less: accumulated depreciation and amortization		(3,399	)		(1,955	)

Real estate investments	$	58,358		$	48,086

*	This project, which was developed by the Company’s consolidated variable interest entity, was completed in July 2017. The capitalized costs were reclassified to land, land improvement, and building.

On October 17, 2017, the Company, through a wholly owned subsidiary, acquired commercial real estate in Tampa, Florida for a purchase price of $9,100. The acquired assets primarily consisted of land, building and in-placelease agreements. The Company incurred approximately $115 of acquisition-related costs and accounted for this transaction as an asset acquisition in accordance with ASU 2017-01 which the Company early adopted in the fourth quarter of 2017. As a result, all transaction-related costs were allocated among the assets acquired. During 2016, the Company acquired properties through two business acquisitions. See Note 6 — “Business Acquisitions” for additional information. Depreciation and amortization expense related to real estate investments was $1,447, $531 and $370, respectively, for the years ended December 31, 2017, 2016 and 2015.

f) Consolidated Variable Interest Entity

The Company has a commercial property in Riverview, Florida. The development project of this property was completed in July 2017 through a limited liability company treated under U.S. GAAP as a joint venture in which the Company’s subsidiary had a controlling financial interest and, as a result, it was the primary beneficiary (See Note 27 — “Subsequent Events”). The real estate investments of this limited liability company primarily include a retail strip center with 8,400 square feet of net rentable space and an adjacent parcel of land which is currently leased in its entirety to a large gas station and convenience store chain. The following table summarizes the assets and liabilities related to this variable interest entity which are included in the accompanying consolidated balance sheets.


	December 31,
	2017		2016
Cash and cash equivalents	$	—	$	65
Construction in progress included in real estate investments	$	—	$	3,404
Real estate investments	$	4,680	$	—
Other assets	$	152	$	—
Accrued expenses	$	21	$	68
Other liabilities	$	160	$	11

g) Net Investment Income

Net investment income (loss), by source, is summarized as follows:


	Years Ended December 31,
	2017			2016			2015
Available-for-sale securities:
Fixed-maturity securities	$	5,689		$	4,589		$	3,935
Equity securities		3,318			3,452			3,710
Investment expense		(726	)		(651	)		(673	)
Limited partnership investments		2,334			1,207			(3,244	)
Real estate investments		(1,018	)		(592	)		(343	)
Loss from unconsolidated joint venture		(234	)		—			(125	)
Cash and cash equivalents		2,069			1,036			661
Other		7			46			57

Net investment income	$	11,439		$	9,087		$	3,978

At December 31, 2017, $87,092 or 34.1% of the Company’s cash and cash equivalents were deposited at three national banks and included $38,543 in three custodial accounts. At December 31, 2016, $203,139 or 72.6% of the Company’s cash and cash equivalents were deposited at three national banks and included $28,431 in three custodial accounts. At December 31, 2017 and 2016, the Company’s cash deposits at any one bank generally exceed the Federal Deposit Insurance Corporation’s $250 coverage limit for insured deposit accounts.