Investments (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of Amortized Cost and Estimated Fair Value of Investments

The amortized cost and estimated fair value of investments were as follows as of December 31, 2017 and 2016:

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Other than temporary impairments recognized in AOCI (1)
As of December 31, 2017
Fixed maturities:
U.S. treasury and agency obligations	$	105,311	$	562	$	(1,193	)	$	104,680	$	—
Obligations of states and political subdivisions		94,947		441		(274	)		95,114		—
Mortgage-backed securities		150,237		404		(1,291	)		149,350		—
Asset-backed securities		203,827		267		(393	)		203,701		(1	)
Commercial mortgage-backed securities		140,761		101		(1,067	)		139,795		—
Corporate bonds		422,486		2,295		(1,391	)		423,390		—
Foreign corporate bonds		125,575		377		(545	)		125,407		—
Total fixed maturities		1,243,144		4,447		(6,154	)		1,241,437		(1	)
Common stock		124,915		18,574		(3,260	)		140,229		—
Other invested assets		77,820		—		—			77,820		—
Total	$	1,445,879	$	23,021	$	(9,414	)	$	1,459,486	$	(1	)

(1) Represents the total amount of other than temporary impairment losses relating to factors other than credit losses recognized in accumulated other comprehensive income (“AOCI”).

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Other than temporary impairments recognized in AOCI (1)
As of December 31, 2016
Fixed maturities:
U.S. treasury and agency obligations	$	71,517	$	763	$	(233	)	$	72,047	$	—
Obligations of states and political subdivisions		155,402		1,423		(379	)		156,446		—
Mortgage-backed securities		88,131		895		(558	)		88,468		—
Asset-backed securities		233,890		684		(583	)		233,991		(4	)
Commercial mortgage-backed securities		184,821		118		(1,747	)		183,192		—
Corporate bonds		381,209		1,666		(2,848	)		380,027		—
Foreign corporate bonds		126,369		164		(673	)		125,860		—
Total fixed maturities		1,241,339		5,713		(7,021	)		1,240,031		(4	)
Common stock		119,515		3,445		(2,403	)		120,557		—
Other invested assets		66,121		—		—			66,121		—
Total	$	1,426,975	$	9,158	$	(9,424	)	$	1,426,709	$	(4	)

(1) Represents the total amount of other than temporary impairment losses relating to factors other than credit losses recognized in accumulated other comprehensive income (“AOCI”).

Summary of Amortized Cost and Estimated Fair Value Through Fixed Maturities

The amortized cost and estimated fair value of the Company’s fixed maturities portfolio classified as available for sale at December 31, 2017, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(Dollars in thousands)	Amortized Cost		Estimated Fair Value
Due in one year or less	$	70,222	$	70,165
Due in one year through five years		435,122		434,078
Due in five years through ten years		235,233		236,552
Due in ten years through fifteen years		2,187		2,205
Due after fifteen years		5,555		5,591
Mortgage-backed securities		150,237		149,350
Asset-backed securities		203,827		203,701
Commercial mortgage-backed securities		140,761		139,795
Total	$	1,243,144	$	1,241,437

Summary of Securities With Gross Unrealized Losses

The following table contains an analysis of the Company’s securities with gross unrealized losses, categorized by the period that the securities were in a continuous loss position as of December 31, 2017:

	Less than 12 months					12 months or longer (1)					Total
(Dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities:
U.S. treasury and agency obligations	$	79,403	$	(962	)	$	17,469	$	(231	)	$	96,872	$	(1,193	)
Obligations of states and political subdivisions		34,537		(149	)		12,060		(125	)		46,597		(274	)
Mortgage-backed securities		127,991		(1,247	)		1,866		(44	)		129,857		(1,291	)
Asset-backed securities		97,817		(371	)		6,423		(22	)		104,240		(393	)
Commercial mortgage-backed securities		83,051		(523	)		27,976		(544	)		111,027		(1,067	)
Corporate bonds		147,064		(754	)		53,024		(637	)		200,088		(1,391	)
Foreign corporate bonds		53,320		(305	)		20,582		(240	)		73,902		(545	)
Total fixed maturities		623,183		(4,311	)		139,400		(1,843	)		762,583		(6,154	)
Common stock		32,759		(3,260	)		—		—			32,759		(3,260	)
Total	$	655,942	$	(7,571	)	$	139,400	$	(1,843	)	$	795,342	$	(9,414	)

(1) Fixed maturities 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 more likely than not that the Company will not be forced to sell the security before recovery. The Company has analyzed these securities and has determined that they are not other than temporarily impaired.

The following table contains an analysis of the Company’s securities with gross unrealized losses, categorized by the period that the securities were in a continuous loss position as of December 31, 2016:

	Less than 12 months					12 months or longer (1)					Total
(Dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities:
U.S. treasury and agency obligations	$	39,570	$	(233	)	$	—	$	—		$	39,570	$	(233	)
Obligations of states and political subdivisions		46,861		(369	)		670		(10	)		47,531		(379	)
Mortgage-backed securities		52,780		(541	)		298		(17	)		53,078		(558	)
Asset-backed securities		62,737		(493	)		23,937		(90	)		86,674		(583	)
Commercial mortgage-backed securities		94,366		(1,090	)		69,747		(657	)		164,113		(1,747	)
Corporate bonds		171,621		(2,731	)		9,218		(117	)		180,839		(2,848	)
Foreign corporate bonds		76,036		(673	)		—		—			76,036		(673	)
Total fixed maturities		543,971		(6,130	)		103,870		(891	)		647,841		(7,021	)
Common stock		57,439		(2,403	)		—		—			57,439		(2,403	)
Total	$	601,410	$	(8,533	)	$	103,870	$	(891	)	$	705,280	$	(9,424	)

(1) Fixed maturities 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 more likely than not that the Company will not be forced to sell the security before recovery. The Company has analyzed these securities and has determined that they are not other than temporarily impaired.

Schedule of Other Than Temporary Impairments on Investments

The Company recorded the following other than temporary impairments (“OTTI”) on its investment portfolio for the years ended December 31, 2017, 2016, and 2015:

	Years Ended December 31,
(Dollars in thousands)	2017			2016			2015
Fixed maturities:
OTTI losses, gross	$	(31	)	$	(259	)	$	(24	)
Portion of loss recognized in other comprehensive income (pre-tax)		—			—			—
Net impairment losses on fixed maturities recognized in earnings		(31	)		(259	)		(24	)
Equity securities		(2,575	)		(6,474	)		(7,311	)
Total	$	(2,606	)	$	(6,733	)	$	(7,335	)

Schedule of Credit Losses Recognized in Earnings

The following table is an analysis of the credit losses recognized in earnings on fixed maturities held by the Company as of December 31, 2017, 2016, and 2015 for which a portion of the OTTI loss was recognized in other comprehensive income.

	Years Ended December 31,
(Dollars in thousands)	2017			2016		2015
Balance at beginning of period	$	31		$	31	$	50
Additions where no OTTI was previously recorded		—			—		—
Additions where an OTTI was previously recorded		—			—		—
Reductions for securities for which the company intends to sell or more likely than not will be required to sell before recovery		—			—		—
Reductions reflecting increases in expected cash flows to be collected		—			—		—
Reductions for securities sold during the period		(18	)		—		(19	)
Balance at end of period	$	13		$	31	$	31

Schedule of Accumulated Other Comprehensive Income, Net of Tax

Accumulated Other Comprehensive Income, Net of Tax

Accumulated other comprehensive income, net of tax, as of December 31, 2017 and 2016 was as follows:

	December 31,
(Dollars in thousands)	2017			2016
Net unrealized gains (losses) from:
Fixed maturities	$	(1,707	)	$	(1,308	)
Common stock		15,314			1,042
Foreign currency fluctuations		551			—
Deferred taxes		(5,175	)		(352	)
Accumulated other comprehensive income, net of tax	$	8,983		$	(618	)

Changes in Accumulated Other Comprehensive Income

The following tables present the changes in accumulated other comprehensive income, net of tax, by component for the years ended December 31, 2017 and 2016:

Year Ended December 31, 2017 (Dollars in thousands)	Unrealized Gains and Losses on Available for Sale Securities, Net of Tax			Foreign Currency Items, Net of Tax			Accumulated Other Comprehensive Income, Net of Tax
Beginning balance	$	(554	)	$	(64	)	$	(618	)
Other comprehensive income (loss) before reclassification		9,455			994			10,449
Amounts reclassified from accumulated other comprehensive income (loss)		(629	)		(219	)		(848	)
Other comprehensive income (loss)		8,826			775			9,601
Ending balance	$	8,272		$	711		$	8,983

Year Ended December 31, 2016 (Dollars in thousands)	Unrealized Gains and Losses on Available for Sale Securities, Net of Tax			Foreign Currency Items, Net of Tax			Accumulated Other Comprehensive Income, Net of Tax
Beginning balance	$	4,200		$	(122	)	$	4,078
Other comprehensive income (loss) before reclassification		10,374			(261	)		10,113
Amounts reclassified from accumulated other comprehensive income (loss)		(15,128	)		319			(14,809	)
Other comprehensive income (loss)		(4,754	)		58			(4,696	)
Ending balance	$	(554	)	$	(64	)	$	(618	)

Reclassifications Out of Accumulated Other Comprehensive Income

The reclassifications out of accumulated other comprehensive income for the years ended December 31, 2017 and 2016 were as follows:

(Dollars in thousands)		Amounts Reclassified from Accumulated Other Comprehensive Income Years Ended December 31,
Details about Accumulated Other Comprehensive Income Components	Affected Line Item in the Consolidated Statements of Operations	2017			2016
Unrealized gains and losses on available for sale securities	Other net realized investment (gains)	$	(3,921	)	$	(30,055	)
	Other than temporary impairment losses on investments		2,606			6,733
	Total before tax		(1,315	)		(23,322	)
	Income tax expense		686			8,194
	Unrealized gains and losses on available for sale securities, net of tax		(629	)		(15,128	)
Foreign currency items	Other net realized investment (gains) losses		(336	)		491
	Income tax expense (benefit)		117			(172	)
	Foreign currency items, net of tax		(219	)		319
Total reclassifications	Total reclassifications, net of tax	$	(848	)	$	(14,809	)

Components of Net Realized Investment Gains (Losses)

The components of net realized investment gains (losses) for the years ended December 31, 2017, 2016, and 2015 were as follows:

	Years Ended December 31,
(Dollars in thousands)	2017			2016			2015
Fixed maturities:
Gross realized gains	$	4,066		$	2,947		$	3,565
Gross realized losses		(3,387	)		(691	)		(2,180	)
Net realized gains		679			2,256			1,385
Common stock:
Gross realized gains		4,178			28,785			10,379
Gross realized losses		(3,206	)		(8,210	)		(8,246	)
Net realized gains		972			20,575			2,133
Preferred stock:
Gross realized gains		—			—			96
Gross realized losses		—			—			—
Net realized gains		—			—			96
Derivatives:
Gross realized gains		3,555			3,733			—
Gross realized losses		(3,630	)		(4,843	)		(6,988	)
Net realized gains (losses) (1)		(75	)		(1,110	)		(6,988	)
Total net realized investment gains (losses)	$	1,576		$	21,721		$	(3,374	)

(1) Includes $3.6 million, $4.8 million, and $5.4 million of periodic net interest settlements related to the derivatives for the years ended December 31, 2017, 2016, and 2015, respectively.

Proceeds from Sales and Redemptions of Available-for-Sale Securities

The proceeds from sales and redemptions of available for sale securities resulting in net realized investment gains (losses) for the years ended December 31, 2017, 2016, and 2015 were as follows:

	Years Ended December 31,
(Dollars in thousands)	2017		2016		2015
Fixed maturities	$	918,439	$	381,389	$	647,404
Equity securities		32,218		111,156		39,723
Preferred stock		—		—		1,540

Schedule of Investment Income

The sources of net investment income for the years ended December 31, 2017, 2016, and 2015 were as follows:

	Years Ended December 31,
(Dollars in thousands)	2017			2016			2015
Fixed maturities	$	33,020		$	30,337		$	32,091
Equity securities		3,595			3,302			3,125
Cash and cash equivalents		894			217			82
Other invested assets		4,741			5,295			2,620
Total investment income		42,250			39,151			37,918
Investment expense (1)		(2,927	)		(5,168	)		(3,309	)
Net investment income	$	39,323		$	33,983		$	34,609

(1) Investment expense for the year ended December 31, 2016 includes $1.5 million in upfront fees necessary to enter into a new investment. See Note 15 for additional information on the Company’s $40 million commitment related to this investment.

Schedule of Total Investment Return

The Company’s total investment return on a pre-tax basis for the years ended December 31, 2017, 2016, and 2015 were as follows:

	Years Ended December 31,
(Dollars in thousands)	2017			2016			2015
Net investment income	$	39,323		$	33,983		$	34,609
Net realized investment gains (losses)		1,576			21,721			(3,374	)
Change in unrealized holding gains and losses		14,424			(8,240	)		(25,673	)
Net realized and unrealized investment returns		16,000			13,481			(29,047	)
Total investment return	$	55,323		$	47,464		$	5,562
Total investment return %		3.5	%		3.1	%		0.3	%
Average investment portfolio	$	1,597,487		$	1,507,184		$	1,752,785

Summary of Insurance Enhanced Municipal Bonds Backed by Financial Guarantors

A summary of the Company’s insurance enhanced municipal bonds that are backed by financial guarantors, including the pre-refunded bonds that are escrowed in U.S. government obligations, as of December 31, 2017, is as follows:

(Dollars in thousands) Financial Guarantor	Total		Pre-refunded Securities		Government Guaranteed Securities		Exposure Net of Pre-refunded & Government Guaranteed Securities
Municipal Bond Insurance Association	$	1,157	$	—	$	—	$	1,157
Gov’t National Housing Association		425		—		425		—
Total backed by financial guarantors		1,582		—		425		1,157
Other credit enhanced municipal bonds		—		—		—		—
Total		1,582		—		425		1,157

Summary of Estimated Fair Values of Bonds Held on Deposit

The fair values were as follows as of December 31, 2017 and 2016:

	Estimated Fair Value
(Dollars in thousands)	December 31, 2017		December 31, 2016
On deposit with governmental authorities	$	26,852	$	29,079
Intercompany trusts held for the benefit of U.S. policyholders		328,494		351,002
Held in trust pursuant to third party requirements		94,098		88,178
Letter of credit held for third party requirements		3,944		4,871
Securities held as collateral for borrowing arrangements (1)		88,040		85,939
Total	$	541,428	$	559,069

(1) Amount required to collateralize margin borrowing facility.