The Company implemented new accounting guidance on January 1, 2020 related to the measurement of credit losses on financial instruments. For financial assets held at amortized cost basis, the new guidance requires a forward-looking methodology for in-scope financial assets that reflects expected credit losses and requires consideration of a broader range of information for credit loss estimates, including historical experience, current economic conditions and supportable forecasts that affect the collectability of the financial asset. For available for sale debt securities, credit losses are still measured similar to the old guidance; however, the new guidance requires that credit losses be presented as an allowance rather than as a write-down of the amortized cost basis of the impaired security and allows for the reversal of credit losses in the current period net income. Any impairments related to factors other than credit losses continue to be recorded through other comprehensive income, net of taxes.

The Company elects the practical expedient to exclude accrued interest from both the fair value and the amortized cost basis of the available for sale debt securities for the purposes of identifying and measuring an impairment and to not measure an allowance for credit losses for accrued investment receivables. Accrued interest receivable is written off through net realized investment gains (losses) at the time the issuer of the bond defaults or is expected to default of payment. The Company made an accounting policy election to present the accrued interest receivable balance with other assets on the Company’s consolidated statements of financial position. Accrued interest receivable was $6.6 million and $7.0 million as of March 31, 2020 and December 31, 2019, respectively.

The amortized cost and estimated fair value of the Company’s fixed maturities securities were as follows as of March 31, 2020 and December 31, 2019:

(Dollars in thousands)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
As of March 31, 2020
Fixed maturities:
U.S. treasury and agency obligations	$	174,475	$	—	$	15,739	$	(25	)	$	190,189
Obligations of states and political subdivisions		63,878		—		1,667		(218	)		65,327
Mortgage-backed securities		377,274		—		14,551		(3,179	)		388,646
Asset-backed securities		155,937		—		375		(9,215	)		147,097
Commercial mortgage-backed securities		164,211		—		6,490		(3,739	)		166,962
Corporate bonds		221,326		—		5,613		(7,965	)		218,974
Foreign corporate bonds		95,830		—		1,075		(2,394	)		94,511
Total fixed maturities	$	1,252,931	$	—	$	45,510	$	(26,735	)	$	1,271,706

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
As of December 31, 2019
Fixed maturities:
U.S. treasury and agency obligations	$	153,906	$	3,580	$	(797	)	$	156,689
Obligations of states and political subdivisions		63,256		853		(271	)		63,838
Mortgage-backed securities		325,448		3,177		(251	)		328,374
Asset-backed securities		168,020		937		(420	)		168,537
Commercial mortgage-backed securities		183,944		4,369		(209	)		188,104
Corporate bonds		239,860		8,478		(79	)		248,259
Foreign corporate bonds		97,134		2,247		(23	)		99,358
Total fixed maturities	$	1,231,568	$	23,641	$	(2,050	)	$	1,253,159

As of March 31, 2020 and December 31, 2019, the Company’s investments in equity securities consist of the following:

As of March 31, 2020 and December 31, 2019, the Company held a Fannie Mae mortgage pool totaling 4.7% and 4.2% of shareholders’ equity, respectively. Excluding the Fannie Mae pool, U.S. treasuries, agency bonds, mutual funds, and limited partnerships, the Company did not hold any debt or equity investments in a single issuer in excess of 3% of shareholders' equity at March 31, 2020 and December 31, 2019.

The amortized cost and estimated fair value of the Company’s fixed maturities portfolio classified as available for sale at March 31, 2020, 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.

The following table contains an analysis of the Company’s fixed income securities with gross unrealized losses that are not deemed to have credit losses, categorized by the period that the securities were in a continuous loss position as of March 31, 2020. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 4 of the notes to the consolidated financial statements in Item 1 of Part I of this report:

	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	$	7,498	$	(25	)	$	—	$	—		$	7,498	$	(25	)
Obligations of states and political subdivisions		6,654		(218	)		—		—			6,654		(218	)
Mortgage-backed securities		33,010		(3,178	)		60		(1	)		33,070		(3,179	)
Asset-backed securities		107,158		(7,030	)		16,820		(2,185	)		123,978		(9,215	)
Commercial mortgage-backed securities		41,561		(3,739	)		34		—			41,595		(3,739	)
Corporate bonds		75,676		(7,965	)		—		—			75,676		(7,965	)
Foreign corporate bonds		47,548		(2,394	)		—		—			47,548		(2,394	)
Total fixed maturities	$	319,105	$	(24,549	)	$	16,914	$	(2,186	)	$	336,019	$	(26,735	)

(1)	Fixed maturities in a gross unrealized loss position are 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 following table contains an analysis of the Company’s fixed income securities with gross unrealized losses, categorized by the period that the securities were in a continuous loss position as of December 31, 2019. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 4 of the notes to the consolidated financial statements in Item 1 of Part I of this report:

	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	$	35,633	$	(797	)	$	—	$	—		$	35,633	$	(797	)
Obligations of states and political subdivisions		27,180		(271	)		—		—			27,180		(271	)
Mortgage-backed securities		93,579		(244	)		902		(7	)		94,481		(251	)
Asset-backed securities		43,402		(167	)		16,152		(253	)		59,554		(420	)
Commercial mortgage-backed securities		25,698		(196	)		1,945		(13	)		27,643		(209	)
Corporate bonds		19,407		(79	)		—		—			19,407		(79	)
Foreign corporate bonds		4,822		(20	)		2,035		(3	)		6,857		(23	)
Total fixed maturities	$	249,721	$	(1,774	)	$	21,034	$	(276	)	$	270,755	$	(2,050	)

(1)	Fixed maturities in a gross unrealized loss position are 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 outbreak of the coronavirus pandemic in the first quarter of 2020 and uncertainty around the extent of its economic impact caused severe declines in financial markets which are reflected in the fair values of our investments.

The Company regularly performs various analytical valuation procedures with respect to its investments, including reviewing each available for sale debt security in an unrealized loss position to assess whether the decline in fair value below amortized cost basis has resulted from a credit loss or other factors. In assessing whether a credit loss exists, the Company compares the present value of the cash flows expected to be collected from the security to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis of the security, a credit loss exists and an allowance for credit losses is recorded. Subsequent changes in the allowances are recorded in the period of change as either credit loss expense or reversal of credit loss expense. Any impairments related to factors other than credit losses are recorded through other comprehensive income, net of taxes.

For fixed maturities, the factors considered in reaching the conclusion that a credit loss exists include, among others, whether:

According to accounting guidance for debt securities in an unrealized loss position, the Company is required to assess whether it has the intent to sell the debt security or more likely than not will be required to sell the debt security before the anticipated recovery. If either of these conditions is met, any allowance for credit losses is written off and the amortized cost basis is written down to the fair value of the fixed maturity security with any incremental impairment reported in earnings. That new amortized cost basis shall not be adjusted for subsequent recoveries in fair value.

The following is a description, by asset type, of the methodology and significant inputs that the Company used to measure the amount of credit loss recognized in earnings, if any:

U.S. treasury and agency obligations – As of March 31, 2020, gross unrealized losses related to U.S. treasury and agency obligations were $0.025 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, macroeconomic and market analysis is conducted in evaluating these securities. Consideration is given to the interest rate environment, duration and yield curve management of the portfolio, sector allocation and security selection. Based on the analysis performed, the Company did not recognize a credit loss on U.S. treasury and agency obligations during the period.

Obligations of states and political subdivisions – As of March 31, 2020, gross unrealized losses related to obligations of states and political subdivisions were $0.218 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, elements that may influence the performance of the municipal bond market are considered in evaluating these securities such as investor expectations, supply and demand patterns, and current versus historical yield and spread relationships. The analysis relies on the output of fixed income credit analysts, as well as dedicated municipal bond analysts who perform extensive in-house fundamental analysis on each issuer, regardless of their rating by the major agencies. Based on the analysis performed, the Company did not recognize a credit loss on obligations of states and political subdivisions during the period.

Mortgage-backed securities (“MBS”) – As of March 31, 2020, gross unrealized losses related to mortgage-backed securities were $3.179 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, mortgage-backed securities are modeled to project principal losses under downside, base, and upside scenarios for the economy and home prices. The primary assumption that drives the security and loan level modeling is the Home Price Index (“HPI”) projection. These forecasts incorporate not just national macro-economic trends, but also regional impacts to arrive at the most granular and accurate projections. These assumptions are incorporated into the model as a basis to generate delinquency probabilities, default curves, loss severity curves, and voluntary prepayment curves at the loan level within each deal. The model utilizes HPI-adjusted current LTV, payment history, loan terms, loan modification history, and borrower characteristics as inputs to generate expected cash flows and principal loss for each bond under various scenarios. Based on the analysis performed, the Company did not recognize a credit loss on mortgage-backed securities during the period.

Asset backed securities (“ABS”) - As of March 31, 2020, gross unrealized losses related to asset backed securities were $9.215 million. The weighted average credit enhancement for the Company’s asset backed portfolio is 32.3. This represents the percentage of pool losses that can occur before an asset backed security will incur its first dollar of principal losses. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, every ABS transaction is analyzed on a stand-alone basis. This analysis involves a thorough review of the collateral, prepayment, and structural risk in each transaction. Additionally, the analysis includes an in-depth credit analysis of the originator and servicer of the collateral. The analysis projects an expected loss for a deal given a set of assumptions specific to the asset type. These assumptions are used to calculate at what level of losses the deal will incur its first dollar of principal loss. The major assumptions used to calculate this ratio are loss severities, recovery lags, and no advances on principal and interest. Based on the analysis performed, the Company did not recognize a credit loss on asset backed securities during the period.

Commercial mortgage-backed securities (“CMBS”) - As of March 31, 2020, gross unrealized losses related to the CMBS portfolio were $3.739 million. The weighted average credit enhancement for the Company’s CMBS portfolio is 29.8. This represents the percentage of pool losses that can occur before a mortgage-backed security will incur its first dollar of principal loss. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, a loan level analysis is utilized where every underlying CMBS loan is re-underwritten based on a set of assumptions reflecting expectations for the future path of the economy. Each loan is analyzed over time using a series of tests to determine if a credit event will occur during the life of the loan. Inherent in this process are several economic scenarios and their corresponding rent/vacancy and capital market states. The five primary credit events that frame the analysis include loan modifications, term default, balloon default, extension, and ability to pay off at balloon. The resulting output is the expected loss adjusted cash flows for each bond under the base case and distressed scenarios. Based on the analysis performed, the Company did not recognize a credit loss on commercial mortgage-backed securities during the period.

Corporate bonds - As of March 31, 2020, gross unrealized losses related to corporate bonds were $7.965 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, analysis for this asset class includes maintaining detailed financial models that include a projection of each issuer’s future financial performance, including prospective debt servicing capabilities, capital structure composition, and the value of the collateral. The analysis incorporates the macroeconomic environment, industry conditions in which the issuer operates, the issuer’s current competitive position, its vulnerability to changes in the competitive and regulatory environment, issuer liquidity, issuer commitment to bondholders, issuer creditworthiness, and asset protection. Part of the process also includes running downside scenarios to evaluate the expected likelihood of default as well as potential losses in the event of default. Based on the analysis performed, the Company did not recognize a credit loss on corporate bonds during the period.

Foreign bonds – As of March 31, 2020, gross unrealized losses related to foreign bonds were $2.394 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, detailed financial models are maintained that include a projection of each issuer’s future financial performance, including prospective debt servicing capabilities, capital structure composition, and the value of the collateral. The analysis incorporates the macroeconomic environment, industry conditions in which the issuer operates, the issuer’s current competitive position, its vulnerability to changes in the competitive and regulatory environment, issuer liquidity, issuer commitment to bondholders, issuer creditworthiness, and asset protection. Part of the process also includes running downside scenarios to evaluate the expected likelihood of default as well as potential losses in the event of default. Based on the analysis performed, the Company did not recognize a credit loss on foreign bonds during the period.

The Company recorded the following other than temporary impairments (“OTTI”) on its investment portfolio for the quarter ended March 31, 2019:

The following table is an analysis of the credit losses recognized in earnings on fixed maturities held by the Company for the quarter ended March 31, 2019 for which a portion of the OTTI loss was recognized in other comprehensive income.

Accumulated other comprehensive income, net of tax, as of March 31, 2020 and December 31, 2019 was as follows:

The following tables present the changes in accumulated other comprehensive income, net of tax, by component for the quarters ended March 31, 2020 and 2019:

Quarter Ended March 31, 2020 (Dollars In Thousands)	Unrealized Gains and Losses on Available for Sale Securities			Foreign Currency Items			Accumulated Other Comprehensive Income
Beginning balance, net of tax	$	18,641		$	(1,032	)	$	17,609
Other comprehensive income before reclassification, before tax		(884	)		(1,303	)		(2,187	)
Amounts reclassified from accumulated other comprehensive (income), before tax		(1,932	)		—			(1,932	)
Other comprehensive income, before tax		(2,816	)		(1,303	)		(4,119	)
Income tax (expense)		(930	)		—			(930	)
Ending balance, net of tax	$	14,895		$	(2,335	)	$	12,560

Quarter Ended March 31, 2019 (Dollars In Thousands)	Unrealized Gains and Losses on Available for Sale Securities			Foreign Currency Items			Accumulated Other Comprehensive Income
Beginning balance, net of tax	$	(19,897	)	$	(1,334	)	$	(21,231	)
Other comprehensive income before reclassification, before tax		23,907			194			24,101
Amounts reclassified from accumulated other comprehensive income, before tax		2,195			—			2,195
Other comprehensive income, before tax		26,102			194			26,296
Income tax expense		(3,396	)		—			(3,396	)
Ending balance, net of tax	$	2,809		$	(1,140	)	$	1,669

The reclassifications out of accumulated other comprehensive income for the quarters ended March 31, 2020 and 2019 were as follows:

(Dollars in thousands)		Amounts Reclassified from Accumulated Other Comprehensive Income
		Quarters Ended March 31,
Details about Accumulated Other Comprehensive Income Components	Affected Line Item in the Consolidated Statements of Operations	2020			2019
Unrealized gains and losses on available for sale securities	Other net realized investment (gains) losses	$	(1,932	)	$	298
	Other than temporary impairment losses on investments		—			1,897
	Total before tax		(1,932	)		2,195
	Income tax expense (benefit)		218			(273	)
	Unrealized gains and losses on available for sale securities, net of tax		(1,714	)		1,922
Foreign currency items	Other net realized investment (gains) losses		—			—
	Income tax expense		—			—
	Foreign currency items, net of tax		—			—
Total reclassifications	Total reclassifications, net of tax	$	(1,714	)	$	1,922

The components of net realized investment gains (losses) for the quarters ended March 31, 2020 and 2019 were as follows:

	Quarters Ended March 31,
(Dollars in thousands)	2020			2019
Fixed maturities:
Gross realized gains	$	2,243		$	26
Gross realized losses		(311	)		(2,221	)
Net realized gains (losses)		1,932			(2,195	)
Equity securities:
Gross realized gains		1,822			16,685
Gross realized losses		(51,804	)		(1,533	)
Net realized gains (losses)		(49,982	)		15,152
Derivatives:
Gross realized gains		13,623			—
Gross realized losses		(33,735	)		(2,567	)
Net realized gains (losses) (1)		(20,112	)		(2,567	)
Total net realized investment gains (losses)	$	(68,162	)	$	10,390

(1)	Includes periodic net interest settlements related to the derivatives of $0.6 million and $0.2 million for the quarters ended March 31, 2020 and 2019, respectively.

Net realized investment losses for the quarter ended March 31, 2020 were primarily due to the impact of changes in fair value on equity securities and derivatives due to the recent disruption in the global financial markets as a result of COVID-19.

The following table shows the calculation of the portion of realized gains and losses related to equity securities held as of March 31, 2020 and 2019:

The proceeds from sales and redemptions of available for sale and equity securities resulting in net realized investment gains (losses) for the quarters ended March 31, 2020 and 2019 were as follows:

The sources of net investment income for the quarters ended March 31, 2020 and 2019 were as follows:

The Company’s total investment return on a pre-tax basis for the quarters ended March 31, 2020 and 2019 were as follows:

As of March 31, 2020 and December 31, 2019, the Company did not own any fixed maturity securities that were non-income producing for the preceding twelve months.

As of March 31, 2020, the Company held insurance enhanced bonds with a market value of approximately $37.5 million which represented 2.4% of the Company’s total cash and invested assets, net of payable/ receivable for securities purchased and sold.

The insurance enhanced bonds are comprised of $16.4 million of municipal bonds, $9.9 million of commercial mortgage-backed securities, and $11.2 million of collateralized mortgage obligations. The financial guarantors of the Company’s $37.5 million of insurance enhanced commercial-mortgage-backed, municipal securities, and collateralized mortgage obligations include Municipal Bond Insurance Association ($3.9 million), Assured Guaranty Corporation ($10.3 million), Federal Home Loan Mortgage Corporation ($21.1 million), Ambac Financial Group ($2.2 million), and Federal Deposit Insurance Corporation (less than $0.1 million).

The Company had no direct investments in the entities that have provided financial guarantees or other credit support to any security held by the Company at March 31, 2020.

Certain cash balances, cash equivalents, equity securities, and bonds available for sale were deposited with various governmental authorities in accordance with statutory requirements, were held as collateral, or were held in trust pursuant to intercompany reinsurance agreements. The fair values were as follows as of March 31, 2020 and December 31, 2019:

A Variable Interest Entity (VIE) refers to an investment in which an investor holds a controlling interest that is not based on the majority of voting rights. Under the VIE model, the party that has the power to exercise significant management influence and maintain a controlling financial interest in the entity’s economics is said to be the primary beneficiary, and is required to consolidate the entity within their results. Other entities that participate in a VIE, for which their financial interests fluctuate with changes in the fair value of the investment entity’s net assets but do not have significant management influence and the ability to direct the VIE’s significant economic activities are said to have a variable interest in the VIE but do not consolidate the VIE in their financial results.

The Company has variable interests in three VIE’s for which it is not the primary beneficiary. These investments are accounted for under the equity method of accounting as their ownership interest exceeds 3% of their respective investments.

The carrying value of one of the Company’s VIE’s, which invests in distressed securities and assets, was $12.5 million and $13.5 million as of March 31, 2020 and December 31, 2019, respectively. The Company’s maximum exposure to loss from this VIE, which factors in future funding commitments, was $26.7 million and $27.7 million at March 31, 2020 and December 31, 2019, respectively. The carrying value of a second VIE that also invests in distressed securities and assets was $24.3 million and $24.0 million at March 31, 2020 and December 31, 2019, respectively. The Company’s maximum exposure to loss from this VIE, which factors in future funding commitments, was $41.3 million and $41.0 million at March 31, 2020 and December 31, 2019, respectively. The carrying value of a third VIE that invests in REIT qualifying assets was $10.5 million and $9.8 million as of March 31, 2020 and December 31, 2019, respectively. The Company’s maximum exposure to loss from this VIE, which factors in future funding commitments, was $11.0 million and $10.3 million at March 31, 2020 and December 31, 2019, respectively. The Company’s investment in VIEs is included in other invested assets on the consolidated balance sheet with changes in carrying value recorded in the consolidated statements of operations.

The limited partnerships typically report results one to three months following the end of the reporting period. As a result, the impact of the recent disruption in markets due to COVID-19 is not reflected in the 1^st quarter results. Certain information has come to our attention that these limited partnership investments will have a decline in value which will be reflected in the 2^nd quarter.