

	Three Months Ended March 31,
	2020		2019
	(In thousands)

Available for sale debt securities:
Realized gains on disposal	$	761	1,183
Realized losses on disposal	—		(84	)
Held to maturity debt securities:
Realized gains on disposal	2,724		27
Realized losses on disposal	—		—
Real estate gains (losses)	—		3,503

Totals	$	3,485	4,629

Disposals in the held to maturity category during the periods shown represent calls initiated by the credit issuer of the debt security. It is the Company's policy to initiate disposals of debt securities in the held to maturity category only in instances in which the credit status of the issuer comes into question and the realization of all or a significant portion of the investment principal of the holding is deemed to be in jeopardy.

Net real estate gains for the three months ended March 31, 2019 primarily pertain to the Company's sale of its nursing home operations in Reno, Nevada and San Marcos, Texas as well as a property sold located in Austin, Texas. The sale of the Reno nursing home was completed effective February 1, 2019 and a gain of $5.7 million was realized on the sale of the land and building associated with the operation. The sale of the San Marcos nursing home was concluded effective May 1, 2019 and the Company recorded a loss of $(2.0) million associated with the sale of the land and building of this operation (an impairment loss on this property of $(2.2) million was recorded in the quarter ended March 31, 2019). The sale of the Company's prior home office completed effective June 7, 2019 realized a gain on the sale of $3.2 million.



	Debt Securities Held to Maturity
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value	Allowance for Credit Losses
	(In thousands)

U.S. agencies	$	89,906	3,270	—		93,176	(4	)
U.S. Treasury	3,787		217	—		4,004	—
States and political subdivisions	418,332		21,576	(174	)	439,734	(74	)
Foreign governments	1,139		123	—		1,262	—
Public utilities	891,636		22,159	(7,360	)	906,435	(1,173	)
Corporate	4,547,631		140,323	(65,070	)	4,622,884	(4,788	)
Commercial mortgage-backed	3,031		—	(12	)	3,019	—
Residential mortgage-backed	1,038,062		70,619	(49	)	1,108,632	—
Asset-backed	2,556		6	(21	)	2,541	—

Totals	$	6,996,080	258,293	(72,686	)	7,181,687	(6,039	)



	Debt Securities Available for Sale
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value	Allowance for Credit Losses
	(In thousands)

States and political subdivisions	$	89,407	6,477	(8	)	95,876	—
Foreign governments	9,986		152	—		10,138	—
Public utilities	64,401		2,363	(406	)	66,358	—
Corporate	2,941,700		65,845	(104,331	)	2,903,214	—
Commercial mortgage-backed	27,514		3	(1,183	)	26,334	—
Residential mortgage-backed	12,071		1,340	(192	)	13,219	—
Asset-backed	61,278		302	(2,459	)	59,121	—

Totals	$	3,206,357	76,482	(108,579	)	3,174,260	—



	Debt Securities Held to Maturity
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)

U.S. agencies	$	100,910	1,686	—		102,596
U.S. Treasury	3,782		140	—		3,922
States and political subdivisions	431,433		19,440	(84	)	450,789
Foreign governments	1,144		55	—		1,199
Public utilities	888,444		36,638	(83	)	924,999
Corporate	4,607,826		212,281	(718	)	4,819,389
Commercial mortgage-backed	3,032		52	—		3,084
Residential mortgage-backed	1,066,899		32,706	(716	)	1,098,889
Asset-backed	2,775		62	(1	)	2,836

Totals	$	7,106,245	303,060	(1,602	)	7,407,703



	Debt Securities Available for Sale
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)

States and political subdivisions	$	98,037	4,495	(3	)	102,529
Foreign governments	9,983		203	—		10,186
Public utilities	67,895		3,476	—		71,371
Corporate	2,921,431		141,705	(2,479	)	3,060,657
Commercial mortgage-backed	28,871		1,071	—		29,942
Residential mortgage-backed	12,815		1,077	(117	)	13,775
Asset-backed	67,088		1,397	—		68,485

Totals	$	3,206,120	153,424	(2,599	)	3,356,945

Unrealized losses for debt securities held to maturity and debt securities available for sale increased at March 31, 2020 from comparable balances at December 31, 2019 primarily due to the widening in interest rate spreads that occurred during the period as a result of COVID-19 effects on financial markets. Market values of debt securities generally decline as interest rate levels increase.

Debt securities balances at March 31, 2020 and 2019 include Ozark National holdings of $324.6 million and $265.2 million in held to maturity and $388.1 million and $392.5 million in available for sale. As part of the acquisition effective January 31, 2019 the Company employed purchase accounting procedures in accordance with GAAP which revalued the acquired investment portfolio to their fair values as of the date of the acquisition. These fair values became the book values for Ozark National from that point going forward. Accordingly, unrealized gains and losses for the Ozark National debt securities represent the changes subsequent to the purchase accounting book values established at the acquisition.



	Debt Securities Held to Maturity
	Less than 12 Months				12 Months or Greater			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(In thousands)

States and political subdivisions	$	3,884	(102	)	1,713	(72	)	5,597	(174	)
Public utilities	276,339		(7,360	)	—	—		276,339	(7,360	)
Corporate	1,058,680		(64,115	)	16,617	(955	)	1,075,297	(65,070	)
Commercial mortgage-backed	3,019		(12	)	—	—		3,019	(12	)
Residential mortgage-backed	1,229		(49	)	—	—		1,229	(49	)
Asset-backed	1,818		(21	)	—	—		1,818	(21	)

Totals	$	1,344,969	(71,659	)	18,330	(1,027	)	1,363,299	(72,686	)



	Debt Securities Available for Sale
	Less than 12 Months				12 Months or Greater			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(In thousands)

States and political subdivisions	$	1,024	(8	)	—	—		1,024	(8	)
Public utilities	28,536		(406	)	—	—		28,536	(406	)
Corporate	987,347		(100,065	)	26,689	(4,266	)	1,014,036	(104,331	)
Commercial mortgage-backed	21,331		(1,183	)	—	—		21,331	(1,183	)
Residential mortgage-backed	—		—		577	(192	)	577	(192	)
Asset-backed	41,288		(2,459	)	—	—		41,288	(2,459	)

Totals	$	1,079,526	(104,121	)	27,266	(4,458	)	1,106,792	(108,579	)



	Debt Securities Held to Maturity
	Less than 12 Months				12 Months or Greater			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(In thousands)

States and political subdivisions	$	5,013	(33	)	1,712	(51	)	6,725	(84	)
Public utilities	2,345		(83	)	—	—		2,345	(83	)
Corporate	31,419		(337	)	17,191	(381	)	48,610	(718	)
Residential mortgage-backed	25,859		(63	)	43,498	(653	)	69,357	(716	)
Asset-backed	1,349		(1	)	—	—		1,349	(1	)

Totals	$	65,985	(517	)	62,401	(1,085	)	128,386	(1,602	)



	Debt Securities Available for Sale
	Less than 12 Months				12 Months or Greater			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(In thousands)

States and political subdivisions	$	470	(3	)	—	—		470	(3	)
Public utilities	—		—		—	—		—	—
Corporate	40,080		(105	)	28,582	(2,374	)	68,662	(2,479	)
Residential mortgage-backed	—		—		710	(117	)	710	(117	)

Totals	$	40,550	(108	)	29,292	(2,491	)	69,842	(2,599	)

Debt securities. The gross unrealized losses for debt securities are made up of 325 individual issues, or 22.8% of the total debt securities held by the Company at March 31, 2020. The market value of these bonds as a percent of amortized cost approximates 93.2%. Of the 325 securities, 8, or 2.5%, fall in the 12 months or greater aging category; and 295 were rated investment grade at March 31, 2020.

The amortized cost and fair value of investments in debt securities at March 31, 2020, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	Debt Securities Available for Sale			Debt Securities Held to Maturity
	Amortized Cost		Fair Value	Amortized Cost		Fair Value
	(In thousands)

Due in 1 year or less	$	152,316	151,449	652,617		659,061
Due after 1 year through 5 years	1,334,782		1,324,948	2,942,362		2,969,035
Due after 5 years through 10 years	1,340,411		1,312,864	1,710,000		1,757,710
Due after 10 years	277,985		286,325	647,452		681,689
	3,105,494		3,075,586	5,952,431		6,067,495

Mortgage and asset-backed securities	100,863		98,674	1,043,649		1,114,192

Totals before allowance for credit losses	3,206,357		3,174,260	6,996,080		7,181,687

Allowance for credit losses	—		—	(6,039	)	—

Totals	$	3,206,357	3,174,260	6,990,041		7,181,687

As disclosed in Note (2) New Accounting Pronouncements in the Notes to Condensed Consolidated Financial Statements, the Company adopted new accounting guidance as of January 1, 2020 for credit loss recognition of certain financial assets, including debt securities classified in the held to maturity category. The Company employs a cohort cumulative loss rate method in estimating current expected credit losses with respect to its held to maturity debt securities. This method applies publicly available industry wide statistics of default incidence by defined segmentations of debt security investments combined with future assumptions regarding economic conditions (i.e. GDP forecasts) both in the near term and the long term.The Company utilizes Moody's loss rates by industry type and credit ratings and applies them to each major bond category. These bond categories are further segmented by credit ratings and by maturities of two years and less and more than two years. The following table presents the allowance for credit losses for the quarter ended March 31, 2020.



	Debt Securities Held to Maturity		Debt Securities Available for Sale
	(In thousands)

Balance, beginning of period	$	—	—
Provision January 1, 2020 for adoption of new accounting guidance	3,334		—
Provision during the period	2,705		—
Releases	—		—

Balance, end of period	$	6,039	—

Provisions to and releases from the allowance for credit losses are recorded in net investment income in the Condensed Consolidated Statements of Earnings (Loss). Previous accounting guidance required the Company to review its portfolio for potential other-than-temporary impairments which would require that affected securities be written down to an adjusted cost basis with the amount of the writedown recorded as part of net realized gains and losses in the Condensed Consolidated Statements of Earnings (Loss).

The Company determines current expected credit losses for available-for-sale debt securities in accordance with FASB ASC Subtopic 326-30 when fair value is less than amortized cost, interest payments are missed and the security is experiencing credit issues. At March 31, 2020, the Company performed additional analyses on certain available-for-sale securities whose market values were negatively impacted by the change in the economic environment precipitated by the COVID-19 pandemic crisis. Based on its review, the Company determined none of these investments required an allowance for credit loss at March 31, 2020. Under the previous guidance, debt securities were considered to be other-than-temporarily impaired when a decline in market value was attributable to factors such as market volatility, liquidity, spread widening and credit quality in which it was anticipated that a recovery of all amounts due under the contractual terms of the security would occur and the Company had the intent and ability to hold the security until recovery or maturity. There were no other-than-temporary impairments recorded during the three months ended March 31, 2019. The Company's operating procedures include monitoring the investment portfolio on an ongoing basis for any changes in issuer facts and circumstances that might lead to future need for a credit loss allowance.



	Debt Securities Held to Maturity
	Amortized Cost		Allowance for Credit Losses		Carrying Value
	(In thousands)

AAA	$	97,878	—		97,878
AA	1,853,169		(57	)	1,853,112
A	2,213,874		(1,201	)	2,212,673
BBB	2,758,085		(4,468	)	2,753,617
BB and other below investment	73,074		(313	)	72,761

Bonds Total	$	6,996,080	(6,039	)	6,990,041

A financing receivable is a contractual right to receive money on demand or on fixed or determinable dates that is recognized as an asset in a company's statement of financial position. The Company's mortgage, participation and mezzanine loans on real estate are the only financing receivables included in the Condensed Consolidated Balance Sheets.

Credit and default risk is minimized through strict underwriting guidelines and diversification of underlying property types and geographic locations. In addition to being secured by the property, mortgage loans with leases on the underlying property are often guaranteed by the lease payments and also by the borrower. This approach has proved to result in quality mortgage loans with few defaults. Mortgage loan interest income is recognized on an accrual basis with any premium or discount amortized over the life of the loan. Prepayment and late fees are recorded on the date of collection.

Loans in foreclosure, loans considered impaired or loans past due 90 days or more are placed on a non-accrual status. If a mortgage loan is determined to be on non-accrual status, the mortgage loan does not accrue any revenue into the Condensed Consolidated Statements of Earnings (Loss). The loan is independently monitored and evaluated as to potential impairment or foreclosure. If delinquent payments are made and the loan is brought current, then the Company returns the loan to active status and accrues income accordingly. The Company had no mortgage loans past due 90 days or more at March 31, 2020 or 2019 and as a result all interest income was recognized at March 31, 2020 and 2019. At March 31, 2020, no loan terms had been modified or restructured on mortgage loans due to the economic climate changes precipitated by the COVID-19 pandemic crisis.



	March 31, 2020					December 31, 2019
	Amount			%		Amount			%
	(In thousands)					(In thousands)

Mortgage Loans by Loan-to-Value Ratio (1):
Less than 50%	$	57,157		20.6		$	52,778		19.3
50% to 60%	45,896			16.5		56,929			20.8
60% to 70%	127,832			46.0		117,377			43.0
70% to 80%	47,083			16.9		46,013			16.9
80% to 90%	—			—		—			—
Greater than 90%	—			—		—			—
Gross balance	277,968			100.0		273,097			100.0

Allowance for credit losses	(1,885		)	(0.7	)	(675		)	(0.2	)

Totals	$	276,083		99.3		$	272,422		99.8

All mortgage loans are analyzed quarterly in order to monitor the financial quality of these assets. Based on ongoing monitoring, mortgage loans with a likelihood of becoming delinquent are identified and placed on an internal “watch list.” Among the criteria that may indicate a potential problem include: major tenant vacancies or bankruptcies, late payments, and loan relief/restructuring requests. The mortgage loan portfolio is analyzed for the need for a valuation allowance on any loan that is on the internal watch list, in the process of foreclosure or that currently has a valuation allowance.

Prior to January 1, 2020, mortgage loans were considered impaired when, based on current information and events, it was probable that the Company would be unable to collect all amounts due according to the contractual terms of the loan agreement. When it was determined that a loan was impaired, a loss was recognized for the difference between the carrying amount of the mortgage loan and the estimated value reduced by the cost to sell. Estimated value was typically based on the loan's observable market price or the fair value of the collateral less cost to sell. Impairments and changes in the valuation allowance were reported in net realized investment gains (losses) in the Condensed Consolidated Statements of Earnings (Loss). The Company held a valuation allowance of $0.7 million at December 31, 2019.

Effective January 1, 2020, the Company implemented FASB ASU 2016-13, Financial Instruments-Credit Losses, which revises the credit loss recognition criteria for certain financial assets measured at amortized cost. The new guidance replaces the existing incurred loss recognition model with an expected loss recognition model (“CECL”). The objective of the CECL model is for the reporting entity to recognize its estimate of current expected credit losses for affected financial assets in a valuation allowance deducted from the amortized cost basis of the related financial assets that results in presenting the net carrying value of the financial assets at the amount expected to be collected. For mortgage loan investments the Company is using the Weighted Average Remaining Maturity ("WARM") method, which uses an average annual charge-off rate applied to each mortgage loan risk category. Under this new accounting guidance, at January 1, 2020 a balance of $1.2 million was recorded which incorporated the previous year-end balance under the prior accounting method. The adjustment resulted in a charge to retained earnings as a change in accounting, net of tax, of $0.4 million. Subsequent changes in the allowance for current expected credit losses are reported in net investment income in the Condensed Consolidated Statements of Earnings (Loss).



	March 31, 2020		December 31, 2019
	(In thousands)

Balance, beginning of the period	$	675	675
Provision January 1, 2020 for adoption of new accounting guidance	504		—
Provision during the period	706		—
Releases	—		—

Total ending allowance for credit losses	$	1,885	675