Investments

The Company invests primarily in fixed maturity securities, which totaled 87.6% of total cash, cash equivalents and investments at September 30, 2018. The Company's cash, cash equivalents and investments are listed below.



	September 30, 2018			December 31, 2017
	Carrying Value		% of Total Carrying Value	Carrying Value		% of Total Carrying Value
	(In thousands)			(In thousands)
Fixed maturity securities	$	1,200,154	87.6	$	1,208,570	89.3
Equity securities	15,529		1.1	16,164		1.2
Mortgage loans	188		—	195		—
Policy loans	79,012		5.8	73,735		5.5
Real estate and other long-term investments	7,248		0.5	7,452		0.6
Cash and cash equivalents	68,753		5.0	46,064		3.4
Total cash, cash equivalents and investments	$	1,370,884	100.0	$	1,352,180	100.0

Cash and cash equivalents increased during the current quarter ended September 30, 2018 as we held cash in anticipation of the novation transaction accounting settlement and those funds had not yet been reinvested into fixed maturities as of the end of the current reporting period.

The following tables represent the cost, gross unrealized gains and losses and fair value for fixed maturities as of the periods indicated.



	September 30, 2018
	Cost or Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
	(In thousands)
Fixed maturities:
Available-for-sale:
U.S. Treasury securities	$	9,887	1,250	6	11,131
U.S. Government-sponsored enterprises	3,546		662	—	4,208
States and political subdivisions	740,333		4,973	4,376	740,930
Foreign governments	118		—	1	117
Corporate	404,183		9,655	4,706	409,132
Commercial mortgage-backed	3,662		13	49	3,626
Residential mortgage-backed	31,482		105	577	31,010
Total fixed maturities	$	1,193,211	16,658	9,715	1,200,154

We reclassified all of our fixed maturity holdings that were previously classified as held-to-maturity to available-for-sale based upon our intent and investment strategy as of September 30, 2018. The net carrying value of the fixed maturities held-to-maturity reclassified as available-for-sale amounted to $209.7 million and resulted in a net unrealized gain of $0.5 million being recorded in other comprehensive income before tax.



	December 31, 2017
	Cost or Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
	(In thousands)
Fixed maturities:
Available-for-sale securities:
U.S. Treasury securities	$	9,860	1,948	—	11,808
U.S. Government-sponsored enterprises	3,570		926	—	4,496
States and political subdivisions	550,536		18,507	1,540	567,503
Foreign governments	103		18	—	121
Corporate	370,043		20,212	1,552	388,703
Residential mortgage-backed	1,865		118	5	1,978
Total available-for-sale securities	935,977		41,729	3,097	974,609
Held-to-maturity securities:
States and political subdivisions	213,054		7,585	629	220,010
Corporate	20,907		1,118	658	21,367
Total held-to-maturity securities	233,961		8,703	1,287	241,377
Total fixed maturity securities	$	1,169,938	50,432	4,384	1,215,986

The majority of the Company's equity securities are diversified stock and bond mutual funds.



	September 30, 2018		December 31, 2017
	Fair Value		Fair Value
	(In thousands)
Equity securities:
Stock mutual funds	$	3,196	3,217
Bond mutual funds	12,096		12,367
Common stock	96		24
Preferred stock	141		556
Total equity securities	$	15,529	16,164

The Company recognized net realized gain of $156,000 and net realized losses of $232,000 on equity securities held for the three and nine months ended September 30, 2018, respectively.

Valuation of Investments in Fixed Maturity and Equity Securities

Held-to-maturity securities are reported in the consolidated financial statements at amortized cost and available-for-sale securities are reported at fair value. Equity securities are measured at fair value with the change in fair value recorded through net income pursuant to the adoption of ASU 2016-01 as described in Note 2.

The Company monitors all debt securities on an on-going basis relative to changes in credit ratings, market prices, earnings trends and financial performance, in addition to specific region or industry reviews. The assessment of whether other-than-temporary impairments ("OTTI") have occurred is based on a case-by-case evaluation of underlying reasons for the decline in fair value. The Company determines other-than-temporary impairment by reviewing relevant evidence related to the specific security issuer as well as the Company's intent to sell the security, or if it is more likely than not that the Company would be required to sell a security before recovery of its amortized cost.

When an other-than-temporary impairment has occurred, the amount of the other-than-temporary impairment recognized in earnings depends on whether the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis. If the Company intends to sell the security or it is more likely that the Company will be required to sell the security before recovery of its amortized cost basis, the other-than-temporary impairment is recognized in earnings equal to the entire difference between the investment's cost and its fair value at the balance sheet date. If the Company does not intend to sell the security and it is more likely than not that the Company will not be required to sell the security before recovery of its amortized cost basis, the other-than-temporary impairment is separated into the following: (a) the amount representing the credit loss; and (b) the amount related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the other-than-temporary impairment recognized in earnings becomes the new amortized cost basis of the investment. The new amortized cost basis is not adjusted for subsequent recoveries in fair value.

The Company evaluates whether a credit impairment exists for fixed maturity securities by considering primarily the following factors: (a) changes in the financial condition of the security's underlying collateral; (b) whether the issuer is current on contractually obligated interest and principal payments; (c) changes in the financial condition, credit rating and near-term prospects of the issuer; (d) the length of time to which the fair value has been less than the amortized cost of the security; and (e) the payment structure of the security. The Company's best estimate of expected future cash flows used to determine the credit loss amount is a quantitative and qualitative process. Quantitative review includes information received from third party sources such as financial statements, pricing and rating changes, liquidity and other statistical information. Qualitative factors include judgments related to business strategies, economic impacts on the issuer and overall judgment related to estimates and industry factors. The Company's best estimate of future cash flows involves assumptions including, but not limited to, various performance indicators, such as historical and projected default and recovery rates, credit ratings, and current delinquency rates. These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries, which may include estimating the underlying collateral value. In addition, projections of expected future debt security cash flows may change based upon new information regarding the performance of the issuer.

There were other-than-temporary impairments recorded on several bond issuers for the three and nine months ended September 30, 2018 of $551,000 and $776,000, respectively. No impairments were recognized on equity securities for the three and nine months ended September 30, 2018.

No other-than-temporary impairments were recorded for the three months ended September 30, 2017 but one equity security totaling $17,000 was impaired during the nine months ended September 30, 2017.

The following tables present the fair values and gross unrealized losses of fixed maturity securities that have remained in a continuous unrealized loss position for the periods indicated.



	September 30, 2018
	Less than 12 months				Greater than 12 months			Total
	Fair Value		Unrealized Losses	# of Securities	Fair Value	Unrealized Losses	# of Securities	Fair Value	Unrealized Losses	# of Securities
	(In thousands, except for # of securities)
Fixed maturities:
Available-for-sale securities:
U.S. Treasury securities	$	757	6	2	—	—	—	757	6	2
States and political subdivisions	494,116		3,659	479	31,452	717	42	525,568	4,376	521
Corporate	206,965		4,193	160	6,366	513	6	213,331	4,706	166
Commercial mortgage-backed	2,725		49	4	—	—	—	2,725	49	4
Residential mortgage-backed	27,048		574	21	101	3	3	27,149	577	24
Foreign	117		1	1	—	—	—	117	1	1
Total available-for-sale securities	$	731,728	8,482	667	37,919	1,233	51	769,647	9,715	718

As of September 30, 2018, the Company had 51 available-for-sale fixed maturity securities that were in an unrealized loss position for greater than 12 months.



	December 31, 2017
	Less than 12 months				Greater than 12 months			Total
	Fair Value		Unrealized Losses	# of Securities	Fair Value	Unrealized Losses	# of Securities	Fair Value	Unrealized Losses	# of Securities
	(In thousands, except for # of securities)
Fixed maturities:
Available-for-sale securities:
States and political subdivisions	$	49,408	312	46	47,233	1,228	46	96,641	1,540	92
Corporate	61,071		732	39	7,651	820	10	68,722	1,552	49
Residential mortgage-backed	132		3	4	157	2	4	289	5	8
Total available-for-sale securities	110,611		1,047	89	55,041	2,050	60	165,652	3,097	149
Held-to-maturity securities:
States and political subdivisions	14,178		45	15	7,460	584	14	21,638	629	29
Corporate	—		—	—	2,169	658	2	2,169	658	2
Total held-to-maturity securities	14,178		45	15	9,629	1,242	16	23,807	1,287	31
Total fixed maturities	$	124,789	1,092	104	64,670	3,292	76	189,459	4,384	180
Equity securities:
Redeemable preferred stock	95		6	1	—	—	—	95	6	1
Total equity securities	$	95	6	1	—	—	—	95	6	1

We have reviewed these securities in an unrealized loss position for the periods ended September 30, 2018 and December 31, 2017 and determined that no other-than-temporary impairment exists that have not been recognized based on our evaluation of the credit worthiness of the issuers and the fact that we do not intend to sell the investments nor is it likely that we will be required to sell the securities before recovery of their amortized cost bases which may be maturity. We continue to monitor all securities on an on-going basis and future information may become available which could result in other-than-temporary impairments being recorded.

The amortized cost and fair value of fixed maturity securities at September 30, 2018 by contractual maturity are shown in the table 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. Securities not due at a single maturity date have been reflected based upon final stated maturity.



	September 30, 2018
	Amortized Cost		Fair Value
	(In thousands)
Fixed maturity securities:
Due in one year or less	$	43,088	43,190
Due after one year through five years	142,943		146,280
Due after five years through ten years	230,995		232,627
Due after ten years	776,185		778,057
Total fixed maturity securities	$	1,193,211	1,200,154

The Company uses the specific identification method of the individual security to determine the cost basis used in the calculation of realized gains and losses related to security sales.



	Fixed Maturities, Available-for-Sale					Equity Securities
	Three Months Ended			Nine Months Ended		Three Months Ended		Nine Months Ended
	September 30,			September 30,		September 30,		September 30,
	2018		2017	2018	2017	2018	2017	2018	2017
	(In thousands)

Proceeds	$	1,084	—	1,084	508	—	—	—	1,940
Gross realized gains	$	54	—	53	6	—	—	—	—
Gross realized losses	$	—	—	—	—	—	—	—	30

There was one sale of available-for-sale fixed maturity securities for the three and nine months ended September 30, 2018. No available-for-sale fixed maturity securities were sold during the three months ended September 30, 2017. One available-for-sale fixed maturity security was sold during the nine months ended September 30, 2017. No equity securities or held-to-maturity securities were sold during the three and nine months ended September 30, 2018 and 2017.