4. Investments

Available-For-Sale Investments

Investments classified as available-for-sale securities were as follows:


	September 30, 2019
			Gross Unrealized		Gross Unrealized
	Amortized Cost		Gains		(Losses)		Fair Value
Investments - debt securities:
Corporate debt securities	$	178	$	—	$	(143)	$	35
		178		—		(143)		35
Restricted investments:
Short-term bond		2,229		11		—		2,240
Money market fund		113		—		—		113
		2,342		11		—		2,353
	$	2,520	$	11	$	(143)	$	2,388


	December 31, 2018
			Gross Unrealized		Gross Unrealized
	Amortized Cost		Gains		(Losses)		Fair Value
Investments - debt securities:
U.S. Treasury securities	$	6,936	$	1	$	—	$	6,937
Corporate debt securities		2,908		—		(887)		2,021
		9,844		1		(887)		8,958
Restricted investments:
Short-term bond		3,274		—		(9)		3,265
Money market fund		167		—		—		167
		3,441		—		(9)		3,432
	$	13,285	$	1	$	(896)	$	12,390

During the three and nine months ended September 30, 2019 net realized gains from the sale of available-for-sale securities were $0.1 million. During the nine months ended September 30, 2019 proceeds from the sale of available-for-sale securities were $4.0 million and purchases of available-for-sale securities were less than $0.1 million.

During the three months ended September 30, 2018 there were no realized gains or losses from the sale of available-for-sale securities. During the nine months ended September 30, 2018 net realized losses from the sale of available for-sale securities were $1.0 million. During the nine months ended September 30, 2018 proceeds from the sale of available-for-sale securities were $64.6 million and purchases of available-for sale securities were less than $0.1 million.

The following table provides the available-for-sale investments unrealized loss position and related fair values:


	September 30, 2019
	Less Than 12 Months				12 Months or Greater
			Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses
Investments - debt securities:
Corporate debt securities	$	—	$	—	$	35	$	143


	December 31, 2018
	Less Than 12 Months				12 Months or Greater
			Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses
Investments - debt securities:
Corporate debt securities	$	—	$	—	$	1,843	$	887
Restricted investments:
Short-term bond		—		—		3,265		9
	$	—	$	—	$	5,108	$	896

As of September 30, 2019, the Company had unrealized losses of $0.1 million related to corporate debt securities. The Company had unrealized losses of $0.9 million as of December 31, 2018 related to corporate debt securities and restricted investments. As of September 30, 2019 and December 31, 2018, the Company did not intend to sell the investments with a material unrealized loss and it is more likely than not that the Company will not be required to sell any of these securities prior to their anticipated recovery, which could be maturity. During the nine months ended September 30, 2018, the Company determined unrealized losses related to its corporate debt securities were other-than-temporarily impaired and recorded an impairment of $1.7 million for credit-related loss in investment income, net in the Company’s condensed consolidated statements of income.

The amortized cost and estimated fair value of investments - debt securities and restricted investments classified as available-for-sale, by contractual maturity are shown in the following table. Actual maturities may differ from contractual maturities since certain borrowers have the right to call or prepay obligations.


	September 30, 2019
	Amortized Cost		Fair Value
Due in one year or less	$	178	$	35
Restricted investments		2,342		2,353
	$	2,520	$	2,388

Investments - Equity Securities

As of September 30, 2019 and December 31, 2018 investments - equity securities included $35.2 million and $36.1 million, respectively, of preferred stock investments recorded at fair value. As of September 30, 2019 investments – equity securities also included $1.9 million of common stock investments recorded at fair value. During the three and nine months ended September 30, 2019 the Company had an unrealized loss on investments - equity securities of $1.4 million and $1.3 million, respectively. During the three and nine months ended September 30, 2018 the Company had an unrealized loss on investments – equity securities of $0.1 million and an unrealized gain on investments – equity securities of $0.6 million, respectively. These amounts were included within investment income, net on the condensed consolidated statements of income.

Investment Management Agreement

Mr. Bruce R. Berkowitz is the Chairman of the Company’s Board of Directors (the “Board”). He is the Manager of, and controls entities that own and control, Fairholme Holdings, LLC (“Fairholme”), which wholly owns Fairholme Capital Management, L.L.C. (“FCM”, an investment advisor registered with the SEC). Mr. Berkowitz is the Chief Investment Officer of FCM. FCM has provided investment advisory services to the Company since April 2013. FCM does not receive any compensation for services as the Company’s investment advisor. As of September 30, 2019, clients of FCM, including Mr. Berkowitz, beneficially owned approximately 44.24% of the Company’s common stock. FCM and its client, The Fairholme Fund, a series of the Fairholme Funds, Inc., may be deemed affiliates of the Company.

Both Mr. Cesar Alvarez and Mr. Howard Frank are members of the Company’s Board and also serve as directors of Fairholme Funds, Inc.

Pursuant to the terms of an Investment Management Agreement, as amended, with the Company (the “Investment Management Agreement”), FCM agreed to supervise and direct the investments of investment accounts established by the Company in accordance with the investment guidelines and restrictions approved by the Investment Committee of the Company’s Board. The investment guidelines are set forth in the Investment Management Agreement and require that, as of the date of any investment: (i) no more than 15% of the investment account may be invested in securities of any one issuer (excluding the U.S. Government), (ii) any investment in any one issuer (excluding the U.S. Government) that exceeds 10% of the investment account, but not 15%, requires the consent of at least two members of the Investment Committee, (iii) 25% of the investment account must be held in cash or cash equivalents, (iv) the investment account is permitted to be invested in common equity securities; however, common stock investments shall be limited to exchange-traded common equities, shall not exceed 5% ownership of a single issuer and, cumulatively, the common stock held in the Company’s investment portfolio shall not exceed $100.0 million market value, and (v) the aggregate market value of investments in common stock, preferred stock or other equity investments cannot exceed 25% of the market value of the Company’s investment portfolio at the time of purchase.