Investments

12 Months Ended

Dec. 31, 2020

Investments

Investments

5. Investments

Available-For-Sale Investments

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

	December 31, 2020
			Gross Unrealized		Gross Unrealized
	Amortized Cost		Gains		(Losses)		Fair Value
Investments - debt securities:
U.S. Treasury Bills	$	47,986	$	5	$	—	$	47,991
Corporate debt securities		60		—		—		60
		48,046		5		—		48,051
Restricted investments:
Short-term bond		1,160		11		—		1,171
		1,160		11		—		1,171
	$	49,206	$	16	$	—	$	49,222

	December 31, 2019
			Gross Unrealized		Gross Unrealized
	Amortized Cost		Gains		(Losses)		Fair Value
Investments - debt securities:
Corporate debt securities	$	178	$	—	$	(125)	$	53
		178		—		(125)		53
Restricted investments:
Short-term bond		2,239		11		—		2,250
Money market fund		114		—		—		114
		2,353		11		—		2,364
	$	2,531	$	11	$	(125)	$	2,417

During 2020, net realized gains from the sale of available-for-sale securities were $0.1 million, proceeds from the sale of available-for-sale securities were $1.2 million, proceeds from the maturity of available-for-sale securities were $11.0 million and purchases of available-for-sale securities were $58.9 million. During 2019, net realized gains from the sale of available-for-sale securities were $0.1 million, proceeds from the sale of available-for-sale securities were $4.0 million, proceeds from the maturity of available-for-sale securities were $7.0 million and purchases of available-for-sale securities were $0.1 million.

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

	December 31, 2020								December 31, 2019
	Less Than 12 Months				12 Months or Greater				Less Than 12 Months				12 Months or Greater
			Unrealized				Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investments - debt securities:
Corporate debt securities	$	—	$	—	$	—	$	—	$	—	$	—	$	53	$	125

As of December 31, 2020, the Company did not have unrealized losses related to investments – debt securities. The Company had unrealized losses of $0.1 million as of December 31, 2019 related to corporate debt securities.

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.

	December 31, 2020
	Amortized Cost		Fair Value
Due in one year or less	$	48,046	$	48,051
Restricted investments		1,160		1,171
	$	49,206	$	49,222

Investments – Equity Securities

As of December 31, 2020 and 2019, investments – equity securities included $2.6 million and $9.7 million, respectively, of preferred stock investments recorded at fair value. During 2020, 2019 and 2018 the Company had net unrealized losses on investments – equity securities of $4.7 million, $5.3 million and $3.0 million respectively, which were included within investment income, net on the consolidated statements of income.

Investment Management Agreement

Mr. Bruce R. Berkowitz is the Chairman of the Company’s Board. He is the Manager of, and controls entities that own and control, Fairholme Holdings, LLC, which wholly owns FCM. Mr. Berkowitz is the Chief Investment Officer of FCM, which 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 December 31, 2020, clients of FCM, including Mr. Berkowitz, beneficially owned approximately 44.89% of the Company’s common stock. FCM and its client, The Fairholme Fund, a series of investments originating from the Fairholme Funds, Inc., may be deemed affiliates of the Company.

Pursuant to the terms of the Investment Management Agreement, as amended, with the Company, FCM agreed to supervise and direct the investment accounts established by the Company in accordance with the investment guidelines and restrictions approved by the Company. 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 approval by a second member of the Company’s Board, (iii) 25% of the investment account must be held in cash and 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. See Note 22. Subsequent Events for information regarding the Amended Investment Management Agreement dated February 23, 2021.