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Investments

9 Months Ended

Sep. 30, 2023

Note 3.

Investments

The following tables set forth the estimated fair value, gross unrealized gains, gross unrealized losses, ACL and cost or amortized cost of the Company’s investments in fixed maturities and equity securities, aggregated by type and industry, as of September 30, 2023 and December 31, 2022.

Fixed maturities were comprised of the following:

	September 30, 2023
	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Cost or Amortized Cost
Fixed maturities:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	47,576	$	1	$	6,595	$	—	$	54,170
Obligations of states and political subdivisions		7,570		—		1,947		—		9,517
Corporate securities:
Utilities and telecom		19,693		—		4,064		—		23,757
Financial services		55,897		369		8,212		—		63,740
Other business – diversified		31,035		87		5,524		—		36,472
Other consumer – diversified		41,073		3		8,294		—		49,364
Total corporate securities		147,698		459		26,094		—		173,333
Redeemable preferred stocks:
Other consumer – diversified		224		31		—		—		193
Total redeemable preferred stocks		224		31		—		—		193
Total fixed maturities	$	203,068	$	491	$	34,636	$	—	$	237,213

	December 31, 2022
	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Cost or Amortized Cost
Fixed maturities:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	44,412	$	5	$	5,926	$	50,333
Obligations of states and political subdivisions		9,187		4		1,702		10,885
Corporate securities:
Utilities and telecom		22,090		120		3,299		25,269
Financial services		59,054		397		7,085		65,742
Other business – diversified		31,058		161		4,689		35,586
Other consumer – diversified		42,705		35		6,089		48,759
Total corporate securities		154,907		713		21,162		175,356
Redeemable preferred stocks:
Other consumer – diversified		223		31		—		192
Total redeemable preferred stocks		223		31		—		192
Total fixed maturities	$	208,729	$	753	$	28,790	$	236,766

Bonds having an amortized cost of $11,778 and $12,333 and included in the tables above were on deposit with insurance regulatory authorities as of September 30, 2023 and December 31, 2022, respectively, in accordance with statutory requirements. Additionally, bonds having an amortized cost of $6,883 and $7,221 and included in the tables above were pledged as collateral to the Federal Home Loan Bank of Atlanta (“FHLB”) at September 30, 2023 and December 31, 2022, respectively.

Equity securities were comprised of the following:

	September 30, 2023
	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Cost
Equity securities:
Common and non-redeemable preferred stocks:
Financial services	$	880	$	577	$	—	$	303
Other business – diversified		7,344		2,711		—		4,633
Total equity securities	$	8,224	$	3,288	$	—	$	4,936

	December 31, 2022
	Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses		Cost
Equity securities:
Common and non-redeemable preferred stocks:
Financial services	$	790	$	516	$	—	$	274
Other business – diversified		10,772		6,139		—		4,633
Total equity securities	$	11,562	$	6,655	$	—	$	4,907

The carrying value and amortized cost of the Company’s investments in fixed maturities at September 30, 2023 and December 31, 2022 by contractual maturity were as follows. Actual maturities may differ from contractual maturities because issuers may call or prepay obligations with or without call or prepayment penalties.

	September 30, 2023				December 31, 2022
	Carrying Value		Amortized Cost		Carrying Value		Amortized Cost
Due in one year or less	$	367	$	375	$	3,776	$	3,797
Due after one year through five years		57,498		61,209		40,150		42,174
Due after five years through ten years		33,444		38,759		44,044		49,711
Due after ten years		77,744		97,530		87,719		103,095
Asset backed securities		34,015		39,340		33,040		37,989
Totals	$	203,068	$	237,213	$	208,729	$	236,766

The following tables present the Company’s unrealized loss aging for securities by type and length of time the security was in a continuous unrealized loss position as of September 30, 2023 and December 31, 2022.

	September 30, 2023
	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	10,205	$	264	$	36,873	$	6,331	$	47,078	$	6,595
Obligations of states and political subdivisions		2,121		39		5,449		1,908		7,570		1,947
Corporate securities		12,457		748		129,484		25,346		141,941		26,094
Total temporarily impaired securities	$	24,783	$	1,051	$	171,806	$	33,585	$	196,589	$	34,636

	December 31, 2022
	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of U.S. Government agencies and authorities	$	23,763	$	2,410	$	19,259	$	3,516	$	43,022	$	5,926
Obligations of states and political subdivisions		8,183		1,702		—		—		8,183		1,702
Corporate securities		127,928		16,214		14,514		4,948		142,442		21,162
Total temporarily impaired securities	$	159,874	$	20,326	$	33,773	$	8,464	$	193,647	$	28,790

Analysis of Securities in Unrealized Loss Positions

As of September 30, 2023 and December 31, 2022, there were 251 and 237 securities, respectively, in an unrealized loss position which primarily included certain of the Company’s investments in fixed maturities within the utilities and telecom, financial services, other diversified business and other diversified consumer sectors. The unrealized losses on the Company’s fixed maturity securities investments have been primarily related to general market changes in interest rates and/or the levels of credit spreads rather than specific concerns with the issuer’s ability to pay interest and repay principal.

For any of its fixed maturity securities with significant declines in fair value, the Company performs detailed analyses to identify whether the drivers of the declines are due to general market drivers, such as the recent increases in interest rates, or due to credit-related factors. Identifying the drivers of the declines in fair value helps to align and allocate the Company’s resources to securities with real credit-related concerns that could impact the ultimate collection of principal and interest. For any significant declines in fair value determined to be non-interest rate or market related, the Company performs a more focused review of the related issuers’ specific credit profile.

For corporate issuers, the Company evaluates their assets, business profile including industry dynamics and competitive positioning, financial statements and other available financial data. For non-corporate issuers, the Company analyzes all sources of credit support, including issuer-specific factors. The Company utilizes information available in the public domain and, for certain private placement issuers, from consultations with the issuers directly. The Company also considers ratings from Nationally Recognized Statistical Rating Organizations (NRSROs), as well as the specific characteristics of the security it owns including seniority in the issuer’s capital structure, covenant protections, or other relevant features. From these reviews, the Company evaluates the issuers’ continued ability to service the Company’s investment through payment of interest and principal.

Assuming no credit-related factors develop, unrealized gains and losses on fixed maturity securities are expected to diminish as investments near maturity. Based on its credit analysis, the Company believes that the issuers of its fixed maturity investments in the sectors shown in the table above have the ability to service their obligations to the Company. In addition, the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

However, from time to time the Company identifies certain available-for-sale fixed maturity securities where the amortized cost basis exceeds the present value of the cash flows expected to be collected due to credit related factors and as a result, a credit allowance will be estimated. The Company had no ACL on its available-for-sale fixed maturities as of September 30, 2023.

The following tables summarize realized investment gains for the three month and nine month periods ended September 30, 2023 and 2022.

Three Months Ended

September 30, 2023

Fixed

Maturities

Equity

Securities

Other

Invested Assets

Total

Gains

—

Losses

—

Realized investment gains, net

—

	Three Months Ended September 30, 2022
	Fixed Maturities		Equity Securities		Other Invested Assets		Total
Gains	$	101	$	—	$	—	$	101
Losses		—		—		—		—
Realized investment gains, net	$	101	$	—	$	—	$	101

	Nine Months Ended September 30, 2023
	Fixed Maturities		Equity Securities		Other Invested Assets		Total
Gains	$	70	$	—	$	—	$	70
Losses		—		—		—		—
Realized investment gains, net	$	70	$	—	$	—	$	70

	Nine Months Ended September 30, 2022
	Fixed Maturities			Equity Securities		Other Invested Assets			Total
Gains	$	101		$	—	$	—		$	101
Losses		(53	)		—		(19	)		(72	)
Realized investment gains (losses), net	$	48		$	—	$	(19	)	$	29

The following table presents the change in unrealized losses related to equity securities still held for the three month and nine month periods ended September 30, 2023 and 2022.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net realized and unrealized losses recognized during the period on equity securities	$	(1,486	)	$	(2,783	)	$	(3,367	)	$	(5,456	)
Less: Net realized gains recognized during the period on equity securities sold during the period		—			—			—			—
Unrealized losses recognized during the reporting period on equity securities, net	$	(1,486	)	$	(2,783	)	$	(3,367	)	$	(5,456	)

Variable Interest Entities

The Company holds passive interests in a number of entities that are considered to be variable interest entities (“VIEs”) under GAAP guidance. The Company’s VIE interests principally consist of interests in limited liability companies formed for the purpose of achieving diversified equity returns. The Company’s VIE interests, carried as a part of other invested assets, totaled $6,398 and $5,386 as of September 30, 2023 and December 31, 2022, respectively. The Company’s VIE interests, carried as a part of investment in unconsolidated trusts, totaled $1,238 as of September 30, 2023 and December 31, 2022.

The Company does not have power over the activities that most significantly impact the economic performance of these VIEs and thus is not the primary beneficiary. Therefore, the Company has not consolidated these VIEs. The Company’s involvement with each VIE is limited to its direct ownership interest in the VIE. The Company has no arrangements with any of the VIEs to provide other financial support to or on behalf of the VIE. The Company’s maximum loss exposure relative to these investments was limited to the carrying value of the Company’s investment in the VIEs, which amount to $7,636 and $6,624, as of September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023 and December 31, 2022, the Company had outstanding commitments totaling $4,518 and $5,872, respectively, whereby the Company is committed to fund these investments and may be called by the partnership during the commitment period to fund the purchase of new investments and partnership expenses.