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Investments
 9 Months Ended
Sep. 30, 2016
Investments [Abstract]  
Investments

5. Investments



The amortized cost and estimated fair value of investments in debt and equity securities by category is as follows (in thousands):





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

Gross

 

Gross

 

 



 

Amortized

 

Unrealized

 

Unrealized

 

Fair

As of September 30, 2016

 

Cost

 

Gains

 

Losses

 

Value

U.S. Treasury securities and obligations of U.S. Government

 

$

 71,891 

 

$

 181 

 

$

 -

 

$

 72,072 

Corporate bonds

 

 

 205,482 

 

 

 2,412 

 

 

 (193)

 

 

 207,701 

Collateralized corporate bank loans

 

 

 86,115 

 

 

 447 

 

 

 (127)

 

 

 86,435 

Municipal bonds

 

 

 169,553 

 

 

 2,006 

 

 

 (2,079)

 

 

 169,480 

Mortgage-backed

 

 

 64,849 

 

 

 312 

 

 

 (58)

 

 

 65,103 



 

 

 

 

 

 

 

 

 

 

 

 

Total debt securities

 

 

 597,890 

 

 

 5,358 

 

 

 (2,457)

 

 

 600,791 



 

 

 

 

 

 

 

 

 

 

 

 

Total equity securities

 

 

 30,309 

 

 

 19,474 

 

 

 (947)

 

 

 48,836 



 

 

 

 

 

 

 

 

 

 

 

 

Total debt and equity securities

 

$

 628,199 

 

$

 24,832 

 

$

 (3,404)

 

$

 649,627 



 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of U.S. Government

 

$

 76,323 

 

$

 7 

 

$

 (61)

 

$

 76,269 

Corporate bonds

 

 

 122,894 

 

 

 637 

 

 

 (1,822)

 

 

 121,709 

Collateralized corporate bank loans

 

 

 83,434 

 

 

 44 

 

 

 (1,882)

 

 

 81,596 

Municipal bonds

 

 

 196,446 

 

 

 1,888 

 

 

 (5,966)

 

 

 192,368 

Mortgage-backed

 

 

 59,532 

 

 

 155 

 

 

 (304)

 

 

 59,383 



 

 

 

 

 

 

 

 

 

 

 

 

Total debt securities

 

 

 538,629 

 

 

 2,731 

 

 

 (10,035)

 

 

 531,325 



 

 

 

 

 

 

 

 

 

 

 

 

Total equity securities

 

 

 24,951 

 

 

 23,391 

 

 

 (838)

 

 

 47,504 



 

 

 

 

 

 

 

 

 

 

 

 

Total debt and equity securities

 

$

 563,580 

 

$

 26,122 

 

$

 (10,873)

 

$

 578,829 

Major categories of net realized gains (losses) on investments are summarized as follows (in thousands):





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended September 30,

 

Nine Months Ended September 30,



 

2016

 

2015

 

2016

 

2015



 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and  obligations of U.S. Government

 

$

-

 

$

-

 

$

-

 

$

-

Corporate bonds

 

 

 (81)

 

 

 -

 

 

 (1)

 

 

 -

Collateralized corporate bank loans

 

 

 (98)

 

 

 8 

 

 

 (116)

 

 

 158 

Municipal bonds

 

 

 (97)

 

 

 (12)

 

 

 (165)

 

 

 (54)

Mortgage-backed

 

 

 (1)

 

 

 -

 

 

 (1)

 

 

 240 

Equity securities

 

 

 1,382 

 

 

 32 

 

 

 1,872 

 

 

 5,537 

Gain on investments

 

 

 1,105 

 

 

 28 

 

 

 1,589 

 

 

 5,881 

Other-than-temporary impairments

 

 

 -

 

 

 (363)

 

 

 (2,888)

 

 

 (2,193)

Net realized gains (losses)

 

$

 1,105 

 

$

 (335)

 

$

 (1,299)

 

$

 3,688 



We realized gross gains on investments of $1.4 million and $76 thousand during the three months ended September 30, 2016 and 2015, respectively, and $2.1 million and $6.0 million for the nine months ended September 30, 2016 and 2015, respectively.  We realized gross losses on investments of $0.3 million and $48 thousand for the three months ended September 30, 2016 and 2015, respectively, and $0.5 million and $0.1 million for the nine months ended September 30, 2016 and 2015, respectively. We recorded proceeds from the sale of investment securities of $5.4 million and $0.8 million during the three months ended September 30, 2016 and 2015, respectively, and $21.3 million and $17.7 million for the nine months ended September 30, 2016 and 2015, respectively. Realized investment gains and losses are recognized in operations on the specific identification method.



The following schedules summarize the gross unrealized losses showing the length of time that investments have been continuously in an unrealized loss position as of September 30, 2016 and December 31, 2015 (in thousands):







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of September 30, 2016



 

12 months or less

 

Longer than 12 months

 

Total



 

 

 

Unrealized

 

 

 

Unrealized

 

 

 

Unrealized



 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Fair Value

 

Losses



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of U.S. Government

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$

 -

Corporate bonds

 

 

 42,945 

 

 

 (164)

 

 

 2,694 

 

 

 (29)

 

 

 45,639 

 

 

 (193)

Collateralized corporate bank loans

 

 

 10,252 

 

 

 (69)

 

 

 11,381 

 

 

 (58)

 

 

 21,633 

 

 

 (127)

Municipal bonds

 

 

 16,102 

 

 

 (282)

 

 

 16,897 

 

 

 (1,797)

 

 

 32,999 

 

 

 (2,079)

Mortgage-backed

 

 

 17,794 

 

 

 (42)

 

 

 10,821 

 

 

 (16)

 

 

 28,615 

 

 

 (58)

    Total debt securities

 

 

 87,093 

 

 

 (557)

 

 

 41,793 

 

 

 (1,900)

 

 

 128,886 

 

 

 (2,457)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Total equity securities

 

 

 6,569 

 

 

 (364)

 

 

 1,761 

 

 

 (583)

 

 

 8,330 

 

 

 (947)

Total debt and equity securities

 

$

 93,662 

 

$

 (921)

 

$

 43,554 

 

$

 (2,483)

 

$

 137,216 

 

$

 (3,404)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of December 31, 2015



 

12 months or less

 

Longer than 12 months

 

Total



 

 

 

Unrealized

 

 

 

Unrealized

 

 

 

Unrealized



 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Fair Value

 

Losses

U.S. Treasury securities and obligations of U.S. Government

 

$

 41,428 

 

$

 (61)

 

$

 -

 

$

 -

 

$

 41,428 

 

$

 (61)

Corporate bonds

 

 

 96,475 

 

 

 (1,822)

 

 

 -

 

 

 -

 

 

 96,475 

 

 

 (1,822)

Collateralized corporate bank loans

 

 

 65,868 

 

 

 (1,758)

 

 

 3,532 

 

 

 (124)

 

 

 69,400 

 

 

 (1,882)

Municipal bonds

 

 

 44,525 

 

 

 (488)

 

 

 25,310 

 

 

 (5,478)

 

 

 69,835 

 

 

 (5,966)

Mortgage-backed

 

 

 36,251 

 

 

 (302)

 

 

 48 

 

 

 (2)

 

 

 36,299 

 

 

 (304)

    Total debt securities

 

 

 284,547 

 

 

 (4,431)

 

 

 28,890 

 

 

 (5,604)

 

 

 313,437 

 

 

 (10,035)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Total equity securities

 

 

 6,584 

 

 

 (838)

 

 

 -

 

 

 -

 

 

 6,584 

 

 

 (838)

Total debt and equity securities

 

$

 291,131 

 

$

 (5,269)

 

$

 28,890 

 

$

 (5,604)

 

$

 320,021 

 

$

 (10,873)



At September 30, 2016, the gross unrealized losses more than twelve months old were attributable to 33 debt security positions and one equity position.  At December 31, 2015, the gross unrealized losses more than twelve months old were attributable to 39 debt security positions.  We consider these losses as a temporary decline in value as they are predominately on bonds that we do not intend to sell and do not believe we will be required to sell prior to recovery of our amortized cost basis.  We see no other indications that the decline in values of these securities is other-than-temporary. We recognized $2.9 million of other-than-temporary impairments for the nine months ended September 30, 2016 related to six municipal bond securities and two bank loans in the energy sector.



We complete a detailed analysis each quarter to assess whether any decline in the fair value of any investment below cost is deemed other-than-temporary. All securities with an unrealized loss are reviewed.  We recognize an impairment loss when an investment's value declines below cost, adjusted for accretion, amortization and previous other-than-temporary impairments, and it is determined that the decline is other-than-temporary. 



Debt Investments:   We assess whether we intend to sell, or it is more likely than not that we will be required to sell, a fixed maturity investment before recovery of its amortized cost basis less any current period credit losses.  For fixed maturity investments that are considered other-than-temporarily impaired and that we do not intend to sell and will not be required to sell, we separate the amount of the impairment into the amount that is credit related (credit loss component) and the amount due to all other factors.  The credit loss component is recognized in earnings and is the difference between the investment’s amortized cost basis and the present value of its expected future cash flows.  The remaining difference between the investment’s fair value and the present value of future expected cash flows is recognized in other comprehensive income.

 

Equity Investments:  Some of the factors considered in evaluating whether a decline in fair value for an equity investment is other-than-temporary include: (1) our ability and intent to retain the investment for a period of time sufficient to allow for an anticipated recovery in value; (2) the recoverability of cost; (3) the length of time and extent to which the fair value has been less than cost; and (4) the financial condition and near-term and long-term prospects for the issuer, including the relevant industry conditions and trends, and implications of rating agency actions and offering prices. When it is determined that an equity investment is other-than-temporarily impaired, the security is written down to fair value, and the amount of the impairment is included in earnings as a realized investment loss. The fair value then becomes the new cost basis of the investment, and any subsequent recoveries in fair value are recognized at disposition. We recognize a realized loss when impairment is deemed to be other-than-temporary even if a decision to sell an equity investment has not been made. When we decide to sell a temporarily impaired available-for-sale equity investment and we do not expect the fair value of the equity investment to fully recover prior to the expected time of sale, the investment is deemed to be other-than-temporarily impaired in the period in which the decision to sell is made.



The amortized cost and estimated fair value of debt securities at September 30, 2016 by contractual maturity are as follows. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without penalties.







 

 

 

 

 

 



 

 

 

 

 

 



 

Amortized

 

Fair



 

Cost

 

Value



 

(in thousands)

Due in one year or less

 

$

 81,699 

 

$

 81,687 

Due after one year through five years

 

 

 297,438 

 

 

 298,846 

Due after five years through ten years

 

 

 97,531 

 

 

 98,574 

Due after ten years

 

 

 56,373 

 

 

 56,581 

Mortgage-backed

 

 

 64,849 

 

 

 65,103 



 

$

 597,890 

 

$

 600,791