Investments

9 Months Ended

Sep. 30, 2023

Investments

(8) Investments

Investments include primarily investment-grade corporate bonds, U.S. treasury obligations and asset-backed securities having maturities of up to five years (the “bond portfolio”) and money market investments. Investments in the bond portfolio are reported as available-for-sale and are carried at fair value. Investments maturing less than one year from the balance sheet date are included in short-term investments and investments maturing more than one year from the balance sheet date are included in other assets in the consolidated balance sheets. Management performs an analysis of the nature of the unrealized losses on available-for-sale investments to determine whether an allowance for credit loss is necessary. Unrealized losses, representing the excess of the purchase price of an investment over its fair value as of the end of a period, considered to be a result of credit-related factors, are to be included as a charge in the statement of income, while unrealized losses considered to be a result of non-credit-related factors are to be included as a component of shareholders’ equity. Investments whose values are based on quoted market prices in active markets are classified within Level 1. Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, are classified within Level 2. As Level 2 investments include positions that are not traded in active markets, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. Any transfers between levels are recognized as of the beginning of any reporting period. Fair value of the bond portfolio was determined using Level 1 inputs related to U.S. Treasury obligations and money market investments and Level 2 inputs related to investment-grade corporate bonds, asset-backed securities and direct obligations of government agencies. Unrealized losses, net of unrealized gains, on the investments in the bond portfolio were $9,542,000 and $10,763,000 at September 30, 2023 and December 31, 2022, respectively.

The amortized cost and fair values of available-for-sale investments are as follows at September 30, 2023 and December 31, 2022 (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2023
Money market investments	$	16,032	$	—	$	—	$	16,032
Asset-backed securities		17,044		—		2,708		14,336
Corporate bonds and direct obligations of
government agencies		119,632		—		6,758		112,874
U.S. Treasury obligations		9,203		—		76		9,127
Total	$	161,911	$	—	$	9,542	$	152,369
December 31, 2022
Money market investments	$	21,910	$	—	$	—	$	21,910
Asset-backed securities		18,905		—		2,889		16,016
Corporate bonds and direct obligations of
government agencies		126,134		1		7,775		118,360
U.S. Treasury obligations		2,344		—		100		2,244
Total	$	169,293	$	1	$	10,764	$	158,530

For those available-for-sale investments with unrealized losses at September 30, 2023 and December 31, 2022, the following table summarizes the duration of the unrealized loss (in thousands):

	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
September 30, 2023
Asset-backed securities	$	—	$	—	$	14,336	$	2,708	$	14,336	$	2,708
Corporate bonds and direct obligations of government agencies		20,707		507		92,167		6,251		112,874		6,758
U.S. Treasury obligations		6,849		8		2,278		68		9,127		76
Total	$	27,556	$	515	$	108,781	$	9,027	$	136,337	$	9,542
December 31, 2022
Asset-backed securities	$	—	$	—	$	16,016	$	2,889	$	16,016	$	2,889
Corporate bonds and direct obligations of government agencies		54,031		1,516		62,390		6,259		116,421		7,775
U.S. Treasury obligations		2,244		100		—		—		2,244		100
Total	$	56,275	$	1,616	$	78,406	$	9,148	$	134,681	$	10,764

The Company believes unrealized losses on investments were primarily caused by rising interest rates rather than changes in credit quality. The Company expects to recover, through collection of all of the contractual cash flows of each security, the amortized cost basis of these securities as it does not intend to sell, and does not anticipate being required to sell, these securities before recovery of the cost basis. For these reasons, no losses have been recognized in the Company’s consolidated statements of income.