INVESTMENTS

3 Months Ended

Mar. 31, 2020

Our investment in available-for-sale securities, which are reported at fair value, includes fixed maturity securities and equity securities. Net unrealized gains or losses on fixed maturities are reported after-tax as a component of other comprehensive income. Changes in fair value of equity securities are reported in investment gains/losses as a component of net income.

The amortized cost and aggregate fair values of investments in available-for-sale securities as of March 31, 2020 are as follows:



($ in thousands) Available-for-sale securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Government corporations and agencies	$	4,569	$	326	$	—	$	4,895
Agency mortgage backed securities	33,437		1,569		19		34,987
Asset backed securities	10,195		37		962		9,270
Private label mortgage backed securities	8,255		115		50		8,320
Corporate bonds	38,365		1,170		1,721		37,814
States, municipalities and political subdivisions	6,178		153		14		6,317
Foreign governments	829		98		—		927
Total Fixed Maturities	101,828		3,468		2,766		102,530
Equity securities	2,127		2,607		30		4,704
Total	$	103,955	$	6,075	$	2,796	$	107,234

The amortized cost and aggregate fair values of investments in held-to-maturity securities as of March 31, 2020 are as follows:



($ in thousands) Held-to-maturity securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Agency mortgage backed securities	$	1,249	$	105	$	—	$	1,354
Total	$	1,249	$	105	$	—	$	1,354

The amortized cost and aggregate fair values of investments in available-for-sale securities as of December 31, 2019 are as follows:



($ in thousands) Available-for-sale securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Government corporations and agencies	$	4,131	$	150	$	—	$	4,281
Agency mortgage backed securities	32,283		861		157		32,987
Asset backed securities	10,307		71		104		10,274
Private label mortgage backed securities	6,815		441		4		7,252
Corporate bonds	36,074		1,816		70		37,820
States, municipalities and political subdivisions	6,669		109		1		6,777
Foreign governments	823		46		—		869
Total Fixed Maturities	97,102		3,494		336		100,260
Equity securities	2,127		3,176		—		5,303
Total	$	99,229	$	6,670	$	336	$	105,563

The amortized cost and aggregate fair values of investments in held-to-maturity securities as of December 31, 2019 are as follows:



($ in thousands) Held-to-maturity securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Agency mortgage backed securities	$	1,290	$	55	$	—	$	1,345
Total	$	1,290	$	55	$	—	$	1,345

The amortized cost and aggregate fair value of debt securities at March 31, 2020, by contractual maturity, are presented in the following table. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.



($ in thousands)	Amortized Cost		Fair Value
Available-for-sale securities:
Due in one year or less	$	1,637	$	1,629
Due after one year through five years	18,944		18,644
Due after five years through ten years	27,489		26,786
Due after ten years	53,758		55,471
Total	$	101,828	$	102,530

Held-to-maturity securities:
Due after one year through five years	$	26	$	27
Due after five years through ten years	4		5
Due after ten years	1,219		1,322
Total	$	1,249	$	1,354

A summary of securities available-for-sale with unrealized losses as of March 31, 2020, along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows:



($ in thousands)	Less than 12 months				12 months or longer				Total
March 31, 2020	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Total Securities in a Loss Position
Agency mortgage backed securities	$	364	$	5	$	536	$	14	$	900	$	19	3
Asset backed securities	6,291		610		1,135		352		7,426		962		11
Private label mortgage backed securities	2,450		50		—		—		2,450		50		6
Corporate bonds	16,831		1,712		491		9		17,322		1,721		36
States, municipalities and political subdivisions	1,483		14		—		—		1,483		14		3
Equity securities	128		30		—		—		128		30		2
	$	27,547	$	2,421	$	2,162	$	375	$	29,709	$	2,796	61

There were no securities held-to-maturity with unrealized losses as of March 31, 2020.

A summary of securities available-for-sale with unrealized losses as of December 31, 2019, along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows:



($ in thousands)	Less than 12 months				12 months or longer				Total
December 31, 2019	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Total Securities in a Loss Position
Agency mortgage backed securities	$	5,663	$	104	$	1,751	$	53	$	7,414	$	157	18
Asset backed securities	4,241		33		1,579		71		5,820		104		9
Private label mortgage backed securities	1,060		4		—		—		1,060		4		1
Corporate bonds	6,363		54		1,484		16		7,847		70		14
States, municipalities and political subdivisions	512		1		—		—		512		1		1
	$	17,839	$	196	$	4,814	$	140	$	22,653	$	336	43

There were no securities held-to-maturity with unrealized losses as of December 31, 2019.

The Company conducts periodic reviews to identify and evaluate securities in an unrealized loss position in order to identify other-than-temporary impairments. For securities in an unrealized loss position, the Company assesses whether the Company has the intent to sell the security or more-likely-than-not will be required to sell the security before the anticipated recovery. If either of these conditions is met, the Company is required to recognize an other-than-temporary impairment with the entire unrealized loss reported in earnings. For securities in an unrealized loss position that do not meet these conditions, the Company assesses whether the impairment of a security is other-than-temporary. If the impairment is determined to be other-than-temporary, the Company is required to separate the other-than-temporary impairments into two components: the amount representing the credit loss and the amount related to all other factors. The credit loss is the portion of the amortized book value in excess of the net present value of the projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. The credit loss component of other-than-temporary impairments is reported in earnings, whereas the amount relating to factors other than credit losses are recorded in other comprehensive income, net of taxes.

Management has evaluated each security in a significant unrealized loss position in the fixed maturity investment portfolio. The Company has no material exposure to sub-prime mortgage loans and approximately 4% of the fixed income investment portfolio is rated below investment grade. Based on a review of the available financial information, the prospect for future earnings of each company and consideration of the Company’s intent and ability to hold the securities until market values recovered, it was determined that, other than the impairment described below, the securities in an accumulated loss position in the portfolio were temporary impairments.

For the three months ended March 31, 2020, the Company realized $238,000 other-than-temporary impairments. For the year ended December 31, 2019, the Company realized no other-than-temporary impairments. At March 31, 2020, the three largest losses not realized as an impairment in the fixed maturity portfolio totaled $356,000, $289,000 and $242,000. After evaluation by management, it was determined that each of these losses were driven by changes in market interest rates and, in some cases, a lack of liquidity in some sectors driven by market dislocation in late March of 2020 associated with the initial market shocks from COVID-19. However, management currently has the intent and ability to hold these investments until recovery so no other-than-temporary impairments were recognized. At December 31, 2019, the three largest losses not realized as an impairment in the fixed maturity portfolio totaled $60,000, $23,000 and $20,000.

Major categories of investment income are summarized as follows:



($ in thousands)	Three months ended March 31,
	2020		2019
Fixed maturities	$	916	$	937
Equity securities	41		27
Mortgage loans on real estate	2		2
Investment real estate	1		2
Policy loans	36		34
Other	4		3
	1,000		1,005
Less: Investment expenses	36		43
Net investment income	$	964	$	962

Major categories of investment gains and losses are summarized as follows:



($ in thousands)	Three months ended March 31,
	2020			2019
Realized gains on fixed maturities	$	121		$	10
Gains (losses) on trading securities	(25		)	3
Change in fair value of equity securities	(599		)	126
Change in surrender value of company owned life insurance	(251		)	189
Realized gain on company owned life insurance	—			1,792
Other gains principally real estate	2			—
Other-than-temporary impairments	(238		)	—
Net investment gains (losses)	$	(990	)	$	2,120

An analysis of the net change in unrealized gains (losses) on available-for-sale securities follows:



($ in thousands)	March 31, 2020			December 31, 2019
Fixed maturities	$	(2,456	)	$	4,910
Deferred income tax	516			(1,031		)
Change in net unrealized gains (losses) on available-for-sale securities	$	(1,940	)	$	3,879