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Investments
12 Months Ended
Dec. 31, 2016
Investments [Abstract]  
Investments
Note 5.  Investments
 
Available-for-sale securities
The following tables summarize the cost and fair value of our available-for-sale securities:
 
 
At December 31, 2016
(in thousands)
 
Amortized cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Estimated fair value
Available-for-sale securities:
 
 
 
 
 
 
 
 
U.S. treasury
 
$
5,093

 
$
0

 
$
62

 
$
5,031

Government sponsored entities
 
2,004

 
22

 
0

 
2,026

States & political subdivisions
 
249,312

 
6,113

 
2,293

 
253,132

Corporate debt securities
 
321,041

 
3,293

 
1,386

 
322,948

Residential mortgage-backed securities
 
16,232

 
61

 
191

 
16,102

Commercial mortgage-backed securities
 
37,723

 
59

 
933

 
36,849

Collateralized debt obligations
 
68,998

 
351

 
96

 
69,253

Other debt securities
 
2,000

 
0

 
0

 
2,000

Total fixed maturities
 
702,403

 
9,899

 
4,961

 
707,341

Common stock
 
6,152

 
0

 
202

 
5,950

Total available-for-sale securities
 
$
708,555

 
$
9,899

 
$
5,163

 
$
713,291


 
 
 
 
At December 31, 2015
(in thousands)
 
Amortized cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Estimated fair value
Available-for-sale securities:
 
 
 
 
 
 
 
 
States & political subdivisions
 
$
221,093

 
$
10,761

 
$
7

 
$
231,847

Corporate debt securities
 
254,464

 
281

 
4,412

 
250,333

Residential mortgage-backed securities
 
13,639

 
4

 
130

 
13,513

Commercial mortgage-backed securities
 
38,630

 
30

 
1,089

 
37,571

Collateralized debt obligations
 
51,905

 
61

 
221

 
51,745

Other debt securities
 
2,241

 
0

 
41

 
2,200

Total fixed maturities
 
581,972

 
11,137

 
5,900

 
587,209

Common stock
 
12,865

 
0

 
133

 
12,732

Total available-for-sale securities
 
$
594,837

 
$
11,137

 
$
6,033

 
$
599,941


 
The amortized cost and estimated fair value of fixed maturities at December 31, 2016, are shown below by remaining contractual term to maturity.  Mortgage-backed securities are allocated based upon stated maturity dates.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
 
At December 31, 2016
(in thousands)
 
Amortized
 
Estimated
 
 
cost
 
fair value
Due in one year or less
 
$
55,304

 
$
55,394

Due after one year through five years
 
329,377

 
331,617

Due after five years through ten years
 
203,880

 
207,358

Due after ten years
 
113,842

 
112,972

Total fixed maturities
 
$
702,403

 
$
707,341


 
Available-for-sale securities in a gross unrealized loss position are as follows.  Data is provided by length of time for securities in a gross unrealized loss position.
 
 
At December 31, 2016
(dollars in thousands)
 
Less than 12 months
 
12 months or longer
 
Total
 
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
No. of
 
 
value
 
losses
 
value
 
losses
 
value
 
losses
 
holdings
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury
 
$
5,031

 
$
62

 
$
0

 
$
0

 
$
5,031

 
$
62

 
1

States & political subdivisions
 
84,611

 
2,293

 
0

 
0

 
84,611

 
2,293

 
40

Corporate debt securities
 
112,453

 
987

 
8,692

 
399

 
121,145

 
1,386

 
155

Residential mortgage-backed securities
 
7,451

 
60

 
4,974

 
131

 
12,425

 
191

 
13

Commercial mortgage-backed securities
 
26,509

 
437

 
4,319

 
496

 
30,828

 
933

 
28

Collateralized debt obligations
 
27,470

 
75

 
4,208

 
21

 
31,678

 
96

 
15

Total fixed maturities
 
263,525

 
3,914

 
22,193

 
1,047

 
285,718

 
4,961

 
252

Common stock
 
5,950

 
202

 
0

 
0

 
5,950

 
202

 
1

Total available-for-sale securities
 
$
269,475

 
$
4,116

 
$
22,193

 
$
1,047

 
$
291,668

 
$
5,163

 
253

Quality breakdown of fixed maturities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Investment grade
 
$
239,041

 
$
3,605

 
$
16,061

 
$
399

 
$
255,102

 
$
4,004

 
136

Non-investment grade
 
24,484

 
309

 
6,132

 
648

 
30,616

 
957

 
116

Total fixed maturities
 
$
263,525

 
$
3,914

 
$
22,193

 
$
1,047

 
$
285,718

 
$
4,961

 
252


 
 
 
 
At December 31, 2015
(dollars in thousands)
 
Less than 12 months
 
12 months or longer
 
Total
 
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
No. of
 
 
value
 
losses
 
value
 
losses
 
value
 
losses
 
holdings
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
States & political subdivisions
 
$
5,867

 
$
7

 
$
0

 
$
0

 
$
5,867

 
$
7

 
3

Corporate debt securities
 
172,831

 
2,447

 
19,086

 
1,965

 
191,917

 
4,412

 
349

Residential mortgage-backed securities
 
9,827

 
84

 
936

 
46

 
10,763

 
130

 
9

Commercial mortgage-backed securities
 
13,081

 
68

 
19,081

 
1,021

 
32,162

 
1,089

 
24

Collateralized debt obligations
 
27,981

 
103

 
9,174

 
118

 
37,155

 
221

 
19

Other debt securities
 
1,960

 
40

 
241

 
1

 
2,201

 
41

 
2

Total fixed maturities
 
231,547

 
2,749

 
48,518

 
3,151

 
280,065

 
5,900

 
406

Common stock
 
12,732

 
133

 
0

 
0

 
12,732

 
133

 
1

Total available-for-sale securities
 
$
244,279

 
$
2,882

 
$
48,518

 
$
3,151

 
$
292,797

 
$
6,033

 
407

Quality breakdown of fixed maturities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Investment grade
 
$
174,723

 
$
1,296

 
$
38,369

 
$
1,256

 
$
213,092

 
$
2,552

 
105

Non-investment grade
 
56,824

 
1,453

 
10,149

 
1,895

 
66,973

 
3,348

 
301

Total fixed maturities
 
$
231,547

 
$
2,749

 
$
48,518

 
$
3,151

 
$
280,065

 
$
5,900

 
406


 
 
The above securities have been evaluated and determined to be temporary impairments for which we expect to recover our entire principal plus interest. The primary components of this analysis include a general review of market conditions and financial performance of the issuer along with the extent and duration at which fair value is less than cost.  Any securities that we intend to sell or will more likely than not be required to sell before recovery are included in other-than-temporary impairments with the impairment charges recognized in earnings.


Net investment income
Interest and dividend income are recognized as earned and recorded to net investment income. Investment income, net of expenses, was generated from the following portfolios for the years ended December 31:
(in thousands)
 
2016
 
2015
 
2014
Fixed maturities
 
$
20,175

 
$
16,457

 
$
14,173

Equity securities
 
171

 
1,045

 
1,550

Cash equivalents and other
 
1,391

 
1,174

 
1,207

Total investment income
 
21,737

 
18,676

 
16,930

Less: investment expenses
 
1,190

 
885

 
394

Investment income, net of expenses
 
$
20,547

 
$
17,791

 
$
16,536

 
 
Realized investment gains (losses)
Realized gains and losses on sales of securities are recognized in income based upon the specific identification method. Realized gains (losses) on investments were as follows for the years ended December 31:
(in thousands)
 
2016
 
2015
 
2014
Available-for-sale securities:
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
Gross realized gains
 
$
2,111

 
$
1,571

 
$
453

Gross realized losses
 
(2,113
)
 
(1,764
)
 
(333
)
Net realized (losses) gains
 
(2
)
 
(193
)
 
120

Equity securities:
 
 

 
 

 
 
Gross realized gains
 
1

 
759

 
1,132

Gross realized losses
 
(34
)
 
(74
)
 
(195
)
Net realized (losses) gains
 
(33
)
 
685

 
937

Trading securities:
 
 

 
 

 
 
Common stock:
 
 

 
 

 
 
Gross realized gains
 
$
707

 
$
0

 
$
0

Net realized gains
 
707

 
0

 
0

Net realized investment gains
 
$
672

 
$
492

 
$
1,057



The components of other-than-temporary impairments on investments are included below for the years ended December 31:
(in thousands)
 
2016
 
2015
 
2014
Fixed maturities
 
$
(416
)
 
$
(1,558
)
 
$
(105
)
Total other-than-temporary impairments
 
(416
)
 
(1,558
)
 
(105
)
Portion recognized in other comprehensive income
 
0

 
0

 
0

Net impairment losses recognized in earnings
 
$
(416
)
 
$
(1,558
)
 
$
(105
)

 
 
In considering if fixed maturity securities were credit-impaired, some of the factors considered include: potential for the default of interest and/or principal, level of subordination, collateral of the issue, compliance with financial covenants, credit ratings, and industry conditions.  We have the intent to sell all credit-impaired fixed maturity securities; therefore, the entire amount of the impairment charges were included in earnings and no non-credit impairments were recognized in other comprehensive income.  See also Note 2, "Significant Accounting Policies".
 
Limited partnerships
Limited partnership investments, excluding certain real estate limited partnerships recorded at fair value, are generally reported on a one-quarter lag; therefore, our year-to-date limited partnership results through December 31, 2016 are comprised of partnership financial results for the fourth quarter of 2015 and the first, second and third quarters of 2016.  Given the lag in reporting, our limited partnership results do not reflect the market conditions of the fourth quarter of 2016.  Cash contributions made to and distributions received from the partnerships are recorded in the period in which the transaction occurs.

Amounts included in equity in earnings of limited partnerships by method of accounting are included below for the years ended December 31:
(in thousands)
 
2016
 
2015
 
2014
Equity in earnings of limited partnerships accounted for under the equity method
 
$
6,273

 
$
16,545

 
$
8,517

Change in fair value of limited partnerships accounted for under the fair value option
 
752

 
438

 
2,412

Equity in earnings of limited partnerships
 
$
7,025

 
$
16,983

 
$
10,929




The following table summarizes limited partnership investments by sector at December 31:
(in thousands)
 
2016
 
2015
Private equity
 
$
35,228

 
$
48,397

Mezzanine debt
 
6,010

 
12,701

Real estate
 
12,509

 
22,911

Real estate - fair value option
 
4,412

 
4,526

Total limited partnerships
 
$
58,159

 
$
88,535



See also Note 15, "Commitments and Contingencies", for investment commitments related to limited partnerships.