| Investments | Note 4. Investments
The gross unrealized gains and losses on, and the amortized cost
and fair value of, those investments classified as held-to-maturity
at June 30, 2015 are summarized as follows:
Gross Gross Fair Value
(in
thousands)
States and political subdivisions $ 439,985 $ 15,536 $ (961 ) $ 454,560
Corporate bonds 183,246 425 (384 ) 183,287
Commercial mortgage-backed securities 44,907 1,001
— 45,908
U.S. agency-based mortgage-backed securities 14,974 1,516 (2 ) 16,488
U.S. Treasury securities and obligations of U.S. Government
agencies 12,869 1,045
— 13,914
Asset-backed securities 2,532 236 (69 ) 2,699
Totals $ 698,513 $ 19,759 $ (1,416 ) $ 716,856
The gross unrealized gains and losses on, and the cost or amortized
cost and fair value of, those investments classified as
available-for-sale at June 30, 2015 are summarized as
follows:
Cost or Cost Gross Gross Fair Value
(in
thousands)
Fixed maturity:
States and political subdivisions $ 168,047 $ 5,725 $ (609 ) $ 173,163
Corporate bonds 163,985 398 (330 ) 164,053
U.S. agency-based mortgage-backed securities 9,559 4 (2,120 ) 7,443
Total fixed maturity 341,591 6,127 (3,059 ) 344,659
Other investments 10,000 1,695
— 11,695
Equity securities
— 28
— 28
Totals $ 351,591 $ 7,850 $ (3,059 ) $ 356,382
The gross unrealized gains and losses on, and the amortized cost
and fair value of, those investments classified as held-to-maturity
at December 31, 2014 are summarized as follows:
Amortized Cost Gross Gross Fair Value
(in
thousands)
States and political subdivisions $ 385,623 $ 20,100 $ (58 ) $ 405,665
Corporate bonds 176,880 374 (520 ) 176,734
Commercial mortgage-backed securities 46,662 1,867
— 48,529
U.S. agency-based mortgage-backed securities 16,972 1,702 (2 ) 18,672
U.S. Treasury securities and obligations of U.S. Government
agencies 10,697 1,097 (2 ) 11,792
Asset-backed securities 2,797 264 (82 ) 2,979
Totals $ 639,631 $ 25,404 $ (664 ) $ 664,371
The gross unrealized gains and losses on, and the cost or amortized
cost and fair value of, those investments classified as
available-for-sale at December 31, 2014 are summarized as
follows:
Cost or Cost Gross Gross Fair Value
(in
thousands)
Fixed maturity:
States and political subdivisions $ 151,744 $ 7,302 $ (1,672 ) $ 157,374
Corporate bonds 165,412 428 (470 ) 165,370
U.S. agency-based mortgage-backed securities 9,848 2 (1,352 ) 8,498
Total fixed maturity 327,004 7,732 (3,494 ) 331,242
Other investments 10,000 1,748
— 11,748
Equity securities
— 28
— 28
Totals $ 337,004 $ 9,508 $ (3,494 ) $ 343,018
A summary of the cost and fair value of investments in fixed
maturity securities, classified as held-to-maturity at
June 30, 2015, by contractual maturity, is as follows:
Remaining Time to Maturity Amortized Fair Value
(in
thousands)
Within one year $ 146,632 $ 147,370
After one year through five years 280,016 287,865
After five years through ten years 137,031 142,228
After ten years 72,721 74,298
U.S. agency-based mortgage-backed securities 14,974 16,488
Commercial mortgage-backed securities 44,907 45,908
Asset-backed securities 2,532 2,699
Total $ 698,513 $ 716,856
A summary of cost and fair value of investments in fixed maturity
securities, classified as available-for-sale at June 30, 2015,
by contractual maturity, is as follows:
Remaining Time to Maturity Amortized Fair Value
(in
thousands)
Within one year $ 54,714 $ 54,750
After one year through five years 133,161 133,717
After five years through ten years 16,132 16,165
After ten years 128,025 132,584
U.S. agency-based mortgage-backed securities 9,559 7,443
Total $ 341,591 $ 344,659
The following table summarizes the fair value and gross unrealized
losses on securities, aggregated by major investment category and
length of time that the individual securities have been in a
continuous unrealized loss position:
Less Than 12 Months 12 Months or Greater Total
Fair Value of Gross Fair Value of Gross Fair Value of Gross
(in
thousands)
June 30, 2015
Held-to-Maturity
Fixed maturity securities:
Corporate bonds $ 92,732 $ 356 $ 10,852 $ 28 $ 103,584 $ 384
States and political subdivisions 77,142 961
—
— 77,142 961
U.S. agency-based mortgage-backed securities 71 2
—
— 71 2
Asset-backed securities
—
— 1,560 69 1,560 69
Total held-to-maturity securities 169,945 1,319 12,412 97 182,357 1,416
Available-for Sale
Fixed maturity securities:
Corporate bonds $ 76,180 $ 323 $ 4,085 $ 7 $ 80,265 $ 330
States and political subdivisions 33,017 333 4,392 276 37,409 609
U.S. agency-based mortgage-backed securities 577 17 7,743 2,103 8,320 2,120
Total available-for-sale securities 109,774 673 16,220 2,386 125,994 3,059
Total $ 279,719 $ 1,992 $ 28,632 $ 2,483 $ 308,351 $ 4,475
December 31, 2014
Held-to-Maturity
Fixed maturity securities:
Corporate bonds $ 129,788 $ 520 $
— $
— $ 129,788 $ 520
States and political subdivisions 16,896 58
—
— 16,896 58
U.S. Treasury securities and obligations of U.S. Government
agencies 3,385 2
—
— 3,385 2
U.S. agency-based mortgage-backed securities 78 2
—
— 78 2
Asset-backed securities
—
— 1,662 82 1,662 82
Total held-to-maturity securities 150,147 582 1,662 82 151,809 664
Available-for Sale
Fixed maturity securities:
Corporate bonds $ 106,185 $ 470 $
— $
— $ 106,185 $ 470
States and political subdivisions 3,810 6 10,347 1,666 14,157 1,672
U.S. agency-based mortgage-backed securities 627 11 7,757 1,341 8,384 1,352
Total available-for-sale securities 110,622 487 18,104 3,007 128,726 3,494
Total $ 260,769 $ 1,069 $ 19,766 $ 3,089 $ 280,535 $ 4,158
At June 30, 2015, the Company held 205 individual fixed
maturity securities that were in an unrealized loss position, of
which 22 individual fixed maturity securities were in a continuous
unrealized loss position for longer than 12 months.
The Company holds investments in a long/short equity fund,
accounted for under the equity method. The carrying value of this
investment is $11.7 million at June 30, 2015.
Investment income is recognized as it is earned. The discount or
premium on fixed maturity securities is amortized using the
“constant yield” method. Anticipated prepayments, where
applicable, are considered when determining the amortization of
premiums or discounts. Realized investment gains and losses are
determined using the specific identification method.
We regularly review our investment portfolio to evaluate the
necessity of recording impairment losses for other-than-temporary
declines in the fair value of specific investments. We consider
various factors in determining if a decline in the fair value of an
individual security is other-than-temporary. The key factors we
consider are:
• any reduction or elimination of
preferred dividends, or nonpayment of scheduled principal or
interest payments;
• the financial condition and near-term
prospects of the issuer of the applicable security, including any
specific events that may affect its operations or earnings;
• how long and by how much the fair
value of the security has been below its cost or amortized
cost;
• any downgrades of the security by a
rating agency;
• our intent not to sell the security
for a sufficient time period for it to recover its value;
• the likelihood of being forced to
sell the security before the recovery of its value; and
• an evaluation as to whether there are
any credit losses on debt securities.
We reviewed all securities with unrealized losses in accordance
with the impairment policy described above. With the exception of
four securities deemed to be other-than-temporarily impaired, the
Company determined that the unrealized losses in the fixed maturity
securities portfolio related primarily to changes in market
interest rates since the date of purchase, current conditions in
the capital markets and the impact of those conditions on market
liquidity and prices generally, and the transfer of the investments
from the available-for-sale classification to the held-to-maturity
classification in January 2004. We expect to recover the carrying
value of these securities as it is not more likely than not that we
will be required to sell the securities before the recovery of the
amortized cost basis.
During the second quarter of 2015, the Company impaired four fixed
maturity securities in the amount of $2.7 million. The impairment
charge is included in “Net realized gains/(losses) on
investments” for 2015. We impaired the securities due to
recent downgrades of the securities and the amount of the
accumulated unrealized loss. After reviewing the change in relevant
benchmark yields, the Company determined the loss was credit
related.
Net realized losses in the six months ended June 30, 2015 were
$2.6 million resulting from an impairment loss of $2.7 million
recognized for the other-than-temporary decline in the fair value
of four fixed maturity securities offset by $0.1 million in gains
on called fixed maturity securities. Net realized gains in the six
months ended June 30, 2014 were $0.3 million resulting from
gains on called fixed maturity securities and the sale of equity
securities. |
