Investments | 5 - Investments The amortized cost and estimated fair values of our fixed maturities at June 30, 2019 were as follows: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (in thousands) Held to Maturity U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 87,839 $ 1,725 $ 66 $ 89,498 Obligations of states and political subdivisions 171,174 13,282 15 184,441 Corporate securities 139,037 5,513 438 144,112 Mortgage-backed securities 36,408 547 39 36,916 Totals $ 434,458 $ 21,067 $ 558 $ 454,967 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (in thousands) Available for Sale U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 32,829 $ 85 $ 45 $ 32,869 Obligations of states and political subdivisions 60,059 1,856 8 61,907 Corporate securities 150,056 2,998 244 152,810 Mortgage-backed securities 321,051 2,338 1,225 322,164 Totals $ 563,995 $ 7,277 $ 1,522 $ 569,750 At June 30, 2019, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $ 162.9 million and an amortized cost of $ 153.7 million. Our holdings at June 30, 2019 also included special revenue bonds with an aggregate fair value of $ 83.4 million and an amortized cost of $ 77.5 million. With respect to both categories of those bonds at June 30, 2019, we held no securities of any issuer that comprised more than 10% of our holdings of either bond category. Education bonds and water and sewer utility bonds represented 46 % and 32 %, respectively, of our total investments in special revenue bonds based on the carrying values of these investments at June 30, 2019. Many of the issuers of the special revenue bonds we held at June 30, 2019 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held at June 30, 2019 are similar to general obligation bonds. The amortized cost and estimated fair values of our fixed maturities at December 31, 2018 were as follows: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (in thousands) Held to Maturity U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 76,222 $ 175 $ 1,087 $ 75,310 Obligations of states and political subdivisions 159,292 8,237 704 166,825 Corporate securities 127,010 396 4,391 123,015 Mortgage-backed securities 40,274 64 450 39,888 Totals $ 402,798 $ 8,872 $ 6,632 $ 405,038 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (in thousands) Available for Sale U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 45,188 $ 25 $ 1,003 $ 44,210 Obligations of states and political subdivisions 73,761 1,762 307 75,216 Corporate securities 140,689 203 3,059 137,833 Mortgage-backed securities 275,475 149 6,325 269,299 Totals $ 535,113 $ 2,139 $ 10,694 $ 526,558 At December 31, 2018, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $157.7 million and an amortized cost of $152.2 million. Our holdings also included special revenue bonds with an aggregate fair value of $84.3 million and an amortized cost of $80.9 million. With respect to both categories of bonds, we held no securities of any issuer that comprised more than 10% of that category at December 31, 2018. Education bonds and water and sewer utility bonds represented 49% and 29%, respectively, of our total investments in special revenue bonds based on their carrying values at December 31, 2018. Many of the issuers of the special revenue bonds we held at December 31, 2018 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held are similar to general obligation bonds. We made reclassifications from available for sale to held to maturity of certain fixed maturities at fair value on November 30, 2013. We segregated within accumulated other comprehensive loss the net unrealized losses of $15.1 million arising prior to the November 30, 2013 reclassifications. We are amortizing this balance over the remaining life of the related securities as an adjustment to yield in a manner consistent with the accretion of discount on the same fixed maturities. We recorded amortization of $ 568,486 and $575,107 in other comprehensive income (loss) during the six months ended June 30, 2019 and 2018, respectively. At June 30, 2019 and December 31, 2018, net unrealized losses of $ 8.1 million and $8.6 million, respectively, remained within accumulated other comprehensive loss. We show below the amortized cost and estimated fair value of our fixed maturities at June 30, 2019 by contractual maturity. Expected maturities may differ from contractual maturities because issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized Cost Estimated Fair Value (in thousands) Held to maturity Due in one year or less $ 23,975 $ 24,103 Due after one year through five years 72,869 75,460 Due after five years through ten years 166,809 174,481 Due after ten years 134,397 144,007 Mortgage-backed securities 36,408 36,916 Total held to maturity $ 434,458 $ 454,967 Available for sale Due in one year or less $ 30,622 $ 30,840 Due after one year through five years 91,216 93,077 Due after five years through ten years 106,807 108,931 Due after ten years 14,299 14,738 Mortgage-backed securities 321,051 322,164 Total available for sale $ 563,995 $ 569,750 The cost and estimated fair values of our equity securities at June 30, 2019 were as follows: Cost Gross Gains Gross Losses Estimated Fair Value (in thousands) Equity securities $ 37,483 $ 9,646 $ 362 $ 46,767 The cost and estimated fair values of our equity securities at December 31, 2018 were as follows: Cost Gross Gains Gross Losses Estimated Fair Value (in thousands) Equity securities $ 40,943 $ 4,818 $ 2,094 $ 43,667 Gross investment gains and losses before applicable income taxes for the three and six months ended June 30, 2019 and 2018 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 (in thousands) (in thousands) Gross investment gains: Fixed maturities $ 14 $ 12 $ 372 $ 12 Equity securities 1,586 2,125 7,572 3,270 Investment in affiliate — — 12,662 — 1,600 2,137 20,606 3,282 Gross investment losses: Fixed maturities 2 1 320 45 Equity securities 32 619 623 2,638 34 620 943 2,683 Net investment gains $ 1,566 $ 1,517 $ 19,663 $ 599 We recognized $6.2 million of gains and $39,898 of losses on equity securities we held at June 30, 2019 in net investment gains for the six months ended June 30, 2019. We recognized $2.1 million of gains and $2.6 million of losses on equity securities held at June 30, 2018 in net investment gains for the six months ended June 30, 2018. We held fixed maturities with unrealized losses representing declines that we considered temporary at June 30, 2019 as follows: Less Than 12 Months More Than 12 Months Fair Value Unrealized Losses Fair Value Unrealized Losses (in thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ — $ — $ 25,618 $ 111 Obligations of states and political subdivisions 3,740 15 4,864 8 Corporate securities 6,538 58 40,055 624 Mortgage-backed securities 3,693 5 130,148 1,259 Totals $ 13,971 $ 78 $ 200,685 $ 2,002 We held fixed maturities with unrealized losses representing declines that we considered temporary at December 31, 2018 as follows: Less Than 12 Months More Than 12 Months Fair Value Unrealized Losses Fair Value Unrealized Losses (in thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 26,342 $ 166 $ 54,900 $ 1,924 Obligations of states and political subdivisions 28,322 477 21,560 534 Corporate securities 149,270 4,483 59,397 2,968 Mortgage-backed securities 82,594 913 181,379 5,862 Totals $ 286,528 $ 6,039 $ 317,236 $ 11,288 We make estimates concerning the valuation of our investments and the recognition of other-than-temporary declines in the value of our investments. For equity securities, we measure investments at fair value, and we recognize changes in fair value in our results of operations. With respect to a debt security that is in an unrealized loss position, we first assess if we intend to sell the debt security. If we determine we intend to sell the debt security, we recognize the impairment loss in our results of operations. If we do not intend to sell the debt security, we determine whether it is more likely than not that we will be required to sell the debt security prior to recovery. If we determine it is more likely than not that we will be required to sell the debt security prior to recovery, we recognize the impairment loss in our results of operations. If we determine it is more likely than not that we will not be required to sell the debt security prior to recovery, we then evaluate whether a credit loss has occurred with respect to that security. We determine whether a credit loss has occurred by comparing the amortized cost of the debt security to the present value of the cash flows we expect to collect. If we expect a cash flow shortfall, we consider that a credit loss has occurred. If we determine that a credit loss has occurred, we consider the impairment to be other than temporary. We then recognize the amount of the impairment loss related to the credit loss in our results of operations, and we recognize the remaining portion of the impairment loss in our other comprehensive income, net of applicable taxes. In addition, we may write down securities in an unrealized loss position based on a number of other factors, including when the fair value of an investment is significantly below its cost, when the financial condition of the issuer of a security has deteriorated, the occurrence of industry, issuer or geographic events that have negatively impacted the value of a security and rating agency downgrades. We held 163 debt securities that were in an unrealized loss position at June 30, 2019. Based upon our analysis of general market conditions and underlying factors impacting these debt securities, we considered these declines in value to be temporary. We amortize premiums and discounts on debt securities over the life of the security as an adjustment to yield using the effective interest method. We compute realized investment gains and losses using the specific identification method. We amortize premiums and discounts on mortgage-backed debt securities using anticipated prepayments. |