• Filing Date: 2018-03-07
  • Form Type: 10-K
  • Description: Annual report
v3.8.0.1
Investments (Tables)
12 Months Ended
Dec. 31, 2017
Summary of Amortized Cost, Gross Unrealized Gains and Losses, and Estimated Fair Value of Available-for-Sale Securities

The Company holds investments in fixed-maturity securities and equity securities that are classified as available-for-sale. At December 31, 2017 and 2016, the cost or amortized cost, gross unrealized gains and losses, and estimated fair value of the Company’s available-for-sale securities by security type were as follows:

 

     Cost or
Amortized
Cost
     Gross
Unrealized
Gain
     Gross
Unrealized
Loss
     Estimated
Fair

Value
 

As of December 31, 2017

           

Fixed-maturity securities

           

U.S. Treasury and U.S. government agencies

   $ 42,313      $ 1      $ (287    $ 42,027  

Corporate bonds

     106,897        1,110        (904      107,103  

State, municipalities, and political subdivisions

     78,954        1,816        (75      80,695  

Exchange-traded debt

     7,666        197        (204      7,659  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     235,830        3,124        (1,470      237,484  

Equity securities

     53,132        6,280        (501      58,911  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

   $ 288,962      $ 9,404      $ (1,971    $ 296,395  
  

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2016

           

Fixed-maturity securities

           

U.S. Treasury and U.S. government agencies

   $ 1,975      $ —        $ (36    $ 1,939  

Corporate bonds

     75,538        607        (1,641      74,504  

State, municipalities, and political subdivisions

     78,018        776        (488      78,306  

Exchange-traded debt

     11,463        36        (237      11,262  

Redeemable preferred stock

     237        3        (3      237  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     167,231        1,422        (2,405      166,248  

Equity securities

     47,750        5,769        (484      53,035  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

   $ 214,981      $ 7,191      $ (2,889    $ 219,283  
  

 

 

    

 

 

    

 

 

    

 

 

 

Scheduled Contractual Maturities of Fixed-Maturity Securities

The scheduled contractual maturities of fixed-maturity securities at December 31, 2017 and 2016 are as follows:

 

     December 31,  
     2017      2016  
     Amortized
Cost
     Estimated
Fair

Value
     Amortized
Cost
     Estimated
Fair

Value
 

Available-for-sale

           

Due in one year or less

   $ 35,386      $ 35,364      $ 2,656      $ 2,662  

Due after one year through five years

     116,575        115,766        49,915        50,023  

Due after five years through ten years

     57,415        58,984        90,360        89,332  

Due after ten years

     26,454        27,370        24,300        24,231  
  

 

 

    

 

 

    

 

 

    

 

 

 
     $235,830      $237,484      $167,231      $166,248  
  

 

 

    

 

 

    

 

 

    

 

 

 

Summary of Proceeds Received and Gross Realized Gains and Losses from Sales of Available for Sale Securities

Proceeds received, and the gross realized gains and losses from sales of available-for-sale securities, for the years ended December 31, 2017, 2016 and 2015 were as follows:

 

     Proceeds      Gross
Realized
Gains
     Gross
Realized
Losses
 

Year ended December 31, 2017

        

Fixed-maturity securities

   $ 31,759      $ 2,176      $ (181
  

 

 

    

 

 

    

 

 

 

Equity securities

   $ 42,657      $ 3,882      $ (1,565
  

 

 

    

 

 

    

 

 

 

Year ended December 31, 2016

        

Fixed-maturity securities

   $ 40,454      $ 604      $ (79
  

 

 

    

 

 

    

 

 

 

Equity securities

   $ 23,127      $ 2,656      $ (580
  

 

 

    

 

 

    

 

 

 

Year ended December 31, 2015

        

Fixed-maturity securities

   $ 53,711      $ 253      $ (470
  

 

 

    

 

 

    

 

 

 

Equity securities

   $ 25,695      $ 1,327      $ (1,718
  

 

 

    

 

 

    

 

 

 

Rollforward of Cumulative Credit Losses in Other-Than-Temporary Impairments Recognized in Income for Available for Sale Fixed-Maturity Securities

The following table presents a rollforward of the cumulative credit losses in other-than-temporary impairments recognized in income for available for sale fixed-maturity securities:

 

     2017     2016     2015  

Balance at January 1

   $ 475     $ 111     $ —    

Credit impairments on impaired securities

     —         475       111  

Additional credit impairments on previously impaired securities

     —         293       —    

Credit impaired security fully disposed of for which there was no prior intent or requirement to sell

     (475     (385     —    

Reduction due to increase in expected cash flows recognized over the remaining life of the previously impaired security

     —         (19     —    
  

 

 

   

 

 

   

 

 

 

Balance at December 31

   $ —       $ 475     $ 111  
  

 

 

   

 

 

   

 

 

 

Summary of Securities with Gross Unrealized Loss Positions Aggregated by Investment Category

Securities with gross unrealized loss positions at December 31, 2017 and 2016, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows:

 

     Less Than Twelve Months      Twelve Months or Longer      Total  
As of December 31, 2017    Gross
Unrealized
Loss
    Estimated
Fair

Value
     Gross
Unrealized
Loss
    Estimated
Fair Value
     Gross
Unrealized
Loss
    Estimated
Fair

Value
 

Fixed-maturity securities

              

U.S. Treasury and U.S. government agencies

   $ (246   $ 40,587      $ (41   $ 1,938      $ (287   $ 42,525  

Corporate bonds

     (174     40,627        (730     30,563        (904     71,190  

State, municipalities, and political subdivisions

     (30     9,775        (45     2,297        (75     12,072  

Exchange-traded debt

     (203     2,481        (1     36        (204     2,517  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total fixed-maturity securities

     (653     93,470        (817     34,834        (1,470     128,304  

Equity securities

     (449     12,812        (52     1,440        (501     14,252  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total available-for-sale securities

   $ (1,102   $ 106,282      $ (869   $ 36,274      $ (1,971   $ 142,556  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

At December 31, 2017, there were 135 securities in an unrealized loss position. Of these securities, 22 securities had been in an unrealized loss position for 12 months or longer.

 


     Less Than Twelve
Months
     Twelve Months or
Longer
     Total  
As of December 31, 2016    Gross
Unrealized
Loss
    Estimated
Fair
Value
     Gross
Unrealized
Loss
    Estimated
Fair
Value
     Gross
Unrealized
Loss
    Estimated
Fair
Value
 

Fixed-maturity securities

              

U.S. Treasury and U.S. government agencies

   $ (36   $ 1,939      $ —       $ —        $ (36   $ 1,939  

Corporate bonds

     (1,546     43,859        (95     2,814        (1,641     46,673  

State, municipalities, and political subdivisions

     (441     26,029        (47     3,036        (488     29,065  

Exchange-traded debt

     (191     4,980        (46     1,954        (237     6,934  

Redeemable preferred stock

     (3     47        —         —          (3     47  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total fixed-maturity securities

     (2,217     76,854        (188     7,804        (2,405     84,658  

Equity securities

     (293     10,042        (191     3,209        (484     13,251  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total available-for-sale securities

   $ (2,510   $ 86,896      $ (379   $ 11,013      $ (2,889   $ 97,909  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

Summary of Proceeds Received, and The Gross Realized Gains and Losses From Sales of Trading Equity Securities

Proceeds received, and the gross realized gains and losses from sales of trading equity securities, for the year ended December 31, 2017 were as follows:

 

     Proceeds      Gross
Realized
Gains
     Gross
Realized
Losses
 

Year ended December 31, 2017

        

Equity securities

   $ 2,625      $ 111      $ (77
  

 

 

    

 

 

    

 

 

 

Schedule of Company's Investments in Limited Partnerships

The following table provides information related to the Company’s investments in limited partnerships:

 

     December 31, 2017      December 31, 2016  
Investment Strategy    Carrying
Value
     Unfunded
Balance
     (%)(a)      Carrying
Value
     Unfunded
Balance
     (%)(a)  

Primarily in senior secured loans and, to a limited extent, in other debt and equity securities of private U.S. lower-middle-market companies. (b)(c)(e)

   $ 7,276      $ 5,505        15.37      $ 6,246      $ 6,428        16.50  

Value creation through active distressed debt investing primarily in bank loans, public and private corporate bonds, asset-backed securities, and equity securities received in connection with debt restructuring. (b)(d)(e)

     7,951        1,745        1.76        7,358        1,360        1.76  

Maximum long-term capital appreciation through long and short positions in equity and/or debt securities of publicly traded U.S. and non-U.S. issuers, derivative instruments and certain other financial instruments. (f)

     —          —          —          11,333        —          66.58  

High returns and long-term capital appreciation through investments in the power, utility and energy industries, and in the infrastructure sector. (b)(g)(h)

     7,509        2,512        0.18        4,326        5,766        0.18  

Value-oriented investments in less liquid and mispriced senior and junior debts of private equity-backed companies. (b)(i)(j)

     448        4,566        0.47        —          —          —    
  

 

 

    

 

 

       

 

 

    

 

 

    

Total

   $ 23,184      $ 14,328         $ 29,263      $ 13,554     
  

 

 

    

 

 

       

 

 

    

 

 

    

 

(a) Represents the Company’s percentage investment in the fund at each balance sheet date.
(b) Except under certain circumstances, withdrawals from the funds or any assignments are not permitted. Distributions, except income from late admission of a new limited partner, will be received when underlying investments of the funds are liquidated.
(c) Expected to have a 10-year term and the capital commitment is expected to expire on September 3, 2019.
(d) Expected to have a three-year term from the end of the capital commitment period, which is March 31, 2018.
(e) At the fund manager’s discretion, the term of the fund may be extended for up to two additional one-year periods.
(f) The withdrawal was effective on February 15, 2017. As a result, the Company’s investment in this limited partnership was terminated.
(g) Expected to have a 10-year term and the capital commitment is expected to expire on June 30, 2020.
(h) With the consent of a super majority of partners, the term of the fund may be extended for up to three additional one-year periods.
(i) Expected to have a six-year term from the commencement date, which can be extended for up to two additional one-year periods with the consent of either the advisory committee or a majority of limited partners.
(j) Unless extended or terminated for reasons specified in the agreement, the capital commitment is expected to expire on December 1, 2018.
Summary of Unaudited Financial Information and Unaudited Financial Position

The following tables provide FMJV’s summarized unaudited financial results and the unaudited financial positions:

 

     Years Ended December 31,  
     2017      2016      2015  

Operating results:

        

Total revenues

   $ 331      $ —        $ 118  

Total expenses

     483        —          257  
  

 

 

    

 

 

    

 

 

 

Net loss

   $ (152    $ —        $ (139
  

 

 

    

 

 

    

 

 

 

The Company’s share of net loss (a)

   $ (234    $ —        $ (125

 

(a) Included in net investment income in the Company’s consolidated statements of income. Gain from the sale of the outparcel during 2017 was allocated in accordance with the method specified in the operating agreement.

 

     December 31,  
     2017      2016  

Balance Sheet:

     

Construction in progress—real estate

   $ 27      $ 334  

Property and equipment, net

     1,199        1,654  

Cash

     236        179  

Other

     5        180  
  

 

 

    

 

 

 

Total assets

   $ 1,467      $ 2,347  
  

 

 

    

 

 

 

Accounts payable

   $      $ 11  

Other liabilities

     18        —    

Members’ capital

     1,449        2,336  
  

 

 

    

 

 

 

Total liabilities and members’ capital

   $ 1,467      $ 2,347  
  

 

 

    

 

 

 

Investment in unconsolidated joint venture, at equity*

   $ 1,304      $ 2,102  

 

* Included the 90% share of FMKT Mel JV’s operating results.
Summary of Real Estate Investment

Real estate investments consist of the following as of December 31, 2017 and 2016:

 

     December 31,  
     2017      2016  

Land

   $ 26,315      $ 17,592  

Land improvements

     9,904        9,336  

Building

     21,284        16,154  

Tenant and leasehold improvements

     1,204        872  

Construction in progress*

     —          3,404  

Other

     3,050        2,683  
  

 

 

    

 

 

 

Total, at cost

     61,757        50,041  

Less: accumulated depreciation and amortization

     (3,399      (1,955
  

 

 

    

 

 

 

Real estate investments

   $ 58,358      $ 48,086  
  

 

 

    

 

 

 

 

* This project, which was developed by the Company’s consolidated variable interest entity, was completed in July 2017. The capitalized costs were reclassified to land, land improvement, and building.
Investment (Loss) Income Summarized

Net investment income (loss), by source, is summarized as follows:

 

     Years Ended December 31,  
     2017      2016      2015  

Available-for-sale securities:

        

Fixed-maturity securities

   $ 5,689      $ 4,589      $ 3,935  

Equity securities

     3,318        3,452        3,710  

Investment expense

     (726      (651      (673

Limited partnership investments

     2,334        1,207        (3,244

Real estate investments

     (1,018      (592      (343

Loss from unconsolidated joint venture

     (234      —          (125

Cash and cash equivalents

     2,069        1,036        661  

Other

     7        46        57  
  

 

 

    

 

 

    

 

 

 

Net investment income

   $ 11,439      $ 9,087      $ 3,978  
  

 

 

    

 

 

    

 

 

 

Variable Interest Entity [Member]  
Summary of Unaudited Financial Information and Unaudited Financial Position

The following table summarizes the assets and liabilities related to this variable interest entity which are included in the accompanying consolidated balance sheets.

 

     December 31,  
     2017      2016  

Cash and cash equivalents

   $ —        $ 65  

Construction in progress included in real estate investments

   $ —        $ 3,404  

Real estate investments

   $ 4,680      $ —    

Other assets

   $ 152      $ —    

Accrued expenses

   $ 21      $ 68  

Other liabilities

   $ 160      $ 11  

Limited Partnership [Member]  
Summary of Unaudited Financial Information and Unaudited Financial Position

The following is the aggregated summarized unaudited financial information of limited partnerships included in the investment strategy table above, which in certain cases is presented on a three-month lag due to the unavailability of information at the Company’s respective balance sheet dates. In applying the equity method of accounting, the Company uses the most recently available financial information provided by the general partner of each of these partnerships. The financial statements of these limited partnerships are audited annually.

 

     Years Ended December 31,  
     2017      2016      2015  

Operating results:

        

Total income

   $ 409,169      $ 310,998      $ 4,350  

Total expenses

     105,281        185,126        77,508  
  

 

 

    

 

 

    

 

 

 

Net income (loss)

   $ 303,888      $ 125,872      $ (73,158
  

 

 

    

 

 

    

 

 

 

 

     December 31,  
     2017      2016  

Balance Sheet:

     

Total assets

   $ 4,381,321      $ 2,956,327  

Total liabilities

   $ 382,310      $ 63,813