very-10q_20200630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020 

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM                      TO                     

Commission File Number 001-38945

 

VERICITY, INC.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

 

46-2348863

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

8700 W. Bryn Mawr Avenue, Suite 900S, Chicago Illinois

 

60631

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (312) 288-0073

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol

 

Name on each exchange on which registered

Common Stock, Par Value $0.001 per share

 

VERY

 

NASDAQ Capital Market

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES  NO  

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES  NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  NO 

The number of shares of Registrant’s Common Stock outstanding as of August 13, 2020 was 14,875,000.

 

 


Table of Contents

 

 

 

 

 

Page

 

 

 

 

 

PART I –

 

Financial Information

 

 

 

Item 1.

 

Financial Statements (Unaudited) (at June 30, 2020 and December 31, 2019 and for the Three Months and Six Months Ended June 30, 2020 and 2019)

 

 

 

 

 

Interim Condensed Consolidated Balance Sheets

 

1

 

 

Interim Condensed Consolidated Statements of Operations

 

2

 

 

Interim Condensed Consolidated Statements of Comprehensive Income (Loss)

 

3

 

 

Interim Condensed Consolidated Statements of Changes in Equity

 

4

 

 

Interim Condensed Consolidated Statements of Cash Flows

 

5

 

 

Notes to the Interim Condensed Consolidated Financial Statements

 

6

 

 

 

Note 1 – Summary of Significant Accounting Policies

 

6

 

 

 

Note 2 – Investments

 

7

 

 

 

Note 3 – Policy Liabilities

 

12

 

 

 

Note 4 – Reinsurance

 

12

 

 

 

Note 5 – Closed Block

 

13

 

 

 

Note 6 – Commitments and Contingencies

 

15

 

 

 

Note 7 – Assets and Liabilities Measured at Fair Value

 

16

 

 

 

Note 8 – Long and Short-term Debt

 

19

 

 

 

Note 9 – Accumulated Other Comprehensive Income (Loss)

 

20

 

 

 

Note 10 – Business Segments

 

20

 

 

 

Note 11 – Subsequent Events

 

21

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

22

Item 4.

 

Controls and Procedures

 

36

 

 

 

 

 

PART II –

 

Other Information

 

37

Item 1.

 

Legal Proceedings

 

37

Item 1A.

 

Risk Factors

 

37

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

37

Item 3.

 

Default upon Senior Securities

 

37

Item 4.

 

Mine Safety Disclosures

 

37

Item 5.

 

Other Information

 

37

Item 6.

 

Exhibits

 

38

Signature

 

 

 

39

 

 


Part 1. Financial Information

Item I. Financial Statements

Vericity, Inc.

Interim Condensed Consolidated Balance Sheets

(dollars in thousands)

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(Unaudited)

 

 

(Audited)

 

Assets

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

Fixed maturities – available-for-sale – at fair value (amortized cost; $306,398

   and $294,402)

 

$

334,664

 

 

$

314,921

 

Equity securities – at fair value (cost; $6,427 and $6,350)

 

 

3,612

 

 

 

5,231

 

Short-term investments - at fair value (amortized cost; $250 and $29,742)

 

 

250

 

 

 

29,757

 

Mortgage loans (net of valuation allowances of $33 and $53)

 

 

52,209

 

 

 

51,835

 

Policyholder loans

 

 

6,205

 

 

 

6,040

 

Other invested assets

 

 

115

 

 

 

104

 

Total investments

 

 

397,055

 

 

 

407,888

 

Cash and cash equivalents

 

 

56,964

 

 

 

37,842

 

Accrued investment income

 

 

2,582

 

 

 

2,780

 

Reinsurance recoverables

 

 

145,821

 

 

 

132,870

 

Deferred policy acquisition costs

 

 

89,518

 

 

 

85,776

 

Commissions and agent balances (net of allowances of $545 and $545)

 

 

14,753

 

 

 

11,270

 

Intangible assets

 

 

1,635

 

 

 

1,635

 

Deferred income tax assets, net

 

 

10,520

 

 

 

9,440

 

Other assets

 

 

25,906

 

 

 

32,281

 

Total assets

 

 

744,754

 

 

 

721,782

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Future policy benefits and claims

 

 

362,985

 

 

 

335,766

 

Policyholder account balances

 

 

85,047

 

 

 

87,517

 

Other policyholder liabilities

 

 

29,193

 

 

 

25,063

 

Policy dividend obligations

 

 

13,085

 

 

 

11,453

 

Reinsurance liabilities and payables

 

 

7,151

 

 

 

15,382

 

Long-term debt

 

 

19,961

 

 

 

16,601

 

Short-term debt

 

 

5,098

 

 

 

3,999

 

Other liabilities

 

 

22,189

 

 

 

13,584

 

Total liabilities

 

 

544,709

 

 

 

509,365

 

Commitments and Contingencies (Note 6)

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

Common stock, $.001 par value, 30,000,000 shares authorized, 14,875,000 shares, issued and outstanding

 

 

15

 

 

 

15

 

Additional paid-in capital

 

 

39,840

 

 

 

39,840

 

Retained earnings

 

 

148,455

 

 

 

163,805

 

Accumulated other comprehensive income (loss)

 

 

11,735

 

 

 

8,757

 

Total shareholders' equity

 

 

200,045

 

 

 

212,417

 

Total liabilities and shareholders' equity

 

$

744,754

 

 

$

721,782

 

 

See notes to interim condensed consolidated financial statements

1


Vericity, Inc.

Interim Condensed Consolidated Statements of Operations

(dollars in thousands, except earnings per share)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net insurance premiums

 

$

26,313

 

 

$

25,791

 

 

$

56,369

 

 

$

48,880

 

Net investment income

 

 

3,456

 

 

 

3,682

 

 

 

7,028

 

 

 

7,501

 

Net realized investment (losses) gains

 

 

1,307

 

 

 

(99

)

 

 

(1,750

)

 

 

949

 

Other-than-temporary-impairment (OTTI)

 

 

 

 

 

 

 

 

(54

)

 

 

 

Earned commissions

 

 

4,403

 

 

 

5,149

 

 

 

8,528

 

 

 

8,895

 

Insurance lead sales

 

 

1,061

 

 

 

1,444

 

 

 

2,649

 

 

 

2,879

 

Other income

 

 

117

 

 

 

87

 

 

 

200

 

 

 

142

 

Total revenues

 

 

36,657

 

 

 

36,054

 

 

 

72,970

 

 

 

69,246

 

Benefits and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Life, annuity, and health claim benefits

 

 

20,916

 

 

 

16,085

 

 

 

41,677

 

 

 

32,330

 

Interest credited to policyholder account balances

 

 

781

 

 

 

837

 

 

 

1,564

 

 

 

1,638

 

Operating costs and expenses

 

 

18,657

 

 

 

18,377

 

 

 

42,186

 

 

 

37,305

 

Amortization of deferred policy acquisition costs

 

 

3,791

 

 

 

3,383

 

 

 

4,767

 

 

 

6,522

 

Total benefits and expenses

 

 

44,145

 

 

 

38,682

 

 

 

90,194

 

 

 

77,795

 

(Loss) income before income tax

 

 

(7,488

)

 

 

(2,628

)

 

 

(17,224

)

 

 

(8,549

)

Income tax (benefit) expense

 

 

(716

)

 

 

(30

)

 

 

(1,874

)

 

 

284

 

Net (loss) income

 

$

(6,772

)

 

$

(2,598

)

 

$

(15,350

)

 

$

(8,833

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share for the periods

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(Unaudited)

 

 

(Unaudited)

(Pro forma)

 

 

(Unaudited)

 

 

(Unaudited)

(Pro forma)

 

Weighted average shares outstanding, basic and diluted

 

 

14,875,000

 

 

 

14,875,000

 

 

 

14,875,000

 

 

 

14,875,000

 

Basic earnings per share

 

$

(0.46

)

 

$

(0.17

)

 

$

(1.03

)

 

$

(0.59

)

Diluted earnings per share

 

$

(0.46

)

 

$

(0.17

)

 

$

(1.03

)

 

$

(0.59

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The 2019 pro forma earnings per common share—basic and diluted—presented on the above Interim Condensed Consolidated Statements of Operations is intended to depict the impact of the Conversion because neither Vericity, Inc., nor the Predecessor, had, prior to the Conversion, any outstanding common shares. The above table presents the 2019 pro forma net loss and weighted average common shares outstanding used in the computation of earnings per common share and earnings per common share – assuming dilution.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to interim condensed consolidated financial statements

2


Vericity, Inc.

Interim Condensed Consolidated Statements of Comprehensive Income (Loss)

(dollars in thousands)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Net (loss) income

 

$

(6,772

)

 

$

(2,598

)

 

$

(15,350

)

 

$

(8,833

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gains (losses) on investments

 

 

10,231

 

 

 

4,608

 

 

 

2,978

 

 

 

9,306

 

Total other comprehensive income (loss)

 

 

10,231

 

 

 

4,608

 

 

 

2,978

 

 

 

9,306

 

Total comprehensive (loss) income

 

$

3,459

 

 

$

2,010

 

 

$

(12,372

)

 

$

473

 

 

See notes to interim condensed consolidated financial statements

3


Vericity, Inc.

Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity

(dollars in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

 

(Unaudited)

 

Common stock

 

 

 

 

 

 

 

 

Balance – beginning of period

 

$

15

 

 

$

 

Common stock issued

 

 

 

 

 

 

Balance – end of period

 

$

15

 

 

$

 

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

 

 

 

 

 

 

Balance – beginning of period

 

$

39,840

 

 

$

 

Proceeds net of offering costs

 

 

 

 

 

 

Balance – end of period

 

$

39,840

 

 

$

 

 

 

 

 

 

 

 

 

 

Retained earnings

 

 

 

 

 

 

 

 

Balance – beginning of period

 

$

163,805

 

 

$

174,558

 

Cumulative effect adjustment from changes in accounting guidance, net of tax

 

 

 

 

 

8,571

 

Balance after adjustments – beginning of period

 

 

163,805

 

 

 

183,129

 

Net (loss) income

 

 

(15,350

)

 

 

(8,833

)

Balance – end of period

 

$

148,455

 

 

$

174,296

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income (loss)

 

 

 

 

 

 

 

 

Balance – beginning of period

 

$

8,757

 

 

$

(2,368

)

Other comprehensive (loss) income

 

 

2,978

 

 

 

9,306

 

Balance – end of period

 

$

11,735

 

 

$

6,938

 

Total shareholders' equity

 

$

200,045

 

 

$

181,234

 

 

See notes to interim condensed consolidated financial statements

4


Vericity, Inc.

Interim Condensed Consolidated Statements of Cash Flows

(dollars in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

 

(Unaudited)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(15,350

)

 

$

(8,833

)

Adjustments to reconcile net (loss) to net cash provided (used) by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization and other non-cash items

 

 

1,263

 

 

 

921

 

Interest credited to policyholder account balances

 

 

1,564

 

 

 

1,638

 

Deferred income tax

 

 

(1,874

)

 

 

85

 

Net realized investment (losses) gains

 

 

1,750

 

 

 

(949

)

Other-than-temporary-impairment

 

 

54

 

 

 

 

Interest expense

 

 

638

 

 

 

446

 

Change in:

 

 

 

 

 

 

 

 

Equity securities

 

 

(390

)

 

 

(216

)

Accrued investment income

 

 

198

 

 

 

258

 

Reinsurance recoverables

 

 

(12,951

)

 

 

1,740

 

Deferred policy acquisition costs

 

 

(3,742

)

 

 

(665

)

Commissions and agent balances

 

 

(3,483

)

 

 

(2,834

)

Other assets

 

 

8,388

 

 

 

(3,672

)

Insurance liabilities

 

 

29,023

 

 

 

3,309

 

Other liabilities

 

 

348

 

 

 

1,823

 

Net cash provided (used) by operating activities

 

 

5,436

 

 

 

(6,949

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Sales, maturities and repayments of:

 

 

 

 

 

 

 

 

Fixed maturity securities

 

 

36,225

 

 

 

60,356

 

Short-term investments

 

 

29,800

 

 

 

 

Mortgage loans

 

 

1,187

 

 

 

1,215

 

Limited partnership interests

 

 

 

 

 

138

 

Purchases of:

 

 

 

 

 

 

 

 

Fixed maturity securities

 

 

(48,253

)

 

 

(53,467

)

Short-term investments

 

 

(250

)

 

 

 

Mortgage loans

 

 

(1,541

)

 

 

(4,508

)

Other invested assets

 

 

(11

)

 

 

 

Limited partnership interests

 

 

 

 

 

(38

)

Change in policyholder loans, net

 

 

(165

)

 

 

(86

)

Other, net

 

 

(3,179

)

 

 

(2,336

)

Net cash provided by investing activities

 

 

13,813

 

 

 

1,274

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Debt issued

 

 

7,671

 

 

 

6,845

 

Debt repaid

 

 

(3,850

)

 

 

(3,482

)

Deposits to policyholder account balances

 

 

228

 

 

 

240

 

Withdrawals from policyholder account balances

 

 

(4,176

)

 

 

(4,658

)

Net cash (used) by financing activities

 

 

(127

)

 

 

(1,055

)

Net increase (decrease) in cash and cash equivalents

 

 

19,122

 

 

 

(6,730

)

Cash, cash equivalents and restricted cash – beginning of period

 

 

37,842

 

 

 

20,984

 

Cash, cash equivalents and restricted cash – end of period

 

$

56,964

 

 

$

14,254

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Non-cash transactions

 

$

 

 

$

 

Cumulative effect adjustment from changes in accounting guidance, net of tax

 

$

 

 

$

8,571

 

 

 

See notes to interim condensed consolidated financial statements

5


Vericity, Inc.

Notes to Interim Condensed Consolidated Financial Statements

(dollars in thousands)

Note 1 – Summary of Significant Accounting Policies

Description of Business

Vericity, Inc. (the Company) is a Delaware corporation organized to be the stock holding company for Members Holding Company (Members) and its subsidiaries. On August 7, 2019, the Company completed the initial public offering of 14,875,000 shares of its common stock at a price of $10.00 per share (the IPO). The IPO was conducted in connection with the conversion of Members Mutual Holding Company from mutual to stock form and the acquisition by the Company of all of the capital stock of Members following its conversion to stock form after its plan of conversion and amended and restated articles of incorporation were approved at a special meeting of eligible members on August 6, 2019 (the Conversion). As a result of the Conversion, the Company became the holding company for converted Members Mutual Holding Company and its indirect subsidiaries, including Fidelity Life Association (Fidelity Life) and Efinancial, LLC (Efinancial).

The Company operates as a holding company and currently has no other business operations. Fidelity Life is an Illinois‑domiciled life insurance company that was founded in 1896.  Fidelity Life markets life insurance products through independent and affiliated distributors and is licensed in the District of Columbia and all states, except New York and Wyoming.  Efinancial markets life and other products for non‑affiliated insurance companies and sells life products for Fidelity Life.

The accompanying interim condensed consolidated financial statements present the accounts of the Company and subsidiaries for the six months ended June 30, 2020 and June 30, 2019 and at June 30, 2020 and December 31, 2019. These interim condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report in the Form 10-K for the year ended December 31, 2019. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year.

Basis of Presentation 

These interim condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The unaudited interim condensed consolidated financial information furnished herein reflects all adjustments which are, in the opinion of management, necessary to fairly state the results for the interim periods presented. All such adjustments are of a normal recurring nature. All intercompany accounts and transactions have been eliminated in consolidation. The consolidated results of operations for the interim periods presented are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted from this report, as is permitted by such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the financial statements as of and for the year ended December 31, 2019, and notes thereto, included in the Form 10-K.

Use of Estimates

The preparation of interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  The more significant estimates employed in the preparation of the interim condensed consolidated financial statements include the determination of the valuation of investments in fixed maturities and equity securities, investment impairments, the valuation of deferred tax assets, future policy benefits and other policyholder liabilities.  

Accounting Standards Adopted

  On January 1, 2020, the Company adopted ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, to improve the effectiveness of disclosures in the Notes to the Interim Condensed Consolidated Financial Statements included in this Form 10-Q.

Recent Developments

 

The outbreak of the novel coronavirus (“COVID-19”) in many countries continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The measures governments worldwide have enacted to combat the pandemic have resulted in disruptions in global and local supply chains and have led to adverse impacts on economic and

6


market conditions as well as increases in unemployment. The severity of COVID-19 and duration of government containment actions impacts both employees and customers of the Company and presents material uncertainty and risk with respect to the Company’s performance, liquidity, results of operations, and financial condition.

 

The stress and disruption placed on the global economy and financial markets from the outbreak of COVID-19 may continue to have near and long-term negative effects on investment valuations, returns, and credit allowance exposure.  The Company will continue to closely monitor the situation, including potential negative impacts on sales of new policies and mortality; however, due to the highly uncertain nature of these conditions, it is not possible to reliably estimate the length and severity of COVID-19 or its impact to the Company’s operations, but the effect could be material.

 

Note 2 Investments

The Company continuously monitors its investment strategies and individual holdings with consideration of current and projected market conditions, the composition of the Company’s liabilities, projected liquidity and capital investment needs, and compliance with investment policies and state regulatory guidelines.

Available‑for‑Sale Securities

The amortized cost, gross unrealized gains, gross unrealized losses, fair value, and OTTI loss included in accumulated other comprehensive income (AOCI) of fixed maturities available-for-sale are as follows:

 

 

 

June 30, 2020

 

Fixed maturities

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

 

OTTI

Losses

 

U.S. government and agencies

 

$

11,668

 

 

$

3,161

 

 

$

 

 

$

14,829

 

 

$

 

U.S. agency mortgage-backed

 

 

27,984

 

 

 

1,914

 

 

 

(1

)

 

 

29,897

 

 

 

 

State and political subdivisions

 

 

38,727

 

 

 

3,405

 

 

 

(2

)

 

 

42,130

 

 

 

 

Corporate and miscellaneous

 

 

132,249

 

 

 

21,484

 

 

 

(507

)

 

 

153,226

 

 

 

 

Foreign government

 

 

131

 

 

 

33

 

 

 

 

 

 

164

 

 

 

 

Residential mortgage-backed

 

 

7,369

 

 

 

339

 

 

 

(64

)

 

 

7,644

 

 

 

(136

)

Commercial mortgage-backed

 

 

18,670

 

 

 

1,036

 

 

 

(264

)

 

 

19,442

 

 

 

 

Asset-backed

 

 

69,600

 

 

 

428

 

 

 

(2,696

)

 

 

67,332

 

 

 

 

Total fixed maturities

 

$

306,398

 

 

$

31,800

 

 

$

(3,534

)

 

$

334,664

 

 

$

(136

)

 

 

 

December 31, 2019

 

Fixed maturities

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

 

OTTI

Losses

 

U.S. government and agencies

 

$

14,195

 

 

$

1,907

 

 

$

 

 

$

16,102

 

 

$

 

U.S. agency mortgage-backed

 

 

38,542

 

 

 

1,044

 

 

 

(52

)

 

 

39,534

 

 

 

 

State and political subdivisions

 

 

23,246

 

 

 

1,561

 

 

 

(64

)

 

 

24,743

 

 

 

 

Corporate and miscellaneous

 

 

132,108

 

 

 

15,311

 

 

 

(280

)

 

 

147,139

 

 

 

 

Foreign government

 

 

131

 

 

 

40

 

 

 

 

 

 

171

 

 

 

 

Residential mortgage-backed

 

 

8,820

 

 

 

421

 

 

 

(26

)

 

 

9,215

 

 

 

(306

)

Commercial mortgage-backed

 

 

18,685

 

 

 

681

 

 

 

(31

)

 

 

19,335

 

 

 

 

Asset-backed

 

 

58,675

 

 

 

306

 

 

 

(299

)

 

 

58,682

 

 

 

 

Total fixed maturities

 

$

294,402

 

 

$

21,271

 

 

$

(752

)

 

$

314,921

 

 

$

(306

)

 

7


Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Maturities of mortgage-backed and asset-backed securities may be substantially shorter than their contractual maturity because they may require monthly principal installments and such loans may prepay principal. The amortized cost and fair value of fixed maturities available-for-sale by contractual maturity, are presented in the following table:

 

 

 

June 30, 2020

 

 

 

Amortized

Cost

 

 

Fair

Value

 

Due in one year or less

 

$

10,656

 

 

$

10,835

 

Due after one year through five years

 

 

44,215

 

 

 

47,204

 

Due after five years through ten years

 

 

24,909

 

 

 

28,883

 

Due after ten years

 

 

102,996

 

 

 

123,428

 

Securities not due at a single maturity date — primarily mortgage and

   asset-backed

 

 

123,622

 

 

 

124,314

 

Total fixed maturities

 

$

306,398

 

 

$

334,664

 

 

Fixed maturities with a carrying value of $3,972 and $3,398 were on deposit with governmental authorities as required by law at June 30, 2020 and December 31, 2019 respectively.

The Company’s fixed maturities portfolio was primarily composed of investment grade securities, defined as a security having a rating of Aaa, Aa, A, or Baa from Moody’s, AAA, AA, A, or BBB from Standard & Poor’s, or National Association of Insurance Commissioners (NAIC) rating of NAIC 1 or NAIC 2. Investment grade securities comprised 98.2% and 98.2% of the Company’s total fixed maturities portfolio at June 30, 2020 and December 31, 2019, respectively.

Short-Term Investments

The Company owned $250 and $29,757 of short-term investments as of June 30, 2020 and December 31, 2019, respectively.  

Mortgage Loans

The Company makes investments in commercial mortgage loans. The Company, along with other investors, owns a pro rata share of each loan. The Company participates in 32 such investment instruments with ownership shares ranging from 2.7% to 30.0% of the trust at June 30, 2020. The Company owns a share of 296 mortgage loans with an average loan balance of $176 and a maximum exposure related to any single loan of $555. Mortgage loan holdings are diversified by geography and property type as follows:

 

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

Gross Carrying

Value

 

 

% of Total

 

 

Gross Carrying

Value

 

 

% of Total

 

Property Type:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

$

16,557

 

 

 

31.7

%

 

$

16,892

 

 

 

32.6

%

Office

 

 

12,503

 

 

 

23.9

%

 

 

12,160

 

 

 

23.4

%

Industrial

 

 

8,607

 

 

 

16.5

%

 

 

8,517

 

 

 

16.4

%

Mixed use

 

 

6,130

 

 

 

11.7

%

 

 

6,240

 

 

 

12.0

%

Apartments

 

 

4,099

 

 

 

7.8

%

 

 

3,713

 

 

 

7.2

%

Medical office

 

 

3,166

 

 

 

6.1

%

 

 

3,163

 

 

 

6.1

%

Other

 

 

1,180

 

 

 

2.3

%

 

 

1,203

 

 

 

2.3

%

Gross carrying value of mortgage loans

 

 

52,242

 

 

 

100.0

%

 

 

51,888

 

 

 

100.0

%

Valuation allowance

 

 

(33

)

 

 

 

 

 

 

(53

)

 

 

 

 

Net carrying value of mortgage loans

 

$

52,209

 

 

 

 

 

 

$

51,835

 

 

 

 

 

8


 

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

Gross Carrying

Value

 

 

% of Total

 

 

Gross Carrying

Value