SEC Filing | Trean Insurance Group, Inc.

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tig-20220630

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2022

☐ 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: 001-39392

TREAN INSURANCE GROUP, INC.

(Exact name of registrant as specified in its charter)


Delaware						84-4512647
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

150 Lake Street West

Wayzata, MN 55391

(Address of principal executive offices and zip code)

(952) 974-2200

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

TIG

The Nasdaq Global Select 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," a "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 Act). Yes ☐ No ☒

As of August 4, 2022, there were 51,202,136 shares of the registrant's common stock outstanding.

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TREAN INSURANCE GROUP, INC.

TABLE OF CONTENTS


		Page
PART I - FINANCIAL INFORMATION

Item 1	Financial Statements
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to the Condensed Consolidated Financial Statements	9
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4	Controls and Procedures	47

PART II - OTHER INFORMATION

Item 1	Legal Proceedings	48
Item 1A	Risk Factors	48
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3	Defaults Upon Senior Securities	48
Item 4	Mine Safety Disclosures	48
Item 5	Other Information	48
Item 6	Exhibits	49

Signatures		50

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Trean Insurance Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)


	June 30, 2022		December 31, 2021
Assets	(unaudited)
Fixed maturities, at fair value (amortized cost of $499,544 and $465,459, respectively)	$	466,819	$	471,061

Equity securities, at fair value (cost $34,248 and $984, respectively)	30,698		969

Total investments	497,517		472,030
Cash and cash equivalents	100,716		129,577
Restricted cash	299		407
Accrued investment income	2,736		2,344
Premiums and other receivables	153,822		141,920
Income taxes receivable	969		460
Reinsurance recoverable	388,801		377,241
Prepaid reinsurance premiums	115,459		129,411
Deferred policy acquisition cost, net	16,195		13,344
Property and equipment, net	7,590		7,632
Right of use asset	3,807		4,530
Goodwill	142,347		142,347
Intangible assets, net	70,116		73,114
Other assets	10,906		8,658
Total assets	$	1,511,280	$	1,503,015
Liabilities
Unpaid loss and loss adjustment expenses	$	577,686	$	544,320
Unearned premiums	219,949		219,940
Funds held under reinsurance agreements	200,338		199,410
Reinsurance premiums payable	45,250		45,130
Accounts payable and accrued expenses	23,601		29,448
Lease liability	4,178		4,976

Deferred tax liability	539		7,520
Debt	29,621		30,362
Total liabilities	1,101,162		1,081,106
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value per share (600,000,000 authorized; 51,202,136 and 51,176,887 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively)	512		512
Additional paid-in capital	289,174		288,623
Retained earnings	146,221		128,390
Accumulated other comprehensive income (loss)	(25,789)		4,384
Total stockholders' equity	410,118		421,909
Total liabilities and stockholders' equity	$	1,511,280	$	1,503,015

See accompanying notes to the condensed consolidated financial statements.

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Trean Insurance Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues
Gross written premiums	$	154,189	$	156,551	$	315,592	$	303,281
Decrease (increase) in gross unearned premiums	2,953		(17,927)		89		(36,358)
Gross earned premiums	157,142		138,624		315,681		266,923
Ceded earned premiums	(91,132)		(90,681)		(185,494)		(177,846)
Net earned premiums	66,010		47,943		130,187		89,077
Net investment income (loss)	(391)		2,103		2,185		4,375

Net realized gains	1,349		10		302		23
Other revenue	1,804		1,229		5,005		5,884
Total revenue	68,772		51,285		137,679		99,359
Expenses
Losses and loss adjustment expenses	40,887		29,725		80,080		54,606
General and administrative expenses	21,679		15,267		39,979		27,158
Other expenses	268		845		268		845
Intangible asset amortization	1,500		1,413		2,999		2,827
Noncash stock compensation	403		419		559		630
Interest expense	467		425		875		852
Total expenses	65,204		48,094		124,760		86,918
Gains (losses) on embedded derivatives	3,356		(686)		9,592		1,990
Other income	24		35		47		156
Income before taxes	6,948		2,540		22,558		14,587
Income tax expense	1,457		414		4,727		3,019

Net income	$	5,491	$	2,126	$	17,831	$	11,568
Earnings per share:
Basic	$	0.11	$	0.04	$	0.35	$	0.23
Diluted	$	0.11	$	0.04	$	0.35	$	0.23
Weighted average shares outstanding:
Basic	51,197,111		51,152,979		51,187,509		51,150,881
Diluted	51,197,533		51,166,587		51,187,720		51,173,204

See accompanying notes to the condensed consolidated financial statements.

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Trean Insurance Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Net income	$	5,491	$	2,126	$	17,831	$	11,568
Other comprehensive gain (loss), net of tax:
Unrealized investment gains (losses):
Unrealized investment gains (losses) arising during the period	(15,470)		2,325		(39,274)		(6,251)
Income tax expense (benefit)	(3,254)		488		(8,247)		(1,313)
Unrealized investment gains (losses), net of tax	(12,216)		1,837		(31,027)		(4,938)
Less reclassification adjustments to:
Net realized investment gains (losses) included in net realized gains (losses)	(54)		10		(1,081)		23
Income tax expense (benefit)	(11)		2		(227)		5
Total reclassifications included in net income, net of tax	(43)		8		(854)		18
Other comprehensive income (loss)	(12,173)		1,829		(30,173)		(4,956)
Total comprehensive income (loss)	$	(6,682)	$	3,955	$	(12,342)	$	6,612

See accompanying notes to the condensed consolidated financial statements.

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Trean Insurance Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

For the Three and Six Months Ended June 30, 2022 and 2021

(in thousands, except share and unit data)

(unaudited)


	Common Stock			Additional Paid in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders' Equity
	Shares	Amount
Balance at March 31, 2022	51,192,196	$	512	$	288,771	$	(13,616)	$	140,730	$	416,397
Stock compensation expense	—	—		403		—		—		403
Common stock issued pursuant to equity compensation awards	9,940	—		—		—		—		—
Other comprehensive loss	—	—		—		(12,173)		—		(12,173)
Net income	—	—		—		—		5,491		5,491
Balance at June 30, 2022	51,202,136	$	512	$	289,174	$	(25,789)	$	146,221	$	410,118




Balance at March 31, 2021	51,148,782	$	511	$	287,321	$	6,641	$	118,502	$	412,975
Stock compensation expense	—	—		419		—		—		419
Common stock issuances pursuant to equity compensation awards, net of shares repurchased	8,222	—		(6)		—		—		(6)
Other comprehensive income	—	—		—		1,829		—		1,829
Net income	—	—		—		—		2,126		2,126
Balance at June 30, 2021	51,157,004	$	511	$	287,734	$	8,470	$	120,628	$	417,343




Balance at December 31, 2021	51,176,887	$	512	$	288,623	$	4,384	$	128,390	$	421,909
Stock compensation expense	—	—		559		—		—		559
Common stock issuances pursuant to equity compensation awards, net of shares repurchased	25,249	—		(8)		—		—		(8)
Other comprehensive loss	—	—		—		(30,173)		—		(30,173)
Net income	—	—		—		—		17,831		17,831
Balance at June 30, 2022	51,202,136	$	512	$	289,174	$	(25,789)	$	146,221	$	410,118




Balance at December 31, 2020	51,148,782	$	511	$	287,110	$	13,426	$	109,060	$	410,107
Stock compensation expense	—	—		630		—		—		630
Common stock issuances pursuant to equity compensation awards, net of shares repurchased	8,222	—		(6)		—		—		(6)
Other comprehensive loss	—	—		—		(4,956)		—		(4,956)
Net income	—	—		—		—		11,568		11,568
Balance at June 30, 2021	51,157,004	$	511	$	287,734	$	8,470	$	120,628	$	417,343

See accompanying notes to the condensed consolidated financial statements.

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Trean Insurance Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2022		2021
Operating activities
Net income	$	17,831	$	11,568
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	3,380		3,374
Stock compensation	559		630
Unrealized gains on embedded derivatives	(11,036)		(3,189)
Net losses on investments	(302)		(23)
Unrealized losses on equity securities	3,441		—

Bond amortization and accretion	824		1,174



Deferred income taxes	1,040		(781)
Deferred financing costs	84		84
Changes in operating assets and liabilities:
Accrued investment income	(392)		129
Premiums and other receivables	(11,902)		(22,714)
Reinsurance recoverable on paid and unpaid losses	(11,560)		(18,730)
Prepaid reinsurance premiums	13,952		(13,033)
Right of use asset	723		959
Other assets	(5,101)		(6,623)
Unpaid loss and loss adjustment expenses	33,366		44,742
Unearned premiums	8		36,401
Funds held under reinsurance agreements	11,963		3,080
Reinsurance premiums payable	120		(5,388)
Accounts payable and accrued expenses	(5,616)		(4,011)
Lease liability	(798)		(1,038)
Income taxes payable and receivable	(509)		(3,791)
Net cash provided by operating activities	40,075		22,820
Investing activities
Payments for capital expenditures	(339)		(73)
Proceeds from sale of equity method investment	—		232

Purchase of investments, available for sale	(156,514)		(104,183)
Proceeds from investments sold, matured or repaid	88,641		38,425


Net cash used in investing activities	(68,212)		(65,599)
Financing activities
Shares redeemed for payroll taxes	(7)		(6)



Principal payments on debt	(825)		(619)



Net cash used in financing activities	(832)		(625)
Net decrease in cash, cash equivalents and restricted cash	(28,969)		(43,404)
Cash, cash equivalents and restricted cash – beginning of period	129,984		157,234
Cash, cash equivalents and restricted cash – end of period	$	101,015	$	113,830

See accompanying notes to the condensed consolidated financial statements.

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Trean Insurance Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


Disaggregation of cash and restricted cash:	June 30, 2022		December 31, 2021
Cash and cash equivalents	$	100,716	$	129,577
Restricted cash	299		407
Total cash, cash equivalents and restricted cash	$	101,015	$	129,984


	Six Months Ended June 30,
Supplemental disclosure of cash flow information:	2022		2021
Cash paid during the year for:
Interest	$	791	$	768
Income taxes	4,368		7,548
Non-cash investing and financing activity:
Right-of-use assets obtained in exchange for new operating lease liabilities	281		31
Non-cash transfer of investments to settle funds held for reinsurance	—		13,562
Non-cash transfer of investments to settle amounts held for others in accounts payable	—		26,211


Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	1,257		1,217

See accompanying notes to the condensed consolidated financial statements.

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Notes to the Condensed Consolidated Financial Statements

Note 1. Business and Basis of Presentation

Trean Insurance Group, Inc. (together with its wholly owned subsidiaries, the "Company") provides products and services to the specialty insurance market. Historically, the Company has focused on specialty casualty markets management believes are under-served and where the Company’s expertise allows the Company to achieve higher rates, such as niche workers' compensation markets and small- to medium-sized specialty casualty insurance programs. The Company underwrites specialty-casualty insurance products both through programs where the Company partners with other organizations ("Program Partners"), and also through Company owned managing general agencies ("Owned MGAs"). The Company also provides Program Partners with a variety of services, including issuing carrier services, claims administration, and reinsurance brokerage from which the Company generates fee-based revenues.

The Company's wholly owned subsidiaries include: (i) Benchmark Holding Company, a property and casualty insurance holding company, which owns Benchmark Insurance Company ("Benchmark"), a property and casualty insurance company domiciled in the state of Kansas, American Liberty Insurance Company ("ALIC"), a property and casualty insurance company domiciled in the state of Utah, 7710 Insurance Company ("7710"), a property and casualty insurance company domiciled in the state of South Carolina and Benchmark Specialty Insurance Company ("BSIC"), a property and casualty insurance company domiciled in the state of Arkansas; (ii) Trean Compstar Holdings, LLC, a limited liability company created originally for the purchase of Compstar Insurance Services LLC, a California-based general agency; and (iii) Trean Corporation ("Trean Corp"), a reinsurance intermediary manager and a managing general agent, which consists of the following wholly owned subsidiaries: (a) Trean Reinsurance Services, LLC ("TRS"), a reinsurance intermediary broker; Benchmark Administrators LLC (BIC Admin"), a claims third-party administrator; (b) Western Integrated Care, LLC ("WIC"), a managed care organization; and (c) Westcap Insurance Services, LLC ("Westcap"), a managing general agent based in California.

The accompanying condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to the Quarterly Report on Form 10-Q under the Securities Exchange Act of 1934, as amended. Accordingly, they do not contain all of the information included in the Company's annual consolidated financial statements and notes. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation of the Company’s condensed consolidated financial position and results of operations for the periods presented have been included. Although management believes the disclosures and information presented are adequate, these interim condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Form 10-K"). Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Use of estimates

While preparing the condensed consolidated financial statements, the Company has made certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements, as well as reported amounts of revenue and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Reported amounts that require extensive use of estimates include the reserves for unpaid losses and loss adjustment expenses ("LAE"), reinsurance recoverables, investments, goodwill, and other intangible assets. Except for the captions on the condensed consolidated balance sheets and condensed consolidated statements of comprehensive income, generally, the term loss(es) is used to collectively refer to both losses and LAE.

Accounting pronouncements

Recently adopted policies

In January 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivative and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323 and Topic 815 (ASU 2020-01). This update addresses the accounting for certain equity securities upon the application or discontinuation of the equity method of accounting. Further, the update addresses scope considerations for forward contracts and purchased options on certain securities. ASU 2020-01 is effective for annual periods beginning after December 15, 2021, including interim periods thereafter. The Company adopted

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this standard effective January 1, 2022. Adoption of this standard did not have a material impact on the condensed consolidated financial statements.

Pending policies

The Company completed its initial public offering in July 2020, and is an emerging growth company as defined under federal securities laws. As such, the Company has elected to adopt pending accounting policies under the dates required for private companies. Therefore, the dates included within this section reflect the effective dates for the adoption of new accounting policies required by private companies.

In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments (ASU 2020-03). This update represents changes to clarify and improve the codification to allow for easier application by eliminating inconsistencies and providing clarification on items such as (i) the application of fair value option disclosures; (ii) the accounting for fees related to modifications of debt; and (iii) aligning the contractual term of a net investment in a lease in accordance with ASC Topic 326, Financial Instruments - Credit Losses, and the lease term determined in accordance with ASC Topic 842, Leases. The Company adopted items (i) and (ii) effective January 1, 2020 and will adopt item (iii) on January 1, 2023. Adoption of this standard has not had, and is not expected to have, a material impact on the condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (ASU 2016-13). This update requires financial assets measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net income. Additionally, credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses, with the amount of the allowance limited to the amount by which the fair value is below the amortized cost. ASU 2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. The Company will adopt this standard effective January 1, 2023. The Company is currently evaluating the impact of this standard on the condensed consolidated financial statements.

Note 2. Acquisitions

Western Integrated Care

Effective July 6, 2021, Trean Corp acquired 100% ownership of WIC for a total purchase price of $5,500, which includes $1,500 that is contingent on WIC's future earnings, as defined in the agreement. WIC is a managed care organization that offers services to workers' compensation insurers to enable employees who are injured on the job to access qualified medical treatment. The Company recorded $1,501 of goodwill and intangible assets of $3,624 associated with the business combination.

Note 3. Fair Value Measurements

The Company’s financial instruments include assets and liabilities carried at fair value. The inputs to valuation techniques used to measure fair value are prioritized into a three level hierarchy. The fair value hierarchy is as follows:

Level 1: Fair values primarily based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2: Fair values primarily based on observable inputs, other than quoted prices included in Level 1, or based on prices for similar assets and liabilities.

Level 3: Fair values primarily based on valuations derived when one or more of the significant inputs are unobservable. With little or no observable market, the determination of fair value uses considerable judgment and represents the Company’s best estimate of an amount that could be realized in a market exchange for the asset or liability.

The Company classifies the financial asset or liability by level based upon the lowest level input that is significant to the determination of the fair value. The following tables present the estimated fair value of the Company’s significant financial instruments.

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	June 30, 2022
	Level 1		Level 2		Level 3		Total
Fixed maturities:
U.S. government and government securities	$	51,678	$	—	$	—	$	51,678
Foreign governments	—		392		—		392
States, territories and possessions	—		10,274		—		10,274
Political subdivisions of states territories and possessions	—		35,925		—		35,925
Special revenue and special assessment obligations	—		99,528		—		99,528
Industrial and public utilities	—		102,514		—		102,514
Commercial mortgage-backed securities	—		98,807		—		98,807
Residential mortgage-backed securities	—		19,087		—		19,087
Other loan-backed securities	—		43,830		—		43,830
Total fixed maturities	51,678		415,141		—		466,819
Equity securities	12,490		18,208		—		30,698
Total investments	$	64,168	$	433,349	$	—	$	497,517

Embedded derivatives on funds held under reinsurance agreements	$	(1,422)	$	(9,342)	$	—	$	(10,764)
Debt	—		30,112		—		30,112


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Fixed maturities:
U.S. government and government securities	$	2,392	$	39,042	$	—	$	41,434
Foreign governments	—		2,490		—		2,490
States, territories and possessions	—		10,766		—		10,766
Political subdivisions of states, territories and possessions	—		40,002		—		40,002
Special revenue and special assessment obligations	—		95,991		—		95,991
Industrial and public utilities	—		103,257		—		103,257
Commercial mortgage-backed securities	—		118,218		—		118,218
Residential mortgage-backed securities	—		17,368		—		17,368
Other loan-backed securities	—		41,425		—		41,425
Hybrid securities	—		110		—		110
Total fixed maturities	2,392		468,669		—		471,061


Equity securities	—		969		—		969

Total investments	$	2,392	$	469,638	$	—	$	472,030

Embedded derivatives on funds held under reinsurance agreements	$	(4)	$	275	$	—	$	271
Debt	—		30,938		—		30,938

Fixed maturities and equity securities: The Company, through its third-party pricing service provider, uses a variety of sources to estimate the fair value of investments such as Refinitiv (formerly Reuters), PricingDirect, ICE Data Services, and for equities, Bloomberg or S&P Capital IQ Pro. Equity securities are generally valued at the closing price on the exchange on

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which they are primarily traded as provided by a third-party pricing service. Fixed income securities are generally valued at an evaluated bid as provided by a third-party pricing service. Securities and other assets generally valued using third-party pricing services may also be valued at broker/dealer indications. Values obtained from third-party pricing services can utilize several market data sources for inputs such as transaction data, yield, quality, coupon rate, maturity, issue type, trading characteristics, and other market activity. To validate the reasonableness of the prices, the Company performs various qualitative and quantitative procedures such as analysis of recent trading activity, analytical review of fair values and an evaluation of the underlying pricing methodologies. Based on these procedures, the Company did not adjust the prices or quotes from the third-party pricing service.

Embedded derivatives: The Company enters into funds held contracts under reinsurance agreements, which create embedded derivatives on the underlying investments. These embedded derivatives are valued based upon the unrealized gain or loss position of the funds held portfolio, which is determined consistent with other investments using third-party pricing services. To validate the reasonableness of the quoted prices, the Company performs various qualitative and quantitative procedures such as analysis of recent activity, analytical review of fair values and an evaluation of the underlying pricing methodologies. Based on these procedures, the Company did not adjust the prices or quotes from the third-party pricing service.

Debt: The Company holds debt related to its secured credit facility. The Company has determined that the remaining balance of the debt reflected its fair value as this would represent the total amount to repay the debt.

Note 4. Investments

Fixed income securities include bonds, asset-backed securities, and redeemable preferred securities. Fixed income securities, which may be sold prior to their contractual maturity, are designated as available-for-sale and are carried at fair value. Equity securities primarily include common stocks, mutual funds, and non-redeemable preferred stocks, which are carried at fair value.

The cost or amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the Company's fixed maturities investments are as follows:


	June 30, 2022
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Fixed maturities:
U.S. government and government securities	$	53,592	$	—	$	(1,914)	$	51,678
Foreign governments	400		—		(8)		392
States, territories and possessions	11,102		22		(850)		10,274
Political subdivisions of states, territories and possessions	39,098		77		(3,250)		35,925
Special revenue and special assessment obligations	107,939		241		(8,652)		99,528
Industrial and public utilities	106,575		98		(4,159)		102,514
Commercial mortgage-backed securities	110,538		49		(11,780)		98,807
Residential mortgage-backed securities	20,076		—		(989)		19,087
Other loan-backed securities	44,880		2		(1,052)		43,830
Hybrid securities	5,344		—		(560)		4,784
Total fixed maturities available for sale	$	499,544	$	489	$	(33,214)	$	466,819

Table of Contents


	December 31, 2021
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Fixed maturities:
U.S. government and government securities	$	41,490	$	113	$	(169)	$	41,434
Foreign governments	2,500		—		(10)		2,490
States, territories and possessions	10,593		189		(16)		10,766
Political subdivisions of states, territories and possessions	39,170		975		(143)		40,002
Special revenue and special assessment obligations	93,664		2,920		(593)		95,991
Industrial and public utilities	100,774		2,835		(352)		103,257
Commercial mortgage-backed securities	119,378		591		(1,751)		118,218
Residential mortgage-backed securities	16,549		843		(24)		17,368
Other loan-backed securities	41,236		248		(59)		41,425
Hybrid securities	105		5		—		110
Total fixed maturities available for sale	$	465,459	$	8,719	$	(3,117)	$	471,061

The following table illustrates the Company’s gross unrealized losses and fair value of fixed maturities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:


	June 30, 2022
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Fixed maturities:
U.S. government and government securities	$	50,142	$	(1,826)	$	1,536	$	(88)	$	51,678	$	(1,914)
Foreign governments	392		(8)		—		—		392		(8)
States, territories and possessions	7,811		(767)		242		(83)		8,053		(850)
Political subdivisions of states, territories and possessions	26,849		(3,220)		269		(30)		27,118		(3,250)
Special revenue and special assessment obligations	73,580		(7,989)		3,614		(663)		77,194		(8,652)
Industrial and public utilities	72,164		(3,800)		3,039		(359)		75,203		(4,159)
Commercial mortgage-backed securities	58,330		(5,634)		36,500		(