Iowa | 45-2302834 | |||||
(State of Incorporation) | (IRS Employer Identification No.) |
Large accelerated filer☒ | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company ☐ | |||
Emerging growth company ☐ |
Page | |
Signatures |
• | The frequency and severity of claims, including those related to catastrophe losses and the impact those claims have on our loss reserve adequacy; the occurrence of catastrophic events, including international events, significant severe weather conditions, climate change, acts of terrorism, acts of war and pandemics; |
• | The adequacy of our reserves for property and casualty insurance losses and loss settlement expenses and our life insurance reserve for future policy benefits; |
• | Geographic concentration risk in both property and casualty insurance and life insurance segments; |
• | The potential disruption of our operations and reputation due to unauthorized data access, cyber-attacks or cyber-terrorism and other security breaches; |
• | Developments in general economic conditions, domestic and global financial markets, interest rates and other-than-temporary impairment losses that could affect the performance of our investment portfolio; |
• | Our ability to effectively underwrite and adequately price insured risks; |
• | Changes in industry trends, an increase in competition and significant industry developments; |
• | Litigation or regulatory actions that could require us to pay significant damages, fines or penalties or change the way we do business; |
• | Lowering of one or more of the financial strength ratings of our operating subsidiaries or our issuer credit ratings and the adverse impact such action may have on our premium writings, policy retention, profitability and liquidity; |
• | Governmental actions, policies and regulations, including, but not limited to, domestic health care reform, financial services regulatory reform, corporate governance, new laws or regulations or court decisions interpreting existing laws and regulations or policy provisions; changes in laws, regulations and stock exchange requirements relating to corporate governance and the cost of compliance; |
• | Our relationship with and the financial strength of our reinsurers; |
• | Competitive, legal, regulatory or tax changes that affect the distribution cost or demand for our products through our independent agent/agency distribution network; and |
• | The satisfaction of the conditions precedent to the consummation of the sale of our life insurance subsidiary, including the receipt of regulatory approvals. |
United Fire Group, Inc. Consolidated Balance Sheets | |||||||
(In Thousands, Except Share Data) | September 30, 2017 | December 31, 2016 | |||||
(unaudited) | |||||||
ASSETS | |||||||
Investments | |||||||
Fixed maturities | |||||||
Held-to-maturity, at amortized cost (fair value $150 in 2017 and $150 in 2016) | $ | 150 | $ | 150 | |||
Available-for-sale, at fair value (amortized cost $1,480,730 in 2017 and $1,458,235 in 2016) | 1,498,662 | 1,453,286 | |||||
Trading securities, at fair value (amortized cost $11,833 in 2017 and $13,054 in 2016) | 13,673 | 14,390 | |||||
Equity securities | |||||||
Available-for-sale, at fair value (cost $57,387 in 2017 and $59,994 in 2016) | 269,341 | 246,370 | |||||
Trading securities, at fair value (cost $5,888 in 2017 and $5,434 in 2016) | 6,330 | 5,644 | |||||
Other long-term investments | 49,966 | 51,769 | |||||
Short-term investments | 175 | 175 | |||||
1,838,297 | 1,771,784 | ||||||
Cash and cash equivalents | 98,610 | 89,194 | |||||
Accrued investment income | 14,911 | 13,617 | |||||
Premiums receivable (net of allowance for doubtful accounts of $1,170 in 2017 and $1,255 in 2016) | 351,410 | 306,202 | |||||
Deferred policy acquisition costs | 97,477 | 93,362 | |||||
Property and equipment (primarily land and buildings, at cost, less accumulated depreciation of $52,081 in 2017 and $50,925 in 2016) | 64,520 | 55,524 | |||||
Reinsurance receivables and recoverables | 68,116 | 62,707 | |||||
Prepaid reinsurance premiums | 3,821 | 3,782 | |||||
Income taxes receivable | 21,360 | 14,285 | |||||
Goodwill and intangible assets | 24,163 | 24,740 | |||||
Other assets | 15,302 | 13,943 | |||||
Assets held for sale | 1,592,846 | 1,605,618 | |||||
TOTAL ASSETS | $ | 4,190,833 | $ | 4,054,758 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Liabilities | |||||||
Losses and loss settlement expenses | $ | 1,237,280 | $ | 1,123,896 | |||
Unearned premiums | 490,443 | 443,802 | |||||
Accrued expenses and other liabilities | 130,618 | 147,104 | |||||
Deferred income taxes | 24,707 | 7,849 | |||||
Liabilities held for sale | 1,363,737 | 1,390,223 | |||||
TOTAL LIABILITIES | $ | 3,246,785 | $ | 3,112,874 | |||
Stockholders’ Equity | |||||||
Common stock, $0.001 par value; authorized 75,000,000 shares; 24,849,889 and 25,429,769 shares issued and outstanding in 2017 and 2016, respectively | $ | 25 | $ | 25 | |||
Additional paid-in capital | 193,114 | 216,482 | |||||
Retained earnings | 600,988 | 616,322 | |||||
Accumulated other comprehensive income, net of tax | 149,921 | 109,055 | |||||
TOTAL STOCKHOLDERS’ EQUITY | $ | 944,048 | $ | 941,884 | |||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 4,190,833 | $ | 4,054,758 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(In Thousands, Except Share Data) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Revenues | |||||||||||||||
Net premiums earned | $ | 255,758 | $ | 239,469 | $ | 737,424 | $ | 691,976 | |||||||
Investment income, net of investment expenses | 13,792 | 14,027 | 38,561 | 35,017 | |||||||||||
Net realized investment gains (includes reclassifications for net unrealized investment gains on available-for-sale securities of $419 and $5,799 in 2017 and $2,320 and $4,666 in 2016; previously included in accumulated other comprehensive income) | 67 | 2,129 | 3,397 | 4,832 | |||||||||||
Total revenues | $ | 269,617 | $ | 255,625 | $ | 779,382 | $ | 731,825 | |||||||
Benefits, Losses and Expenses | |||||||||||||||
Losses and loss settlement expenses | $ | 223,208 | $ | 169,303 | $ | 568,356 | $ | 475,568 | |||||||
Amortization of deferred policy acquisition costs | 52,986 | 52,240 | 154,845 | 151,216 | |||||||||||
Other underwriting expenses (includes reclassifications for employee benefit costs of $1,352 and $4,056 in 2017 and $1,371 and $4,113 in 2016; previously included in accumulated other comprehensive income) | 25,817 | 20,047 | 69,900 | 61,469 | |||||||||||
Total benefits, losses and expenses | $ | 302,011 | $ | 241,590 | $ | 793,101 | $ | 688,253 | |||||||
Income (loss) from continuing operations before income taxes | $ | (32,394 | ) | $ | 14,035 | $ | (13,719 | ) | $ | 43,572 | |||||
Federal income tax expense (benefit) (includes reclassifications of $327 and ($610) in 2017 and ($332) and ($194) in 2016; previously included in accumulated other comprehensive income) | (13,312 | ) | 2,407 | (13,330 | ) | 6,489 | |||||||||
Income (loss) from continuing operations | $ | (19,082 | ) | $ | 11,628 | $ | (389 | ) | $ | 37,083 | |||||
Income from discontinued operations, net of taxes | 1,218 | 740 | 5,419 | 826 | |||||||||||
Net income (loss) | $ | (17,864 | ) | $ | 12,368 | $ | 5,030 | $ | 37,909 | ||||||
Other comprehensive income (loss) | |||||||||||||||
Change in net unrealized appreciation on investments | $ | 18,995 | $ | (9,440 | ) | $ | 64,614 | $ | 83,768 | ||||||
Change in liability for underfunded employee benefit plans | — | — | — | — | |||||||||||
Other comprehensive income , before tax and reclassification adjustments | $ | 18,995 | $ | (9,440 | ) | $ | 64,614 | $ | 83,768 | ||||||
Income tax effect | (6,648 | ) | 3,304 | (22,615 | ) | (29,320 | ) | ||||||||
Other comprehensive income, after tax, before reclassification adjustments | $ | 12,347 | $ | (6,136 | ) | $ | 41,999 | $ | 54,448 | ||||||
Reclassification adjustment for net realized investment gains included in income | $ | (419 | ) | $ | (2,320 | ) | $ | (5,799 | ) | $ | (4,666 | ) | |||
Reclassification adjustment for employee benefit costs included in expense | 1,352 | 1,371 | 4,056 | 4,113 | |||||||||||
Total reclassification adjustments, before tax | $ | 933 | $ | (949 | ) | $ | (1,743 | ) | $ | (553 | ) | ||||
Income tax effect | (327 | ) | 332 | 610 | 194 | ||||||||||
Total reclassification adjustments, after tax | $ | 606 | $ | (617 | ) | $ | (1,133 | ) | $ | (359 | ) | ||||
Comprehensive income (loss) | $ | (4,911 | ) | $ | 5,615 | $ | 45,896 | $ | 91,998 | ||||||
Diluted weighted average common shares outstanding | 24,960,086 | 25,815,346 | 25,666,405 | 25,711,014 | |||||||||||
Earnings per common share from continuing operations: | |||||||||||||||
Basic | $ | (0.77 | ) | $ | 0.46 | $ | (0.01 | ) | $ | 1.47 | |||||
Diluted | (0.77 | ) | 0.45 | (0.01 | ) | 1.44 | |||||||||
Earnings per common share: | |||||||||||||||
Basic | $ | (0.72 | ) | $ | 0.49 | $ | 0.20 | $ | 1.50 | ||||||
Diluted | (0.72 | ) | 0.48 | 0.20 | 1.47 |
(In Thousands, Except Share Data) | Nine Months Ended September 30, 2017 | ||
Common stock | |||
Balance, beginning of year | $ | 25 | |
Shares repurchased (701,899 shares) | — | ||
Shares issued for stock-based awards (131,777 shares) | — | ||
Balance, end of period | $ | 25 | |
Additional paid-in capital | |||
Balance, beginning of year | $ | 216,482 | |
Compensation expense and related tax benefit for stock-based award grants | 3,456 | ||
Shares repurchased | (29,784 | ) | |
Shares issued for stock-based awards | 2,960 | ||
Balance, end of period | $ | 193,114 | |
Retained earnings | |||
Balance, beginning of year | $ | 616,322 | |
Net income | 5,030 | ||
Dividends on common stock ($0.81 per share) | (20,364 | ) | |
Balance, end of period | $ | 600,988 | |
Accumulated other comprehensive income, net of tax | |||
Balance, beginning of year | $ | 109,055 | |
Change in net unrealized investment appreciation(1) | 38,230 | ||
Change in liability for underfunded employee benefit plans(2) | 2,636 | ||
Balance, end of period | $ | 149,921 | |
Summary of changes | |||
Balance, beginning of year | $ | 941,884 | |
Net income | 5,030 | ||
All other changes in stockholders’ equity accounts | (2,866 | ) | |
Balance, end of period | $ | 944,048 |
(1) | The change in net unrealized appreciation is net of reclassification adjustments and income taxes. |
(2) | The change in liability for underfunded employee benefit plans is net of reclassification adjustments and income taxes. |
Nine Months Ended September 30, | |||||||
(In Thousands) | 2017 | 2016 | |||||
Cash Flows From Operating Activities | |||||||
Net income | $ | 5,030 | $ | 37,909 | |||
Less net income from discontinued operations, net of taxes | 5,419 | 826 | |||||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||
Net accretion of bond premium | 6,663 | 5,181 | |||||
Depreciation and amortization | 3,501 | 4,879 | |||||
Stock-based compensation expense | 3,456 | 2,731 | |||||
Net realized investment gains | (3,397 | ) | (4,832 | ) | |||
Net cash flows from trading investments | 816 | (36 | ) | ||||
Deferred income tax benefit | (4,979 | ) | (3,847 | ) | |||
Changes in: | |||||||
Accrued investment income | (1,294 | ) | (831 | ) | |||
Premiums receivable | (45,208 | ) | (54,725 | ) | |||
Deferred policy acquisition costs | (4,115 | ) | (10,268 | ) | |||
Reinsurance receivables | (5,409 | ) | (12,224 | ) | |||
Prepaid reinsurance premiums | (39 | ) | (212 | ) | |||
Income taxes receivable | (7,075 | ) | (11,370 | ) | |||
Other assets | (1,358 | ) | 659 | ||||
Future policy benefits and losses, claims and loss settlement expenses | 113,384 | 86,272 | |||||
Unearned premiums | 46,641 | 53,699 | |||||
Accrued expenses and other liabilities | (12,430 | ) | (6,198 | ) | |||
Income taxes payable | — | (4,917 | ) | ||||
Deferred income taxes | 1,794 | 2,665 | |||||
Other, net | 1,920 | (1,605 | ) | ||||
Cash from operating activities - continuing operations | 92,871 | 45,021 | |||||
Cash from operating activities - discontinued operations | 23,814 | 45,965 | |||||
Total adjustments | $ | 116,685 | $ | 90,986 | |||
Net cash provided by operating activities | $ | 116,296 | $ | 128,069 | |||
Cash Flows From Investing Activities | |||||||
Proceeds from sale of available-for-sale investments | $ | 3,388 | $ | 1,968 | |||
Proceeds from call and maturity of available-for-sale investments | 134,503 | 260,520 | |||||
Proceeds from short-term and other investments | 4,846 | 1,725 | |||||
Purchase of available-for-sale investments | (162,121 | ) | (313,060 | ) | |||
Purchase of short-term and other investments | (4,864 | ) | (2,772 | ) | |||
Net purchases and sales of property and equipment | (11,630 | ) | (6,090 | ) | |||
Cash from investing activities - continuing operations | (35,878 | ) | (57,709 | ) | |||
Cash from investing activities - discontinued operations | 31,517 | 37,685 | |||||
Net cash used in investing activities | $ | (4,361 | ) | $ | (20,024 | ) | |
Cash Flows From Financing Activities | |||||||
Payment of cash dividends | $ | (20,364 | ) | $ | (18,246 | ) | |
Repurchase of common stock | (29,784 | ) | (2,867 | ) | |||
Issuance of common stock | 2,960 | 7,149 | |||||
Tax impact from issuance of common stock | — | (482 | ) | ||||
Cash from financing activities - continuing operations | (47,188 | ) | (14,446 | ) | |||
Cash from financing activities - discontinued operations | (46,239 | ) | (59,104 | ) | |||
Net cash used in financing activities | $ | (93,427 | ) | $ | (73,550 | ) | |
Net Change in Cash and Cash Equivalents | $ | 18,508 | $ | 34,495 | |||
Less: decrease (increase) in cash and cash equivalents - discontinued operations | (9,092 | ) | (24,546 | ) | |||
Net increase in cash and cash equivalents - continuing operations | 9,416 | 9,949 | |||||
Cash and Cash Equivalents at Beginning of Period - Continuing Operations | 89,194 | 89,496 | |||||
Cash and Cash Equivalents at End of Period - Continuing Operations | $ | 98,610 | $ | 99,445 |
Continuing Operations | Discontinued Operations | ||||||||||
Property & Casualty Insurance | Life Insurance | Total | |||||||||
Recorded asset at beginning of period | $ | 93,362 | $ | 70,750 | $ | 164,112 | |||||
Underwriting costs deferred | 158,960 | 4,192 | 163,152 | ||||||||
Amortization of deferred policy acquisition costs | (154,845 | ) | (5,524 | ) | (160,369 | ) | |||||
Ending unamortized deferred policy acquisition costs | $ | 97,477 | $ | 69,418 | $ | 166,895 | |||||
Impact of unrealized gains and losses on available-for-sale securities | — | (3,582 | ) | (3,582 | ) | ||||||
Recorded asset at September 30, 2017 | $ | 97,477 | $ | 65,836 | $ | 163,313 |
September 30, 2017 | |||||||||||||||
Type of Investment | Cost or Amortized Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Fair Value | |||||||||||
HELD-TO-MATURITY | |||||||||||||||
Fixed maturities: | |||||||||||||||
Bonds | |||||||||||||||
Corporate bonds - financial services | $ | 150 | $ | — | $ | — | $ | 150 | |||||||
Mortgage-backed securities | 38 | 1 | — | 39 | |||||||||||
Total Held-to-Maturity Fixed Maturities | $ | 188 | $ | 1 | $ | — | $ | 189 | |||||||
AVAILABLE-FOR-SALE | |||||||||||||||
Fixed maturities: | |||||||||||||||
Bonds | |||||||||||||||
U.S. Treasury | $ | 22,032 | $ | 40 | $ | 91 | $ | 21,981 | |||||||
U.S. government agency | 98,523 | 1,518 | 516 | 99,525 | |||||||||||
States, municipalities and political subdivisions | |||||||||||||||
General obligations: | |||||||||||||||
Midwest | 120,549 | 2,388 | 499 | 122,438 | |||||||||||
Northeast | 50,174 | 1,478 | 73 | 51,579 | |||||||||||
South | 142,172 | 2,463 | 1,210 | 143,425 | |||||||||||
West | 113,135 | 2,474 | 963 | 114,646 | |||||||||||
Special revenue: | |||||||||||||||
Midwest | 151,634 | 3,646 | 494 | 154,786 | |||||||||||
Northeast | 79,159 | 1,061 | 795 | 79,425 | |||||||||||
South | 261,141 | 4,421 | 2,974 | 262,588 | |||||||||||
West | 157,622 | 2,676 | 1,940 | 158,358 | |||||||||||
Foreign bonds | 54,300 | 1,907 | — | 56,207 | |||||||||||
Public utilities | 201,418 | 4,538 | 200 | 205,756 | |||||||||||
Corporate bonds | |||||||||||||||
Energy | 96,373 | 2,367 | 95 | 98,645 | |||||||||||
Industrials | 209,076 | 5,323 | 109 | 214,290 | |||||||||||
Consumer goods and services | 181,471 | 5,049 | 135 | 186,385 | |||||||||||
Health care | 75,775 | 2,600 | — | 78,375 | |||||||||||
Technology, media and telecommunications | 143,024 | 3,308 | 193 | 146,139 | |||||||||||
Financial services | 252,373 | 6,939 | 303 | 259,009 |
Mortgage-backed securities | 14,496 | 169 | 179 | 14,486 | |||||||||||
Collateralized mortgage obligations | |||||||||||||||
Government national mortgage association | 153,896 | 2,292 | 1,458 | 154,730 | |||||||||||
Federal home loan mortgage corporation | 191,246 | 2,410 | 3,132 | 190,524 | |||||||||||
Federal national mortgage association | 106,326 | 2,240 | 832 | 107,734 | |||||||||||
Asset-backed securities | 4,280 | 345 | 3 | 4,622 | |||||||||||
Total Available-for-Sale Fixed Maturities | $ | 2,880,195 | $ | 61,652 | $ | 16,194 | $ | 2,925,653 | |||||||
Equity securities: | |||||||||||||||
Common stocks | |||||||||||||||
Public utilities | $ | 6,394 | $ | 15,750 | $ | 58 | $ | 22,086 | |||||||
Energy | 6,514 | 7,998 | 106 | 14,406 | |||||||||||
Industrials | 13,117 | 49,890 | 164 | 62,843 | |||||||||||
Consumer goods and services | 10,070 | 14,872 | 154 | 24,788 | |||||||||||
Health care | 7,763 | 29,463 | — | 37,226 | |||||||||||
Technology, media and telecommunications | 6,006 | 10,215 | 136 | 16,085 | |||||||||||
Financial services | 11,630 | 101,813 | 73 | 113,370 | |||||||||||
Nonredeemable preferred stocks | 992 | 161 | — | 1,153 | |||||||||||
Total Available-for-Sale Equity Securities | $ | 62,486 | $ | 230,162 | $ | 691 | $ | 291,957 | |||||||
Total Available-for-Sale Securities | $ | 2,942,681 | $ | 291,814 | $ | 16,885 | $ | 3,217,610 |
December 31, 2016 | |||||||||||||||
Type of Investment | Cost or Amortized Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Fair Value | |||||||||||
HELD-TO-MATURITY | |||||||||||||||
Fixed maturities: | |||||||||||||||
Bonds | |||||||||||||||
Corporate bonds - financial services | $ | 150 | $ | — | $ | — | $ | 150 | |||||||
Mortgage-backed securities | 48 | 1 | — | 49 | |||||||||||
Total Held-to-Maturity Fixed Maturities | $ | 198 | $ | 1 | $ | — | $ | 199 | |||||||
AVAILABLE-FOR-SALE | |||||||||||||||
Fixed maturities: | |||||||||||||||
Bonds | |||||||||||||||
U.S. Treasury | $ | 23,216 | $ | 87 | $ | 108 | $ | 23,195 | |||||||
U.S. government agency | 76,692 | 1,445 | 540 | 77,597 | |||||||||||
States, municipalities and political subdivisions | |||||||||||||||
General obligations: | |||||||||||||||
Midwest | 143,747 | 1,808 | 1,412 | 144,143 | |||||||||||
Northeast | 57,731 | 909 | 231 | 58,409 | |||||||||||
South | 129,475 | 1,249 | 2,355 | 128,369 | |||||||||||
West | 114,524 | 1,380 | 2,173 | 113,731 | |||||||||||
Special revenue: | |||||||||||||||
Midwest | 167,430 | 2,313 | 1,433 | 168,310 | |||||||||||
Northeast | 70,202 | 487 | 2,624 | 68,065 | |||||||||||
South | 244,225 | 1,753 | 6,791 | 239,187 | |||||||||||
West | 134,287 | 1,509 | 4,052 | 131,744 | |||||||||||
Foreign bonds | 62,995 | 2,239 | — | 65,234 | |||||||||||
Public utilities | 212,360 | 3,761 | 447 | 215,674 | |||||||||||
Corporate bonds | |||||||||||||||
Energy | 107,084 | 2,195 | 419 | 108,860 | |||||||||||
Industrials | 225,526 | 5,359 | 982 | 229,903 | |||||||||||
Consumer goods and services | 178,135 | 3,847 | 295 | 181,687 | |||||||||||
Health care | 81,211 | 2,063 | 151 | 83,123 | |||||||||||
Technology, media and telecommunications | 143,402 | 2,029 | 819 | 144,612 | |||||||||||
Financial services | 269,981 | 5,328 | 1,358 | 273,951 | |||||||||||
Mortgage-backed securities | 17,288 | 201 | 241 | 17,248 | |||||||||||
Collateralized mortgage obligations | |||||||||||||||
Government national mortgage association | 145,947 | 1,279 | 2,766 | 144,460 | |||||||||||
Federal home loan mortgage corporation | 176,226 | 1,638 | 3,406 | 174,458 | |||||||||||
Federal national mortgage association | 101,414 | 1,816 | 1,334 | 101,896 | |||||||||||
Asset-backed securities | 4,407 | 145 | 282 | 4,270 | |||||||||||
Total Available-for-Sale Fixed Maturities | $ | 2,887,505 | $ | 44,840 | $ | 34,219 | $ | 2,898,126 |
Equity securities: | |||||||||||||||
Common stocks | |||||||||||||||
Public utilities | $ | 6,394 | $ | 13,465 | $ | 188 | $ | 19,671 | |||||||
Energy | 6,514 | 8,555 | 22 | 15,047 | |||||||||||
Industrials | 13,252 | 38,715 | 173 | 51,794 | |||||||||||
Consumer goods and services | 10,324 | 13,851 | 58 | 24,117 | |||||||||||
Health care | 7,763 | 19,657 | — | 27,420 | |||||||||||
Technology, media and telecommunications | 5,931 | 9,476 | 38 | 15,369 | |||||||||||
Financial services | 17,289 | 98,728 | 67 | 115,950 | |||||||||||
Nonredeemable preferred stocks | 1,037 | 11 | — | 1,048 | |||||||||||
Total Available-for-Sale Equity Securities | $ | 68,504 | $ | 202,458 | $ | 546 | $ | 270,416 | |||||||
Total Available-for-Sale Securities | $ | 2,956,009 | $ | 247,298 | $ | 34,765 | $ | 3,168,542 |
September 30, 2017 | |||||||||||||||
Type of Investment | Cost or Amortized Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Fair Value | |||||||||||
HELD-TO-MATURITY | |||||||||||||||
Fixed maturities: | |||||||||||||||
Continuing operations | $ | 150 | $ | — | $ | — | $ | 150 | |||||||
Discontinued operations | 38 | 1 | — | 39 | |||||||||||
Total Held-to-Maturity Fixed Maturities | $ | 188 | $ | 1 | $ | — | 189 | ||||||||
AVAILABLE-FOR-SALE | |||||||||||||||
Fixed maturities: | |||||||||||||||
Continuing operations | $ | 1,480,730 | $ | 28,606 | $ | 10,674 | $ | 1,498,662 | |||||||
Discontinued operations | 1,399,465 | 33,046 | 5,520 | 1,426,991 | |||||||||||
Total Available-for-Sale Fixed Maturities | $ | 2,880,195 | $ | 61,652 | $ | 16,194 | $ | 2,925,653 | |||||||
Equity securities: | |||||||||||||||
Continuing operations | $ | 57,387 | $ | 212,545 | $ | 591 | $ | 269,341 | |||||||
Discontinued operations | 5,099 | 17,617 | 100 | 22,616 | |||||||||||
Total Available-for-Sale Equity Securities | $ | 62,486 | $ | 230,162 | $ | 691 | $ | 291,957 | |||||||
Total Available-for-Sale Securities | $ | 2,942,681 | $ | 291,814 | $ | 16,885 | $ | 3,217,610 |
December 31, 2016 | |||||||||||||||
Type of Investment | Cost or Amortized Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Fair Value | |||||||||||
HELD-TO-MATURITY | |||||||||||||||
Fixed maturities: | |||||||||||||||
Continuing operations | $ | 150 | $ | — | $ | — | $ | 150 | |||||||
Discontinued operations | 48 | 1 | — | 49 | |||||||||||
Total Held-to-Maturity Fixed Maturities | $ | 198 | $ | 1 | $ | — | $ | 199 | |||||||
AVAILABLE-FOR-SALE | |||||||||||||||
Fixed maturities: | |||||||||||||||
Continuing operations | $ | 1,458,235 | $ | 18,725 | $ | 23,674 | $ | 1,453,286 | |||||||
Discontinued operations | 1,429,270 | 26,115 | 10,545 | 1,444,840 | |||||||||||
Total Available-for-Sale Fixed Maturities | 2,887,505 | 44,840 | 34,219 | 2,898,126 | |||||||||||
Equity securities: | |||||||||||||||
Continuing operations | $ | 59,994 | $ | 186,692 | $ | 316 | $ | 246,370 | |||||||
Discontinued operations | 8,510 | 15,766 | 230 | 24,046 | |||||||||||
Total Available-for-Sale Equity Securities | 68,504 | 202,458 | 546 | 270,416 | |||||||||||
Total Available-for-Sale Securities | $ | 2,956,009 | $ | 247,298 | $ | 34,765 | $ | 3,168,542 |
Maturities - Consolidated: | |||||||||||||||||||||||
Held-To-Maturity | Available-For-Sale | Trading | |||||||||||||||||||||
September 30, 2017 | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||
Due in one year or less | $ | 150 | $ | 150 | $ | 128,884 | $ | 129,945 | $ | 1,401 | $ | 1,821 | |||||||||||
Due after one year through five years | — | — | 782,192 | 803,774 | 6,979 | 8,233 | |||||||||||||||||
Due after five years through 10 years | — | — | 751,756 | 771,205 | 1,302 | 1,185 | |||||||||||||||||
Due after 10 years | — | — | 747,119 | 748,633 | 2,151 | 2,434 | |||||||||||||||||
Asset-backed securities | — | — | 4,280 | 4,622 | — | — | |||||||||||||||||
Mortgage-backed securities | 38 | 39 | 14,496 | 14,486 | — | — | |||||||||||||||||
Collateralized mortgage obligations | — | — | 451,468 | 452,988 | — | — | |||||||||||||||||
$ | 188 | $ | 189 | $ | 2,880,195 | $ | 2,925,653 | $ | 11,833 | $ | 13,673 |
Maturities - Continuing Operations: | |||||||||||||||||||||||
Held-To-Maturity | Available-For-Sale | Trading | |||||||||||||||||||||
September 30, 2017 | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||
Due in one year or less | $ | 150 | $ | 150 | $ | 54,340 | $ | 54,762 | $ | 1,401 | $ | 1,821 | |||||||||||
Due after one year through five years | — | — | 224,804 | 230,986 | 6,979 | 8,233 | |||||||||||||||||
Due after five years through 10 years | — | — | 344,553 | 354,308 | 1,302 | 1,185 | |||||||||||||||||
Due after 10 years | — | — | 675,795 | 676,310 | 2,151 | 2,434 | |||||||||||||||||
Asset-backed securities | — | — | 3,174 | 3,517 | — | — | |||||||||||||||||
Mortgage-backed securities | — | — | 9,664 | 9,783 | — | — | |||||||||||||||||
Collateralized mortgage obligations | — | — | 168,400 | 168,996 | — | — | |||||||||||||||||
$ | 150 | $ | 150 | $ | 1,480,730 | $ | 1,498,662 | $ | 11,833 | $ | 13,673 |
Maturities - Discontinued Operations: | |||||||||||||||||||||||
Held-To-Maturity | Available-For-Sale | Trading | |||||||||||||||||||||
September 30, 2017 | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||
Due in one year or less | $ | — | $ | — | $ | 74,544 | $ | 75,183 | $ | — | $ | — | |||||||||||
Due after one year through five years | — | — | 557,388 | 572,788 | — | — | |||||||||||||||||
Due after five years through 10 years | — | — | 407,203 | 416,897 | — | — | |||||||||||||||||
Due after 10 years | — | — | 71,324 | 72,323 | — | — | |||||||||||||||||
Asset-backed securities | — | — | 1,107 | 1,105 | — | — | |||||||||||||||||
Mortgage-backed securities | 38 | 39 | 4,832 | 4,703 | — | — | |||||||||||||||||
Collateralized mortgage obligations | — | — | 283,067 | 283,992 | — | — | |||||||||||||||||
$ | 38 | $ | 39 | $ | 1,399,465 | $ | 1,426,991 | $ | — | $ | — |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net realized investment gains (losses) from continuing operations: | |||||||||||||||
Fixed maturities: | |||||||||||||||
Available-for-sale | $ | 118 | $ | 484 | $ | 645 | $ | 898 | |||||||
Trading securities | |||||||||||||||
Change in fair value | (43 | ) | 148 | 504 | 519 | ||||||||||
Sales | 72 | 107 | 117 | 568 | |||||||||||
Equity securities: | |||||||||||||||
Available-for-sale | 3 | 1,375 | 1,553 | 2,359 | |||||||||||
Trading securities | |||||||||||||||
Change in fair value | (124 | ) | (5 | ) | 232 | 325 | |||||||||
Sales | 41 | 20 | 57 | (6 | ) | ||||||||||
Cash equivalents | — | — | — | 169 | |||||||||||
Real estate | — | — | 289 | — | |||||||||||
Total net realized investment gains from continuing operations | $ | 67 | $ | 2,129 | $ | 3,397 | $ | 4,832 | |||||||
Total net realized investment gains from discontinued operations | 296 | 461 | 3,600 | 1,409 | |||||||||||
Total net realized investment gains | $ | 363 | $ | 2,590 | $ | 6,997 | $ | 6,241 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Proceeds from sales | $ | 2,293 | $ | — | $ | 3,388 | $ | 1,968 | |||||||
Gross realized gains | — | — | 1,046 | 921 | |||||||||||
Gross realized losses | — | — | — | — |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Proceeds from sales | $ | 1,844 | $ | 2,007 | $ | 5,807 | $ | 3,081 | |||||||
Gross realized gains | — | 11 | 1,254 | 65 | |||||||||||
Gross realized losses | — | — | (78 | ) | — |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Change in net unrealized investment appreciation | |||||||
Available-for-sale fixed maturities | $ | 34,837 | $ | 83,498 | |||
Available-for-sale equity securities | 27,559 | 15,459 | |||||
Deferred policy acquisition costs | (3,582 | ) | (19,857 | ) | |||
Income tax effect | (20,584 | ) | (27,685 | ) | |||
Total change in net unrealized investment appreciation, net of tax | $ | 38,230 | $ | 51,415 |
September 30, 2017 | Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||||
Type of Investment | Number of Issues | Fair Value | Gross Unrealized Depreciation | Number of Issues | Fair Value | Gross Unrealized Depreciation | Fair Value | Gross Unrealized Depreciation | |||||||||||||||||||||
AVAILABLE-FOR-SALE | |||||||||||||||||||||||||||||
Fixed maturities: | |||||||||||||||||||||||||||||
Bonds | |||||||||||||||||||||||||||||
U.S. Treasury | 3 | $ | 8,920 | $ | 44 | 3 | $ | 2,829 | $ | 47 | $ | 11,749 | $ | 91 | |||||||||||||||
U.S. government agency | 8 | 33,607 | 306 | 3 | 12,789 | 210 | 46,396 | 516 | |||||||||||||||||||||
States, municipalities and political subdivisions | |||||||||||||||||||||||||||||
General obligations | |||||||||||||||||||||||||||||
Midwest | 3 | 4,343 | 46 | 3 | 19,742 | 453 | 24,085 | 499 | |||||||||||||||||||||
Northeast | — | — | — | 1 | 3,587 | 73 | 3,587 | 73 | |||||||||||||||||||||
South | 7 | 14,594 | 56 | 11 | 27,919 | 1,154 | 42,513 | 1,210 | |||||||||||||||||||||
West | 2 | 3,600 | 29 | 8 | 25,333 | 934 | 28,933 | 963 | |||||||||||||||||||||
Special revenue | |||||||||||||||||||||||||||||
Midwest | 2 | 3,990 | 10 | 7 | 19,034 | 484 | 23,024 | 494 | |||||||||||||||||||||
Northeast | 6 | 27,751 | 312 | 9 | 15,275 | 483 | 43,026 | 795 | |||||||||||||||||||||
South | 13 | 32,415 | 433 | 27 | 66,978 | 2,541 | 99,393 | 2,974 | |||||||||||||||||||||
West | 8 | 20,369 | 135 | 22 | 55,836 | 1,805 | 76,205 | 1,940 | |||||||||||||||||||||
Public utilities | 2 | 3,201 | 52 | 4 | 7,491 | 148 | 10,692 | 200 | |||||||||||||||||||||
Corporate bonds | |||||||||||||||||||||||||||||
Energy | 2 | 6,166 | 13 | 1 | 1,807 | 82 | 7,973 | 95 | |||||||||||||||||||||
Industrials | — | — | — | 2 | 4,271 | 109 | 4,271 | 109 | |||||||||||||||||||||
Consumer goods and services | 5 | 7,469 | 62 | 2 | 5,097 | 73 | 12,566 | 135 | |||||||||||||||||||||
Technology, media and telecommunications | 6 | 15,263 | 88 | 2 | 8,384 | 105 | 23,647 | 193 | |||||||||||||||||||||
Financial services | 11 | 21,623 | 163 | 1 | 7,243 | 140 | 28,866 | 303 | |||||||||||||||||||||
Mortgage-backed securities | 11 | 4,411 | 43 | 3 | 4,790 | 136 | 9,201 | 179 | |||||||||||||||||||||
Collateralized mortgage obligations | |||||||||||||||||||||||||||||
Government national mortgage association | 16 | 40,243 | 439 | 13 | 38,573 | 1,019 | 78,816 | 1,458 | |||||||||||||||||||||
Federal home loan mortgage corporation | 16 | 64,647 | 1,166 | 12 | 42,472 | 1,966 | 107,119 | 3,132 | |||||||||||||||||||||
Federal national mortgage association | 13 | 35,709 | 496 | 6 | 10,008 | 336 | 45,717 | 832 | |||||||||||||||||||||
Asset-backed securities | 1 | 997 | 3 | — | — | — | 997 | 3 | |||||||||||||||||||||
Total Available-for-Sale Fixed Maturities | 135 | $ | 349,318 | $ | 3,896 | 140 | $ | 379,458 | $ | 12,298 | $ | 728,776 | $ | 16,194 | |||||||||||||||
Equity securities: | |||||||||||||||||||||||||||||
Common stocks | |||||||||||||||||||||||||||||
Public utilities | — | $ | — | $ | — | 1 | $ | 250 | $ | 58 | $ | 250 | $ | 58 | |||||||||||||||
Energy | 2 | 546 | 102 | 1 | 182 | 4 | 728 | 106 | |||||||||||||||||||||
Industrials | 1 | 106 | 6 | 5 | 141 | 158 | 247 | 164 | |||||||||||||||||||||
Consumer goods and services | — | — | — | 4 | 178 | 154 | 178 | 154 | |||||||||||||||||||||
Technology, media and telecommunications | 2 | 445 | 115 | 1 | 4 | 21 | 449 | 136 | |||||||||||||||||||||
Financial services | 1 | 30 | 25 | 2 | 165 | 48 | 195 | 73 | |||||||||||||||||||||
Total Available-for-Sale Equity Securities | 6 | $ | 1,127 | $ | 248 | 14 | $ | 920 | $ | 443 | $ | 2,047 | $ | 691 | |||||||||||||||
Total Available-for-Sale Securities | 141 | $ | 350,445 | $ | 4,144 | 154 | $ | 380,378 | $ | 12,741 | $ | 730,823 | $ | 16,885 |
December 31, 2016 | Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||||
Type of Investment | Number of Issues | Fair Value | Gross Unrealized Depreciation | Number of Issues | Fair Value | Gross Unrealized Depreciation | Fair Value | Gross Unrealized Depreciation | |||||||||||||||||||||
AVAILABLE-FOR-SALE | |||||||||||||||||||||||||||||
Fixed maturities: | |||||||||||||||||||||||||||||
Bonds | |||||||||||||||||||||||||||||
U.S. Treasury | 9 | $ | 10,800 | $ | 108 | — | $ | — | $ | — | $ | 10,800 | $ | 108 | |||||||||||||||
U.S. government agency | 10 | 36,593 | 540 | — | — | — | 36,593 | 540 | |||||||||||||||||||||
States, municipalities and political subdivisions | |||||||||||||||||||||||||||||
General obligations | |||||||||||||||||||||||||||||
Midwest | 27 | 40,545 | 1,412 | — | — | — | 40,545 | 1,412 | |||||||||||||||||||||
Northeast | 9 | 9,874 | 231 | — | — | — | 9,874 | 231 | |||||||||||||||||||||
South | 37 | 53,699 | 2,355 | — | — | — | 53,699 | 2,355 | |||||||||||||||||||||
West | 30 | 55,265 | 2,173 | — | — | — | 55,265 | 2,173 | |||||||||||||||||||||
Special revenue | |||||||||||||||||||||||||||||
Midwest | 41 | 62,937 | 1,433 | — | — | — | 62,937 | 1,433 | |||||||||||||||||||||
Northeast | 22 | 54,993 | 2,624 | — | — | — | 54,993 | 2,624 | |||||||||||||||||||||
South | 79 | 152,979 | 6,791 | — | — | — | 152,979 | 6,791 | |||||||||||||||||||||
West | 44 | 81,676 | 4,052 | — | — | — | 81,676 | 4,052 | |||||||||||||||||||||
Public utilities | 20 | 38,511 | 423 | 2 | 2,122 | 24 | 40,633 | 447 | |||||||||||||||||||||
Corporate bonds | |||||||||||||||||||||||||||||
Energy | 8 | 15,938 | 313 | 3 | 8,232 | 106 | 24,170 | 419 | |||||||||||||||||||||
Industrials | 24 | 42,854 | 596 | 3 | 5,641 | 386 | 48,495 | 982 | |||||||||||||||||||||
Consumer goods and services | 11 | 21,059 | 295 | — | — | — | 21,059 | 295 | |||||||||||||||||||||
Health care | 9 | 20,918 | 151 | — | — | — | 20,918 | 151 | |||||||||||||||||||||
Technology, media and telecommunications | 16 | 41,230 | 516 | 3 | 10,241 | 303 | 51,471 | 819 | |||||||||||||||||||||
Financial services | 37 | 75,286 | 1,358 | — | — | — | 75,286 | 1,358 | |||||||||||||||||||||
Mortgage-backed securities | 16 | 9,611 | 187 | 5 | 1,198 | 54 | 10,809 | 241 | |||||||||||||||||||||
Collateralized mortgage obligations | |||||||||||||||||||||||||||||
Government national mortgage association | 36 | 82,430 | 2,261 | 9 | 13,603 | 505 | 96,033 | 2,766 | |||||||||||||||||||||
Federal home loan mortgage corporation | 41 | 105,775 | 3,165 | 3 | 5,141 | 241 | 110,916 | 3,406 | |||||||||||||||||||||
Federal national mortgage association | 27 | 46,633 | 1,091 | 4 | 4,341 | 243 | 50,974 | 1,334 | |||||||||||||||||||||
Asset-backed securities | 1 | 971 | 29 | 1 | 2,559 | 253 | 3,530 | 282 | |||||||||||||||||||||
Total Available-for-Sale Fixed Maturities | 554 | $ | 1,060,577 | $ | 32,104 | 33 | $ | 53,078 | $ | 2,115 | $ | 1,113,655 | $ | 34,219 | |||||||||||||||
Equity securities: | |||||||||||||||||||||||||||||
Common stocks | |||||||||||||||||||||||||||||
Public utilities | — | $ | — | $ | — | 3 | $ | 120 | $ | 188 | $ | 120 | $ | 188 | |||||||||||||||
Energy | — | — | — | 1 | 163 | 22 | 163 | 22 | |||||||||||||||||||||
Industrials | — | — | — | 6 | 239 | 173 | 239 | 173 | |||||||||||||||||||||
Consumer goods and services | 3 | 282 | 55 | 2 | 15 | 3 | 297 | 58 | |||||||||||||||||||||
Technology, media and telecommunications | 7 | 26 | 5 | 8 | 33 | 33 | 59 | 38 | |||||||||||||||||||||
Financial services | 3 | 53 | 3 | 2 | 150 | 64 | 203 | 67 | |||||||||||||||||||||
Total Available-for-Sale Equity Securities | 13 | $ | 361 | $ | 63 | 22 | $ | 720 | $ | 483 | $ | 1,081 | $ | 546 | |||||||||||||||
Total Available-for-Sale Securities | 567 | $ | 1,060,938 | $ | 32,167 | 55 | $ | 53,798 | $ | 2,598 | $ | 1,114,736 | $ | 34,765 |
September 30, 2017 | Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||||
Type of Investment | Number of Issues | Fair Value | Gross Unrealized Depreciation | Number of Issues | Fair Value | Gross Unrealized Depreciation | Fair Value | Gross Unrealized Depreciation | |||||||||||||||||||||
AVAILABLE-FOR-SALE | |||||||||||||||||||||||||||||
Fixed maturities: | |||||||||||||||||||||||||||||
Continuing operations | 85 | $ | 206,874 | $ | 2,059 | 101 | $ | 259,297 | $ | 8,615 | $ | 466,171 | $ | 10,674 | |||||||||||||||
Discontinued operations | 50 | 142,444 | 1,837 | 39 | 120,161 | 3,683 | 262,605 | 5,520 | |||||||||||||||||||||
Total Available-for-Sale Fixed Maturities | 135 | $ | 349,318 | $ | 3,896 | 140 | $ | 379,458 | $ | 12,298 | $ | 728,776 | $ | 16,194 | |||||||||||||||
Equity securities: | |||||||||||||||||||||||||||||
Continuing operations | 6 | $ | 1,127 | $ | 248 | 10 | $ | 540 | $ | 343 | $ | 1,667 | $ | 591 | |||||||||||||||
Discontinued operations | — | — | — | 4 | 380 | 100 | 380 | 100 | |||||||||||||||||||||
Total Available-for-Sale Equity Securities | 6 | $ | 1,127 | $ | 248 | 14 | $ | 920 | $ | 443 | $ | 2,047 | $ | 691 | |||||||||||||||
Total Available-for-Sale Securities | 141 | $ | 350,445 | $ | 4,144 | 154 | $ | 380,378 | $ | 12,741 | $ | 730,823 | $ | 16,885 |
December 31, 2016 | Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||||
Type of Investment | Number of Issues | Fair Value | Gross Unrealized Depreciation | Number of Issues | Fair Value | Gross Unrealized Depreciation | Fair Value | Gross Unrealized Depreciation | |||||||||||||||||||||
AVAILABLE-FOR-SALE | |||||||||||||||||||||||||||||
Fixed maturities: | |||||||||||||||||||||||||||||
Continuing operations | 404 | $ | 654,235 | $ | 23,359 | 12 | $ | 6,288 | $ | 315 | $ | 660,523 | $ | 23,674 | |||||||||||||||
Discontinued operations | 150 | 406,342 | 8,745 | 21 | 46,790 | 1,800 | 453,132 | 10,545 | |||||||||||||||||||||
Total Available-for-Sale Fixed Maturities | 554 | $ | 1,060,577 | $ | 32,104 | 33 | $ | 53,078 | $ | 2,115 | $ | 1,113,655 | $ | 34,219 | |||||||||||||||
Equity securities: | |||||||||||||||||||||||||||||
Continuing operations | 12 | $ | 351 | $ | 62 | 17 | $ | 477 | $ | 254 | $ | 828 | $ | 316 | |||||||||||||||
Discontinued operations | 1 | 10 | 1 | 5 | 243 | 229 | 253 | 230 | |||||||||||||||||||||
Total Available-for-Sale Equity Securities | 13 | $ | 361 | $ | 63 | 22 | $ | 720 | $ | 483 | $ | 1,081 | $ | 546 | |||||||||||||||
Total Available-for-Sale Securities | 567 | $ | 1,060,938 | $ | 32,167 | 55 | $ | 53,798 | $ | 2,598 | $ | 1,114,736 | $ | 34,765 |
• | Level 1: Valuations are based on unadjusted quoted prices in active markets for identical financial instruments that we have the ability to access. |
• | Level 2: Valuations are based on quoted prices for similar financial instruments, other than quoted prices included in Level 1, in markets that are not active or on inputs that are observable either directly or indirectly for the full term of the financial instrument. |
• | Level 3: Valuations are based on pricing or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement of the financial instrument. Such inputs may reflect management's own assumptions about the assumptions a market participant would use in pricing the financial instrument. |
September 30, 2017 | December 31, 2016 | ||||||||||||||
Fair Value | Carrying Value | Fair Value | Carrying Value | ||||||||||||
Assets | |||||||||||||||
Investments | |||||||||||||||
Fixed maturities: | |||||||||||||||
Held-to-maturity securities | $ | 150 | $ | 150 | $ | 150 | $ | 150 | |||||||
Available-for-sale securities | 1,498,662 | 1,498,662 | 1,453,286 | 1,453,286 | |||||||||||
Trading securities | 13,673 | 13,673 | 14,390 | 14,390 | |||||||||||
Equity securities: | |||||||||||||||
Available-for-sale securities | 269,341 | 269,341 | 246,370 | 246,370 | |||||||||||
Trading securities | 6,330 | 6,330 | 5,644 | 5,644 | |||||||||||
Other long-term investments | 49,966 | 49,966 | 51,769 | 51,769 | |||||||||||
Short-term investments | 175 | 175 | 175 | 175 | |||||||||||
Cash and cash equivalents | 98,610 | 98,610 | 89,194 | 89,194 | |||||||||||
Corporate-owned life insurance | 3,759 | 3,759 | 2,592 | 2,592 |
September 30, 2017 | December 31, 2016 | ||||||||||||||
Fair Value | Carrying Value | Fair Value | Carrying Value | ||||||||||||
Assets | |||||||||||||||
Investments | |||||||||||||||
Fixed maturities: | |||||||||||||||
Held-to-maturity securities | $ | 39 | $ | 38 | $ | 49 | $ | 48 | |||||||
Available-for-sale securities | 1,426,991 | 1,426,991 | 1,444,840 | 1,444,840 | |||||||||||
Equity securities: | |||||||||||||||
Available-for-sale securities | 22,616 | 22,616 | 24,046 | 24,046 | |||||||||||
Mortgage loans | 3,690 | 3,504 | 3,895 | 3,706 | |||||||||||
Policy loans | 5,770 | 5,770 | 5,366 | 5,366 | |||||||||||
Other long-term investments | 16,299 | 16,299 | 15,780 | 15,870 | |||||||||||
Cash and cash equivalents | 30,751 | 30,751 | 21,659 | 21,659 | |||||||||||
Liabilities | |||||||||||||||
Policy reserves | |||||||||||||||
Annuity (accumulations) (1) | $ | 617,819 | $ | 620,037 | $ | 646,764 | $ | 666,711 | |||||||
Annuity (benefit payments) | 144,901 | 95,086 | 144,283 | 95,129 |
September 30, 2017 | Fair Value Measurements | ||||||||||||||
Description | Total | Level 1 | Level 2 | Level 3 | |||||||||||
AVAILABLE-FOR-SALE | |||||||||||||||
Fixed maturities: | |||||||||||||||
Bonds | |||||||||||||||
U.S. Treasury | $ | 21,981 | $ | — | $ | 21,981 | $ | — | |||||||
U.S. government agency | 99,525 | — | 99,525 | — | |||||||||||
States, municipalities and political subdivisions | |||||||||||||||
General obligations | |||||||||||||||
Midwest | 122,438 | — | 122,438 | — | |||||||||||
Northeast | 51,579 | — | 51,579 | — | |||||||||||
South | 143,425 | — | 143,425 | — | |||||||||||
West | 114,646 | — | 114,646 | — | |||||||||||
Special revenue | |||||||||||||||
Midwest | 154,786 | — | 154,709 | 77 | |||||||||||
Northeast | 79,425 | — | 79,425 | — | |||||||||||
South | 262,588 | — | 262,588 | — | |||||||||||
West | 158,358 | — | 158,358 | — | |||||||||||
Foreign bonds | 56,207 | — | 56,207 | — | |||||||||||
Public utilities | 205,756 | — | 205,756 | — | |||||||||||
Corporate bonds | |||||||||||||||
Energy | 98,645 | — | 98,645 | — | |||||||||||
Industrials | 214,290 | — | 214,290 | — | |||||||||||
Consumer goods and services | 186,385 | — | 185,686 | 699 | |||||||||||
Health care | 78,375 | — | 78,375 | — | |||||||||||
Technology, media and telecommunications | 146,139 | — | 146,139 | — | |||||||||||
Financial services | 259,009 | — | 250,992 | 8,017 | |||||||||||
Mortgage-backed securities | 14,486 | — | 14,486 | — | |||||||||||
Collateralized mortgage obligations | |||||||||||||||
Government national mortgage association | 154,730 | — | 154,730 | — | |||||||||||
Federal home loan mortgage corporation | 190,524 | — | 190,524 | — | |||||||||||
Federal national mortgage association | 107,734 | — | 107,734 | — | |||||||||||
Asset-backed securities | 4,622 | — | 3,991 | 631 | |||||||||||
Total Available-for-Sale Fixed Maturities | $ | 2,925,653 | $ | — | $ | 2,916,229 | $ | 9,424 | |||||||
Equity securities: | |||||||||||||||
Common stocks | |||||||||||||||
Public utilities | $ | 22,086 | $ | 22,086 | $ | — | $ | — | |||||||
Energy | 14,406 | 14,406 | — | — | |||||||||||
Industrials | 62,843 | 62,843 | — | — | |||||||||||
Consumer goods and services | 24,788 | 24,788 | — | — | |||||||||||
Health care | 37,226 | 37,226 | — | — |
Technology, media and telecommunications | 16,085 | 16,085 | — | — | |||||||||||
Financial services | 113,370 | 113,370 | — | — | |||||||||||
Nonredeemable preferred stocks | 1,153 | 419 | — | 734 | |||||||||||
Total Available-for-Sale Equity Securities | $ | 291,957 | $ | 291,223 | $ | — | $ | 734 | |||||||
Total Available-for-Sale Securities | $ | 3,217,610 | $ | 291,223 | $ | 2,916,229 | $ | 10,158 | |||||||
TRADING | |||||||||||||||
Fixed maturities: | |||||||||||||||
Corporate bonds | |||||||||||||||
Industrials | $ | 2,117 | $ | — | $ | 2,117 | $ | — | |||||||
Consumer goods and services | 289 | — | 289 | — | |||||||||||
Health care | 3,557 | — | 3,557 | — | |||||||||||
Technology, media and telecommunications | 1,373 | — | 1,373 | — | |||||||||||
Financial services | 4,780 | — | 4,780 | — | |||||||||||
Redeemable preferred stocks | 1,557 | 1,557 | — | — | |||||||||||
Equity securities: | |||||||||||||||
Public utilities | 831 | 831 | — | — | |||||||||||
Energy | 206 | 206 | — | — | |||||||||||
Industrials | 900 | 900 | — | — | |||||||||||
Consumer goods and services | 1,209 | 1,209 | — | — | |||||||||||
Health care | 369 | 369 | — | — | |||||||||||
Financial services | 218 | 218 | — | — | |||||||||||
Nonredeemable preferred stocks | 2,597 | 2,597 | — | — | |||||||||||
Total Trading Securities | $ | 20,003 | $ | 7,887 | $ | 12,116 | $ | — | |||||||
Short-Term Investments | $ | 175 | $ | 175 | $ | — | $ | — | |||||||
Money Market Accounts | $ | 13,897 | $ | 13,897 | $ | — | $ | — | |||||||
Corporate-Owned Life Insurance | $ | 3,759 | $ | — | $ | 3,759 | $ | — | |||||||
Total Assets Measured at Fair Value | $ | 3,255,444 | $ | 313,182 | $ | 2,932,104 | $ | 10,158 |
December 31, 2016 | Fair Value Measurements | ||||||||||||||
Description | Total | Level 1 | Level 2 | Level 3 | |||||||||||
AVAILABLE-FOR-SALE | |||||||||||||||
Fixed maturities: | |||||||||||||||
Bonds | |||||||||||||||
U.S. Treasury | $ | 23,195 | $ | — | $ | 23,195 | $ | — | |||||||
U.S. government agency | 77,597 | — | 77,597 | — | |||||||||||
States, municipalities and political subdivisions | |||||||||||||||
General obligations | |||||||||||||||
Midwest | 144,143 | — | 144,143 | — | |||||||||||
Northeast | 58,409 | — | 58,409 | — | |||||||||||
South | 128,369 | — | 128,369 | — | |||||||||||
West | 113,731 | — | 113,731 | — | |||||||||||
Special revenue | |||||||||||||||
Midwest | 168,310 | — | 168,142 | 168 | |||||||||||
Northeast | 68,065 | — | 68,065 | — | |||||||||||
South | 239,187 | — | 239,187 | — | |||||||||||
West | 131,744 | — | 131,744 | — | |||||||||||
Foreign bonds | 65,234 | — | 65,234 | — | |||||||||||
Public utilities | 215,674 | — | 215,674 | — | |||||||||||
Corporate bonds | |||||||||||||||
Energy | 108,860 | — | 108,860 | — | |||||||||||
Industrials | 229,903 | — | 229,903 | — | |||||||||||
Consumer goods and services | 181,687 | — | 180,590 | 1,097 | |||||||||||
Health care | 83,123 | — | 83,123 | — | |||||||||||
Technology, media and telecommunications | 144,612 | — | 144,612 | — | |||||||||||
Financial services | 273,951 | — | 265,154 | 8,797 | |||||||||||
Mortgage-backed securities | 17,248 | — | 17,248 | — | |||||||||||
Collateralized mortgage obligations | |||||||||||||||
Government national mortgage association | 144,460 | — | 144,460 | — | |||||||||||
Federal home loan mortgage corporation | 174,458 | — | 174,458 | — | |||||||||||
Federal national mortgage association | 101,896 | — | 101,896 | — | |||||||||||
Asset-backed securities | 4,270 | — | 3,821 | 449 | |||||||||||
Total Available-for-Sale Fixed Maturities | $ | 2,898,126 | $ | — | $ | 2,887,615 | $ | 10,511 | |||||||
Equity securities: | |||||||||||||||
Common stocks | |||||||||||||||
Public utilities | $ | 19,671 | $ | 19,671 | $ | — | $ | — | |||||||
Energy | 15,047 | 15,047 | — | — | |||||||||||
Industrials | 51,794 | 51,794 | — | — | |||||||||||
Consumer goods and services | 24,117 | 24,117 | — | — | |||||||||||
Health care | 27,420 | 27,420 | — | — | |||||||||||
Technology, media and telecommunications | 15,369 | 15,369 | — | — | |||||||||||
Financial services | 115,950 | 111,958 | — | 3,992 |
Nonredeemable preferred stocks | 1,048 | 453 | — | 595 | |||||||||||
Total Available-for-Sale Equity Securities | $ | 270,416 | $ | 265,829 | $ | — | $ | 4,587 | |||||||
Total Available-for-Sale Securities | $ | 3,168,542 | $ | 265,829 | $ | 2,887,615 | $ | 15,098 | |||||||
TRADING | |||||||||||||||
Fixed maturities: | |||||||||||||||
Bonds | |||||||||||||||
Corporate bonds | |||||||||||||||
Industrials | $ | 3,919 | $ | — | $ | 3,919 | $ | — | |||||||
Consumer goods and services | 127 | — | 127 | — | |||||||||||
Health care | 3,410 | — | 3,410 | — | |||||||||||
Technology, media and telecommunications | 787 | — | 787 | — | |||||||||||
Financial services | 4,842 | — | 4,842 | — | |||||||||||
Redeemable preferred stocks | 1,305 | 1,305 | — | — | |||||||||||
Equity securities: | |||||||||||||||
Public utilities | 613 | 613 | — | — | |||||||||||
Energy | 286 | 286 | — | — | |||||||||||
Industrials | 877 | 877 | — | — | |||||||||||
Consumer goods and services | 1,202 | 1,202 | — | — | |||||||||||
Health care | 339 | 339 | — | — | |||||||||||
Financial services | 206 | 206 | — | — | |||||||||||
Nonredeemable preferred stocks | 2,121 | 2,121 | — | — | |||||||||||
Total Trading Securities | $ | 20,034 | $ | 6,949 | $ | 13,085 | $ | — | |||||||
Short-Term Investments | $ | 175 | $ | 175 | $ | — | $ | — | |||||||
Money Market Accounts | $ | 16,802 | $ | 16,802 | $ | — | $ | — | |||||||
Corporate-Owned Life Insurance | $ | 2,592 | $ | — | $ | 2,592 | $ | — | |||||||
Total Assets Measured at Fair Value | $ | 3,208,145 | $ | 289,755 | $ | 2,903,292 | $ | 15,098 |
September 30, 2017 | Fair Value Measurements | ||||||||||||||
Description | Total | Level 1 | Level 2 | Level 3 | |||||||||||
AVAILABLE-FOR-SALE | |||||||||||||||
Fixed maturities: | |||||||||||||||
Continuing operations | $ | 1,498,662 | $ | — | $ | 1,497,931 | $ | 731 | |||||||
Discontinued operations | 1,426,991 | — | 1,418,298 | 8,693 | |||||||||||
Total Available-for-Sale Fixed Maturities | $ | 2,925,653 | $ | — | $ | 2,916,229 | $ | 9,424 | |||||||
Equity securities: | |||||||||||||||
Continuing operations | $ | 269,341 | $ | 268,607 | $ | — | $ | 734 | |||||||
Discontinued operations | 22,616 | 22,616 | — | — | |||||||||||
Total Available-for-Sale Equity Securities | $ | 291,957 | $ | 291,223 | $ | — | $ | 734 | |||||||
Total Available-for-Sale Securities | $ | 3,217,610 | $ | 291,223 | $ | 2,916,229 | $ | 10,158 | |||||||
TRADING | |||||||||||||||
Fixed maturities: | |||||||||||||||
Continuing operations | $ | 13,673 | $ | 1,557 | $ | 12,116 | $ | — | |||||||
Discontinued operations | — | — | — | — | |||||||||||
Equity securities: | |||||||||||||||
Continuing operations | 6,330 | 6,330 | — | — | |||||||||||
Discontinued operations | — | — | — | — | |||||||||||
Total Trading Securities | $ | 20,003 | $ | 7,887 | $ | 12,116 | $ | — | |||||||
SHORT-TERM INVESTMENTS | |||||||||||||||
Continuing operations | $ | 175 | $ | 175 | $ | — | $ | — | |||||||
Discontinued operations | — | — | — | $ | — | ||||||||||
Short-Term Investments | $ | 175 | $ | 175 | $ | — | $ | — | |||||||
MONEY MARKET ACCOUNTS | |||||||||||||||
Continuing operations | $ | 13,203 | $ | 13,203 | $ | — | $ | — | |||||||
Discontinued operations | 694 | 694 | — | — | |||||||||||
Money Market Accounts | $ | 13,897 | $ | 13,897 | $ | — | $ | — | |||||||
CORPORATE-OWNED LIFE INSURANCE | |||||||||||||||
Continuing operations | $ | 3,759 | $ | — | $ | 3,759 | $ | — | |||||||
Discontinued operations | — | — | — | — | |||||||||||
Corporate-Owned Life Insurance | $ | 3,759 | $ | — | $ | 3,759 | $ | — | |||||||
Total Assets Measured at Fair Value | $ | 3,255,444 | $ | 313,182 | $ | 2,932,104 | $ | 10,158 |
December 31, 2016 | Fair Value Measurements | ||||||||||||||
Description | Total | Level 1 | Level 2 | Level 3 | |||||||||||
AVAILABLE-FOR-SALE | |||||||||||||||
Fixed maturities: | |||||||||||||||
Continuing operations | $ | 1,453,286 | $ | — | $ | 1,452,737 | $ | 549 | |||||||
Discontinued operations | 1,444,840 | — | 1,434,878 | 9,962 | |||||||||||
Total Available-for-Sale Fixed Maturities | $ | 2,898,126 | $ | — | $ | 2,887,615 | $ | 10,511 | |||||||
Equity securities: | |||||||||||||||
Continuing operations | $ | 246,370 | $ | 243,627 | $ | — | $ | 2,743 | |||||||
Discontinued operations | 24,046 | 22,202 | — | 1,844 | |||||||||||
Total Available-for-Sale Equity Securities | $ | 270,416 | $ | 265,829 | $ | — | $ | 4,587 | |||||||
Total Available-for-Sale Securities | $ | 3,168,542 | $ | 265,829 | $ | 2,887,615 | $ | 15,098 | |||||||
TRADING | |||||||||||||||
Fixed maturities: | |||||||||||||||
Continuing operations | $ | 14,390 | $ | 1,305 | $ | 13,085 | $ | — | |||||||
Discontinued operations | — | — | — | — | |||||||||||
Equity securities: | |||||||||||||||
Continuing operations | 5,644 | 5,644 | — | — | |||||||||||
Discontinued operations | — | — | — | — | |||||||||||
Total Trading Securities | $ | 20,034 | $ | 6,949 | $ | 13,085 | $ | — | |||||||
SHORT-TERM INVESTMENTS | |||||||||||||||
Continuing operations | $ | 175 | $ | 175 | $ | — | $ | — | |||||||
Discontinued operations | — | — | — | — | |||||||||||
Short-Term Investments | $ | 175 | $ | 175 | $ | — | $ | — | |||||||
MONEY MARKET ACCOUNTS | |||||||||||||||
Continuing operations | $ | 4,810 | $ | 4,810 | $ | — | $ | — | |||||||
Discontinued operations | 11,992 | 11,992 | — | — | |||||||||||
Money Market Accounts | $ | 16,802 | $ | 16,802 | $ | — | $ | — | |||||||
CORPORATE-OWNED LIFE INSURANCE | |||||||||||||||
Continuing operations | $ | 2,592 | $ | — | $ | 2,592 | $ | — | |||||||
Discontinued operations | — | — | — | — | |||||||||||
Corporate-Owned Life Insurance | $ | 2,592 | $ | — | $ | 2,592 | $ | — | |||||||
Total Assets Measured at Fair Value | $ | 3,208,145 | $ | 289,755 | $ | 2,903,292 | $ | 15,098 |
States, municipalities and political subdivisions | Corporate bonds | Asset-backed securities | Equities | Total | |||||||||||||||
Balance at June 30, 2017 | $ | 77 | $ | 9,056 | $ | 622 | $ | 595 | $ | 10,350 | |||||||||
Net unrealized gains (losses)(1) | — | (7 | ) | 9 | 139 | 141 | |||||||||||||
Purchases | — | 100 | — | — | 100 | ||||||||||||||
Disposals | — | (433 | ) | — | — | (433 | ) | ||||||||||||
Balance at September 30, 2017 | $ | 77 | $ | 8,716 | $ | 631 | $ | 734 | $ | 10,158 |
States, municipalities and political subdivisions | Corporate bonds | Asset-backed securities | Equities | Total | |||||||||||||||
Balance at January 1, 2017 | $ | 168 | $ | 9,894 | $ | 449 | $ | 4,587 | $ | 15,098 | |||||||||
Net unrealized gains (losses)(1) | (6 | ) | (6 | ) | 182 | 139 | 309 | ||||||||||||
Purchases | — | 100 | — | 145 | 245 | ||||||||||||||
Disposals | (85 | ) | (1,272 | ) | — | (4,137 | ) | (5,494 | ) | ||||||||||
Balance at September 30, 2017 | $ | 77 | $ | 8,716 | $ | 631 | $ | 734 | $ | 10,158 |
September 30, 2017 | December 31, 2016 | ||||||
Gross liability for losses and loss settlement expenses at beginning of year | $ | 1,123,896 | $ | 1,003,895 | |||
Ceded losses and loss settlement expenses | (59,794 | ) | (54,653 | ) | |||
Net liability for losses and loss settlement expenses at beginning of year | $ | 1,064,102 | $ | 949,242 | |||
Losses and loss settlement expenses incurred for claims occurring during | |||||||
Current year | $ | 606,344 | $ | 683,662 | |||
Prior years | (37,988 | ) | (31,229 | ) | |||
Total incurred | $ | 568,356 | $ | 652,433 | |||
Losses and loss settlement expense payments for claims occurring during | |||||||
Current year | $ | 212,591 | $ | 277,053 | |||
Prior years | 247,608 | 260,520 | |||||
Total paid | $ | 460,199 | $ | 537,573 | |||
Net liability for losses and loss settlement expenses at end of year | $ | 1,172,259 | $ | 1,064,102 | |||
Ceded loss and loss settlement expenses | 65,021 | 59,794 | |||||
Gross liability for losses and loss settlement expenses at end of period | $ | 1,237,280 | $ | 1,123,896 |
Pension Plan | Postretirement Benefit Plan | ||||||||||||||
Three Months Ended September 30, | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net periodic benefit cost | |||||||||||||||
Service cost | $ | 1,714 | $ | 1,623 | $ | 505 | $ | 932 | |||||||
Interest cost | 1,765 | 1,663 | 482 | 754 | |||||||||||
Expected return on plan assets | (2,413 | ) | (1,988 | ) | — | — | |||||||||
Amortization of prior service credit | — | — | (1,352 | ) | — | ||||||||||
Amortization of net loss | 891 | 992 | 462 | 379 | |||||||||||
Net periodic benefit cost | $ | 1,957 | $ | 2,290 | $ | 97 | $ | 2,065 |
Pension Plan | Postretirement Benefit Plan | ||||||||||||||
Nine Months Ended September 30, | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net periodic benefit cost | |||||||||||||||
Service cost | $ | 5,141 | $ | 4,869 | $ | 1,515 | $ | 2,796 | |||||||
Interest cost | 5,295 | 4,989 | 1,446 | 2,262 | |||||||||||
Expected return on plan assets | (7,237 | ) | (5,964 | ) | — | — | |||||||||
Amortization of prior service credit | — | — | (4,056 | ) | — | ||||||||||
Amortization of net loss | 2,673 | 2,976 | 1,384 | 1,137 | |||||||||||
Net periodic benefit cost | $ | 5,872 | $ | 6,870 | $ | 289 | $ | 6,195 |
Authorized Shares Available for Future Award Grants | Nine Months Ended September 30, 2017 | From Inception to September 30, 2017 | |||
Beginning balance | 1,248,651 | 1,900,000 | |||
Additional shares authorized | — | 1,500,000 | |||
Number of awards granted | (255,040 | ) | (2,867,606 | ) | |
Number of awards forfeited or expired | 3,228 | 464,445 | |||
Ending balance | 996,839 | 996,839 | |||
Number of option awards exercised | 101,189 | 1,050,257 | |||
Number of unrestricted stock awards granted | 1,145 | 8,470 | |||
Number of restricted stock awards vested | — | 36,970 |
Authorized Shares Available for Future Award Grants | Nine Months Ended September 30, 2017 | From Inception to June 30, 2017 | |||
Beginning balance | 74,771 | 300,000 | |||
Number of awards granted | (12,958 | ) | (262,190 | ) | |
Number of awards forfeited or expired | — | 24,003 | |||
Ending balance | 61,813 | 61,813 | |||
Number of option awards exercised | 6,727 | 59,200 | |||
Number of restricted stock awards vested | 22,716 | 54,272 |
2017 | $ | 1,202 | ||
2018 | 4,047 | |||
2019 | 2,784 | |||
2020 | 1,120 | |||
2021 | 393 | |||
2022 | 40 | |||
Total | $ | 9,586 |
Three Months Ended September 30, | |||||||||||||||
(In Thousands, Except Share Data) | 2017 | 2016 | |||||||||||||
Basic | Diluted | Basic | Diluted | ||||||||||||
Net income (loss) from continuing operations | $ | (19,082 | ) | $ | (19,082 | ) | $ | 11,628 | $ | 11,628 | |||||
Weighted-average common shares outstanding | 24,960,086 | 24,960,086 | 25,389,633 | 25,389,633 | |||||||||||
Add dilutive effect of restricted stock unit awards | — | — | — | 155,270 | |||||||||||
Add dilutive effect of stock options | — | — | — | 270,443 | |||||||||||
Weighted-average common shares outstanding | 24,960,086 | 24,960,086 | 25,389,633 | 25,815,346 | |||||||||||
Earnings (loss) per common share from continuing operations | $ | (0.77 | ) | $ | (0.77 | ) | $ | 0.46 | $ | 0.45 | |||||
Earnings per common share from discontinued operations | 0.05 | 0.05 | 0.03 | 0.03 | |||||||||||
Earnings (loss) per common share | $ | (0.72 | ) | $ | (0.72 | ) | $ | 0.49 | $ | 0.48 | |||||
Awards excluded from diluted earnings per share calculation(1) | — | — | — | — |
(1) | Outstanding awards that are not "in-the-money" are excluded from the diluted earnings per share calculation because the effect of including them would have been anti-dilutive. |
Nine Months Ended September 30, | |||||||||||||||
(In Thousands, Except Share Data) | 2017 | 2016 | |||||||||||||
Basic | Diluted | Basic | Diluted | ||||||||||||
Net income (loss) from continuing operations | $ | (389 | ) | $ | (389 | ) | $ | 37,083 | $ | 37,083 | |||||
Weighted-average common shares outstanding | 25,177,133 | 25,177,133 | 25,322,427 | 25,322,427 | |||||||||||
Add dilutive effect of restricted stock unit awards | — | 253,082 | — | 155,270 | |||||||||||
Add dilutive effect of stock options | — | 236,190 | — | 233,317 | |||||||||||
Weighted-average common shares outstanding | 25,177,133 | 25,666,405 | 25,322,427 | 25,711,014 | |||||||||||
Earnings (loss) per common share from continuing operations | $ | (0.01 | ) | $ | (0.01 | ) | $ | 1.47 | $ | 1.44 | |||||
Earnings per common share from discontinued operations | 0.21 | 0.21 | 0.03 | 0.03 | |||||||||||
Earnings (loss) per common share | $ | 0.20 | $ | 0.20 | $ | 1.50 | $ | 1.47 | |||||||
Awards excluded from diluted earnings per share calculation(1) | — | — | — | — |
(1) | Outstanding awards that are not "in-the-money" are excluded from the diluted earnings per share calculation because the effect of including them would have been anti-dilutive. |
Liability for | |||||||||||
Net unrealized | underfunded | ||||||||||
appreciation | employee | ||||||||||
on investments | benefit costs(1) | Total | |||||||||
Balance as of June 30, 2017 | $ | 160,048 | $ | (23,080 | ) | $ | 136,968 | ||||
Change in accumulated other comprehensive income before reclassifications | 12,347 | — | 12,347 | ||||||||
Reclassification adjustments from accumulated other comprehensive income (loss) | (273 | ) | 879 | 606 | |||||||
Balance as of September 30, 2017 | $ | 172,122 | $ | (22,201 | ) | $ | 149,921 |
Liability for | |||||||||||
Net unrealized | underfunded | ||||||||||
appreciation | employee | ||||||||||
on investments | benefit costs(1) | Total | |||||||||
Balance as of January 1, 2017 | $ | 133,892 | $ | (24,837 | ) | $ | 109,055 | ||||
Change in accumulated other comprehensive income before reclassifications | 41,999 | — | 41,999 | ||||||||
Reclassification adjustments from accumulated other comprehensive income (loss) | (3,769 | ) | 2,636 | (1,133 | ) | ||||||
Balance as of September 30, 2017 | $ | 172,122 | $ | (22,201 | ) | $ | 149,921 |
Discontinued Operations | |||||||
Balance Sheets | |||||||
(In Thousands, Except Share Data) | September 30, 2017 | December 31, 2016 | |||||
(unaudited) | |||||||
Assets | |||||||
Investments | |||||||
Fixed maturities | |||||||
Held-to-maturity, at amortized cost (fair value $39 in 2017 and $49 in 2016) | $ | 38 | $ | 48 | |||
Available-for-sale, at fair value (amortized cost $1,399,465 in 2017 and $1,429,270 in 2016) | 1,426,991 | 1,444,840 | |||||
Equity Securities available-for-sale, at fair value (cost $5,099 in 2017 and $8,510 in 2016) | 22,616 | 24,046 | |||||
Mortgage loans | 3,504 | 3,706 | |||||
Policy loans | 5,770 | 5,366 | |||||
Other long-term investments | 16,299 | 15,870 | |||||
1,475,218 | 1,493,876 | ||||||
Cash and cash equivalents | 30,751 | 21,659 | |||||
Deferred policy acquisition costs | 65,836 | 70,750 | |||||
Other assets | 21,041 | 19,333 | |||||
Total assets held for sale | $ | 1,592,846 | $ | 1,605,618 | |||
Liabilities | |||||||
Future policy benefits and losses | $ | 1,324,029 | $ | 1,350,503 | |||
Accrued expenses and other liabilities | 39,708 | 39,720 | |||||
Total liabilities held for sale | $ | 1,363,737 | $ | 1,390,223 |
Discontinued Operations | |||||||||||||||
Statements of Income | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(In Thousands, Except Share Data) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Revenues | |||||||||||||||
Net premiums earned | $ | 14,230 | $ | 20,600 | $ | 45,999 | $ | 62,878 | |||||||
Investment income, net of investment expenses | 12,354 | 12,663 | 37,230 | 38,404 | |||||||||||
Net realized investment gains | 296 | 461 | 3,600 | 1,409 | |||||||||||
Other income | 174 | 145 | 498 | 436 | |||||||||||
Total revenues | $ | 27,054 | $ | 33,869 | $ | 87,327 | $ | 103,127 | |||||||
Benefits, Losses and Expenses | |||||||||||||||
Losses and loss settlement expenses | $ | 10,506 | $ | 7,252 | $ | 30,679 | $ | 23,527 | |||||||
Increase in liability for future policy benefits | 5,481 | 14,091 | 19,341 | 42,645 | |||||||||||
Amortization of deferred policy acquisition costs | 2,156 | 1,876 | 5,524 | 5,716 | |||||||||||
Other underwriting expenses | 2,444 | 4,527 | 9,452 | 14,630 | |||||||||||
Interest on policyholders’ accounts | 4,587 | 4,983 | 13,982 | 15,368 | |||||||||||
Total benefits, losses and expenses | $ | 25,174 | $ | 32,729 | $ | 78,978 | $ | 101,886 | |||||||
Income from discontinued operations before income taxes | $ | 1,880 | $ | 1,140 | $ | 8,349 | $ | 1,241 | |||||||
Federal income tax expense | 662 | 400 | 2,930 | 415 | |||||||||||
Net income from discontinued operations | $ | 1,218 | $ | 740 | $ | 5,419 | $ | 826 | |||||||
Earnings per common share from discontinued operations: | |||||||||||||||
Basic | $ | 0.05 | $ | 0.03 | $ | 0.21 | $ | 0.03 | |||||||
Diluted | 0.05 | 0.03 | 0.21 | 0.03 |
/s/ Ernst & Young LLP | ||||
Ernst & Young LLP |
• | property and casualty insurance, which includes commercial lines insurance, personal lines insurance, surety bonds and assumed reinsurance; and |
• | life insurance, which includes deferred and immediate annuities, universal life products and traditional life (primarily single premium whole life) insurance products. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
(In Thousands) | 2017 | 2016 | % | 2017 | 2016 | % | |||||||||||||||
Revenues | |||||||||||||||||||||
Net premiums earned | $ | 255,758 | $ | 239,469 | 6.8 | % | $ | 737,424 | $ | 691,976 | 6.6 | % | |||||||||
Investment income, net of investment expenses | 13,792 | 14,027 | (1.7 | ) | 38,561 | 35,017 | 10.1 | ||||||||||||||
Net realized investment gains | 67 | 2,129 | (96.9 | ) | 3,397 | 4,832 | (29.7 | ) | |||||||||||||
Total revenues | $ | 269,617 | $ | 255,625 | 5.5 | % | $ | 779,382 | $ | 731,825 | 6.5 | % | |||||||||
Benefits, Losses and Expenses | |||||||||||||||||||||
Losses and loss settlement expenses | $ | 223,208 | $ | 169,303 | 31.8 | % | $ | 568,356 | $ | 475,568 | 19.5 | % | |||||||||
Amortization of deferred policy acquisition costs | 52,986 | 52,240 | 1.4 | 154,845 | 151,216 | 2.4 | |||||||||||||||
Other underwriting expenses | 25,817 | 20,047 | 28.8 | 69,900 | 61,469 | 13.7 | |||||||||||||||
Total benefits, losses and expenses | $ | 302,011 | $ | 241,590 | 25.0 | % | $ | 793,101 | $ | 688,253 | 15.2 | % | |||||||||
Income (loss) from continuing operations before income taxes | $ | (32,394 | ) | $ | 14,035 | NM | $ | (13,719 | ) | $ | 43,572 | (131.5 | )% | ||||||||
Federal income tax expense (benefit) | (13,312 | ) | 2,407 | NM | (13,330 | ) | 6,489 | NM | |||||||||||||
Net income (loss) from continuing operations | $ | (19,082 | ) | $ | 11,628 | (264.1 | )% | $ | (389 | ) | $ | 37,083 | (101.0 | )% | |||||||
Income from discontinued operations, net of tax | 1,218 | 740 | 64.6 | % | 5,419 | 826 | NM | ||||||||||||||
Net income (loss) | $ | (17,864 | ) | $ | 12,368 | (244.4 | )% | $ | 5,030 | $ | 37,909 | (86.7 | )% | ||||||||
GAAP Ratios: | |||||||||||||||||||||
Net loss ratio (without catastrophes) | 75.3 | % | 65.5 | % | 15.0 | % | 67.8 | % | 61.1 | % | 11.0 | % | |||||||||
Catastrophes - effect on net loss ratio | 12.0 | 5.2 | 130.8 | % | 9.3 | 7.6 | 22.4 | % | |||||||||||||
Net loss ratio(1) | 87.3 | % | 70.7 | % | 23.5 | % | 77.1 | % | 68.7 | % | 12.2 | % | |||||||||
Expense ratio(2) | 30.8 | 30.2 | 2.0 | % | 30.5 | 30.8 | (1.0 | )% | |||||||||||||
Combined ratio(3) | 118.1 | % | 100.9 | % | 17.0 | % | 107.6 | % | 99.5 | % | 8.1 | % |
Three Months Ended September 30, | 2017 | 2016 | |||||||||||||||||||
Net Losses | Net Losses | ||||||||||||||||||||
and Loss | and Loss | ||||||||||||||||||||
Net | Settlement | Net | Net | Settlement | Net | ||||||||||||||||
(In Thousands, Except Ratios) | Premiums | Expenses | Loss | Premiums | Expenses | Loss | |||||||||||||||
Unaudited | Earned | Incurred | Ratio | Earned | Incurred | Ratio | |||||||||||||||
Commercial lines | |||||||||||||||||||||
Other liability | $ | 77,955 | $ | 50,836 | 65.2 | % | $ | 74,784 | $ | 32,714 | 43.7 | % | |||||||||
Fire and allied lines | 58,568 | 45,809 | 78.2 | 56,451 | 47,086 | 83.4 | |||||||||||||||
Automobile | 64,470 | 74,161 | 115.0 | 55,111 | 53,330 | 96.8 | |||||||||||||||
Workers' compensation | 26,387 | 23,357 | 88.5 | 26,766 | 21,772 | 81.3 | |||||||||||||||
Fidelity and surety | 6,430 | (485 | ) | (7.5 | ) | 5,711 | 908 | 15.9 | |||||||||||||
Miscellaneous | 459 | 111 | 24.2 | 453 | 39 | 8.6 | |||||||||||||||
Total commercial lines | $ | 234,269 | $ | 193,789 | 82.7 | % | $ | 219,276 | $ | 155,849 | 71.1 | % | |||||||||
Personal lines | |||||||||||||||||||||
Fire and allied lines | $ | 10,730 | $ | 9,077 | 84.6 | % | $ | 10,986 | $ | 6,606 | 60.1 | % | |||||||||
Automobile | 6,878 | 8,250 | 119.9 | 6,386 | 6,328 | 99.1 | |||||||||||||||
Miscellaneous | 294 | 150 | 51.0 | 277 | (276 | ) | (99.6 | ) | |||||||||||||
Total personal lines | $ | 17,902 | $ | 17,477 | 97.6 | % | $ | 17,649 | $ | 12,658 | 71.7 | % | |||||||||
Reinsurance assumed | $ | 3,587 | $ | 11,942 | NM | $ | 2,544 | $ | 796 | 31.3 | % | ||||||||||
Total | $ | 255,758 | $ | 223,208 | 87.3 | % | $ | 239,469 | $ | 169,303 | 70.7 | % |
Nine Months Ended September 30, | 2017 | 2016 | |||||||||||||||||||
Net Losses | Net Losses | ||||||||||||||||||||
and Loss | and Loss | ||||||||||||||||||||
Net | Settlement | Net | Net | Settlement | Net | ||||||||||||||||
(In Thousands, Except Ratios) | Premiums | Expenses | Loss | Premiums | Expenses | Loss | |||||||||||||||
Unaudited | Earned | Incurred | Ratio | Earned | Incurred | Ratio | |||||||||||||||
Commercial lines | |||||||||||||||||||||
Other liability | $ | 228,250 | $ | 73,597 | 32.2 | % | $ | 215,572 | $ | 101,378 | 47.0 | % | |||||||||
Fire and allied lines | 168,506 | 156,702 | 93.0 | 164,503 | 133,823 | 81.3 | |||||||||||||||
Automobile | 183,688 | 208,346 | 113.4 | 157,106 | 140,397 | 89.4 | |||||||||||||||
Workers' compensation | 78,092 | 55,569 | 71.2 | 77,009 | 53,106 | 69.0 | |||||||||||||||
Fidelity and surety | 18,041 | 207 | 1.1 | 16,221 | 432 | 2.7 | |||||||||||||||
Miscellaneous | 1,374 | 278 | 20.2 | 1,292 | 357 | 27.6 | |||||||||||||||
Total commercial lines | $ | 677,951 | $ | 494,699 | 73.0 | % | $ | 631,703 | $ | 429,493 | 68.0 | % | |||||||||
Personal lines | |||||||||||||||||||||
Fire and allied lines | $ | 32,300 | $ | 31,361 | 97.1 | % | $ | 32,794 | $ | 25,442 | 77.6 | % | |||||||||
Automobile | 20,031 | 22,909 | 114.4 | 18,686 | 16,872 | 90.3 | |||||||||||||||
Miscellaneous | 860 | 80 | 9.3 | 808 | 319 | 39.5 | |||||||||||||||
Total personal lines | $ | 53,191 | $ | 54,350 | 102.2 | % | $ | 52,288 | $ | 42,633 | 81.5 | % | |||||||||
Reinsurance assumed | $ | 6,282 | $ | 19,307 | NM | $ | 7,985 | $ | 3,442 | 43.1 | % | ||||||||||
Total | $ | 737,424 | $ | 568,356 | 77.1 | % | $ | 691,976 | $ | 475,568 | 68.7 | % |
• | Other liability - The net loss ratio deteriorated 21.5 percentage points and improved 14.8 percentage points in the three- and nine-month periods ended September 30, 2017, respectively, compared to the same periods of 2016. Loss ratio deterioration for the three-month period ended September 30, 2017 is primarily due to an increase in losses on commercial automobile policies with umbrella coverage resulting in an increase in claim payments for prior years, increase in reserves for current year reported claims and an increase in reserves for prior year incurred but not reported claims. Loss ratio improvement for the-nine month period ended September 30, 2017 is due to a decrease in reserves for incurred but not reported claims and a decrease in reserves for unpaid loss adjustment expense which is attributed to our continued litigation management efforts. |
• | Commercial fire and allied lines - The net loss ratio improved 5.2 percentage points and deteriorated 11.7 percentage points in the three- and nine-month periods ended September 30, 2017, respectively, compared to the same periods of 2016. Loss ratio improvement for the three-month period ended September 30, 2017 comes from a decrease in reserves for incurred but not reported claims for the current year which is attributable to lower than expected claim emergence from various storms that had occurred earlier in the year. Loss ratio deterioration for the-nine month period ended September 30, 2017 is due to an increase in claim payments for the current year and first previous year. In addition, the change results from an increase in frequency, with the number of claims increasing in 2017 as compared to the same periods of 2016, along with an increase in paid loss adjustment expenses. |
• | Commercial automobile - The net loss ratio deteriorated 18.2 percentage points and 24.0 percentage points in the three- and nine-month periods ended September 30, 2017, respectively, compared to the same periods of 2016. The change was due to an increase in the number of severe losses, which we define as losses over $500 thousand, in 2017 as compared to the same periods of 2016 along with strengthening of reserves on prior accident years and only partially due to an increase in direct paid losses in the current accident year. We are implementing many initiatives to improve the profitability of this line of business, which include pricing increases, stricter underwriting guidelines, new analytical tools and more rigorous loss control requirements. |
• | Personal fire and allied lines - The net loss ratio deteriorated 24.5 percentage points and 19.5 percentage points in the three- and nine-month periods ended September 30, 2017, respectively, compared to the same periods of 2016. The change results from an increase in frequency, with the number of claims increasing in 2017 as compared to the same periods of 2016. |
• | Personal automobile - The net loss ratio deteriorated 20.8 percentage points and 24.1 percentage points in the three- and nine-month periods ended September 30, 2017, respectively, compared to the same periods of 2016.The change is primarily attributable to an increase in claim frequency in 2017 as compared to the same periods 2016 which resulted in increased paid loss and increased reserves for reported claims. |
• | Reinsurance assumed - The net loss ratio deteriorated in both the three- and nine-month periods ended September 30, 2017 compared to the same periods of 2016.The increase in losses is primarily due to an increase of reserves for incurred but not reported claims for hurricanes that occurred late in the third quarter. An increase in paid losses also contributed to the increased loss ratios for both the three- and nine-month periods. In addition, the nine-month period is also affected by the emergence of prior year losses from the programs in which we participate, which are reported on a lag basis. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(In Thousands) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Revenues | |||||||||||||||
Net premiums earned | $ | 14,230 | $ | 20,600 | $ | 45,999 | $ | 62,878 | |||||||
Investment income, net of investment expenses | 12,354 | 12,663 | 37,230 | 38,404 | |||||||||||
Net realized investment gains | 296 | 461 | 3,600 | 1,409 | |||||||||||
Other income | 174 | 145 | 498 | 436 | |||||||||||
Total revenues | $ | 27,054 | $ | 33,869 | $ | 87,327 | $ | 103,127 | |||||||
Benefits, Losses and Expenses | |||||||||||||||
Losses and loss settlement expenses | $ | 10,506 | $ | 7,252 | $ | 30,679 | $ | 23,527 | |||||||
Increase in liability for future policy benefits | 5,481 | 14,091 | 19,341 | 42,645 | |||||||||||
Amortization of deferred policy acquisition costs | 2,156 | 1,876 | 5,524 | 5,716 | |||||||||||
Other underwriting expenses | 2,444 | 4,527 | 9,452 | 14,630 | |||||||||||
Interest on policyholders' accounts | 4,587 | 4,983 | 13,982 | 15,368 | |||||||||||
Total benefits, losses and expenses | $ | 25,174 | $ | 32,729 | $ | 78,978 | $ | 101,886 | |||||||
Income from discontinued operations, before income taxes | $ | 1,880 | $ | 1,140 | $ | 8,349 | $ | 1,241 |
Continuing Operations | Discontinued Operations | |||||||||||||||||||
Property & Casualty Insurance | Life Insurance | Total | ||||||||||||||||||
Percent | Percent | Percent | ||||||||||||||||||
(In Thousands, Except Ratios) | of Total | of Total | of Total | |||||||||||||||||
Fixed maturities (1) | ||||||||||||||||||||
Held-to-maturity | $ | 150 | — | % | $ | 38 | — | % | $ | 188 | — | % | ||||||||
Available-for-sale | 1,498,662 | 81.5 | 1,426,991 | 96.8 | 2,925,653 | 88.3 | ||||||||||||||
Trading securities | 13,673 | 0.7 | — | — | 13,673 | 0.4 | ||||||||||||||
Equity securities | ||||||||||||||||||||
Available-for-sale | 269,341 | 14.7 | 22,616 | 1.5 | 291,957 | 8.8 | ||||||||||||||
Trading securities | 6,330 | 0.4 | — | — | 6,330 | 0.2 | ||||||||||||||
Mortgage loans | — | — | 3,504 | 0.2 | 3,504 | 0.1 | ||||||||||||||
Policy loans | — | — | 5,770 | 0.4 | 5,770 | 0.2 | ||||||||||||||
Other long-term investments | 49,966 | 2.7 | 16,299 | 1.1 | 66,265 | 2.0 | ||||||||||||||
Short-term investments | 175 | — | — | — | 175 | — | ||||||||||||||
Total | $ | 1,838,297 | 100.0 | % | $ | 1,475,218 | 100.0 | % | $ | 3,313,515 | 100.0 | % |
(In Thousands, Except Ratios) | September 30, 2017 | December 31, 2016 | |||||||||||
Rating | Carrying Value | % of Total | Carrying Value | % of Total | |||||||||
AAA | $ | 867,490 | 29.5 | % | $ | 782,329 | 26.9 | % | |||||
AA | 848,295 | 28.8 | 857,946 | 29.4 | |||||||||
A | 616,366 | 21.0 | 651,696 | 22.4 | |||||||||
Baa/BBB | 551,478 | 18.8 | 554,475 | 19.0 | |||||||||
Other/Not Rated | 55,885 | 1.9 | 66,268 | 2.3 | |||||||||
$ | 2,939,514 | 100.0 | % | $ | 2,912,714 | 100.0 | % |
Cash Flow Summary | Nine Months Ended September 30, | ||||||
(In Thousands) | 2017 | 2016 | |||||
Cash provided by (used in) | |||||||
Operating activities | $ | 116,296 | $ | 128,069 | |||
Investing activities | (4,361 | ) | (20,024 | ) | |||
Financing activities | (93,427 | ) | (73,550 | ) | |||
Net increase in cash and cash equivalents | $ | 18,508 | $ | 34,495 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(In Thousands) | 2017 | 2016 | 2017 | 2016 | |||||||||||
ISO catastrophes | $ | 25,628 | $ | 10,517 | $ | 62,170 | $ | 49,686 | |||||||
Non-ISO catastrophes (1) | 5,077 | 2,014 | 6,596 | 2,711 | |||||||||||
Total catastrophes | $ | 30,705 | $ | 12,531 | $ | 68,766 | $ | 52,397 |
Total Number of Shares | Maximum Number of | |||||||||||
Total | Purchased as a Part of | Shares that may yet be | ||||||||||
Number of | Average Price | Publicly Announced | Purchased Under the | |||||||||
Period | Shares Purchased | Paid per Share | Plans or Programs | Plans or Programs(1) | ||||||||
7/1/2017 - 7/31/2017 | 4,904 | $ | 43.00 | 4,904 | 2,436,959 | |||||||
8/1/2017 - 8/31/2017 | 127,387 | 42.41 | 127,387 | 2,309,572 | ||||||||
9/1/2017 - 9/30/2017 | 73,000 | 40.92 | 73,000 | 2,236,572 | ||||||||
Total | 205,291 | $ | 41.89 | 205,291 |
Exhibit number | Exhibit description | Furnished herewith | Filed herewith | ||
2.1† | |||||
31.1 | X | ||||
31.2 | X | ||||
32.1 | X | ||||
32.2 | X | ||||
101.1 | X |
UNITED FIRE GROUP, INC. | ||
(Registrant) | ||
/s/ Randy A. Ramlo | /s/ Dawn M. Jaffray | |
Randy A. Ramlo | Dawn M. Jaffray | |
President, Chief Executive Officer, | Senior Vice President, Chief Financial Officer and | |
Director and Principal Executive Officer | Principal Accounting Officer | |
November 8, 2017 | November 8, 2017 | |
(Date) | (Date) |
1. | I have reviewed this quarterly report on Form 10-Q of United Fire Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the Consolidated Financial Statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 8, 2017 | |
/s/ Randy A. Ramlo | ||
Randy A. Ramlo | ||
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of United Fire Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the Consolidated Financial Statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 8, 2017 | |
/s/ Dawn M. Jaffray | ||
Dawn M. Jaffray | ||
Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 8, 2017 | |
/s/ Randy A. Ramlo | ||
Randy A. Ramlo | ||
Chief Executive Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 8, 2017 | |
/s/ Dawn M. Jaffray | ||
Dawn M. Jaffray | ||
Chief Financial Officer |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Nov. 06, 2017 |
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | UFCS | |
Entity Registrant Name | UNITED FIRE GROUP INC | |
Entity Central Index Key | 0000101199 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding (in shares) | 24,877,643 |
Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Fixed maturities, held-to-maturity securities, fair value | $ 150 | $ 150 |
Fixed maturities, available-for-sale securities, amortized cost | 1,480,730 | 1,458,235 |
Fixed maturities, trading securities, amortized cost | 11,833 | 13,054 |
Equity securities, available-for-sale securities, amortized cost | 57,387 | 59,994 |
Equity securities, trading securities, amortized cost | 5,888 | 5,434 |
Allowance for doubtful accounts | 1,170 | 1,255 |
Property and equipment accumulated depreciation | $ 52,081 | $ 50,925 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 75,000,000 | 75,000,000 |
Common stock, shares issued (in shares) | 24,849,889 | 25,429,769 |
Common stock, shares outstanding (in shares) | 24,849,889 | 25,429,769 |
Consolidated Statements of Income and Comprehensive Income (Unaudited) (Parentheticals) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Income Statement [Abstract] | ||||
Reclassifications for net unrealized gains on available-for-sale securities | $ 419 | $ 2,320 | $ 5,799 | $ 4,666 |
Reclassification adjustment for employee benefit costs included in expense | 1,352 | 1,371 | 4,056 | 4,113 |
Reclassifications adjustments - tax | $ (327) | $ 332 | $ 610 | $ 194 |
Consolidated Statement of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands |
Total |
Common stock |
Additional paid-in capital |
Retained earnings |
Accumulated other comprehensive income, net of tax |
|||||
---|---|---|---|---|---|---|---|---|---|---|
Balance, beginning of year at Dec. 31, 2016 | $ 941,884 | $ 25 | $ 216,482 | $ 616,322 | $ 109,055 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Shares repurchased | 0 | (29,784) | ||||||||
Shares issued for stock-based awards | 0 | 2,960 | ||||||||
Compensation expense and related tax benefit for stock-based award grants | 3,456 | |||||||||
Net income | 5,030 | 5,030 | ||||||||
Dividends on common stock ($0.81 per share) | (20,364) | |||||||||
Change in net unrealized investment appreciation | [1] | 38,230 | ||||||||
Change in liability for underfunded employee benefit plans | [2] | 2,636 | ||||||||
All other changes in stockholders’ equity accounts | (2,866) | |||||||||
Balance, end of period at Sep. 30, 2017 | 944,048 | 25 | 193,114 | 600,988 | 149,921 | |||||
Balance, beginning of year at Jun. 30, 2017 | 136,968 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Net income | (17,864) | |||||||||
Balance, end of period at Sep. 30, 2017 | $ 944,048 | $ 25 | $ 193,114 | $ 600,988 | $ 149,921 | |||||
|
Consolidated Statement of Stockholders' Equity (Unaudited) (Parentheticals) |
9 Months Ended |
---|---|
Sep. 30, 2017
$ / shares
shares
| |
Statement of Stockholders' Equity [Abstract] | |
Shares repurchased (in shares) | 701,899 |
Shares issued for stock-based awards (in shares) | 131,777 |
Dividends on common stock, per share (in dollars per share) | $ / shares | $ 0.81 |
Nature of Operations and Basis of Presentation |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Operations and Basis of Presentation | NATURE OF OPERATIONS AND BASIS OF PRESENTATION Nature of Business United Fire Group, Inc. ("UFG," the "Registrant," the "Company," "we," "us," or "our") and its consolidated subsidiaries and affiliates are engaged in the business of writing property and casualty insurance and life insurance and selling annuities through a network of independent agencies. Our insurance company subsidiaries are licensed as a property and casualty insurer in 46 states and the District of Columbia, and as a life insurer in 37 states. Discontinued Operations We have historically reported our operations in two business segments: property and casualty insurance and life insurance. On September 18, 2017, the Company signed a definitive agreement to sell its subsidiary, United Life Insurance Company, to Kuvare US Holdings, Inc. ("Kuvare"). As a result, our life insurance business, previously a separate segment, has been considered held for sale and reported as discontinued operations in the Consolidated Balance Sheets, Consolidated Statements of Income and Comprehensive Income and Consolidated Statements of Cash Flows (collectively, the "Consolidated Financial Statements"). Subsequent to the announcement of this sale, our continuing operations are now reported as one business segment. All current and prior periods reflected in this Form 10-Q have been presented as continuing and discontinued operations, unless otherwise noted. The sale is expected to close in the first half of 2018, subject to customary conditions, including regulatory approval. For more information, refer to Note 11. Discontinued Operations. Basis of Presentation The unaudited consolidated interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial reporting and with the instructions to Form 10-Q and Regulation S-X promulgated by the SEC. Certain financial information that is included in our Annual Report on Form 10-K, including certain financial statement footnote disclosures, are not required by the rules and regulations of the SEC for interim financial reporting and have been condensed or omitted. The preparation of 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 financial statement categories that are most dependent on management estimates and assumptions include: investments; deferred policy acquisition costs; reinsurance receivables and recoverables; future policy benefits and losses, claims and loss settlement expenses; and pension and postretirement benefit obligations. Certain prior year amounts have been reclassified to conform to the current year presentation. Management of UFG believes the accompanying unaudited Consolidated Financial Statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. All significant intercompany transactions have been eliminated in consolidation. The results reported for the interim periods are not necessarily indicative of the results of operations that may be expected for the year. The unaudited Consolidated Financial Statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016. The review report of Ernst & Young LLP as of September 30, 2017 and for the three- and nine-month periods ended September 30, 2017 and 2016 accompanies the unaudited Consolidated Financial Statements included in Part I, Item 1 "Financial Statements." Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash, money market accounts, and non-negotiable certificates of deposit with original maturities of three months or less. For the nine-month periods ended September 30, 2017 and 2016, we made payments for income taxes for continuing operations totaling $7,648 and $24,026, respectively. We received a tax refund of $10,000 during the nine-month period ended September 30, 2017. We did not receive a tax refund during the nine-month period ended September 30, 2016. For the nine-month periods ended September 30, 2017 and 2016, we made no interest payments (excluding interest credited to policyholders’ accounts). Deferred Policy Acquisition Costs ("DAC") Certain costs associated with underwriting new business (primarily commissions, premium taxes and variable underwriting and policy issue expenses associated with successful acquisition efforts) are deferred. The following table is a summary of the components of DAC, including the related amortization recognized for the nine-month period ended September 30, 2017.
Property and casualty insurance policy acquisition costs deferred are amortized as premium revenue is recognized. The method followed in computing DAC limits the amount of such deferred costs to their estimated realizable value. This takes into account the premium to be earned, losses and loss settlement expenses expected to be incurred and certain other costs expected to be incurred as the premium is earned. For traditional life insurance policies, DAC is amortized to income over the premium-paying period in proportion to the ratio of the expected annual premium revenue to the expected total premium revenue. Expected premium revenue and gross profits are based on the same mortality and withdrawal assumptions used in determining future policy benefits. These assumptions are not revised after policy issuance unless the recorded DAC asset is deemed to be unrecoverable from future expected profits. For non-traditional life insurance policies, DAC is amortized over the anticipated terms in proportion to the ratio of the expected annual gross profits to the total expected gross profits. Changes in the amount or timing of expected gross profits result in adjustments to the cumulative amortization of these costs. The effect on amortization of DAC for revisions to estimated gross profits is reported in earnings in the period the estimated gross profits are revised. The effect on DAC that results from the assumed realization of unrealized gains (losses) on investments allocated to non-traditional life insurance business is recognized with an offset to net unrealized investment appreciation as of the balance sheet date. The impact of unrealized gains and losses on available-for-sale securities decreased the DAC asset by $9,995 and $6,413 at September 30, 2017 and December 31, 2016, respectively. Income Taxes Deferred tax assets and liabilities are established based on differences between the financial statement bases of assets and liabilities and the tax bases of those same assets and liabilities, using the currently enacted statutory tax rates. Deferred income tax expense is measured by the year-to-year change in the net deferred tax asset or liability, except for certain changes in deferred tax amounts that affect stockholders' equity and do not impact federal income tax expense. We reported a federal income tax benefit from continuing and discontinued operations on a consolidated basis of $10,400 and a federal income tax expenses $6,904 for the nine-month periods ended September 30, 2017 and 2016, respectively. Our effective tax rate is different than the federal statutory rate of 35.0 percent due principally to the effect of tax-exempt municipal bond interest income and non-taxable dividend income. The Company performs a quarterly review of its tax positions and makes a determination of whether it is more likely than not that the tax position will be sustained upon examination. If based on review, it appears not more likely than not that the positions will be sustained, the Company will calculate any unrecognized tax benefits and, if necessary, calculate and accrue any related interest and penalties. We did not recognize any liability for unrecognized tax benefits at September 30, 2017 or December 31, 2016. In addition, we have not accrued for interest and penalties related to unrecognized tax benefits. However, if interest and penalties would need to be accrued related to unrecognized tax benefits, such amounts would be recognized as a component of federal income tax expense. With regard to the sale of our life insurance subsidiary, federal income taxes will be allocated to continuing and discontinued operations in accordance with the Company’s tax allocation agreement and the terms of the definitive agreement related to the sale. We file a consolidated federal income tax return. We also file income tax returns in various state jurisdictions. We are no longer subject to federal or state income tax examination for years before 2014. The Internal Revenue Service is conducting routine examinations of our income tax return for the 2015 tax year. Subsequent Events In the preparation of the accompanying financial statements, the Company has evaluated all material subsequent events or transactions that occurred after the balance sheet date through the date on which the financial statements were issued for potential recognition or disclosure in the Company's financial statements. The Company concluded there are no material subsequent events or transactions that have occurred after the balance sheet date through the date on which the financial statements were issued. Recently Issued Accounting Standards Accounting Standards Adopted in 2017 Share-Based Payments In March 2016, the Financial Accounting Standards Board ("FASB") issued new guidance on the accounting for share-based payments. The new guidance was issued to simplify the accounting of share-based payments, specifically in the areas of income taxes, classification on the balance sheets as liabilities or equity and classification in the cash flow statement. The new guidance is effective for annual periods beginning after December 15, 2016 and interim periods within those years. The Company adopted the new guidance prospectively as of January 1, 2017. The new guidance resulted in classification changes between the financing and operating section of the Statement of Cash Flow for stock based compensation expense. The adoption also resulted in a tax benefit of $62 and $546 during the three- and nine-months ended September 30, 2017. Income Taxes In December 2015, the FASB issued guidance on the balance sheet classification of deferred taxes. The new guidance eliminates the requirement to split deferred tax liabilities and assets between current and non-current in a classified balance sheet. The new guidance allows deferred tax liabilities and assets to be included in non-current accounts. The Company adopted the new guidance as of January 1, 2017. The adoption had no impact on the Company's financial position and results of operations since we do not currently report deferred taxes in classified balance sheets. Pending Adoption of Accounting Standards Revenue Recognition In May 2014, the FASB issued comprehensive new guidance on revenue recognition which supersedes nearly all existing revenue recognition guidance under GAAP. The new guidance requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard creates a five-step model that requires companies to exercise judgment when considering the terms of the contract(s) and all relevant facts and circumstances. Insurance contracts are not within the scope of this new guidance. The new guidance is effective for annual and interim periods beginning after December 15, 2017. The Company will adopt the guidance as of January 1, 2018. The Company has completed its review of revenue streams under this new guidance and concluded that the adoption of the new guidance will have no impact on the Company's reporting and disclosure of net premiums earned from insurance contracts, net investment income or net realized gains and losses, as these items are not within the scope of this new guidance. The Company's primary revenue streams from insurance contracts, investment income and net realized gains and losses, are out of scope under this new guidance. The remaining revenue streams are immaterial and not impacted by the new standard. Financial Instruments In January 2016, the FASB issued guidance updating certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments in this update supersede the guidance to classify equity securities with readily determinable fair values into different categories (for example, trading or available-for-sale) and require equity securities to be measured at fair value with changes in the fair value recognized through net income. The new guidance also simplifies the impairment process for equity investments without readily determinable fair values. The new guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those years. The Company will adopt the new guidance as of January 1, 2018. If the new guidance were adopted as of September 30, 2017, there would be a reclassification from accumulated other comprehensive income to retained earnings equal to the amount of net unrealized gains and losses on available-for-sale equity securities at December 31, 2016 disclosed in Note 2 "Summary of Investments," of this section. The impact to net realized gains (losses) would equal the change in net unrealized gains and losses on available-for-sale equity securities between September 30, 2017 and December 31, 2016, in the same tables. Statement of Cash Flows - Classification of Certain Cash Receipts and Payments In August 2016, the FASB issued an update that clarifies the classification of certain cash receipts and payments in the Statement of Cash Flows. The update addresses eight existing cash flow issues by clarifying the correct classification to establish uniformity in practice. The updated guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those years. The Company will adopt the new guidance as of January 1, 2018 and is currently reviewing the updates to the eight existing cash flow issues. Currently, management believes that one existing cash flow issue will be impacted by these updates. Management believes the update will have no impact on the Company's financial position and results of operations but may effect the current classification of the cash flow in the Statement of Cash Flows. Defined Benefit Retirement Plan Cost In March 2017, the FASB issued guidance on the presentation of net periodic benefit costs of defined benefit retirement benefit plans in the Statements of Income. The new guidance requires the service cost component of net periodic benefit cost of defined benefit plans to be presented in the same line in the Statements of Income as other employee compensation expenses. Also, under the new guidance, the service cost component of the net periodic benefit costs will be the only portion of costs subject to be capitalized in assets. The new guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those years. The Company will adopt the new guidance as of January 1, 2018 and is currently evaluating the presentation of net periodic benefit costs in its financial statements and the impact on the Company's financial position and results of operations. Share-Based Payments In May 2017, the FASB issued new guidance which clarifies and addresses the diversity in practice when there is a change in the terms of a share-based payment award. The updated guidance clarifies when to use modification accounting when there is a change in the terms of a share-based payment and provides three conditions where modification accounting should not be applied. The new guidance is effective for annual and interim periods beginning after December 15, 2017. The Company will adopt the new guidance as of January 1, 2018 and is currently evaluating the impact on the Company's financial position and results of operations. Leases In February 2016, the FASB issued guidance on the accounting for leases. The new guidance requires lessees to place most leases on their balance sheets with expenses recognized on the income statement in a similar manner as previous methods. The new guidance is effective for annual periods beginning after December 15, 2018 and interim periods within those years. The Company will adopt the new guidance as of January 1, 2019. The Company has created an inventory of its leases and has calculated the current minimum future lease payment, which is disclosed in Note 13 "Lease Commitments" of our Annual Report on Form 10-K for the year ended December 31, 2016. Financial Instruments - Credit Losses In June 2016, the FASB issued new guidance on the measurement of credit losses for most financial instruments. The new guidance replaces the current incurred loss model for recognizing credit losses with an expected loss model for instruments measured at amortized cost and requires allowances to be recorded for available-for-sale debt securities rather than reduce the carrying amount. These allowances will be remeasured each reporting period. The new guidance is effective for annual periods beginning after December 15, 2020 and interim periods within those years. The Company will adopt the new guidance as of January 1, 2021 and is currently evaluating the impact on the Company's financial position, results of operations and key processes. Income Taxes - Intra-entity Transfers In October 2016, the FASB issued new guidance on the income tax treatment of intra-entity transfers. The new guidance replaces the current guidance which prohibits the recognition of current and deferred income taxes of intra-entity transfers until the asset is sold externally. Under the new guidance, the exemption is eliminated and income taxes will be recognized on transfers of intra-entity assets. The new guidance is effective for annual periods beginning after December 15, 2018 and interim periods beginning after December 15, 2019. The Company will adopt the new guidance as of January 1, 2019 and is currently evaluating the impact on the Company's financial position and results of operations. Goodwill In January 2017, the FASB issued new guidance which simplifies the test for goodwill impairment. The new guidance eliminates the implied fair value calculation when measuring a goodwill impairment charge. Under the new guidance, impairment charges will be based on the excess of the carrying value over fair value of goodwill. The new guidance is effective for annual and interim periods beginning after December 15, 2019. The Company will adopt the new guidance as of January 1, 2020 and is currently evaluating the impact on the Company's financial position and results of operations. |
Summary of Investments |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Investments | SUMMARY OF INVESTMENTS Fair Value of Investments A reconciliation of the amortized cost (cost for equity securities) to fair value of investments in held-to-maturity and available-for-sale fixed maturity and equity securities, presented on a consolidated basis, including both continuing and discontinued operations as of September 30, 2017 and December 31, 2016, is as follows:
The following table is a reconciliation of the amortized cost (cost for equity securities) to fair value of investments in held-to-maturity and available-for-sale fixed maturity and equity securities for continuing and discontinued operations by investment type at September 30, 2017 and December 31, 2016:
Maturities The amortized cost and fair value of held-to-maturity, available-for-sale and trading fixed maturity securities at September 30, 2017, by contractual maturity, are shown in the following tables. The first table includes consolidated investments from both continuing and discontinued operations. The second and third tables separate maturities into continuing and discontinued operations. 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. Asset-backed securities, mortgage-backed securities and collateralized mortgage obligations may be subject to prepayment risk and are therefore not categorized by contractual maturity.
Net Realized Investment Gains and Losses Net realized gains on disposition of investments are computed using the specific identification method and are included in the computation of net income. A summary of the components of net realized investment gains (losses) is as follows:
The proceeds and gross realized gains on the sale of available-for-sale fixed maturity securities from continuing operations are as follows:
The proceeds and gross realized gains on the sale of available-for-sale fixed maturity securities from discontinued operations are as follows:
There were no sales of held-to-maturity securities during the three- and nine-month periods ended September 30, 2017 and 2016. Our investment portfolio includes trading securities with embedded derivatives. These securities are primarily convertible securities which are recorded at fair value. Income or loss, including the change in the fair value of these trading securities, is recognized currently in earnings as a component of net realized investment gains. Our portfolio of trading securities had a fair value of $20,003 and $20,034 at September 30, 2017 and December 31, 2016, respectively. Funding Commitment Pursuant to an agreement with one of our limited liability partnership investments, we are contractually committed through December 31, 2023 to make capital contributions upon request of the partnership. Our remaining potential contractual obligation was $3,738 at September 30, 2017. Unrealized Appreciation A summary of the changes in net unrealized investment appreciation during the reporting period is as follows:
We continually monitor the difference between our cost basis and the estimated fair value of our investments. Our accounting policy for impairment recognition requires other-than-temporary impairment ("OTTI") charges to be recorded when we determine that it is more likely than not that we will be unable to collect all amounts due according to the contractual terms of the fixed maturity security or that the anticipated recovery in fair value of the equity security will not occur in a reasonable amount of time. Impairment charges on investments are recorded based on the fair value of the investments at the measurement date or based on the value calculated using a discounted cash flow model. Credit-related impairments on fixed maturity securities that we do not plan to sell, and for which we are not more likely than not to be required to sell, are recognized in net income. Any non-credit related impairment is recognized as a component of other comprehensive income. Factors considered in evaluating whether a decline in value is other-than-temporary include: the length of time and the extent to which fair value has been less than cost; the financial condition and near-term prospects of the issuer; our intention to hold the investment; and the likelihood that we will be required to sell the investment. The tables on the following pages summarize our fixed maturity and equity securities that were in an unrealized loss position on a consolidated basis, including both continuing and discontinued operations at September 30, 2017 and December 31, 2016. The securities are presented by the length of time they have been continuously in an unrealized loss position. It is possible that we could recognize OTTI charges in future periods on securities held at September 30, 2017, if future events or information cause us to determine that a decline in fair value is other-than-temporary. We have evaluated the near-term prospects of the issuers of our fixed maturity securities in relation to the severity and duration of the unrealized loss and determined that these losses did not warrant the recognition of an OTTI charge at September 30, 2017 or at September 30, 2016. We have no intent to sell, and it is more likely than not that we will not be required to sell, these securities until the fair value recovers to at least equal our cost basis or the securities mature. We have evaluated the near-term prospects of the issuers of our equity securities in relation to the severity and duration of the unrealized loss and determined that these losses did not warrant the recognition of an OTTI charge at September 30, 2017 or at September 30, 2016. Our largest unrealized loss greater than 12 months on an individual equity security at September 30, 2017 was $152. We have no intention to sell any of these securities prior to a recovery in value, but will continue to monitor the fair value reported for these securities as part of our overall process to evaluate investments for OTTI recognition.
The tables on the following pages are a reconciliation for continuing and discontinued operations of our total fixed maturity and equity securities that were in an unrealized loss position at September 30, 2017 and December 31, 2016. The securities are presented by the length of time they have been continuously in an unrealized loss position:
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Fair Value of Financial Instruments |
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Fair Value of Financial Instruments | FAIR VALUE OF FINANCIAL INSTRUMENTS Current accounting guidance on fair value measurements includes the application of a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Our financial instruments that are recorded at fair value are categorized into a three-level hierarchy, which is based upon the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (i.e., Level 1) and the lowest priority to unobservable inputs (i.e., Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the financial instrument. Financial instruments recorded at fair value are categorized in the fair value hierarchy as follows:
We review our fair value hierarchy categorizations on a quarterly basis at which time the classification of certain financial instruments may change if the input observations have changed. Transfers between levels, if any, are recorded as of the beginning of the reporting period. To determine the fair value of the majority of our investments, we utilize prices obtained from independent, nationally recognized pricing services. We obtain one price for each security. When the pricing services cannot provide a determination of fair value for a specific security, we obtain non-binding price quotes from broker-dealers with whom we have had several years experience and who have demonstrated knowledge of the subject security. We request and utilize one broker quote per security. In order to determine the proper classification in the fair value hierarchy for each security where the price is obtained from an independent pricing service, we obtain and evaluate the vendors' pricing procedures and inputs used to price the security, which include unadjusted quoted market prices for identical securities, such as a New York Stock Exchange closing price, and quoted prices for identical securities in markets that are not active. For fixed maturity securities, an evaluation of interest rates and yield curves observable at commonly quoted intervals, volatility, prepayment speeds, credit risks and default rates may also be performed. We have determined that these processes and inputs result in fair values and classifications consistent with the applicable accounting guidance on fair value measurements. When possible, we use quoted market prices to determine the fair value of fixed maturities, equity securities, trading securities and short-term investments. When quoted market prices do not exist, we base estimates of fair value on market information obtained from independent pricing services and brokers or on valuation techniques that are both unobservable and significant to the overall fair value measurement of the financial instrument. Such inputs may reflect management's own assumptions about the assumptions a market participant would use in pricing the financial instrument. Our valuation techniques are discussed in more detail throughout this section. The fair value of our mortgage loans is determined by modeling performed by us based on the stated principal and coupon payments provided for in the loan agreements. These cash flows are then discounted using an appropriate risk-adjusted discount rate to determine the security's fair value, which is a Level 3 fair value measurement. The fair value of our policy loans is equivalent to carrying value, which is a reasonable estimate of fair value and is classified as Level 2. We do not make policy loans for amounts in excess of the cash surrender value of the related policy. In all instances, the policy loans are fully collateralized by the related liability for future policy benefits for traditional insurance policies or by the policyholders' account balance for non-traditional policies. Our other long-term investments consist primarily of our interests in limited liability partnerships that are recorded on the equity method of accounting. The fair value of the partnerships is obtained from the fund managers, which is based on the fair value of the underlying investments held in the partnerships. In management's opinion, these values represent a reasonable estimate of fair value. We have not adjusted the net asset value provided by the fund managers. For cash and cash equivalents and accrued investment income, carrying value is a reasonable estimate of fair value due to the short-term nature of these financial instruments. The Company formed a rabbi trust in 2014 to fund obligations under the United Fire & Casualty Company Non-qualified Deferred Compensation Plan and United Fire Group Supplemental Executive Retirement and Deferral Plan (collectively, the "Executive Retirement Plans"). Within the rabbi trust, corporate-owned life insurance ("COLI") policies are utilized as an investment vehicle and source of funding for the Company's Executive Retirement Plans. The COLI policies invest in mutual funds, which are priced daily by independent sources. As of September 30, 2017, the cash surrender value of the COLI policies was $3,759, which is equal to the fair value measured using Level 2 inputs, based on the underlying assets of the COLI policies, and is included in other assets in the Consolidated Balance Sheets. Policy reserves are developed and recorded for deferred annuities, which is an interest-sensitive product, and income annuities. The fair value of the reserve liability for these annuity products is based upon an estimate of the discounted pretax cash flows that are forecast for the underlying business, which is a Level 3 fair value measurement. We base the discount rate on the current U.S. Treasury spot yield curve, which is then risk-adjusted for nonperformance risk and, for interest-sensitive business and market risk factors. The risk-adjusted discount rate is developed using interest rates that are available in the market and representative of the risks applicable to the underlying business. A summary of the carrying value and estimated fair value of our financial instruments from continuing operations at September 30, 2017 and December 31, 2016 is as follows:
A summary of the carrying value and estimated fair value of our financial instruments from discontinued operations at September 30, 2017 and December 31, 2016 is as follows:
The following tables present the categorization for our financial instruments measured at fair value on a recurring basis. The table includes financial instruments from both continuing and discontinued operations at September 30, 2017 and December 31, 2016:
The following tables are a reconciliation for both continuing and discontinued operations of the presentation of the categorization for our financial instruments measured at fair value on a recurring basis at September 30, 2017 and December 31, 2016:
The fair value of securities that are categorized as Level 1 is based on quoted market prices that are readily and regularly available. We use a market-based approach for valuing all of our Level 2 securities and submit them primarily to a third-party valuation service provider. Any of these securities not valued by this service provider are submitted to another third-party valuation service provider. Both service providers use a market approach to find pricing of similar financial instruments. The market inputs our service providers normally seek to value our securities include the following, listed in approximate order of priority: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. The method and inputs for these securities classified as Level 2 are the same regardless of industry category, credit quality, duration, geographical concentration or economic characteristics. For our mortgage-backed securities, collateralized mortgage obligations and asset-backed securities, our service providers use additional market inputs to value these securities, including the following: new issue data, periodic payment information, monthly payment information, collateral performance and real estate analysis from third parties. Our service providers prioritize inputs based on market conditions, and not all inputs listed are available for use in the valuation process for each security on any given day. At least annually, we review the methodologies and assumptions used by our valuation service providers and verify that they are reasonable and representative of the fair value of the underlying securities held in the investment portfolio. We validate the prices obtained from independent pricing services and brokers prior to their use for reporting purposes by evaluating their reasonableness on a monthly basis. Our validation process includes a review for unusual fluctuations. Unusual fluctuations outside of our expectations are independently corroborated with additional third-party sources that use similar valuation techniques as discussed above. In addition, we also randomly select securities and independently corroborate the valuations obtained from our third-party valuation service providers. In our opinion, the pricing obtained at September 30, 2017 and December 31, 2016 was reasonable. For the three- and nine-month periods ended September 30, 2017, the change in our available-for-sale securities categorized as Level 1 and Level 2 is the result of investment purchases that were made using funds held in our money market accounts, disposals and the change in unrealized gains on both fixed maturities and equity securities. During the three- and nine-month periods ended September 30, 2017, there were no securities transferred between Level 1 and Level 2. Securities categorized as Level 3 include holdings in certain private placement fixed maturity and equity securities for which an active market does not currently exist. The fair value of our Level 3 private placement securities is determined by management relying on pricing received from our independent pricing services and brokers consistent with the process to estimate fair value for Level 2 securities. However, securities are categorized as Level 3 if these quotes cannot be corroborated by other market observable data due to the unobservable nature of the brokers’ valuation processes. If pricing cannot be obtained from these sources, which occurs on a limited basis, management will perform a discounted cash flow analysis, using an appropriate risk-adjusted discount rate, on the underlying security to estimate fair value. During the three- and nine-month periods ended September 30, 2017, there were no securities transferred in or out of Level 3. The following table provides a summary of the changes in fair value of our Level 3 securities, from both continuing and discontinued operations for the three-month period ended September 30, 2017:
(1) Net unrealized gains (losses) are recorded as a component of comprehensive income. The following table provides a summary of the changes in fair value of our Level 3 securities, from both continuing and discontinued operations for the nine-month period ended September 30, 2017:
(1) Net unrealized gains (losses) are recorded as a component of comprehensive income. The fixed maturities reported as disposals relate to the receipt of principal on calls or sinking fund bonds, in accordance with the indentures. |
Reserves for Losses and Loss Settlement Expenses |
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Insurance Loss Reserves [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserves for Losses and Loss Settlement Expenses | RESERVES FOR LOSSES AND LOSS SETTLEMENT EXPENSES Property insurance indemnifies an insured with an interest in physical property for loss of, or damage to, such property or the loss of its income-producing abilities. Casualty insurance primarily covers liability for damage to property of, or injury to, a person or entity other than the insured. In most cases, casualty insurance also obligates the insurance company to provide a defense for the insured in litigation, arising out of events covered by the policy. Liabilities for losses and loss settlement expenses reflect management's best estimates at a given point in time of what we expect to pay for claims that have been reported and those that have been incurred but not reported ("IBNR"), based on known facts, circumstances, and historical trends. Because property and casualty insurance reserves are estimates of the unpaid portions of incurred losses that have been reported to us, as well as losses that have been incurred but not reported, the establishment of appropriate reserves, including reserves for catastrophes, is an inherently uncertain and complex process. The ultimate cost of losses and related loss settlement expenses may vary materially from recorded amounts. We regularly update our reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in prior year reserve estimates, which may be material, are reported as a component of losses and loss settlement expenses incurred in the period such changes are determined. The determination of reserves (particularly those relating to liability lines of insurance that have relatively longer lag in claim reporting) requires significant work to reasonably project expected future claim reporting and payment patterns. If, during the course of our regular monitoring of reserves, we determine that coverages previously written are incurring higher than expected losses, we will take action that may include, among other things, increasing the related reserves. Any adjustments we make to reserves are reflected in operating results in the year in which we make those adjustments. We engage an independent actuary, Regnier Consulting Group, Inc., to render an opinion as to the reasonableness of our statutory reserves annually. The actuarial opinion is filed in those states where we are licensed. On a quarterly basis, UFG's internal actuary performs a detailed actuarial review of IBNR reserves. This review includes a comparison of results from the most recent analysis of reserves completed by both our internal and external actuaries. Senior management meets with our internal actuary to review, on a regular and quarterly basis, the adequacy of carried reserves based on results from this actuarial analysis. There are two fundamental types or sources of IBNR reserves. We record IBNR reserves for "normal" types of claims and also specific IBNR reserves related to unique circumstances or events. A major hurricane is an example of an event that might necessitate establishing specific IBNR reserves because an analysis of existing historical data would not provide an appropriate estimate. We do not discount loss reserves based on the time value of money. The following table provides an analysis of changes in our property and casualty losses and loss settlement expense reserves at September 30, 2017 and December 31, 2016 (net of reinsurance amounts):
There are a multitude of factors that can impact loss reserve development. Those factors include, but are not limited to: historical data, the potential impact of various loss reserve development factors and trends including historical loss experience, legislative enactments, judicial decisions, legal developments in imposition of damages, experience with alternative dispute resolution, results of our medical bill review process, the potential impact of salvage and subrogation and changes and trends in general economic conditions, including the effects of inflation. All of these factors influence our estimates of required reserves and for long tail lines these factors can change over the course of the settlement of the claim. However, there is no precise method for evaluating the specific dollar impact of any individual factor on the development of reserves. The significant drivers of the favorable reserve development in 2017 came from two lines, commercial liability and workers compensation, partially offset by unfavorable development from commercial fire and allied lines, assumed reinsurance and commercial automobile. Much of the favorable long-tail liability development continues to come from loss adjustment expense and is attributed to our continued litigation management efforts. There was also a reduction in reserves for incurred but not reported claims because our long tail liability has experienced fewer late reported claims than what was initially anticipated. The majority of the favorable workers compensation development is due to reductions in reserves for reported claims which were greater than what was necessary to offset claim payments. Assumed reinsurance was adversely affected by increases in reserves for reported claims while commercial fire adverse development is attributable to loss payments which were greater than reductions in reported loss reserves and reserves for claims incurred but not reported. The majority of adverse commercial fire development resulted from claim payments that exceeded reductions in reserves for reported claims. The significant drivers of the favorable reserve development in 2016 were our commercial liability and workers compensation. Much of the favorable commercial liability development came from loss adjustment expense and is attributed to our continued litigation management efforts. Workers compensation favorable development was due to the combined effects of decreases in claim reserves along with favorable changes affecting loss adjustment expense. Loss adjustment expense, closely tied to loss, generally decreases when loss decreases. Commercial property, commercial automobile and assumed reinsurance exhibited adverse development which provided a partial offset to the favorable development previously noted. The adverse development for all three lines is due to paid loss which was greater than reductions in reported loss reserves and reserves for claims incurred but not reported. No other single line of business contributed a significant portion of the total development. Generally, we base reserves for each claim on the estimated ultimate exposure for that claim. We believe that it is appropriate and reasonable to establish a best estimate for reserves within a range of reasonable estimates, especially when we are reserving for claims for bodily injury, disabilities and similar claims, for which settlements and verdicts can vary widely. Our reserving philosophy may result in favorable reserve development in future years that will decrease losses and loss settlement expenses for prior year claims in the year of adjustment. We realize that this philosophy, coupled with what we believe to be aggressive and successful claims management and loss settlement practices, has resulted in year-to-year redundancies in reserves. We believe our approach produces recorded reserves that are reasonably consistent as to their relative position within a range of reasonable reserves from year-to-year. However, conditions and trends that have affected the reserve development for a given year do change. Therefore, such development cannot be used to project future reserve redundancies or deficiencies. We are not aware of any significant contingent liabilities related to environmental issues. Because of the type of property coverage we write, we have potential exposure to environmental pollution, mold and asbestos claims. Our underwriters are aware of these exposures and use riders or endorsements to limit exposure. |
Employee Benefits |
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Employee Benefits | EMPLOYEE BENEFITS Net Periodic Benefit Cost The components of the net periodic benefit cost for our pension and postretirement benefit plans are as follows:
Employer Contributions We previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016 that we expected to contribute $6,400 to the pension plan in 2017. For the nine-month period ended September 30, 2017, we contributed $11,396 to the pension plan. In September 2017, the Company contributed an additional $5,000 to the pension plan for tax advantages and to reduce future obligations. |
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Share-based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | STOCK-BASED COMPENSATION Non-qualified Employee Stock Award Plan The United Fire Group, Inc. 2008 Stock Plan (the "2008 Stock Plan") authorized the issuance of restricted and unrestricted stock awards, restricted stock units, stock appreciation rights, incentive stock options, and non-qualified stock options for up to 1,900,000 shares of UFG common stock to employees. In May 2014, the Registrant's shareholders approved an additional 1,500,000 shares of UFG common stock issuable at any time and from time to time pursuant to the 2008 Stock Plan, among other amendments, and renamed such plan as the United Fire Group, Inc. Stock Plan (as amended, the "Stock Plan"). At September 30, 2017, there were 996,839 authorized shares remaining available for future issuance. The Stock Plan is administered by the Board of Directors, which determines those employees who will receive awards, when awards will be granted, and the terms and conditions of the awards. The Board of Directors may also take any action it deems necessary and appropriate for the administration of the Stock Plan. Pursuant to the Stock Plan, the Board of Directors may, at its sole discretion, grant awards to our employees who are in positions of substantial responsibility with UFG. Options granted pursuant to the Stock Plan are granted to buy shares of UFG's common stock at the market value of the stock on the date of grant. All outstanding option awards have graded vesting over 3 years or 5 years from the grant date, unless the Board of Directors authorizes acceleration of vesting. Performance stock units cliff-vest after 3 years and the certification of performance results by UFG’s Compensation Committee. To the extent not exercised, vested option awards accumulate and are exercisable by the awardee, in whole or in part, in any subsequent year included in the option period, but not later than 10 years from the grant date. Restricted and unrestricted stock awards granted pursuant to the Stock Plan are granted at the market value of UFG's common stock on the date of the grant. Restricted stock units fully vest after 3 years or 5 years from the date of issuance, unless accelerated upon the approval of the Board of Directors, at which time UFG common stock will be issued to the awardee. The activity in the Stock Plan is displayed in the following table:
Non-qualified Non-employee Director Stock Option and Restricted Stock Plan The United Fire Group, Inc. 2005 Non-qualified Non-employee Director Stock Option and Restricted Stock Plan (the "Director Plan") authorizes the issuance of restricted stock awards and non-qualified stock options to purchase shares of UFG's common stock to non-employee directors. At September 30, 2017, we had 61,813 authorized shares available for future issuance. The Board of Directors has the authority to determine which non-employee directors receive awards, when options and restricted stock shall be granted, the option price, the option expiration date, the date of grant, the vesting schedule of options or whether the options shall be immediately vested, the terms and conditions of options and restricted stock (other than those terms and conditions set forth in the plan) and the number of shares of common stock to be issued pursuant to an option agreement or restricted stock agreement (subject to limits set forth in the plan). The Board of Directors may also take any action it deems necessary and appropriate for the administration of the Director Plan. The activity in the Director Plan is displayed in the following table:
Stock-Based Compensation Expense For the three-month periods ended September 30, 2017 and 2016, we recognized stock-based compensation expense of $1,202 and $865, respectively. For the nine-month periods ended September 30, 2017 and 2016, we recognized stock-based compensation expense of $3,456 and $2,731, respectively. Stock-based compensation expense is recognized over the vesting period of the stock options. As of September 30, 2017, we had $9,586 in stock-based compensation expense that has yet to be recognized through our results of operations. We expect this compensation to be recognized over the remainder of 2017 and subsequent years according to the table below, except with respect to awards that are accelerated by the Board of Directors, in which case we will recognize any remaining compensation expense in the period in which the awards are accelerated.
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Segment Information |
9 Months Ended |
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Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Segment Information | SEGMENT INFORMATION On September 19, 2017, the Company announced that it had agreed to sell its subsidiary, United Life Insurance Company, to Kuvare. As a result, our life insurance segment has been considered held for sale and reported as discontinued operations in the Consolidated Financial Statements and all comparable prior periods have been presented to conform to the current year presentation. The sale is expected to close in the first half of 2018, subject to customary conditions, including regulatory approval. For more information, refer to Note 11. Discontinued Operations. Prior to the announcement to sell our subsidiary, United Life Insurance Company, we had two reportable business segments in our operations: property and casualty insurance and life insurance. The property and casualty insurance segment has six domestic locations from which it conducts its business. The life insurance segment operates from our home office in Cedar Rapids, Iowa. Because all of our insurance is sold domestically, we have no revenues from foreign operations. After the announcement of the sale of our life insurance segment, the Company has one reportable segment, the property and casualty insurance segment, which includes all continuing operations. The property and casualty insurance segment profit or loss is consistent with consolidated reporting as disclosed on the Consolidated Statements of Income and Comprehensive Income. We analyze the property and casualty insurance segment results based on profitability (i.e., loss ratios), expenses and return on equity. The Company's property and casualty insurance segment was determined using a management approach to make decisions on operating matters, including allocating resources, assessing performance, determining which products to market and sell, determining distribution networks with insurance agents and monitoring the regulatory environment. The property and casualty insurance segment products have similar economic characteristics and use a similar marketing and distribution strategy with our independent agents. The property and casualty insurance segment geographic concentration did not change after the announcement of the sale of the life insurance segment. We will continue to evaluate our segment on the basis of both statutory accounting principles prescribed or permitted by our states of domicile and GAAP. |
Earnings Per Common Share |
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Earnings Per Common Share | EARNINGS PER COMMON SHARE Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share gives effect to all dilutive common shares outstanding during the reporting period. The dilutive shares we consider in our diluted earnings per share calculation relate to our outstanding stock options, restricted stock awards and restricted stock unit awards. We determine the dilutive effect of our outstanding stock options using the "treasury stock" method. Under this method, we assume the exercise of all of the outstanding stock options whose exercise price is less than the weighted-average market value of our common stock during the reporting period. This method also assumes that the proceeds from the hypothetical stock option exercises are used to repurchase shares of our common stock at the weighted-average market value of the stock during the reporting period. The net of the assumed stock options exercised and assumed common shares repurchased represents the number of dilutive common shares, which we add to the denominator of the earnings per share calculation. The components of basic and diluted earnings per share were as follows for the three-month periods ended September 30, 2017 and 2016:
The components of basic and diluted earnings per share were as follows for the nine-month periods ended September 30, 2017 and 2016:
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Credit Facility |
9 Months Ended |
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Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Credit Facility | CREDIT FACILITY On February 2, 2016, the Company, as borrower, entered into a Credit Agreement (the "Credit Agreement") by and among the Company, with the lenders from time to time party thereto and KeyBank National Association ("Key Bank"), as administrative agent, swingline lender and letter of credit issuer. The Credit Agreement provides for a $50,000 four-year unsecured revolving credit facility that includes a $20,000 letter of credit subfacility and a swingline subfacility in the amount up to $5,000. The Credit Agreement allows the Company to increase the aggregate amount of the commitments thereunder by up to $100,000, provided that no event of default has occurred and is continuing and certain other conditions are satisfied. The Credit Agreement is available for the Company's general corporate purposes, including liquidity, acquisitions and working capital. All unpaid principal and accrued interest under the Credit Agreement is due and payable in full at maturity on February 2, 2020. Based on the type of loan, advances under the Credit Agreement would bear interest on either the London interbank offered rate ("LIBOR") or a base rate plus, in each case, a calculated margin amount. The unused commitments under the Credit Agreement will be subject to a commitment fee that will be calculated at a per annum rate. The applicable margins for borrowings under the Credit Agreement and the commitment fee thereunder will be determined by reference to a pricing grid based on the Company’s issuer credit rating by A.M. Best Company, Inc. The Credit Agreement contains customary representations, conditions to borrowing, covenants and events of default, including certain covenants that limit or restrict, subject to certain exceptions, the ability of the Company and its subsidiaries to sell or transfer assets, enter into a merger or consolidate with another company, create liens, impose restrictions on subsidiary dividends, enter into sale-leaseback transactions, make investments or acquisitions, enter into certain reinsurance agreements, pay dividends during any period of default, enter into transactions with affiliates, change the nature of its business, or incur indebtedness. The Credit Agreement also includes financial covenants that require the Company to (i) maintain a minimum consolidated net worth, (ii) maintain a minimum consolidated statutory surplus and (iii) not exceed a 0.35 to 1.0 debt to total capitalization ratio. There was no outstanding balance on the Credit Agreement at September 30, 2017 and 2016, respectively. For the nine-month periods ended September 30, 2017 and 2016, we did not incur any interest expense related to either credit facility. We were in compliance with all covenants of the Credit Agreement at September 30, 2017. |
Accumulated Other Comprehensive Income |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income | ACCUMULATED OTHER COMPREHENSIVE INCOME The following table shows the changes in the components of our accumulated other comprehensive income (loss), net of tax, for the three-month period ended September 30, 2017:
(1) The preparation of financial statements in conformity with GAAP requires us to make various estimates and assumptions that affect the reporting of net periodic benefit cost, plan assets and plan obligations for each plan at the date of the financial statements. Actual results could differ from these estimates. One significant estimate relates to the calculation of the benefit obligation for each plan. We annually establish the discount rate, which is an estimate of the interest rate at which these benefits could be effectively settled, that is used to determine the present value of the respective plan's benefit obligations as of December 31. The following table shows the changes in the components of our accumulated other comprehensive income (loss), net of tax, for the nine-month period ended September 30, 2017:
(1) The preparation of financial statements in conformity with GAAP requires us to make various estimates and assumptions that affect the reporting of net periodic benefit cost, plan assets and plan obligations for each plan at the date of the financial statements. Actual results could differ from these estimates. One significant estimate relates to the calculation of the benefit obligation for each plan. We annually establish the discount rate, which is an estimate of the interest rate at which these benefits could be effectively settled, that is used to determine the present value of the respective plan's benefit obligations as of December 31. |
Discontinued Operations |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | DISCONTINUED OPERATIONS On September 18, 2017, we signed a definitive agreement to sell our subsidiary, United Life Insurance Company, to Kuvare for $280,000 in cash, subject to specified adjustments as set forth in the definitive agreement. As a result, our life insurance business (previously reported as a separate segment) has been considered held for sale and reported as discontinued operations and its financial position, results of operations and cash flows are separately reported separately for all periods presented, unless otherwise noted. The sale is expected to close in the first half of 2018, subject to customary conditions, including regulatory approval. Subsequent to the close of the sale in the first half of 2018, UFG will provide services to Kuvare through a transition services agreement ("TSA"). The TSA will be put in place to ensure a seamless transfer of the business between UFG and Kuvare. The TSA includes, among other considerations, accounting management, human resources, legal and information technology services, from the closing date for up to 24 months. The assets and liabilities associated with discontinued operations prior to the closing of the sale have been presented separately in our Consolidated Balance Sheets. The major assets and liability categories were as follows as of the dates indicated:
Summary operating results of discontinued operations were as follows for the periods indicated:
The Company's Consolidated Statement of Cash Flows presents operating, investing and financing cash flows of the discontinued operations separately. The Company's cash management and financial management of both continued and discontinued operations is consolidated as a centralized corporate function in our Finance Department. Cash and cash equivalents of the discontinued operations at September 30, 2017 and December 31, 2016 were $30,751 and $21,659, respectively. |
Nature of Operations and Basis of Presentation (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | Discontinued Operations We have historically reported our operations in two business segments: property and casualty insurance and life insurance. On September 18, 2017, the Company signed a definitive agreement to sell its subsidiary, United Life Insurance Company, to Kuvare US Holdings, Inc. ("Kuvare"). As a result, our life insurance business, previously a separate segment, has been considered held for sale and reported as discontinued operations in the Consolidated Balance Sheets, Consolidated Statements of Income and Comprehensive Income and Consolidated Statements of Cash Flows (collectively, the "Consolidated Financial Statements"). Subsequent to the announcement of this sale, our continuing operations are now reported as one business segment. All current and prior periods reflected in this Form 10-Q have been presented as continuing and discontinued operations, unless otherwise noted. The sale is expected to close in the first half of 2018, subject to customary conditions, including regulatory approval. |
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Basis of Presentation | Basis of Presentation The unaudited consolidated interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial reporting and with the instructions to Form 10-Q and Regulation S-X promulgated by the SEC. Certain financial information that is included in our Annual Report on Form 10-K, including certain financial statement footnote disclosures, are not required by the rules and regulations of the SEC for interim financial reporting and have been condensed or omitted. |
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Use of Estimates | The preparation of 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 financial statement categories that are most dependent on management estimates and assumptions include: investments; deferred policy acquisition costs; reinsurance receivables and recoverables; future policy benefits and losses, claims and loss settlement expenses; and pension and postretirement benefit obligations. |
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Reclassification | Certain prior year amounts have been reclassified to conform to the current year presentation. |
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Cash and Cash Equivalents | Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash, money market accounts, and non-negotiable certificates of deposit with original maturities of three months or less. |
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Deferred Policy Acquisition Costs (DAC) | Deferred Policy Acquisition Costs ("DAC") Certain costs associated with underwriting new business (primarily commissions, premium taxes and variable underwriting and policy issue expenses associated with successful acquisition efforts) are deferred. The following table is a summary of the components of DAC, including the related amortization recognized for the nine-month period ended September 30, 2017.
Property and casualty insurance policy acquisition costs deferred are amortized as premium revenue is recognized. The method followed in computing DAC limits the amount of such deferred costs to their estimated realizable value. This takes into account the premium to be earned, losses and loss settlement expenses expected to be incurred and certain other costs expected to be incurred as the premium is earned. For traditional life insurance policies, DAC is amortized to income over the premium-paying period in proportion to the ratio of the expected annual premium revenue to the expected total premium revenue. Expected premium revenue and gross profits are based on the same mortality and withdrawal assumptions used in determining future policy benefits. These assumptions are not revised after policy issuance unless the recorded DAC asset is deemed to be unrecoverable from future expected profits. For non-traditional life insurance policies, DAC is amortized over the anticipated terms in proportion to the ratio of the expected annual gross profits to the total expected gross profits. Changes in the amount or timing of expected gross profits result in adjustments to the cumulative amortization of these costs. The effect on amortization of DAC for revisions to estimated gross profits is reported in earnings in the period the estimated gross profits are revised. The effect on DAC that results from the assumed realization of unrealized gains (losses) on investments allocated to non-traditional life insurance business is recognized with an offset to net unrealized investment appreciation as of the balance sheet date. |
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Income Taxes | Income Taxes Deferred tax assets and liabilities are established based on differences between the financial statement bases of assets and liabilities and the tax bases of those same assets and liabilities, using the currently enacted statutory tax rates. Deferred income tax expense is measured by the year-to-year change in the net deferred tax asset or liability, except for certain changes in deferred tax amounts that affect stockholders' equity and do not impact federal income tax expense. We reported a federal income tax benefit from continuing and discontinued operations on a consolidated basis of $10,400 and a federal income tax expenses $6,904 for the nine-month periods ended September 30, 2017 and 2016, respectively. Our effective tax rate is different than the federal statutory rate of 35.0 percent due principally to the effect of tax-exempt municipal bond interest income and non-taxable dividend income. The Company performs a quarterly review of its tax positions and makes a determination of whether it is more likely than not that the tax position will be sustained upon examination. If based on review, it appears not more likely than not that the positions will be sustained, the Company will calculate any unrecognized tax benefits and, if necessary, calculate and accrue any related interest and penalties. We did not recognize any liability for unrecognized tax benefits at September 30, 2017 or December 31, 2016. In addition, we have not accrued for interest and penalties related to unrecognized tax benefits. However, if interest and penalties would need to be accrued related to unrecognized tax benefits, such amounts would be recognized as a component of federal income tax expense. With regard to the sale of our life insurance subsidiary, federal income taxes will be allocated to continuing and discontinued operations in accordance with the Company’s tax allocation agreement and the terms of the definitive agreement related to the sale. We file a consolidated federal income tax return. We also file income tax returns in various state jurisdictions. We are no longer subject to federal or state income tax examination for years before 2014. The Internal Revenue Service is conducting routine examinations of our income tax return for the 2015 tax year. |
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Subsequent Events | Subsequent Events In the preparation of the accompanying financial statements, the Company has evaluated all material subsequent events or transactions that occurred after the balance sheet date through the date on which the financial statements were issued for potential recognition or disclosure in the Company's financial statements. |
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Recently Issued Accounting Standards | Recently Issued Accounting Standards Accounting Standards Adopted in 2017 Share-Based Payments In March 2016, the Financial Accounting Standards Board ("FASB") issued new guidance on the accounting for share-based payments. The new guidance was issued to simplify the accounting of share-based payments, specifically in the areas of income taxes, classification on the balance sheets as liabilities or equity and classification in the cash flow statement. The new guidance is effective for annual periods beginning after December 15, 2016 and interim periods within those years. The Company adopted the new guidance prospectively as of January 1, 2017. The new guidance resulted in classification changes between the financing and operating section of the Statement of Cash Flow for stock based compensation expense. The adoption also resulted in a tax benefit of $62 and $546 during the three- and nine-months ended September 30, 2017. Income Taxes In December 2015, the FASB issued guidance on the balance sheet classification of deferred taxes. The new guidance eliminates the requirement to split deferred tax liabilities and assets between current and non-current in a classified balance sheet. The new guidance allows deferred tax liabilities and assets to be included in non-current accounts. The Company adopted the new guidance as of January 1, 2017. The adoption had no impact on the Company's financial position and results of operations since we do not currently report deferred taxes in classified balance sheets. Pending Adoption of Accounting Standards Revenue Recognition In May 2014, the FASB issued comprehensive new guidance on revenue recognition which supersedes nearly all existing revenue recognition guidance under GAAP. The new guidance requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard creates a five-step model that requires companies to exercise judgment when considering the terms of the contract(s) and all relevant facts and circumstances. Insurance contracts are not within the scope of this new guidance. The new guidance is effective for annual and interim periods beginning after December 15, 2017. The Company will adopt the guidance as of January 1, 2018. The Company has completed its review of revenue streams under this new guidance and concluded that the adoption of the new guidance will have no impact on the Company's reporting and disclosure of net premiums earned from insurance contracts, net investment income or net realized gains and losses, as these items are not within the scope of this new guidance. The Company's primary revenue streams from insurance contracts, investment income and net realized gains and losses, are out of scope under this new guidance. The remaining revenue streams are immaterial and not impacted by the new standard. Financial Instruments In January 2016, the FASB issued guidance updating certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments in this update supersede the guidance to classify equity securities with readily determinable fair values into different categories (for example, trading or available-for-sale) and require equity securities to be measured at fair value with changes in the fair value recognized through net income. The new guidance also simplifies the impairment process for equity investments without readily determinable fair values. The new guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those years. The Company will adopt the new guidance as of January 1, 2018. If the new guidance were adopted as of September 30, 2017, there would be a reclassification from accumulated other comprehensive income to retained earnings equal to the amount of net unrealized gains and losses on available-for-sale equity securities at December 31, 2016 disclosed in Note 2 "Summary of Investments," of this section. The impact to net realized gains (losses) would equal the change in net unrealized gains and losses on available-for-sale equity securities between September 30, 2017 and December 31, 2016, in the same tables. Statement of Cash Flows - Classification of Certain Cash Receipts and Payments In August 2016, the FASB issued an update that clarifies the classification of certain cash receipts and payments in the Statement of Cash Flows. The update addresses eight existing cash flow issues by clarifying the correct classification to establish uniformity in practice. The updated guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those years. The Company will adopt the new guidance as of January 1, 2018 and is currently reviewing the updates to the eight existing cash flow issues. Currently, management believes that one existing cash flow issue will be impacted by these updates. Management believes the update will have no impact on the Company's financial position and results of operations but may effect the current classification of the cash flow in the Statement of Cash Flows. Defined Benefit Retirement Plan Cost In March 2017, the FASB issued guidance on the presentation of net periodic benefit costs of defined benefit retirement benefit plans in the Statements of Income. The new guidance requires the service cost component of net periodic benefit cost of defined benefit plans to be presented in the same line in the Statements of Income as other employee compensation expenses. Also, under the new guidance, the service cost component of the net periodic benefit costs will be the only portion of costs subject to be capitalized in assets. The new guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those years. The Company will adopt the new guidance as of January 1, 2018 and is currently evaluating the presentation of net periodic benefit costs in its financial statements and the impact on the Company's financial position and results of operations. Share-Based Payments In May 2017, the FASB issued new guidance which clarifies and addresses the diversity in practice when there is a change in the terms of a share-based payment award. The updated guidance clarifies when to use modification accounting when there is a change in the terms of a share-based payment and provides three conditions where modification accounting should not be applied. The new guidance is effective for annual and interim periods beginning after December 15, 2017. The Company will adopt the new guidance as of January 1, 2018 and is currently evaluating the impact on the Company's financial position and results of operations. Leases In February 2016, the FASB issued guidance on the accounting for leases. The new guidance requires lessees to place most leases on their balance sheets with expenses recognized on the income statement in a similar manner as previous methods. The new guidance is effective for annual periods beginning after December 15, 2018 and interim periods within those years. The Company will adopt the new guidance as of January 1, 2019. The Company has created an inventory of its leases and has calculated the current minimum future lease payment, which is disclosed in Note 13 "Lease Commitments" of our Annual Report on Form 10-K for the year ended December 31, 2016. Financial Instruments - Credit Losses In June 2016, the FASB issued new guidance on the measurement of credit losses for most financial instruments. The new guidance replaces the current incurred loss model for recognizing credit losses with an expected loss model for instruments measured at amortized cost and requires allowances to be recorded for available-for-sale debt securities rather than reduce the carrying amount. These allowances will be remeasured each reporting period. The new guidance is effective for annual periods beginning after December 15, 2020 and interim periods within those years. The Company will adopt the new guidance as of January 1, 2021 and is currently evaluating the impact on the Company's financial position, results of operations and key processes. Income Taxes - Intra-entity Transfers In October 2016, the FASB issued new guidance on the income tax treatment of intra-entity transfers. The new guidance replaces the current guidance which prohibits the recognition of current and deferred income taxes of intra-entity transfers until the asset is sold externally. Under the new guidance, the exemption is eliminated and income taxes will be recognized on transfers of intra-entity assets. The new guidance is effective for annual periods beginning after December 15, 2018 and interim periods beginning after December 15, 2019. The Company will adopt the new guidance as of January 1, 2019 and is currently evaluating the impact on the Company's financial position and results of operations. Goodwill In January 2017, the FASB issued new guidance which simplifies the test for goodwill impairment. The new guidance eliminates the implied fair value calculation when measuring a goodwill impairment charge. Under the new guidance, impairment charges will be based on the excess of the carrying value over fair value of goodwill. The new guidance is effective for annual and interim periods beginning after December 15, 2019. The Company will adopt the new guidance as of January 1, 2020 and is currently evaluating the impact on the Company's financial position and results of operations. |
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Fair Value Measurement | Current accounting guidance on fair value measurements includes the application of a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Our financial instruments that are recorded at fair value are categorized into a three-level hierarchy, which is based upon the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (i.e., Level 1) and the lowest priority to unobservable inputs (i.e., Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the financial instrument. Financial instruments recorded at fair value are categorized in the fair value hierarchy as follows:
We review our fair value hierarchy categorizations on a quarterly basis at which time the classification of certain financial instruments may change if the input observations have changed. Transfers between levels, if any, are recorded as of the beginning of the reporting period. To determine the fair value of the majority of our investments, we utilize prices obtained from independent, nationally recognized pricing services. We obtain one price for each security. When the pricing services cannot provide a determination of fair value for a specific security, we obtain non-binding price quotes from broker-dealers with whom we have had several years experience and who have demonstrated knowledge of the subject security. We request and utilize one broker quote per security. In order to determine the proper classification in the fair value hierarchy for each security where the price is obtained from an independent pricing service, we obtain and evaluate the vendors' pricing procedures and inputs used to price the security, which include unadjusted quoted market prices for identical securities, such as a New York Stock Exchange closing price, and quoted prices for identical securities in markets that are not active. For fixed maturity securities, an evaluation of interest rates and yield curves observable at commonly quoted intervals, volatility, prepayment speeds, credit risks and default rates may also be performed. We have determined that these processes and inputs result in fair values and classifications consistent with the applicable accounting guidance on fair value measurements. When possible, we use quoted market prices to determine the fair value of fixed maturities, equity securities, trading securities and short-term investments. When quoted market prices do not exist, we base estimates of fair value on market information obtained from independent pricing services and brokers or on valuation techniques that are both unobservable and significant to the overall fair value measurement of the financial instrument. Such inputs may reflect management's own assumptions about the assumptions a market participant would use in pricing the financial instrument. Our valuation techniques are discussed in more detail throughout this section. The fair value of our mortgage loans is determined by modeling performed by us based on the stated principal and coupon payments provided for in the loan agreements. These cash flows are then discounted using an appropriate risk-adjusted discount rate to determine the security's fair value, which is a Level 3 fair value measurement. The fair value of our policy loans is equivalent to carrying value, which is a reasonable estimate of fair value and is classified as Level 2. We do not make policy loans for amounts in excess of the cash surrender value of the related policy. In all instances, the policy loans are fully collateralized by the related liability for future policy benefits for traditional insurance policies or by the policyholders' account balance for non-traditional policies. Our other long-term investments consist primarily of our interests in limited liability partnerships that are recorded on the equity method of accounting. The fair value of the partnerships is obtained from the fund managers, which is based on the fair value of the underlying investments held in the partnerships. In management's opinion, these values represent a reasonable estimate of fair value. We have not adjusted the net asset value provided by the fund managers. For cash and cash equivalents and accrued investment income, carrying value is a reasonable estimate of fair value due to the short-term nature of these financial instruments. The Company formed a rabbi trust in 2014 to fund obligations under the United Fire & Casualty Company Non-qualified Deferred Compensation Plan and United Fire Group Supplemental Executive Retirement and Deferral Plan (collectively, the "Executive Retirement Plans"). Within the rabbi trust, corporate-owned life insurance ("COLI") policies are utilized as an investment vehicle and source of funding for the Company's Executive Retirement Plans. The COLI policies invest in mutual funds, which are priced daily by independent sources. As of September 30, 2017, the cash surrender value of the COLI policies was $3,759, which is equal to the fair value measured using Level 2 inputs, based on the underlying assets of the COLI policies, and is included in other assets in the Consolidated Balance Sheets. Policy reserves are developed and recorded for deferred annuities, which is an interest-sensitive product, and income annuities. The fair value of the reserve liability for these annuity products is based upon an estimate of the discounted pretax cash flows that are forecast for the underlying business, which is a Level 3 fair value measurement. We base the discount rate on the current U.S. Treasury spot yield curve, which is then risk-adjusted for nonperformance risk and, for interest-sensitive business and market risk factors. The risk-adjusted discount rate is developed using interest rates that are available in the market and representative of the risks applicable to the underlying business. The fair value of securities that are categorized as Level 1 is based on quoted market prices that are readily and regularly available. We use a market-based approach for valuing all of our Level 2 securities and submit them primarily to a third-party valuation service provider. Any of these securities not valued by this service provider are submitted to another third-party valuation service provider. Both service providers use a market approach to find pricing of similar financial instruments. The market inputs our service providers normally seek to value our securities include the following, listed in approximate order of priority: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. The method and inputs for these securities classified as Level 2 are the same regardless of industry category, credit quality, duration, geographical concentration or economic characteristics. For our mortgage-backed securities, collateralized mortgage obligations and asset-backed securities, our service providers use additional market inputs to value these securities, including the following: new issue data, periodic payment information, monthly payment information, collateral performance and real estate analysis from third parties. Our service providers prioritize inputs based on market conditions, and not all inputs listed are available for use in the valuation process for each security on any given day. At least annually, we review the methodologies and assumptions used by our valuation service providers and verify that they are reasonable and representative of the fair value of the underlying securities held in the investment portfolio. We validate the prices obtained from independent pricing services and brokers prior to their use for reporting purposes by evaluating their reasonableness on a monthly basis. Our validation process includes a review for unusual fluctuations. Unusual fluctuations outside of our expectations are independently corroborated with additional third-party sources that use similar valuation techniques as discussed above. In addition, we also randomly select securities and independently corroborate the valuations obtained from our third-party valuation service providers. In our opinion, the pricing obtained at September 30, 2017 and December 31, 2016 was reasonable. For the three- and nine-month periods ended September 30, 2017, the change in our available-for-sale securities categorized as Level 1 and Level 2 is the result of investment purchases that were made using funds held in our money market accounts, disposals and the change in unrealized gains on both fixed maturities and equity securities. During the three- and nine-month periods ended September 30, 2017, there were no securities transferred between Level 1 and Level 2. Securities categorized as Level 3 include holdings in certain private placement fixed maturity and equity securities for which an active market does not currently exist. The fair value of our Level 3 private placement securities is determined by management relying on pricing received from our independent pricing services and brokers consistent with the process to estimate fair value for Level 2 securities. However, securities are categorized as Level 3 if these quotes cannot be corroborated by other market observable data due to the unobservable nature of the brokers’ valuation processes. If pricing cannot be obtained from these sources, which occurs on a limited basis, management will perform a discounted cash flow analysis, using an appropriate risk-adjusted discount rate, on the underlying security to estimate fair value. During the three- and nine-month periods ended September 30, 2017, there were no securities transferred in or out of Level 3. |
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Segment Information | Prior to the announcement to sell our subsidiary, United Life Insurance Company, we had two reportable business segments in our operations: property and casualty insurance and life insurance. The property and casualty insurance segment has six domestic locations from which it conducts its business. The life insurance segment operates from our home office in Cedar Rapids, Iowa. Because all of our insurance is sold domestically, we have no revenues from foreign operations. After the announcement of the sale of our life insurance segment, the Company has one reportable segment, the property and casualty insurance segment, which includes all continuing operations. The property and casualty insurance segment profit or loss is consistent with consolidated reporting as disclosed on the Consolidated Statements of Income and Comprehensive Income. We analyze the property and casualty insurance segment results based on profitability (i.e., loss ratios), expenses and return on equity. The Company's property and casualty insurance segment was determined using a management approach to make decisions on operating matters, including allocating resources, assessing performance, determining which products to market and sell, determining distribution networks with insurance agents and monitoring the regulatory environment. The property and casualty insurance segment products have similar economic characteristics and use a similar marketing and distribution strategy with our independent agents. The property and casualty insurance segment geographic concentration did not change after the announcement of the sale of the life insurance segment. We will continue to evaluate our segment on the basis of both statutory accounting principles prescribed or permitted by our states of domicile and GAAP. |
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Earnings Per Share | Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share gives effect to all dilutive common shares outstanding during the reporting period. The dilutive shares we consider in our diluted earnings per share calculation relate to our outstanding stock options, restricted stock awards and restricted stock unit awards. We determine the dilutive effect of our outstanding stock options using the "treasury stock" method. Under this method, we assume the exercise of all of the outstanding stock options whose exercise price is less than the weighted-average market value of our common stock during the reporting period. This method also assumes that the proceeds from the hypothetical stock option exercises are used to repurchase shares of our common stock at the weighted-average market value of the stock during the reporting period. The net of the assumed stock options exercised and assumed common shares repurchased represents the number of dilutive common shares, which we add to the denominator of the earnings per share calculation. |
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Components of Deferred Acquisition Costs | The following table is a summary of the components of DAC, including the related amortization recognized for the nine-month period ended September 30, 2017.
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Summary of Investments (Tables) |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Investments | A reconciliation of the amortized cost (cost for equity securities) to fair value of investments in held-to-maturity and available-for-sale fixed maturity and equity securities, presented on a consolidated basis, including both continuing and discontinued operations as of September 30, 2017 and December 31, 2016, is as follows:
The following table is a reconciliation of the amortized cost (cost for equity securities) to fair value of investments in held-to-maturity and available-for-sale fixed maturity and equity securities for continuing and discontinued operations by investment type at September 30, 2017 and December 31, 2016:
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Maturities | The amortized cost and fair value of held-to-maturity, available-for-sale and trading fixed maturity securities at September 30, 2017, by contractual maturity, are shown in the following tables. The first table includes consolidated investments from both continuing and discontinued operations. The second and third tables separate maturities into continuing and discontinued operations. 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. Asset-backed securities, mortgage-backed securities and collateralized mortgage obligations may be subject to prepayment risk and are therefore not categorized by contractual maturity.
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Net Realized Investment Gains and Losses | A summary of the components of net realized investment gains (losses) is as follows:
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Proceeds and Gross Realized Gains and Losses | The proceeds and gross realized gains on the sale of available-for-sale fixed maturity securities from continuing operations are as follows:
The proceeds and gross realized gains on the sale of available-for-sale fixed maturity securities from discontinued operations are as follows:
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Unrealized Investment Appreciation | A summary of the changes in net unrealized investment appreciation during the reporting period is as follows:
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Investments in Unrealized Loss Position |
The tables on the following pages are a reconciliation for continuing and discontinued operations of our total fixed maturity and equity securities that were in an unrealized loss position at September 30, 2017 and December 31, 2016. The securities are presented by the length of time they have been continuously in an unrealized loss position:
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Fair Value of Financial Instruments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Value and Estimated Fair Value of Financial Instruments | A summary of the carrying value and estimated fair value of our financial instruments from continuing operations at September 30, 2017 and December 31, 2016 is as follows:
A summary of the carrying value and estimated fair value of our financial instruments from discontinued operations at September 30, 2017 and December 31, 2016 is as follows:
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Financial Instruments Measured at Fair Value on Recurring Basis | The following tables present the categorization for our financial instruments measured at fair value on a recurring basis. The table includes financial instruments from both continuing and discontinued operations at September 30, 2017 and December 31, 2016:
The following tables are a reconciliation for both continuing and discontinued operations of the presentation of the categorization for our financial instruments measured at fair value on a recurring basis at September 30, 2017 and December 31, 2016:
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Changes in Fair Value of Level 3 Securities | The following table provides a summary of the changes in fair value of our Level 3 securities, from both continuing and discontinued operations for the three-month period ended September 30, 2017:
(1) Net unrealized gains (losses) are recorded as a component of comprehensive income. The following table provides a summary of the changes in fair value of our Level 3 securities, from both continuing and discontinued operations for the nine-month period ended September 30, 2017:
(1) Net unrealized gains (losses) are recorded as a component of comprehensive income. |
Reserves for Losses and Loss Settlement Expenses (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insurance Loss Reserves [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Liability for Unpaid Claims and Claims Adjustment Expense | The following table provides an analysis of changes in our property and casualty losses and loss settlement expense reserves at September 30, 2017 and December 31, 2016 (net of reinsurance amounts):
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Employee Benefits (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Periodic Benefit Cost | The components of the net periodic benefit cost for our pension and postretirement benefit plans are as follows:
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Stock-Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity in Stock Award Plans | The activity in the Stock Plan is displayed in the following table:
The activity in the Director Plan is displayed in the following table:
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Remaining Stock-Based Compensation Expense | We expect this compensation to be recognized over the remainder of 2017 and subsequent years according to the table below, except with respect to awards that are accelerated by the Board of Directors, in which case we will recognize any remaining compensation expense in the period in which the awards are accelerated.
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Earnings Per Common Share (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Basic and Diluted Earnings Per Share | The components of basic and diluted earnings per share were as follows for the three-month periods ended September 30, 2017 and 2016:
The components of basic and diluted earnings per share were as follows for the nine-month periods ended September 30, 2017 and 2016:
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Accumulated Other Comprehensive Income (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | The following table shows the changes in the components of our accumulated other comprehensive income (loss), net of tax, for the three-month period ended September 30, 2017:
(1) The preparation of financial statements in conformity with GAAP requires us to make various estimates and assumptions that affect the reporting of net periodic benefit cost, plan assets and plan obligations for each plan at the date of the financial statements. Actual results could differ from these estimates. One significant estimate relates to the calculation of the benefit obligation for each plan. We annually establish the discount rate, which is an estimate of the interest rate at which these benefits could be effectively settled, that is used to determine the present value of the respective plan's benefit obligations as of December 31. The following table shows the changes in the components of our accumulated other comprehensive income (loss), net of tax, for the nine-month period ended September 30, 2017:
(1) The preparation of financial statements in conformity with GAAP requires us to make various estimates and assumptions that affect the reporting of net periodic benefit cost, plan assets and plan obligations for each plan at the date of the financial statements. Actual results could differ from these estimates. One significant estimate relates to the calculation of the benefit obligation for each plan. We annually establish the discount rate, which is an estimate of the interest rate at which these benefits could be effectively settled, that is used to determine the present value of the respective plan's benefit obligations as of December 31. |
Discontinued Operations (Tables) |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposal Groups, Including Discontinued Operations | The major assets and liability categories were as follows as of the dates indicated:
Summary operating results of discontinued operations were as follows for the periods indicated:
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Summary of Investments (Narrative) (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
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Investments [Abstract] | |||||
Sale of held-to-maturity securities | $ 0 | $ 0 | $ 0 | $ 0 | |
Trading securities | 20,003,000 | 20,003,000 | $ 20,034,000 | ||
Remaining potential contractual obligation | 3,738,000 | 3,738,000 | |||
Maximum | Equity securities: | |||||
Schedule of Investments [Line Items] | |||||
Largest unrealized loss greater than 12 months on an individual security | $ 152,000 | $ 152,000 |
Summary of Investments (Unrealized Appreciation) (Details) - USD ($) $ in Thousands |
9 Months Ended | |
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Sep. 30, 2017 |
Sep. 30, 2016 |
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Change in net unrealized investment appreciation | ||
Available-for-sale fixed maturities | $ 34,837 | $ 83,498 |
Available-for-sale equity securities | 27,559 | 15,459 |
Deferred policy acquisition costs | (3,582) | (19,857) |
Income tax effect | (20,584) | (27,685) |
Total change in net unrealized investment appreciation, net of tax | $ 38,230 | $ 51,415 |
Fair Value of Financial Instruments (Narrative) (Details) $ in Thousands |
Sep. 30, 2017
USD ($)
|
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Rabbi Trust | Other Assets | Level 2 | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |
Cash surrender value | $ 3,759 |
Reserves for Losses and Loss Settlement Expenses (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Insurance Loss Reserves [Abstract] | ||
Gross liability for losses and loss settlement expenses at beginning of year | $ 1,123,896 | $ 1,003,895 |
Ceded losses and loss settlement expenses | (59,794) | (54,653) |
Net liability for losses and loss settlement expenses at beginning of year | 1,064,102 | 949,242 |
Losses and loss settlement expenses incurred for claims occurring during | ||
Current year | 606,344 | 683,662 |
Prior years | (37,988) | (31,229) |
Total incurred | 568,356 | 652,433 |
Losses and loss settlement expense payments for claims occurring during | ||
Current year | 212,591 | 277,053 |
Prior years | 247,608 | 260,520 |
Total paid | 460,199 | 537,573 |
Net liability for losses and loss settlement expenses at end of year | 1,172,259 | 1,064,102 |
Ceded loss and loss settlement expenses | 65,021 | 59,794 |
Gross liability for losses and loss settlement expenses at end of period | $ 1,237,280 | $ 1,123,896 |
Employee Benefits (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
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Pension Plan | ||||||
Net periodic benefit cost | ||||||
Service cost | $ 1,714 | $ 1,623 | $ 5,141 | $ 4,869 | ||
Interest cost | 1,765 | 1,663 | 5,295 | 4,989 | ||
Expected return on plan assets | (2,413) | (1,988) | (7,237) | (5,964) | ||
Amortization of prior service credit | 0 | 0 | 0 | 0 | ||
Amortization of net loss | 891 | 992 | 2,673 | 2,976 | ||
Net periodic benefit cost | 1,957 | 2,290 | 5,872 | 6,870 | ||
Estimated 2017 pension plan contribution, disclosed in prior year 10K | $ 6,400 | |||||
Contribution by employer | $ 5,000 | 11,396 | ||||
Postretirement Benefit Plan | ||||||
Net periodic benefit cost | ||||||
Service cost | 505 | 932 | 1,515 | 2,796 | ||
Interest cost | 482 | 754 | 1,446 | 2,262 | ||
Expected return on plan assets | 0 | 0 | 0 | 0 | ||
Amortization of prior service credit | (1,352) | 0 | (4,056) | 0 | ||
Amortization of net loss | 462 | 379 | 1,384 | 1,137 | ||
Net periodic benefit cost | $ 97 | $ 2,065 | $ 289 | $ 6,195 |
Stock-Based Compensation (Stock-based Compensation Expense) (Details) $ in Thousands |
Sep. 30, 2017
USD ($)
|
---|---|
Share-based Compensation [Abstract] | |
2017 | $ 1,202 |
2018 | 4,047 |
2019 | 2,784 |
2020 | 1,120 |
2021 | 393 |
2022 | 40 |
Total | $ 9,586 |
Segment Information (Details) |
9 Months Ended | |
---|---|---|
Sep. 30, 2017
segment
location
|
Sep. 17, 2017
segment
|
|
Segment Reporting Information [Line Items] | ||
Number of business segments | 1 | 2 |
Property and Casualty Insurance | ||
Segment Reporting Information [Line Items] | ||
Number of business segments | 1 | |
Number of domestic locations | location | 6 |
Credit Facility (Details) |
9 Months Ended | ||
---|---|---|---|
Feb. 02, 2016
USD ($)
|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2016
USD ($)
|
|
Line of Credit Facility [Line Items] | |||
Maximum borrowing capacity | $ 100,000,000 | ||
Debt covenant, maximum debt to total capitalization ratio | 0.35 | ||
Outstanding balance on credit facility | $ 0 | $ 0 | |
Interest expense incurred | $ 0 | $ 0 | |
Revolving Credit Facility [Member] | |||
Line of Credit Facility [Line Items] | |||
Maximum borrowing capacity | $ 50,000,000 | ||
Credit agreement term | 4 years | ||
Letter of Credit | |||
Line of Credit Facility [Line Items] | |||
Maximum borrowing capacity | $ 20,000,000 | ||
Swing Line of Credit | |||
Line of Credit Facility [Line Items] | |||
Maximum borrowing capacity | $ 5,000,000 |
Discontinued Operations Narrative (Details) - United Life Insurance Company - Discontinued Operations, Held-for-sale - USD ($) $ in Thousands |
Sep. 30, 2017 |
Sep. 18, 2017 |
Dec. 31, 2016 |
---|---|---|---|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Cash proceeds | $ 280,000 | ||
Cash and cash equivalents | $ 30,751 | $ 21,659 |
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