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Fair Value of Financial Instruments
 9 Months Ended
Sep. 30, 2018
Fair Value Disclosures [Abstract]  
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:
•
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.
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 mortgage loan portfolio consists entirely of commercial mortgage loans. The fair value of our mortgage loans is determined by modeling performed by our third party fund manager 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.
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 Supplemental Executive Retirement and Deferral Plan (the "Executive Retirement Plan"). 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 Plan. The COLI policies invest in mutual funds, which are priced daily by independent sources. As of September 30, 2018, the cash surrender value of the COLI policies was $4,998, 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, 2018 and December 31, 2017 is as follows:
 
September 30, 2018
 
December 31, 2017
 
Fair Value
 
Carrying Value
 
Fair Value
 
Carrying Value
Assets
 
 
 
 
 
 
 
Investments
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Held-to-maturity securities
$
—

 
$
—

 
$
150

 
$
150

Available-for-sale securities
1,730,031

 
1,730,031

 
1,535,070

 
1,535,070

Trading securities
14,399

 
14,399

 
16,842

 
16,842

Equity securities
276,253

 
276,253

 
287,344


287,344

Mortgage loans
14,749

 
14,896

 
—

 
—

Other long-term investments
40,432

 
40,432

 
49,352

 
49,352

Short-term investments
175

 
175

 
175

 
175

Cash and cash equivalents
52,252

 
52,252

 
95,562

 
95,562

Corporate-owned life insurance
4,998

 
4,998

 
4,029

 
4,029








A summary of the carrying value and estimated fair value of our financial instruments from discontinued operations at September 30, 2018 and December 31, 2017 is as follows:
 
September 30, 2018
 
December 31, 2017
 
Fair Value
 
Carrying Value
 
Fair Value
 
Carrying Value
Assets
 
 
 
 
 
 
 
Investments
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Held-to-maturity securities
$
—

 
$
—

 
$
34

 
$
34

Available-for-sale securities
—

 
—

 
1,430,025

 
1,430,025

Equity securities:
 
 
 
 
 
 
 
Available-for-sale securities
—

 
—

 
23,653

 
23,653

Mortgage loans
—

 
—

 
3,594

 
3,435

Policy loans
—

 
—

 
5,815

 
5,815

Other long-term investments
—

 
—

 
16,437

 
16,437

Cash and cash equivalents
—

 
—

 
15,851

 
15,851

Liabilities
 
 
 
 
 
 
 
Policy reserves
 
 
 
 
 
 
 
Annuity (accumulations)
$
—

 
$
—

 
$
591,702

 
$
611,866

Annuity (benefit payments)
—

 
—

 
147,038

 
93,560

Note: The sale of the life insurance business was completed on March 30, 2018.

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, 2018 and December 31, 2017:
September 30, 2018
 
 
Fair Value Measurements
Description
Total
 
Level 1
 
Level 2
 
Level 3
AVAILABLE-FOR-SALE
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Bonds
 
 
 
 
 
 
 
U.S. Treasury
$
26,841

 
$
—

 
$
26,841

 
$
—

U.S. government agency
206,990

 
—

 
206,990

 
—

States, municipalities and political subdivisions
 
 
 
 
 
 
 
General obligations
 
 
 
 
 
 
 
Midwest
98,238

 
—

 
98,238

 
—

Northeast
37,351

 
—

 
37,351

 
—

South
113,214

 
—

 
113,214

 
—

West
106,638

 
—

 
106,638

 
—

Special revenue
 
 
 
 
 
 
 
Midwest
139,327

 
—

 
139,327

 
—

Northeast
62,097

 
—

 
62,097

 
—

South
235,441

 
—

 
235,441

 
—

West
142,398

 
—

 
142,398

 
—

Foreign bonds
9,747

 
—

 
9,747

 
—

Public utilities
53,544

 
—

 
53,544

 
—

Corporate bonds
 
 
 
 
 
 
 
Energy
26,686

 
—

 
26,686

 
—

Industrials
55,531

 
—

 
55,531

 
—

Consumer goods and services
51,677

 
—

 
51,677

 
—

Health care
17,986

 
—

 
17,986

 
—

Technology, media and telecommunications
26,122

 
—

 
26,122

 
—

Financial services
76,064

 
—

 
75,814

 
250

Mortgage-backed securities
7,738

 
—

 
7,738

 
—

Collateralized mortgage obligations
 
 
 
 
 
 
 
Government national mortgage association
75,316

 
—

 
75,316

 
—

Federal home loan mortgage corporation
105,716

 
—

 
105,716

 
—

Federal national mortgage association
51,854

 
—

 
51,854

 
—

Asset-backed securities
3,515

 
—

 
2,883

 
632

Total Available-for-Sale Fixed Maturities
$
1,730,031

 
$
—

 
$
1,729,149

 
$
882

TRADING
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Bonds
 
 
 
 
 
 
 
U.S. Treasury
$
200

 
$
—

 
$
200

 
$
—

Corporate bonds


 
—

 
—

 
—

Industrials
1,812

 
—

 
1,812

 
$
—

Consumer goods and services
1,750

 
—

 
1,750

 
—

Health care
3,182

 
—

 
3,182

 
—

Technology, media and telecommunications
2,694

 
—

 
2,694

 
—

Financial services
2,114

 
—

 
2,114

 
—

Redeemable preferred stocks
2,647

 
2,647

 
—

 
—

Total Trading Securities
$
14,399

 
$
2,647

 
$
11,752

 
$
—

EQUITY SECURITIES
 
 
 
 
 
 
 
Common stocks
 
 
 
 
 
 
 
Public utilities
$
15,563

 
$
15,563

 
$
—

 
$
—

Energy
13,647

 
13,647

 
—

 
—

Industrials
62,741

 
62,741

 
—

 
—

Consumer goods and services
25,870

 
25,870

 
—

 
—

Health care
22,991

 
22,991

 
—

 
—

Technology, media and telecommunications
15,047

 
15,047

 
—

 
—

Financial services
114,708

 
114,708

 
—

 
—

Nonredeemable preferred stocks
5,686

 
5,091

 
—

 
595

Total Equity Securities
$
276,253

 
$
275,658

 
$
—

 
$
595

Short-Term Investments
$
175

 
$
175

 
$
—

 
$
—

Money Market Accounts
$
3,824

 
$
3,824

 
$
—

 
$
—

Corporate-Owned Life Insurance
$
4,998

 
$
—

 
$
4,998

 
$
—

Total Assets Measured at Fair Value
$
2,029,680

 
$
282,304

 
$
1,745,899

 
$
1,477

Note: The sale of the life insurance business was completed on March 30, 2018.

December 31, 2017
 
 
Fair Value Measurements
Description
Total
 
Level 1
 
Level 2
 
Level 3
AVAILABLE-FOR-SALE
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Bonds
 
 
 
 
 
 
 
U.S. Treasury
$
16,891

 
$
—

 
$
16,891

 
$
—

U.S. government agency
122,168

 
—

 
122,168

 
—

States, municipalities and political subdivisions
 
 
 
 
 
 
 
General obligations
 
 
 
 
 
 
 
Midwest
109,696

 
—

 
109,696

 
—

Northeast
48,641

 
—

 
48,641

 
—

South
141,519

 
—

 
141,519

 
—

West
113,011

 
—

 
113,011

 
—

Special revenue
 
 
 
 
 
 
 
Midwest
158,744

 
—

 
158,744

 
—

Northeast
79,760

 
—

 
79,760

 
—

South
263,512

 
—

 
263,512

 
—

West
158,307

 
—

 
158,307

 
—

Foreign bonds
52,753

 
—

 
52,753

 
—

Public utilities
209,144

 
—

 
209,144

 
—

Corporate bonds
 
 
 
 
 
 
 
Energy
95,053

 
—

 
95,053

 
—

Industrials
221,707

 
—

 
221,707

 
—

Consumer goods and services
186,257

 
—

 
185,589

 
668

Health care
75,408

 
—

 
75,408

 
—

Technology, media and telecommunications
148,979

 
—

 
148,979

 
—

Financial services
283,151

 
—

 
275,474

 
7,677

Mortgage-backed securities
13,691

 
—

 
13,691

 
—

Collateralized mortgage obligations
 
 
 
 
 
 
 
Government national mortgage association
157,483

 
—

 
157,483

 
—

Federal home loan mortgage corporation
199,152

 
—

 
199,152

 
—

Federal national mortgage association
105,432

 
—

 
105,432

 
—

Asset-backed securities
4,636

 
—

 
3,989

 
647

Total Available-for-Sale Fixed Maturities
$
2,965,095

 
$
—

 
$
2,956,103

 
$
8,992

Equity securities:
 
 
 
 
 
 
 
Common stocks
 
 
 
 
 
 
 
Public utilities
$
22,439

 
$
22,439

 
$
—

 
$
—

Energy
14,565

 
14,565

 
—

 
—

Industrials
66,519

 
66,517

 
2

 
—

Consumer goods and services
25,688

 
25,688

 
—

 
—

Health care
40,103

 
40,103

 
—

 
—

Technology, media and telecommunications
17,508

 
17,508

 
—

 
—

Financial services
116,447

 
116,447

 
—

 
—


Nonredeemable preferred stocks
1,297

 
415

 
—

 
882

Total Available-for-Sale Equity Securities
$
304,566

 
$
303,682

 
$
2

 
$
882

Total Available-for-Sale Securities
$
3,269,661

 
$
303,682

 
$
2,956,105

 
$
9,874

TRADING
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Bonds
 
 
 
 
 
 
 
Corporate bonds
 
 
 
 
 
 
 
Industrials
$
2,220

 
$
—

 
$
2,220

 
$
—

Consumer goods and services
1,535

 
—

 
1,535

 
—

Health care
3,741

 
—

 
3,741

 
—

Technology, media and telecommunications
1,221

 
—

 
1,221

 
—

Financial services
5,566

 
—

 
5,566

 
—

Redeemable preferred stocks
2,559

 
2,559

 
—

 
—

Equity securities:
 
 
 
 
 
 
 
Public utilities
874

 
874

 
—

 
—

Energy
190

 
190

 
—

 
—

Industrials
989

 
989

 
—

 
—

Consumer goods and services
1,314

 
1,314

 
—

 
—

Health care
325

 
325

 
—

 
—

Financial services
198

 
198

 
—

 
—

Nonredeemable preferred stocks
2,541

 
2,541

 
—

 
—

Total Trading Securities
$
23,273

 
$
8,990

 
$
14,283

 
$
—

Short-Term Investments
$
175

 
$
175

 
$
—

 
$
—

Money Market Accounts
$
16,824

 
$
16,824

 
$
—

 
$
—

Corporate-Owned Life Insurance
$
4,029

 
$
—

 
$
4,029

 
$
—

Total Assets Measured at Fair Value
$
3,313,962

 
$
329,671

 
$
2,974,417

 
$
9,874




















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, 2018 and December 31, 2017:
September 30, 2018
 
 
Fair Value Measurements
Description
Total
 
Level 1
 
Level 2
 
Level 3
AVAILABLE-FOR-SALE
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Continuing operations
$
1,730,031

 

 
$
1,729,149

 
$
882

Discontinued operations
—

 
—

 
—

 
—

Total Available-for-Sale Fixed Maturities
$
1,730,031

 
$
—

 
$
1,729,149

 
$
882

TRADING
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Continuing operations
$
14,399

 
$
2,647

 
$
11,752

 
$
—

Discontinued operations
—

 
—

 
—

 
—

Total Trading Securities
$
14,399

 
$
2,647

 
$
11,752

 
$
—

EQUITY SECURITIES
 
 
 
 
 
 
 
Continuing operations
$
276,253

 
$
275,658

 
$
—

 
$
595

Discontinued operations
—

 
—

 
—

 
—

Total Equity Securities
$
276,253

 
$
275,658

 
$
—

 
$
595

SHORT-TERM INVESTMENTS
 
 
 
 
 
 
 
Continuing operations
$
175

 
$
175

 


 


Discontinued operations
—

 
—

 
—

 
$
—

Short-Term Investments
$
175

 
$
175

 
$
—

 
$
—

MONEY MARKET ACCOUNTS
 
 
 
 
 
 
 
Continuing operations
$
3,824

 
$
3,824

 

 

Discontinued operations
—

 
—

 
—

 
—

Money Market Accounts
$
3,824

 
$
3,824

 
$
—

 
$
—

CORPORATE-OWNED LIFE INSURANCE
 
 
 
 
 
 
 
Continuing operations
$
4,998

 


 
$
4,998

 


Discontinued operations
—

 
—

 
—

 
—

Corporate-Owned Life Insurance
$
4,998

 
$
—

 
$
4,998

 
$
—

Total Assets Measured at Fair Value
$
2,029,680

 
$
282,304

 
$
1,745,899

 
$
1,477

Note: The sale of the life insurance business was completed on March 30, 2018.

December 31, 2017
 
 
Fair Value Measurements
Description
Total
 
Level 1
 
Level 2
 
Level 3
AVAILABLE-FOR-SALE
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Continuing operations
$
1,535,070

 
$
—

 
$
1,534,323

 
$
747

Discontinued operations
1,430,025

 
—

 
1,421,780

 
8,245

Total Available-for-Sale Fixed Maturities
$
2,965,095

 
$
—

 
$
2,956,103

 
$
8,992

Equity securities:
 
 
 
 
 
 
 
Continuing operations
$
280,913

 
$
280,031

 
$
—

 
$
882

Discontinued operations
23,653

 
23,651

 
2

 
—

Total Equity Securities
$
304,566

 
$
303,682

 
$
2

 
$
882

Total Available-for-Sale Securities
$
3,269,661

 
$
303,682

 
$
2,956,105

 
$
9,874

TRADING
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
Continuing operations
$
16,842

 
$
2,559

 
$
14,283

 
$
—

Discontinued operations
—

 
—

 
—

 
—

Equity securities:
 
 
 
 
 
 
 
Continuing operations
6,431

 
6,431

 
—

 
—

Discontinued operations
—

 
—

 
—

 
—

Total Trading Securities
$
23,273

 
$
8,990

 
$
14,283

 
$
—

SHORT-TERM INVESTMENTS
 
 
 
 
 
 
 
Continuing operations
$
175

 
$
175

 
$
—

 
$
—

Discontinued operations
—

 
—

 
—

 
—

Short-Term Investments
$
175

 
$
175

 
$
—

 
$
—

MONEY MARKET ACCOUNTS
 
 
 
 
 
 
 
Continuing operations
$
6,147

 
$
6,147

 
$
—

 
$
—

Discontinued operations
10,677

 
10,677

 
—

 
—

Money Market Accounts
$
16,824

 
$
16,824

 
$
—

 
$
—

CORPORATE-OWNED LIFE INSURANCE
 
 
 
 
 
 
 
Continuing operations
$
4,029

 
$
—

 
$
4,029

 
$
—

Discontinued operations
—

 
—

 
—

 
—

Corporate-Owned Life Insurance
$
4,029

 
$
—

 
$
4,029

 
$
—

Total Assets Measured at Fair Value
$
3,313,962

 
$
329,671

 
$
2,974,417

 
$
9,874








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, 2018 and December 31, 2017 was reasonable.
For the three- and nine-month periods ended September 30, 2018, 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, 2018, 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, 2018, 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 continuing operations for the three-month period ended September 30, 2018:
 
Corporate bonds
 
Asset-backed securities
 
Equities
 
Total
Balance at June 30, 2018
$
100

 
$
639

 
$
669

 
$
1,408

Net unrealized gains (losses)(1)
150

 
(7
)
 
(74
)
 
69

Balance at September 30, 2018
$
250

 
$
632

 
$
595

 
$
1,477

(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 continuing operations for the nine-month period ended September 30, 2018:
 
Corporate bonds
 
Asset-backed securities
 
Equities
 
Total
Balance at January 1, 2018
$
100

 
$
647

 
$
882

 
$
1,629

Net unrealized gains (losses)(1)
150

 
(15
)
 
(287
)
 
(152
)
Balance at September 30, 2018
$
250

 
$
632

 
$
595

 
$
1,477

(1) Net unrealized losses are recorded as a component of comprehensive income.

Commercial Mortgage Loans
The following tables present the carrying value of our commercial mortgage loans and additional information at September 30, 2018 and December 31, 2017:
Commercial Mortgage Loans
 
September 30, 2018
 
December 31, 2017
Loan-to-value
Carrying Value
 
Carrying Value
Less than 65%
$
14,896

 
—

Total commercial mortgage loans
$
14,896

 
$
—



Mortgage Loans by Region
 
September 30, 2018
 
December 31, 2017
 
Carrying Value
 
Percent of Total
 
Carrying Value
 
Percent of Total
East North Central
$
3,245

 
21.8
%
 
$
—

 
—
%
Southern Atlantic
6,651

 
44.7

 
—

 
—

East South Central
5,000

 
33.5

 
—

 
—

Total mortgage loans
$
14,896

 
100.0
%
 
$
—

 
—
%
Mortgage Loans by Property Type
 
September 30, 2018
 
December 31, 2017
 
Carrying Value
 
Percent of Total
 
Carrying Value
 
Percent of Total
Commercial
 
 
 
 
 
 
 
Multifamily
$
3,245

 
21.8
%
 
$
—

 
—
%
Office
11,651

 
78.2

 
—

 
—

Total mortgage loans
$
14,896

 
100.0
%
 
$
—

 
—
%

The commercial mortgage loans originate with an initial loan-to-value ratio to provide sufficient collateral to absorb losses should a loan be required to foreclose. Mortgage loans are evaluated on a quarterly basis for impairment on an individual basis through a monitoring process and review of key credit indicators, such as economic trends, delinquency rates, property valuations, occupancy and rental rates and loan-to-value ratios. A loan is considered impaired when the Company believes it will not collect the contractual principal and interest set forth in the contractual terms of the loan. A valuation allowance is established on each loan recognizing a loss for amounts which we believe will not be collected according to the contractual terms of the respective loan agreement. As of September 30, 2018 there were no mortgage loan impairments.