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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2020

Carrying Value and Estimated Fair Value of Financial Instruments

A summary of the carrying value and estimated fair value of our financial instruments at March 31, 2020 and December 31, 2019 is as follows:



	March 31, 2020				December 31, 2019
	Fair Value		Carrying Value		Fair Value		Carrying Value
Assets
Investments
Fixed maturities:
Available-for-sale securities	$	1,699,418	$	1,699,359	$	1,719,607	$	1,719,607
Trading securities	11,208		11,208		15,256		15,256
Equity securities	206,951		206,951		299,203		299,203
Mortgage loans	45,821		45,115		43,992		42,448
Other long-term investments	66,917		66,917		78,410		78,410
Short-term investments	175		175		175		175
Cash and cash equivalents	120,724		120,724		120,722		120,722
Corporate-owned life insurance	6,167		6,167		6,777		6,777

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 at March 31, 2020 and December 31, 2019:



March 31, 2020			Fair Value Measurements
Description	Total		Level 1		Level 2		Level 3
AVAILABLE-FOR-SALE
Fixed maturities:
Bonds
U.S. Treasury	$	50,094	$	—	$	50,094	$	—
U.S. government agency	79,688		—		79,688		—
States, municipalities and political subdivisions
General obligations
Midwest	88,446		—		88,446		—
Northeast	31,138		—		31,138		—
South	115,076		—		115,076		—
West	110,075		—		110,075		—
Special revenue
Midwest	137,498		—		137,498		—
Northeast	61,432		—		61,432		—
South	233,929		—		233,929		—
West	143,307		—		143,307		—
Foreign bonds	5,112		—		5,112		—
Public utilities	75,840		—		75,840		—
Corporate bonds
Energy	26,000		—		26,000		—
Industrials	57,433		—		57,433		—
Consumer goods and services	48,771		—		48,771		—
Health care	9,374		—		9,374		—
Technology, media and telecommunications	35,531		—		35,531		—
Financial services	102,550		—		102,300		250
Mortgage-backed securities	6,130		—		6,130		—
Collateralized mortgage obligations
Government national mortgage association	82,112		—		82,112
Federal home loan mortgage corporation	118,586		—		118,586
Federal national mortgage association	80,375		—		80,375
Asset-backed securities	921		—		—		921
Total Available-for-Sale Fixed Maturities	$	1,699,418	$	—	$	1,698,247	$	1,171
TRADING
Bonds
Corporate bonds
Industrials	$	463	$	—	$	463	$	—
Consumer goods and services	1,374		—		1,374		—
Health care	3,945		—		3,945		—
Financial services	2,193		—		2,193		—
Redeemable preferred stocks	3,233		3,233		—		—



Total Trading Securities	$	11,208	$	3,233	$	7,975	$	—
EQUITY SECURITIES
Common stocks
Public utilities	$	14,779	$	14,779	$	—	$	—
Energy	8,837		8,837		—		—
Industrials	34,453		34,453		—		—
Consumer goods and services	25,188		25,188		—		—
Health care	24,001		24,001		—		—
Technology, media and telecommunications	15,778		15,778		—		—
Financial services	78,010		78,010		—		—
Nonredeemable preferred stocks	5,905		5,310		—		595
Total Equity Securities	$	206,951	$	206,356	$	—	$	595
Short-Term Investments	$	175	$	175	$	—	$	—
Money Market Accounts	$	31,168	$	31,168	$	—	$	—
Corporate-Owned Life Insurance	$	6,167	$	—	$	6,167	$	—
Total Assets Measured at Fair Value	$	1,955,087	$	240,932	$	1,712,389	$	1,766



December 31, 2019			Fair Value Measurements
Description	Total		Level 1		Level 2		Level 3
AVAILABLE-FOR-SALE
Fixed maturities:
Bonds
U.S. Treasury	$	69,491	$	—	$	69,491	$	—
U.S. government agency	100,202		—		100,202		—
States, municipalities and political subdivisions
General obligations
Midwest	88,594		—		88,594		—
Northeast	31,270		—		31,270		—
South	115,203		—		115,203		—
West	110,317		—		110,317		—
Special revenue
Midwest	139,892		—		139,892		—
Northeast	61,543		—		61,543		—
South	234,666		—		234,666		—
West	144,844		—		144,844		—
Foreign bonds	5,117		—		5,117		—
Public utilities	63,651		—		63,651		—
Corporate bonds
Energy	30,124		—		30,124		—
Industrials	54,015		—		54,015		—
Consumer goods and services	49,466		—		49,466		—
Health care	9,480		—		9,480		—
Technology, media and telecommunications	27,670		—		27,670		—
Financial services	100,253		—		100,003		250
Mortgage-backed securities	6,356		—		6,356		—
Collateralized mortgage obligations
Government national mortgage association	80,356		—		80,356		—
Federal home loan mortgage corporation	124,502		—		124,502		—
Federal national mortgage association	71,845		—		71,845		—
Asset-backed securities	750		—		—		750
Total Available-for-Sale Fixed Maturities	$	1,719,607	$	—	$	1,718,607	$	1,000
TRADING
Fixed maturities:
Bonds
Corporate bonds
Consumer goods and services	2,276		—		2,276		—
Health care	4,701		—		4,701		—
Technology, media and telecommunications	1,732		—		1,732		—
Financial services	2,460		—		2,460		—
Redeemable preferred stocks	4,087		4,087		—		—



Total Trading Securities	$	15,256	$	4,087	$	11,169	—
EQUITY SECURITIES
Common Stocks
Public utilities	$	16,295	$	16,295	$	—	$	—
Energy	14,639		14,639		—		—
Industrials	57,330		57,330		—		—
Consumer goods and services	29,935		29,935		—		—
Health care	27,285		27,285		—		—
Technology, media and telecommunications	19,265		19,265		—		—
Financial services	127,780		127,780		—		—
Nonredeemable preferred stocks	6,674		6,079		—		595
Total Equity Securities	$	299,203	$	298,608	$	—	$	595
Short-Term Investments	$	175	$	175	$	—	$	—
Money Market Accounts	$	9,334	$	9,334	$	—	$	—
Corporate-Owned Life Insurance	$	6,777	$	—	$	6,777	$	—
Total Assets Measured at Fair Value	$	2,050,352	$	312,204	$	1,736,553	$	1,595

Quantitative Information About Level 3 Fair Value Measurements

The following table provides a quantitative information about our Level 3 securities at March 31, 2020:



Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at		Valuation Technique(s)	Unobservable inputs	Range of weighted average significant unobservable inputs
	March 31, 2020		Valuation Technique(s)	Unobservable inputs	Range of weighted average significant unobservable inputs
Corporate bonds - financial services	$	250	Fair value equals cost	NA	NA

Fixed Maturities asset-backed securities	921		Discounted cash flow	Probability of default	4% - 6%

Nonredeemable preferred stocks	595		Discounted cash flow	Multiplier	3x - 4x

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 for the three-month period ended March 31, 2020:



	Corporate bonds		Asset-backed securities		Equities		Total
Balance at January 1, 2020	$	250	$	750	$	595	$	1,595
Net unrealized gains⁽¹⁾	—		171		—		171
Purchases	—		—		—		—
Disposals	—		—		—		—
Balance at March 31, 2020	$	250	$	921	$	595	$	1,766

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

Carrying Value of Commercial Mortgage Loans by Loan-to-Value Ratio

The following tables present the carrying value of our commercial mortgage loans and additional information at March 31, 2020 and December 31, 2019:



Commercial Mortgage Loans
	March 31, 2020			December 31, 2019
Loan-to-value	Carrying Value			Carrying Value
Less than 65%	$	36,696		$	34,024
65%-75%	8,496			8,496
Total amortized cost	$	45,192		$	42,520
Allowance for mortgage loan losses	(77		)	(72		)
Mortgage loans, net	$	45,115		$	42,448



Mortgage Loans by Region
	March 31, 2020				December 31, 2019
	Carrying Value		Percent of Total		Carrying Value		Percent of Total
East North Central	$	3,245	7.2	%	$	3,245	7.6	%
Southern Atlantic	7,026		15.5		7,026		16.5
East South Central	8,318		18.4		8,358		19.7
New England	6,588		14.6		6,588		15.5
Middle Atlantic	15,042		33.3		15,076		35.5
Mountain	2,227		4.9		2,227		5.2
West North Central	2,746		6.1	%	—		—
Total mortgage loans at amortized cost	$	45,192	100.0	%	$	42,520	100.0	%



Mortgage Loans by Property Type
	March 31, 2020				December 31, 2019
	Carrying Value		Percent of Total		Carrying Value		Percent of Total
Commercial
Multifamily	$	14,487	32.1	%	$	11,741	27.6	%
Office	11,808		26.1		11,848		27.9
Industrial	10,124		22.4		10,124		23.8
Retail	2,227		4.9		2,227		5.2
Mixed use/Other	6,546		14.5		6,580		15.5
Total mortgage loans at amortized cost	$	45,192	100.0	%	$	42,520	100.0	%

Amortized Cost Basis by Year of Origination and Credit Quality Indicator



Amortized Cost Basis by Year of Origination and Credit Quality Indicator
	2020		2019		2018		Total
Commercial mortgage loans:
Risk Rating:
1-2 internal grade	$	2,746	$	8,427	$	18,935	$	30,108
3-4 internal grade	—		8,496		6,588		15,084
5 internal grade	—		—		—		—
6 internal grade	—		—		—		—
7 internal grade	—		—		—		—
Total commercial mortgage loans	$	2,746	$	16,923	$	25,523	$	45,192
Current-period write-offs	—		—		—		—
Current-period recoveries	—		—		—		—
Current-period net write-offs	$	—	$	—	$	—	$	—

Rollforward of Allowance for Mortgage Loan Losses

As of March 31, 2020, the Company had an allowance for mortgage loan losses of $77, summarized in the following rollforward:



Rollforward of allowance for mortgage loan losses:
	As of
	March 31, 2020
Beginning balance, January 1, 2020	$	72
Current-period provision for expected credit losses	5
Write-off charged against the allowance, if any	—
Recoveries of amounts previously written off, if any	—
Ending balance of the allowance for mortgage loan losses, March 31, 2020	$	77