DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2017

Summary of carrying amount and estimated fair value of financial instruments

The carrying amounts and estimated fair values of the Company’s financial instruments as of March 31, 2017 and December 31, 2016 are summarized in the tables below.



March 31, 2017	Carrying amounts		Estimated fair values
($ in thousands)	Carrying amounts		Estimated fair values
Assets:
Fixed maturity securities available-for-sale:
U.S. treasury	$	7,863	$	7,863
U.S. government-sponsored agencies	229,671		229,671
Obligations of states and political subdivisions	351,708		351,708
Commercial mortgage-backed	35,619		35,619
Residential mortgage-backed	87,099		87,099
Other asset-backed	25,617		25,617
Corporate	460,716		460,716
Total fixed maturity securities available-for-sale	1,198,293		1,198,293

Equity securities available-for-sale:
Common stocks:
Financial services	39,655		39,655
Information technology	35,575		35,575
Healthcare	27,522		27,522
Consumer staples	19,866		19,866
Consumer discretionary	20,367		20,367
Energy	17,622		17,622
Industrials	25,171		25,171
Other	18,313		18,313
Non-redeemable preferred stocks	26,111		26,111
Total equity securities available-for-sale	230,202		230,202

Short-term investments	25,530		25,530

Liabilities:
Surplus notes	25,000		11,735



December 31, 2016	Carrying amounts		Estimated fair values
($ in thousands)	Carrying amounts		Estimated fair values
Assets:
Fixed maturity securities available-for-sale:
U.S. treasury	$	7,830	$	7,830
U.S. government-sponsored agencies	239,197		239,197
Obligations of states and political subdivisions	335,757		335,757
Commercial mortgage-backed	37,572		37,572
Residential mortgage-backed	96,434		96,434
Other asset-backed	26,393		26,393
Corporate	456,516		456,516
Total fixed maturity securities available-for-sale	1,199,699		1,199,699

Equity securities available-for-sale:
Common stocks:
Financial services	35,122		35,122
Information technology	30,542		30,542
Healthcare	24,707		24,707
Consumer staples	19,100		19,100
Consumer discretionary	22,321		22,321
Energy	19,071		19,071
Industrials	24,245		24,245
Other	18,384		18,384
Non-redeemable preferred stocks	20,347		20,347
Total equity securities available-for-sale	213,839		213,839

Short-term investments	39,670		39,670

Liabilities:
Surplus notes	25,000		11,228

Summary of assets and liabilities measured on recurring and non-recurring basis

Presented in the tables below are the estimated fair values of the Company’s financial instruments as of March 31, 2017 and December 31, 2016.



March 31, 2017			Fair value measurements using
($ in thousands)	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Financial instruments reported at fair value on recurring basis:
Assets:
Fixed maturity securities available-for-sale:
U.S. treasury	$	7,863	$	—	$	7,863	$	—
U.S. government-sponsored agencies	229,671		—		229,671		—
Obligations of states and political subdivisions	351,708		—		351,708		—
Commercial mortgage-backed	35,619		—		35,619		—
Residential mortgage-backed	87,099		—		87,099		—
Other asset-backed	25,617		—		25,617		—
Corporate	460,716		—		459,787		929
Total fixed maturity securities available-for-sale	1,198,293		—		1,197,364		929

Equity securities available-for-sale:
Common stocks:
Financial services	39,655		39,652		—		3
Information technology	35,575		35,575		—		—
Healthcare	27,522		27,522		—		—
Consumer staples	19,866		19,866		—		—
Consumer discretionary	20,367		20,367		—		—
Energy	17,622		17,622		—		—
Industrials	25,171		25,171		—		—
Other	18,313		18,313		—		—
Non-redeemable preferred stocks	26,111		11,611		12,500		2,000
Total equity securities available-for-sale	230,202		215,699		12,500		2,003

Short-term investments	25,530		25,530		—		—

Financial instruments not reported at fair value:
Liabilities:
Surplus notes	11,735		—		—		11,735



December 31, 2016			Fair value measurements using
($ in thousands)	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Financial instruments reported at fair value on recurring basis:
Assets:
Fixed maturity securities available-for-sale:
U.S. treasury	$	7,830	$	—	$	7,830	$	—
U.S. government-sponsored agencies	239,197		—		239,197		—
Obligations of states and political subdivisions	335,757		—		335,757		—
Commercial mortgage-backed	37,572		—		37,572		—
Residential mortgage-backed	96,434		—		96,434		—
Other asset-backed	26,393		—		26,393		—
Corporate	456,516		—		455,534		982
Total fixed maturity securities available-for-sale	1,199,699		—		1,198,717		982

Equity securities available-for-sale:
Common stocks:
Financial services	35,122		35,119		—		3
Information technology	30,542		30,542		—		—
Healthcare	24,707		24,707		—		—
Consumer staples	19,100		19,100		—		—
Consumer discretionary	22,321		22,321		—		—
Energy	19,071		19,071		—		—
Industrials	24,245		24,245		—		—
Other	18,384		18,384		—		—
Non-redeemable preferred stocks	20,347		11,074		7,273		2,000
Total equity securities available-for-sale	213,839		204,563		7,273		2,003

Short-term investments	39,670		39,670		—		—

Financial instruments not reported at fair value:
Liabilities:
Surplus notes	11,228		—		—		11,228

Reconciliation of assets measured at fair value on recurring basis using significant unobservable inputs

Presented in the table below is a reconciliation of the assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2017 and 2016. Any unrealized gains or losses on these securities are recognized in other comprehensive income. Any gains or losses from settlements, disposals or impairments of these securities are reported as realized investment gains or losses in net income.



Three months ended March 31, 2017	Fair value measurements using significant unobservable (Level 3) inputs
($ in thousands)	Fixed maturity securities available-for-sale, corporate			Equity securities available-for-sale, financial services		Equity securities available-for-sale, non-redeemable preferred stocks		Total
Beginning balance	$	982		$	3	$	2,000	$	2,985
Settlements	(50		)	—		—		(50		)
Unrealized gains (losses) included in other comprehensive income (loss)	(3		)	—		—		(3		)
Balance at March 31, 2017	$	929		$	3	$	2,000	$	2,932



Three months ended March 31, 2016	Fair value measurements using significant unobservable (Level 3) inputs
($ in thousands)	Fixed maturity securities available-for-sale, corporate			Equity securities available-for-sale, financial services		Equity securities available-for-sale, non-redeemable preferred stocks		Total
Beginning balance	$	1,329		$	3	$	—	$	1,332
Settlements	(61		)	—		—		(61		)
Unrealized gains (losses) included in other comprehensive income (loss)	3			—		—		3
Balance at March 31, 2016	$	1,271		$	3	$	—	$	1,274

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details