ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
EMC INSURANCE GROUP INC. |
(Exact name of registrant as specified in its charter) |
Iowa | 42-6234555 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
717 Mulberry Street, Des Moines, Iowa | 50309 | |
(Address of principal executive offices) | (Zip Code) |
(515) 345-2902 |
(Registrant’s telephone number, including area code) |
o | Large accelerated filer | ý | Accelerated filer | o | Non-accelerated filer |
o | Smaller reporting company | o | Emerging growth company | (Do not check if a smaller reporting company) |
Class | Outstanding at October 31, 2017 | |
Common stock, $1.00 par value | 21,399,578 |
PAGE | ||
PART I | FINANCIAL INFORMATION | |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II | OTHER INFORMATION | |
Item 2. | ||
Item 6. | ||
PART I. | FINANCIAL INFORMATION |
ITEM 1. | FINANCIAL STATEMENTS |
September 30, 2017 | December 31, 2016 | |||||||
($ in thousands, except share and per share amounts) | (Unaudited) | |||||||
ASSETS | ||||||||
Investments: | ||||||||
Fixed maturity securities available-for-sale, at fair value (amortized cost $1,233,772 and $1,189,525) | $ | 1,258,340 | $ | 1,199,699 | ||||
Equity securities available-for-sale, at fair value (cost $150,428 and $147,479) | 231,719 | 213,839 | ||||||
Other long-term investments | 14,471 | 12,506 | ||||||
Short-term investments | 25,255 | 39,670 | ||||||
Total investments | 1,529,785 | 1,465,714 | ||||||
Cash | 402 | 307 | ||||||
Reinsurance receivables due from affiliate | 26,079 | 21,326 | ||||||
Prepaid reinsurance premiums due from affiliate | 15,759 | 9,309 | ||||||
Deferred policy acquisition costs (affiliated $43,836 and $40,660) | 44,110 | 40,939 | ||||||
Amounts due from affiliate to settle inter-company transaction balances | 4,210 | — | ||||||
Prepaid pension and postretirement benefits due from affiliate | 11,407 | 12,314 | ||||||
Accrued investment income | 11,963 | 11,050 | ||||||
Amounts receivable under reverse repurchase agreements | 16,500 | 20,000 | ||||||
Accounts receivable | 813 | 2,076 | ||||||
Income taxes recoverable | 3,850 | — | ||||||
Goodwill | 942 | 942 | ||||||
Other assets (affiliated $4,818 and $4,632) | 5,018 | 4,836 | ||||||
Total assets | $ | 1,670,838 | $ | 1,588,813 |
September 30, 2017 | December 31, 2016 | |||||||
($ in thousands, except share and per share amounts) | (Unaudited) | |||||||
LIABILITIES | ||||||||
Losses and settlement expenses (affiliated $720,901 and $685,533) | $ | 726,461 | $ | 690,532 | ||||
Unearned premiums (affiliated $281,055 and $243,682) | 282,443 | 244,885 | ||||||
Other policyholders' funds (all affiliated) | 9,847 | 13,068 | ||||||
Surplus notes payable to affiliate | 25,000 | 25,000 | ||||||
Amounts due affiliate to settle inter-company transaction balances | — | 11,222 | ||||||
Pension benefits payable to affiliate | 3,807 | 4,097 | ||||||
Income taxes payable | — | 2,359 | ||||||
Deferred income taxes | 21,403 | 11,321 | ||||||
Other liabilities (affiliated $24,155 and $27,871) | 26,815 | 32,987 | ||||||
Total liabilities | 1,095,776 | 1,035,471 | ||||||
STOCKHOLDERS' EQUITY | ||||||||
Common stock, $1 par value, authorized 30,000,000 shares; issued and outstanding, 21,379,763 shares in 2017 and 21,222,535 shares in 2016 | 21,380 | 21,223 | ||||||
Additional paid-in capital | 122,640 | 119,054 | ||||||
Accumulated other comprehensive income | 64,326 | 46,081 | ||||||
Retained earnings | 366,716 | 366,984 | ||||||
Total stockholders' equity | 575,062 | 553,342 | ||||||
Total liabilities and stockholders' equity | $ | 1,670,838 | $ | 1,588,813 |
Three months ended September 30, | ||||||||
($ in thousands, except share and per share amounts) | 2017 | 2016 | ||||||
REVENUES | ||||||||
Premiums earned (affiliated $154,451 and $149,988) | $ | 155,190 | $ | 152,181 | ||||
Net investment income | 11,501 | 11,474 | ||||||
Net realized investment gains (losses), excluding impairment losses on securities available-for-sale | (239 | ) | (917 | ) | ||||
Total "other-than-temporary" impairment losses on securities available-for-sale | (355 | ) | (275 | ) | ||||
Portion of "other-than-temporary" impairment losses on fixed maturity securities available-for-sale reclassified from other comprehensive income (before taxes) | — | — | ||||||
Net impairment losses on securities available-for-sale | (355 | ) | (275 | ) | ||||
Net realized investment gains (losses) | (594 | ) | (1,192 | ) | ||||
Other income (loss) (affiliated $(30) and $39) | (179 | ) | (85 | ) | ||||
Total revenues | 165,918 | 162,378 | ||||||
LOSSES AND EXPENSES | ||||||||
Losses and settlement expenses (affiliated $116,908 and $106,795) | 119,576 | 108,173 | ||||||
Dividends to policyholders (all affiliated) | 46 | 3,944 | ||||||
Amortization of deferred policy acquisition costs (affiliated $26,177 and $26,256) | 26,430 | 26,845 | ||||||
Other underwriting expenses (affiliated $19,520 and $17,600) | 19,521 | 17,606 | ||||||
Interest expense (all affiliated) | 84 | 84 | ||||||
Other expenses (affiliated $442 and $481) | 701 | 679 | ||||||
Total losses and expenses | 166,358 | 157,331 | ||||||
Income (loss) before income tax expense (benefit) | (440 | ) | 5,047 | |||||
INCOME TAX EXPENSE (BENEFIT) | ||||||||
Current | (2,197 | ) | 1,448 | |||||
Deferred | 1,011 | (530 | ) | |||||
Total income tax expense (benefit) | (1,186 | ) | 918 | |||||
Net income | $ | 746 | $ | 4,129 | ||||
Net income per common share - basic and diluted | $ | 0.03 | $ | 0.20 | ||||
Dividend per common share | $ | 0.21 | $ | 0.19 | ||||
Average number of common shares outstanding - basic and diluted | 21,356,588 | 21,060,665 |
Nine months ended September 30, | ||||||||
($ in thousands, except share and per share amounts) | 2017 | 2016 | ||||||
REVENUES | ||||||||
Premiums earned (affiliated $446,522, and $436,804) | $ | 449,514 | $ | 441,364 | ||||
Net investment income | 33,679 | 35,883 | ||||||
Net realized investment gains (losses), excluding impairment losses on securities available-for-sale | 3,254 | 333 | ||||||
Total "other-than-temporary" impairment losses on securities available-for-sale | (1,088 | ) | (976 | ) | ||||
Portion of "other-than-temporary" impairment losses on fixed maturity securities available-for-sale reclassified from other comprehensive income (before taxes) | — | — | ||||||
Net impairment losses on securities available-for-sale | (1,088 | ) | (976 | ) | ||||
Net realized investment gains (losses) | 2,166 | (643 | ) | |||||
Other income (loss) (affiliated $(350) and $307) | (834 | ) | (19 | ) | ||||
Total revenues | 484,525 | 476,585 | ||||||
LOSSES AND EXPENSES | ||||||||
Losses and settlement expenses (affiliated $318,902 and $295,061) | 323,089 | 296,102 | ||||||
Dividends to policyholders (all affiliated) | 5,184 | 11,292 | ||||||
Amortization of deferred policy acquisition costs (affiliated $79,957 and $79,584) | 80,774 | 80,740 | ||||||
Other underwriting expenses (affiliated $57,803 and $52,120) | 57,732 | 52,134 | ||||||
Interest expense (all affiliated) | 253 | 253 | ||||||
Other expenses (affiliated $1,423 and $1,414) | 2,264 | 2,053 | ||||||
Total losses and expenses | 469,296 | 442,574 | ||||||
Income (loss) before income tax expense (benefit) | 15,229 | 34,011 | ||||||
INCOME TAX EXPENSE (BENEFIT) | ||||||||
Current | 1,918 | 11,440 | ||||||
Deferred | 257 | (2,340 | ) | |||||
Total income tax expense (benefit) | 2,175 | 9,100 | ||||||
Net income | $ | 13,054 | $ | 24,911 | ||||
Net income per common share - basic and diluted | $ | 0.61 | $ | 1.19 | ||||
Dividend per common share | $ | 0.63 | $ | 0.57 | ||||
Average number of common shares outstanding - basic and diluted | 21,295,882 | 20,964,236 |
Three months ended September 30, | ||||||||
($ in thousands) | 2017 | 2016 | ||||||
Net income | $ | 746 | $ | 4,129 | ||||
OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||
Unrealized holding gains (losses) on investment securities, net of deferred income tax expense (benefit) of $2,951 and $(1,226) | 5,481 | (2,275 | ) | |||||
Reclassification adjustment for net realized investment gains included in net income, net of income tax expense of $(141) and $(252) | (264 | ) | (466 | ) | ||||
Reclassification adjustment for amounts amortized into net periodic pension and postretirement benefit income, net of deferred income tax expense of $(146) and $(62): | ||||||||
Net actuarial loss | 240 | 722 | ||||||
Prior service credit | (511 | ) | (839 | ) | ||||
Total reclassification adjustment associated with affiliate's pension and postretirement benefit plans | (271 | ) | (117 | ) | ||||
Other comprehensive income (loss) | 4,946 | (2,858 | ) | |||||
Total comprehensive income | $ | 5,692 | $ | 1,271 |
Nine months ended September 30, | ||||||||
($ in thousands) | 2017 | 2016 | ||||||
Net income | $ | 13,054 | $ | 24,911 | ||||
OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||
Unrealized holding gains (losses) on investment securities, net of deferred income tax expense of $12,632 and $11,145 | 23,460 | 20,698 | ||||||
Reclassification adjustment for net realized investment gains included in net income, net of income tax expense of $(2,368) and $(1,613) | (4,399 | ) | (2,995 | ) | ||||
Reclassification adjustment for amounts amortized into net periodic pension and postretirement benefit income, net of deferred income tax expense of $(439) and $(327): | ||||||||
Net actuarial loss | 719 | 1,271 | ||||||
Prior service credit | (1,535 | ) | (1,878 | ) | ||||
Total reclassification adjustment associated with affiliate's pension and postretirement benefit plans | (816 | ) | (607 | ) | ||||
Other comprehensive income (loss) | 18,245 | 17,096 | ||||||
Total comprehensive income | $ | 31,299 | $ | 42,007 |
($ in thousands, except per share amounts) | Common stock | Additional paid-in capital | Accumulated other comprehensive income | Retained earnings | Total stockholders' equity | |||||||||||||||
Balance at December 31, 2016 | $ | 21,223 | $ | 119,054 | $ | 46,081 | $ | 366,984 | $ | 553,342 | ||||||||||
Issuance of common stock through stock plans | 225 | 5,328 | 5,553 | |||||||||||||||||
Repurchase of common stock | (68 | ) | (1,790 | ) | (1,858 | ) | ||||||||||||||
Increase resulting from stock-based compensation expense | 48 | 48 | ||||||||||||||||||
Other comprehensive income | 18,245 | 18,245 | ||||||||||||||||||
Net income | 13,054 | 13,054 | ||||||||||||||||||
Dividends paid to public stockholders ($0.63 per share) | (5,906 | ) | (5,906 | ) | ||||||||||||||||
Dividends paid to affiliate ($0.63 per share) | (7,416 | ) | (7,416 | ) | ||||||||||||||||
Balance at September 30, 2017 | $ | 21,380 | $ | 122,640 | $ | 64,326 | $ | 366,716 | $ | 575,062 |
($ in thousands, except per share amounts) | Common stock | Additional paid-in capital | Accumulated other comprehensive income | Retained earnings | Total stockholders' equity | |||||||||||||||
Balance at December 31, 2015 | $ | 20,781 | $ | 108,747 | $ | 58,433 | $ | 336,977 | $ | 524,938 | ||||||||||
Issuance of common stock through stock plans | 321 | 7,294 | 7,615 | |||||||||||||||||
Repurchase of common stock | (17 | ) | (366 | ) | (383 | ) | ||||||||||||||
Increase resulting from stock-based compensation expense | 49 | 49 | ||||||||||||||||||
Other comprehensive income | 17,096 | 17,096 | ||||||||||||||||||
Net income | 24,911 | 24,911 | ||||||||||||||||||
Dividends paid to public stockholders ($0.57 per share) | (5,107 | ) | (5,107 | ) | ||||||||||||||||
Dividends paid to affiliate ($0.57 per share) | (6,710 | ) | (6,710 | ) | ||||||||||||||||
Balance at September 30, 2016 | $ | 21,085 | $ | 115,724 | $ | 75,529 | $ | 350,071 | $ | 562,409 |
Nine months ended September 30, | ||||||||
($ in thousands) | 2017 | 2016 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 13,054 | $ | 24,911 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Losses and settlement expenses (affiliated $35,368 and $24,292) | 35,929 | 21,791 | ||||||
Unearned premiums (affiliated $37,373 and $32,902) | 37,558 | 33,465 | ||||||
Other policyholders' funds due to affiliate | (3,221 | ) | 3,088 | |||||
Amounts due to/from affiliate to settle inter-company transaction balances | (15,432 | ) | (2,383 | ) | ||||
Net pension and postretirement benefits due from affiliate | (638 | ) | (317 | ) | ||||
Reinsurance receivables due from affiliate | (4,753 | ) | 1,646 | |||||
Prepaid reinsurance premiums due from affiliate | (6,450 | ) | (5,025 | ) | ||||
Commissions payable (affiliated $(2,309) and $(3,682)) | (2,318 | ) | (3,743 | ) | ||||
Deferred policy acquisition costs (affiliated $(3,176) and $(3,785)) | (3,171 | ) | (3,900 | ) | ||||
Accrued investment income | (913 | ) | (1,354 | ) | ||||
Current income tax | (6,209 | ) | 1,891 | |||||
Deferred income tax | 257 | (2,340 | ) | |||||
Net realized investment gains | (2,166 | ) | 643 | |||||
Other, net (affiliated $(1,545) and $(451)) | 8,596 | 6,769 | ||||||
Total adjustments to reconcile net income to net cash provided by operating activities | 37,069 | 50,231 | ||||||
Net cash provided by operating activities | 50,123 | 75,142 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchases of fixed maturity securities available-for-sale | (174,579 | ) | (338,659 | ) | ||||
Disposals of fixed maturity securities available-for-sale | 121,463 | 282,787 | ||||||
Purchases of equity securities available-for-sale | (43,868 | ) | (45,632 | ) | ||||
Disposals of equity securities available-for-sale | 49,595 | 40,525 | ||||||
Purchases of other long-term investments | (12,231 | ) | (5,920 | ) | ||||
Disposals of other long-term investments | 1,304 | 480 | ||||||
Net (purchases) disposals of short-term investments | 14,415 | (4,012 | ) | |||||
Net receipts under reverse repurchase agreements | 3,500 | — | ||||||
Net cash used in investing activities | (40,401 | ) | (70,431 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Issuance of common stock through affiliate’s stock plans | 5,553 | 7,615 | ||||||
Repurchase of common stock | (1,858 | ) | (383 | ) | ||||
Dividends paid to stockholders (affiliated $(7,416) and $(6,710)) | (13,322 | ) | (11,817 | ) | ||||
Net cash used in financing activities | (9,627 | ) | (4,585 | ) | ||||
NET INCREASE IN CASH | 95 | 126 | ||||||
Cash at the beginning of the year | 307 | 224 | ||||||
Cash at the end of the quarter | $ | 402 | $ | 350 |
1. | BASIS OF PRESENTATION |
2. | TRANSACTIONS WITH AFFILIATES |
3. | REINSURANCE |
Three months ended September 30, 2017 | ||||||||||||
($ in thousands) | Property and casualty insurance | Reinsurance | Total | |||||||||
Premiums written | ||||||||||||
Direct | $ | 122,665 | $ | — | $ | 122,665 | ||||||
Assumed from nonaffiliates | 1,333 | 38,955 | 40,288 | |||||||||
Assumed from affiliates | 153,900 | — | 153,900 | |||||||||
Ceded to nonaffiliates | (10,532 | ) | (1,220 | ) | (11,752 | ) | ||||||
Ceded to affiliates | (123,355 | ) | (1,212 | ) | (124,567 | ) | ||||||
Net premiums written | $ | 144,011 | $ | 36,523 | $ | 180,534 | ||||||
Premiums earned | ||||||||||||
Direct | $ | 96,547 | $ | — | $ | 96,547 | ||||||
Assumed from nonaffiliates | 1,225 | 38,463 | 39,688 | |||||||||
Assumed from affiliates | 128,325 | — | 128,325 | |||||||||
Ceded to nonaffiliates | (8,388 | ) | (2,533 | ) | (10,921 | ) | ||||||
Ceded to affiliates | (97,237 | ) | (1,212 | ) | (98,449 | ) | ||||||
Net premiums earned | $ | 120,472 | $ | 34,718 | $ | 155,190 | ||||||
Losses and settlement expenses incurred | ||||||||||||
Direct | $ | 62,745 | $ | — | $ | 62,745 | ||||||
Assumed from nonaffiliates | 961 | 57,268 | 58,229 | |||||||||
Assumed from affiliates | 81,047 | 277 | 81,324 | |||||||||
Ceded to nonaffiliates | (4,435 | ) | (3,039 | ) | (7,474 | ) | ||||||
Ceded to affiliates | (66,279 | ) | (8,969 | ) | (75,248 | ) | ||||||
Net losses and settlement expenses incurred | $ | 74,039 | $ | 45,537 | $ | 119,576 |
Three months ended September 30, 2016 | ||||||||||||
($ in thousands) | Property and casualty insurance | Reinsurance | Total | |||||||||
Premiums written | ||||||||||||
Direct | $ | 119,849 | $ | — | $ | 119,849 | ||||||
Assumed from nonaffiliates | 1,221 | 39,592 | 40,813 | |||||||||
Assumed from affiliates | 146,289 | — | 146,289 | |||||||||
Ceded to nonaffiliates | (7,841 | ) | (983 | ) | (8,824 | ) | ||||||
Ceded to affiliates | (120,614 | ) | (1,270 | ) | (121,884 | ) | ||||||
Net premiums written | $ | 138,904 | $ | 37,339 | $ | 176,243 | ||||||
Premiums earned | ||||||||||||
Direct | $ | 96,730 | $ | — | $ | 96,730 | ||||||
Assumed from nonaffiliates | 1,170 | 39,394 | 40,564 | |||||||||
Assumed from affiliates | 122,058 | — | 122,058 | |||||||||
Ceded to nonaffiliates | (6,091 | ) | (2,315 | ) | (8,406 | ) | ||||||
Ceded to affiliates | (97,495 | ) | (1,270 | ) | (98,765 | ) | ||||||
Net premiums earned | $ | 116,372 | $ | 35,809 | $ | 152,181 | ||||||
Losses and settlement expenses incurred | ||||||||||||
Direct | $ | 59,831 | $ | — | $ | 59,831 | ||||||
Assumed from nonaffiliates | 793 | 27,206 | 27,999 | |||||||||
Assumed from affiliates | 85,196 | 280 | 85,476 | |||||||||
Ceded to nonaffiliates | (895 | ) | (944 | ) | (1,839 | ) | ||||||
Ceded to affiliates | (63,282 | ) | (12 | ) | (63,294 | ) | ||||||
Net losses and settlement expenses incurred | $ | 81,643 | $ | 26,530 | $ | 108,173 |
Nine months ended September 30, 2017 | ||||||||||||
($ in thousands) | Property and casualty insurance | Reinsurance | Total | |||||||||
Premiums written | ||||||||||||
Direct | $ | 312,809 | $ | — | $ | 312,809 | ||||||
Assumed from nonaffiliates | 3,542 | 108,056 | 111,598 | |||||||||
Assumed from affiliates | 415,426 | — | 415,426 | |||||||||
Ceded to nonaffiliates | (27,109 | ) | (9,074 | ) | (36,183 | ) | ||||||
Ceded to affiliates | (319,459 | ) | (3,637 | ) | (323,096 | ) | ||||||
Net premiums written | $ | 385,209 | $ | 95,345 | $ | 480,554 | ||||||
Premiums earned | ||||||||||||
Direct | $ | 287,821 | $ | — | $ | 287,821 | ||||||
Assumed from nonaffiliates | 3,370 | 110,563 | 113,933 | |||||||||
Assumed from affiliates | 375,601 | — | 375,601 | |||||||||
Ceded to nonaffiliates | (22,014 | ) | (7,719 | ) | (29,733 | ) | ||||||
Ceded to affiliates | (294,471 | ) | (3,637 | ) | (298,108 | ) | ||||||
Net premiums earned | $ | 350,307 | $ | 99,207 | $ | 449,514 | ||||||
Losses and settlement expenses incurred | ||||||||||||
Direct | $ | 198,317 | $ | — | $ | 198,317 | ||||||
Assumed from nonaffiliates | 2,406 | 104,685 | 107,091 | |||||||||
Assumed from affiliates | 258,169 | 942 | 259,111 | |||||||||
Ceded to nonaffiliates | (9,400 | ) | (4,626 | ) | (14,026 | ) | ||||||
Ceded to affiliates | (218,425 | ) | (8,979 | ) | (227,404 | ) | ||||||
Net losses and settlement expenses incurred | $ | 231,067 | $ | 92,022 | $ | 323,089 |
Nine months ended September 30, 2016 | ||||||||||||
($ in thousands) | Property and casualty insurance | Reinsurance | Total | |||||||||
Premiums written | ||||||||||||
Direct | $ | 311,542 | $ | — | $ | 311,542 | ||||||
Assumed from nonaffiliates | 3,430 | 111,378 | 114,808 | |||||||||
Assumed from affiliates | 393,418 | — | 393,418 | |||||||||
Ceded to nonaffiliates | (19,069 | ) | (8,814 | ) | (27,883 | ) | ||||||
Ceded to affiliates | (318,617 | ) | (3,810 | ) | (322,427 | ) | ||||||
Net premiums written | $ | 370,704 | $ | 98,754 | $ | 469,458 | ||||||
Premiums earned | ||||||||||||
Direct | $ | 284,281 | $ | — | $ | 284,281 | ||||||
Assumed from nonaffiliates | 3,332 | 111,790 | 115,122 | |||||||||
Assumed from affiliates | 359,985 | — | 359,985 | |||||||||
Ceded to nonaffiliates | (17,653 | ) | (5,205 | ) | (22,858 | ) | ||||||
Ceded to affiliates | (291,356 | ) | (3,810 | ) | (295,166 | ) | ||||||
Net premiums earned | $ | 338,589 | $ | 102,775 | $ | 441,364 | ||||||
Losses and settlement expenses incurred | ||||||||||||
Direct | $ | 167,827 | $ | — | $ | 167,827 | ||||||
Assumed from nonaffiliates | 2,298 | 71,787 | 74,085 | |||||||||
Assumed from affiliates | 232,472 | 1,033 | 233,505 | |||||||||
Ceded to nonaffiliates | (4,498 | ) | (2,336 | ) | (6,834 | ) | ||||||
Ceded to affiliates | (172,892 | ) | 411 | (172,481 | ) | |||||||
Net losses and settlement expenses incurred | $ | 225,207 | $ | 70,895 | $ | 296,102 |
• | “Direct” represents business produced by the property and casualty insurance subsidiaries. |
• | “Assumed from nonaffiliates” for the property and casualty insurance subsidiaries represents their aggregate 30 percent pool participation percentage of involuntary business assumed by the pool participants pursuant to state law. For the reinsurance subsidiary, this line represents the reinsurance business assumed through the quota share agreement (including “fronting” activities initiated by Employers Mutual) and the business assumed outside the quota share agreement. |
• | “Assumed from affiliates” for the property and casualty insurance subsidiaries represents their aggregate 30 percent pool participation percentage of all the pool members’ direct business. The amounts reported under the caption “Losses and settlement expenses incurred” also include claim-related services provided by Employers Mutual that are allocated to the property and casualty insurance subsidiaries and the reinsurance subsidiary. |
• | “Ceded to nonaffiliates” for the property and casualty insurance subsidiaries represents their aggregate 30 percent pool participation percentage of 1) the amounts ceded to nonaffiliated reinsurance companies in accordance with the terms of the reinsurance agreements providing protection to the pool and each of its participants, and 2) the amounts ceded on a mandatory basis to state organizations in connection with various programs. For the reinsurance subsidiary, this line includes 1) reinsurance business that is ceded to other insurance companies in connection with “fronting” activities initiated by Employers Mutual, and 2) amounts ceded to purchase additional reinsurance protection in peak exposure territories from external parties. |
• | “Ceded to affiliates” for the property and casualty insurance subsidiaries represents the cession of their direct business to Employers Mutual under the terms of the pooling agreement and amounts ceded to Employers Mutual under the terms of the inter-company reinsurance program. For the reinsurance subsidiary this line represents amounts ceded to Employers Mutual under the terms of the inter-company reinsurance program. |
4. | LIABILITY FOR LOSSES AND SETTLEMENT EXPENSES |
Nine months ended September 30, | ||||||||
($ in thousands) | 2017 | 2016 | ||||||
Gross reserves at beginning of year | $ | 690,532 | $ | 678,774 | ||||
Re-valuation due to foreign currency exchange rates | (1,913 | ) | (2,475 | ) | ||||
Less ceded reserves at beginning of year | 20,664 | 23,477 | ||||||
Net reserves at beginning of year | 671,781 | 657,772 | ||||||
Incurred losses and settlement expenses related to: | ||||||||
Current year | 340,706 | 325,211 | ||||||
Prior years | (17,617 | ) | (29,109 | ) | ||||
Total incurred losses and settlement expenses | 323,089 | 296,102 | ||||||
Paid losses and settlement expenses related to: | ||||||||
Current year | 120,053 | 112,283 | ||||||
Prior years | 173,986 | 161,888 | ||||||
Total paid losses and settlement expenses | 294,039 | 274,171 | ||||||
Net reserves at end of period | 700,831 | 679,703 | ||||||
Plus ceded reserves at end of period | 25,348 | 21,983 | ||||||
Re-valuation due to foreign currency exchange rates | 282 | (1,121 | ) | |||||
Gross reserves at end of period | $ | 726,461 | $ | 700,565 |
5. | SEGMENT INFORMATION |
Three months ended September 30, 2017 | Property and casualty insurance | Reinsurance | Parent company | Consolidated | ||||||||||||
($ in thousands) | ||||||||||||||||
Premiums earned | $ | 120,472 | $ | 34,718 | $ | — | $ | 155,190 | ||||||||
Underwriting profit (loss): | ||||||||||||||||
SAP underwriting profit (loss) | 1,927 | (18,364 | ) | — | (16,437 | ) | ||||||||||
GAAP adjustments | 5,860 | 194 | — | 6,054 | ||||||||||||
GAAP underwriting profit (loss) | 7,787 | (18,170 | ) | — | (10,383 | ) | ||||||||||
Net investment income | 8,252 | 3,237 | 12 | 11,501 | ||||||||||||
Net realized investment gains (losses) | (108 | ) | (486 | ) | — | (594 | ) | |||||||||
Other income (loss) | 179 | (358 | ) | — | (179 | ) | ||||||||||
Interest expense | 84 | — | — | 84 | ||||||||||||
Other expenses | 170 | — | 531 | 701 | ||||||||||||
Income (loss) before income tax expense (benefit) | $ | 15,856 | $ | (15,777 | ) | $ | (519 | ) | $ | (440 | ) |
Three months ended September 30, 2016 | Property and casualty insurance | Reinsurance | Parent company | Consolidated | ||||||||||||
($ in thousands) | ||||||||||||||||
Premiums earned | $ | 116,372 | $ | 35,809 | $ | — | $ | 152,181 | ||||||||
Underwriting profit (loss): | ||||||||||||||||
SAP underwriting profit (loss) | (8,081 | ) | 689 | — | (7,392 | ) | ||||||||||
GAAP adjustments | 2,970 | 35 | — | 3,005 | ||||||||||||
GAAP underwriting profit (loss) | (5,111 | ) | 724 | — | (4,387 | ) | ||||||||||
Net investment income | 8,185 | 3,285 | 4 | 11,474 | ||||||||||||
Net realized investment gains (losses) | (799 | ) | (393 | ) | — | (1,192 | ) | |||||||||
Other income (loss) | 172 | (257 | ) | — | (85 | ) | ||||||||||
Interest expense | 84 | — | — | 84 | ||||||||||||
Other expenses | 190 | — | 489 | 679 | ||||||||||||
Income (loss) before income tax expense (benefit) | $ | 2,173 | $ | 3,359 | $ | (485 | ) | $ | 5,047 |
Nine months ended September 30, 2017 | Property and casualty insurance | Reinsurance | Parent company | Consolidated | ||||||||||||
($ in thousands) | ||||||||||||||||
Premiums earned | $ | 350,307 | $ | 99,207 | $ | — | $ | 449,514 | ||||||||
Underwriting profit (loss): | ||||||||||||||||
SAP underwriting profit (loss) | (9,559 | ) | (14,899 | ) | — | (24,458 | ) | |||||||||
GAAP adjustments | 8,135 | (942 | ) | — | 7,193 | |||||||||||
GAAP underwriting profit (loss) | (1,424 | ) | (15,841 | ) | — | (17,265 | ) | |||||||||
Net investment income | 24,225 | 9,421 | 33 | 33,679 | ||||||||||||
Net realized investment gains (losses) | 3,033 | (867 | ) | — | 2,166 | |||||||||||
Other income (loss) | 623 | (1,457 | ) | — | (834 | ) | ||||||||||
Interest expense | 253 | — | — | 253 | ||||||||||||
Other expenses | 580 | — | 1,684 | 2,264 | ||||||||||||
Income (loss) before income tax expense (benefit) | $ | 25,624 | $ | (8,744 | ) | $ | (1,651 | ) | $ | 15,229 | ||||||
Assets | $ | 1,185,269 | $ | 481,951 | $ | 575,365 | $ | 2,242,585 | ||||||||
Eliminations | — | — | (568,814 | ) | (568,814 | ) | ||||||||||
Reclassifications | (2,772 | ) | — | (161 | ) | (2,933 | ) | |||||||||
Total assets | $ | 1,182,497 | $ | 481,951 | $ | 6,390 | $ | 1,670,838 |
Nine months ended September 30, 2016 | Property and casualty insurance | Reinsurance | Parent company | Consolidated | ||||||||||||
($ in thousands) | ||||||||||||||||
Premiums earned | $ | 338,589 | $ | 102,775 | $ | — | $ | 441,364 | ||||||||
Underwriting profit (loss): | ||||||||||||||||
SAP underwriting profit (loss) | (8,904 | ) | 7,777 | — | (1,127 | ) | ||||||||||
GAAP adjustments | 3,026 | (803 | ) | — | 2,223 | |||||||||||
GAAP underwriting profit (loss) | (5,878 | ) | 6,974 | — | 1,096 | |||||||||||
Net investment income | 25,524 | 10,350 | 9 | 35,883 | ||||||||||||
Net realized investment gains (losses) | (627 | ) | (16 | ) | — | (643 | ) | |||||||||
Other income (loss) | 466 | (485 | ) | — | (19 | ) | ||||||||||
Interest expense | 253 | — | — | 253 | ||||||||||||
Other expenses | 558 | — | 1,495 | 2,053 | ||||||||||||
Income (loss) before income tax expense (benefit) | $ | 18,674 | $ | 16,823 | $ | (1,486 | ) | $ | 34,011 | |||||||
Year ended December 31, 2016 | ||||||||||||||||
Assets | $ | 1,122,037 | $ | 455,493 | $ | 554,164 | $ | 2,131,694 | ||||||||
Eliminations | — | — | (540,249 | ) | (540,249 | ) | ||||||||||
Reclassifications | — | (1,932 | ) | (700 | ) | (2,632 | ) | |||||||||
Total assets | $ | 1,122,037 | $ | 453,561 | $ | 13,215 | $ | 1,588,813 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
($ in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Property and casualty insurance segment | ||||||||||||||||
Commercial lines: | ||||||||||||||||
Automobile | $ | 30,229 | $ | 28,113 | $ | 87,275 | $ | 82,449 | ||||||||
Property | 27,980 | 27,471 | 79,551 | 77,292 | ||||||||||||
Workers' compensation | 25,373 | 24,536 | 75,419 | 71,272 | ||||||||||||
Other liability | 24,996 | 24,277 | 73,378 | 72,086 | ||||||||||||
Other | 2,203 | 2,102 | 6,509 | 6,246 | ||||||||||||
Total commercial lines | 110,781 | 106,499 | 322,132 | 309,345 | ||||||||||||
Personal lines | 9,691 | 9,873 | 28,175 | 29,244 | ||||||||||||
Total property and casualty insurance | $ | 120,472 | $ | 116,372 | $ | 350,307 | $ | 338,589 | ||||||||
Reinsurance segment | ||||||||||||||||
Pro rata reinsurance | $ | 10,730 | $ | 15,066 | $ | 33,181 | $ | 44,175 | ||||||||
Excess of loss reinsurance | 23,988 | 20,743 | 66,026 | 58,600 | ||||||||||||
Total reinsurance | $ | 34,718 | $ | 35,809 | $ | 99,207 | $ | 102,775 | ||||||||
Consolidated | $ | 155,190 | $ | 152,181 | $ | 449,514 | $ | 441,364 |
6. | INCOME TAXES |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
($ in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Computed "expected" income tax expense (benefit) | $ | (154 | ) | $ | 1,767 | $ | 5,330 | $ | 11,904 | |||||||
Increases (decreases) in tax resulting from: | ||||||||||||||||
Tax-exempt interest income | (656 | ) | (709 | ) | (2,122 | ) | (2,101 | ) | ||||||||
Dividends received deduction | (294 | ) | (336 | ) | (948 | ) | (1,110 | ) | ||||||||
Proration of tax-exempt interest and dividends received deduction | 142 | 157 | 460 | 482 | ||||||||||||
Other, net | (224 | ) | 39 | (545 | ) | (75 | ) | |||||||||
Total income tax expense (benefit) | $ | (1,186 | ) | $ | 918 | $ | 2,175 | $ | 9,100 |
7. | EMPLOYEE RETIREMENT PLANS |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
($ in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Pension plans: | ||||||||||||||||
Service cost | $ | 3,783 | $ | 3,639 | $ | 11,351 | $ | 10,824 | ||||||||
Interest cost | 2,798 | 2,551 | 8,393 | 7,620 | ||||||||||||
Expected return on plan assets | (5,192 | ) | (4,841 | ) | (15,574 | ) | (14,521 | ) | ||||||||
Amortization of net actuarial loss | 911 | 1,111 | 2,732 | 3,233 | ||||||||||||
Amortization of prior service cost | 5 | 9 | 15 | 24 | ||||||||||||
Net periodic pension benefit cost | $ | 2,305 | $ | 2,469 | $ | 6,917 | $ | 7,180 | ||||||||
Postretirement benefit plans: | ||||||||||||||||
Service cost | $ | 341 | $ | 319 | $ | 1,022 | $ | 955 | ||||||||
Interest cost | 570 | 553 | 1,710 | 1,661 | ||||||||||||
Expected return on plan assets | (1,077 | ) | (1,056 | ) | (3,233 | ) | (3,168 | ) | ||||||||
Amortization of net actuarial loss | 342 | 374 | 1,028 | 1,121 | ||||||||||||
Amortization of prior service credit | (2,788 | ) | (2,835 | ) | (8,365 | ) | (8,504 | ) | ||||||||
Net periodic postretirement benefit income | $ | (2,612 | ) | $ | (2,645 | ) | $ | (7,838 | ) | $ | (7,935 | ) |
8. | STOCK-BASED COMPENSATION |
9. | DISCLOSURES ABOUT THE FAIR VALUES OF FINANCIAL INSTRUMENTS |
September 30, 2017 | Carrying amounts | Estimated fair values | ||||||
($ in thousands) | ||||||||
Assets: | ||||||||
Fixed maturity securities available-for-sale: | ||||||||
U.S. treasury | $ | 8,164 | $ | 8,164 | ||||
U.S. government-sponsored agencies | 255,619 | 255,619 | ||||||
Obligations of states and political subdivisions | 336,638 | 336,638 | ||||||
Commercial mortgage-backed | 65,810 | 65,810 | ||||||
Residential mortgage-backed | 103,666 | 103,666 | ||||||
Other asset-backed | 24,967 | 24,967 | ||||||
Corporate | 463,476 | 463,476 | ||||||
Total fixed maturity securities available-for-sale | 1,258,340 | 1,258,340 | ||||||
Equity securities available-for-sale: | ||||||||
Common stocks: | ||||||||
Financial services | 40,738 | 40,738 | ||||||
Information technology | 36,684 | 36,684 | ||||||
Healthcare | 30,730 | 30,730 | ||||||
Consumer staples | 15,044 | 15,044 | ||||||
Consumer discretionary | 21,605 | 21,605 | ||||||
Energy | 17,196 | 17,196 | ||||||
Industrials | 28,315 | 28,315 | ||||||
Other | 16,787 | 16,787 | ||||||
Non-redeemable preferred stocks | 24,620 | 24,620 | ||||||
Total equity securities available-for-sale | 231,719 | 231,719 | ||||||
Short-term investments | 25,255 | 25,255 | ||||||
Liabilities: | ||||||||
Surplus notes | 25,000 | 11,512 |
December 31, 2016 | Carrying amounts | Estimated fair values | ||||||
($ in thousands) | ||||||||
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 |
Level 1 - | Unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. | |
Level 2 - | Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data. | |
Level 3 - | Prices or valuation techniques that require significant unobservable inputs because observable inputs are not available. The unobservable inputs may reflect the Company’s own judgments about the assumptions that market participants would use. |
• | U.S. Treasury securities (including bonds, notes, and bills) are priced according to a number of live data sources, including active market makers and inter-dealer brokers. Prices from these sources are reviewed based on the sources’ historical accuracy for individual issues and maturity ranges. |
• | U.S. government-sponsored agencies and corporate securities (including fixed-rate corporate bonds and medium-term notes) are priced by determining a bullet (non-call) spread scale for each issuer for maturities going out to forty years. These spreads represent credit risk and are obtained from the new issue market, secondary trading, and dealer quotes. An option adjusted spread model is incorporated to adjust spreads of issues that have early redemption features. The final spread is then added to the U.S. Treasury curve. |
• | Obligations of states and political subdivisions are priced by tracking and analyzing actively quoted issues and reported trades, material event notices and benchmark yields. Municipal bonds with similar characteristics are grouped together into market sectors, and internal yield curves are constructed daily for these sectors. Individual bond evaluations are extrapolated from these sectors, with the ability to make individual spread adjustments for attributes such as discounts, premiums, alternative minimum tax, and/or whether or not the bond is callable. |
• | Mortgage-backed and asset-backed securities are first reviewed for the appropriate pricing speed (if prepayable), spread, yield and volatility. The securities are priced with models using spreads and other information solicited from market buy- and sell-side sources, including primary and secondary dealers, portfolio managers, and research analysts. To determine a tranche’s price, first the benchmark yield is determined and adjusted for collateral performance, tranche level attributes and market conditions. Then the cash flow for each tranche is generated (using consensus prepayment speed assumptions including, as appropriate, a prepayment projection based on historical statistics of the underlying collateral). The tranche-level yield is used to discount the cash flows and generate the price. Depending on the characteristics of the tranche, a volatility-driven, multi-dimensional single cash flow stream model or an option-adjusted spread model may be used. When cash flows or other security structure or market information is not available, broker quotes may be used. |
September 30, 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 | $ | 8,164 | $ | — | $ | 8,164 | $ | — | ||||||||
U.S. government-sponsored agencies | 255,619 | — | 255,619 | — | ||||||||||||
Obligations of states and political subdivisions | 336,638 | — | 336,638 | — | ||||||||||||
Commercial mortgage-backed | 65,810 | — | 65,810 | — | ||||||||||||
Residential mortgage-backed | 103,666 | — | 103,666 | — | ||||||||||||
Other asset-backed | 24,967 | — | 24,967 | — | ||||||||||||
Corporate | 463,476 | — | 462,762 | 714 | ||||||||||||
Total fixed maturity securities available-for-sale | 1,258,340 | — | 1,257,626 | 714 | ||||||||||||
Equity securities available-for-sale: | ||||||||||||||||
Common stocks: | ||||||||||||||||
Financial services | 40,738 | 40,735 | — | 3 | ||||||||||||
Information technology | 36,684 | 36,684 | — | — | ||||||||||||
Healthcare | 30,730 | 30,730 | — | — | ||||||||||||
Consumer staples | 15,044 | 15,044 | — | — | ||||||||||||
Consumer discretionary | 21,605 | 21,605 | — | — | ||||||||||||
Energy | 17,196 | 17,196 | — | — | ||||||||||||
Industrials | 28,315 | 28,315 | — | — | ||||||||||||
Other | 16,787 | 16,787 | — | — | ||||||||||||
Non-redeemable preferred stocks | 24,620 | 9,822 | 12,798 | 2,000 | ||||||||||||
Total equity securities available-for-sale | 231,719 | 216,918 | 12,798 | 2,003 | ||||||||||||
Short-term investments | 25,255 | 25,255 | — | — | ||||||||||||
Financial instruments not reported at fair value: | ||||||||||||||||
Liabilities: | ||||||||||||||||
Surplus notes | 11,512 | — | — | 11,512 |
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 |
($ in thousands) | Fair value measurements using significant unobservable (Level 3) inputs | |||||||||||||||
Three months ended September 30, 2017 | 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 | $ | 840 | $ | 3 | $ | 2,000 | $ | 2,843 | ||||||||
Settlements | (125 | ) | — | — | (125 | ) | ||||||||||
Unrealized gains (losses) included in other comprehensive income (loss) | (1 | ) | — | — | (1 | ) | ||||||||||
Balance at September 30, 2017 | $ | 714 | $ | 3 | $ | 2,000 | $ | 2,717 | ||||||||
Nine months ended September 30, 2017 | ||||||||||||||||
Beginning balance | $ | 982 | $ | 3 | $ | 2,000 | $ | 2,985 | ||||||||
Settlements | (265 | ) | — | — | (265 | ) | ||||||||||
Unrealized gains (losses) included in other comprehensive income (loss) | (3 | ) | — | — | (3 | ) | ||||||||||
Balance at September 30, 2017 | $ | 714 | $ | 3 | $ | 2,000 | $ | 2,717 |
($ in thousands) | Fair value measurements using significant unobservable (Level 3) inputs | |||||||||||||||
Three months ended September 30, 2016 | 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 | $ | 1,191 | $ | 3 | $ | — | $ | 1,194 | ||||||||
Settlements | (117 | ) | — | — | (117 | ) | ||||||||||
Unrealized gains (losses) included in other comprehensive income (loss) | (4 | ) | — | — | (4 | ) | ||||||||||
Balance at September 30, 2016 | $ | 1,070 | $ | 3 | $ | — | $ | 1,073 | ||||||||
Nine months ended September 30, 2016 | ||||||||||||||||
Beginning balance | $ | 1,329 | $ | 3 | $ | — | $ | 1,332 | ||||||||
Settlements | (262 | ) | — | — | (262 | ) | ||||||||||
Unrealized gains (losses) included in other comprehensive income (loss) | 3 | — | — | 3 | ||||||||||||
Balance at September 30, 2016 | $ | 1,070 | $ | 3 | $ | — | $ | 1,073 |
10. | INVESTMENTS |
September 30, 2017 | Amortized cost | Gross unrealized gains | Gross unrealized losses | Estimated fair values | ||||||||||||
($ in thousands) | ||||||||||||||||
Securities available-for-sale: | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. treasury | $ | 8,109 | $ | 57 | $ | 2 | $ | 8,164 | ||||||||
U.S. government-sponsored agencies | 262,050 | 237 | 6,668 | 255,619 | ||||||||||||
Obligations of states and political subdivisions | 318,016 | 18,954 | 332 | 336,638 | ||||||||||||
Commercial mortgage-backed | 66,138 | 583 | 911 | 65,810 | ||||||||||||
Residential mortgage-backed | 104,620 | 2,593 | 3,547 | 103,666 | ||||||||||||
Other asset-backed | 24,501 | 756 | 290 | 24,967 | ||||||||||||
Corporate | 450,338 | 14,001 | 863 | 463,476 | ||||||||||||
Total fixed maturity securities | 1,233,772 | 37,181 | 12,613 | 1,258,340 | ||||||||||||
Equity securities: | ||||||||||||||||
Common stocks: | ||||||||||||||||
Financial services | 28,130 | 12,679 | 71 | 40,738 | ||||||||||||
Information technology | 19,772 | 16,912 | — | 36,684 | ||||||||||||
Healthcare | 18,417 | 12,457 | 144 | 30,730 | ||||||||||||
Consumer staples | 10,258 | 4,794 | 8 | 15,044 | ||||||||||||
Consumer discretionary | 12,224 | 9,464 | 83 | 21,605 | ||||||||||||
Energy | 13,273 | 4,692 | 769 | 17,196 | ||||||||||||
Industrials | 13,209 | 15,138 | 32 | 28,315 | ||||||||||||
Other | 12,114 | 4,704 | 31 | 16,787 | ||||||||||||
Non-redeemable preferred stocks | 23,031 | 1,591 | 2 | 24,620 | ||||||||||||
Total equity securities | 150,428 | 82,431 | 1,140 | 231,719 | ||||||||||||
Total securities available-for-sale | $ | 1,384,200 | $ | 119,612 | $ | 13,753 | $ | 1,490,059 |
December 31, 2016 | Amortized cost | Gross unrealized gains | Gross unrealized losses | Estimated fair values | ||||||||||||
($ in thousands) | ||||||||||||||||
Securities available-for-sale: | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. treasury | $ | 7,841 | $ | — | $ | 11 | $ | 7,830 | ||||||||
U.S. government-sponsored agencies | 249,495 | 311 | 10,609 | 239,197 | ||||||||||||
Obligations of states and political subdivisions | 319,663 | 17,034 | 940 | 335,757 | ||||||||||||
Commercial mortgage-backed | 37,964 | 741 | 1,133 | 37,572 | ||||||||||||
Residential mortgage-backed | 102,307 | 1,435 | 7,308 | 96,434 | ||||||||||||
Other asset-backed | 26,592 | 732 | 931 | 26,393 | ||||||||||||
Corporate | 445,663 | 12,232 | 1,379 | 456,516 | ||||||||||||
Total fixed maturity securities | 1,189,525 | 32,485 | 22,311 | 1,199,699 | ||||||||||||
Equity securities: | ||||||||||||||||
Common stocks: | ||||||||||||||||
Financial services | 22,922 | 12,410 | 210 | 35,122 | ||||||||||||
Information technology | 19,832 | 10,739 | 29 | 30,542 | ||||||||||||
Healthcare | 16,092 | 8,700 | 85 | 24,707 | ||||||||||||
Consumer staples | 13,438 | 5,787 | 125 | 19,100 | ||||||||||||
Consumer discretionary | 14,812 | 7,672 | 163 | 22,321 | ||||||||||||
Energy | 14,276 | 4,873 | 78 | 19,071 | ||||||||||||
Industrials | 13,005 | 11,258 | 18 | 24,245 | ||||||||||||
Other | 13,071 | 5,345 | 32 | 18,384 | ||||||||||||
Non-redeemable preferred stocks | 20,031 | 483 | 167 | 20,347 | ||||||||||||
Total equity securities | 147,479 | 67,267 | 907 | 213,839 | ||||||||||||
Total securities available-for-sale | $ | 1,337,004 | $ | 99,752 | $ | 23,218 | $ | 1,413,538 |
September 30, 2017 | Less than twelve months | Twelve months or longer | Total | |||||||||||||||||||||
($ in thousands) | Fair values | Unrealized losses | Fair values | Unrealized losses | Fair values | Unrealized losses | ||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||
U.S. treasury | $ | 248 | $ | 2 | $ | — | $ | — | $ | 248 | $ | 2 | ||||||||||||
U.S. government-sponsored agencies | 104,235 | 1,695 | 125,982 | 4,973 | 230,217 | 6,668 | ||||||||||||||||||
Obligations of states and political subdivisions | — | — | 14,372 | 332 | 14,372 | 332 | ||||||||||||||||||
Commercial mortgage-backed | 26,070 | 133 | 15,653 | 778 | 41,723 | 911 | ||||||||||||||||||
Residential mortgage-backed | 19,872 | 431 | 21,155 | 3,116 | 41,027 | 3,547 | ||||||||||||||||||
Other asset-backed | 5,211 | 39 | 8,809 | 251 | 14,020 | 290 | ||||||||||||||||||
Corporate | 9,056 | 67 | 15,956 | 796 | 25,012 | 863 | ||||||||||||||||||
Total fixed maturity securities | 164,692 | 2,367 | 201,927 | 10,246 | 366,619 | 12,613 | ||||||||||||||||||
Equity securities: | ||||||||||||||||||||||||
Common stocks: | ||||||||||||||||||||||||
Financial services | 2,964 | 71 | — | — | 2,964 | 71 | ||||||||||||||||||
Healthcare | 1,594 | 144 | — | — | 1,594 | 144 | ||||||||||||||||||
Consumer staples | 159 | 8 | — | — | 159 | 8 | ||||||||||||||||||
Consumer discretionary | 1,023 | 79 | 99 | 4 | 1,122 | 83 | ||||||||||||||||||
Energy | 4,323 | 769 | — | — | 4,323 | 769 | ||||||||||||||||||
Industrials | 309 | 32 | — | — | 309 | 32 | ||||||||||||||||||
Other | 894 | 31 | — | — | 894 | 31 | ||||||||||||||||||
Non-redeemable preferred stocks | — | — | 1,998 | 2 | 1,998 | 2 | ||||||||||||||||||
Total equity securities | 11,266 | 1,134 | 2,097 | 6 | 13,363 | 1,140 | ||||||||||||||||||
Total temporarily impaired securities | $ | 175,958 | $ | 3,501 | $ | 204,024 | $ | 10,252 | $ | 379,982 | $ | 13,753 |
December 31, 2016 | Less than twelve months | Twelve months or longer | Total | |||||||||||||||||||||
($ in thousands) | Fair values | Unrealized losses | Fair values | Unrealized losses | Fair values | Unrealized losses | ||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||
U.S. treasury | $ | 7,830 | $ | 11 | $ | — | $ | — | $ | 7,830 | $ | 11 | ||||||||||||
U.S. government-sponsored agencies | 202,900 | 10,609 | — | — | 202,900 | 10,609 | ||||||||||||||||||
Obligations of states and political subdivisions | 43,777 | 940 | — | — | 43,777 | 940 | ||||||||||||||||||
Commercial mortgage-backed | 21,695 | 1,133 | — | — | 21,695 | 1,133 | ||||||||||||||||||
Residential mortgage-backed | 26,217 | 1,232 | 23,625 | 6,076 | 49,842 | 7,308 | ||||||||||||||||||
Other asset-backed | 19,091 | 931 | — | — | 19,091 | 931 | ||||||||||||||||||
Corporate | 82,657 | 1,273 | 8,625 | 106 | 91,282 | 1,379 | ||||||||||||||||||
Total fixed maturity securities | 404,167 | 16,129 | 32,250 | 6,182 | 436,417 | 22,311 | ||||||||||||||||||
Equity securities: | ||||||||||||||||||||||||
Common stocks: | ||||||||||||||||||||||||
Financial services | 1,462 | 12 | 908 | 198 | 2,370 | 210 | ||||||||||||||||||
Information technology | 1,947 | 29 | — | — | 1,947 | 29 | ||||||||||||||||||
Healthcare | 3,585 | 85 | — | — | 3,585 | 85 | ||||||||||||||||||
Consumer staples | 2,427 | 125 | — | — | 2,427 | 125 | ||||||||||||||||||
Consumer discretionary | 1,637 | 163 | — | — | 1,637 | 163 | ||||||||||||||||||
Energy | 1,621 | 33 | 1,188 | 45 | 2,809 | 78 | ||||||||||||||||||
Industrials | 779 | 18 | — | — | 779 | 18 | ||||||||||||||||||
Other | 1,472 | 32 | — | — | 1,472 | 32 | ||||||||||||||||||
Non-redeemable preferred stocks | 3,356 | 44 | 1,877 | 123 | 5,233 | 167 | ||||||||||||||||||
Total equity securities | 18,286 | 541 | 3,973 | 366 | 22,259 | 907 | ||||||||||||||||||
Total temporarily impaired securities | $ | 422,453 | $ | 16,670 | $ | 36,223 | $ | 6,548 | $ | 458,676 | $ | 23,218 |
($ in thousands) | Amortized cost | Estimated fair values | ||||||
Securities available-for-sale: | ||||||||
Due in one year or less | $ | 51,964 | $ | 52,464 | ||||
Due after one year through five years | 167,769 | 173,934 | ||||||
Due after five years through ten years | 378,169 | 387,220 | ||||||
Due after ten years | 462,916 | 473,065 | ||||||
Securities not due at a single maturity date | 172,954 | 171,657 | ||||||
Totals | $ | 1,233,772 | $ | 1,258,340 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
($ in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Fixed maturity securities available-for-sale: | ||||||||||||||||
Gross realized investment gains | $ | 29 | $ | 261 | $ | 408 | $ | 1,935 | ||||||||
Gross realized investment losses | (230 | ) | (218 | ) | (2,316 | ) | (517 | ) | ||||||||
Equity securities available-for-sale: | ||||||||||||||||
Gross realized investment gains | 1,396 | 1,001 | 10,669 | 5,849 | ||||||||||||
Gross realized investment losses | (435 | ) | (50 | ) | (906 | ) | (1,683 | ) | ||||||||
"Other-than-temporary" impairments | (355 | ) | (275 | ) | (1,088 | ) | (976 | ) | ||||||||
Other long-term investments, net | (999 | ) | (1,911 | ) | (4,601 | ) | (5,251 | ) | ||||||||
Totals | $ | (594 | ) | $ | (1,192 | ) | $ | 2,166 | $ | (643 | ) |
11. | CONTINGENT LIABILITIES |
12. | STOCK REPURCHASE PROGRAM |
13. | ACCUMULATED OTHER COMPREHENSIVE INCOME |
Accumulated other comprehensive income by component | ||||||||||||||||||||
Unrealized gains (losses) on available-for- sale securities | Unrecognized pension and postretirement benefit obligations | |||||||||||||||||||
($ in thousands) | Net actuarial loss | Prior service credit | Total | Total | ||||||||||||||||
Balance at December 31, 2016 | $ | 49,748 | $ | (16,299 | ) | $ | 12,632 | $ | (3,667 | ) | $ | 46,081 | ||||||||
Other comprehensive income before reclassifications | 23,460 | — | — | — | 23,460 | |||||||||||||||
Amounts reclassified from accumulated other comprehensive income | (4,399 | ) | 719 | (1,535 | ) | (816 | ) | (5,215 | ) | |||||||||||
Other comprehensive income (loss) | 19,061 | 719 | (1,535 | ) | (816 | ) | 18,245 | |||||||||||||
Balance at September 30, 2017 | $ | 68,809 | $ | (15,580 | ) | $ | 11,097 | $ | (4,483 | ) | $ | 64,326 |
Accumulated other comprehensive income by component | ||||||||||||||||||||
Unrealized gains (losses) on available-for- sale securities | Unrecognized pension and postretirement benefit obligations | |||||||||||||||||||
($ in thousands) | Net actuarial loss | Prior service credit | Total | Total | ||||||||||||||||
Balance at December 31, 2015 | $ | 60,369 | $ | (17,306 | ) | $ | 15,370 | $ | (1,936 | ) | $ | 58,433 | ||||||||
Other comprehensive income before reclassifications | 20,698 | — | — | — | 20,698 | |||||||||||||||
Amounts reclassified from accumulated other comprehensive income | (2,995 | ) | 1,271 | (1,878 | ) | (607 | ) | (3,602 | ) | |||||||||||
Other comprehensive income (loss) | 17,703 | 1,271 | (1,878 | ) | (607 | ) | 17,096 | |||||||||||||
Balance at September 30, 2016 | $ | 78,072 | $ | (16,035 | ) | $ | 13,492 | $ | (2,543 | ) | $ | 75,529 |
($ in thousands) | Amounts reclassified from accumulated other comprehensive income | |||||||||
Accumulated other comprehensive income components | Three months ended September 30, 2017 | Nine months ended September 30, 2017 | Affected line item in the consolidated statements of income | |||||||
Unrealized gains on investments: | ||||||||||
Reclassification adjustment for net realized investment gains included in net income | $ | 405 | $ | 6,767 | Net realized investment gains (losses), excluding impairment losses on securities available-for-sale | |||||
Deferred income tax expense | (141 | ) | (2,368 | ) | Total income tax expense (benefit) | |||||
Net reclassification adjustment | 264 | 4,399 | Net income | |||||||
Unrecognized pension and postretirement benefit obligations: | ||||||||||
Reclassification adjustment for amounts amortized into net periodic pension and postretirement benefit income: | ||||||||||
Net actuarial loss | (370 | ) | (1,107 | ) | (1) | |||||
Prior service credit | 787 | 2,362 | (1) | |||||||
Total before tax | 417 | 1,255 | ||||||||
Deferred income tax expense | (146 | ) | (439 | ) | ||||||
Net reclassification adjustment | 271 | 816 | ||||||||
Total reclassification adjustment | $ | 535 | $ | 5,215 |
(1) | These reclassified components of accumulated other comprehensive income are included in the computation of net periodic pension and postretirement benefit income (see note 7, Employee Retirement Plans, for additional details). |
($ in thousands) | Amounts reclassified from accumulated other comprehensive income | |||||||||
Accumulated other comprehensive income components | Three months ended September 30, 2016 | Nine months ended September 30, 2016 | Affected line item in the consolidated statements of income | |||||||
Unrealized gains on investments: | ||||||||||
Reclassification adjustment for net realized investment gains included in net income | $ | 718 | $ | 4,608 | Net realized investment gains (losses), excluding impairment losses on securities available-for-sale | |||||
Deferred income tax expense | (252 | ) | (1,613 | ) | Total income tax expense (benefit) | |||||
Net reclassification adjustment | 466 | 2,995 | Net income | |||||||
Unrecognized pension and postretirement benefit obligations: | ||||||||||
Reclassification adjustment for amounts amortized into net periodic pension and postretirement benefit income: | ||||||||||
Net actuarial loss | (1,112 | ) | (1,956 | ) | (1) | |||||
Prior service credit | 1,291 | 2,890 | (1) | |||||||
Total before tax | 179 | 934 | ||||||||
Deferred income tax expense | (62 | ) | (327 | ) | ||||||
Net reclassification adjustment | 117 | 607 | ||||||||
Total reclassification adjustment | $ | 583 | $ | 3,602 |
(1) | These reclassified components of accumulated other comprehensive income are included in the computation of net periodic pension and postretirement benefit income (see note 7, Employee Retirement Plans, for additional details). |
14. | NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | catastrophic events and the occurrence of significant severe weather conditions; |
• | the adequacy of loss and settlement expense reserves; |
• | state and federal legislation and regulations; |
• | changes in the property and casualty insurance industry, interest rates or the performance of financial markets and the general economy; |
• | rating agency actions; |
• | “other-than-temporary” investment impairment losses; and |
• | other risks and uncertainties inherent to the Company’s business, including those discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K. |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
($ in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Property and casualty insurance | ||||||||||||||||
Premiums earned | $ | 120,472 | $ | 116,372 | $ | 350,307 | $ | 338,589 | ||||||||
Losses and settlement expenses | 74,039 | 81,643 | 231,067 | 225,207 | ||||||||||||
Acquisition and other expenses | 38,646 | 39,840 | 120,664 | 119,260 | ||||||||||||
Underwriting profit (loss) | $ | 7,787 | $ | (5,111 | ) | $ | (1,424 | ) | $ | (5,878 | ) | |||||
GAAP ratios: | ||||||||||||||||
Loss and settlement expense ratio | 61.5 | % | 70.2 | % | 66.0 | % | 66.5 | % | ||||||||
Acquisition expense ratio | 32.0 | % | 34.2 | % | 34.4 | % | 35.2 | % | ||||||||
Combined ratio | 93.5 | % | 104.4 | % | 100.4 | % | 101.7 | % | ||||||||
Reconciliation of loss and settlement expense ratio to underlying loss and settlement expense ratio1: | ||||||||||||||||
Loss and settlement expense ratio | 61.5 | % | 70.2 | % | 66.0 | % | 66.5 | % | ||||||||
Catastrophe and storm losses | (8.2 | )% | (12.7 | )% | (8.5 | )% | (10.3 | )% | ||||||||
Favorable development on prior years' reserves | 5.2 | % | 5.9 | % | 4.4 | % | 4.9 | % | ||||||||
Underlying loss and settlement expense ratio | 58.5 | % | 63.4 | % | 61.9 | % | 61.1 | % | ||||||||
Favorable development on prior years' reserves2 | $ | (6,242 | ) | $ | (6,850 | ) | $ | (15,555 | ) | $ | (16,637 | ) | ||||
Catastrophe and storm losses | $ | 9,922 | $ | 14,787 | $ | 29,922 | $ | 34,787 |
Three months ended September 30, | ||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||
($ in thousands) | Premiums earned | Losses and settlement expenses | Loss and settlement expense ratio | Premiums earned | Losses and settlement expenses | Loss and settlement expense ratio | ||||||||||||||||
Property and casualty insurance | ||||||||||||||||||||||
Commercial lines: | ||||||||||||||||||||||
Automobile | $ | 30,229 | $ | 24,293 | 80.4 | % | $ | 28,113 | $ | 26,274 | 93.5 | % | ||||||||||
Property | 27,980 | 15,803 | 56.5 | % | 27,471 | 17,227 | 62.7 | % | ||||||||||||||
Workers' compensation | 25,373 | 11,386 | 44.9 | % | 24,536 | 13,510 | 55.1 | % | ||||||||||||||
Other liability | 24,996 | 15,802 | 63.2 | % | 24,277 | 14,179 | 58.4 | % | ||||||||||||||
Other | 2,203 | 447 | 20.3 | % | 2,102 | 705 | 33.6 | % | ||||||||||||||
Total commercial lines | 110,781 | 67,731 | 61.1 | % | 106,499 | 71,895 | 67.5 | % | ||||||||||||||
Personal lines | 9,691 | 6,308 | 65.1 | % | 9,873 | 9,748 | 98.7 | % | ||||||||||||||
Total property and casualty insurance | $ | 120,472 | $ | 74,039 | 61.5 | % | $ | 116,372 | $ | 81,643 | 70.2 | % |
Nine months ended September 30, | ||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||
($ in thousands) | Premiums earned | Losses and settlement expenses | Loss and settlement expense ratio | Premiums earned | Losses and settlement expenses | Loss and settlement expense ratio | ||||||||||||||||
Property and casualty insurance | ||||||||||||||||||||||
Commercial lines: | ||||||||||||||||||||||
Automobile | $ | 87,275 | $ | 74,926 | 85.8 | % | $ | 82,449 | $ | 69,763 | 84.6 | % | ||||||||||
Property | 79,551 | 51,291 | 64.5 | % | 77,292 | 52,687 | 68.2 | % | ||||||||||||||
Workers' compensation | 75,419 | 41,451 | 55.0 | % | 71,272 | 39,680 | 55.7 | % | ||||||||||||||
Other liability | 73,378 | 40,833 | 55.6 | % | 72,086 | 38,045 | 52.8 | % | ||||||||||||||
Other | 6,509 | 777 | 11.9 | % | 6,246 | 648 | 10.4 | % | ||||||||||||||
Total commercial lines | 322,132 | 209,278 | 65.0 | % | 309,345 | 200,823 | 64.9 | % | ||||||||||||||
Personal lines | 28,175 | 21,789 | 77.3 | % | 29,244 | 24,384 | 83.4 | % | ||||||||||||||
Total property and casualty insurance | $ | 350,307 | $ | 231,067 | 66.0 | % | $ | 338,589 | $ | 225,207 | 66.5 | % |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
($ in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Reinsurance | ||||||||||||||||
Premiums earned | $ | 34,718 | $ | 35,809 | $ | 99,207 | $ | 102,775 | ||||||||
Losses and settlement expenses | 45,537 | 26,530 | 92,022 | 70,895 | ||||||||||||
Acquisition and other expenses | 7,351 | 8,555 | 23,026 | 24,906 | ||||||||||||
Underwriting profit (loss) | $ | (18,170 | ) | $ | 724 | $ | (15,841 | ) | $ | 6,974 | ||||||
GAAP ratios: | ||||||||||||||||
Loss and settlement expense ratio | 131.2 | % | 74.1 | % | 92.8 | % | 69.0 | % | ||||||||
Acquisition expense ratio | 21.1 | % | 23.9 | % | 23.2 | % | 24.2 | % | ||||||||
Combined ratio | 152.3 | % | 98.0 | % | 116.0 | % | 93.2 | % | ||||||||
(Favorable) unfavorable development on prior years' reserves | $ | 1,822 | $ | (796 | ) | $ | (2,062 | ) | $ | (6,880 | ) | |||||
Catastrophe and storm losses | $ | 19,499 | $ | 2,266 | $ | 27,996 | $ | 10,747 |
Three months ended September 30, | ||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||
($ in thousands) | Premiums earned | Losses and settlement expenses | Loss and settlement expense ratio | Premiums earned | Losses and settlement expenses | Loss and settlement expense ratio | ||||||||||||||||
Reinsurance | ||||||||||||||||||||||
Pro rata reinsurance | $ | 10,730 | $ | 10,159 | 94.7 | % | $ | 15,066 | $ | 10,235 | 67.9 | % | ||||||||||
Excess of loss reinsurance | 23,988 | 35,378 | 147.5 | % | 20,743 | 16,295 | 78.6 | % | ||||||||||||||
Total reinsurance | $ | 34,718 | $ | 45,537 | 131.2 | % | $ | 35,809 | $ | 26,530 | 74.1 | % |
Nine months ended September 30, | ||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||
($ in thousands) | Premiums earned | Losses and settlement expenses | Loss and settlement expense ratio | Premiums earned | Losses and settlement expenses | Loss and settlement expense ratio | ||||||||||||||||
Reinsurance | ||||||||||||||||||||||
Pro rata reinsurance | $ | 33,181 | $ | 23,979 | 72.3 | % | $ | 44,175 | $ | 26,367 | 59.7 | % | ||||||||||
Excess of loss reinsurance | 66,026 | 68,043 | 103.1 | % | 58,600 | 44,528 | 76.0 | % | ||||||||||||||
Total reinsurance | $ | 99,207 | $ | 92,022 | 92.8 | % | $ | 102,775 | $ | 70,895 | 69.0 | % |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
($ in thousands, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Consolidated | ||||||||||||||||
REVENUES | ||||||||||||||||
Premiums earned | $ | 155,190 | $ | 152,181 | $ | 449,514 | $ | 441,364 | ||||||||
Net investment income | 11,501 | 11,474 | 33,679 | 35,883 | ||||||||||||
Realized investment gains (losses) | (594 | ) | (1,192 | ) | 2,166 | (643 | ) | |||||||||
Other losses | (179 | ) | (85 | ) | (834 | ) | (19 | ) | ||||||||
165,918 | 162,378 | 484,525 | 476,585 | |||||||||||||
LOSSES AND EXPENSES | ||||||||||||||||
Losses and settlement expenses | 119,576 | 108,173 | 323,089 | 296,102 | ||||||||||||
Acquisition and other expenses | 45,997 | 48,395 | 143,690 | 144,166 | ||||||||||||
Interest expense | 84 | 84 | 253 | 253 | ||||||||||||
Other expense | 701 | 679 | 2,264 | 2,053 | ||||||||||||
166,358 | 157,331 | 469,296 | 442,574 | |||||||||||||
Income (loss) before income tax expense (benefit) | (440 | ) | 5,047 | 15,229 | 34,011 | |||||||||||
Income tax expense (benefit) | (1,186 | ) | 918 | 2,175 | 9,100 | |||||||||||
Net income | $ | 746 | $ | 4,129 | $ | 13,054 | $ | 24,911 | ||||||||
Net income per share | $ | 0.03 | $ | 0.20 | $ | 0.61 | $ | 1.19 | ||||||||
GAAP ratios: | ||||||||||||||||
Loss and settlement expense ratio | 77.1 | % | 71.1 | % | 71.9 | % | 67.1 | % | ||||||||
Acquisition expense ratio | 29.6 | % | 31.8 | % | 31.9 | % | 32.7 | % | ||||||||
Combined ratio | 106.7 | % | 102.9 | % | 103.8 | % | 99.8 | % | ||||||||
Favorable development on prior years' reserves2 | $ | (4,420 | ) | $ | (7,646 | ) | $ | (17,617 | ) | $ | (23,517 | ) | ||||
Catastrophe and storm losses | $ | 29,421 | $ | 17,053 | $ | 57,918 | $ | 45,534 |
September 30, 2017 | |||||||||||||||
($ in thousands) | Amortized cost | Fair value | Percent of total fair value | Carrying value | |||||||||||
Fixed maturity securities available-for-sale | $ | 1,233,772 | $ | 1,258,340 | 82.3 | % | $ | 1,258,340 | |||||||
Equity securities available-for-sale | 150,428 | 231,719 | 15.1 | % | 231,719 | ||||||||||
Cash | 402 | 402 | — | % | 402 | ||||||||||
Short-term investments | 25,255 | 25,255 | 1.7 | % | 25,255 | ||||||||||
Other long-term investments | 14,471 | 14,471 | 0.9 | % | 14,471 | ||||||||||
$ | 1,424,328 | $ | 1,530,187 | 100.0 | % | $ | 1,530,187 |
December 31, 2016 | |||||||||||||||
($ in thousands) | Amortized cost | Fair value | Percent of total fair value | Carrying value | |||||||||||
Fixed maturity securities available-for-sale | $ | 1,189,525 | $ | 1,199,699 | 81.8 | % | $ | 1,199,699 | |||||||
Equity securities available-for-sale | 147,479 | 213,839 | 14.6 | % | 213,839 | ||||||||||
Cash | 307 | 307 | — | % | 307 | ||||||||||
Short-term investments | 39,670 | 39,670 | 2.7 | % | 39,670 | ||||||||||
Other long-term investments | 12,506 | 12,506 | 0.9 | % | 12,506 | ||||||||||
$ | 1,389,487 | $ | 1,466,021 | 100.0 | % | $ | 1,466,021 |
($ in thousands) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Estimated fair values | ||||||||||||
Securities available-for-sale: | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. treasury | $ | 8,109 | $ | 57 | $ | 2 | $ | 8,164 | ||||||||
U.S. government-sponsored agencies | 262,050 | 237 | 6,668 | 255,619 | ||||||||||||
Obligations of states and political subdivisions | 318,016 | 18,954 | 332 | 336,638 | ||||||||||||
Commercial mortgage-backed | 66,138 | 583 | 911 | 65,810 | ||||||||||||
Residential mortgage-backed | 104,620 | 2,593 | 3,547 | 103,666 | ||||||||||||
Other asset-backed | 24,501 | 756 | 290 | 24,967 | ||||||||||||
Corporate | 450,338 | 14,001 | 863 | 463,476 | ||||||||||||
Total fixed maturity securities | 1,233,772 | 37,181 | 12,613 | 1,258,340 | ||||||||||||
Equity securities: | ||||||||||||||||
Common stocks: | ||||||||||||||||
Financial services | 28,130 | 12,679 | 71 | 40,738 | ||||||||||||
Information technology | 19,772 | 16,912 | — | 36,684 | ||||||||||||
Healthcare | 18,417 | 12,457 | 144 | 30,730 | ||||||||||||
Consumer staples | 10,258 | 4,794 | 8 | 15,044 | ||||||||||||
Consumer discretionary | 12,224 | 9,464 | 83 | 21,605 | ||||||||||||
Energy | 13,273 | 4,692 | 769 | 17,196 | ||||||||||||
Industrials | 13,209 | 15,138 | 32 | 28,315 | ||||||||||||
Other | 12,114 | 4,704 | 31 | 16,787 | ||||||||||||
Non-redeemable preferred stocks | 23,031 | 1,591 | 2 | 24,620 | ||||||||||||
Total equity securities | 150,428 | 82,431 | 1,140 | 231,719 | ||||||||||||
Total securities available-for-sale | $ | 1,384,200 | $ | 119,612 | $ | 13,753 | $ | 1,490,059 |
Less than twelve months | Twelve months or longer | Total | ||||||||||||||||||||||
($ in thousands) | Fair values | Unrealized losses | Fair values | Unrealized losses | Fair values | Unrealized losses | ||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||
U.S. treasury | $ | 248 | $ | 2 | $ | — | $ | — | $ | 248 | $ | 2 | ||||||||||||
U.S. government-sponsored agencies | 104,235 | 1,695 | 125,982 | 4,973 | 230,217 | 6,668 | ||||||||||||||||||
Obligations of states and political subdivisions | — | — | 14,372 | 332 | 14,372 | 332 | ||||||||||||||||||
Commercial mortgage-backed | 26,070 | 133 | 15,653 | 778 | 41,723 | 911 | ||||||||||||||||||
Residential mortgage-backed | 19,872 | 431 | 21,155 | 3,116 | 41,027 | 3,547 | ||||||||||||||||||
Other asset-backed | 5,211 | 39 | 8,809 | 251 | 14,020 | 290 | ||||||||||||||||||
Corporate | 9,056 | 67 | 15,956 | 796 | 25,012 | 863 | ||||||||||||||||||
Total fixed maturity securities | 164,692 | 2,367 | 201,927 | 10,246 | 366,619 | 12,613 | ||||||||||||||||||
Equity securities: | ||||||||||||||||||||||||
Common stocks: | ||||||||||||||||||||||||
Financial services | 2,964 | 71 | — | — | 2,964 | 71 | ||||||||||||||||||
Healthcare | 1,594 | 144 | — | — | 1,594 | 144 | ||||||||||||||||||
Consumer staples | 159 | 8 | — | — | 159 | 8 | ||||||||||||||||||
Consumer discretionary | 1,023 | 79 | 99 | 4 | 1,122 | 83 | ||||||||||||||||||
Energy | 4,323 | 769 | — | — | 4,323 | 769 | ||||||||||||||||||
Industrials | 309 | 32 | — | — | 309 | 32 | ||||||||||||||||||
Other | 894 | 31 | — | — | 894 | 31 | ||||||||||||||||||
Non-redeemable preferred stocks | — | — | 1,998 | 2 | 1,998 | 2 | ||||||||||||||||||
Total equity securities | 11,266 | 1,134 | 2,097 | 6 | 13,363 | 1,140 | ||||||||||||||||||
Total temporarily impaired securities | $ | 175,958 | $ | 3,501 | $ | 204,024 | $ | 10,252 | $ | 379,982 | $ | 13,753 |
Realized losses from sales | "Other-than- temporary" impairment losses | Total gross realized losses | ||||||||||||||||||
($ in thousands) | Book value | Sales price | Gross realized losses | |||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
Three months or less | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Over three months to six months | 2,330 | 2,086 | 244 | — | 244 | |||||||||||||||
Over six months to nine months | 2,993 | 2,938 | 55 | — | 55 | |||||||||||||||
Over nine months to twelve months | 5,044 | 4,684 | 360 | — | 360 | |||||||||||||||
Over twelve months | 24,880 | 23,223 | 1,657 | — | 1,657 | |||||||||||||||
Subtotal, fixed maturity securities | 35,247 | 32,931 | 2,316 | — | 2,316 | |||||||||||||||
Equity securities: | ||||||||||||||||||||
Three months or less | 8,540 | 7,884 | 656 | — | 656 | |||||||||||||||
Over three months to six months | 2,233 | 2,000 | 233 | 733 | 966 | |||||||||||||||
Over six months to nine months | 129 | 112 | 17 | — | 17 | |||||||||||||||
Over nine months to twelve months | — | — | — | — | — | |||||||||||||||
Over twelve months | — | — | — | 355 | 355 | |||||||||||||||
Subtotal, equity securities | 10,902 | 9,996 | 906 | 1,088 | 1,994 | |||||||||||||||
Total realized losses | $ | 46,149 | $ | 42,927 | $ | 3,222 | $ | 1,088 | $ | 4,310 |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
PART II. | OTHER INFORMATION |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Period | (a) Total number of shares (or units) purchased1 | (b) Average price paid per share (or unit) | (c) Total number of shares (or units) purchased as part of publicly announced plans or programs2 | (d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs ($ in thousands)2,3 | ||||||||||
7/1/2017 - 7/31/2017 | 97 | $ | 27.97 | — | $ | 19,108 | ||||||||
8/1/2017 - 8/31/2017 | 31 | 27.66 | — | 19,108 | ||||||||||
9/1/2017 - 9/30/2017 | 4,833 | 27.74 | — | 19,108 | ||||||||||
Total | 4,961 | $ | 27.74 | — |
ITEM 6. | EXHIBITS |
Exhibit number | Item | |
31.1* | ||
31.2* | ||
32.1* | ||
32.2* | ||
101.INS** | XBRL Instance Document | |
101.SCH** | XBRL Taxonomy Extension Schema Document | |
101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB** | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Filed herewith |
** | Furnished, not filed |
EMC INSURANCE GROUP INC. |
Registrant |
/s/ Bruce G. Kelley |
Bruce G. Kelley |
President, Chief Executive Officer, Treasurer and Director |
(Principal Executive Officer) |
/s/ Mark E. Reese |
Mark E. Reese |
Senior Vice President and Chief Financial Officer |
(Principal Financial and Accounting Officer) |
1. | I have reviewed this report on Form 10-Q of EMC Insurance 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 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 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 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. |
/s/ Bruce G. Kelley | |
Bruce G. Kelley, President, | |
Chief Executive Officer and Treasurer |
1. | I have reviewed this report on Form 10-Q of EMC Insurance 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 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 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 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. |
/s/ Mark E. Reese | |
Mark E. Reese, Senior Vice President | |
and Chief Financial Officer |
(1) | The report fully complies with the requirements of Section 13(a) or 15(d) of Securities Exchange Act of 1934, and |
(2) | The information contained in this report fairly presents, in all material respects, the company’s financial condition and results of operations. |
EMC INSURANCE GROUP INC. | |
Registrant | |
/s/ Bruce G. Kelley | |
Bruce G. Kelley, President, | |
Chief Executive Officer and Treasurer |
(1) | The report fully complies with the requirements of Section 13(a) or15(d) of Securities Exchange Act of 1934, and |
(2) | The information contained in this report fairly presents, in all material respects, the company’s financial condition and results of operations. |
EMC INSURANCE GROUP INC. | |
Registrant | |
/s/ Mark E. Reese | |
Mark E. Reese | |
Senior Vice President and | |
Chief Financial Officer |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 31, 2017 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | EMC INSURANCE GROUP INC. | |
Entity Central Index Key | 0000356130 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 21,399,578 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2017 |
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Investments: | ||
Fixed maturity securities available-for-sale, amortized cost | $ 1,233,772 | $ 1,189,525 |
Equity securities available-for-sale, cost | 150,428 | 147,479 |
Deferred policy acquisition costs from affiliates | 43,836 | 40,660 |
Affiliated other assets | 4,818 | 4,632 |
LIABILITIES | ||
Affiliated losses and settlement expenses | 720,901 | 685,533 |
Unearned premiums from affiliates | 281,055 | 243,682 |
Affiliated other liabilities | $ 24,155 | $ 27,871 |
STOCKHOLDERS' EQUITY | ||
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, shares authorized (in shares) | 30,000,000 | 30,000,000 |
Common stock, shares issued (in shares) | 21,379,763 | 21,222,535 |
Common stock, shares outstanding (in shares) | 21,379,763 | 21,222,535 |
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
REVENUES | ||||
Premiums earned, affiliated | $ 154,451 | $ 149,988 | $ 446,522 | $ 436,804 |
Other income, affiliated | (30) | 39 | (350) | 307 |
LOSSES AND EXPENSES | ||||
Losses and settlement expenses, affiliated | 116,908 | 106,795 | 318,902 | 295,061 |
Amortization of deferred policy acquisition costs, affiliated | 26,177 | 26,256 | 79,957 | 79,584 |
Other underwriting expenses, affiliated | 19,520 | 17,600 | 57,803 | 52,120 |
Other expense, affiliated | $ 442 | $ 481 | $ 1,423 | $ 1,414 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
OTHER COMPREHENSIVE INCOME (LOSS) | ||||
Unrealized holding gains (losses) on investment securities, deferred income tax expense (benefit) | $ 2,951 | $ (1,226) | $ 12,632 | $ 11,145 |
Reclassification adjustment for net realized investment (gains) losses included in net income (loss), income tax (expense) benefit | (141) | (252) | (2,368) | (1,613) |
Reclassification adjustment for amounts amortized into net periodic pension and postretirement benefit cost (income), deferred income tax (expense) benefit | $ (146) | $ (62) | $ (439) | $ (327) |
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Statement of Stockholders' Equity [Abstract] | ||
Dividends paid to public stockholders (per share) | $ 0.63 | $ 0.57 |
Dividends paid to affiliate (per share) | $ 0.63 | $ 0.57 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Losses and settlement expenses, affiliated | $ 35,368 | $ 24,292 |
Unearned premiums, affiliated | 37,373 | 32,902 |
Commissions payable, affiliated | (2,309) | (3,682) |
Deferred policy acquisition costs, affiliated | (3,176) | (3,785) |
Other, net, affiliated | (1,545) | (451) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Dividends paid to stockholders, affiliated | $ (7,416) | $ (6,710) |
BASIS OF PRESENTATION |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION EMC Insurance Group Inc., a majority owned subsidiary of Employers Mutual Casualty Company (Employers Mutual), is an insurance holding company with operations in property and casualty insurance and reinsurance. The Company writes property and casualty insurance in both commercial and personal lines of insurance, with a focus on medium-sized commercial accounts. The term “Company” is used interchangeably to describe EMC Insurance Group Inc. (Parent Company only) and EMC Insurance Group Inc. and its subsidiaries. The accompanying unaudited consolidated financial statements have been prepared on the basis of U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The Company has evaluated all subsequent events through the date the financial statements were issued. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the interim financial statements have been included. The results of operations for the interim periods reported are not necessarily indicative of results to be expected for the year. The consolidated balance sheet at December 31, 2016 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements. In reading these financial statements, reference should be made to the Company’s 2016 Form 10-K or the 2016 Annual Report to Stockholders for more detailed footnote information. |
TRANSACTIONS WITH AFFILIATES |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
TRANSACTIONS WITH AFFILIATES | TRANSACTIONS WITH AFFILIATES An inter-company reinsurance program is in place between the Company's insurance subsidiaries in the property and casualty insurance segment and Employers Mutual. This reinsurance program is intended to reduce the volatility of the Company's quarterly results caused by excessive catastrophe and storm losses, and provide protection from both the frequency and severity of such losses. The reinsurance program consists of two semi-annual aggregate catastrophe excess of loss treaties. The first treaty was effective from January 1, 2017 through June 30, 2017, and had a retention of $20.0 million and a limit of $24.0 million. The total cost of this treaty was approximately $6.0 million. The second treaty is effective from July 1, 2017 through December 31, 2017, and has a retention of $15.0 million and a limit of $12.0 million. The total cost of this treaty is approximately $1.4 million. Losses and settlement expenses ceded to Employers Mutual under the 2017 program totaled $3.0 million and $19.0 million for the three and nine months ended September 30, 2017, respectively, compared to $3.5 million and $5.1 million ceded during the three and nine months ended September 30, 2016, respectively. In both years the ceded amounts are applicable to the treaties that covered the first half of each year. The terms of these treaties were the same in 2016 with the exception of the costs, which were $6.3 million during the first half of 2016 and $1.5 million during the second half of 2016. All catastrophe and storm losses assumed by the property and casualty insurance subsidiaries (net of applicable reinsurance recoveries from external reinsurance protections purchased by the pool participants) are subject to the terms of these treaties, and there is no co-participation provision. An inter-company reinsurance program is also in place between the Company's reinsurance subsidiary and Employers Mutual. The reinsurance program consists of two treaties. The first is a per occurrence catastrophe excess of loss treaty with a retention of $10.0 million, a limit of $10.0 million, 20 percent co-participation, and no reinstatement. The total cost of this treaty is approximately $1.7 million. The second is an annual aggregate catastrophe excess of loss treaty with a retention of $20.0 million, a limit of $100.0 million, and 20 percent co-participation. The total cost of this treaty is approximately $3.2 million. Any losses recovered under the per occurrence treaty inure to the benefit of the aggregate treaty, and only catastrophic events with total losses greater than $500,000 are subject to the terms of the aggregate treaty. Recoveries totaled $9.0 million during the three and nine months ended September 30, 2017, all under the annual aggregate treaty. The terms of these treaties were the same in 2016 with the exception of the costs, which were $2.0 million for the per occurrence treaty and $3.2 million for the annual aggregate treaty. No recoveries were made under these treaties during the same periods of 2016. The reinsurance subsidiary purchases additional reinsurance protection in peak exposure territories from external parties in which coverage is triggered when losses experienced by the insurance industry from a catastrophic event exceed a specified threshold. Any reinsurance recoveries received from external parties reduces the amount of losses ceded to Employers Mutual under the inter-company reinsurance program. No recoveries have been made from external parties in 2017 or 2016. |
REINSURANCE |
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Reinsurance Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REINSURANCE | REINSURANCE The effect of reinsurance on premiums written and earned, and losses and settlement expenses incurred, for the three and nine months ended September 30, 2017 and 2016 is presented below. The classification of the assumed and ceded reinsurance amounts between affiliates and nonaffiliates is based on the participants in the underlying reinsurance agreements, and is intended to provide an understanding of the actual source of the reinsurance activities. This presentation differs from the classifications used in the consolidated financial statements, where all amounts flowing through the pooling and quota share agreements and inter-company reinsurance programs with Employers Mutual are reported as “affiliated” balances.
Individual lines in the above tables are defined as follows:
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LIABILITY FOR LOSSES AND SETTLEMENT EXPENSES |
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Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LIABILITY FOR LOSSES AND SETTLEMENT EXPENSES | LIABILITY FOR LOSSES AND SETTLEMENT EXPENSES The following table sets forth a reconciliation of beginning and ending reserves for losses and settlement expenses of the Company. Amounts presented are on a net basis, with a reconciliation of beginning and ending reserves to the gross amounts presented in the consolidated financial statements.
There is an inherent amount of uncertainty involved in the establishment of insurance liabilities. This uncertainty is greatest in the current and more recent accident years because a smaller percentage of the expected ultimate claims have been reported, adjusted and settled compared to more mature accident years. For this reason, carried reserves for these accident years reflect prudently conservative assumptions. As the carried reserves for these accident years run off, the overall expectation is that, more often than not, favorable development will occur. However, there is also the possibility that the ultimate settlement of liabilities associated with these accident years will show adverse development, and such adverse development could be substantial. Changes in reserve estimates are reflected in net income in the year such changes are recorded. Following is an analysis of the reserve development the Company experienced during the nine months ended September 30, 2017 and 2016. Care should be exercised when attempting to analyze the financial impact of the reported development amounts because, as noted above, the overall expectation is that, more often than not, favorable development will occur as the prior accident years’ reserves run off. 2017 Development For the property and casualty insurance segment, the September 30, 2017 estimate of loss and settlement expense reserves for accident years 2016 and prior decreased $15.6 million from the estimate at December 31, 2016. This decrease represents 3.2 percent of the December 31, 2016 gross carried reserves and is primarily attributed to reductions in prior year ultimate loss ratios for every line of business except commercial auto liability. The other liability line of business was the largest contributor to favorable development. The ultimate loss ratios for this line were decreased slightly for most accident years from 2003 through 2016 due to declines in expected ultimate claim frequency and/or severity. Due to increases in projected ultimate claim frequency and severity, the ultimate loss ratios in the commercial auto line of business were increased for accident years 2013 through 2016, producing adverse reserve development for that line of business. Included in the development amount is adverse development experienced in the other liability line of business stemming from the settlement of claims for past and future legal fees and losses on a multi-year asbestos exposure associated with a former insured, and a slight strengthening of remaining reserves. For the reinsurance segment, the September 30, 2017 estimate of loss and settlement expense reserves for accident years 2016 and prior decreased $2.1 million from the estimate at December 31, 2016. This decrease represents 1.0 percent of the December 31, 2016 gross carried reserves and is primarily attributed to prior year reserve releases in the per risk excess, property/casualty global excess and property/casualty global pro rata contract types. 2016 Development During the third quarter of 2016, management implemented a new reserving methodology for the determination of direct bulk reserves in the property and casualty insurance segment. The new methodology, which is referred to as the accident year ultimate estimate approach, better conforms to industry practices and provides increased transparency of the drivers of the property and casualty insurance segment's performance. In connection with this change in reserving methodology, there was a reallocation of incurred but not reported (IBNR) loss and allocated settlement expense reserves from prior accident years to the current accident year in multiple lines of business. This change resulted in the movement of approximately $5.6 million of reserves from prior accident years to the current accident year that is reported as favorable development; however, this development is "mechanical in nature", and did not have an impact on earnings because the total amount of carried reserves did not change. For the property and casualty insurance segment, the September 30, 2016 estimate of loss and settlement expense reserves for accident years 2015 and prior decreased $22.2 million from the estimate at December 31, 2015. Excluding the $5.6 million of "mechanical" favorable development that resulted from the change in reserving methodology noted above, the implied amount of favorable development that had an impact on earnings was approximately $16.6 million. This decrease represented 3.5 percent of the December 31, 2015 gross carried reserves and was primarily attributed to better than expected outcomes for all lines of business except commercial auto liability, commercial property and homeowners (workers' compensation and other liability lines of business were the largest contributors to favorable development). As noted above, the change in bulk reserving methodology implemented on September 30, 2016 resulted in the movement of a significant amount of settlement expense reserves to loss reserves, and a reallocation of reserves between current and prior accident years. Other liability accounted for most of the favorable development on settlement expense reserves. For the reinsurance segment, the September 30, 2016 estimate of loss and settlement expense reserves for accident years 2015 and prior decreased $6.9 million from the estimate at December 31, 2015. This decrease represented 3.5 percent of the December 31, 2015 gross carried reserves, with slightly less than half of the favorable development coming from the Mutual Reinsurance Bureau underwriting association (MRB), which included a decrease in bulk reserves. |
SEGMENT INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | SEGMENT INFORMATION The Company’s operations consist of a property and casualty insurance segment and a reinsurance segment. The property and casualty insurance segment writes both commercial and personal lines of insurance, with a focus on medium-sized commercial accounts. The reinsurance segment provides reinsurance for other insurers and reinsurers. The segments are managed separately due to differences in the insurance products sold and the business environments in which they operate. Management evaluates the performance of its insurance segments using financial measurements based on Statutory Accounting Principles (SAP) instead of GAAP. Such measures include premiums written, premiums earned, statutory underwriting profit (loss), and investment results, as well as loss and loss adjustment expense ratios, trade underwriting expense ratios, and combined ratios. Summarized financial information for the Company’s segments is as follows:
The following table displays the premiums earned for the property and casualty insurance segment and the reinsurance segment for the three and nine months ended September 30, 2017 and 2016, by line of insurance.
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INCOME TAXES |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | INCOME TAXES The actual income tax expense (benefit) for the three and nine months ended September 30, 2017 and 2016 differed from the “expected” income tax expense (benefit) for those periods (computed by applying the United States federal corporate tax rate of 35 percent to income (loss) before income tax) as follows:
The Company had no provision for uncertain income tax positions at September 30, 2017 or December 31, 2016. The Company recognized no interest expense or other penalties related to U.S. federal or state income taxes during the three or nine months ended September 30, 2017 or 2016. It is the Company’s accounting policy to reflect income tax penalties as other expense, and interest as interest expense. The Company files a U.S. federal income tax return, along with various state income tax returns. The Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2014. |
EMPLOYEE RETIREMENT PLANS |
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Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EMPLOYEE RETIREMENT PLANS | EMPLOYEE RETIREMENT PLANS The components of net periodic benefit cost (income) for Employers Mutual’s pension and postretirement benefit plans is as follows:
Net periodic pension benefit cost allocated to the Company amounted to $692,000 and $1.1 million for the three months and $2.1 million and $2.5 million for the nine months ended September 30, 2017 and 2016, respectively. Net periodic postretirement benefit income allocated to the Company amounted to $736,000 and $937,000 for the three months and $2.2 million and $2.4 million for the nine months ended September 30, 2017 and 2016, respectively. The Company’s share of Employers Mutual’s remaining 2017 planned contribution to the pension plan, if made, will be approximately $2.7 million. No contributions will be made to the Voluntary Employee Beneficiary Association (VEBA) trust in 2017. |
STOCK-BASED COMPENSATION |
9 Months Ended |
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Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION On May 26, 2017, the Company registered 150,000 shares of the Company's common stock for use in the EMC Insurance Group Inc. 2017 Non-Employee Director Stock Plan (the "2017 Director Plan"). The 2017 Director Plan provides for the awarding of non-qualified stock options, restricted stock, restricted stock units and other stock-based awards to non-employee directors of the Company. During the first nine months of 2017, 2,000 shares of restricted stock were granted to non-employee directors of the Company. Employers Mutual also has several stock plans which utilize the common stock of the Company. Employers Mutual can provide the common stock required under its plans by: 1) using shares of common stock that it currently owns; 2) purchasing common stock in the open market; or 3) directly purchasing common stock from the Company at the current fair value. A portion of the compensation expense recognized by Employers Mutual (as the requisite service period for granted options and restricted stock awards/units is rendered) is allocated to the Company’s property and casualty insurance subsidiaries though their participation in the pooling agreement. During the first quarter of 2017, Employers Mutual began issuing restricted stock units rather than restricted stock awards. In connection with this change, Employers Mutual will now acquire stock to fulfill its obligations to the recipients of the restricted stock units on the date they vest, rather than on the grant date of the awards. Because of this change, an account Employers Mutual established to hold previously granted restricted stock awards until they vest will contain excess shares of the Company's stock stemming from forfeitures and surrenders. During the first nine months of 2017, the Company repurchased 67,974 shares of stock from this unvested restricted stock account at an average cost of $27.34. During the first nine months of 2017, 116,288 restricted stock units were granted to eligible employees of Employers Mutual. Under the stock plans, 85,192 shares of restricted stock vested, and 163,658 options were exercised at a weighted average exercise price of $14.76. The Company recognized compensation expense from these plans of $296,000 ($192,000 net of tax) and $218,000 ($142,000 net of tax) for the three months and $508,000 ($330,000 net of tax) and $542,000 ($353,000 net of tax) for the nine months ended September 30, 2017 and 2016, respectively. |
DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS | DISCLOSURES ABOUT THE FAIR VALUES OF FINANCIAL INSTRUMENTS The carrying amounts and estimated fair values of the Company’s financial instruments as of September 30, 2017 and December 31, 2016 are summarized in the tables below.
The estimated fair values of fixed maturity and equity securities is based on quoted market prices, where available. In cases where quoted market prices are not available, fair values are based on a variety of valuation techniques depending on the type of security. Short-term investments generally include money market funds, U.S. Treasury bills and commercial paper. Short-term investments are carried at fair value, which approximates cost, due to the highly liquid nature of the securities. Short-term securities are classified as Level 1 fair value measurements when the fair values can be validated by recent trades. When recent trades are not available, fair value is deemed to be the cost basis and the securities are classified as Level 2 fair value measurements. The estimated fair value of the surplus notes is derived by discounting future expected cash flows at a rate deemed appropriate. The discount rate was set at the average of current yields-to-maturity on several insurance company surplus notes that are traded in observable markets, adjusted upward by 50 basis points to reflect illiquidity and perceived risk premium differences. Other assumptions include a 25-year term (the surplus notes have no stated maturity date) and an interest rate that continues at the current 1.35 percent interest rate. The rate is typically adjusted every five years (next review due in 2018) and is based upon the then-current Federal Home Loan Bank borrowing rate for 5-year funds available to Employers Mutual. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value.
The Company uses an independent pricing source to obtain the estimated fair values of a majority of its securities, subject to an internal validation. The fair values are based on quoted market prices, where available. This is typically the case for equity securities and money market funds, which are accordingly classified as Level 1 fair value measurements. In cases where quoted market prices are not available, fair values are based on a variety of valuation techniques depending on the type of security. Fixed maturity securities, non-redeemable preferred stocks and various short-term investments in the Company’s portfolio may not trade on a daily basis; however, observable inputs are utilized in their valuations, and these securities are therefore classified as Level 2 fair value measurements. Following is a brief description of the various pricing techniques used by the independent pricing source for different asset classes.
On a quarterly basis, the Company receives from its independent pricing service a list of fixed maturity securities, if any, that were priced solely from broker quotes. For these securities, fair value may be determined using the broker quotes, or by the Company using similar pricing techniques as the Company’s independent pricing service. Depending on the level of observable inputs, these securities would be classified as Level 2 or Level 3 fair value measurements. At September 30, 2017 and December 31, 2016, the Company had no securities priced solely from broker quotes. A small number of the Company’s securities are not priced by the independent pricing service. Two of these are equity securities that are reported as Level 3 fair value measurements since no observable inputs are used in their valuations. The largest of these equity security holdings is in a privately placed non-redeemable convertible preferred stock investment in a start-up technology company that Employers Mutual is working closely with in its data analytics activities. This security is carried at its acquisition cost, which is presumed to approximate fair value. The other equity security, a much smaller holding, continues to be reported at the fair value obtained from the Securities Valuation Office (SVO) of the National Association of Insurance Commissioners (NAIC). The SVO establishes a per share price for this security based on an annual review of that company’s financial statements, typically performed during the second quarter. The other securities not priced by the Company’s independent pricing service consist of eight fixed maturity securities (nine at December 31, 2016). Two of these fixed maturity securities, classified as Level 3 fair value measurements, are corporate securities that convey premium tax benefits and are not publicly traded. The fair values for these securities are based on discounted cash flow analyses. The other fixed maturity securities are classified as Level 2 fair value measurements. The fair values for these fixed maturity securities were obtained from either the SVO, the Company's investment custodian, or the Company's investment department using similar pricing techniques as the Company’s independent pricing service. Presented in the tables below are the estimated fair values of the Company’s financial instruments as of September 30, 2017 and December 31, 2016.
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 and nine months ended September 30, 2017 and 2016. Any unrealized gains or losses on these securities are recognized in other comprehensive income (loss). Any gains or losses from settlements, disposals or impairments of these securities are reported as realized investment gains or losses in net income.
There were no transfers into or out of Levels 1 or 2 during the nine months ended September 30, 2017 or 2016. It is the Company’s policy to recognize transfers between levels at the beginning of the reporting period. |
INVESTMENTS |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS | INVESTMENTS Investments of the Company’s insurance subsidiaries are subject to the insurance laws of the state of their incorporation. These laws prescribe the kind, quality and concentration of investments that may be made by insurance companies. In general, these laws permit investments, within specified limits and subject to certain qualifications, in federal, state and municipal obligations, corporate bonds, preferred and common stocks and real estate mortgages. The Company believes that it is in compliance with these laws. The amortized cost and estimated fair value of securities available-for-sale as of September 30, 2017 and December 31, 2016 are as follows. All securities are classified as available-for-sale and are carried at fair value.
The following tables set forth the estimated fair values and gross unrealized losses associated with investment securities that were in an unrealized loss position as of September 30, 2017 and December 31, 2016, listed by length of time the securities were consistently in an unrealized loss position.
Most of the fixed maturity securities that are in an unrealized loss position are considered investment grade by credit rating agencies. Because management does not intend to sell these securities, does not believe it will be required to sell these securities before recovery, and believes it will collect the amounts due on these securities, it was determined that these securities were not “other-than-temporarily” impaired at September 30, 2017. No individual equity security accounted for a material amount of unrealized losses. Because the Company has the ability and intent to hold these securities for a reasonable amount of time to allow for recovery, it was determined that these securities were not “other-than-temporarily” impaired at September 30, 2017. All of the Company’s preferred stock holdings that are in an unrealized loss position are perpetual preferred stocks. The Company evaluates these perpetual preferred stocks with unrealized losses for “other-than-temporary” impairment similar to fixed maturity securities since they have debt-like characteristics such as periodic cash flows in the form of dividends and call features, are rated by rating agencies and are priced like other long-term callable fixed maturity securities. There was no evidence of any credit deterioration in the issuers of the preferred stocks and the Company does not intend to sell these securities before recovery, nor does it believe it will be required to sell these securities before recovery; therefore, it was determined that these securities were not “other-than-temporarily” impaired at September 30, 2017. The amortized cost and estimated fair values of fixed maturity securities at September 30, 2017, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties.
A summary of realized investment gains and (losses) is as follows:
Gains and losses realized on the disposition of investments are included in net income. The cost of investments sold is determined on the specific identification method using the highest cost basis first. The Company did not have any outstanding cumulative credit losses on fixed maturity securities that have been recognized in earnings from “other-than-temporary” impairments during any of the reported periods. The amounts reported as “other-than-temporary” impairments on equity securities do not include any individually significant items. The net realized investment losses recognized on other long-term investments primarily represent changes in the carrying value of a limited partnership that is used solely to support an equity tail-risk hedging strategy. |
CONTINGENT LIABILITIES |
9 Months Ended |
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Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
CONTINGENT LIABILITIES | CONTINGENT LIABILITIES The Company and Employers Mutual and its other subsidiaries are parties to numerous lawsuits arising in the normal course of the insurance business. The Company believes that the resolution of these lawsuits will not have a material adverse effect on its financial condition or its results of operations. The companies involved have established reserves which are believed adequate to cover any potential liabilities arising out of all such pending or threatened proceedings. The participants in the pooling agreement have purchased annuities from life insurance companies, under which the claimant is payee, to fund future payments that are fixed pursuant to specific claim settlement provisions. The Company’s share of case loss reserves eliminated by the purchase of those annuities was $110,000 at December 31, 2016. The Company had a contingent liability for the aggregate guaranteed amount of the annuities of $183,000 at December 31, 2016 should the issuers of those annuities fail to perform. Although management is not able to verify the amount, the Company would likely have a similar contingent liability at September 30, 2017. The probability of a material loss due to failure of performance by the issuers of these annuities is considered remote. |
STOCK REPURCHASE PROGRAM |
9 Months Ended |
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Sep. 30, 2017 | |
Equity [Abstract] | |
STOCK REPURCHASE PROGRAM | STOCK REPURCHASE PROGRAM On November 3, 2011, the Company’s Board of Directors authorized a $15.0 million stock repurchase program. This program does not have an expiration date. The timing and terms of the purchases are determined by management based on board approved parameters and market conditions, and are conducted in accordance with the applicable rules of the Securities and Exchange Commission. Common stock repurchased under this program will be retired by the Company. During the first nine months of 2016, the Company repurchased 17,300 shares under this program at an average cost of $22.14. |
ACCUMULATED OTHER COMPREHENSIVE INCOME |
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME | ACCUMULATED OTHER COMPREHENSIVE INCOME The Company has available-for-sale securities and receives an allocation of the actuarial losses and net prior service credits associated with Employers Mutual’s pension and postretirement benefit plans, both of which generate accumulated other comprehensive income (loss) amounts. The following table reconciles, by component, the beginning and ending balances of accumulated other comprehensive income, net of tax.
The following tables display amounts reclassified out of accumulated other comprehensive income and into net income during the three and nine months ended September 30, 2017 and 2016, respectively.
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NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED |
9 Months Ended |
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Sep. 30, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED | NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED In May 2014, the Financial Accounting Standards Board (FASB) updated its guidance related to the Revenue from Contracts with Customers Topic 606 of the Accounting Standards CodificationTM (Codification or ASC). The objective of this update (and other related following updates) is to improve the reporting of revenue by providing a more robust framework for addressing revenue issues, and improved disclosure requirements. Current revenue recognition guidance in U.S. GAAP is comprised of broad revenue recognition concepts together with numerous revenue requirements for particular industries or transactions, which sometimes result in different accounting for economically similar transactions. This guidance is to be applied retrospectively to annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted as of the original effective date (annual and interim reporting periods beginning after December 15, 2016). The Company will adopt this guidance during the first quarter of 2018. Since premium revenue from insurance contracts is excluded, the Company has only minimal revenue items that are covered by this guidance. The largest revenue item, outside of premium income, is commission income on excess and surplus lines business marketed by EMC Underwriters, LLC, which is included in "Other income" in the consolidated statements of income. Applying this new revenue recognition guidance to commission income produces no material difference compared to that recognized under current practices, as the commission income is typically recognized in full at the time the policy is issued, which is when substantially all of the performance obligation is performed. This guidance will have no impact on the consolidated financial condition or operating results of the Company. In January 2016, the FASB updated its guidance related to the Financial Instruments-Overall Subtopic 825-10 of the ASC. The objective of this update is to enhance the reporting model for financial instruments to provide financial statement users with more decision-useful information. The major change in reporting from this update that will impact the Company is a requirement that equity investments (excluding those accounted for under the equity method of accounting or those that are consolidated) be measured at fair value, with changes in fair value recognized in net income. While all of the Company's equity investments are already measured at fair value (with the exception of those that are consolidated and those that are accounted for under the equity method of accounting), the Company currently classifies all of its investments in equity securities as available-for-sale, and as such, the changes in fair value are currently recognized in other comprehensive income rather than net income. This guidance is to be applied to annual and interim reporting periods beginning after December 15, 2017, with recognition of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. Early adoption is not permitted. The Company will adopt this guidance during the first quarter of 2018. Adoption is not expected to impact consolidated stockholders' equity, but is expected to introduce a material amount of volatility to the Company's consolidated net income. In February 2016, the FASB issued updated guidance in Leases Topic 842 of the ASC, which supersedes the guidance in Leases Topic 840 of the ASC. The objective of this update is to increase transparency and comparability among organizations by requiring recognition of lease assets and lease liabilities on the balance sheet, and disclosure of key information about leasing arrangements. This guidance is effective for interim and annual periods beginning after December 15, 2018, and is to be applied using a modified retrospective approach. Early adoption is permitted. The Company will adopt this guidance during the first quarter of 2019. Management continues to research this guidance, which thus far has lead management to a preliminary determination that lease costs allocated to the Company through the pooling and quota share agreements can not be attributed to a specified asset, and therefore do not meet the definition of a leased asset contained in the guidance. As a result, adoption of this guidance is not expected to have a material impact on the Company's consolidated financial condition or net income. In June 2016, the FASB issued updated guidance in Financial Instruments-Credit Losses Topic 326 of the ASC. The objective of this update is to provide information about expected credit losses on financial instruments and other commitments to extend credit. Specifically, this updated guidance replaces the current incurred loss impairment methodology which delays recognition of a loss until it is probable a loss has been incurred, with a methodology that reflects expected credit losses considering a broader range of reasonable and supportable information. This guidance covers financial assets that are not accounted for at fair value through net income, thus will not be applicable to the Company's equity investments upon implementation of the updated guidance described above for the Financial Instruments-Overall Subtopic 825-10. This guidance is effective for interim and annual periods beginning after December 15, 2019, and is to be applied with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (modified-retrospective approach). Early adoption is permitted, but only to fiscal years beginning after December 15, 2018. The Company will adopt this guidance during the first quarter of 2020. The Company is currently evaluating the impact this guidance will have on the Company's consolidated financial condition and net income. In March 2017, the FASB issued updated guidance in Compensation-Retirement Benefits Topic 715 of the ASC. The objective of this update is to improve the presentation of net periodic pension and postretirement benefit costs by disaggregating the components of these expenses (disclosing the service cost component separately from the other components) for income statement reporting. Also included in this update is a prohibition against including components of the net periodic pension and postretirement benefit costs, other than the service cost component, in any capitalized assets. This guidance is effective for interim and annual periods beginning after December 15, 2017. The portion of the guidance related to the income statement display of net periodic pension and postretirement benefit costs is to be applied retrospectively, while the prohibition against including these costs, other than the service cost component, in capitalized assets is to be applied prospectively. Early adoption is permitted. The Company will adopt this guidance during the first quarter of 2018. Adoption will not impact consolidated stockholders' equity initially; however, the prohibition against including components of the net periodic pension and postretirement benefit costs, other than the service cost component, in capitalized assets is expected to result in a relatively small change in the deferred policy acquisition cost asset starting March 31, 2018, which is expected to have an immaterial impact, net of tax, on consolidated stockholders' equity and net income from that which would otherwise have been reported. |
REINSURANCE (Tables) |
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Reinsurance Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reinsurance transactions for insurance companies | The effect of reinsurance on premiums written and earned, and losses and settlement expenses incurred, for the three and nine months ended September 30, 2017 and 2016 is presented below. The classification of the assumed and ceded reinsurance amounts between affiliates and nonaffiliates is based on the participants in the underlying reinsurance agreements, and is intended to provide an understanding of the actual source of the reinsurance activities. This presentation differs from the classifications used in the consolidated financial statements, where all amounts flowing through the pooling and quota share agreements and inter-company reinsurance programs with Employers Mutual are reported as “affiliated” balances.
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LIABILITY FOR LOSSES AND SETTLEMENT EXPENSES (Tables) |
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Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation of beginning and ending reserves for losses and settlement expenses | The following table sets forth a reconciliation of beginning and ending reserves for losses and settlement expenses of the Company. Amounts presented are on a net basis, with a reconciliation of beginning and ending reserves to the gross amounts presented in the consolidated financial statements.
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SEGMENT INFORMATION (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarized financial information for segments | Summarized financial information for the Company’s segments is as follows:
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Summary of net premiums earned by line of insurance | The following table displays the premiums earned for the property and casualty insurance segment and the reinsurance segment for the three and nine months ended September 30, 2017 and 2016, by line of insurance.
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INCOME TAXES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of income tax expense (benefit) | The actual income tax expense (benefit) for the three and nine months ended September 30, 2017 and 2016 differed from the “expected” income tax expense (benefit) for those periods (computed by applying the United States federal corporate tax rate of 35 percent to income (loss) before income tax) as follows:
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EMPLOYEE RETIREMENT PLANS (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of net periodic benefit cost | The components of net periodic benefit cost (income) for Employers Mutual’s pension and postretirement benefit plans is as follows:
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DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 September 30, 2017 and December 31, 2016 are summarized in the tables below.
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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 September 30, 2017 and December 31, 2016.
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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 and nine months ended September 30, 2017 and 2016. Any unrealized gains or losses on these securities are recognized in other comprehensive income (loss). Any gains or losses from settlements, disposals or impairments of these securities are reported as realized investment gains or losses in net income.
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INVESTMENTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of available-for-sale securities from cost basis to fair value | The amortized cost and estimated fair value of securities available-for-sale as of September 30, 2017 and December 31, 2016 are as follows. All securities are classified as available-for-sale and are carried at fair value.
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Estimated fair value and gross unrealized losses associated with investment securities | The following tables set forth the estimated fair values and gross unrealized losses associated with investment securities that were in an unrealized loss position as of September 30, 2017 and December 31, 2016, listed by length of time the securities were consistently in an unrealized loss position.
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Amortized cost and estimated fair value of fixed maturity securities | The amortized cost and estimated fair values of fixed maturity securities at September 30, 2017, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties.
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Summary of realized investment gains and (losses) | A summary of realized investment gains and (losses) is as follows:
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ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of beginning and ending balances of accumulated other comprehensive income | The following table reconciles, by component, the beginning and ending balances of accumulated other comprehensive income, net of tax.
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Amounts reclassified out of accumulated other comprehensive income (loss) | The following tables display amounts reclassified out of accumulated other comprehensive income and into net income during the three and nine months ended September 30, 2017 and 2016, respectively.
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REINSURANCE (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
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Premiums written | ||||
Net premiums written | $ 180,534 | $ 176,243 | $ 480,554 | $ 469,458 |
Premiums earned | ||||
Net premiums earned | 155,190 | 152,181 | 449,514 | 441,364 |
Losses and settlement expenses incurred | ||||
Net losses and settlement expenses incurred | 119,576 | 108,173 | 323,089 | 296,102 |
Affiliated Entity [Member] | ||||
Premiums written | ||||
Assumed | 153,900 | 146,289 | 415,426 | 393,418 |
Ceded | (124,567) | (121,884) | (323,096) | (322,427) |
Premiums earned | ||||
Assumed | 128,325 | 122,058 | 375,601 | 359,985 |
Ceded | (98,449) | (98,765) | (298,108) | (295,166) |
Losses and settlement expenses incurred | ||||
Assumed | 81,324 | 85,476 | 259,111 | 233,505 |
Ceded | (75,248) | (63,294) | (227,404) | (172,481) |
Non Affiliated Entity [Member] | ||||
Premiums written | ||||
Direct | 122,665 | 119,849 | 312,809 | 311,542 |
Assumed | 40,288 | 40,813 | 111,598 | 114,808 |
Ceded | (11,752) | (8,824) | (36,183) | (27,883) |
Premiums earned | ||||
Direct | 96,547 | 96,730 | 287,821 | 284,281 |
Assumed | 39,688 | 40,564 | 113,933 | 115,122 |
Ceded | (10,921) | (8,406) | (29,733) | (22,858) |
Losses and settlement expenses incurred | ||||
Direct | 62,745 | 59,831 | 198,317 | 167,827 |
Assumed | 58,229 | 27,999 | 107,091 | 74,085 |
Ceded | $ (7,474) | $ (1,839) | $ (14,026) | $ (6,834) |
Property and casualty insurance [Member] | ||||
Reinsurance Transactions For Insurance Companies, by Product Segment [Line Items] | ||||
Percentage of pool participation (in hundredths) | 30.00% | 30.00% | 30.00% | 30.00% |
Premiums written | ||||
Net premiums written | $ 144,011 | $ 138,904 | $ 385,209 | $ 370,704 |
Premiums earned | ||||
Net premiums earned | 120,472 | 116,372 | 350,307 | 338,589 |
Losses and settlement expenses incurred | ||||
Net losses and settlement expenses incurred | 74,039 | 81,643 | 231,067 | 225,207 |
Property and casualty insurance [Member] | Affiliated Entity [Member] | ||||
Premiums written | ||||
Assumed | 153,900 | 146,289 | 415,426 | 393,418 |
Ceded | (123,355) | (120,614) | (319,459) | (318,617) |
Premiums earned | ||||
Assumed | 128,325 | 122,058 | 375,601 | 359,985 |
Ceded | (97,237) | (97,495) | (294,471) | (291,356) |
Losses and settlement expenses incurred | ||||
Assumed | 81,047 | 85,196 | 258,169 | 232,472 |
Ceded | (66,279) | (63,282) | (218,425) | (172,892) |
Property and casualty insurance [Member] | Non Affiliated Entity [Member] | ||||
Premiums written | ||||
Direct | 122,665 | 119,849 | 312,809 | 311,542 |
Assumed | 1,333 | 1,221 | 3,542 | 3,430 |
Ceded | (10,532) | (7,841) | (27,109) | (19,069) |
Premiums earned | ||||
Direct | 96,547 | 96,730 | 287,821 | 284,281 |
Assumed | 1,225 | 1,170 | 3,370 | 3,332 |
Ceded | (8,388) | (6,091) | (22,014) | (17,653) |
Losses and settlement expenses incurred | ||||
Direct | 62,745 | 59,831 | 198,317 | 167,827 |
Assumed | 961 | 793 | 2,406 | 2,298 |
Ceded | (4,435) | (895) | (9,400) | (4,498) |
Reinsurance [Member] | ||||
Premiums written | ||||
Net premiums written | 36,523 | 37,339 | 95,345 | 98,754 |
Premiums earned | ||||
Net premiums earned | 34,718 | 35,809 | 99,207 | 102,775 |
Losses and settlement expenses incurred | ||||
Net losses and settlement expenses incurred | 45,537 | 26,530 | 92,022 | 70,895 |
Reinsurance [Member] | Affiliated Entity [Member] | ||||
Premiums written | ||||
Assumed | 0 | 0 | 0 | 0 |
Ceded | (1,212) | (1,270) | (3,637) | (3,810) |
Premiums earned | ||||
Assumed | 0 | 0 | 0 | 0 |
Ceded | (1,212) | (1,270) | (3,637) | (3,810) |
Losses and settlement expenses incurred | ||||
Assumed | 277 | 280 | 942 | 1,033 |
Ceded | (8,969) | (12) | (8,979) | 411 |
Reinsurance [Member] | Non Affiliated Entity [Member] | ||||
Premiums written | ||||
Direct | 0 | 0 | 0 | 0 |
Assumed | 38,955 | 39,592 | 108,056 | 111,378 |
Ceded | (1,220) | (983) | (9,074) | (8,814) |
Premiums earned | ||||
Direct | 0 | 0 | 0 | 0 |
Assumed | 38,463 | 39,394 | 110,563 | 111,790 |
Ceded | (2,533) | (2,315) | (7,719) | (5,205) |
Losses and settlement expenses incurred | ||||
Direct | 0 | 0 | 0 | 0 |
Assumed | 57,268 | 27,206 | 104,685 | 71,787 |
Ceded | $ (3,039) | $ (944) | $ (4,626) | $ (2,336) |
INCOME TAXES (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Income tax expense (benefit) reconciliation [Abstract] | |||||
United States federal corporate tax rate (in hundredths) | 35.00% | 35.00% | 35.00% | 35.00% | |
Computed expected income tax expense (benefit) | $ (154) | $ 1,767 | $ 5,330 | $ 11,904 | |
Increases (decreases) in tax resulting from: | |||||
Tax-exempt interest income | (656) | (709) | (2,122) | (2,101) | |
Dividends received deduction | (294) | (336) | (948) | (1,110) | |
Proration of tax-exempt interest and dividends received deduction | 142 | 157 | 460 | 482 | |
Other, net | (224) | 39 | (545) | (75) | |
Total income tax expense (benefit) | (1,186) | $ 918 | 2,175 | $ 9,100 | |
Provision for uncertain tax positions | $ 0 | $ 0 | $ 0 |
CONTINGENT LIABILITIES (Details) $ in Thousands |
Dec. 31, 2016
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Entity's share of case loss reserves, eliminated by the purchase of annuities | $ 110 |
Contingent liability for aggregate guaranteed amount of annuities | $ 183 |
STOCK REPURCHASE PROGRAM (Details) - USD ($) $ / shares in Units, $ in Thousands |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Nov. 03, 2011 |
|
Equity [Abstract] | |||
Authorized amount of stock repurchase program | $ 15,000 | ||
Stock repurchased and retired during period, shares | 67,974 | 17,300 | |
Average cost per share of stock repurchased | $ 27.34 | $ 22.14 |
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