DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2018

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 June 30, 2018 and December 31, 2017 are summarized in the tables below.



June 30, 2018	Carrying amounts		Estimated fair values
($ in thousands)	Carrying amounts		Estimated fair values
Assets:
Fixed maturity securities available-for-sale:
U.S. treasury	$	7,914	$	7,914
U.S. government-sponsored agencies	296,224		296,224
Obligations of states and political subdivisions	289,730		289,730
Commercial mortgage-backed	75,676		75,676
Residential mortgage-backed	128,530		128,530
Other asset-backed	21,671		21,671
Corporate	421,954		421,954
Total fixed maturity securities available-for-sale	1,241,699		1,241,699

Equity investments, at fair value
Common stocks:
Financial services	47,818		47,818
Information technology	33,801		33,801
Healthcare	29,813		29,813
Consumer staples	12,571		12,571
Consumer discretionary	23,237		23,237
Energy	17,676		17,676
Industrials	24,721		24,721
Other	12,476		12,476
Non-redeemable preferred stocks	19,028		19,028
Investment funds	1,256		1,256
Total equity investments	222,397		222,397

Short-term investments	23,447		23,447

Liabilities:
Surplus notes	25,000		15,505



December 31, 2017	Carrying amounts		Estimated fair values
($ in thousands)	Carrying amounts		Estimated fair values
Assets:
Fixed maturity securities available-for-sale:
U.S. treasury	$	8,078	$	8,078
U.S. government-sponsored agencies	297,949		297,949
Obligations of states and political subdivisions	307,536		307,536
Commercial mortgage-backed	83,980		83,980
Residential mortgage-backed	119,799		119,799
Other asset-backed	24,114		24,114
Corporate	433,560		433,560
Total fixed maturity securities available-for-sale	1,275,016		1,275,016

Equity securities available-for-sale:
Common stocks:
Financial services	43,522		43,522
Information technology	35,810		35,810
Healthcare	30,595		30,595
Consumer staples	14,127		14,127
Consumer discretionary	20,538		20,538
Energy	16,905		16,905
Industrials	28,489		28,489
Other	16,421		16,421
Non-redeemable preferred stocks	21,708		21,708
Total equity securities available-for-sale	228,115		228,115

Short-term investments	23,613		23,613

Liabilities:
Surplus notes	25,000		16,689

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 June 30, 2018 and December 31, 2017.



June 30, 2018					Fair value measurements using
($ in thousands)	Total		Investments measured at net asset value (NAV)		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	$	7,914	$	—	$	—	$	7,914	$	—
U.S. government-sponsored agencies	296,224		—		—		296,224		—
Obligations of states and political subdivisions	289,730		—		—		289,730		—
Commercial mortgage-backed	75,676		—		—		75,676		—
Residential mortgage-backed	128,530		—		—		128,530		—
Other asset-backed	21,671		—		—		21,671		—
Corporate	421,954		—		—		421,480		474
Total fixed maturity securities available-for-sale	1,241,699		—		—		1,241,225		474

Equity investments, at fair value:
Common stocks:
Financial services	47,818		—		47,818		—		—
Information technology	33,801		—		33,801		—		—
Healthcare	29,813		—		29,813		—		—
Consumer staples	12,571		—		12,571		—		—
Consumer discretionary	23,237		—		23,237		—		—
Energy	17,676		—		17,676		—		—
Industrials	24,721		—		24,721		—		—
Other	12,476		—		12,476		—		—
Non-redeemable preferred stocks	19,028		—		9,396		9,632		—
Investment funds	1,256		1,256		—		—		—
Total equity investments	222,397		1,256		211,509		9,632		—

Short-term investments	23,447		—		23,447		—		—

Financial instruments not reported at fair value:
Liabilities:
Surplus notes	15,505		—		—		—		15,505



December 31, 2017					Fair value measurements using
($ in thousands)	Total		Investments measured at net asset value (NAV)		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	$	8,078	$	—	$	—	$	8,078	$	—
U.S. government-sponsored agencies	297,949		—		—		297,949		—
Obligations of states and political subdivisions	307,536		—		—		307,536		—
Commercial mortgage-backed	83,980		—		—		83,980		—
Residential mortgage-backed	119,799		—		—		119,799		—
Other asset-backed	24,114		—		—		24,114		—
Corporate	433,560		—		—		432,940		620
Total fixed maturity securities available-for-sale	1,275,016		—		—		1,274,396		620

Equity securities available-for-sale:
Common stocks:
Financial services	43,522		—		43,519		—		3
Information technology	35,810		—		35,810		—		—
Healthcare	30,595		—		30,595		—		—
Consumer staples	14,127		—		14,127		—		—
Consumer discretionary	20,538		—		20,538		—		—
Energy	16,905		—		16,905		—		—
Industrials	28,489		—		28,489		—		—
Other	16,421		—		16,421		—		—
Non-redeemable preferred stocks	21,708		—		9,512		10,196		2,000
Total equity securities available-for-sale	228,115		—		215,916		10,196		2,003

Short-term investments	23,613		—		23,613		—		—

Financial instruments not reported at fair value:
Liabilities:
Surplus notes	16,689		—		—		—		16,689

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 six months ended June 30, 2018 and 2017. 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.



($ in thousands)	Fair value measurements using significant unobservable (Level 3) inputs
Three months ended June 30, 2018	Fixed maturity securities available-for-sale, corporate			Equity securities, financial services			Total
Beginning balance	$	562		$	3		$	565
Settlements	(89		)	—			(89		)
Unrealized gains (losses) included in other comprehensive income (loss)	1			(3		)	(2		)
Balance at June 30, 2018	$	474		$	—		$	474

Six months ended June 30, 2018
Beginning balance	$	620		$	3		$	623
Settlements	(145		)	—			(145		)
Unrealized gains (losses) included in other comprehensive income (loss)	(1		)	(3		)	(4		)
Balance at June 30, 2018	$	474		$	—		$	474



($ in thousands)	Fair value measurements using significant unobservable (Level 3) inputs
Three months ended June 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	$	929		$	3	$	2,000	$	2,932
Settlements	(90		)	—		—		(90		)
Unrealized gains (losses) included in other comprehensive income (loss)	1			—		—		1
Balance at June 30, 2017	$	840		$	3	$	2,000	$	2,843

Six months ended June 30, 2017
Beginning balance	$	982		$	3	$	2,000	$	2,985
Settlements	(140		)	—		—		(140		)
Unrealized gains (losses) included in other comprehensive income (loss)	(2		)	—		—		(2		)
Balance at June 30, 2017	$	840		$	3	$	2,000	$	2,843

- Definition

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

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