DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2016

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, 2016 and December 31, 2015 are summarized in the tables below.



September 30, 2016	Carrying amounts		Estimated fair values
($ in thousands)	Carrying amounts		Estimated fair values
Assets:
Fixed maturity securities available-for-sale:
U.S. treasury	$	8,207	$	8,207
U.S. government-sponsored agencies	237,494		237,494
Obligations of states and political subdivisions	349,912		349,912
Commercial mortgage-backed	41,882		41,882
Residential mortgage-backed	99,509		99,509
Other asset-backed	28,251		28,251
Corporate	471,895		471,895
Total fixed maturity securities available-for-sale	1,237,150		1,237,150

Equity securities available-for-sale:
Common stocks:
Financial services	32,419		32,419
Information technology	30,937		30,937
Healthcare	27,519		27,519
Consumer staples	21,066		21,066
Consumer discretionary	24,046		24,046
Energy	18,829		18,829
Industrials	23,694		23,694
Other	21,322		21,322
Non-redeemable preferred stocks	19,450		19,450
Total equity securities available-for-sale	219,282		219,282

Short-term investments	42,611		42,611

Liabilities:
Surplus notes	25,000		12,131



December 31, 2015	Carrying amounts		Estimated fair values
($ in thousands)	Carrying amounts		Estimated fair values
Assets:
Fixed maturity securities available-for-sale:
U.S. treasury	$	12,589	$	12,589
U.S. government-sponsored agencies	202,666		202,666
Obligations of states and political subdivisions	344,359		344,359
Commercial mortgage-backed	46,108		46,108
Residential mortgage-backed	88,543		88,543
Other asset-backed	17,844		17,844
Corporate	448,916		448,916
Total fixed maturity securities available-for-sale	1,161,025		1,161,025

Equity securities available-for-sale:
Common stocks:
Financial services	33,955		33,955
Information technology	28,102		28,102
Healthcare	25,894		25,894
Consumer staples	18,200		18,200
Consumer discretionary	18,923		18,923
Energy	21,068		21,068
Industrials	20,416		20,416
Other	20,683		20,683
Non-redeemable preferred stocks	19,002		19,002
Total equity securities available-for-sale	206,243		206,243

Short-term investments	38,599		38,599

Liabilities:
Surplus notes	25,000		10,823

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, 2016 and December 31, 2015.



September 30, 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	$	8,207	$	—	$	8,207	$	—
U.S. government-sponsored agencies	237,494		—		237,494		—
Obligations of states and political subdivisions	349,912		—		349,912		—
Commercial mortgage-backed	41,882		—		41,882		—
Residential mortgage-backed	99,509		—		99,509		—
Other asset-backed	28,251		—		28,251		—
Corporate	471,895		—		470,825		1,070
Total fixed maturity securities available-for-sale	1,237,150		—		1,236,080		1,070

Equity securities available-for-sale:
Common stocks:
Financial services	32,419		32,416		—		3
Information technology	30,937		30,937		—		—
Healthcare	27,519		27,519		—		—
Consumer staples	21,066		21,066		—		—
Consumer discretionary	24,046		24,046		—		—
Energy	18,829		18,829		—		—
Industrials	23,694		23,694		—		—
Other	21,322		21,322		—		—
Non-redeemable preferred stocks	19,450		11,991		7,459		—
Total equity securities available-for-sale	219,282		211,820		7,459		3

Short-term investments	42,611		42,611		—		—

Financial instruments not reported at fair value:
Liabilities:
Surplus notes	12,131		—		—		12,131



December 31, 2015			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	$	12,589	$	—	$	12,589	$	—
U.S. government-sponsored agencies	202,666		—		202,666		—
Obligations of states and political subdivisions	344,359		—		344,359		—
Commercial mortgage-backed	46,108		—		46,108		—
Residential mortgage-backed	88,543		—		88,543		—
Other asset-backed	17,844		—		17,844		—
Corporate	448,916		—		447,587		1,329
Total fixed maturity securities available-for-sale	1,161,025		—		1,159,696		1,329

Equity securities available-for-sale:
Common stocks:
Financial services	33,955		33,952		—		3
Information technology	28,102		28,102		—		—
Healthcare	25,894		25,894		—		—
Consumer staples	18,200		18,200		—		—
Consumer discretionary	18,923		18,923		—		—
Energy	21,068		21,068		—		—
Industrials	20,416		20,416		—		—
Other	20,683		20,683		—		—
Non-redeemable preferred stocks	19,002		11,706		7,296		—
Total equity securities available-for-sale	206,243		198,944		7,296		3

Short-term investments	38,599		38,599		—		—

Financial instruments not reported at fair value:
Liabilities:
Surplus notes	10,823		—		—		10,823

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

Presented in the tables below are 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, 2016 and 2015. Any unrealized gains or losses on these securities are recognized in other comprehensive income. Any gains or losses from settlements, disposals or impairments of these securities are reported as realized investment gains or losses in net income.



Three months ended September 30, 2016	Fair value measurements using significant unobservable (Level 3) inputs
($ in thousands)	Fixed maturity securities available-for-sale, corporate			Equity securities available-for-sale, financial services		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



Three months ended September 30, 2015	Fair value measurements using significant unobservable (Level 3) inputs
($ in thousands)	Fixed maturity securities available-for-sale, corporate			Equity securities available-for-sale, financial services		Total
Beginning balance	$	1,622		$	3	$	1,625
Settlements	(171		)	—		(171		)
Unrealized gains (losses) included in other comprehensive income (loss)	2			—		2
Balance at September 30, 2015	$	1,453		$	3	$	1,456

Nine months ended September 30, 2015
Beginning balance	$	1,662		$	3	$	1,665
Settlements	(214		)	—		(214		)
Unrealized gains (losses) included in other comprehensive income (loss)	5			—		5
Balance at September 30, 2015	$	1,453		$	3	$	1,456

- 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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