DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2017

Summary of carrying amount and estimated fair value of financial instruments

The carrying amounts and estimated fair values of the Company’s financial instruments as of September 30, 2017 and December 31, 2016 are summarized in the tables below.



September 30, 2017	Carrying amounts		Estimated fair values
($ in thousands)	Carrying amounts		Estimated fair values
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)	Carrying amounts		Estimated fair values
Assets:
Fixed maturity securities available-for-sale:
U.S. treasury	$	7,830	$	7,830
U.S. government-sponsored agencies	239,197		239,197
Obligations of states and political subdivisions	335,757		335,757
Commercial mortgage-backed	37,572		37,572
Residential mortgage-backed	96,434		96,434
Other asset-backed	26,393		26,393
Corporate	456,516		456,516
Total fixed maturity securities available-for-sale	1,199,699		1,199,699

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

Short-term investments	39,670		39,670

Liabilities:
Surplus notes	25,000		11,228

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

Presented in the tables below are the estimated fair values of the Company’s financial instruments as of September 30, 2017 and December 31, 2016.



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

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.



($ 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

- 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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