DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 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 March 31, 2018 and December 31, 2017 are summarized in the tables below.



March 31, 2018	Carrying amounts		Estimated fair values
($ in thousands)	Carrying amounts		Estimated fair values
Assets:
Fixed maturity securities available-for-sale:
U.S. treasury	$	7,956	$	7,956
U.S. government-sponsored agencies	302,476		302,476
Obligations of states and political subdivisions	293,931		293,931
Commercial mortgage-backed	76,660		76,660
Residential mortgage-backed	132,350		132,350
Other asset-backed	22,748		22,748
Corporate	420,352		420,352
Total fixed maturity securities available-for-sale	1,256,473		1,256,473

Equity investments, at fair value
Common stocks:
Financial services	44,895		44,895
Information technology	33,886		33,886
Healthcare	28,372		28,372
Consumer staples	14,715		14,715
Consumer discretionary	21,966		21,966
Energy	15,620		15,620
Industrials	25,235		25,235
Other	15,762		15,762
Non-redeemable preferred stocks	19,224		19,224
Investment funds	823		823
Total equity investments	220,498		220,498

Short-term investments	21,664		21,664

Liabilities:
Surplus notes	25,000		15,731



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 March 31, 2018 and December 31, 2017.



March 31, 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	$	7,956	$	—	$	—	$	7,956	$	—
U.S. government-sponsored agencies	302,476		—		—		302,476		—
Obligations of states and political subdivisions	293,931		—		—		293,931		—
Commercial mortgage-backed	76,660		—		—		76,660		—
Residential mortgage-backed	132,350		—		—		132,350		—
Other asset-backed	22,748		—		—		22,748		—
Corporate	420,352		—		—		419,790		562
Total fixed maturity securities available-for-sale	1,256,473		—		—		1,255,911		562

Equity investments, at fair value:
Common stocks:
Financial services	44,895		—		44,892		—		3
Information technology	33,886		—		33,886		—		—
Healthcare	28,372		—		28,372		—		—
Consumer staples	14,715		—		14,715		—		—
Consumer discretionary	21,966		—		21,966		—		—
Energy	15,620		—		15,620		—		—
Industrials	25,235		—		25,235		—		—
Other	15,762		—		15,762		—		—
Non-redeemable preferred stocks	19,224		—		9,443		9,781		—
Investment funds	823		823		—		—		—
Total equity investments	220,498		823		209,891		9,781		3

Short-term investments	21,664		—		21,664		—		—

Financial instruments not reported at fair value:
Liabilities:
Surplus notes	15,731		—		—		—		15,731



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 months ended March 31, 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 March 31, 2018	Fixed maturity securities available-for-sale, corporate			Equity securities, financial services		Total
Beginning balance	$	620		$	3	$	623
Settlements	(56		)	—		(56		)
Unrealized losses included in other comprehensive income (loss)	(2		)	—		(2		)
Balance at March 31, 2018	$	562		$	3	$	565



($ in thousands)	Fair value measurements using significant unobservable (Level 3) inputs
Three months ended March 31, 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	$	982		$	3	$	2,000	$	2,985
Settlements	(50		)	—		—		(50		)
Unrealized losses included in other comprehensive income (loss)	(3		)	—		—		(3		)
Balance at March 31, 2017	$	929		$	3	$	2,000	$	2,932

- 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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