DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

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



September 30, 2018	Carrying amounts		Estimated fair values
($ in thousands)	Carrying amounts		Estimated fair values
Assets:
Fixed maturity securities available-for-sale:
U.S. treasury	$	7,858	$	7,858
U.S. government-sponsored agencies	290,057		290,057
Obligations of states and political subdivisions	282,307		282,307
Commercial mortgage-backed	75,314		75,314
Residential mortgage-backed	146,725		146,725
Other asset-backed	21,329		21,329
Corporate	424,482		424,482
Total fixed maturity securities available-for-sale	1,248,072		1,248,072

Equity investments, at fair value
Common stocks:
Financial services	48,647		48,647
Information technology	39,711		39,711
Healthcare	33,389		33,389
Consumer staples	13,302		13,302
Consumer discretionary	24,087		24,087
Energy	17,808		17,808
Industrials	23,943		23,943
Other	15,029		15,029
Non-redeemable preferred stocks	18,706		18,706
Investment funds	4,146		4,146
Total equity investments	238,768		238,768

Short-term investments	33,717		33,717

Liabilities:
Surplus notes	25,000		15,145



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 September 30, 2018 and December 31, 2017.



September 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	$	7,858	$	—	$	—	$	7,858	$	—
U.S. government-sponsored agencies	290,057		—		—		290,057		—
Obligations of states and political subdivisions	282,307		—		—		282,307		—
Commercial mortgage-backed	75,314		—		—		75,314		—
Residential mortgage-backed	146,725		—		—		146,725		—
Other asset-backed	21,329		—		—		21,329		—
Corporate	424,482		—		—		424,133		349
Total fixed maturity securities available-for-sale	1,248,072		—		—		1,247,723		349

Equity investments, at fair value:
Common stocks:
Financial services	48,647		—		48,647		—		—
Information technology	39,711		—		39,711		—		—
Healthcare	33,389		—		33,389		—		—
Consumer staples	13,302		—		13,302		—		—
Consumer discretionary	24,087		—		24,087		—		—
Energy	17,808		—		17,808		—		—
Industrials	23,943		—		23,943		—		—
Other	15,029		—		15,029		—		—
Non-redeemable preferred stocks	18,706		—		9,093		9,613		—
Investment funds	4,146		4,146		—		—		—
Total equity investments	238,768		4,146		225,009		9,613		—

Short-term investments	33,717		—		33,717		—		—

Financial instruments not reported at fair value:
Liabilities:
Surplus notes	15,145		—		—		—		15,145



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 nine months ended September 30, 2018 and 2017. Any unrealized gains or losses on fixed maturity securities are recognized in other comprehensive income (loss). Any gains or losses from settlements, disposals, impairments and, starting in 2018, unrealized gains or losses on equity 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, 2018	Fixed maturity securities available-for-sale, corporate			Equity securities, financial services			Total
Beginning balance	$	474		$	—		$	474
Settlements	(125		)	—			(125		)
Balance at September 30, 2018	$	349		$	—		$	349

Nine months ended September 30, 2018
Beginning balance	$	620		$	3		$	623
Settlements	(270		)	—			(270		)
Unrealized losses included in net income	—			(3		)	(3		)
Unrealized losses included in other comprehensive income (loss) on securities still held at reporting date	(1		)	—			(1		)
Balance at September 30, 2018	$	349		$	—		$	349



($ 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 losses included in other comprehensive income (loss) on securities still held at reporting date	(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 losses included in other comprehensive income (loss) on securities still held at reporting date	(3		)	—		—		(3		)
Balance at September 30, 2017	$	714		$	3	$	2,000	$	2,717

- 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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