XML 29 R13.htm IDEA: XBRL DOCUMENT

Fair Value Disclosures [Text Block]

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures

Available-for-sale securities included in Level 1 are equities with quoted market prices. Level 2 is primarily comprised of our portfolio of government securities, agency mortgage-backed securities, corporate fixed income securities, foreign government obligations, collateralized mortgage obligations, municipals and GSEs that were priced with observable market inputs. Level 3 securities consist of municipal tax credit strips.

The valuation method used to determine the fair value of municipal tax credit strips is the present value of the remaining future tax credits (at the original issue discount rate) as presented in the redemption tables in the Municipal Prospectuses. This original issue discount is accreted into income on a constant yield basis over the term of the debt instrument. Further we retain independent pricing vendors to assist in valuing certain instruments.

Trading securities:

Trading securities included in Level 1 are equity securities with quoted market prices.

The following tables present our financial assets measured at fair value on a recurring basis for the periods indicated (in thousands):

		September 30, 2017
		Level 1			Level 2		Level 3		Total

FINANCIAL ASSETS:
Fixed maturities available-for-sale:
Corporate securities	$	`-`		$	`158,176`	$	`-`	$	`158,176`
CMOs - residential		`-`			`6,905`		`-`		`6,905`
US Government obligations		`-`			`43,877`		`-`		`43,877`
Agency MBS - residential		`-`			`16`		`-`		`16`
GSEs		`-`			`9,782`		`-`		`9,782`
States and political subdivisions		`-`			`191,124`		`1,917`		`193,041`
Foreign government obligations		`-`			`4,213`		`-`		`4,213`
Redeemable preferred stocks		`9,990`			`-`		`-`		`9,990`
Total fixed maturities		`9,990`			`414,093`		`1,917`		`426,000`

Equity securities available-for-sale:
Common stocks		`1,785`			`-`		`-`		`1,785`
Nonredeemable preferred stocks		`3,675`			`-`		`-`		`3,675`
Total equity securities		`5,460`			`-`		`-`		`5,460`

Trading securities - equities		`516`			`-`		`-`		`516`
Total trading securities		`516`			`-`		`-`		`516`

Total Financial Assets	$	`15,966`		$	`414,093`	$	`1,917`	$	`431,976`

		December 31, 2016
		Level 1			Level 2		Level 3		Total

FINANCIAL ASSETS:
Fixed maturities available-for-sale:
Corporate securities	$	-		$	187,695	$	-	$	187,695
CMOs - residential		-			5,913		-		5,913
US Government obligations		-			43,109		-		43,109
Agency MBS - residential		-			23		-		23
GSEs		-			9,880		-		9,880
States and political subdivisions		-			184,778		2,033		186,811
Foreign government obligations		-			4,954		-		4,954
Redeemable preferred stocks		11,102			-		-		11,102
Total fixed maturities		11,102			436,352		2,033		449,487

Equity securities available-for-sale:
Common stocks		1,790			-		-		1,790
Nonredeemable preferred stocks		3,543			-		-		3,543
Total equity securities		5,333			-		-		5,333

Trading securities - equities		592			-		-		592
Total trading securities		592			-		-		592

Total Financial Assets	$	17,027		$	436,352	$	2,033	$	455,412

It is the Company’s policy to recognize transfers of assets and liabilities between levels of the fair value hierarchy at the end of a reporting period. The Company does not transfer out of Level 3 and into Level 2 until such time as observable inputs become available and reliable or the range of available independent prices narrow. The Company did not transfer any securities between Level 1, Level 2 or Level 3 in either 2017 or 2016.

The following table presents the changes in fair value of our Level 3 financial assets for the periods indicated (in thousands):

		Three Months Ended September 30,
		2017				2016
		States and		Total			States and		Total
		Political		Level 3			Political		Level 3
		Subdivisions		Assets			Subdivisions		Assets

Beginning balance	$	`1,956`	$	`1,956`		$	`2,107`	$	`2,107`

Increases (decreases) recognized in earnings:
Net realized investment gains		`-`		`-`			`-`		`-`

Gains (losses) included in other
comprehensive income (loss):
Net unrealized gains (losses)		`(8)`		`(8)`			`(10)`		`(10)`

Repayments and amortization of
fixed maturities		`(31)`		`(31)`			`(27)`		`(27)`
Sales		`-`		`-`			`-`		`-`

Balance at end of period	$	`1,917`	$	`1,917`		$	`2,070`	$	`2,070`

		Nine Months Ended September 30,
		2017					2016
		States and		Total					States and		Total
		Political		Level 3		CMOs			Political		Level 3
		Subdivisions		Assets		Commercial			Subdivisions		Assets

Beginning balance	$	`2,033`	$	`2,033`	$	`1,195`		$	`2,179`	$	`3,374`

Gains (losses) included in earnings:
Net realized investment gains		`-`		`-`		`141`			`-`		`141`

Gains (losses) included in other
comprehensive income (loss):
Net unrealized gains (losses)		`(26)`		`(26)`		`(296)`			`(31)`		`(327)`

Repayments and amortization of
fixed maturities		`(90)`		`(90)`		`(74)`			`(78)`		`(152)`
Sales		`-`		`-`		`(966)`			`-`		`(966)`

Balance at end of period	$	`1,917`	$	`1,917`	$	`-`		$	`2,070`	$	`2,070`

During 2016, the Company had contingent liabilities classified in Level 3 of the fair value hierarchy. These liabilities were paid out by December 31, 2016; there were no comparable amounts in 2017. The following table presents the changes in fair value of our Level 3 financial liabilities for the periods indicated (in thousands):

		Three Months Ended				Nine Months Ended
		September 30, 2016				September 30, 2016
				Total				Total
		Contingent		Level 3		Contingent		Level 3
		Liabilities		Liabilities		Liabilities		Liabilities

Beginning balance	$	`1,445`	$	`1,445`	$	`1,650`	$	`1,650`

Gains (losses) included in earnings:
Net investment income		`(204)`		`(204)`		`(947)`		`(947)`
Other income		`(185)`		`(185)`		`353`		`353`

Payment of contingent liability		`(700)`		`(700)`		`(700)`		`(700)`

Balance at end of period	$	`356`	$	`356`	$	`356`	$	`356`

The following table provides carrying values, fair values and classification in the fair value hierarchy of the Company’s financial instruments, for the periods indicated, that are not carried at fair value but are subject to fair value disclosure requirements, for the periods indicated (in thousands):

September 30, 2017

December 31, 2016

Level 1

Level 2

Level 1

Level 2

Fair

Fair

Carrying

Fair

Fair

Carrying

Value

Value

Value

Value

Value

Value

FINANCIAL ASSETS:

Short-term investments

$

50

$

-

$

50

$

6,912

$

-

$

6,912

FINANCIAL LIABILITIES:

Funds on deposit

$

-

$

143,911

$

143,637

$

-

$

146,098

$

145,749

The following methods and assumptions were used to estimate the fair value of the financial instruments that are not carried at fair value in the Condensed Consolidated Financial Statements:

Short-term Investments

Investments with original maturities of 91 days to one year are considered short-term investments and are carried at cost, which approximates fair value.

Funds on Deposit

The Company has two types of funds on deposit. The first type is credited with a current market interest rate, resulting in a fair value which approximates the carrying amount. The second type carries fixed interest rates which are higher than current market interest rates. The fair value of these deposits was estimated by discounting the payments using current market interest rates. The Company's universal life policies are also credited with current market interest rates, resulting in a fair value which approximates the carrying amount. Both types of funds on deposit are included in Level 2 of the fair value hierarchy.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details