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Fair Value Disclosures [Text Block]

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures

Note 5.Fair Value Disclosures For all financial and non-financial assets and liabilities accounted for at fair value on a recurring basis, the Company utilizes valuation techniques based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market expectations. These two types of inputs create the following fair value hierarchy: Level 1 - Quoted prices for identical instruments in active markets. Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3 - Instruments where significant value drivers are unobservable. The following section describes the valuation methodologies we use to measure different assets and liabilities at fair value. Fixed maturities available-for-sale: Fixed maturities available-for-sale included in Level 2 are 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 debt 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. Equity securities: Equity 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): December 31, 2019 Level 1 Level 2 Level 3 Total FINANCIAL ASSETS: Fixed maturities available-for-sale: Corporate securities $ - $ 162,023 $ - $ 162,023 CMOs - residential - 5,382 - 5,382 US Government obligations - 50,549 - 50,549 GSEs - 6,123 - 6,123 States and political subdivisions - 152,479 1,529 154,008 Foreign government obligations - 6,889 - 6,889 Total fixed maturities - 383,445 1,529 384,974 Equity securities: Common stocks 2,864 - - 2,864 Nonredeemable preferred stocks 883 - - 883 Total equity securities 3,747 - - 3,747 Total Financial Assets $ 3,747 $ 383,445 $ 1,529 $ 388,721 December 31, 2018 Level 1 Level 2 Level 3 Total FINANCIAL ASSETS: Fixed maturities available-for-sale: Corporate securities $ - $ 197,489 $ - $ 197,489 CMOs - residential - 5,840 - 5,840 US Government obligations - 62,809 - 62,809 Agency MBS - residential - 3 - 3 GSEs - 6,486 - 6,486 States and political subdivisions - 166,225 1,709 167,934 Foreign government obligations - 7,044 - 7,044 Redeemable preferred stocks 5,859 - - 5,859 Total fixed maturities 5,859 445,896 1,709 453,464 Equity securities: Common stocks 2,366 - - 2,366 Nonredeemable preferred stocks 2,800 - - 2,800 Total equity securities 5,166 - - 5,166 Total Financial Assets $ 11,025 $ 445,896 $ 1,709 $ 458,630 The following table presents the changes in fair value of our Level 3 financial assets for the years indicated (in thousands): 2019 2018 States and Total States and Total Political Level 3 Political Level 3 Subdivisions Assets Subdivisions Assets Beginning balance $ 1,709 $ 1,709 $ 1,876 $ 1,876 Gains (losses) included in other comprehensive income (loss): Net unrealized gains (losses) (26) (26) (30) (30) Repayments and amortization of fixed maturities (154) (154) (137) (137) Balance at end of period $ 1,529 $ 1,529 $ 1,709 $ 1,709 The following table provides carrying values, fair values and classification in the fair value hierarchy of the Company’s financial instruments, that are not carried at fair value but are subject to fair value disclosure requirements, for the periods indicated (in thousands): December 31, 2019 December 31, 2018 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 1,050 - 1,050 Securities purchased under agreements to resell 107,157 - 107,157 12,063 - 12,063 FINANCIAL LIABILITIES: Funds on deposit $ - $ 141,010 $ 140,951 $ - $ 141,662 $ 141,635 Other policyholders’ funds - 12,049 12,049 - 10,939 10,939 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 Consolidated Financial Statements: Securities purchased under agreements to resell Securities purchased under agreements to resell are carried at the amounts at which the securities will be subsequently resold, which approximates fair value. 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. Other Policyholders’ Funds Other policyholders’ funds are primarily credited with current market interest rates resulting in a fair value which approximates the carrying amount.

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.

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