ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
EMC INSURANCE GROUP INC.
|
(Exact name of registrant as specified in its charter)
|
Iowa
|
|
42-6234555
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
717 Mulberry Street, Des Moines, Iowa
|
|
50309
|
(Address of principal executive offices)
|
|
(Zip Code)
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(515) 345-2902
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(Registrant’s telephone number, including area code)
|
o
|
Large accelerated filer
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ý
|
Accelerated filer
|
o
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
o
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Emerging growth company
|
|
(Do not check if a smaller reporting company)
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Class
|
|
Outstanding at April 30, 2018
|
Common stock, $1.00 par value
|
|
21,541,316
|
|
|
PAGE
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PART I
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FINANCIAL INFORMATION
|
|
Item 1.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
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PART II
|
OTHER INFORMATION
|
|
Item 2.
|
||
Item 6.
|
||
|
|
|
PART I.
|
FINANCIAL INFORMATION
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
($ in thousands, except share and per share amounts)
|
|
(Unaudited)
|
|
|
||||
ASSETS
|
|
|
|
|
||||
Investments:
|
|
|
|
|
||||
Fixed maturity securities available-for-sale, at fair value (amortized cost $1,258,390 and $1,253,166)
|
|
$
|
1,256,473
|
|
|
$
|
1,275,016
|
|
Equity investments, at fair value (cost $146,520 and $144,274)
|
|
220,498
|
|
|
228,115
|
|
||
Equity investments, at alternative measurement of cost less impairments
|
|
2,000
|
|
|
—
|
|
||
Other long-term investments
|
|
17,212
|
|
|
13,648
|
|
||
Short-term investments
|
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21,664
|
|
|
23,613
|
|
||
Total investments
|
|
1,517,847
|
|
|
1,540,392
|
|
||
|
|
|
|
|
||||
Cash
|
|
382
|
|
|
347
|
|
||
Reinsurance receivables due from affiliate
|
|
31,276
|
|
|
31,650
|
|
||
Prepaid reinsurance premiums due from affiliate
|
|
11,601
|
|
|
12,789
|
|
||
Deferred policy acquisition costs (affiliated $42,667 and $40,848)
|
|
42,892
|
|
|
41,114
|
|
||
Prepaid pension and postretirement benefits due from affiliate
|
|
20,593
|
|
|
20,683
|
|
||
Accrued investment income
|
|
11,616
|
|
|
11,286
|
|
||
Amounts receivable under reverse repurchase agreements
|
|
22,250
|
|
|
16,500
|
|
||
Accounts receivable
|
|
906
|
|
|
1,604
|
|
||
Goodwill
|
|
942
|
|
|
942
|
|
||
Other assets (affiliated $4,034 and $4,423)
|
|
4,848
|
|
|
4,633
|
|
||
Total assets
|
|
$
|
1,665,153
|
|
|
$
|
1,681,940
|
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
($ in thousands, except share and per share amounts)
|
|
(Unaudited)
|
|
|
||||
LIABILITIES
|
|
|
|
|
||||
Losses and settlement expenses (affiliated $732,840 and $726,413)
|
|
$
|
737,055
|
|
|
$
|
732,612
|
|
Unearned premiums (affiliated $257,992 and $256,434)
|
|
259,071
|
|
|
257,797
|
|
||
Other policyholders' funds (all affiliated)
|
|
9,586
|
|
|
10,013
|
|
||
Surplus notes payable to affiliate
|
|
25,000
|
|
|
25,000
|
|
||
Amounts due affiliate to settle inter-company transaction balances
|
|
214
|
|
|
367
|
|
||
Pension benefits payable to affiliate
|
|
3,953
|
|
|
4,185
|
|
||
Income taxes payable
|
|
1,751
|
|
|
544
|
|
||
Deferred income taxes
|
|
8,227
|
|
|
15,020
|
|
||
Other liabilities (affiliated $18,493 and $27,520)
|
|
38,947
|
|
|
32,556
|
|
||
Total liabilities
|
|
1,083,804
|
|
|
1,078,094
|
|
||
|
|
|
|
|
||||
STOCKHOLDERS' EQUITY
|
|
|
|
|
||||
Common stock, $1 par value, authorized 30,000,000 shares; issued and outstanding, 21,519,498 shares in 2018 and 21,455,545 shares in 2017
|
|
21,519
|
|
|
21,455
|
|
||
Additional paid-in capital
|
|
126,106
|
|
|
124,556
|
|
||
Accumulated other comprehensive income (loss)
|
|
(2,167
|
)
|
|
83,384
|
|
||
Retained earnings
|
|
435,891
|
|
|
374,451
|
|
||
Total stockholders' equity
|
|
581,349
|
|
|
603,846
|
|
||
Total liabilities and stockholders' equity
|
|
$
|
1,665,153
|
|
|
$
|
1,681,940
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
||||||
($ in thousands, except share and per share amounts)
|
|
2018
|
|
2017
|
||||
REVENUES
|
|
|
|
|
||||
Premiums earned (affiliated $154,246, and $143,611)
|
|
$
|
155,786
|
|
|
$
|
144,487
|
|
Net investment income
|
|
11,371
|
|
|
11,007
|
|
||
Net realized investment gains (losses) and, beginning in 2018, change in unrealized investment gains on equity investments
|
|
(5,393
|
)
|
|
(627
|
)
|
||
Other income (affiliated $1,581 and $1,009)
|
|
1,615
|
|
|
870
|
|
||
Total revenues
|
|
163,379
|
|
|
155,737
|
|
||
|
|
|
|
|
||||
LOSSES AND EXPENSES
|
|
|
|
|
||||
Losses and settlement expenses (affiliated $110,570 and $94,771)
|
|
110,628
|
|
|
96,285
|
|
||
Dividends to policyholders (all affiliated)
|
|
2,120
|
|
|
2,722
|
|
||
Amortization of deferred policy acquisition costs (affiliated $26,917 and $26,595)
|
|
27,292
|
|
|
26,811
|
|
||
Other underwriting expenses (affiliated $22,920 and $20,693)
|
|
22,855
|
|
|
20,634
|
|
||
Interest expense (all affiliated)
|
|
142
|
|
|
84
|
|
||
Other expenses (affiliated $498 and $467)
|
|
870
|
|
|
761
|
|
||
Total losses and expenses
|
|
163,907
|
|
|
147,297
|
|
||
Income (loss) before income tax expense (benefit)
|
|
(528
|
)
|
|
8,440
|
|
||
|
|
|
|
|
||||
INCOME TAX EXPENSE (BENEFIT)
|
|
|
|
|
||||
Current
|
|
1,206
|
|
|
2,046
|
|
||
Deferred
|
|
(1,658
|
)
|
|
(410
|
)
|
||
Total income tax expense (benefit)
|
|
(452
|
)
|
|
1,636
|
|
||
Net income (loss)
|
|
$
|
(76
|
)
|
|
$
|
6,804
|
|
|
|
|
|
|
||||
Net income (loss) per common share - basic and diluted
|
|
$
|
—
|
|
|
$
|
0.32
|
|
|
|
|
|
|
||||
Dividend per common share
|
|
$
|
0.22
|
|
|
$
|
0.21
|
|
|
|
|
|
|
||||
Average number of common shares outstanding - basic and diluted
|
|
21,501,897
|
|
|
21,254,430
|
|
|
|
|
|
|
|
|
Three months ended
March 31, |
||||||
($ in thousands)
|
|
2018
|
|
2017
|
||||
Net income (loss)
|
|
$
|
(76
|
)
|
|
$
|
6,804
|
|
|
|
|
|
|
||||
OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
||||
Unrealized holding gains (losses) on investment securities not reflected in net income, net of deferred income tax expense (benefit) of $(5,042) and $5,226
|
|
(18,969
|
)
|
|
9,705
|
|
||
Reclassification adjustment for net realized investment (gains) losses included in net income (loss), net of income tax (expense) benefit of $51 and $(581)
|
|
193
|
|
|
(1,079
|
)
|
||
Reclassification adjustment for amounts amortized into net periodic pension and postretirement benefit income, net of deferred income tax expense of $(144) and $(147):
|
|
|
|
|
||||
Net actuarial loss
|
|
81
|
|
|
239
|
|
||
Prior service credit
|
|
(622
|
)
|
|
(511
|
)
|
||
Total reclassification adjustment associated with affiliate's pension and postretirement benefit plans
|
|
(541
|
)
|
|
(272
|
)
|
||
|
|
|
|
|
||||
Other comprehensive income (loss)
|
|
(19,317
|
)
|
|
8,354
|
|
||
|
|
|
|
|
||||
Total comprehensive income (loss)
|
|
$
|
(19,393
|
)
|
|
$
|
15,158
|
|
($ in thousands, except per share amounts)
|
|
Common
stock |
|
Additional
paid-in capital |
|
Accumulated
other comprehensive income (loss) |
|
Retained
earnings |
|
Total
stockholders' equity |
||||||||||
Balance at December 31, 2017
|
|
$
|
21,455
|
|
|
$
|
124,556
|
|
|
$
|
83,384
|
|
|
$
|
374,451
|
|
|
$
|
603,846
|
|
Cumulative adjustment for adoption of financial instruments recognition and measurement changes
|
|
|
|
|
|
|
|
(66,234
|
)
|
|
66,234
|
|
|
—
|
|
|||||
Issuance of common stock through stock plans
|
|
94
|
|
|
2,304
|
|
|
|
|
|
|
|
|
2,398
|
|
|||||
Repurchase of common stock
|
|
(30
|
)
|
|
(772
|
)
|
|
|
|
|
|
|
|
(802
|
)
|
|||||
Increase resulting from stock-based compensation expense
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
18
|
|
|||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
(19,317
|
)
|
|
|
|
|
(19,317
|
)
|
|||||
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
(76
|
)
|
|
(76
|
)
|
|||||
Dividends paid to public stockholders ($0.22 per share)
|
|
|
|
|
|
|
|
|
|
|
(2,128
|
)
|
|
(2,128
|
)
|
|||||
Dividends paid to affiliate ($0.22 per share)
|
|
|
|
|
|
|
|
|
|
|
(2,590
|
)
|
|
(2,590
|
)
|
|||||
Balance at March 31, 2018
|
|
$
|
21,519
|
|
|
$
|
126,106
|
|
|
$
|
(2,167
|
)
|
|
$
|
435,891
|
|
|
$
|
581,349
|
|
($ in thousands, except per share amounts)
|
|
Common
stock |
|
Additional
paid-in capital |
|
Accumulated
other comprehensive income (loss) |
|
Retained
earnings |
|
Total
stockholders' equity |
||||||||||
Balance at December 31, 2016
|
|
$
|
21,223
|
|
|
$
|
119,054
|
|
|
$
|
46,081
|
|
|
$
|
366,984
|
|
|
$
|
553,342
|
|
Issuance of common stock through stock plans
|
|
76
|
|
|
1,877
|
|
|
|
|
|
|
|
|
1,953
|
|
|||||
Repurchase of common stock
|
|
(64
|
)
|
|
(1,694
|
)
|
|
|
|
|
|
|
|
(1,758
|
)
|
|||||
Increase resulting from stock-based compensation expense
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
7
|
|
|||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
8,354
|
|
|
|
|
|
8,354
|
|
|||||
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
6,804
|
|
|
6,804
|
|
|||||
Dividends paid to public stockholders ($0.21 per share)
|
|
|
|
|
|
|
|
|
|
|
(1,956
|
)
|
|
(1,956
|
)
|
|||||
Dividends paid to affiliate ($0.21 per share)
|
|
|
|
|
|
|
|
|
|
|
(2,472
|
)
|
|
(2,472
|
)
|
|||||
Balance at March 31, 2017
|
|
$
|
21,235
|
|
|
$
|
119,244
|
|
|
$
|
54,435
|
|
|
$
|
369,360
|
|
|
$
|
564,274
|
|
|
|
Three months ended
March 31, |
||||||
($ in thousands)
|
|
2018
|
|
2017
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
||||
Net income (loss)
|
|
$
|
(76
|
)
|
|
$
|
6,804
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
||||
Losses and settlement expenses (affiliated $6,427 and $5,016)
|
|
4,443
|
|
|
4,597
|
|
||
Unearned premiums (affiliated $1,558 and $2,021)
|
|
1,274
|
|
|
1,595
|
|
||
Other policyholders' funds due to affiliate
|
|
(427
|
)
|
|
550
|
|
||
Amounts due to/from affiliate to settle inter-company transaction balances
|
|
(153
|
)
|
|
(12,135
|
)
|
||
Net pension and postretirement benefits due from affiliate
|
|
(827
|
)
|
|
(512
|
)
|
||
Reinsurance receivables due from affiliate
|
|
374
|
|
|
(171
|
)
|
||
Prepaid reinsurance premiums due from affiliate
|
|
1,188
|
|
|
(1,035
|
)
|
||
Commissions payable (affiliated $(7,893) and $(7,270))
|
|
(7,817
|
)
|
|
(7,270
|
)
|
||
Deferred policy acquisition costs (affiliated $(1,819) and $905)
|
|
(1,778
|
)
|
|
1,023
|
|
||
Accrued investment income
|
|
(330
|
)
|
|
(1,081
|
)
|
||
Current income tax
|
|
1,207
|
|
|
1,682
|
|
||
Deferred income tax
|
|
(1,658
|
)
|
|
(410
|
)
|
||
Net realized investment gains (losses) and, beginning in 2018, change in unrealized investment gains on equity investments
|
|
5,393
|
|
|
627
|
|
||
Other, net (affiliated $(727) and $(3,145))
|
|
2,644
|
|
|
1,997
|
|
||
Total adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
|
|
3,533
|
|
|
(10,543
|
)
|
||
Net cash provided by (used in) operating activities
|
|
3,457
|
|
|
(3,739
|
)
|
||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
||||
Purchases of fixed maturity securities available-for-sale
|
|
(53,019
|
)
|
|
(39,461
|
)
|
||
Disposals of fixed maturity securities available-for-sale
|
|
51,447
|
|
|
41,013
|
|
||
Purchases of equity investments
|
|
(20,143
|
)
|
|
(17,490
|
)
|
||
Disposals of equity investments
|
|
19,168
|
|
|
12,134
|
|
||
Purchases of other long-term investments
|
|
(4,507
|
)
|
|
(6,087
|
)
|
||
Disposals of other long-term investments
|
|
2,305
|
|
|
365
|
|
||
Net (purchases) disposals of short-term investments
|
|
1,949
|
|
|
14,140
|
|
||
Net receipts under reverse repurchase agreements
|
|
2,500
|
|
|
3,500
|
|
||
Net cash (used in) provided by investing activities
|
|
(300
|
)
|
|
8,114
|
|
||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
||||
Issuance of common stock through affiliate’s stock plans
|
|
2,398
|
|
|
1,953
|
|
||
Repurchase of common stock
|
|
(802
|
)
|
|
(1,758
|
)
|
||
Dividends paid to stockholders (affiliated $(2,590) and $(2,472))
|
|
(4,718
|
)
|
|
(4,428
|
)
|
||
Net cash used in financing activities
|
|
(3,122
|
)
|
|
(4,233
|
)
|
||
NET INCREASE IN CASH
|
|
35
|
|
|
142
|
|
||
Cash at the beginning of the year
|
|
347
|
|
|
307
|
|
||
Cash at the end of the quarter
|
|
$
|
382
|
|
|
$
|
449
|
|
1.
|
BASIS OF PRESENTATION
|
2.
|
TRANSACTIONS WITH AFFILIATES
|
3.
|
REINSURANCE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2018
|
||||||||||
($ in thousands)
|
|
Property and
casualty insurance |
|
Reinsurance
|
|
Total
|
||||||
Premiums written
|
|
|
|
|
|
|
||||||
Direct
|
|
$
|
100,044
|
|
|
$
|
—
|
|
|
$
|
100,044
|
|
Assumed from nonaffiliates
|
|
1,018
|
|
|
41,121
|
|
|
42,139
|
|
|||
Assumed from affiliates
|
|
130,201
|
|
|
—
|
|
|
130,201
|
|
|||
Ceded to nonaffiliates
|
|
(7,970
|
)
|
|
(2,005
|
)
|
|
(9,975
|
)
|
|||
Ceded to affiliates
|
|
(103,024
|
)
|
|
(1,313
|
)
|
|
(104,337
|
)
|
|||
Net premiums written
|
|
$
|
120,269
|
|
|
$
|
37,803
|
|
|
$
|
158,072
|
|
|
|
|
|
|
|
|
||||||
Premiums earned
|
|
|
|
|
|
|
||||||
Direct
|
|
$
|
95,745
|
|
|
$
|
—
|
|
|
$
|
95,745
|
|
Assumed from nonaffiliates
|
|
1,002
|
|
|
41,092
|
|
|
42,094
|
|
|||
Assumed from affiliates
|
|
129,148
|
|
|
—
|
|
|
129,148
|
|
|||
Ceded to nonaffiliates
|
|
(8,538
|
)
|
|
(2,625
|
)
|
|
(11,163
|
)
|
|||
Ceded to affiliates
|
|
(98,725
|
)
|
|
(1,313
|
)
|
|
(100,038
|
)
|
|||
Net premiums earned
|
|
$
|
118,632
|
|
|
$
|
37,154
|
|
|
$
|
155,786
|
|
|
|
|
|
|
|
|
||||||
Losses and settlement expenses incurred
|
|
|
|
|
|
|
||||||
Direct
|
|
$
|
52,287
|
|
|
$
|
—
|
|
|
$
|
52,287
|
|
Assumed from nonaffiliates
|
|
992
|
|
|
26,415
|
|
|
27,407
|
|
|||
Assumed from affiliates
|
|
85,967
|
|
|
358
|
|
|
86,325
|
|
|||
Ceded to nonaffiliates
|
|
(2,991
|
)
|
|
(399
|
)
|
|
(3,390
|
)
|
|||
Ceded to affiliates
|
|
(52,754
|
)
|
|
753
|
|
|
(52,001
|
)
|
|||
Net losses and settlement expenses incurred
|
|
$
|
83,501
|
|
|
$
|
27,127
|
|
|
$
|
110,628
|
|
|
|
Three months ended March 31, 2017
|
||||||||||
($ in thousands)
|
|
Property and
casualty insurance |
|
Reinsurance
|
|
Total
|
||||||
Premiums written
|
|
|
|
|
|
|
||||||
Direct
|
|
$
|
96,752
|
|
|
$
|
—
|
|
|
$
|
96,752
|
|
Assumed from nonaffiliates
|
|
919
|
|
|
33,505
|
|
|
34,424
|
|
|||
Assumed from affiliates
|
|
124,800
|
|
|
—
|
|
|
124,800
|
|
|||
Ceded to nonaffiliates
|
|
(8,133
|
)
|
|
(2,024
|
)
|
|
(10,157
|
)
|
|||
Ceded to affiliates
|
|
(99,731
|
)
|
|
(1,213
|
)
|
|
(100,944
|
)
|
|||
Net premiums written
|
|
$
|
114,607
|
|
|
$
|
30,268
|
|
|
$
|
144,875
|
|
|
|
|
|
|
|
|
||||||
Premiums earned
|
|
|
|
|
|
|
||||||
Direct
|
|
$
|
95,898
|
|
|
$
|
—
|
|
|
$
|
95,898
|
|
Assumed from nonaffiliates
|
|
1,015
|
|
|
34,689
|
|
|
35,704
|
|
|||
Assumed from affiliates
|
|
122,097
|
|
|
—
|
|
|
122,097
|
|
|||
Ceded to nonaffiliates
|
|
(6,484
|
)
|
|
(2,637
|
)
|
|
(9,121
|
)
|
|||
Ceded to affiliates
|
|
(98,878
|
)
|
|
(1,213
|
)
|
|
(100,091
|
)
|
|||
Net premiums earned
|
|
$
|
113,648
|
|
|
$
|
30,839
|
|
|
$
|
144,487
|
|
|
|
|
|
|
|
|
||||||
Losses and settlement expenses incurred
|
|
|
|
|
|
|
||||||
Direct
|
|
$
|
62,761
|
|
|
$
|
—
|
|
|
$
|
62,761
|
|
Assumed from nonaffiliates
|
|
752
|
|
|
21,240
|
|
|
21,992
|
|
|||
Assumed from affiliates
|
|
76,742
|
|
|
364
|
|
|
77,106
|
|
|||
Ceded to nonaffiliates
|
|
(1,401
|
)
|
|
(830
|
)
|
|
(2,231
|
)
|
|||
Ceded to affiliates
|
|
(63,334
|
)
|
|
(9
|
)
|
|
(63,343
|
)
|
|||
Net losses and settlement expenses incurred
|
|
$
|
75,520
|
|
|
$
|
20,765
|
|
|
$
|
96,285
|
|
•
|
“Direct” represents business produced by the property and casualty insurance subsidiaries.
|
•
|
“Assumed from nonaffiliates” for the property and casualty insurance subsidiaries represents their aggregate
30 percent
pool participation percentage of involuntary business assumed by the pool participants pursuant to state law. For the reinsurance subsidiary, this line represents the reinsurance business assumed through the quota share agreement (including “fronting” activities initiated by Employers Mutual) and the business assumed outside the quota share agreement.
|
•
|
“Assumed from affiliates” for the property and casualty insurance subsidiaries represents their aggregate
30 percent
pool participation percentage of all the pool members’ direct business. The amounts reported under the caption “Losses and settlement expenses incurred” also include claim-related services provided by Employers Mutual that are allocated to the property and casualty insurance subsidiaries and the reinsurance subsidiary.
|
•
|
“Ceded to nonaffiliates” for the property and casualty insurance subsidiaries represents their aggregate
30 percent
pool participation percentage of 1) the amounts ceded to nonaffiliated reinsurance companies in accordance with the terms of the reinsurance agreements providing protection to the pool and each of its participants, and 2) the amounts ceded on a mandatory basis to state organizations in connection with various programs. For the reinsurance subsidiary, this line includes 1) reinsurance business that is ceded to other insurance companies in connection with “fronting” activities initiated by Employers Mutual, and 2) amounts ceded to purchase additional reinsurance protection in peak exposure territories from external parties.
|
•
|
“Ceded to affiliates” for the property and casualty insurance subsidiaries represents the cession of their direct business to Employers Mutual under the terms of the pooling agreement and amounts ceded to Employers Mutual under the terms of the inter-company reinsurance program. For the reinsurance subsidiary this line represents amounts ceded to Employers Mutual under the terms of the inter-company reinsurance program.
|
4.
|
LIABILITY FOR LOSSES AND SETTLEMENT EXPENSES
|
|
|
Three months ended March 31,
|
||||||
($ in thousands)
|
|
2018
|
|
2017
|
||||
Gross reserves at beginning of year
|
|
$
|
732,612
|
|
|
$
|
690,532
|
|
Re-valuation due to foreign currency exchange rates
|
|
525
|
|
|
(1,913
|
)
|
||
Less ceded reserves at beginning of year
|
|
30,923
|
|
|
20,664
|
|
||
Net reserves at beginning of year
|
|
701,164
|
|
|
671,781
|
|
||
|
|
|
|
|
||||
Incurred losses and settlement expenses related to:
|
|
|
|
|
|
|
||
Current year
|
|
116,204
|
|
|
111,189
|
|
||
Prior years
|
|
(5,576
|
)
|
|
(14,904
|
)
|
||
Total incurred losses and settlement expenses
|
|
110,628
|
|
|
96,285
|
|
||
|
|
|
|
|
||||
Paid losses and settlement expenses related to:
|
|
|
|
|
|
|
||
Current year
|
|
24,262
|
|
|
22,923
|
|
||
Prior years
|
|
81,877
|
|
|
69,826
|
|
||
Total paid losses and settlement expenses
|
|
106,139
|
|
|
92,749
|
|
||
|
|
|
|
|
||||
Net reserves at end of period
|
|
705,653
|
|
|
675,317
|
|
||
Plus ceded reserves at end of period
|
|
30,549
|
|
|
20,788
|
|
||
Re-valuation due to foreign currency exchange rates
|
|
853
|
|
|
(976
|
)
|
||
Gross reserves at end of period
|
|
$
|
737,055
|
|
|
$
|
695,129
|
|
5.
|
SEGMENT INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2018
|
|
Property and
casualty insurance |
|
Reinsurance
|
|
Parent
company |
|
Consolidated
|
||||||||
($ in thousands)
|
|
|
|
|
||||||||||||
Premiums earned
|
|
$
|
118,632
|
|
|
$
|
37,154
|
|
|
$
|
—
|
|
|
$
|
155,786
|
|
|
|
|
|
|
|
|
|
|
||||||||
Underwriting profit (loss):
|
|
|
|
|
|
|
|
|
||||||||
SAP underwriting profit (loss)
|
|
(9,036
|
)
|
|
1,563
|
|
|
—
|
|
|
(7,473
|
)
|
||||
GAAP adjustments
|
|
262
|
|
|
102
|
|
|
—
|
|
|
364
|
|
||||
GAAP underwriting profit (loss)
|
|
(8,774
|
)
|
|
1,665
|
|
|
—
|
|
|
(7,109
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net investment income
|
|
8,148
|
|
|
3,218
|
|
|
5
|
|
|
11,371
|
|
||||
Net realized investment gains (losses) and, beginning in 2018, change in unrealized investment gains on equity investments
|
|
(3,293
|
)
|
|
(2,100
|
)
|
|
—
|
|
|
(5,393
|
)
|
||||
Other income (loss)
|
|
2,051
|
|
|
(436
|
)
|
|
—
|
|
|
1,615
|
|
||||
Interest expense
|
|
142
|
|
|
—
|
|
|
—
|
|
|
142
|
|
||||
Other expenses
|
|
233
|
|
|
—
|
|
|
637
|
|
|
870
|
|
||||
Income (loss) before income tax expense (benefit)
|
|
$
|
(2,243
|
)
|
|
$
|
2,347
|
|
|
$
|
(632
|
)
|
|
$
|
(528
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Assets
|
|
$
|
1,185,069
|
|
|
$
|
481,257
|
|
|
$
|
581,742
|
|
|
$
|
2,248,068
|
|
Eliminations
|
|
—
|
|
|
—
|
|
|
(576,656
|
)
|
|
(576,656
|
)
|
||||
Reclassifications
|
|
(316
|
)
|
|
(5,045
|
)
|
|
(898
|
)
|
|
(6,259
|
)
|
||||
Total assets
|
|
$
|
1,184,753
|
|
|
$
|
476,212
|
|
|
$
|
4,188
|
|
|
$
|
1,665,153
|
|
Three months ended March 31, 2017
|
|
Property and
casualty insurance |
|
Reinsurance
|
|
Parent
company |
|
Consolidated
|
||||||||
($ in thousands)
|
|
|
|
|
||||||||||||
Premiums earned
|
|
$
|
113,648
|
|
|
$
|
30,839
|
|
|
$
|
—
|
|
|
$
|
144,487
|
|
|
|
|
|
|
|
|
|
|
||||||||
Underwriting profit (loss):
|
|
|
|
|
|
|
|
|
||||||||
SAP underwriting profit (loss)
|
|
(2,594
|
)
|
|
3,247
|
|
|
—
|
|
|
653
|
|
||||
GAAP adjustments
|
|
(2,287
|
)
|
|
(331
|
)
|
|
—
|
|
|
(2,618
|
)
|
||||
GAAP underwriting profit (loss)
|
|
(4,881
|
)
|
|
2,916
|
|
|
—
|
|
|
(1,965
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net investment income
|
|
8,015
|
|
|
2,983
|
|
|
9
|
|
|
11,007
|
|
||||
Net realized investment gains (losses) and, beginning in 2018, change in unrealized investment gains on equity investments
|
|
(597
|
)
|
|
(30
|
)
|
|
—
|
|
|
(627
|
)
|
||||
Other income (loss)
|
|
1,441
|
|
|
(571
|
)
|
|
—
|
|
|
870
|
|
||||
Interest expense
|
|
84
|
|
|
—
|
|
|
—
|
|
|
84
|
|
||||
Other expenses
|
|
179
|
|
|
—
|
|
|
582
|
|
|
761
|
|
||||
Income (loss) before income tax expense (benefit)
|
|
$
|
3,715
|
|
|
$
|
5,298
|
|
|
$
|
(573
|
)
|
|
$
|
8,440
|
|
|
|
|
|
|
|
|
|
|
||||||||
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
||||||||
Assets
|
|
$
|
1,200,636
|
|
|
$
|
484,678
|
|
|
$
|
604,105
|
|
|
$
|
2,289,419
|
|
Eliminations
|
|
—
|
|
|
—
|
|
|
(599,036
|
)
|
|
(599,036
|
)
|
||||
Reclassifications
|
|
(1,393
|
)
|
|
(6,273
|
)
|
|
(777
|
)
|
|
(8,443
|
)
|
||||
Total assets
|
|
$
|
1,199,243
|
|
|
$
|
478,405
|
|
|
$
|
4,292
|
|
|
$
|
1,681,940
|
|
|
|
Three months ended March 31,
|
||||||
($ in thousands)
|
|
2018
|
|
2017
|
||||
Property and casualty insurance segment
|
|
|
|
|
||||
Commercial lines:
|
|
|
|
|
||||
Automobile
|
|
$
|
30,644
|
|
|
$
|
28,032
|
|
Property
|
|
26,429
|
|
|
25,502
|
|
||
Workers' compensation
|
|
24,902
|
|
|
24,703
|
|
||
Other liability
|
|
24,962
|
|
|
24,128
|
|
||
Other
|
|
2,186
|
|
|
2,109
|
|
||
Total commercial lines
|
|
109,123
|
|
|
104,474
|
|
||
|
|
|
|
|
||||
Personal lines
|
|
9,509
|
|
|
9,174
|
|
||
Total property and casualty insurance
|
|
$
|
118,632
|
|
|
$
|
113,648
|
|
|
|
|
|
|
||||
Reinsurance segment
|
|
|
|
|
||||
Pro rata reinsurance
|
|
$
|
13,073
|
|
|
$
|
10,435
|
|
Excess of loss reinsurance
|
|
24,081
|
|
|
20,404
|
|
||
Total reinsurance
|
|
$
|
37,154
|
|
|
$
|
30,839
|
|
|
|
|
|
|
||||
Consolidated
|
|
$
|
155,786
|
|
|
$
|
144,487
|
|
6.
|
INCOME TAXES
|
|
|
Three months ended
March 31, |
||||||
($ in thousands)
|
|
2018
|
|
2017
|
||||
Computed "expected" income tax expense (benefit)
|
|
$
|
(111
|
)
|
|
$
|
2,954
|
|
Increases (decreases) in tax resulting from:
|
|
|
|
|
||||
Tax-exempt interest income
|
|
(310
|
)
|
|
(705
|
)
|
||
Dividends received deduction
|
|
(123
|
)
|
|
(306
|
)
|
||
Proration of tax-exempt interest and dividends received deduction
|
|
108
|
|
|
152
|
|
||
Other, net
|
|
(16
|
)
|
|
(459
|
)
|
||
Total income tax expense (benefit)
|
|
$
|
(452
|
)
|
|
$
|
1,636
|
|
7.
|
EMPLOYEE RETIREMENT PLANS
|
|
|
Three months ended
March 31, |
||||||
($ in thousands)
|
|
2018
|
|
2017
|
||||
Pension plans:
|
|
|
|
|
||||
Service cost
|
|
$
|
4,126
|
|
|
$
|
3,860
|
|
Interest cost
|
|
2,665
|
|
|
2,795
|
|
||
Expected return on plan assets
|
|
(5,978
|
)
|
|
(5,191
|
)
|
||
Amortization of net actuarial loss
|
|
125
|
|
|
908
|
|
||
Amortization of prior service cost
|
|
—
|
|
|
5
|
|
||
Net periodic pension benefit cost
|
|
$
|
938
|
|
|
$
|
2,377
|
|
|
|
|
|
|
||||
Postretirement benefit plans:
|
|
|
|
|
||||
Service cost
|
|
$
|
368
|
|
|
$
|
341
|
|
Interest cost
|
|
521
|
|
|
570
|
|
||
Expected return on plan assets
|
|
(1,204
|
)
|
|
(1,078
|
)
|
||
Amortization of net actuarial loss
|
|
234
|
|
|
343
|
|
||
Amortization of prior service credit
|
|
(2,782
|
)
|
|
(2,789
|
)
|
||
Net periodic postretirement benefit income
|
|
$
|
(2,863
|
)
|
|
$
|
(2,613
|
)
|
8.
|
STOCK-BASED COMPENSATION
|
9.
|
DISCLOSURES ABOUT THE FAIR VALUES OF FINANCIAL INSTRUMENTS
|
March 31, 2018
|
|
Carrying
amounts |
|
Estimated
fair values |
||||
($ in thousands)
|
|
|
||||||
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)
|
|
|
||||||
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
|
|
•
|
U.S. Treasury securities (including bonds, notes, and bills) are priced according to a number of live data sources, including active market makers and inter-dealer brokers. Prices from these sources are reviewed based on the sources’ historical accuracy for individual issues and maturity ranges.
|
•
|
U.S. government-sponsored agencies and corporate securities (including fixed-rate corporate bonds and medium-term notes) are priced by determining a bullet (non-call) spread scale for each issuer for maturities going out to forty years. These spreads represent credit risk and are obtained from the new issue market, secondary trading, and dealer quotes. An option adjusted spread model is incorporated to adjust spreads of issues that have early redemption features. The final spread is then added to the U.S. Treasury curve.
|
•
|
Obligations of states and political subdivisions are priced by tracking and analyzing actively quoted issues and reported trades, material event notices and benchmark yields. Municipal bonds with similar characteristics are grouped together into market sectors, and internal yield curves are constructed daily for these sectors. Individual bond evaluations are extrapolated from these sectors, with the ability to make individual spread adjustments for attributes such as discounts, premiums, alternative minimum tax, and/or whether or not the bond is callable.
|
•
|
Mortgage-backed and asset-backed securities are first reviewed for the appropriate pricing speed (if prepayable), spread, yield and volatility. The securities are priced with models using spreads and other information solicited from market buy- and sell-side sources, including primary and secondary dealers, portfolio managers, and research analysts. To determine a tranche’s price, first the benchmark yield is determined and adjusted for collateral performance, tranche level attributes and market conditions. Then the cash flow for each tranche is generated (using consensus prepayment speed assumptions including, as appropriate, a prepayment projection based on historical statistics of the underlying collateral). The tranche-level yield is used to discount the cash flows and generate the price. Depending on the characteristics of the tranche, a volatility-driven, multi-dimensional single cash flow stream model or an option-adjusted spread model may be used. When cash flows or other security structure or market information is not available, broker quotes may be used.
|
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
|
|
|
|
|
|
|
|
|
|
|
||||||
($ 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
|
|
10.
|
INVESTMENTS
|
March 31, 2018
|
|
Amortized
cost |
|
Gross
unrealized gains |
|
Gross
unrealized losses |
|
Estimated
fair values |
||||||||
($ in thousands)
|
|
|
|
|
||||||||||||
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury
|
|
$
|
8,121
|
|
|
$
|
—
|
|
|
$
|
165
|
|
|
$
|
7,956
|
|
U.S. government-sponsored agencies
|
|
313,212
|
|
|
36
|
|
|
10,772
|
|
|
302,476
|
|
||||
Obligations of states and political subdivisions
|
|
282,149
|
|
|
12,391
|
|
|
609
|
|
|
293,931
|
|
||||
Commercial mortgage-backed
|
|
79,011
|
|
|
311
|
|
|
2,662
|
|
|
76,660
|
|
||||
Residential mortgage-backed
|
|
134,691
|
|
|
1,898
|
|
|
4,239
|
|
|
132,350
|
|
||||
Other asset-backed
|
|
23,148
|
|
|
418
|
|
|
818
|
|
|
22,748
|
|
||||
Corporate
|
|
418,058
|
|
|
4,742
|
|
|
2,448
|
|
|
420,352
|
|
||||
Total fixed maturity securities
|
|
$
|
1,258,390
|
|
|
$
|
19,796
|
|
|
$
|
21,713
|
|
|
$
|
1,256,473
|
|
December 31, 2017
|
|
Amortized
cost |
|
Gross
unrealized gains |
|
Gross
unrealized losses |
|
Estimated
fair values |
||||||||
($ in thousands)
|
|
|
|
|
||||||||||||
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury
|
|
$
|
8,115
|
|
|
$
|
—
|
|
|
$
|
37
|
|
|
$
|
8,078
|
|
U.S. government-sponsored agencies
|
|
303,932
|
|
|
122
|
|
|
6,105
|
|
|
297,949
|
|
||||
Obligations of states and political subdivisions
|
|
290,038
|
|
|
17,729
|
|
|
231
|
|
|
307,536
|
|
||||
Commercial mortgage-backed
|
|
84,058
|
|
|
591
|
|
|
669
|
|
|
83,980
|
|
||||
Residential mortgage-backed
|
|
120,554
|
|
|
2,479
|
|
|
3,234
|
|
|
119,799
|
|
||||
Other asset-backed
|
|
23,934
|
|
|
625
|
|
|
445
|
|
|
24,114
|
|
||||
Corporate
|
|
422,535
|
|
|
11,490
|
|
|
465
|
|
|
433,560
|
|
||||
Total fixed maturity securities
|
|
1,253,166
|
|
|
33,036
|
|
|
11,186
|
|
|
1,275,016
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
||||||||
Common stocks:
|
|
|
|
|
|
|
|
|
||||||||
Financial services
|
|
30,103
|
|
|
13,594
|
|
|
175
|
|
|
43,522
|
|
||||
Information technology
|
|
18,308
|
|
|
17,504
|
|
|
2
|
|
|
35,810
|
|
||||
Healthcare
|
|
18,877
|
|
|
11,876
|
|
|
158
|
|
|
30,595
|
|
||||
Consumer staples
|
|
9,275
|
|
|
4,917
|
|
|
65
|
|
|
14,127
|
|
||||
Consumer discretionary
|
|
10,935
|
|
|
9,640
|
|
|
37
|
|
|
20,538
|
|
||||
Energy
|
|
12,441
|
|
|
5,381
|
|
|
917
|
|
|
16,905
|
|
||||
Industrials
|
|
12,746
|
|
|
15,757
|
|
|
14
|
|
|
28,489
|
|
||||
Other
|
|
11,058
|
|
|
5,363
|
|
|
—
|
|
|
16,421
|
|
||||
Non-redeemable preferred stocks
|
|
20,531
|
|
|
1,216
|
|
|
39
|
|
|
21,708
|
|
||||
Total equity securities
|
|
144,274
|
|
|
85,248
|
|
|
1,407
|
|
|
228,115
|
|
||||
Total securities available-for-sale
|
|
$
|
1,397,440
|
|
|
$
|
118,284
|
|
|
$
|
12,593
|
|
|
$
|
1,503,131
|
|
March 31, 2018
|
|
Less than twelve months
|
|
Twelve months or longer
|
|
Total
|
||||||||||||||||||
($ in thousands)
|
|
Fair
values |
|
Unrealized
losses |
|
Fair
values |
|
Unrealized
losses |
|
Fair
values |
|
Unrealized
losses |
||||||||||||
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. treasury
|
|
$
|
7,956
|
|
|
$
|
165
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,956
|
|
|
$
|
165
|
|
U.S. government-sponsored agencies
|
|
159,653
|
|
|
3,831
|
|
|
125,284
|
|
|
6,941
|
|
|
284,937
|
|
|
10,772
|
|
||||||
Obligations of states and political subdivisions
|
|
11,287
|
|
|
78
|
|
|
14,057
|
|
|
531
|
|
|
25,344
|
|
|
609
|
|
||||||
Commercial mortgage-backed
|
|
61,143
|
|
|
1,971
|
|
|
8,280
|
|
|
691
|
|
|
69,423
|
|
|
2,662
|
|
||||||
Residential mortgage-backed
|
|
67,489
|
|
|
1,568
|
|
|
21,858
|
|
|
2,671
|
|
|
89,347
|
|
|
4,239
|
|
||||||
Other asset-backed
|
|
5,158
|
|
|
79
|
|
|
12,963
|
|
|
739
|
|
|
18,121
|
|
|
818
|
|
||||||
Corporate
|
|
167,148
|
|
|
2,263
|
|
|
3,999
|
|
|
185
|
|
|
171,147
|
|
|
2,448
|
|
||||||
Total fixed maturity securities
|
|
$
|
479,834
|
|
|
$
|
9,955
|
|
|
$
|
186,441
|
|
|
$
|
11,758
|
|
|
$
|
666,275
|
|
|
$
|
21,713
|
|
December 31, 2017
|
|
Less than twelve months
|
|
Twelve months or longer
|
|
Total
|
||||||||||||||||||
($ in thousands)
|
|
Fair
values |
|
Unrealized
losses |
|
Fair
values |
|
Unrealized
losses |
|
Fair
values |
|
Unrealized
losses |
||||||||||||
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. treasury
|
|
$
|
8,078
|
|
|
$
|
37
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,078
|
|
|
$
|
37
|
|
U.S. government-sponsored agencies
|
|
134,284
|
|
|
1,491
|
|
|
127,604
|
|
|
4,614
|
|
|
261,888
|
|
|
6,105
|
|
||||||
Obligations of states and political subdivisions
|
|
—
|
|
|
—
|
|
|
14,416
|
|
|
231
|
|
|
14,416
|
|
|
231
|
|
||||||
Commercial mortgage-backed
|
|
32,155
|
|
|
221
|
|
|
8,530
|
|
|
448
|
|
|
40,685
|
|
|
669
|
|
||||||
Residential mortgage-backed
|
|
30,003
|
|
|
394
|
|
|
22,948
|
|
|
2,840
|
|
|
52,951
|
|
|
3,234
|
|
||||||
Other asset-backed
|
|
—
|
|
|
—
|
|
|
13,440
|
|
|
445
|
|
|
13,440
|
|
|
445
|
|
||||||
Corporate
|
|
28,314
|
|
|
329
|
|
|
4,047
|
|
|
136
|
|
|
32,361
|
|
|
465
|
|
||||||
Total fixed maturity securities
|
|
232,834
|
|
|
2,472
|
|
|
190,985
|
|
|
8,714
|
|
|
423,819
|
|
|
11,186
|
|
||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Common stocks:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Financial services
|
|
4,391
|
|
|
175
|
|
|
—
|
|
|
—
|
|
|
4,391
|
|
|
175
|
|
||||||
Information technology
|
|
344
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
344
|
|
|
2
|
|
||||||
Healthcare
|
|
2,532
|
|
|
158
|
|
|
—
|
|
|
—
|
|
|
2,532
|
|
|
158
|
|
||||||
Consumer staples
|
|
575
|
|
|
65
|
|
|
—
|
|
|
—
|
|
|
575
|
|
|
65
|
|
||||||
Consumer discretionary
|
|
992
|
|
|
37
|
|
|
—
|
|
|
—
|
|
|
992
|
|
|
37
|
|
||||||
Energy
|
|
3,181
|
|
|
917
|
|
|
—
|
|
|
—
|
|
|
3,181
|
|
|
917
|
|
||||||
Industrials
|
|
3,016
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
3,016
|
|
|
14
|
|
||||||
Non-redeemable preferred stocks
|
|
—
|
|
|
—
|
|
|
1,961
|
|
|
39
|
|
|
1,961
|
|
|
39
|
|
||||||
Total equity securities
|
|
15,031
|
|
|
1,368
|
|
|
1,961
|
|
|
39
|
|
|
16,992
|
|
|
1,407
|
|
||||||
Total temporarily impaired securities
|
|
$
|
247,865
|
|
|
$
|
3,840
|
|
|
$
|
192,946
|
|
|
$
|
8,753
|
|
|
$
|
440,811
|
|
|
$
|
12,593
|
|
($ in thousands)
|
|
Amortized
cost |
|
Estimated
fair values |
||||
Securities available-for-sale:
|
|
|
|
|
||||
Due in one year or less
|
|
$
|
35,995
|
|
|
$
|
36,421
|
|
Due after one year through five years
|
|
189,333
|
|
|
191,111
|
|
||
Due after five years through ten years
|
|
348,705
|
|
|
347,330
|
|
||
Due after ten years
|
|
468,751
|
|
|
470,731
|
|
||
Securities not due at a single maturity date
|
|
215,606
|
|
|
210,880
|
|
||
Totals
|
|
$
|
1,258,390
|
|
|
$
|
1,256,473
|
|
|
|
Three months ended March 31,
|
||||||
($ in thousands)
|
|
2018
|
|
2017
|
||||
Fixed maturity securities available-for-sale:
|
|
|
|
|
||||
Gross realized investment gains
|
|
$
|
234
|
|
|
$
|
90
|
|
Gross realized investment losses
|
|
(478
|
)
|
|
(1,206
|
)
|
||
|
|
|
|
|
||||
Equity securities:
|
|
|
|
|
||||
Net realized investment gains, excluding "other-than-temporary" impairments
|
|
2,716
|
|
|
2,776
|
|
||
Change in unrealized investment gains
|
|
(9,854
|
)
|
|
XXXX
|
|
||
|
|
|
|
|
||||
Other long-term investments, net
|
|
1,989
|
|
|
(2,287
|
)
|
||
Totals
|
|
$
|
(5,393
|
)
|
|
$
|
(627
|
)
|
11.
|
CONTINGENT LIABILITIES
|
12.
|
STOCK REPURCHASE PROGRAM
|
13.
|
ACCUMULATED OTHER COMPREHENSIVE INCOME
|
|
|
Accumulated other comprehensive income (loss) by component
|
||||||||||||||||||
|
|
Unrealized
gains (losses) on available-for- sale securities |
|
Unrecognized pension and postretirement benefit obligations
|
|
|
||||||||||||||
($ in thousands)
|
|
|
Net actuarial loss
|
|
Prior service credit
|
|
Total
|
|
Total
|
|||||||||||
Balance at December 31, 2017
|
|
$
|
83,497
|
|
|
$
|
(13,074
|
)
|
|
$
|
12,961
|
|
|
$
|
(113
|
)
|
|
$
|
83,384
|
|
Cumulative adjustment for adoption of financial instruments recognition and measurement changes
|
|
(66,234
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(66,234
|
)
|
|||||
Other comprehensive income (loss) before reclassifications
|
|
(18,969
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,969
|
)
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
193
|
|
|
81
|
|
|
(622
|
)
|
|
(541
|
)
|
|
(348
|
)
|
|||||
Other comprehensive income (loss)
|
|
(18,776
|
)
|
|
81
|
|
|
(622
|
)
|
|
(541
|
)
|
|
(19,317
|
)
|
|||||
Balance at March 31, 2018
|
|
$
|
(1,513
|
)
|
|
$
|
(12,993
|
)
|
|
$
|
12,339
|
|
|
$
|
(654
|
)
|
|
$
|
(2,167
|
)
|
|
|
Accumulated other comprehensive income (loss) by component
|
||||||||||||||||||
|
|
Unrealized
gains (losses) on available-for- sale securities |
|
Unrecognized pension and postretirement benefit obligations
|
|
|
||||||||||||||
($ in thousands)
|
|
|
Net actuarial loss
|
|
Prior service credit
|
|
Total
|
|
Total
|
|||||||||||
Balance at December 31, 2016
|
|
$
|
49,748
|
|
|
$
|
(16,299
|
)
|
|
$
|
12,632
|
|
|
$
|
(3,667
|
)
|
|
$
|
46,081
|
|
Other comprehensive income (loss) before reclassifications
|
|
9,705
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,705
|
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
(1,079
|
)
|
|
239
|
|
|
(511
|
)
|
|
(272
|
)
|
|
(1,351
|
)
|
|||||
Other comprehensive income (loss)
|
|
8,626
|
|
|
239
|
|
|
(511
|
)
|
|
(272
|
)
|
|
8,354
|
|
|||||
Balance at March 31, 2017
|
|
$
|
58,374
|
|
|
$
|
(16,060
|
)
|
|
$
|
12,121
|
|
|
$
|
(3,939
|
)
|
|
$
|
54,435
|
|
($ in thousands)
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
|
||
Accumulated other comprehensive
income (loss) components |
|
Three months ended
March 31, 2018 |
|
Affected line item in the
consolidated statements of income |
||
Unrealized gains (losses) on investments:
|
|
|
|
|
||
Reclassification adjustment for net realized investment gains (losses) included in net income
|
|
$
|
(244
|
)
|
|
Net realized investment gains (losses) and, beginning in 2018, change in unrealized investment gains on equity investments
|
Deferred income tax (expense) benefit
|
|
51
|
|
|
Total income tax expense (benefit)
|
|
Net reclassification adjustment
|
|
(193
|
)
|
|
Net income (loss)
|
|
|
|
|
|
|
||
Unrecognized pension and postretirement benefit obligations:
|
|
|
|
|
||
Reclassification adjustment for amounts amortized into net periodic pension and postretirement benefit income:
|
|
|
|
|
||
Net actuarial loss
|
|
(103
|
)
|
|
(1)
|
|
Prior service credit
|
|
788
|
|
|
(1)
|
|
Total before tax
|
|
685
|
|
|
|
|
Deferred income tax (expense) benefit
|
|
(144
|
)
|
|
|
|
Net reclassification adjustment
|
|
541
|
|
|
|
|
|
|
|
|
|
||
Total reclassification adjustment
|
|
$
|
348
|
|
|
|
(1)
|
These reclassified components of accumulated other comprehensive income are included in the computation of net periodic pension and postretirement benefit income (see note 7, Employee Retirement Plans, for additional details).
|
($ in thousands)
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
|
||
Accumulated other comprehensive
income (loss) components |
|
Three months ended March 31, 2017
|
|
Affected line item in the
consolidated statements of income |
||
Unrealized gains (losses) on investments:
|
|
|
|
|
||
Reclassification adjustment for net realized investment gains (losses) included in net income
|
|
$
|
1,660
|
|
|
Net realized investment gains (losses) and, beginning in 2018, change in unrealized investment gains on equity investments
|
Deferred income tax (expense) benefit
|
|
(581
|
)
|
|
Total income tax expense (benefit)
|
|
Net reclassification adjustment
|
|
1,079
|
|
|
Net income (loss)
|
|
|
|
|
|
|
||
Unrecognized pension and postretirement benefit obligations:
|
|
|
|
|
||
Reclassification adjustment for amounts amortized into net periodic pension and postretirement benefit income:
|
|
|
|
|
||
Net actuarial loss
|
|
(368
|
)
|
|
(1)
|
|
Prior service credit
|
|
787
|
|
|
(1)
|
|
Total before tax
|
|
419
|
|
|
|
|
Deferred income tax (expense) benefit
|
|
(147
|
)
|
|
|
|
Net reclassification adjustment
|
|
272
|
|
|
|
|
|
|
|
|
|
||
Total reclassification adjustment
|
|
$
|
1,351
|
|
|
|
(1)
|
These reclassified components of accumulated other comprehensive income are included in the computation of net periodic pension and postretirement benefit income (see note 7, Employee Retirement Plans, for additional details).
|
14.
|
NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
catastrophic events and the occurrence of significant severe weather conditions;
|
•
|
the adequacy of loss and settlement expense reserves;
|
•
|
state and federal legislation and regulations;
|
•
|
changes in the U.S. federal corporate tax law;
|
•
|
changes in the property and casualty insurance industry, interest rates or the performance of financial markets and the general economy;
|
•
|
rating agency actions;
|
•
|
“other-than-temporary” investment impairment losses; and
|
•
|
other risks and uncertainties inherent to the Company’s business, including those discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K.
|
|
|
Three months ended March 31,
|
||||||
($ in thousands)
|
|
2018
|
|
2017
|
||||
Property and casualty insurance
|
|
|
|
|
||||
Premiums earned
|
|
$
|
118,632
|
|
|
$
|
113,648
|
|
Losses and settlement expenses
|
|
83,501
|
|
|
75,520
|
|
||
Acquisition and other expenses
|
|
43,905
|
|
|
43,009
|
|
||
Underwriting loss
|
|
$
|
(8,774
|
)
|
|
$
|
(4,881
|
)
|
|
|
|
|
|
||||
GAAP ratios:
|
|
|
|
|
||||
Loss and settlement expense ratio
|
|
70.4
|
%
|
|
66.5
|
%
|
||
Acquisition expense ratio
|
|
37.0
|
%
|
|
37.8
|
%
|
||
Combined ratio
|
|
107.4
|
%
|
|
104.3
|
%
|
||
|
|
|
|
|
||||
Reconciliation of loss and settlement expense ratio to underlying loss and settlement expense ratio
1
:
|
|
|
|
|
||||
Loss and settlement expense ratio
|
|
70.4
|
%
|
|
66.5
|
%
|
||
Catastrophe and storm losses
|
|
(3.6
|
)%
|
|
(8.6
|
)%
|
||
Favorable development on prior years' reserves
|
|
1.8
|
%
|
|
7.4
|
%
|
||
Underlying loss and settlement expense ratio
|
|
68.6
|
%
|
|
65.3
|
%
|
||
|
|
|
|
|
||||
Favorable development on prior years' reserves
|
|
$
|
(2,135
|
)
|
|
$
|
(8,463
|
)
|
|
|
|
|
|
||||
Catastrophe and storm losses
|
|
$
|
4,260
|
|
|
$
|
9,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Three months ended March 31,
|
||||||||||||||||||||
|
|
2018
|
|
2017
|
||||||||||||||||||
($ in thousands)
|
|
Premiums earned
|
|
Losses and settlement expenses
|
|
Loss and settlement expense ratio
|
|
Premiums earned
|
|
Losses and settlement expenses
|
|
Loss and settlement expense ratio
|
||||||||||
Property and casualty insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial lines:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Automobile
|
|
$
|
30,644
|
|
|
$
|
26,456
|
|
|
86.3
|
%
|
|
$
|
28,032
|
|
|
$
|
26,889
|
|
|
95.9
|
%
|
Property
|
|
26,429
|
|
|
18,723
|
|
|
70.8
|
%
|
|
25,502
|
|
|
17,539
|
|
|
68.8
|
%
|
||||
Workers' compensation
|
|
24,902
|
|
|
12,531
|
|
|
50.3
|
%
|
|
24,703
|
|
|
13,774
|
|
|
55.8
|
%
|
||||
Other liability
|
|
24,962
|
|
|
17,701
|
|
|
70.9
|
%
|
|
24,128
|
|
|
10,712
|
|
|
44.4
|
%
|
||||
Other
|
|
2,186
|
|
|
494
|
|
|
22.6
|
%
|
|
2,109
|
|
|
(93
|
)
|
|
(4.4
|
)%
|
||||
Total commercial lines
|
|
109,123
|
|
|
75,905
|
|
|
69.6
|
%
|
|
104,474
|
|
|
68,821
|
|
|
65.9
|
%
|
||||
Personal lines
|
|
9,509
|
|
|
7,596
|
|
|
79.9
|
%
|
|
9,174
|
|
|
6,699
|
|
|
73.0
|
%
|
||||
Total property and casualty insurance
|
|
$
|
118,632
|
|
|
$
|
83,501
|
|
|
70.4
|
%
|
|
$
|
113,648
|
|
|
$
|
75,520
|
|
|
66.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
||||||
($ in thousands)
|
|
2018
|
|
2017
|
||||
Reinsurance
|
|
|
|
|
||||
Premiums earned
|
|
$
|
37,154
|
|
|
$
|
30,839
|
|
Losses and settlement expenses
|
|
27,127
|
|
|
20,765
|
|
||
Acquisition and other expenses
|
|
8,362
|
|
|
7,158
|
|
||
Underwriting profit
|
|
$
|
1,665
|
|
|
$
|
2,916
|
|
|
|
|
|
|
||||
GAAP ratios:
|
|
|
|
|
||||
Loss and settlement expense ratio
|
|
73.0
|
%
|
|
67.3
|
%
|
||
Acquisition expense ratio
|
|
22.5
|
%
|
|
23.2
|
%
|
||
Combined ratio
|
|
95.5
|
%
|
|
90.5
|
%
|
||
|
|
|
|
|
||||
Favorable development on prior years' reserves
|
|
$
|
(3,441
|
)
|
|
$
|
(6,441
|
)
|
|
|
|
|
|
||||
Catastrophe and storm losses
|
|
$
|
396
|
|
|
$
|
3,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Three months ended March 31,
|
||||||||||||||||||||
|
|
2018
|
|
2017
|
||||||||||||||||||
($ in thousands)
|
|
Premiums earned
|
|
Losses and settlement expenses
|
|
Loss and settlement expense ratio
|
|
Premiums earned
|
|
Losses and settlement expenses
|
|
Loss and settlement expense ratio
|
||||||||||
Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Pro rata reinsurance
|
|
$
|
13,073
|
|
|
$
|
4,665
|
|
|
35.7
|
%
|
|
$
|
10,435
|
|
|
$
|
6,146
|
|
|
58.9
|
%
|
Excess of loss reinsurance
|
|
24,081
|
|
|
22,462
|
|
|
93.3
|
%
|
|
20,404
|
|
|
14,619
|
|
|
71.6
|
%
|
||||
Total reinsurance
|
|
$
|
37,154
|
|
|
$
|
27,127
|
|
|
73.0
|
%
|
|
$
|
30,839
|
|
|
$
|
20,765
|
|
|
67.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
||||||
($ in thousands, except per share amounts)
|
|
2018
|
|
2017
|
||||
Consolidated
|
|
|
|
|
||||
REVENUES
|
|
|
|
|
||||
Premiums earned
|
|
$
|
155,786
|
|
|
$
|
144,487
|
|
Net investment income
|
|
11,371
|
|
|
11,007
|
|
||
Net realized investment gains (losses) and, beginning in 2018, change in unrealized investment gains on equity investments
|
|
(5,393
|
)
|
|
(627
|
)
|
||
Other income
|
|
1,615
|
|
|
870
|
|
||
|
|
163,379
|
|
|
155,737
|
|
||
LOSSES AND EXPENSES
|
|
|
|
|
||||
Losses and settlement expenses
|
|
110,628
|
|
|
96,285
|
|
||
Acquisition and other expenses
|
|
52,267
|
|
|
50,167
|
|
||
Interest expense
|
|
142
|
|
|
84
|
|
||
Other expense
|
|
870
|
|
|
761
|
|
||
|
|
163,907
|
|
|
147,297
|
|
||
|
|
|
|
|
||||
Income (loss) before income tax expense (benefit)
|
|
(528
|
)
|
|
8,440
|
|
||
Income tax expense (benefit)
|
|
(452
|
)
|
|
1,636
|
|
||
Net income (loss)
|
|
$
|
(76
|
)
|
|
$
|
6,804
|
|
|
|
|
|
|
||||
Net income (loss) per share
|
|
$
|
—
|
|
|
$
|
0.32
|
|
|
|
|
|
|
||||
GAAP ratios:
|
|
|
|
|
||||
Loss and settlement expense ratio
|
|
71.0
|
%
|
|
66.6
|
%
|
||
Acquisition expense ratio
|
|
33.6
|
%
|
|
34.8
|
%
|
||
Combined ratio
|
|
104.6
|
%
|
|
101.4
|
%
|
||
|
|
|
|
|
||||
Favorable development on prior years' reserves
|
|
$
|
(5,576
|
)
|
|
$
|
(14,904
|
)
|
|
|
|
|
|
||||
Catastrophe and storm losses
|
|
$
|
4,656
|
|
|
$
|
13,374
|
|
|
|
March 31, 2018
|
|||||||||||||
($ in thousands)
|
|
Amortized
cost |
|
Fair
value |
|
Carrying value
|
|
Percent of total carrying value
|
|||||||
Fixed maturity securities available-for-sale
|
|
$
|
1,258,390
|
|
|
$
|
1,256,473
|
|
|
$
|
1,256,473
|
|
|
82.9
|
%
|
Equity securities at fair value
|
|
146,520
|
|
|
220,498
|
|
|
220,498
|
|
|
14.5
|
%
|
|||
Cash
|
|
382
|
|
|
382
|
|
|
382
|
|
|
—
|
%
|
|||
Short-term investments
|
|
21,664
|
|
|
21,664
|
|
|
21,664
|
|
|
1.4
|
%
|
|||
Equity investments, at alternative measurement of cost less impairments
|
|
2,000
|
|
|
XXXX
|
|
|
2,000
|
|
|
0.1
|
%
|
|||
Other long-term investments
|
|
17,212
|
|
|
XXXX
|
|
|
17,212
|
|
|
1.1
|
%
|
|||
|
|
$
|
1,446,168
|
|
|
XXXX
|
|
|
$
|
1,518,229
|
|
|
100.0
|
%
|
|
|
December 31, 2017
|
|||||||||||||
($ in thousands)
|
|
Amortized
cost |
|
Fair
value |
|
Carrying value
|
|
Percent of total carrying value
|
|||||||
Fixed maturity securities available-for-sale
|
|
$
|
1,253,166
|
|
|
$
|
1,275,016
|
|
|
$
|
1,275,016
|
|
|
82.8
|
%
|
Equity securities available-for-sale
|
|
144,274
|
|
|
228,115
|
|
|
228,115
|
|
|
14.8
|
%
|
|||
Cash
|
|
347
|
|
|
347
|
|
|
347
|
|
|
—
|
%
|
|||
Short-term investments
|
|
23,613
|
|
|
23,613
|
|
|
23,613
|
|
|
1.5
|
%
|
|||
Other long-term investments
|
|
13,648
|
|
|
XXXX
|
|
|
13,648
|
|
|
0.9
|
%
|
|||
|
|
$
|
1,435,048
|
|
|
XXXX
|
|
|
$
|
1,540,739
|
|
|
100.0
|
%
|
|
|
Less than twelve months
|
|
Twelve months or longer
|
|
Total
|
||||||||||||||||||
($ in thousands)
|
|
Fair
values |
|
Unrealized
losses |
|
Fair
values |
|
Unrealized
losses |
|
Fair
values |
|
Unrealized
losses |
||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. treasury
|
|
$
|
7,956
|
|
|
$
|
165
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,956
|
|
|
$
|
165
|
|
U.S. government-sponsored agencies
|
|
159,653
|
|
|
3,831
|
|
|
125,284
|
|
|
6,941
|
|
|
284,937
|
|
|
10,772
|
|
||||||
Obligations of states and political subdivisions
|
|
11,287
|
|
|
78
|
|
|
14,057
|
|
|
531
|
|
|
25,344
|
|
|
609
|
|
||||||
Commercial mortgage-backed
|
|
61,143
|
|
|
1,971
|
|
|
8,280
|
|
|
691
|
|
|
69,423
|
|
|
2,662
|
|
||||||
Residential mortgage-backed
|
|
67,489
|
|
|
1,568
|
|
|
21,858
|
|
|
2,671
|
|
|
89,347
|
|
|
4,239
|
|
||||||
Other asset-backed
|
|
5,158
|
|
|
79
|
|
|
12,963
|
|
|
739
|
|
|
18,121
|
|
|
818
|
|
||||||
Corporate
|
|
167,148
|
|
|
2,263
|
|
|
3,999
|
|
|
185
|
|
|
171,147
|
|
|
2,448
|
|
||||||
Total fixed maturity securities
|
|
$
|
479,834
|
|
|
$
|
9,955
|
|
|
$
|
186,441
|
|
|
$
|
11,758
|
|
|
$
|
666,275
|
|
|
$
|
21,713
|
|
|
|
Realized losses from sales
|
|
"Other-than-
temporary" impairment losses |
|
Total
gross realized losses |
||||||||||||||
($ in thousands)
|
|
Book
value |
|
Sales
price |
|
Gross
realized losses |
|
|
||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Three months or less
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Over three months to six months
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Over six months to nine months
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Over nine months to twelve months
|
|
5,035
|
|
|
4,928
|
|
|
107
|
|
|
—
|
|
|
107
|
|
|||||
Over twelve months
|
|
13,682
|
|
|
13,311
|
|
|
371
|
|
|
—
|
|
|
371
|
|
|||||
Total fixed maturity securities
|
|
$
|
18,717
|
|
|
$
|
18,239
|
|
|
$
|
478
|
|
|
$
|
—
|
|
|
$
|
478
|
|
ITEM 3.
|
Q
UANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
PART II.
|
OTHER INFORMATION
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
|
(a) Total
number of shares (or units) purchased 1 |
|
(b) Average
price paid per share (or unit) |
|
(c) Total number
of shares (or units) purchased as part of publicly announced plans or programs 2 |
|
(d) Maximum number
(or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs ($ in thousands) 2,3 |
||||||
1/1/2018 - 1/31/2018
|
|
19
|
|
|
$
|
28.64
|
|
|
—
|
|
|
$
|
19,108
|
|
2/1/2018 - 2/28/2018
|
|
47
|
|
|
27.12
|
|
|
—
|
|
|
19,108
|
|
||
3/1/2018 - 3/31/2018
|
|
31,803
|
|
|
26.37
|
|
|
—
|
|
|
19,108
|
|
||
Total
|
|
31,869
|
|
|
$
|
26.37
|
|
|
—
|
|
|
|
|
ITEM 6.
|
EXHIBITS
|
Exhibit number
|
|
Item
|
10.5.1*
|
|
|
|
|
|
10.5.2*
|
|
|
|
|
|
10.5.3*
|
|
|
|
|
|
31.1*
|
|
|
|
|
|
31.2*
|
|
|
|
|
|
32.1*
|
|
|
|
|
|
32.2*
|
|
|
|
|
|
101.INS**
|
|
XBRL Instance Document
|
|
|
|
101.SCH**
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL**
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF**
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB**
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE**
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Filed herewith
|
**
|
Furnished, not filed
|
EMC INSURANCE GROUP INC.
|
Registrant
|
|
/s/ Bruce G. Kelley
|
Bruce G. Kelley
|
President, Chief Executive Officer, Treasurer and Director
|
(Principal Executive Officer)
|
/s/ Mark E. Reese
|
Mark E. Reese
|
Senior Vice President and Chief Financial Officer
|
(Principal Financial and Accounting Officer)
|
EMCASCO INSURANCE COMPANY
|
|
|
|
By
|
/s/ Bruce G. Kelley
|
|
Its Chairman, President & CEO
|
|
|
|
|
By
|
/s/ Lisa A. Stange
|
|
Its Vice President, Chief Investment Officer & Treasurer
|
EMPLOYERS MUTUAL CASUALTY COMPANY
By
/s/ Bruce G. Kelley
Its President, CEO & Treasurer
EMCASCO INSURANCE COMPANY
By
/s/ Bradley J. Fredericks
Its Senior Vice President & Chief
Investment Officer
|
|
|
|
|
|
ILLINOIS EMCASCO INSURANCE COMPANY
|
|
|
|
By
|
/s/ Bruce G. Kelley
|
|
Its Chairman & Chief Executive Officer
|
|
|
|
|
By
|
/s/ Lisa A. Stange
|
|
Its Vice President, Treasurer & Chief Investment Officer
|
EMPLOYERS MUTUAL CASUALTY COMPANY
By
/s/ Bruce G. Kelley
Its President, CEO & Treasurer
ILLINOIS EMCASCO INSURANCE COMPANY
By
/s/ Bradley J. Fredericks
Its Senior Vice President & Chief
Investment Officer
|
DAKOTA FIRE INSURANCE COMPANY
|
|
|
|
By
|
/s/ Bruce G. Kelley
|
|
Its Chairman & Chief Executive Officer
|
|
|
|
|
By
|
/s/ Lisa A. Stange
|
|
Its Vice President and Chief Investment Officer
|
EMPLOYERS MUTUAL CASUALTY COMPANY
By
/s/ Bruce G. Kelley
Its President, CEO & Treasurer
DAKOTA FIRE INSURANCE COMPANY
By
/s/ Bradley J. Fredericks
Its Senior Vice President & Chief
Investment Officer
|
1.
|
I have reviewed this report on Form 10-Q of EMC Insurance Group Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Bruce G. Kelley
|
|
Bruce G. Kelley, President,
|
|
Chief Executive Officer and Treasurer
|
|
1.
|
I have reviewed this report on Form 10-Q of EMC Insurance Group Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Mark E. Reese
|
|
Mark E. Reese, Senior Vice President
|
|
and Chief Financial Officer
|
|
(1)
|
The report fully complies with the requirements of Section 13(a) or 15(d) of Securities Exchange Act of 1934, and
|
(2)
|
The information contained in this report fairly presents, in all material respects, the company’s financial condition and results of operations.
|
EMC INSURANCE GROUP INC.
|
|
Registrant
|
|
|
|
/s/ Bruce G. Kelley
|
|
Bruce G. Kelley, President,
|
|
Chief Executive Officer and Treasurer
|
|
(1)
|
The report fully complies with the requirements of Section 13(a) or15(d) of Securities Exchange Act of 1934, and
|
(2)
|
The information contained in this report fairly presents, in all material respects, the company’s financial condition and results of operations.
|
EMC INSURANCE GROUP INC.
|
|
Registrant
|
|
|
|
/s/ Mark E. Reese
|
|
Mark E. Reese
|
|
Senior Vice President and
|
|
Chief Financial Officer
|
|