[X]
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QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
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Delaware
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37-0911756
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Large accelerated filer
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X
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company
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PART I - FINANCIAL INFORMATION
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Page
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Item 1.
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Financial Statements
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Item 2.
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Item 3.
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Item 4.
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Item 1A.
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Item 2.
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Item 5.
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Item 6.
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/s/ KPMG LLP
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KPMG LLP
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Chicago, Illinois
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August 8, 2017
|
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June 30, 2017
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December 31, 2016
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||||
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(Unaudited)
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||||
ASSETS
|
||||||||
Investments
|
|
|
|
|
||||
Fixed maturity securities, available for sale, at fair value
(amortized cost 2017, $7,161,917; 2016, $7,152,127)
|
|
$
|
7,578,585
|
|
|
$
|
7,456,708
|
|
Equity securities, available for sale, at fair value
(cost 2017, $140,553; 2016, $134,013)
|
|
156,909
|
|
|
141,649
|
|
||
Short-term and other investments
|
|
502,443
|
|
|
401,015
|
|
||
Total investments
|
|
8,237,937
|
|
|
7,999,372
|
|
||
Cash
|
|
16,006
|
|
|
16,670
|
|
||
Deferred policy acquisition costs
|
|
256,878
|
|
|
267,580
|
|
||
Goodwill
|
|
47,396
|
|
|
47,396
|
|
||
Other assets
|
|
341,684
|
|
|
321,874
|
|
||
Separate Account (variable annuity) assets
|
|
1,976,234
|
|
|
1,923,932
|
|
||
Total assets
|
|
$
|
10,876,135
|
|
|
$
|
10,576,824
|
|
|
|
|
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|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Policy liabilities
|
|
|
|
|
||||
Investment contract and life policy reserves
|
|
$
|
5,480,863
|
|
|
$
|
5,447,969
|
|
Unpaid claims and claim expenses
|
|
352,513
|
|
|
329,888
|
|
||
Unearned premiums
|
|
248,123
|
|
|
246,274
|
|
||
Total policy liabilities
|
|
6,081,499
|
|
|
6,024,131
|
|
||
Other policyholder funds
|
|
713,004
|
|
|
708,950
|
|
||
Other liabilities
|
|
495,931
|
|
|
378,620
|
|
||
Long-term debt
|
|
247,337
|
|
|
247,209
|
|
||
Separate Account (variable annuity) liabilities
|
|
1,976,234
|
|
|
1,923,932
|
|
||
Total liabilities
|
|
9,514,005
|
|
|
9,282,842
|
|
||
Preferred stock, $0.001 par value, authorized
1,000,000 shares; none issued
|
|
—
|
|
|
—
|
|
||
Common stock, $0.001 par value, authorized 75,000,000 shares;
issued, 2017, 65,341,779; 2016, 64,917,683
|
|
65
|
|
|
65
|
|
||
Additional paid-in capital
|
|
459,317
|
|
|
453,479
|
|
||
Retained earnings
|
|
1,150,270
|
|
|
1,155,732
|
|
||
Accumulated other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|||
Net unrealized investment gains on fixed maturity
and equity securities
|
|
243,510
|
|
|
175,738
|
|
||
Net funded status of benefit plans
|
|
(11,817
|
)
|
|
(11,817
|
)
|
||
Treasury stock, at cost, 2017, 24,672,932 shares;
2016, 24,672,932 shares
|
|
(479,215
|
)
|
|
(479,215
|
)
|
||
Total shareholders’ equity
|
|
1,362,130
|
|
|
1,293,982
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
10,876,135
|
|
|
$
|
10,576,824
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
|
|
|
|
|
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|
||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
||||||
Insurance premiums and contract charges earned
|
|
$
|
195,718
|
|
|
$
|
188,360
|
|
|
$
|
391,440
|
|
|
$
|
373,810
|
|
Net investment income
|
|
91,994
|
|
|
91,179
|
|
|
182,705
|
|
|
175,838
|
|
||||
Net realized investment gains
|
|
2,072
|
|
|
3,080
|
|
|
1,830
|
|
|
2,926
|
|
||||
Other income
|
|
1,652
|
|
|
939
|
|
|
2,765
|
|
|
2,287
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total revenues
|
|
291,436
|
|
|
283,558
|
|
|
578,740
|
|
|
554,861
|
|
||||
|
|
|
|
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|
||||||||
Benefits, losses and expenses
|
|
|
|
|
|
|
|
|
|
|
||||||
Benefits, claims and settlement expenses
|
|
165,879
|
|
|
148,408
|
|
|
309,975
|
|
|
267,921
|
|
||||
Interest credited
|
|
49,348
|
|
|
47,576
|
|
|
98,122
|
|
|
94,266
|
|
||||
Policy acquisition expenses amortized
|
|
24,808
|
|
|
24,587
|
|
|
49,694
|
|
|
48,639
|
|
||||
Operating expenses
|
|
46,228
|
|
|
43,345
|
|
|
94,984
|
|
|
86,141
|
|
||||
Interest expense
|
|
2,945
|
|
|
2,948
|
|
|
5,901
|
|
|
5,883
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total benefits, losses and expenses
|
|
289,208
|
|
|
266,864
|
|
|
558,676
|
|
|
502,850
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Income before income taxes
|
|
2,228
|
|
|
16,694
|
|
|
20,064
|
|
|
52,011
|
|
||||
Income tax (benefit) expense
|
|
(33
|
)
|
|
4,828
|
|
|
2,485
|
|
|
14,992
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
|
$
|
2,261
|
|
|
$
|
11,866
|
|
|
$
|
17,579
|
|
|
$
|
37,019
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per share
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
0.05
|
|
|
$
|
0.29
|
|
|
$
|
0.43
|
|
|
$
|
0.90
|
|
Diluted
|
|
$
|
0.05
|
|
|
$
|
0.29
|
|
|
$
|
0.42
|
|
|
$
|
0.89
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average number of shares
and equivalent shares (in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
41,368
|
|
|
41,082
|
|
|
41,268
|
|
|
41,200
|
|
||||
Diluted
|
|
41,493
|
|
|
41,314
|
|
|
41,416
|
|
|
41,416
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net realized investment gains (losses)
|
|
|
|
|
|
|
|
|
||||||||
Total other-than-temporary impairment
losses on securities
|
|
$
|
(3,564
|
)
|
|
$
|
(3,853
|
)
|
|
$
|
(6,361
|
)
|
|
$
|
(7,526
|
)
|
Portion of losses recognized in other
comprehensive income |
|
—
|
|
|
(290
|
)
|
|
—
|
|
|
(290
|
)
|
||||
Net other-than-temporary impairment losses on
securities recognized in earnings
|
|
(3,564
|
)
|
|
(3,563
|
)
|
|
(6,361
|
)
|
|
(7,236
|
)
|
||||
Realized investment gains, net
|
|
5,636
|
|
|
6,643
|
|
|
8,191
|
|
|
10,162
|
|
||||
Total
|
|
$
|
2,072
|
|
|
$
|
3,080
|
|
|
$
|
1,830
|
|
|
$
|
2,926
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
2,261
|
|
|
$
|
11,866
|
|
|
$
|
17,579
|
|
|
$
|
37,019
|
|
Other comprehensive income, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
||||||
Change in net unrealized investment gains
on fixed maturity and equity securities |
|
45,239
|
|
|
84,996
|
|
|
67,772
|
|
|
154,486
|
|
||||
Change in net funded status of benefit plans
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other comprehensive income
|
|
45,239
|
|
|
84,996
|
|
|
67,772
|
|
|
154,486
|
|
||||
Total
|
|
$
|
47,500
|
|
|
$
|
96,862
|
|
|
$
|
85,351
|
|
|
$
|
191,505
|
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2017
|
|
2016
|
||||
|
|
|
|
|
||||
Common stock, $0.001 par value
|
|
|
|
|
||||
Beginning balance
|
|
$
|
65
|
|
|
$
|
65
|
|
Options exercised, 2017, 127,774 shares; 2016, 94,225 shares
|
|
—
|
|
|
—
|
|
||
Conversion of common stock units, 2017,
15,981 shares; 2016, 8,538 shares
|
|
—
|
|
|
—
|
|
||
Conversion of restricted stock units,
2017, 280,341 shares; 2016, 171,042 shares
|
|
—
|
|
|
—
|
|
||
Ending balance
|
|
65
|
|
|
65
|
|
||
|
|
|
|
|
||||
Additional paid-in capital
|
|
|
|
|
||||
Beginning balance
|
|
453,479
|
|
|
442,648
|
|
||
Options exercised and conversion of common stock
units and restricted stock units
|
|
1,909
|
|
|
939
|
|
||
Share-based compensation expense
|
|
3,929
|
|
|
3,917
|
|
||
Ending balance
|
|
459,317
|
|
|
447,504
|
|
||
|
|
|
|
|
||||
Retained earnings
|
|
|
|
|
||||
Beginning balance
|
|
1,155,732
|
|
|
1,116,277
|
|
||
Net income
|
|
17,579
|
|
|
37,019
|
|
||
Cash dividends, 2017, $0.55 per share;
2016, $0.53 per share |
|
(23,041
|
)
|
|
(22,174
|
)
|
||
Ending balance
|
|
1,150,270
|
|
|
1,131,122
|
|
||
|
|
|
|
|
||||
Accumulated other comprehensive income, net of taxes
|
|
|
|
|
||||
Beginning balance
|
|
163,921
|
|
|
163,373
|
|
||
Change in net unrealized investment gains and losses on
fixed maturity and equity securities
|
|
67,772
|
|
|
154,486
|
|
||
Change in net funded status of benefit plans
|
|
—
|
|
|
—
|
|
||
Ending balance
|
|
231,693
|
|
|
317,859
|
|
||
|
|
|
|
|
||||
Treasury stock, at cost
|
|
|
|
|
||||
Beginning balance, 2017, 24,672,932 shares;
2016, 23,971,522 shares |
|
(479,215
|
)
|
|
(457,702
|
)
|
||
Acquisition of shares, 2017, 0 shares;
2016, 701,410 shares |
|
—
|
|
|
(21,513
|
)
|
||
Ending balance, 2017, 24,672,932 shares;
2016, 24,672,932 shares |
|
(479,215
|
)
|
|
(479,215
|
)
|
||
|
|
|
|
|
||||
Shareholders’ equity at end of period
|
|
$
|
1,362,130
|
|
|
$
|
1,417,335
|
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2017
|
|
2016
|
||||
Cash flows - operating activities
|
|
|
|
|
||||
Premiums collected
|
|
$
|
392,715
|
|
|
$
|
367,182
|
|
Policyholder benefits paid
|
|
(274,256
|
)
|
|
(268,212
|
)
|
||
Policy acquisition and other operating expenses paid
|
|
(141,913
|
)
|
|
(138,612
|
)
|
||
Federal income taxes paid
|
|
(8,068
|
)
|
|
(15,094
|
)
|
||
Investment income collected
|
|
185,546
|
|
|
175,541
|
|
||
Interest expense paid
|
|
(5,738
|
)
|
|
(5,989
|
)
|
||
Other
|
|
6,167
|
|
|
954
|
|
||
|
|
|
|
|
||||
Net cash provided by operating activities
|
|
154,453
|
|
|
115,770
|
|
||
|
|
|
|
|
||||
Cash flows - investing activities
|
|
|
|
|
|
|
||
Fixed maturities
|
|
|
|
|
|
|
||
Purchases
|
|
(723,354
|
)
|
|
(834,114
|
)
|
||
Sales
|
|
229,690
|
|
|
257,033
|
|
||
Maturities, paydowns, calls and redemptions
|
|
491,739
|
|
|
475,532
|
|
||
Purchase of other invested assets
|
|
(53,716
|
)
|
|
(33,809
|
)
|
||
Net cash provided by (used in) short-term and other investments
|
|
(32,391
|
)
|
|
7,925
|
|
||
|
|
|
|
|
||||
Net cash (used in) investing activities
|
|
(88,032
|
)
|
|
(127,433
|
)
|
||
|
|
|
|
|
||||
Cash flows - financing activities
|
|
|
|
|
|
|
||
Dividends paid to shareholders
|
|
(23,041
|
)
|
|
(22,174
|
)
|
||
Acquisition of treasury stock
|
|
—
|
|
|
(21,513
|
)
|
||
Proceeds from exercise of stock options
|
|
3,130
|
|
|
1,926
|
|
||
Withholding tax payments on RSUs tendered
|
|
(2,604
|
)
|
|
(3,233
|
)
|
||
Annuity contracts: variable, fixed and FHLB funding agreements
|
|
|
|
|
|
|
||
Deposits
|
|
234,133
|
|
|
237,265
|
|
||
Benefits, withdrawals and net transfers to
Separate Account (variable annuity) assets
|
|
(200,845
|
)
|
|
(162,575
|
)
|
||
Transfer of Company 401(k) assets to a third-party provider
|
|
(77,898
|
)
|
|
—
|
|
||
Life policy accounts
|
|
|
|
|
|
|||
Deposits
|
|
2,240
|
|
|
1,680
|
|
||
Withdrawals and surrenders
|
|
(2,287
|
)
|
|
(1,995
|
)
|
||
Change in bank overdrafts
|
|
87
|
|
|
17,205
|
|
||
|
|
|
|
|
||||
Net cash (used in) provided by financing activities
|
|
(67,085
|
)
|
|
46,586
|
|
||
|
|
|
|
|
||||
Net (decrease) increase in cash
|
|
(664
|
)
|
|
34,923
|
|
||
|
|
|
|
|
||||
Cash at beginning of period
|
|
16,670
|
|
|
15,509
|
|
||
|
|
|
|
|
||||
Cash at end of period
|
|
$
|
16,006
|
|
|
$
|
50,432
|
|
($ in thousands)
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
|
|
|
|
|
||||
Investment contract reserves
|
|
$
|
4,377,759
|
|
|
$
|
4,360,456
|
|
Life policy reserves
|
|
1,103,104
|
|
|
1,087,513
|
|
||
Total
|
|
$
|
5,480,863
|
|
|
$
|
5,447,969
|
|
($ in thousands)
|
|
Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities (1)(2)
|
|
Benefit Plans (1)
|
|
Total (1)
|
||||||
|
|
|
|
|
|
|
||||||
Beginning balance, April 1, 2017
|
|
$
|
198,271
|
|
|
$
|
(11,817
|
)
|
|
$
|
186,454
|
|
Other comprehensive income (loss)
before reclassifications
|
|
46,303
|
|
|
—
|
|
|
46,303
|
|
|||
Amounts reclassified from accumulated
other comprehensive income (loss)
|
|
(1,064
|
)
|
|
—
|
|
|
(1,064
|
)
|
|||
Net current period other
comprehensive income
|
|
45,239
|
|
|
—
|
|
|
45,239
|
|
|||
Ending balance, June 30, 2017
|
|
$
|
243,510
|
|
|
$
|
(11,817
|
)
|
|
$
|
231,693
|
|
|
|
|
|
|
|
|
||||||
Beginning balance, January 1, 2017
|
|
$
|
175,738
|
|
|
$
|
(11,817
|
)
|
|
$
|
163,921
|
|
Other comprehensive income (loss)
before reclassifications
|
|
68,633
|
|
|
—
|
|
|
68,633
|
|
|||
Amounts reclassified from accumulated
other comprehensive income (loss)
|
|
(861
|
)
|
|
—
|
|
|
(861
|
)
|
|||
Net current period other
comprehensive income
|
|
67,772
|
|
|
—
|
|
|
67,772
|
|
|||
Ending balance, June 30, 2017
|
|
$
|
243,510
|
|
|
$
|
(11,817
|
)
|
|
$
|
231,693
|
|
(1)
|
All amounts are net of tax.
|
(2)
|
The pretax amounts reclassified from accumulated other comprehensive income (loss),
$1,638 thousand
and
$1,325 thousand
, are included in net realized investment gains and losses and the related income tax expenses,
$574 thousand
and
$464 thousand
are included in income tax expense in the Consolidated Statements of Operations for the three and six months ended
June 30, 2017
, respectively.
|
($ in thousands)
|
|
Net Unrealized Investment Gains and Losses on Fixed Maturity and Equity Securities (1)(2)
|
|
Benefit Plans (1)
|
|
Total (1)
|
||||||
|
|
|
|
|
|
|
||||||
Beginning balance, April 1, 2016
|
|
$
|
244,657
|
|
|
$
|
(11,794
|
)
|
|
$
|
232,863
|
|
Other comprehensive income (loss)
before reclassifications
|
|
87,809
|
|
|
—
|
|
|
87,809
|
|
|||
Amounts reclassified from accumulated
other comprehensive income (loss)
|
|
(2,813
|
)
|
|
—
|
|
|
(2,813
|
)
|
|||
Net current period other
comprehensive income
|
|
84,996
|
|
|
—
|
|
|
84,996
|
|
|||
Ending balance, June 30, 2016
|
|
$
|
329,653
|
|
|
$
|
(11,794
|
)
|
|
$
|
317,859
|
|
|
|
|
|
|
|
|
||||||
Beginning balance, January 1, 2016
|
|
$
|
175,167
|
|
|
$
|
(11,794
|
)
|
|
$
|
163,373
|
|
Other comprehensive income (loss)
before reclassifications
|
|
157,780
|
|
|
—
|
|
|
157,780
|
|
|||
Amounts reclassified from accumulated
other comprehensive income (loss)
|
|
(3,294
|
)
|
|
—
|
|
|
(3,294
|
)
|
|||
Net current period other
comprehensive income
|
|
154,486
|
|
|
—
|
|
|
154,486
|
|
|||
Ending balance, June 30, 2016
|
|
$
|
329,653
|
|
|
$
|
(11,794
|
)
|
|
$
|
317,859
|
|
(1)
|
All amounts are net of tax.
|
(2)
|
The pretax amounts reclassified from accumulated other comprehensive income (loss),
$4,327 thousand
and
$5,067 thousand
, are included in net realized investment gains and losses and the related income tax expenses,
$1,514 thousand
and
$1,773 thousand
, are included in income tax expense in the Consolidated Statements of Operations for the
three and six
months ended
June 30, 2016
, respectively.
|
($ in thousands)
|
|
Amortized
Cost or Cost
|
|
Unrealized
Investment
Gains
|
|
Unrealized
Investment
Losses
|
|
Fair
Value
|
|
OTTI in
AOCI (1)
|
||||||||||
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government and federally
sponsored agency obligations (2):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage-backed securities
|
|
$
|
589,643
|
|
|
$
|
36,054
|
|
|
$
|
2,633
|
|
|
$
|
623,064
|
|
|
$
|
—
|
|
Other, including
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. Treasury securities
|
|
588,713
|
|
|
23,550
|
|
|
5,913
|
|
|
606,350
|
|
|
—
|
|
|||||
Municipal bonds
|
|
1,659,648
|
|
|
168,001
|
|
|
10,429
|
|
|
1,817,220
|
|
|
—
|
|
|||||
Foreign government bonds
|
|
93,779
|
|
|
6,272
|
|
|
5
|
|
|
100,046
|
|
|
—
|
|
|||||
Corporate bonds
|
|
2,645,268
|
|
|
186,601
|
|
|
4,261
|
|
|
2,827,608
|
|
|
—
|
|
|||||
Other mortgage-backed securities
|
|
1,584,866
|
|
|
26,076
|
|
|
6,645
|
|
|
1,604,297
|
|
|
1,447
|
|
|||||
Totals
|
|
$
|
7,161,917
|
|
|
$
|
446,554
|
|
|
$
|
29,886
|
|
|
$
|
7,578,585
|
|
|
$
|
1,447
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity securities (3)
|
|
$
|
140,553
|
|
|
$
|
17,911
|
|
|
$
|
1,555
|
|
|
$
|
156,909
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government and federally
sponsored agency obligations (2):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage-backed securities
|
|
$
|
587,355
|
|
|
$
|
34,256
|
|
|
$
|
6,720
|
|
|
$
|
614,891
|
|
|
$
|
—
|
|
Other, including
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. Treasury securities
|
|
458,745
|
|
|
18,518
|
|
|
10,120
|
|
|
467,143
|
|
|
—
|
|
|||||
Municipal bonds
|
|
1,648,252
|
|
|
143,733
|
|
|
22,588
|
|
|
1,769,397
|
|
|
—
|
|
|||||
Foreign government bonds
|
|
93,864
|
|
|
5,102
|
|
|
297
|
|
|
98,669
|
|
|
—
|
|
|||||
Corporate bonds
|
|
2,672,818
|
|
|
152,229
|
|
|
14,826
|
|
|
2,810,221
|
|
|
—
|
|
|||||
Other mortgage-backed securities
|
|
1,691,093
|
|
|
21,153
|
|
|
15,859
|
|
|
1,696,387
|
|
|
1,618
|
|
|||||
Totals
|
|
$
|
7,152,127
|
|
|
$
|
374,991
|
|
|
$
|
70,410
|
|
|
$
|
7,456,708
|
|
|
$
|
1,618
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity securities (3)
|
|
$
|
134,013
|
|
|
$
|
13,210
|
|
|
$
|
5,574
|
|
|
$
|
141,649
|
|
|
$
|
—
|
|
(1)
|
Related to securities for which an unrealized loss was bifurcated to distinguish the credit-related portion and the portion driven by other market factors. Represents the amount of OTTI losses in AOCI which was not included in earnings; amounts also include net unrealized investment gains and losses on such impaired securities relating to changes in the fair value of those securities subsequent to the impairment measurement date.
|
(2)
|
Fair value includes securities issued by Federal National Mortgage Association (“FNMA”) of
$310,403 thousand
and
$272,668 thousand
; Federal Home Loan Mortgage Corporation (“FHLMC”) of
$368,396 thousand
and
$378,683 thousand
; and Government National Mortgage Association (“GNMA”) of
$111,458 thousand
and
$115,627 thousand
as of
June 30, 2017
and
December 31, 2016
, respectively.
|
(3)
|
Includes nonredeemable (perpetual) preferred stocks, common stocks and closed-end funds.
|
($ in thousands)
|
|
12 Months or Less
|
|
More than 12 Months
|
|
Total
|
||||||||||||||||||
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
||||||||||||
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Government and federally sponsored agency obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Mortgage-backed securities
|
|
$
|
101,350
|
|
|
$
|
2,320
|
|
|
$
|
3,480
|
|
|
$
|
313
|
|
|
$
|
104,830
|
|
|
$
|
2,633
|
|
Other
|
|
223,396
|
|
|
5,913
|
|
|
—
|
|
|
—
|
|
|
223,396
|
|
|
5,913
|
|
||||||
Municipal bonds
|
|
179,314
|
|
|
6,893
|
|
|
10,023
|
|
|
3,536
|
|
|
189,337
|
|
|
10,429
|
|
||||||
Foreign government bonds
|
|
1,980
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
1,980
|
|
|
5
|
|
||||||
Corporate bonds
|
|
157,230
|
|
|
2,949
|
|
|
26,907
|
|
|
1,312
|
|
|
184,137
|
|
|
4,261
|
|
||||||
Other mortgage-backed securities
|
|
449,341
|
|
|
4,764
|
|
|
133,899
|
|
|
1,881
|
|
|
583,240
|
|
|
6,645
|
|
||||||
Total fixed
maturity securities
|
|
1,112,611
|
|
|
22,844
|
|
|
174,309
|
|
|
7,042
|
|
|
1,286,920
|
|
|
29,886
|
|
||||||
Equity securities (1)
|
|
8,748
|
|
|
727
|
|
|
4,863
|
|
|
828
|
|
|
13,611
|
|
|
1,555
|
|
||||||
Combined totals
|
|
$
|
1,121,359
|
|
|
$
|
23,571
|
|
|
$
|
179,172
|
|
|
$
|
7,870
|
|
|
$
|
1,300,531
|
|
|
$
|
31,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Number of positions with a
gross unrealized loss |
|
413
|
|
|
|
|
60
|
|
|
|
|
473
|
|
|
|
|||||||||
Fair value as a percentage of
total fixed maturity and equity securities fair value |
|
14.5
|
%
|
|
|
|
2.3
|
%
|
|
|
|
16.8
|
%
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Government and federally sponsored agency obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Mortgage-backed securities
|
|
$
|
186,439
|
|
|
$
|
6,176
|
|
|
$
|
3,235
|
|
|
$
|
544
|
|
|
$
|
189,674
|
|
|
$
|
6,720
|
|
Other
|
|
219,372
|
|
|
10,120
|
|
|
—
|
|
|
—
|
|
|
219,372
|
|
|
10,120
|
|
||||||
Municipal bonds
|
|
408,163
|
|
|
19,006
|
|
|
9,928
|
|
|
3,582
|
|
|
418,091
|
|
|
22,588
|
|
||||||
Foreign government bonds
|
|
24,182
|
|
|
297
|
|
|
—
|
|
|
—
|
|
|
24,182
|
|
|
297
|
|
||||||
Corporate bonds
|
|
459,402
|
|
|
11,056
|
|
|
57,261
|
|
|
3,770
|
|
|
516,663
|
|
|
14,826
|
|
||||||
Other mortgage-backed securities
|
|
640,691
|
|
|
10,470
|
|
|
229,106
|
|
|
5,389
|
|
|
869,797
|
|
|
15,859
|
|
||||||
Total fixed
maturity securities
|
|
1,938,249
|
|
|
57,125
|
|
|
299,530
|
|
|
13,285
|
|
|
2,237,779
|
|
|
70,410
|
|
||||||
Equity securities (1)
|
|
56,676
|
|
|
4,567
|
|
|
7,956
|
|
|
1,007
|
|
|
64,632
|
|
|
5,574
|
|
||||||
Combined totals
|
|
$
|
1,994,925
|
|
|
$
|
61,692
|
|
|
$
|
307,486
|
|
|
$
|
14,292
|
|
|
$
|
2,302,411
|
|
|
$
|
75,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Number of positions with a
gross unrealized loss
|
|
629
|
|
|
|
|
102
|
|
|
|
|
731
|
|
|
|
|||||||||
Fair value as a percentage of
total fixed maturity and
equity securities fair value
|
|
26.3
|
%
|
|
|
|
4.0
|
%
|
|
|
|
30.3
|
%
|
|
|
(1)
|
Includes nonredeemable (perpetual) preferred stocks, common stocks and closed-end funds.
|
($ in thousands)
|
|
Six Months Ended June 30,
|
||||||
|
|
2017
|
|
2016
|
||||
Cumulative credit loss (1)
|
|
|
|
|
||||
Beginning of period
|
|
$
|
13,703
|
|
|
$
|
7,844
|
|
New credit losses
|
|
—
|
|
|
300
|
|
||
Increases to previously recognized credit losses
|
|
1,910
|
|
|
2,480
|
|
||
Gains related to securities sold or paid down during the period
|
|
(2
|
)
|
|
—
|
|
||
End of period
|
|
$
|
15,611
|
|
|
$
|
10,624
|
|
(1)
|
The cumulative credit loss amounts exclude OTTI losses on securities held as of the periods indicated that the Company intended to sell or it was more likely than not that the Company would be required to sell the security before the recovery of the amortized cost basis.
|
($ in thousands)
|
|
Percent of Total Fair Value
|
|
June 30, 2017
|
||||||||||
|
|
June 30, 2017
|
|
December 31, 2016
|
|
Fair
Value
|
|
Amortized
Cost
|
||||||
Estimated expected maturity:
|
|
|
|
|
|
|
|
|
||||||
Due in 1 year or less
|
|
3.6
|
%
|
|
3.9
|
%
|
|
$
|
275,005
|
|
|
$
|
269,431
|
|
Due after 1 year through 5 years
|
|
27.4
|
|
|
28.7
|
|
|
2,079,595
|
|
|
1,981,639
|
|
||
Due after 5 years through 10 years
|
|
34.1
|
|
|
35.2
|
|
|
2,580,296
|
|
|
2,478,678
|
|
||
Due after 10 years through 20 years
|
|
22.8
|
|
|
19.5
|
|
|
1,729,382
|
|
|
1,609,894
|
|
||
Due after 20 years
|
|
12.1
|
|
|
12.7
|
|
|
914,307
|
|
|
822,275
|
|
||
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
$
|
7,578,585
|
|
|
$
|
7,161,917
|
|
|
|
|
|
|
|
|
|
|
||||||
Average option-adjusted
duration, in years
|
|
6.0
|
|
|
5.9
|
|
|
|
|
|
($ in thousands)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
||||||||
Proceeds received
|
|
$
|
118,818
|
|
|
$
|
174,944
|
|
|
$
|
229,690
|
|
|
$
|
257,033
|
|
Gross gains realized
|
|
4,080
|
|
|
8,382
|
|
|
6,569
|
|
|
10,858
|
|
||||
Gross losses realized
|
|
(496
|
)
|
|
(948
|
)
|
|
(1,377
|
)
|
|
(1,440
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Equity securities
|
|
|
|
|
|
|
|
|
||||||||
Proceeds received
|
|
$
|
11,507
|
|
|
$
|
6,474
|
|
|
$
|
16,996
|
|
|
$
|
12,622
|
|
Gross gains realized
|
|
1,702
|
|
|
650
|
|
|
2,750
|
|
|
1,170
|
|
||||
Gross losses realized
|
|
(236
|
)
|
|
(195
|
)
|
|
(428
|
)
|
|
(841
|
)
|
($ in thousands)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net unrealized investment gains and losses
on fixed maturity securities, net of tax
|
|
|
|
|
|
|
|
|
||||||||
Beginning of period
|
|
$
|
219,385
|
|
|
$
|
276,381
|
|
|
$
|
197,978
|
|
|
$
|
198,714
|
|
Change in net unrealized investment
gains and losses
|
|
51,523
|
|
|
89,744
|
|
|
73,414
|
|
|
168,085
|
|
||||
Reclassification of net realized
investment gains to net income
|
|
(74
|
)
|
|
5,331
|
|
|
(558
|
)
|
|
4,657
|
|
||||
End of period
|
|
$
|
270,834
|
|
|
$
|
371,456
|
|
|
$
|
270,834
|
|
|
$
|
371,456
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net unrealized investment gains and losses
on equity securities, net of tax
|
|
|
|
|
|
|
|
|
||||||||
Beginning of period
|
|
$
|
8,952
|
|
|
$
|
5,030
|
|
|
$
|
4,963
|
|
|
$
|
2,649
|
|
Change in net unrealized investment
gains and losses
|
|
2,670
|
|
|
4,710
|
|
|
5,972
|
|
|
6,898
|
|
||||
Reclassification of net realized
investment losses to net income
|
|
(991
|
)
|
|
(1,557
|
)
|
|
(304
|
)
|
|
(1,364
|
)
|
||||
End of period
|
|
$
|
10,631
|
|
|
$
|
8,183
|
|
|
$
|
10,631
|
|
|
$
|
8,183
|
|
($ in thousands)
|
|
|
|
Gross
Amounts
Offset in the
|
|
Net Amounts
of Assets/
Liabilities
Presented
in the
|
|
Gross Amounts Not Offset
in the Consolidated
Balance Sheets
|
|
|
||||||||||||||
|
|
Gross
Amounts
|
|
Consolidated
Balance
Sheets
|
|
Consolidated
Balance
Sheets
|
|
Financial
Instruments
|
|
Cash
Collateral
Received
|
|
Net
Amount
|
||||||||||||
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Asset derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Free-standing derivatives
|
|
$
|
9,969
|
|
|
$
|
—
|
|
|
$
|
9,969
|
|
|
$
|
—
|
|
|
$
|
10,959
|
|
|
$
|
(990
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Asset derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Free-standing derivatives
|
|
$
|
8,694
|
|
|
$
|
—
|
|
|
$
|
8,694
|
|
|
$
|
—
|
|
|
$
|
8,824
|
|
|
$
|
(130
|
)
|
($ in thousands)
|
|
|
|
Fair Value Measurements at
|
||||||||||||||||
|
|
Carrying
|
|
Fair
|
|
Reporting Date Using
|
||||||||||||||
|
|
Amount
|
|
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government and federally
sponsored agency obligations:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage-backed securities
|
|
$
|
623,064
|
|
|
$
|
623,064
|
|
|
$
|
—
|
|
|
$
|
619,479
|
|
|
$
|
3,585
|
|
Other, including
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Treasury securities
|
|
606,350
|
|
|
606,350
|
|
|
14,341
|
|
|
592,009
|
|
|
—
|
|
|||||
Municipal bonds
|
|
1,817,220
|
|
|
1,817,220
|
|
|
—
|
|
|
1,768,097
|
|
|
49,123
|
|
|||||
Foreign government bonds
|
|
100,046
|
|
|
100,046
|
|
|
—
|
|
|
100,046
|
|
|
—
|
|
|||||
Corporate bonds
|
|
2,827,608
|
|
|
2,827,608
|
|
|
14,976
|
|
|
2,735,580
|
|
|
77,052
|
|
|||||
Other mortgage-backed securities
|
|
1,604,297
|
|
|
1,604,297
|
|
|
—
|
|
|
1,487,558
|
|
|
116,739
|
|
|||||
Total fixed maturity securities
|
|
7,578,585
|
|
|
7,578,585
|
|
|
29,317
|
|
|
7,302,769
|
|
|
246,499
|
|
|||||
Equity securities
|
|
156,909
|
|
|
156,909
|
|
|
101,847
|
|
|
55,056
|
|
|
6
|
|
|||||
Short-term investments
|
|
104,087
|
|
|
104,087
|
|
|
104,087
|
|
|
—
|
|
|
—
|
|
|||||
Other investments
|
|
21,482
|
|
|
21,482
|
|
|
—
|
|
|
21,482
|
|
|
—
|
|
|||||
Totals
|
|
$
|
7,861,063
|
|
|
$
|
7,861,063
|
|
|
$
|
235,251
|
|
|
$
|
7,379,307
|
|
|
$
|
246,505
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Investment contract and life policy
reserves, embedded derivatives
|
|
$
|
286
|
|
|
$
|
286
|
|
|
$
|
—
|
|
|
$
|
286
|
|
|
$
|
—
|
|
Other policyholder funds,
embedded derivatives
|
|
67,995
|
|
|
67,995
|
|
|
—
|
|
|
—
|
|
|
67,995
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government and federally
sponsored agency obligations: |
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage-backed securities
|
|
$
|
614,891
|
|
|
$
|
614,891
|
|
|
$
|
—
|
|
|
$
|
611,476
|
|
|
$
|
3,415
|
|
Other, including
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. Treasury securities
|
|
467,143
|
|
|
467,143
|
|
|
13,631
|
|
|
453,512
|
|
|
—
|
|
|||||
Municipal bonds
|
|
1,769,397
|
|
|
1,769,397
|
|
|
—
|
|
|
1,722,900
|
|
|
46,497
|
|
|||||
Foreign government bonds
|
|
98,669
|
|
|
98,669
|
|
|
—
|
|
|
98,669
|
|
|
—
|
|
|||||
Corporate bonds
|
|
2,810,221
|
|
|
2,810,221
|
|
|
13,532
|
|
|
2,736,498
|
|
|
60,191
|
|
|||||
Other mortgage-backed securities
|
|
1,696,387
|
|
|
1,696,387
|
|
|
—
|
|
|
1,595,143
|
|
|
101,244
|
|
|||||
Total fixed maturity securities
|
|
7,456,708
|
|
|
7,456,708
|
|
|
27,163
|
|
|
7,218,198
|
|
|
211,347
|
|
|||||
Equity securities
|
|
141,649
|
|
|
141,649
|
|
|
98,632
|
|
|
43,011
|
|
|
6
|
|
|||||
Short-term investments
|
|
44,918
|
|
|
44,918
|
|
|
44,167
|
|
|
—
|
|
|
751
|
|
|||||
Other investments
|
|
20,194
|
|
|
20,194
|
|
|
—
|
|
|
20,194
|
|
|
—
|
|
|||||
Totals
|
|
$
|
7,663,469
|
|
|
$
|
7,663,469
|
|
|
$
|
169,962
|
|
|
$
|
7,281,403
|
|
|
$
|
212,104
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contract and life policy
reserves, embedded derivatives
|
|
$
|
158
|
|
|
$
|
158
|
|
|
$
|
—
|
|
|
$
|
158
|
|
|
$
|
—
|
|
Other policyholder funds,
embedded derivatives
|
|
59,393
|
|
|
59,393
|
|
|
—
|
|
|
—
|
|
|
59,393
|
|
($ in thousands)
|
|
Financial Assets
|
|
Financial
Liabilities(1)
|
||||||||||||||||||||||||||||
|
|
Municipal
Bonds
|
|
Corporate
Bonds
|
|
Mortgage-
Backed
Securities (2)
|
|
Total
Fixed
Maturity
Securities
|
|
Equity
Securities
|
|
Short-term
Investments
|
|
Total
|
|
|
||||||||||||||||
Beginning balance, April 1, 2017
|
|
$
|
53,462
|
|
|
$
|
82,495
|
|
|
$
|
112,794
|
|
|
$
|
248,751
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
248,757
|
|
|
$
|
64,261
|
|
Transfers into Level 3 (3)
|
|
—
|
|
|
2,001
|
|
|
9,482
|
|
|
11,483
|
|
|
—
|
|
|
—
|
|
|
11,483
|
|
|
—
|
|
||||||||
Transfers out of Level 3 (3)
|
|
(5,557
|
)
|
|
(5,853
|
)
|
|
—
|
|
|
(11,410
|
)
|
|
—
|
|
|
—
|
|
|
(11,410
|
)
|
|
—
|
|
||||||||
Total gains or losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net realized investment gains (losses) included in net
income related to financial assets
|
|
—
|
|
|
—
|
|
|
(1,714
|
)
|
|
(1,714
|
)
|
|
—
|
|
|
—
|
|
|
(1,714
|
)
|
|
—
|
|
||||||||
Net realized (gains) losses
included in net income
related to financial liabilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,238
|
|
||||||||
Net unrealized investment
gains (losses) included in other comprehensive income
|
|
1,287
|
|
|
359
|
|
|
3,093
|
|
|
4,739
|
|
|
—
|
|
|
—
|
|
|
4,739
|
|
|
—
|
|
||||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,397
|
|
||||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Settlements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Paydowns, maturities
and distributions
|
|
(69
|
)
|
|
(1,950
|
)
|
|
(3,331
|
)
|
|
(5,350
|
)
|
|
—
|
|
|
—
|
|
|
(5,350
|
)
|
|
(901
|
)
|
||||||||
Ending balance, June 30, 2017
|
|
$
|
49,123
|
|
|
$
|
77,052
|
|
|
$
|
120,324
|
|
|
$
|
246,499
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
246,505
|
|
|
$
|
67,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Beginning balance, January 1, 2017
|
|
$
|
46,497
|
|
|
$
|
60,191
|
|
|
$
|
104,659
|
|
|
$
|
211,347
|
|
|
$
|
6
|
|
|
$
|
751
|
|
|
$
|
212,104
|
|
|
$
|
59,393
|
|
Transfers into Level 3 (3)
|
|
5,214
|
|
|
31,919
|
|
|
24,521
|
|
|
61,654
|
|
|
—
|
|
|
—
|
|
|
61,654
|
|
|
—
|
|
||||||||
Transfers out of Level 3 (3)
|
|
(5,557
|
)
|
|
(11,963
|
)
|
|
—
|
|
|
(17,520
|
)
|
|
—
|
|
|
(751
|
)
|
|
(18,271
|
)
|
|
—
|
|
||||||||
Total gains or losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net realized investment gains (losses) included in net income related to financial assets
|
|
—
|
|
|
—
|
|
|
(1,714
|
)
|
|
(1,714
|
)
|
|
—
|
|
|
—
|
|
|
(1,714
|
)
|
|
—
|
|
||||||||
Net realized (gains) losses
included in net income
related to financial liabilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,546
|
|
||||||||
Net unrealized investment
gains (losses) included in other comprehensive income
|
|
3,158
|
|
|
455
|
|
|
2,322
|
|
|
5,935
|
|
|
—
|
|
|
—
|
|
|
5,935
|
|
|
—
|
|
||||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,786
|
|
||||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Settlements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Paydowns, maturities
and distributions
|
|
(189
|
)
|
|
(3,550
|
)
|
|
(9,464
|
)
|
|
(13,203
|
)
|
|
—
|
|
|
—
|
|
|
(13,203
|
)
|
|
(1,730
|
)
|
||||||||
Ending balance, June 30, 2017
|
|
$
|
49,123
|
|
|
$
|
77,052
|
|
|
$
|
120,324
|
|
|
$
|
246,499
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
246,505
|
|
|
$
|
67,995
|
|
(1)
|
Represents embedded derivatives, all related to the Company’s FIA products, reported in Other policyholder funds in the Company’s Consolidated Balance Sheets.
|
(2)
|
Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other mortgage-backed securities.
|
(3)
|
Transfers into and out of Level 3 during the three and six months ended
June 30, 2017
were attributable to changes in the availability of observable market information for individual fixed maturity securities and short-term investments. The Company’s policy is to recognize transfers into and transfers out of the levels as having occurred at the end of the reporting period in which the transfers were determined.
|
($ in thousands)
|
|
Financial Assets
|
|
Financial
Liabilities(1)
|
||||||||||||||||||||||||||||
|
|
Municipal
Bonds
|
|
Corporate
Bonds
|
|
Mortgage-
Backed
Securities (2)
|
|
Total
Fixed
Maturity
Securities
|
|
Equity
Securities
|
|
Short-term
Investments
|
|
Total
|
|
|
||||||||||||||||
Beginning balance, April 1, 2016
|
|
$
|
46,493
|
|
|
$
|
70,071
|
|
|
$
|
83,821
|
|
|
$
|
200,385
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
200,391
|
|
|
$
|
42,085
|
|
Transfers into Level 3 (3)
|
|
—
|
|
|
5,017
|
|
|
12,984
|
|
|
18,001
|
|
|
—
|
|
|
—
|
|
|
18,001
|
|
|
—
|
|
||||||||
Transfers out of Level 3 (3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total gains or losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net realized investment gains (losses) included in net
income related to financial assets
|
|
—
|
|
|
(657
|
)
|
|
—
|
|
|
(657
|
)
|
|
—
|
|
|
—
|
|
|
(657
|
)
|
|
—
|
|
||||||||
Net realized (gains) losses
included in net income
related to financial liabilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,324
|
|
||||||||
Net unrealized investment gains
(losses) included in other
comprehensive income
|
|
1,297
|
|
|
1,393
|
|
|
229
|
|
|
2,919
|
|
|
—
|
|
|
—
|
|
|
2,919
|
|
|
—
|
|
||||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,993
|
|
||||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Settlements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Paydowns, maturities
and distributions
|
|
(143
|
)
|
|
(2,416
|
)
|
|
(453
|
)
|
|
(3,012
|
)
|
|
—
|
|
|
—
|
|
|
(3,012
|
)
|
|
(696
|
)
|
||||||||
Ending balance, June 30, 2016
|
|
$
|
47,647
|
|
|
$
|
73,408
|
|
|
$
|
96,581
|
|
|
$
|
217,636
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
217,642
|
|
|
$
|
47,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Beginning balance, January 1, 2016
|
|
$
|
30,379
|
|
|
$
|
67,575
|
|
|
$
|
75,466
|
|
|
$
|
173,420
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
173,426
|
|
|
$
|
39,021
|
|
Transfers into Level 3 (3)
|
|
14,751
|
|
|
11,076
|
|
|
24,626
|
|
|
50,453
|
|
|
—
|
|
|
—
|
|
|
50,453
|
|
|
—
|
|
||||||||
Transfers out of Level 3 (3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total gains or losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net realized investment gains
(losses) included in net
income related to
financial assets
|
|
—
|
|
|
(657
|
)
|
|
—
|
|
|
(657
|
)
|
|
—
|
|
|
—
|
|
|
(657
|
)
|
|
—
|
|
||||||||
Net realized (gains) losses
included in net income
related to financial liabilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,998
|
|
||||||||
Net unrealized investment gains
(losses) included in other
comprehensive income
|
|
2,781
|
|
|
1,781
|
|
|
222
|
|
|
4,784
|
|
|
—
|
|
|
—
|
|
|
4,784
|
|
|
—
|
|
||||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,484
|
|
||||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Settlements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Paydowns, maturities
and distributions
|
|
(264
|
)
|
|
(6,367
|
)
|
|
(3,733
|
)
|
|
(10,364
|
)
|
|
—
|
|
|
—
|
|
|
(10,364
|
)
|
|
(1,797
|
)
|
||||||||
Ending balance, June 30, 2016
|
|
$
|
47,647
|
|
|
$
|
73,408
|
|
|
$
|
96,581
|
|
|
$
|
217,636
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
217,642
|
|
|
$
|
47,706
|
|
(1)
|
Represents embedded derivatives, all related to the Company’s FIA products, reported in Other policyholder funds in the Company’s Consolidated Balance Sheets.
|
(2)
|
Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other mortgage-backed securities.
|
(3)
|
Transfers into and out of Level 3 during the three and six months ended June 30, 2016 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company’s policy is to recognize transfers into and transfers out of the levels as having occurred at the end of the reporting period in which the transfers were determined.
|
($ in thousands)
|
|
|
|
Fair Value Measurements at
|
||||||||||||||||
|
|
Carrying
|
|
Fair
|
|
Reporting Date Using
|
||||||||||||||
|
|
Amount
|
|
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other investments
|
|
$
|
152,970
|
|
|
$
|
157,530
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
157,530
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Investment contract and life policy
reserves, fixed annuity contracts |
|
4,377,759
|
|
|
4,288,095
|
|
|
—
|
|
|
—
|
|
|
4,288,095
|
|
|||||
Investment contract and life policy
reserves, account values on life contracts |
|
80,768
|
|
|
86,175
|
|
|
—
|
|
|
—
|
|
|
86,175
|
|
|||||
Other policyholder funds
|
|
645,009
|
|
|
645,009
|
|
|
—
|
|
|
575,475
|
|
|
69,534
|
|
|||||
Long-term debt
|
|
247,337
|
|
|
257,929
|
|
|
257,929
|
|
|
—
|
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other investments
|
|
$
|
151,965
|
|
|
$
|
156,536
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
156,536
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment contract and life policy
reserves, fixed annuity contracts
|
|
4,360,456
|
|
|
4,280,528
|
|
|
—
|
|
|
—
|
|
|
4,280,528
|
|
|||||
Investment contract and life policy
reserves, account values on life contracts
|
|
79,591
|
|
|
85,066
|
|
|
—
|
|
|
—
|
|
|
85,066
|
|
|||||
Other policyholder funds
|
|
649,557
|
|
|
649,557
|
|
|
—
|
|
|
575,253
|
|
|
74,304
|
|
|||||
Long-term debt
|
|
247,209
|
|
|
248,191
|
|
|
248,191
|
|
|
—
|
|
|
—
|
|
($ in thousands)
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
Assets
|
|
|
|
|
|
|
||
Derivative instruments, included in Short-term
and other investments
|
|
$
|
9,969
|
|
|
$
|
8,694
|
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
|
|
|
||
FIA - embedded derivatives,
included in Other policyholder funds
|
|
$
|
67,995
|
|
|
$
|
59,393
|
|
IUL - embedded derivatives,
included in Investment contract and life policy reserves
|
|
286
|
|
|
158
|
|
($ in thousands)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Change in fair value of derivatives (1):
|
|
|
|
|
|
|
|
|
||||||||
Revenues
|
|
|
|
|
|
|
|
|
||||||||
Net realized investment gains (losses)
|
|
$
|
1,729
|
|
|
$
|
78
|
|
|
$
|
4,166
|
|
|
$
|
(140
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Change in fair value of embedded derivatives:
|
|
|
|
|
|
|
|
|
||||||||
Revenues
|
|
|
|
|
|
|
|
|
||||||||
Net realized investment losses
|
|
$
|
(1,295
|
)
|
|
$
|
(1,325
|
)
|
|
$
|
(3,661
|
)
|
|
$
|
(2,001
|
)
|
(1)
|
Includes the gains or losses recognized at the expiration of the option term or early termination and the changes in fair value for open options.
|
($ in thousands)
|
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||||
|
|
Credit Rating
|
|
Notional
|
|
Fair
|
|
Notional
|
|
Fair
|
||||||||
Counterparty
|
|
S&P
|
|
Amount
|
|
Value
|
|
Amount
|
|
Value
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Bank of America, N.A.
|
|
A+
|
|
$
|
43,000
|
|
|
$
|
829
|
|
|
$
|
38,500
|
|
|
$
|
1,934
|
|
Barclays Bank PLC
|
|
A-
|
|
83,700
|
|
|
2,837
|
|
|
66,800
|
|
|
1,543
|
|
||||
Citigroup Inc.
|
|
BBB+
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Credit Suisse International
|
|
A
|
|
50,800
|
|
|
4,762
|
|
|
65,200
|
|
|
4,281
|
|
||||
Societe Generale
|
|
A
|
|
44,800
|
|
|
1,541
|
|
|
15,600
|
|
|
936
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total
|
|
|
|
$
|
222,300
|
|
|
$
|
9,969
|
|
|
$
|
186,100
|
|
|
$
|
8,694
|
|
($ in thousands)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Property and Casualty segment
|
|
|
|
|
|
|
|
|
|
|
||||||
Beginning Gross reserves (1)
|
|
$
|
316,173
|
|
|
$
|
319,276
|
|
|
$
|
307,757
|
|
|
$
|
301,569
|
|
Less: reinsurance recoverables
|
|
61,804
|
|
|
60,429
|
|
|
61,199
|
|
|
50,332
|
|
||||
Net reserves, beginning of period (2)
|
|
254,369
|
|
|
258,847
|
|
|
246,558
|
|
|
251,237
|
|
||||
Incurred claims and claim expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||
Claims occurring in the current period
|
|
148,348
|
|
|
131,355
|
|
|
271,552
|
|
|
234,561
|
|
||||
Decrease in estimated reserves for
claims occurring in prior periods (3)
|
|
(600
|
)
|
|
(1,600
|
)
|
|
(1,600
|
)
|
|
(3,600
|
)
|
||||
Total claims and claim expenses incurred (4)
|
|
147,748
|
|
|
129,755
|
|
|
269,952
|
|
|
230,961
|
|
||||
Claims and claim expense payments
for claims occurring during:
|
|
|
|
|
|
|
|
|
|
|
||||||
Current period
|
|
95,645
|
|
|
89,549
|
|
|
148,025
|
|
|
128,630
|
|
||||
Prior periods
|
|
35,538
|
|
|
38,591
|
|
|
97,551
|
|
|
93,106
|
|
||||
Total claims and claim expense payments
|
|
131,183
|
|
|
128,140
|
|
|
245,576
|
|
|
221,736
|
|
||||
Net reserves, end of period (2)
|
|
270,934
|
|
|
260,462
|
|
|
270,934
|
|
|
260,462
|
|
||||
Plus: reinsurance recoverables
|
|
58,897
|
|
|
60,499
|
|
|
58,897
|
|
|
60,499
|
|
||||
Ending Gross reserves (1)
|
|
$
|
329,831
|
|
|
$
|
320,961
|
|
|
$
|
329,831
|
|
|
$
|
320,961
|
|
(1)
|
Unpaid claims and claim expenses as reported in the Consolidated Balance Sheets also include reserves for the Life and Retirement segments of
$22,682 thousand
and
$23,783 thousand
as of
June 30, 2017
and
2016
, respectively, in addition to Property and Casualty segment reserves.
|
(2)
|
Reserves net of anticipated reinsurance recoverables.
|
(3)
|
Shows the amounts by which the Company decreased its reserves in each of the periods indicated for claims occurring in previous periods to reflect subsequent information on such claims and changes in their projected final settlement costs.
|
(4)
|
Benefits, claims and settlement expenses as reported in the Consolidated Statements of Operations also include amounts for the Life and Retirement segments of
$18,131 thousand
and
$40,023 thousand
for the three and six months ended
June 30, 2017
, respectively, in addition to the Property and Casualty segment amounts. The Life and Retirement segments for the
three and six
months ended
June 30, 2016
were
$18,653 thousand
and
$36,960 thousand
, respectively.
|
($ in thousands)
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
Short-term debt:
|
|
|
|
|
|
|
||
Bank Credit Facility, expires July 30, 2019
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
||||
Long-term debt:
|
|
|
|
|
|
|
||
4.50% Senior Notes, due December 1, 2025. Aggregate
principal amount of $250,000 thousand less unaccrued discount of $575 thousand and $603 thousand (4.5% imputed rate) and unamortized debt issuance costs of $2,088 thousand and $2,188 thousand |
|
247,337
|
|
|
247,209
|
|
($ in thousands)
|
|
Gross
Amount
|
|
Ceded to
Other
Companies
|
|
Assumed
from Other
Companies
|
|
Net
Amount
|
||||||||
Three months ended June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Premiums written and contract deposits
|
|
$
|
316,123
|
|
|
$
|
5,643
|
|
|
$
|
1,134
|
|
|
$
|
311,614
|
|
Premiums and contract charges earned
|
|
200,351
|
|
|
5,665
|
|
|
1,032
|
|
|
195,718
|
|
||||
Benefits, claims and settlement expenses
|
|
168,218
|
|
|
3,185
|
|
|
846
|
|
|
165,879
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Three months ended June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Premiums written and contract deposits
|
|
$
|
316,798
|
|
|
$
|
5,921
|
|
|
$
|
1,002
|
|
|
$
|
311,879
|
|
Premiums and contract charges earned
|
|
193,396
|
|
|
5,952
|
|
|
916
|
|
|
188,360
|
|
||||
Benefits, claims and settlement expenses
|
|
151,998
|
|
|
4,444
|
|
|
854
|
|
|
148,408
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Six months ended June 30, 2017
|
|
|
|
|
|
|
|
|
||||||||
Premiums written and contract deposits
|
|
$
|
617,635
|
|
|
$
|
11,153
|
|
|
$
|
1,864
|
|
|
$
|
608,346
|
|
Premiums and contract charges earned
|
|
400,806
|
|
|
11,199
|
|
|
1,833
|
|
|
391,440
|
|
||||
Benefits, claims and settlement expenses
|
|
315,489
|
|
|
7,068
|
|
|
1,554
|
|
|
309,975
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Six months ended June 30, 2016
|
|
|
|
|
|
|
|
|
||||||||
Premiums written and contract deposits
|
|
$
|
604,790
|
|
|
$
|
11,689
|
|
|
$
|
1,947
|
|
|
$
|
595,048
|
|
Premiums and contract charges earned
|
|
383,629
|
|
|
11,721
|
|
|
1,902
|
|
|
373,810
|
|
||||
Benefits, claims and settlement expenses
|
|
283,238
|
|
|
17,106
|
|
|
1,789
|
|
|
267,921
|
|
($ in thousands)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Insurance premiums and contract charges earned
|
|
|
|
|
|
|
|
|
||||||||
Property and Casualty
|
|
$
|
160,460
|
|
|
$
|
153,673
|
|
|
$
|
318,778
|
|
|
$
|
305,793
|
|
Retirement
|
|
6,759
|
|
|
6,098
|
|
|
13,360
|
|
|
12,166
|
|
||||
Life
|
|
28,499
|
|
|
28,589
|
|
|
59,302
|
|
|
55,851
|
|
||||
Total
|
|
$
|
195,718
|
|
|
$
|
188,360
|
|
|
$
|
391,440
|
|
|
$
|
373,810
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net investment income
|
|
|
|
|
|
|
|
|
||||||||
Property and Casualty
|
|
$
|
8,113
|
|
|
$
|
10,151
|
|
|
$
|
17,290
|
|
|
$
|
18,979
|
|
Retirement
|
|
65,139
|
|
|
62,727
|
|
|
128,581
|
|
|
120,776
|
|
||||
Life
|
|
18,928
|
|
|
18,502
|
|
|
37,216
|
|
|
36,486
|
|
||||
Corporate and Other
|
|
18
|
|
|
14
|
|
|
30
|
|
|
29
|
|
||||
Intersegment eliminations
|
|
(204
|
)
|
|
(215
|
)
|
|
(412
|
)
|
|
(432
|
)
|
||||
Total
|
|
$
|
91,994
|
|
|
$
|
91,179
|
|
|
$
|
182,705
|
|
|
$
|
175,838
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
|
|
|
|
|
|
|
|
||||||||
Property and Casualty
|
|
$
|
(13,956
|
)
|
|
$
|
(4,463
|
)
|
|
$
|
(11,221
|
)
|
|
$
|
9,332
|
|
Retirement
|
|
11,800
|
|
|
13,063
|
|
|
23,330
|
|
|
23,616
|
|
||||
Life
|
|
5,610
|
|
|
4,622
|
|
|
9,495
|
|
|
8,489
|
|
||||
Corporate and Other
|
|
(1,193
|
)
|
|
(1,356
|
)
|
|
(4,025
|
)
|
|
(4,418
|
)
|
||||
Total
|
|
$
|
2,261
|
|
|
$
|
11,866
|
|
|
$
|
17,579
|
|
|
$
|
37,019
|
|
($ in thousands)
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
Assets
|
|
|
|
|
||||
Property and Casualty
|
|
$
|
1,133,015
|
|
|
$
|
1,110,958
|
|
Retirement
|
|
7,671,701
|
|
|
7,449,777
|
|
||
Life
|
|
1,972,540
|
|
|
1,912,771
|
|
||
Corporate and Other
|
|
128,101
|
|
|
140,104
|
|
||
Intersegment eliminations
|
|
(29,222
|
)
|
|
(36,786
|
)
|
||
Total
|
|
$
|
10,876,135
|
|
|
$
|
10,576,824
|
|
•
|
The impact that a prolonged economic recession may have on the Company’s investment portfolio; volume of new business for automobile, homeowners, retirement and life products; policy renewal rates; and additional annuity contract deposit receipts.
|
•
|
Fluctuations in the fair value of securities in the Company’s investment portfolio and the related after tax effect on the Company’s shareholders’ equity and total capital through either realized or unrealized investment losses.
|
•
|
Prevailing low interest rate levels, including the impact of interest rates on (1) the Company’s ability to maintain appropriate interest rate spreads over minimum fixed rates guaranteed in the Company’s annuity and life products, (2) the book yield of the Company’s investment portfolio, (3) unrealized gains and losses in the Company’s investment portfolio and the related after tax effect on the Company’s shareholders’ equity and total capital, (4) amortization of deferred policy acquisition costs and (5) capital levels of the Company’s life insurance subsidiaries.
|
•
|
The frequency and severity of events such as hurricanes, storms, earthquakes and wildfires, and the ability of the Company to provide accurate estimates of ultimate claim costs in its consolidated financial statements.
|
•
|
The Company’s risk exposure to catastrophe-prone areas. Based on full year
2016
Property and Casualty direct earned premiums, the Company’s ten largest states represented 57% of the segment total. Included in this top ten group are certain states which are considered more prone to catastrophe occurrences: California, North Carolina, Texas, South Carolina, Florida and Louisiana.
|
•
|
The ability of the Company to maintain a favorable catastrophe reinsurance program considering both availability and cost; and the collectibility of reinsurance receivables.
|
•
|
Adverse changes in market appreciation, interest spreads, business persistency and policyholder mortality and morbidity rates and the resulting impact on both estimated reserves and the amortization of deferred policy acquisition costs.
|
•
|
The Company’s ability to refinance outstanding indebtedness or repurchase shares of the Company’s common stock.
|
•
|
The Company’s ability to (1) develop and expand its marketing operations, including agents and other points of distribution, (2) maintain and secure access to educators, school administrators, principals and school business officials; and (3) profitably expand its Property and Casualty business in highly competitive environments.
|
•
|
The effects of economic forces and other issues affecting the educator market including, but not limited to, federal, state and local budget deficits and cut-backs and adverse changes in state and local tax revenues. The effects of these forces can include, among others, teacher layoffs and early retirements, as well as individual concerns regarding employment and economic uncertainty.
|
•
|
Changes in federal and state laws and regulations, which affect the relative tax and other advantages of the Company’s life and annuity products to customers, including, but not limited to, changes in IRS regulations governing Section 403(b) plans.
|
•
|
Changes in public employee retirement programs as a result of federal and/or state level pension reform initiatives.
|
•
|
Changes in federal and state laws and regulations, which affect the relative tax advantage of certain investments or which affect the ability of debt issuers to declare bankruptcy or restructure debt.
|
•
|
The Company’s ability to effectively implement new or enhanced information technology systems and applications.
|
•
|
Changes in Cybersecurity regulations as a result of state level requirements.
|
($ in millions)
|
|
Three Months Ended June 30,
|
|
Change From
Prior Year
|
|
Six Months Ended June 30,
|
|
Change From
Prior Year |
||||||||||||||||||||||
|
|
2017
|
|
2016
|
|
Percent
|
|
Amount
|
|
2017
|
|
2016
|
|
Percent
|
|
Amount
|
||||||||||||||
Insurance premiums written and contract deposits*
(includes annuity and life contract deposits)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Property and Casualty
|
|
$
|
167.9
|
|
|
$
|
159.8
|
|
|
5.1
|
%
|
|
$
|
8.1
|
|
|
$
|
320.8
|
|
|
$
|
306.5
|
|
|
4.7
|
%
|
|
$
|
14.3
|
|
Retirement (annuity)
|
|
116.8
|
|
|
124.7
|
|
|
-6.3
|
%
|
|
(7.9
|
)
|
|
234.1
|
|
|
237.3
|
|
|
-1.3
|
%
|
|
(3.2
|
)
|
||||||
Life
|
|
26.9
|
|
|
27.3
|
|
|
-1.5
|
%
|
|
(0.4
|
)
|
|
53.4
|
|
|
51.2
|
|
|
4.3
|
%
|
|
2.2
|
|
||||||
Total
|
|
$
|
311.6
|
|
|
$
|
311.8
|
|
|
-0.1
|
%
|
|
$
|
(0.2
|
)
|
|
$
|
608.3
|
|
|
$
|
595.0
|
|
|
2.2
|
%
|
|
$
|
13.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Insurance premiums and contract charges earned
(excludes annuity and life contract deposits)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Property and Casualty
|
|
$
|
160.4
|
|
|
$
|
153.7
|
|
|
4.4
|
%
|
|
$
|
6.7
|
|
|
$
|
318.7
|
|
|
$
|
305.8
|
|
|
4.2
|
%
|
|
$
|
12.9
|
|
Retirement (annuity)
|
|
6.8
|
|
|
6.1
|
|
|
11.5
|
%
|
|
0.7
|
|
|
13.4
|
|
|
12.2
|
|
|
9.8
|
%
|
|
1.2
|
|
||||||
Life
|
|
28.5
|
|
|
28.5
|
|
|
—
|
%
|
|
—
|
|
|
59.3
|
|
|
55.8
|
|
|
6.3
|
%
|
|
3.5
|
|
||||||
Total
|
|
$
|
195.7
|
|
|
$
|
188.3
|
|
|
3.9
|
%
|
|
$
|
7.4
|
|
|
$
|
391.4
|
|
|
$
|
373.8
|
|
|
4.7
|
%
|
|
$
|
17.6
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
June 30, 2016
|
Property and Casualty
|
|
|
|
|
|
|
Automobile
|
|
483,819
|
|
484,915
|
|
486,475
|
Property
|
|
218,132
|
|
220,137
|
|
222,341
|
Total
|
|
701,951
|
|
705,052
|
|
708,816
|
Retirement
|
|
221,021
|
|
219,105
|
|
214,192
|
Life
|
|
197,171
|
|
197,937
|
|
201,276
|
($ in millions)
|
|
June 30, 2017
|
|||||||||||||
|
|
Number of
Issuers
|
|
Fair
Value
|
|
Amortized
Cost or
Cost
|
|
Pretax Net
Unrealized
Investment
Gain (Loss)
|
|||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Corporate bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Banking and Finance
|
|
123
|
|
|
$
|
713.3
|
|
|
$
|
673.2
|
|
|
$
|
40.1
|
|
Insurance
|
|
53
|
|
|
270.1
|
|
|
240.4
|
|
|
29.7
|
|
|||
Energy (1)
|
|
54
|
|
|
232.8
|
|
|
219.0
|
|
|
13.8
|
|
|||
Technology
|
|
34
|
|
|
176.6
|
|
|
168.6
|
|
|
8.0
|
|
|||
Healthcare, Pharmacy
|
|
49
|
|
|
166.4
|
|
|
156.3
|
|
|
10.1
|
|
|||
Real estate
|
|
39
|
|
|
165.9
|
|
|
157.3
|
|
|
8.6
|
|
|||
Utilities
|
|
45
|
|
|
160.3
|
|
|
140.6
|
|
|
19.7
|
|
|||
Transportation
|
|
38
|
|
|
158.0
|
|
|
150.4
|
|
|
7.6
|
|
|||
Telecommunications
|
|
28
|
|
|
111.8
|
|
|
103.7
|
|
|
8.1
|
|
|||
Food and Beverage
|
|
24
|
|
|
110.3
|
|
|
106.2
|
|
|
4.1
|
|
|||
All other corporates (2)
|
|
207
|
|
|
562.2
|
|
|
529.8
|
|
|
32.4
|
|
|||
Total corporate bonds
|
|
694
|
|
|
2,827.7
|
|
|
2,645.5
|
|
|
182.2
|
|
|||
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
U.S. Government and federally sponsored agencies
|
|
230
|
|
|
421.2
|
|
|
389.8
|
|
|
31.4
|
|
|||
Commercial (3)
|
|
119
|
|
|
541.9
|
|
|
538.4
|
|
|
3.5
|
|
|||
Other
|
|
29
|
|
|
74.0
|
|
|
72.8
|
|
|
1.2
|
|
|||
Municipal bonds (4)
|
|
368
|
|
|
1,817.2
|
|
|
1,659.6
|
|
|
157.6
|
|
|||
Government bonds
|
|
|
|
|
|
|
|
|
|||||||
U.S.
|
|
37
|
|
|
606.3
|
|
|
588.7
|
|
|
17.6
|
|
|||
Foreign
|
|
15
|
|
|
100.0
|
|
|
93.7
|
|
|
6.3
|
|
|||
Collateralized debt obligations (5)
|
|
89
|
|
|
525.8
|
|
|
520.9
|
|
|
4.9
|
|
|||
Asset-backed securities
|
|
101
|
|
|
664.5
|
|
|
652.5
|
|
|
12.0
|
|
|||
Total fixed maturity securities
|
|
1,682
|
|
|
$
|
7,578.6
|
|
|
$
|
7,161.9
|
|
|
$
|
416.7
|
|
|
|
|
|
|
|
|
|
|
|||||||
Equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Non-redeemable preferred stocks
|
|
15
|
|
|
$
|
63.3
|
|
|
$
|
61.5
|
|
|
$
|
1.8
|
|
Common stocks
|
|
197
|
|
|
73.0
|
|
|
59.1
|
|
|
13.9
|
|
|||
Closed-end fund
|
|
1
|
|
|
20.6
|
|
|
20.0
|
|
|
0.6
|
|
|||
Total equity securities
|
|
213
|
|
|
$
|
156.9
|
|
|
$
|
140.6
|
|
|
$
|
16.3
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total
|
|
1,895
|
|
|
$
|
7,735.5
|
|
|
$
|
7,302.5
|
|
|
$
|
433.0
|
|
(1)
|
At
June 30, 2017
, the fair value amount included $12.3 million of securities which were non-investment grade.
|
(2)
|
The All other corporates category contains 18 additional industry sectors. Natural gas, broadcasting and media, consumer products, gaming, lodging and dining, retail and metal and mining represented $400.8 million of fair value at
June 30, 2017
, with the remaining 12 sectors each representing less than $32.6 million.
|
(3)
|
At
June 30, 2017
, 100% were investment grade, with an overall credit rating of AA, and the positions were well diversified by property type, geography and sponsor.
|
(4)
|
Holdings are geographically diversified, approximately 40% are tax-exempt and 78% are revenue bonds tied to essential services, such as mass transit, water and sewer. The overall credit quality of the municipal bond portfolio was AA- at
June 30, 2017
.
|
(5)
|
Based on fair value, 95% of the collateralized debt obligation securities were rated investment grade by Standard and Poor’s Corporation (“S&P”) and/or Moody’s Investors Service, Inc. (“Moody’s”) at
June 30, 2017
.
|
($ in millions)
|
|
Percent of Portfolio
|
|
|
|
|
||||||||
|
|
Fair Value
|
|
June 30, 2017
|
||||||||||
|
|
December 31, 2016
|
|
June 30, 2017
|
|
Fair
Value
|
|
Amortized
Cost or Cost
|
||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
||
AAA
|
|
8.3
|
%
|
|
8.0
|
%
|
|
$
|
608.4
|
|
|
$
|
588.8
|
|
AA (2)
|
|
35.5
|
|
|
35.8
|
|
|
2,711.5
|
|
|
2,564.3
|
|
||
A
|
|
23.6
|
|
|
24.0
|
|
|
1,820.4
|
|
|
1,696.4
|
|
||
BBB
|
|
28.4
|
|
|
28.3
|
|
|
2,142.6
|
|
|
2,026.1
|
|
||
BB
|
|
2.4
|
|
|
2.3
|
|
|
173.3
|
|
|
168.4
|
|
||
B
|
|
1.0
|
|
|
0.8
|
|
|
64.1
|
|
|
66.6
|
|
||
CCC or lower
|
|
0.2
|
|
|
0.1
|
|
|
6.5
|
|
|
6.6
|
|
||
Not rated (3)
|
|
0.6
|
|
|
0.7
|
|
|
51.8
|
|
|
44.7
|
|
||
Total fixed maturity securities
|
|
100.0
|
%
|
|
100.0
|
%
|
|
$
|
7,578.6
|
|
|
$
|
7,161.9
|
|
Equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
||
AAA
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
AA
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
A
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
BBB
|
|
35.3
|
%
|
|
40.4
|
%
|
|
$
|
63.4
|
|
|
$
|
61.5
|
|
BB
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
B
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
CCC or lower
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Not rated
|
|
64.7
|
|
|
59.6
|
|
|
93.5
|
|
|
79.1
|
|
||
Total equity securities
|
|
100.0
|
%
|
|
100.0
|
%
|
|
$
|
156.9
|
|
|
$
|
140.6
|
|
|
|
|
|
|
|
|
|
|
||||||
Total
|
|
|
|
|
|
|
|
$
|
7,735.5
|
|
|
$
|
7,302.5
|
|
(1)
|
Ratings are as assigned primarily by S&P when available, with remaining ratings as assigned on an equivalent basis by Moody’s. Ratings for publicly traded securities are determined when the securities are acquired and are updated monthly to reflect any changes in ratings.
|
(2)
|
At
June 30, 2017
, the AA rated fair value amount included $594.2 million of U.S. Government and federally sponsored agency securities and $529.4 million of mortgage- and asset-backed securities issued by U.S. Government and federally sponsored agencies.
|
(3)
|
This category primarily represents private placement and municipal securities not rated by either S&P or Moody’s.
|
($ in millions)
|
|
Three Months Ended June 30,
|
|
Change From
Prior Year
|
|
Six Months Ended June 30,
|
|
Change From Prior Year
|
||||||||||||||||||||||
|
|
2017
|
|
2016
|
|
Percent
|
|
Amount
|
|
2017
|
|
2016
|
|
Percent
|
|
Amount
|
||||||||||||||
Property and Casualty
|
|
$
|
147.8
|
|
|
$
|
129.8
|
|
|
13.9
|
%
|
|
$
|
18.0
|
|
|
$
|
270.0
|
|
|
$
|
231.0
|
|
|
16.9
|
%
|
|
$
|
39.0
|
|
Retirement
|
|
1.3
|
|
|
0.8
|
|
|
62.5
|
%
|
|
0.5
|
|
|
2.4
|
|
|
1.7
|
|
|
41.2
|
%
|
|
0.7
|
|
||||||
Life
|
|
16.8
|
|
|
17.8
|
|
|
-5.6
|
%
|
|
(1.0
|
)
|
|
37.6
|
|
|
35.2
|
|
|
6.8
|
%
|
|
2.4
|
|
||||||
Total
|
|
$
|
165.9
|
|
|
$
|
148.4
|
|
|
11.8
|
%
|
|
$
|
17.5
|
|
|
$
|
310.0
|
|
|
$
|
267.9
|
|
|
15.7
|
%
|
|
$
|
42.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Property and Casualty catastrophe losses, included above
|
|
$
|
32.4
|
|
|
$
|
27.3
|
|
|
18.7
|
%
|
|
$
|
5.1
|
|
|
$
|
49.6
|
|
|
$
|
40.0
|
|
|
24.0
|
%
|
|
$
|
9.6
|
|
($ in millions)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Incurred claims and claim expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||
Claims occurring in the current year
|
|
$
|
148.4
|
|
|
$
|
131.4
|
|
|
$
|
271.6
|
|
|
$
|
234.6
|
|
Decrease in estimated reserves for claims
occurring in prior years (2)
|
|
(0.6
|
)
|
|
(1.6
|
)
|
|
(1.6
|
)
|
|
(3.6
|
)
|
||||
Total claims and claim expenses incurred
|
|
$
|
147.8
|
|
|
$
|
129.8
|
|
|
$
|
270.0
|
|
|
$
|
231.0
|
|
|
|
|
|
|
|
|
|
|
||||||||
Property and Casualty loss ratio:
|
|
|
|
|
|
|
|
|
|
|
||||||
Total
|
|
92.1
|
%
|
|
84.4
|
%
|
|
84.7
|
%
|
|
75.5
|
%
|
||||
Effect of catastrophe costs, included above (1)
|
|
20.2
|
%
|
|
17.7
|
%
|
|
15.5
|
%
|
|
13.1
|
%
|
||||
Effect of prior years’ reserve development, included above (2)
|
|
-0.4
|
%
|
|
-1.0
|
%
|
|
-0.5
|
%
|
|
-1.2
|
%
|
($ in millions)
|
|
Three Months Ended June 30,
|
|
Change From
Prior Year
|
|
Six Months Ended June 30,
|
|
Change From
Prior Year |
||||||||||||||||||||||
|
|
2017
|
|
2016
|
|
Percent
|
|
Amount
|
|
2017
|
|
2016
|
|
Percent
|
|
Amount
|
||||||||||||||
Retirement (annuity)
|
|
$
|
38.1
|
|
|
$
|
36.4
|
|
|
4.7
|
%
|
|
$
|
1.7
|
|
|
$
|
75.6
|
|
|
$
|
72.0
|
|
|
5.0
|
%
|
|
$
|
3.6
|
|
Life
|
|
11.3
|
|
|
11.2
|
|
|
0.9
|
%
|
|
0.1
|
|
|
22.5
|
|
|
22.3
|
|
|
0.9
|
%
|
|
0.2
|
|
||||||
Total
|
|
$
|
49.4
|
|
|
$
|
47.6
|
|
|
3.8
|
%
|
|
$
|
1.8
|
|
|
$
|
98.1
|
|
|
$
|
94.3
|
|
|
4.0
|
%
|
|
$
|
3.8
|
|
($ in millions)
|
|
June 30, 2017
|
|||||||||||||||
|
|
|
|
|
|
Deferred Annuities at
|
|||||||||||
|
|
Total Deferred Annuities
|
|
Minimum Guaranteed Rate
|
|||||||||||||
|
|
Percent
of Total
|
|
Accumulated
Value (“AV”)
|
|
Percent of
Total Deferred
Annuities AV
|
|
Percent
of Total
|
|
Accumulated
Value
|
|||||||
Minimum guaranteed interest rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Less than 2%
|
|
24.6
|
%
|
|
$
|
1,053.9
|
|
|
49.8
|
%
|
|
14.2
|
%
|
|
$
|
524.6
|
|
Equal to 2% but less than 3%
|
|
7.2
|
|
|
308.7
|
|
|
83.0
|
%
|
|
6.9
|
|
|
256.1
|
|
||
Equal to 3% but less than 4%
|
|
14.2
|
|
|
610.7
|
|
|
99.9
|
%
|
|
16.4
|
|
|
609.9
|
|
||
Equal to 4% but less than 5%
|
|
52.7
|
|
|
2,263.7
|
|
|
100.0
|
%
|
|
61.0
|
|
|
2,263.7
|
|
||
5% or higher
|
|
1.3
|
|
|
55.2
|
|
|
100.0
|
%
|
|
1.5
|
|
|
55.2
|
|
||
Total
|
|
100.0
|
%
|
|
$
|
4,292.2
|
|
|
86.4
|
%
|
|
100.0
|
%
|
|
$
|
3,709.5
|
|
($ in millions)
|
|
Three Months Ended June 30,
|
|
Change From
Prior Year
|
|
Six Months Ended June 30,
|
|
Change From
Prior Year |
||||||||||||||||||||||
|
|
2017
|
|
2016
|
|
Percent
|
|
Amount
|
|
2017
|
|
2016
|
|
Percent
|
|
Amount
|
||||||||||||||
Analysis of net income (loss) by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Property and Casualty
|
|
$
|
(13.9
|
)
|
|
$
|
(4.5
|
)
|
|
N.M.
|
|
|
$
|
(9.4
|
)
|
|
$
|
(11.2
|
)
|
|
$
|
9.3
|
|
|
N.M.
|
|
|
$
|
(20.5
|
)
|
Retirement
|
|
11.8
|
|
|
13.0
|
|
|
-9.2
|
%
|
|
(1.2
|
)
|
|
23.3
|
|
|
23.6
|
|
|
-1.3
|
%
|
|
(0.3
|
)
|
||||||
Life
|
|
5.6
|
|
|
4.6
|
|
|
21.7
|
%
|
|
1.0
|
|
|
9.5
|
|
|
8.5
|
|
|
11.8
|
%
|
|
1.0
|
|
||||||
Corporate and Other (1)
|
|
(1.2
|
)
|
|
(1.3
|
)
|
|
-7.7
|
%
|
|
0.1
|
|
|
(4.0
|
)
|
|
(4.4
|
)
|
|
-9.1
|
%
|
|
0.4
|
|
||||||
Net income
|
|
$
|
2.3
|
|
|
$
|
11.8
|
|
|
-80.5
|
%
|
|
$
|
(9.5
|
)
|
|
$
|
17.6
|
|
|
$
|
37.0
|
|
|
-52.4
|
%
|
|
$
|
(19.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Effect of catastrophe costs, after tax,
included above
|
|
$
|
(21.1
|
)
|
|
$
|
(17.7
|
)
|
|
19.2
|
%
|
|
$
|
(3.4
|
)
|
|
$
|
(32.2
|
)
|
|
$
|
(26.0
|
)
|
|
23.8
|
%
|
|
$
|
(6.2
|
)
|
Effect of net realized investment gains
(losses), after tax, included above
|
|
$
|
1.5
|
|
|
$
|
1.5
|
|
|
—
|
%
|
|
$
|
—
|
|
|
$
|
1.4
|
|
|
$
|
1.1
|
|
|
27.3
|
%
|
|
$
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income per share
|
|
$
|
0.05
|
|
|
$
|
0.29
|
|
|
-82.8
|
%
|
|
$
|
(0.24
|
)
|
|
$
|
0.42
|
|
|
$
|
0.89
|
|
|
-52.8
|
%
|
|
$
|
(0.47
|
)
|
Weighted average number of shares and
equivalent shares (in millions)
|
|
41.5
|
|
|
41.3
|
|
|
0.5
|
%
|
|
0.2
|
|
|
41.4
|
|
|
41.4
|
|
|
—
|
%
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Property and casualty combined ratio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total
|
|
118.5
|
%
|
|
111.6
|
%
|
|
N.M.
|
|
|
6.9
|
%
|
|
112.0
|
%
|
|
102.8
|
%
|
|
N.M.
|
|
|
9.2
|
%
|
||||||
Effect of catastrophe costs, included above
|
|
20.2
|
%
|
|
17.7
|
%
|
|
N.M.
|
|
|
2.5
|
%
|
|
15.5
|
%
|
|
13.1
|
%
|
|
N.M.
|
|
|
2.4
|
%
|
||||||
Effect of prior years’ reserve development,
included above
|
|
-0.4
|
%
|
|
-1.0
|
%
|
|
N.M.
|
|
|
0.6
|
%
|
|
-0.5
|
%
|
|
-1.2
|
%
|
|
N.M.
|
|
|
0.7
|
%
|
(1)
|
The Corporate and Other segment includes interest expense on debt, net realized investment gains and losses, corporate debt retirement costs (when applicable), certain public company expenses and other corporate-level items. The Company does not allocate the impact of corporate-level transactions to the operating segments, consistent with the basis for management’s evaluation of the results of those segments.
|
•
|
It could inhibit our ability to sell and service IRAs, resulting in a change and/or a reduction of the types of products we offer for IRAs, and impact our relationship with current clients.
|
•
|
It could require changes in the way that we compensate our agents, thereby impacting our agents’ business model.
|
•
|
It could require changes in our distribution model for financial services products and could result in a decrease in the number of our agents.
|
•
|
It could increase our costs of doing IRA business and increase our litigation and regulatory risks.
|
•
|
It could increase the cost and complexity of regulatory compliance for our Retirement segment’s products, including our recently introduced fixed indexed annuity product.
|
10.2(b)*
|
|
Specimen Employee Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(d) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.
|
|
|
|
10.2(c)*
|
|
Revised Specimen Employee Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(f) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
|
|
|
|
10.2(d)*
|
|
Specimen Non-employee Director Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(e) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.
|
|
|
|
10.2(e)*
|
|
Revised Specimen Non-employee Director Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(h) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
|
|
|
|
10.3*
|
|
First Amendment to the HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective as of May 20, 2015), incorporated by reference to Exhibit 10.3 to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
|
|
|
|
10.3(a)*
|
|
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) (Section 16 Officer) Non-Qualified Stock Option Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(a) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
|
|
|
|
10.3(b)*
|
|
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) (Non-Section 16) Non-Qualified Stock Option Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(b) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
|
|
|
|
10.3(c)*
|
|
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Service-Vested Restricted Stock Units Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(c) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
|
|
|
|
10.3(d)*
|
|
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Performance-Based Restricted Stock Units Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(d) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
|
|
|
|
10.3(e)*
|
|
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Service-Vested Restricted Stock Units Agreement - Employee Grantee (One-Time Grant Service), incorporated by reference to Exhibit 10.3(e) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
|
|
|
|
10.3(f)*
|
|
Specimen Employee Performance-Based Restricted Stock Units Agreement - Key Strategic Grantee under the HMEC 2010 Comprehensive Executive Compensation Plan incorporated by reference to Exhibit 10.3(e) to HMEC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed with the SEC on May 6, 2016.
|
|
|
|
10.3(g)*
|
|
Specimen Non-employee Director Restricted Stock Unit Agreement under the HMEC 2010 Comprehensive Executive Compensation Plan, incorporated by reference to Exhibit 10.17(a) to HMEC’s Current Report on Form 8-K dated May 27, 2010, filed with the SEC on June 2, 2010.
|
|
|
|
10.4*
|
|
Horace Mann Supplemental Employee Retirement Plan, 2002 Restatement, incorporated by reference to Exhibit 10.1 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, filed with the SEC on May 15, 2002.
|
|
|
|
HORACE MANN EDUCATORS CORPORATION
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
August 8, 2017
|
|
/s/ Marita Zuraitis
|
|
|
|
|
|
|
|
Marita Zuraitis
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
August 8, 2017
|
|
/s/ Bret A. Conklin
|
|
|
|
|
|
|
|
Bret A. Conklin
|
|
|
|
Executive Vice President and
|
|
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
August 8, 2017
|
|
/s/ Kimberly A. Johnson
|
|
|
|
|
|
|
|
Kimberly A. Johnson
|
|
|
|
Vice President, Controller and
|
|
|
|
Principal Accounting Officer
|
10.2*
|
|
Horace Mann Educators Corporation Amended and Restated 2002 Incentive Compensation Plan (“2002 Incentive Compensation Plan”), incorporated by reference to Exhibit 10.2 to HMEC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, filed with the SEC on August 9, 2005.
|
|
|
|
10.2(a)*
|
|
Revised Specimen Employee Stock Option Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(b) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
|
|
|
|
10.2(b)*
|
|
Specimen Employee Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(d) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.
|
|
|
|
10.2(c)*
|
|
Revised Specimen Employee Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(f) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
|
|
|
|
10.2(d)*
|
|
Specimen Non-employee Director Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(e) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 16, 2006.
|
|
|
|
10.2(e)*
|
|
Revised Specimen Non-employee Director Restricted Stock Unit Agreement under the 2002 Incentive Compensation Plan, incorporated by reference to Exhibit 10.6(h) to HMEC’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 2, 2009.
|
|
|
|
10.3*
|
|
First Amendment to the HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective as of May 20, 2015), incorporated by reference to Exhibit 10.3 to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
|
|
|
|
10.3(a)*
|
|
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) (Section 16 Officer) Non-Qualified Stock Option Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(a) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
|
|
|
|
10.3(b)*
|
|
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) (Non-Section 16) Non-Qualified Stock Option Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(b) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
|
|
|
|
10.3(c)*
|
|
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Service-Vested Restricted Stock Units Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(c) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
|
|
|
|
10.3(d)*
|
|
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Performance-Based Restricted Stock Units Agreement - Employee Grantee, incorporated by reference to Exhibit 10.3(d) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
|
|
|
|
10.3(e)*
|
|
HMEC 2010 Comprehensive Executive Compensation Plan (As Amended and Restated Effective May 20, 2015) Service-Vested Restricted Stock Units Agreement - Employee Grantee (One-Time Grant Service), incorporated by reference to Exhibit 10.3(e) to HMEC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 9, 2017.
|
|
|
|
Compensation Element
|
Non-Employee Director Compensation
|
|
|
Board Chairman Annual Retainer
|
$115,000
|
Board Member Annual Retainer (other
than Board Chairman)
|
$60,000
|
Committee Chairman Annual Retainer
|
$25,000 Audit Committee
$15,000 Compensation Committee
$15,000 Investment & Finance Committee
$12,000 Nominating & Governance Committee
$15,000 Customer Experience & Technology Committee
|
Committee Member Annual Retainer
(other than Committee Chairman)
|
$10,000 Audit Committee
$ 7,500 all other Committees
|
Share-based Compensation
|
Fair value on the date of the respective awards is used to determine the number of Restricted Stock Units (“RSUs”) awarded.
An annual award of $95,000 in RSUs following the Annual Shareholder Meeting. $95,000 in RSUs if joining the Board within 6 months after the prior Annual Shareholder Meeting, $47,500 in RSUs if joining more than 6 months after the prior Annual Shareholder Meeting but before the next Annual Shareholder Meeting.
All awards have a 1 year vesting period.
|
Basic Group Term Life Insurance
|
Premium for $10,000 face amount
|
Business Travel Accident Insurance
|
Premium for $100,000 coverage
|
|
|
Original
|
Replacement
|
Employee
|
Duration
|
Agreement Date
|
Agreement Date
|
Robert E. Rich
|
2 years
|
February 2001
|
December 2011
|
Note: The effective date of entry shall be subject to Section 4.2(a)
|
||
|
|
|
NAME OR TITLE
|
|
EFFECTIVE DATE OF
|
|
|
PARTICIPATION*
|
|
|
|
|
TIER I PARTICIPANTS
|
|
President and CEO
|
|
May 16, 2013
|
|
|
|
|
TIER II PARTICIPANTS
|
|
EVP and CFO
|
|
May 23, 2017
|
EVP, Life & Retirement
|
|
February 15, 2012
|
EVP, Property & Casualty
|
|
July 1, 2015
|
|
|
|
|
TIER III PARTICIPANTS
|
|
SVP, Field Operations and Distribution
|
|
August 13, 2015**
|
|
|
|
*Subject to acceptance within 30 days of effective date of participation.
|
||
**On April 13, 2017, the Company announced that Kelly Stacy, head of field operations, was leaving the Company effective April 21, 2017.
|
||
Mr. Stacy’s responsibilities were absorbed by existing members of the management team.
|
||
|
|
|
NAME OR TITLE
|
|
EFFECTIVE DATE OF
|
|
|
PARTICIPATION*
|
|
|
|
|
TIER I PARTICIPANTS
|
|
President and CEO
|
|
May 16, 2013
|
|
|
|
|
TIER II PARTICIPANTS
|
|
EVP and CFO
|
|
May 23, 2017
|
EVP, Life & Retirement
|
|
March 22, 2012
|
EVP, Property & Casualty
|
|
July 1, 2015
|
|
|
|
|
TIER III PARTICIPANTS
|
|
SVP, Field Operations and Distribution
|
|
August 13, 2015**
|
|
|
|
*Subject to acceptance within 30 days of effective date of participation.
|
||
**On April 13, 2017, the Company announced that Kelly Stacy, head of field operations, was leaving the Company effective April 21, 2017.
|
||
Mr. Stacy’s responsibilities were absorbed by existing members of the management team.
|
||
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Basic:
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
|
$
|
2,261
|
|
|
$
|
11,866
|
|
|
$
|
17,579
|
|
|
$
|
37,019
|
|
Weighted average number of common
shares during the period
|
|
41,368
|
|
|
41,082
|
|
|
41,268
|
|
|
41,200
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income per share – basic
|
|
$
|
0.05
|
|
|
$
|
0.29
|
|
|
$
|
0.43
|
|
|
$
|
0.90
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Diluted:
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
|
$
|
2,261
|
|
|
$
|
11,866
|
|
|
$
|
17,579
|
|
|
$
|
37,019
|
|
Weighted average number of common
shares during the period
|
|
41,368
|
|
|
41,082
|
|
|
41,268
|
|
|
41,200
|
|
||||
Weighted average number of common
equivalent shares to reflect the dilutive effect
of common stock equivalent securities:
|
|
|
|
|
|
|
|
|
|
|
||||||
Stock options
|
|
123
|
|
|
101
|
|
|
142
|
|
|
97
|
|
||||
Common stock units related to deferred
compensation for employees
|
|
29
|
|
|
56
|
|
|
29
|
|
|
56
|
|
||||
Restricted common stock units related
to incentive compensation
|
|
(27
|
)
|
|
75
|
|
|
(23
|
)
|
|
63
|
|
||||
Total common and common equivalent shares
adjusted to calculate diluted earnings per share
|
|
41,493
|
|
|
41,314
|
|
|
41,416
|
|
|
41,416
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income per share – diluted
|
|
$
|
0.05
|
|
|
$
|
0.29
|
|
|
$
|
0.42
|
|
|
$
|
0.89
|
|
/s/ KPMG LLP
|
|
KPMG LLP
|
|
|
|
Chicago, Illinois
|
|
August 8, 2017
|
|
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 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
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/ Marita Zuraitis
|
|
|
Marita Zuraitis, Chief Executive Officer
|
|
|
Horace Mann Educators Corporation
|
|
|
|
|
|
Date:
|
August 8, 2017
|
|
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 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
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/ Bret A. Conklin
|
|
|
Bret A. Conklin, Chief Financial Officer
|
|
|
Horace Mann Educators Corporation
|
|
|
|
|
|
Date:
|
August 8, 2017
|
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Marita Zuraitis
|
|
|
Marita Zuraitis
|
|
|
Chief Executive Officer
|
|
|
|
|
|
Date:
|
August 8, 2017
|
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Bret A. Conklin
|
|
|
Bret A. Conklin
|
|
|
Chief Financial Officer
|
|
|
|
|
|
Date:
|
August 8, 2017
|
|
•
|
Loss Ratio
or
Loss and Loss Adjustment Expense Ratio
- The ratio of (1) the sum of net incurred losses and loss adjustment expenses to (2) net earned premiums.
|
•
|
Expense Ratio
- The ratio of (1) the sum of operating expenses and the amortization of policy acquisition costs to (2) net earned premiums.
|
•
|
Combined Ratio
- The sum of the Loss Ratio and the Expense Ratio. A Combined Ratio less than 100% generally indicates profitable underwriting prior to the consideration of net investment income.
|
•
|
Combined Ratio Excluding Catastrophes and Prior Years’ Reserve Development
or
Underlying Combined Ratio
- The sum of the Loss Ratio and the Expense Ratio adjusted to remove the effect of catastrophe costs and prior years’ reserve development. The Combined Ratio is the most directly comparable GAAP measure. Management believes this ratio provides a valuable measure of the Company’s underlying underwriting performance that may be obscured by the effects of catastrophe costs and prior years’ reserve development, the amounts of which may be significant and may vary significantly between periods.
|