NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share amounts or as otherwise noted)
NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Nature of Business
United Fire Group, Inc. ("UFG," the "Registrant," the "Company," "we," "us," or "our") and its consolidated subsidiaries and affiliates are engaged in the business of writing property and casualty insurance through a network of independent agencies. Our insurance company subsidiaries are licensed as a property and casualty insurer in
46
states and the District of Columbia.
Discontinued Operations
On September 18, 2017, the Company signed a definitive agreement to sell its subsidiary, United Life Insurance Company ("United Life"), to Kuvare US Holdings, Inc. ("Kuvare") and on March 30, 2018, the sale closed. As a result, the life insurance business, previously a separate segment, was reported as discontinued operations in the Consolidated Statements of Income and Comprehensive Income and Consolidated Statements of Cash Flows for all periods presented in this Form 10-Q. Subsequent to the announcement of this sale, our continuing operations were reported as
one
business segment. All current and prior periods reflected in this Form 10-Q have been presented as continuing and discontinued operations, as applicable, unless otherwise noted. For more information, refer to Note 11. Discontinued Operations.
Basis of Presentation
The unaudited consolidated interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial reporting and with the instructions to Form 10-Q and Regulation S-X promulgated by the SEC. Certain financial information that is included in our Annual Report on Form 10-K for the year ended December 31, 2018, including certain financial statement footnote disclosures, is not required by the rules and regulations of the SEC for interim financial reporting and have been condensed or omitted.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The financial statement categories that are most dependent on management estimates and assumptions include: investments; deferred policy acquisition costs; reinsurance receivables and recoverables; loss settlement expenses; and pension and postretirement benefit obligations.
Certain prior year amounts have been reclassified to conform to the current year presentation.
Management of UFG believes the accompanying unaudited Consolidated Financial Statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. All significant intercompany transactions have been eliminated in consolidation. The results reported for the interim periods are not necessarily indicative of the results of operations that may be expected for the year. The unaudited Consolidated Financial Statements should be read in conjunction with our Annual Report on Form 10-K for the year ended
December 31, 2018
.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash, money market accounts, and non-negotiable certificates of deposit with original maturities of three months or less.
For the
six-month periods ended June 30, 2019 and 2018
, we made payments for income taxes totaling
$1,537
and
$15,037
, respectively. We received a tax refund of
$5,401
and
$1,503
for the
six-month periods ended June 30, 2019 and 2018
, respectively.
For the
six-month periods ended June 30, 2019 and 2018
, we made
no
interest payments (excluding interest credited to policyholders’ accounts).
Deferred Policy Acquisition Costs ("DAC")
Certain costs associated with underwriting new business (primarily commissions, premium taxes and variable underwriting and policy issue expenses associated with successful acquisition efforts) are deferred. The following table is a summary of the components of DAC, including the related amortization recognized for the
six-month period ended June 30, 2019
.
|
|
|
|
|
|
|
|
Total
|
Recorded asset at beginning of period
|
$
|
92,796
|
|
Underwriting costs deferred
|
115,781
|
|
Amortization of deferred policy acquisition costs
|
(107,014
|
)
|
Recorded asset at June 30, 2019
|
$
|
101,563
|
|
Property and casualty insurance policy acquisition costs deferred are amortized as premium revenue is recognized. The method followed in computing DAC limits the amount of such deferred costs to their estimated realizable value. This takes into account the premium to be earned, losses and loss settlement expenses expected to be incurred and certain other costs expected to be incurred as the premium is earned.
Income Taxes
Deferred tax assets and liabilities are established based on differences between the financial statement bases of assets and liabilities and the tax bases of those same assets and liabilities, using the currently enacted statutory tax rates. Deferred income tax expense is measured by the year-to-year change in the net deferred tax asset or liability, except for certain changes in deferred tax amounts that affect stockholders' equity and do not impact federal income tax expense.
We reported consolidated federal income tax expense from continuing operations of
$9,781
for the
six-month period ended June 30, 2019
compared to income tax expense from continuing operations and discontinued operations of
$7,350
during the same period of 2018. Our effective tax rate is different than the federal statutory rate of
21 percent
, due principally to the effect of tax-exempt municipal bond interest income and non-taxable dividend income.
The Company performs a quarterly review of its tax positions and makes a determination of whether it is more likely than not that the tax position will be sustained upon examination. If, based on review, it appears not more likely than not that the positions will be sustained, the Company will calculate any unrecognized tax benefits and, if necessary, calculate and accrue any related interest and penalties. We did
no
t recognize any liability for unrecognized tax benefits at
June 30, 2019
or
December 31, 2018
. In addition, we have not accrued for interest and penalties related to unrecognized tax benefits. However, if interest and penalties would need to be accrued related to unrecognized tax benefits, such amounts would be recognized as a component of federal income tax expense.
We file a consolidated federal income tax return. We also file income tax returns in various state jurisdictions. We are no longer subject to federal or state income tax examination for years before 2015. The Internal Revenue Service is conducting an examination of our federal income tax return for the 2017 tax year.
Leases
The Company determines if a contract contains a lease at inception of the contract. The Company's inventory of leases consists of operating leases which are recorded as a lease obligation liability disclosed in accrued expenses and other liabilities line on the Consolidated Balance Sheets and as a lease right-of-use asset disclosed in other assets line on the Consolidated Balance Sheets. The Company's operating leases consist of office space, vehicles, computer equipment and office equipment. The lease right-of-use asset represents the Company's right to use each underlying asset for the lease term and the lease obligation liability represents the Company's obligation over the lease term. The Company's lease obligation is recorded at the present value of the lease payments based on the term of the lease. The Company has elected to categorize its leases into four categories based on length of lease terms and applies an incremental borrowing rate of interest as of the effective date of adoption or the lease effective date equivalent to a collateralized rate with similar terms. The four categories are as follows: less than three years, three to five years, five to ten years and greater than ten years. The collateralized discount rate used to calculate the present value of future minimum lease payments is based, where appropriate, on the Company's incremental borrowing rate of its credit facility, described in Note 9 Credit Facility of this Form 10-Q. For leases that existed prior to the adoption of the new accounting guidance on January 1, 2019 or those with terms not similar to the credit facility, the Company has elected to use the remaining lease term based on the four categories noted above as of the date of initial application to measure its incremental borrowing rate. In this case, the incremental borrowing rate is a collateralized rate based on current industry borrowing rates for similar companies with similar ratings.
Certain leases include rental payments adjusted for increases on an annual basis as part of the rental expense and are included in measurement of the lease liability. Lease expenses for lease payments, where appropriate, are recognized on a straight-line basis over the lease term. Short-term leases of 12 months or less are recorded on the Consolidated Balance Sheets and lease payments are recognized on the Consolidated Statement of Income and Comprehensive Income. The Company has agreements with lease and non-lease components, which the Company accounts for separately and continues to follow the guidance and its existing policy for minimum rental payments under Accounting Standard Codification ("ASC") Topic 840 for leases that commenced prior to the effective date. Modified or new leases subsequent to the effective date will follow ASC Topic 842. For more information on leases refer to Note 12. Leases.
Variable Interest Entities
The Company and certain related parties are equity investors in
one
investment in which the Company determined is a variable interest entity ("VIE") as a result of participation in the risks and rewards of the VIE based on the objectives and strategies of the VIE. The VIE is a limited liability company that primarily invests in commercial real estate. The Company and certain related parties are not the primary beneficiary largely due to their inability to influence management or direct the activities that most significantly impact the VIE's economic performance. Based on these facts and circumstances, the Company has a variable interest in the VIE, but has not consolidated the VIE's financial results as it is not the primary beneficiary. The Company's investment is reported in other long-term investments in the Balance Sheets and accounted for under the equity method of accounting. The Company's initial investment and the fair value of the VIE at June 30, 2019 was
$7.5 million
. The Company's maximum exposure to loss from this VIE is
$7.5 million
, its carrying value of the investment, and there are no future funding commitments.
Subsequent Events
In the preparation of the accompanying financial statements, the Company has evaluated all material subsequent events or transactions that occurred after the balance sheet date through the date on which the financial statements were issued for potential recognition or disclosure in the Company's financial statements. The Company concluded there are no material subsequent events or transactions that have occurred after the balance sheet date through the date on which the financial statements were issued.
Recently Issued Accounting Standards
Accounting Standards Adopted in 2019
Leases
In February 2016, the FASB issued guidance on the accounting for leases. The new guidance requires lessees to place a right-of-use asset and a lease liability on their balance sheets. The lease liability will be based on the present value of the future lease payments and the right-of-use asset will be based on the liability. Expenses will be recognized on the income statement in a similar manner as previous methods. The new guidance also requires companies to classify all leases as operating leases or financing leases. The Company has classified all of its leases as operating leases. The new guidance is effective for annual periods beginning after December 15, 2018 and interim periods within those years. The Company adopted the new guidance under a modified retrospective transition approach using the package of practical expedients and the Company did not adopt the hindsight practical expedient as of January 1, 2019. The package of practical expedients allowed the Company not to reassess whether the arrangement contains a lease, lease classification and whether previously capitalized costs qualify as initial direct costs. The practical expedients allowed the Company to continue classifying all of its leases as operating leases as they were previously classified under ASC Topic 840. Therefore, the Company's disclosures for the comparative periods presented in 2019 continues to be in accordance with previous lease guidance under ASC Topic 840. The Company used the accounting standard adoption date as its date of initial application.
Adoption of the new guidance resulted in the recording of additional net lease right-of-use assets and lease obligations of
$19.8 million
and
$20.3 million
, respectively, as of January 1, 2019. The lease amounts recognized were measured based on the present value of discounted future lease payments, net of reversal of prepaid rent and deferred rent balances that existed prior to January 1, 2019. The Company had no adjustments upon adoption related to unrecorded but expected lease abandonments at December 31, 2018. The difference between the additional lease assets and lease liabilities, net of the deferred tax impact, was recorded as a cumulative change in accounting principles adjustment to retained earnings of
$387
. The adoption did not have a significant impact on the Company's financial position or results of operations and had no impact on cash flows.
Income Taxes - Intra-entity Transfers
In October 2016, the FASB issued new guidance on the income tax treatment of intra-entity transfers. The new guidance replaces the current guidance which prohibits the recognition of current and deferred income taxes of intra-entity transfers until the asset is sold externally. Under the new guidance, the exemption is eliminated and income taxes will be recognized on transfers of intra-entity assets. The new guidance is effective for annual periods beginning after December 15, 2018 and interim periods beginning after December 15, 2019. The Company adopted the new guidance as of January 1, 2019. The adoption did not have a significant impact on the Company's financial position and results of operations.
Financial Instruments - Callable Debt Securities
In March 2016, the FASB issued an update to amend the amortization period for certain purchased callable debt securities held at a premium. The update requires the premium to be amortized to the earliest call date. The update doesn’t change the accounting for securities held at a discount, which will continue to be amortized to maturity. The new guidance is effective for annual periods beginning after December 15, 2018 and interim periods beginning after December 15, 2018. The Company adopted the new guidance as of January 1, 2019. The adoption of the new guidance resulted in cumulative change in accounting principles adjustment to retained earnings, net of the deferred tax, of
$126
on January 1, 2019 and did not have a material impact on net income between the comparable periods.
Pending Adoption of Accounting Standards
Intangibles - Other Internal Use Software
In August 2018, the FASB issued guidance to align the requirements for capitalizing implementation costs incurred
in a cloud computing hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance requires the Company to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The new guidance is effective for annual and interim periods beginning after December 15, 2019. The Company will adopt the new guidance as of January 1, 2020. Management currently believes that the adoption will not have a significant impact on the Company's financial position or results of operations.
Financial Instruments - Credit Losses
In June 2016, the FASB issued new guidance on the measurement of credit losses for most financial instruments. The new guidance replaces the current incurred loss model for recognizing credit losses with an expected loss model for instruments measured at amortized cost and requires allowances to be recorded for available-for-sale debt securities rather than reduce the carrying amount. These allowances will be remeasured each reporting period. The new guidance is effective for annual periods beginning after December 15, 2019 and interim periods within those years. The new guidance will impact the Company's portfolio of mortgage loan investments, which are carried at amortized cost, the impairment model related to our available-for-sale fixed-maturity portfolio and reinsurance receivables. The Company will adopt the new guidance as of January 1, 2020. The Company has developed an implementation time-line for adopting the new guidance and is currently building it's model for recognizing credit losses for mortgage loans and available-for-sale fixed-maturity investments and reinsurance receivables as we continue to evaluate moving to an expected loss model. Currently, the Company utilizes an aging method to estimate credit losses on premiums receivable, which is in line with the new guidance. The Company is evaluating the impact of adopting the new guidance and the impact on it's financial position, results of operations and key processes.
Goodwill
In January 2017, the FASB issued new guidance which simplifies the test for goodwill impairment. The new guidance eliminates the implied fair value calculation when measuring a goodwill impairment charge. Under the new guidance, impairment charges will be based on the excess of the carrying value over fair value of goodwill. The new guidance is effective for annual and interim periods beginning after December 15, 2019. The Company will adopt the new guidance as of January 1, 2020 and it currently believes the adoption will have no impact on the Company's financial position and results of operations.
Financial Instruments - Disclosures
In August 2018, the FASB issued new guidance which modifies the disclosure requirements on fair value measurements of financial instruments. The new guidance removes the requirement for disclosing the amount and reason for transfers between Level 1 and Level 2 investment securities and the valuation processes for Level 3 fair value measurements. The guidance also requires additional disclosures on the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The new guidance is effective for annual and interim periods beginning after December 15, 2019. The Company will adopt the new guidance as of January 1, 2020. Management currently believes the new guidance will modify existing fair value disclosures, but will not have an impact on the Company's financial position and results of operations.
Defined Benefit Plans - Disclosures
In August 2018, the FASB issued new guidance which modifies the disclosure requirements for employers that sponsor defined benefit pension and postretirement plans. The new guidance removes the requirement for disclosing the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit costs in the next year and the sensitivity of postretirement health plans to one-percentage-point changes in medical trend rates. The new guidance is effective for annual periods beginning after December 15, 2019. The Company will adopt the new guidance as of January 1, 2020. Management currently believes the new guidance will modify existing disclosures, but will not have an impact on the Company's financial position and results of operations.
NOTE 2. SUMMARY OF INVESTMENTS
Fair Value of Investments
A reconciliation of the amortized cost (cost for equity securities) to fair value of investments in held-to-maturity and available-for-sale fixed maturity and equity securities, presented on a consolidated basis, as of
June 30, 2019
and
December 31, 2018
, is provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
Type of Investment
|
Cost or Amortized Cost
|
|
Gross Unrealized Appreciation
|
|
Gross Unrealized Depreciation
|
|
Fair Value
|
AVAILABLE-FOR-SALE
|
|
|
|
|
|
|
|
Fixed maturities:
|
|
|
|
|
|
|
|
Bonds
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
28,937
|
|
|
$
|
177
|
|
|
$
|
42
|
|
|
$
|
29,072
|
|
U.S. government agency
|
137,846
|
|
|
2,245
|
|
|
41
|
|
|
140,050
|
|
States, municipalities and political subdivisions
|
|
|
|
|
|
|
|
General obligations:
|
|
|
|
|
|
|
|
Midwest
|
86,696
|
|
|
2,674
|
|
|
—
|
|
|
89,370
|
|
Northeast
|
31,213
|
|
|
1,111
|
|
|
—
|
|
|
32,324
|
|
South
|
113,289
|
|
|
2,757
|
|
|
71
|
|
|
115,975
|
|
West
|
105,978
|
|
|
3,927
|
|
|
12
|
|
|
109,893
|
|
Special revenue:
|
|
|
|
|
|
|
|
Midwest
|
139,244
|
|
|
5,203
|
|
|
9
|
|
|
144,438
|
|
Northeast
|
62,469
|
|
|
2,232
|
|
|
—
|
|
|
64,701
|
|
South
|
228,469
|
|
|
8,195
|
|
|
98
|
|
|
236,566
|
|
West
|
142,661
|
|
|
4,664
|
|
|
8
|
|
|
147,317
|
|
Foreign bonds
|
4,939
|
|
|
178
|
|
|
—
|
|
|
5,117
|
|
Public utilities
|
62,749
|
|
|
2,031
|
|
|
62
|
|
|
64,718
|
|
Corporate bonds
|
|
|
|
|
|
|
|
Energy
|
26,634
|
|
|
1,139
|
|
|
—
|
|
|
27,773
|
|
Industrials
|
53,751
|
|
|
1,454
|
|
|
43
|
|
|
55,162
|
|
Consumer goods and services
|
48,118
|
|
|
1,844
|
|
|
73
|
|
|
49,889
|
|
Health care
|
13,982
|
|
|
585
|
|
|
—
|
|
|
14,567
|
|
Technology, media and telecommunications
|
25,897
|
|
|
1,231
|
|
|
—
|
|
|
27,128
|
|
Financial services
|
91,870
|
|
|
3,049
|
|
|
256
|
|
|
94,663
|
|
Mortgage-backed securities
|
7,071
|
|
|
83
|
|
|
60
|
|
|
7,094
|
|
Collateralized mortgage obligations
|
|
|
|
|
|
|
|
Government national mortgage association
|
76,524
|
|
|
2,022
|
|
|
80
|
|
|
78,466
|
|
Federal home loan mortgage corporation
|
109,450
|
|
|
2,100
|
|
|
87
|
|
|
111,463
|
|
Federal national mortgage association
|
52,247
|
|
|
1,755
|
|
|
37
|
|
|
53,965
|
|
Asset-backed securities
|
3,262
|
|
|
430
|
|
|
84
|
|
|
3,608
|
|
Total Available-for-Sale Fixed Maturities
|
$
|
1,653,296
|
|
|
$
|
51,086
|
|
|
$
|
1,063
|
|
|
$
|
1,703,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Type of Investment
|
Cost or Amortized Cost
|
|
Gross Unrealized Appreciation
|
|
Gross Unrealized Depreciation
|
|
Fair Value
|
AVAILABLE-FOR-SALE
|
|
|
|
|
|
|
|
Fixed maturities:
|
|
|
|
|
|
|
|
Bonds
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
27,632
|
|
|
$
|
6
|
|
|
$
|
220
|
|
|
$
|
27,418
|
|
U.S. government agency
|
215,535
|
|
|
896
|
|
|
1,749
|
|
|
214,682
|
|
States, municipalities and political subdivisions
|
|
|
|
|
|
|
|
General obligations:
|
|
|
|
|
|
|
|
Midwest
|
94,806
|
|
|
1,091
|
|
|
685
|
|
|
95,212
|
|
Northeast
|
37,326
|
|
|
432
|
|
|
103
|
|
|
37,655
|
|
South
|
114,710
|
|
|
754
|
|
|
1,553
|
|
|
113,911
|
|
West
|
107,787
|
|
|
1,229
|
|
|
1,175
|
|
|
107,841
|
|
Special revenue:
|
|
|
|
|
|
|
|
Midwest
|
140,025
|
|
|
1,609
|
|
|
870
|
|
|
140,764
|
|
Northeast
|
62,737
|
|
|
452
|
|
|
1,241
|
|
|
61,948
|
|
South
|
237,848
|
|
|
1,669
|
|
|
3,708
|
|
|
235,809
|
|
West
|
143,829
|
|
|
1,294
|
|
|
2,203
|
|
|
142,920
|
|
Foreign bonds
|
9,698
|
|
|
31
|
|
|
13
|
|
|
9,716
|
|
Public utilities
|
56,808
|
|
|
274
|
|
|
1,023
|
|
|
56,059
|
|
Corporate bonds
|
|
|
|
|
|
|
|
|
Energy
|
28,909
|
|
|
43
|
|
|
304
|
|
|
28,648
|
|
Industrials
|
53,867
|
|
|
124
|
|
|
906
|
|
|
53,085
|
|
Consumer goods and services
|
54,323
|
|
|
142
|
|
|
819
|
|
|
53,646
|
|
Health care
|
16,721
|
|
|
42
|
|
|
105
|
|
|
16,658
|
|
Technology, media and telecommunications
|
26,819
|
|
|
35
|
|
|
678
|
|
|
26,176
|
|
Financial services
|
81,286
|
|
|
238
|
|
|
2,175
|
|
|
79,349
|
|
Mortgage-backed securities
|
7,642
|
|
|
14
|
|
|
232
|
|
|
7,424
|
|
Collateralized mortgage obligations
|
|
|
|
|
|
|
|
Government national mortgage association
|
78,055
|
|
|
380
|
|
|
1,734
|
|
|
76,701
|
|
Federal home loan mortgage corporation
|
108,403
|
|
|
524
|
|
|
1,304
|
|
|
107,623
|
|
Federal national mortgage association
|
53,267
|
|
|
213
|
|
|
732
|
|
|
52,748
|
|
Asset-backed securities
|
3,256
|
|
|
352
|
|
|
113
|
|
|
3,495
|
|
Total Available-for-Sale Fixed Maturities
|
$
|
1,761,289
|
|
|
$
|
11,844
|
|
|
$
|
23,645
|
|
|
$
|
1,749,488
|
|
Maturities
The amortized cost and fair value of held-to-maturity, available-for-sale and trading fixed maturity securities at
June 30, 2019
, by contractual maturity, are shown in the following tables. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Asset-backed securities, mortgage-backed securities and collateralized mortgage obligations may be subject to prepayment risk and are therefore not categorized by contractual maturity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities
|
|
|
|
|
|
|
|
|
|
|
Available-For-Sale
|
|
Trading
|
June 30, 2019
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
Due in one year or less
|
|
$
|
44,381
|
|
|
$
|
44,604
|
|
|
$
|
6,176
|
|
|
$
|
7,346
|
|
Due after one year through five years
|
|
233,480
|
|
|
239,201
|
|
|
4,739
|
|
|
7,294
|
|
Due after five years through 10 years
|
|
514,156
|
|
|
533,677
|
|
|
—
|
|
|
—
|
|
Due after 10 years
|
|
612,725
|
|
|
631,241
|
|
|
2,017
|
|
|
2,503
|
|
Asset-backed securities
|
|
3,262
|
|
|
3,608
|
|
|
—
|
|
|
—
|
|
Mortgage-backed securities
|
|
7,071
|
|
|
7,094
|
|
|
—
|
|
|
—
|
|
Collateralized mortgage obligations
|
|
238,221
|
|
|
243,894
|
|
|
—
|
|
|
—
|
|
|
|
$
|
1,653,296
|
|
|
$
|
1,703,319
|
|
|
$
|
12,932
|
|
|
$
|
17,143
|
|
Net Realized Investment Gains and Losses
Net realized gains on disposition of investments are computed using the specific identification method and are included in the computation of net income. A summary of the components of net realized investment gains (losses) is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net realized investment gains (losses) from continuing operations:
|
|
|
|
|
|
|
|
Fixed maturities:
|
|
|
|
|
|
|
|
Available-for-sale
|
$
|
(8
|
)
|
|
$
|
(219
|
)
|
|
$
|
142
|
|
|
$
|
(193
|
)
|
Trading securities
|
|
|
|
|
|
|
|
Change in fair value
|
501
|
|
|
(148
|
)
|
|
2,247
|
|
|
(259
|
)
|
Sales
|
92
|
|
|
349
|
|
|
92
|
|
|
905
|
|
Equity securities
|
|
|
|
|
|
|
|
Change in fair value
|
12,499
|
|
|
305
|
|
|
37,133
|
|
|
(8,883
|
)
|
Sales
|
507
|
|
|
1,010
|
|
|
705
|
|
|
1,863
|
|
Mortgage loans
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
Total net realized investment gains (losses) from continuing operations
|
$
|
13,591
|
|
|
$
|
1,297
|
|
|
$
|
40,304
|
|
|
$
|
(6,567
|
)
|
Total net realized investment gains (losses) from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,057
|
)
|
Total net realized investment gains (losses)
|
$
|
13,591
|
|
|
$
|
1,297
|
|
|
$
|
40,304
|
|
|
$
|
(7,624
|
)
|
The proceeds and gross realized gains on the sale of available-for-sale fixed maturity securities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Proceeds from sales
|
$
|
—
|
|
|
$
|
23,994
|
|
|
$
|
36,490
|
|
|
$
|
23,994
|
|
Gross realized gains
|
—
|
|
|
140
|
|
|
30
|
|
|
140
|
|
Gross realized losses
|
—
|
|
|
(307
|
)
|
|
13
|
|
|
(307
|
)
|
Our investment portfolio includes trading securities with embedded derivatives. These securities are primarily convertible securities which are recorded at fair value. Income or loss, including the change in the fair value of these trading securities, is recognized currently in earnings as a component of net realized investment gains. Our portfolio of trading securities had a fair value of
$17,143
and
$13,240
at
June 30, 2019
and
December 31, 2018
, respectively.
Funding Commitment
Pursuant to an agreement with one of our limited liability partnership investments, we are contractually committed through July 31, 2028 to make capital contributions upon request of the partnership. Our remaining potential contractual obligation was
$17,791
at
June 30, 2019
.
Unrealized Appreciation
A summary of the changes in net unrealized investment appreciation during the reporting period is as follows:
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2019
|
|
2018
|
Change in net unrealized investment appreciation
|
|
|
|
Available-for-sale fixed maturities
|
$
|
61,824
|
|
|
$
|
(65,127
|
)
|
Deferred policy acquisition costs
|
—
|
|
|
7,274
|
|
Income tax effect
|
(12,983
|
)
|
|
12,148
|
|
Net unrealized investment depreciation of discontinued operations, sold
|
—
|
|
|
6,714
|
|
Cumulative change in accounting principles
|
—
|
|
|
(191,244
|
)
|
Total change in net unrealized investment appreciation, net of tax
|
$
|
48,841
|
|
|
$
|
(230,235
|
)
|
We continually monitor the difference between our cost basis and the estimated fair value of our investments. Our accounting policy for impairment recognition requires other-than-temporary impairment ("OTTI") charges to be recorded when we determine that it is more likely than not that we will be unable to collect all amounts due according to the contractual terms of the fixed maturity security or that the anticipated recovery in fair value of the equity security will not occur in a reasonable amount of time. Impairment charges on investments are recorded based on the fair value of the investments at the measurement date or based on the value calculated using a discounted cash flow model. Credit-related impairments on fixed maturity securities that we do not plan to sell, and for which we are not more likely than not to be required to sell, are recognized in net income. Any non-credit related impairment is recognized as a component of other comprehensive income. Factors considered in evaluating whether a decline in value is other-than-temporary include: the length of time and the extent to which fair value has been less than cost; the financial condition and near-term prospects of the issuer; our intention to hold the investment; and the likelihood that we will be required to sell the investment.
The tables on the following pages summarize our fixed maturity and equity securities that were in an unrealized loss position on a consolidated basis at
June 30, 2019
and
December 31, 2018
. The securities are presented by the length of time they have been continuously in an unrealized loss position. It is possible that we could recognize OTTI charges in future periods on securities held at
June 30, 2019
, if future events or information cause us to determine that a decline in fair value is other-than-temporary.
We have evaluated the near-term prospects of the issuers of our fixed maturity securities in relation to the severity and duration of the unrealized loss and determined that these losses did not warrant the recognition of an OTTI charge at
June 30, 2019
or at
June 30, 2018
. We have no intent to sell, and it is more likely than not that we will not be required to sell, these securities until the fair value recovers to at least equal our cost basis or the securities mature.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
Type of Investment
|
Number
of Issues
|
|
Fair
Value
|
|
Gross Unrealized
Depreciation
|
|
Number
of Issues
|
|
Fair
Value
|
|
Gross Unrealized Depreciation
|
|
Fair
Value
|
|
Gross Unrealized Depreciation
|
AVAILABLE-FOR-SALE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
3
|
|
|
$
|
8,737
|
|
|
$
|
42
|
|
|
$
|
8,737
|
|
|
$
|
42
|
|
U.S. government agency
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
7,959
|
|
|
41
|
|
|
7,959
|
|
|
41
|
|
States, municipalities and political subdivisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Midwest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
South
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
9,519
|
|
|
71
|
|
|
9,519
|
|
|
71
|
|
West
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
2,086
|
|
|
12
|
|
|
2,086
|
|
|
12
|
|
Special revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Midwest
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
3,339
|
|
|
9
|
|
|
3,339
|
|
|
9
|
|
Northeast
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1,296
|
|
|
—
|
|
|
1,296
|
|
|
—
|
|
South
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
14,039
|
|
|
98
|
|
|
14,039
|
|
|
98
|
|
West
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4,115
|
|
|
8
|
|
|
4,115
|
|
|
8
|
|
Public utilities
|
1
|
|
|
2,934
|
|
|
62
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,934
|
|
|
62
|
|
Corporate bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Industrials
|
1
|
|
|
5,009
|
|
|
1
|
|
|
1
|
|
|
3,996
|
|
|
42
|
|
|
9,005
|
|
|
43
|
|
Consumer goods and services
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
4,637
|
|
|
73
|
|
|
4,637
|
|
|
73
|
|
Health care
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Technology, media and telecommunications
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Financial services
|
1
|
|
|
4,744
|
|
|
256
|
|
|
1
|
|
|
998
|
|
|
—
|
|
|
5,742
|
|
|
256
|
|
Mortgage-backed securities
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
3,749
|
|
|
60
|
|
|
3,749
|
|
|
60
|
|
Collateralized mortgage obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government national mortgage association
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
10,194
|
|
|
80
|
|
|
10,194
|
|
|
80
|
|
Federal home loan mortgage corporation
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
11,199
|
|
|
87
|
|
|
11,199
|
|
|
87
|
|
Federal national mortgage association
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
3,843
|
|
|
37
|
|
|
3,843
|
|
|
37
|
|
Asset-backed securities
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
2,864
|
|
|
84
|
|
|
2,864
|
|
|
84
|
|
Total Available-for-Sale Fixed Maturities
|
3
|
|
|
$
|
12,687
|
|
|
$
|
319
|
|
|
67
|
|
|
$
|
92,570
|
|
|
$
|
744
|
|
|
$
|
105,257
|
|
|
$
|
1,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
Type of Investment
|
Number
of Issues
|
|
Fair
Value
|
|
Gross Unrealized Depreciation
|
|
Number
of Issues
|
|
Fair
Value
|
|
Gross Unrealized Depreciation
|
|
Fair
Value
|
|
Gross Unrealized Depreciation
|
AVAILABLE-FOR-SALE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
1
|
|
|
$
|
8,018
|
|
|
$
|
7
|
|
|
5
|
|
|
$
|
14,645
|
|
|
$
|
213
|
|
|
$
|
22,663
|
|
|
$
|
220
|
|
U.S. government agency
|
4
|
|
|
17,907
|
|
|
81
|
|
|
17
|
|
|
80,696
|
|
|
1,668
|
|
|
98,603
|
|
|
1,749
|
|
States, municipalities and political subdivisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Midwest
|
2
|
|
|
2,939
|
|
|
5
|
|
|
7
|
|
|
23,749
|
|
|
680
|
|
|
26,688
|
|
|
685
|
|
Northeast
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
12,110
|
|
|
103
|
|
|
12,110
|
|
|
103
|
|
South
|
1
|
|
|
778
|
|
|
2
|
|
|
22
|
|
|
50,174
|
|
|
1,551
|
|
|
50,952
|
|
|
1,553
|
|
West
|
1
|
|
|
1,203
|
|
|
5
|
|
|
16
|
|
|
48,499
|
|
|
1,170
|
|
|
49,702
|
|
|
1,175
|
|
Special revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Midwest
|
4
|
|
|
3,892
|
|
|
8
|
|
|
19
|
|
|
43,854
|
|
|
862
|
|
|
47,746
|
|
|
870
|
|
Northeast
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
37,629
|
|
|
1,241
|
|
|
37,629
|
|
|
1,241
|
|
South
|
4
|
|
|
4,298
|
|
|
30
|
|
|
45
|
|
|
107,016
|
|
|
3,678
|
|
|
111,314
|
|
|
3,708
|
|
West
|
4
|
|
|
11,115
|
|
|
32
|
|
|
28
|
|
|
69,667
|
|
|
2,171
|
|
|
80,782
|
|
|
2,203
|
|
Foreign bonds
|
1
|
|
|
2,984
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,984
|
|
|
13
|
|
Public utilities
|
12
|
|
|
25,781
|
|
|
552
|
|
|
8
|
|
|
17,253
|
|
|
471
|
|
|
43,034
|
|
|
1,023
|
|
Corporate bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
7
|
|
|
12,556
|
|
|
148
|
|
|
2
|
|
|
4,099
|
|
|
156
|
|
|
16,655
|
|
|
304
|
|
Industrials
|
9
|
|
|
21,970
|
|
|
397
|
|
|
4
|
|
|
11,040
|
|
|
509
|
|
|
33,010
|
|
|
906
|
|
Consumer goods and services
|
14
|
|
|
30,399
|
|
|
527
|
|
|
5
|
|
|
9,554
|
|
|
292
|
|
|
39,953
|
|
|
819
|
|
Health care
|
3
|
|
|
6,203
|
|
|
97
|
|
|
1
|
|
|
345
|
|
|
8
|
|
|
6,548
|
|
|
105
|
|
Technology, media and telecommunications
|
6
|
|
|
12,638
|
|
|
288
|
|
|
5
|
|
|
9,619
|
|
|
390
|
|
|
22,257
|
|
|
678
|
|
Financial services
|
13
|
|
|
30,177
|
|
|
650
|
|
|
13
|
|
|
32,855
|
|
|
1,525
|
|
|
63,032
|
|
|
2,175
|
|
Mortgage-backed securities
|
22
|
|
|
1,539
|
|
|
34
|
|
|
22
|
|
|
4,166
|
|
|
198
|
|
|
5,705
|
|
|
232
|
|
Collateralized mortgage obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government national mortgage association
|
2
|
|
|
3,797
|
|
|
55
|
|
|
22
|
|
|
44,690
|
|
|
1,679
|
|
|
48,487
|
|
|
1,734
|
|
Federal home loan mortgage corporation
|
3
|
|
|
4,541
|
|
|
20
|
|
|
18
|
|
|
38,189
|
|
|
1,284
|
|
|
42,730
|
|
|
1,304
|
|
Federal national mortgage association
|
4
|
|
|
2,107
|
|
|
3
|
|
|
15
|
|
|
38,986
|
|
|
729
|
|
|
41,093
|
|
|
732
|
|
Asset-backed securities
|
1
|
|
|
2,829
|
|
|
113
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,829
|
|
|
113
|
|
Total Available-for-Sale Fixed Maturities
|
118
|
|
|
$
|
207,671
|
|
|
$
|
3,067
|
|
|
291
|
|
|
$
|
698,835
|
|
|
$
|
20,578
|
|
|
$
|
906,506
|
|
|
$
|
23,645
|
|
NOTE 3. FAIR VALUE OF FINANCIAL INSTRUMENTS
Current accounting guidance on fair value measurements includes the application of a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Our financial instruments that are recorded at fair value are categorized into a three-level hierarchy, which is based upon the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (i.e., Level 1) and the lowest priority to unobservable inputs (i.e., Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the financial instrument.
Financial instruments recorded at fair value are categorized in the fair value hierarchy as follows:
|
|
•
|
Level 1
: Valuations are based on unadjusted quoted prices in active markets for identical financial instruments that we have the ability to access.
|
|
|
•
|
Level 2
: Valuations are based on quoted prices for similar financial instruments, other than quoted prices included in Level 1, in markets that are not active or on inputs that are observable either directly or indirectly for the full term of the financial instrument.
|
|
|
•
|
Level 3
: Valuations are based on pricing or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement of the financial instrument. Such inputs may reflect management's own assumptions about the assumptions a market participant would use in pricing the financial instrument.
|
We review our fair value hierarchy categorizations on a quarterly basis at which time the classification of certain financial instruments may change if the input observations have changed. Transfers between levels, if any, are recorded as of the beginning of the reporting period.
To determine the fair value of the majority of our investments, we utilize prices obtained from independent, nationally recognized pricing services. We obtain one price for each security. When the pricing services cannot provide a determination of fair value for a specific security, we obtain non-binding price quotes from broker-dealers with whom we have had several years' experience and who have demonstrated knowledge of the subject security. We request and utilize one broker quote per security.
In order to determine the proper classification in the fair value hierarchy for each security where the price is obtained from an independent pricing service, we obtain and evaluate the vendors' pricing procedures and inputs used to price the security, which include unadjusted quoted market prices for identical securities, such as a New York Stock Exchange closing price, and quoted prices for identical securities in markets that are not active. For fixed maturity securities, an evaluation of interest rates and yield curves observable at commonly quoted intervals, volatility, prepayment speeds, credit risks and default rates may also be performed. We have determined that these processes and inputs result in fair values and classifications consistent with the applicable accounting guidance on fair value measurements.
When possible, we use quoted market prices to determine the fair value of fixed maturities, equity securities, trading securities and short-term investments. When quoted market prices do not exist, we base estimates of fair value on market information obtained from independent pricing services and brokers or on valuation techniques that are both unobservable and significant to the overall fair value measurement of the financial instrument. Such inputs may reflect management's own assumptions about the assumptions a market participant would use in pricing the financial instrument. Our valuation techniques are discussed in more detail throughout this section.
The mortgage loan portfolio consists entirely of commercial mortgage loans. The fair value of our mortgage loans is determined by modeling performed by our third party fund manager based on the stated principal and coupon payments provided for in the loan agreements. These cash flows are then discounted using an appropriate risk-adjusted discount rate to determine the security's fair value.
Our other long-term investments consist primarily of our interests in limited liability partnerships that are recorded on the equity method of accounting. The fair value of the partnerships is obtained from the fund managers, which is based on the fair value of the underlying investments held in the partnerships. In management's opinion, these values represent a reasonable estimate of fair value. We have not adjusted the net asset value provided by the fund managers.
For cash and cash equivalents and accrued investment income, carrying value is a reasonable estimate of fair value due to the short-term nature of these financial instruments.
The Company formed a rabbi trust in 2014 to fund obligations under the United Fire & Casualty Company Supplemental Executive Retirement and Deferral Plan (the "Executive Retirement Plan"). Within the rabbi trust, corporate-owned life insurance ("COLI") policies are utilized as an investment vehicle and source of funding for the Company's Executive Retirement Plan. The COLI policies invest in mutual funds, which are priced daily by independent sources. As of
June 30, 2019
, the cash surrender value of the COLI policies was
$5,976
, which is equal to the fair value measured using Level 2 inputs, based on the underlying assets of the COLI policies, and is included in other assets in the Consolidated Balance Sheets.
A summary of the carrying value and estimated fair value of our financial instruments at
June 30, 2019
and
December 31, 2018
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
Assets
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
|
Fixed maturities:
|
|
|
|
|
|
|
|
Available-for-sale securities
|
$
|
1,703,319
|
|
|
$
|
1,703,319
|
|
|
$
|
1,749,488
|
|
|
$
|
1,749,488
|
|
Trading securities
|
17,143
|
|
|
17,143
|
|
|
13,240
|
|
|
13,240
|
|
Equity securities
|
283,178
|
|
|
283,178
|
|
|
248,361
|
|
|
248,361
|
|
Mortgage loans
|
38,018
|
|
|
36,374
|
|
|
26,021
|
|
|
25,782
|
|
Other long-term investments
|
47,772
|
|
|
47,772
|
|
|
37,077
|
|
|
37,077
|
|
Short-term investments
|
175
|
|
|
175
|
|
|
175
|
|
|
175
|
|
Cash and cash equivalents
|
148,784
|
|
|
148,784
|
|
|
64,454
|
|
|
64,454
|
|
Corporate-owned life insurance
|
5,976
|
|
|
5,976
|
|
|
4,907
|
|
|
4,907
|
|
The following tables present the categorization for our financial instruments measured at fair value on a recurring basis. The table includes financial instruments at
June 30, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
|
Fair Value Measurements
|
Description
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
AVAILABLE-FOR-SALE
|
|
|
|
|
|
|
|
Fixed maturities:
|
|
|
|
|
|
|
|
Bonds
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
29,072
|
|
|
$
|
—
|
|
|
$
|
29,072
|
|
|
$
|
—
|
|
U.S. government agency
|
140,050
|
|
|
—
|
|
|
140,050
|
|
|
—
|
|
States, municipalities and political subdivisions
|
|
|
|
|
|
|
|
General obligations
|
|
|
|
|
|
|
|
Midwest
|
89,370
|
|
|
—
|
|
|
89,370
|
|
|
—
|
|
Northeast
|
32,324
|
|
|
—
|
|
|
32,324
|
|
|
—
|
|
South
|
115,975
|
|
|
—
|
|
|
115,975
|
|
|
—
|
|
West
|
109,893
|
|
|
—
|
|
|
109,893
|
|
|
—
|
|
Special revenue
|
|
|
|
|
|
|
|
Midwest
|
144,438
|
|
|
—
|
|
|
144,438
|
|
|
—
|
|
Northeast
|
64,701
|
|
|
—
|
|
|
64,701
|
|
|
—
|
|
South
|
236,566
|
|
|
—
|
|
|
236,566
|
|
|
—
|
|
West
|
147,317
|
|
|
—
|
|
|
147,317
|
|
|
—
|
|
Foreign bonds
|
5,117
|
|
|
—
|
|
|
5,117
|
|
|
—
|
|
Public utilities
|
64,718
|
|
|
—
|
|
|
64,718
|
|
|
—
|
|
Corporate bonds
|
|
|
|
|
|
|
|
Energy
|
27,773
|
|
|
—
|
|
|
27,773
|
|
|
—
|
|
Industrials
|
55,162
|
|
|
—
|
|
|
55,162
|
|
|
—
|
|
Consumer goods and services
|
49,889
|
|
|
—
|
|
|
49,889
|
|
|
—
|
|
Health care
|
14,567
|
|
|
—
|
|
|
14,567
|
|
|
—
|
|
Technology, media and telecommunications
|
27,128
|
|
|
—
|
|
|
27,128
|
|
|
—
|
|
Financial services
|
94,663
|
|
|
—
|
|
|
94,413
|
|
|
250
|
|
Mortgage-backed securities
|
7,094
|
|
|
—
|
|
|
7,094
|
|
|
—
|
|
Collateralized mortgage obligations
|
|
|
|
|
|
|
|
Government national mortgage association
|
78,466
|
|
|
—
|
|
|
78,466
|
|
|
—
|
|
Federal home loan mortgage corporation
|
111,463
|
|
|
—
|
|
|
111,463
|
|
|
—
|
|
Federal national mortgage association
|
53,965
|
|
|
—
|
|
|
53,965
|
|
|
—
|
|
Asset-backed securities
|
3,608
|
|
|
—
|
|
|
2,864
|
|
|
744
|
|
Total Available-for-Sale Fixed Maturities
|
$
|
1,703,319
|
|
|
$
|
—
|
|
|
$
|
1,702,325
|
|
|
$
|
994
|
|
TRADING
|
|
|
|
|
|
|
|
Fixed maturities:
|
|
|
|
|
|
|
|
Bonds
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
749
|
|
|
$
|
—
|
|
|
$
|
749
|
|
|
$
|
—
|
|
Corporate bonds
|
|
|
|
|
|
|
|
Industrials
|
398
|
|
|
—
|
|
|
398
|
|
|
—
|
|
Consumer goods and services
|
1,905
|
|
|
—
|
|
|
1,905
|
|
|
—
|
|
Health care
|
5,164
|
|
|
—
|
|
|
5,164
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology, media and telecommunications
|
3,065
|
|
|
—
|
|
|
3,065
|
|
|
—
|
|
Financial services
|
2,006
|
|
|
—
|
|
|
2,006
|
|
|
—
|
|
Redeemable preferred stocks
|
3,856
|
|
|
3,856
|
|
|
—
|
|
|
—
|
|
Total Trading Securities
|
$
|
17,143
|
|
|
$
|
3,856
|
|
|
$
|
13,287
|
|
|
$
|
—
|
|
EQUITY SECURITIES
|
|
|
|
|
|
|
|
Common stocks
|
|
|
|
|
|
|
|
Public utilities
|
$
|
15,665
|
|
|
$
|
15,665
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Energy
|
13,784
|
|
|
13,784
|
|
|
—
|
|
|
—
|
|
Industrials
|
59,931
|
|
|
59,931
|
|
|
—
|
|
|
—
|
|
Consumer goods and services
|
27,494
|
|
|
27,494
|
|
|
—
|
|
|
—
|
|
Health care
|
25,378
|
|
|
25,378
|
|
|
—
|
|
|
—
|
|
Technology, media and telecommunications
|
16,776
|
|
|
16,776
|
|
|
—
|
|
|
—
|
|
Financial services
|
118,779
|
|
|
118,779
|
|
|
—
|
|
|
—
|
|
Nonredeemable preferred stocks
|
5,371
|
|
|
4,776
|
|
|
—
|
|
|
595
|
|
Total Equity Securities
|
$
|
283,178
|
|
|
$
|
282,583
|
|
|
$
|
—
|
|
|
$
|
595
|
|
Short-Term Investments
|
$
|
175
|
|
|
$
|
175
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Money Market Accounts
|
$
|
17,739
|
|
|
$
|
17,739
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate-Owned Life Insurance
|
$
|
5,976
|
|
|
$
|
—
|
|
|
$
|
5,976
|
|
|
$
|
—
|
|
Total Assets Measured at Fair Value
|
$
|
2,027,530
|
|
|
$
|
304,353
|
|
|
$
|
1,721,588
|
|
|
$
|
1,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
Fair Value Measurements
|
Description
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
AVAILABLE-FOR-SALE
|
|
|
|
|
|
|
|
Fixed maturities:
|
|
|
|
|
|
|
|
Bonds
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
27,418
|
|
|
$
|
—
|
|
|
$
|
27,418
|
|
|
$
|
—
|
|
U.S. government agency
|
214,682
|
|
|
—
|
|
|
214,682
|
|
|
—
|
|
States, municipalities and political subdivisions
|
|
|
|
|
|
|
|
General obligations
|
|
|
|
|
|
|
|
Midwest
|
95,212
|
|
|
—
|
|
|
95,212
|
|
|
—
|
|
Northeast
|
37,655
|
|
|
—
|
|
|
37,655
|
|
|
—
|
|
South
|
113,911
|
|
|
—
|
|
|
113,911
|
|
|
—
|
|
West
|
107,841
|
|
|
—
|
|
|
107,841
|
|
|
—
|
|
Special revenue
|
|
|
|
|
|
|
|
Midwest
|
140,764
|
|
|
—
|
|
|
140,764
|
|
|
—
|
|
Northeast
|
61,948
|
|
|
—
|
|
|
61,948
|
|
|
—
|
|
South
|
235,809
|
|
|
—
|
|
|
235,809
|
|
|
—
|
|
West
|
142,920
|
|
|
—
|
|
|
142,920
|
|
|
—
|
|
Foreign bonds
|
9,716
|
|
|
—
|
|
|
9,716
|
|
|
—
|
|
Public utilities
|
56,059
|
|
|
—
|
|
|
56,059
|
|
|
—
|
|
Corporate bonds
|
|
|
|
|
|
|
|
Energy
|
28,648
|
|
|
—
|
|
|
28,648
|
|
|
—
|
|
Industrials
|
53,085
|
|
|
—
|
|
|
53,085
|
|
|
—
|
|
Consumer goods and services
|
53,646
|
|
|
—
|
|
|
53,646
|
|
|
—
|
|
Health care
|
16,658
|
|
|
—
|
|
|
16,658
|
|
|
—
|
|
Technology, media and telecommunications
|
26,176
|
|
|
—
|
|
|
26,176
|
|
|
—
|
|
Financial services
|
79,349
|
|
|
—
|
|
|
79,099
|
|
|
250
|
|
Mortgage-backed securities
|
7,424
|
|
|
—
|
|
|
7,424
|
|
|
—
|
|
Collateralized mortgage obligations
|
|
|
|
|
|
|
|
Government national mortgage association
|
76,701
|
|
|
—
|
|
|
76,701
|
|
|
—
|
|
Federal home loan mortgage corporation
|
107,623
|
|
|
—
|
|
|
107,623
|
|
|
—
|
|
Federal national mortgage association
|
52,748
|
|
|
—
|
|
|
52,748
|
|
|
—
|
|
Asset-backed securities
|
3,495
|
|
|
—
|
|
|
2,829
|
|
|
666
|
|
Total Available-for-Sale Fixed Maturities
|
$
|
1,749,488
|
|
|
$
|
—
|
|
|
$
|
1,748,572
|
|
|
$
|
916
|
|
TRADING
|
|
|
|
|
|
|
|
Fixed maturities:
|
|
|
|
|
|
|
|
Bonds
|
|
|
|
|
|
|
|
Corporate bonds
|
|
|
|
|
|
|
|
Industrials
|
$
|
397
|
|
|
$
|
—
|
|
|
$
|
397
|
|
|
$
|
—
|
|
Consumer goods and services
|
1,599
|
|
|
—
|
|
|
1,599
|
|
|
—
|
|
Health care
|
3,236
|
|
|
—
|
|
|
3,236
|
|
|
—
|
|
Technology, media and telecommunications
|
3,028
|
|
|
—
|
|
|
3,028
|
|
|
—
|
|
Financial services
|
2,231
|
|
|
—
|
|
|
2,231
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable preferred stocks
|
2,749
|
|
|
2,749
|
|
|
—
|
|
|
—
|
|
Total Trading Securities
|
$
|
13,240
|
|
|
$
|
2,749
|
|
|
$
|
10,491
|
|
|
—
|
|
EQUITY SECURITIES
|
|
|
|
|
|
|
|
Common Stocks
|
|
|
|
|
|
|
|
Public utilities
|
$
|
15,949
|
|
|
$
|
15,949
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Energy
|
10,975
|
|
|
10,975
|
|
|
—
|
|
|
—
|
|
Industrials
|
53,536
|
|
|
53,536
|
|
|
—
|
|
|
—
|
|
Consumer goods and services
|
24,465
|
|
|
24,465
|
|
|
—
|
|
|
—
|
|
Health care
|
22,286
|
|
|
22,286
|
|
|
—
|
|
|
—
|
|
Technology, media and telecommunications
|
13,944
|
|
|
13,944
|
|
|
—
|
|
|
—
|
|
Financial services
|
101,555
|
|
|
101,555
|
|
|
—
|
|
|
—
|
|
Nonredeemable preferred stocks
|
5,651
|
|
|
5,056
|
|
|
—
|
|
|
595
|
|
Total Equity Securities
|
$
|
248,361
|
|
|
$
|
247,766
|
|
|
$
|
—
|
|
|
$
|
595
|
|
Short-Term Investments
|
$
|
175
|
|
|
$
|
175
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Money Market Accounts
|
$
|
3,275
|
|
|
$
|
3,275
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate-Owned Life Insurance
|
$
|
4,907
|
|
|
$
|
—
|
|
|
$
|
4,907
|
|
|
$
|
—
|
|
Total Assets Measured at Fair Value
|
$
|
2,019,446
|
|
|
$
|
253,965
|
|
|
$
|
1,763,970
|
|
|
$
|
1,511
|
|
The fair value of securities that are categorized as Level 1 is based on quoted market prices that are readily and regularly available.
We use a market-based approach for valuing all of our Level 2 securities and submit them primarily to a third-party valuation service provider. Any of these securities not valued by this service provider are submitted to another third-party valuation service provider. Both service providers use a market approach to find pricing of similar financial instruments. The market inputs our service providers normally seek to value our securities include the following, listed in approximate order of priority: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. The method and inputs for these securities classified as Level 2 are the same regardless of industry category, credit quality, duration, geographical concentration or economic characteristics. For our mortgage-backed securities, collateralized mortgage obligations and asset-backed securities, our service providers use additional market inputs to value these securities, including the following: new issue data, periodic payment information, monthly payment information, collateral performance and real estate analysis from third parties. Our service providers prioritize inputs based on market conditions, and not all inputs listed are available for use in the valuation process for each security on any given day.
At least annually, we review the methodologies and assumptions used by our valuation service providers and verify that they are reasonable and representative of the fair value of the underlying securities held in the investment portfolio. We validate the prices obtained from independent pricing services and brokers prior to their use for reporting purposes by evaluating their reasonableness on a monthly basis. Our validation process includes a review for unusual fluctuations. Unusual fluctuations outside of our expectations are independently corroborated with additional third-party sources that use similar valuation techniques as discussed above. In addition, on a quarterly basis, we also test all securities in the portfolio and independently corroborate the valuations obtained from our third-party valuation service providers. Quarterly, we also perform deep dive analysis of the pricing method used by our third-party valuation service provider by selecting a random sample of securities by asset class and reviewing methodologies. In our opinion, the pricing obtained at
June 30, 2019
and
December 31, 2018
was reasonable.
For the
three- and six-month periods ended June 30, 2019
, the change in our available-for-sale securities categorized as Level 1 and Level 2 is the result of investment purchases that were made using funds held in our money market accounts, disposals and the change in unrealized gains on both fixed maturities and equity securities. During the
three- and six-month periods ended June 30, 2019
, there were
no
securities transferred between Level 1 and Level 2.
Securities categorized as Level 3 include holdings in certain private placement fixed maturity and equity securities for which an active market does not currently exist. The fair value of our Level 3 private placement securities is determined by management relying on pricing received from our independent pricing services and brokers consistent with the process to estimate fair value for Level 2 securities. However, securities are categorized as Level 3 if these quotes cannot be corroborated by other market observable data due to the unobservable nature of the brokers’ valuation processes. If pricing cannot be obtained from these sources, which occurs on a limited basis, management will perform a discounted cash flow analysis, using an appropriate risk-adjusted discount rate, on the underlying security to estimate fair value. During the
three- and six-month periods ended June 30, 2019
, there were
no
securities transferred in or out of Level 3.
The following table provides a summary of the changes in fair value of our Level 3 securities for the
three-month period ended June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
Asset-backed securities
|
|
Equities
|
|
Total
|
Balance at March 31, 2019
|
$
|
250
|
|
|
$
|
701
|
|
|
$
|
595
|
|
|
$
|
1,546
|
|
Net unrealized gains
(1)
|
—
|
|
|
43
|
|
|
—
|
|
|
43
|
|
Balance at June 30, 2019
|
$
|
250
|
|
|
$
|
744
|
|
|
$
|
595
|
|
|
$
|
1,589
|
|
(1) Net unrealized gains are recorded as a component of comprehensive income.
The following table provides a summary of the changes in fair value of our Level 3 securities for the
six-month period ended June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
Asset-backed securities
|
|
Equities
|
|
Total
|
Balance at January 1, 2019
|
$
|
250
|
|
|
$
|
666
|
|
|
$
|
595
|
|
|
$
|
1,511
|
|
Net unrealized gains
(1)
|
—
|
|
|
78
|
|
|
—
|
|
|
78
|
|
Balance at June 30, 2019
|
$
|
250
|
|
|
$
|
744
|
|
|
$
|
595
|
|
|
$
|
1,589
|
|
(1) Net unrealized gains are recorded as a component of comprehensive income.
Commercial Mortgage Loans
The following tables present the carrying value of our commercial mortgage loans and additional information at
June 30, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
Commercial Mortgage Loans
|
|
June 30, 2019
|
|
December 31, 2018
|
Loan-to-value
|
Carrying Value
|
|
Carrying Value
|
Less than 65%
|
$
|
27,940
|
|
|
$
|
25,828
|
|
65%-75%
|
8,496
|
|
|
—
|
|
Total amortized cost
|
$
|
36,436
|
|
|
$
|
25,828
|
|
Valuation allowance
|
(62
|
)
|
|
(46
|
)
|
Total mortgage loans
|
$
|
36,374
|
|
|
$
|
25,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Loans by Region
|
|
June 30, 2019
|
|
December 31, 2018
|
|
Carrying Value
|
|
Percent of Total
|
|
Carrying Value
|
|
Percent of Total
|
East North Central
|
$
|
3,245
|
|
|
8.9
|
%
|
|
$
|
3,244
|
|
|
12.6
|
%
|
Southern Atlantic
|
6,652
|
|
|
18.3
|
|
|
6,652
|
|
|
25.8
|
|
East South Central
|
4,899
|
|
|
13.4
|
|
|
4,975
|
|
|
19.3
|
|
New England
|
6,588
|
|
|
18.1
|
|
|
6,588
|
|
|
25.4
|
|
Middle Atlantic
|
12,825
|
|
|
35.2
|
|
|
4,369
|
|
|
16.9
|
|
Mountain
|
2,227
|
|
|
6.1
|
|
|
—
|
|
|
—
|
|
Total mortgage loans at amortized cost
|
$
|
36,436
|
|
|
100.0
|
%
|
|
$
|
25,828
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Loans by Property Type
|
|
June 30, 2019
|
|
December 31, 2018
|
|
Carrying Value
|
|
Percent of Total
|
|
Carrying Value
|
|
Percent of Total
|
Commercial
|
|
|
|
|
|
|
|
Multifamily
|
$
|
3,245
|
|
|
8.9
|
%
|
|
$
|
3,244
|
|
|
12.6
|
%
|
Office
|
11,551
|
|
|
31.7
|
|
|
11,627
|
|
|
45.0
|
|
Retail
|
2,227
|
|
|
6.1
|
|
|
—
|
|
|
—
|
|
Mixed use/Other
|
19,413
|
|
|
53.3
|
|
|
10,957
|
|
|
42.4
|
|
Total mortgage loans at amortized cost
|
$
|
36,436
|
|
|
100.0
|
%
|
|
$
|
25,828
|
|
|
100.0
|
%
|
The commercial mortgage loans originate with an initial loan-to-value ratio to provide sufficient collateral to absorb losses should a loan be required to foreclose. Mortgage loans are evaluated on a quarterly basis for impairment on an individual basis through a monitoring process and review of key credit indicators, such as economic trends, delinquency rates, property valuations, occupancy and rental rates and loan-to-value ratios. A loan is considered impaired when the Company believes it will not collect the contractual principal and interest set forth in the contractual terms of the loan. A valuation allowance is established on each loan recognizing a loss for amounts which we believe will not be collected according to the contractual terms of the respective loan agreement. As of
June 30, 2019
there were no mortgage loan impairments.
NOTE 4. RESERVES FOR LOSSES AND LOSS SETTLEMENT EXPENSES
Property insurance indemnifies an insured with an interest in physical property for loss of, or damage to, such property or the loss of its income-producing abilities. Casualty insurance primarily covers liability for damage to property of, or injury to, a person or entity other than the insured. In most cases, casualty insurance also obligates the insurance company to provide a defense for the insured in litigation, arising out of events covered by the policy.
Liabilities for losses and loss settlement expenses reflect management's best estimates at a given point in time of what we expect to pay for claims that have been reported and those that have been incurred but not reported ("IBNR"), based on known facts, circumstances, and historical trends. Because property and casualty insurance reserves are estimates of the unpaid portions of incurred losses that have been reported to us, as well as losses that have been incurred but not reported, the establishment of appropriate reserves, including reserves for catastrophes, is an inherently uncertain and complex process. The ultimate cost of losses and related loss settlement expenses may vary materially from recorded amounts. We regularly update our reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in prior year reserve estimates, which may be material, are reported as a component of losses and loss settlement expenses incurred in the period such changes are determined.
The determination of reserves (particularly those relating to liability lines of insurance that have relatively longer lag in claim reporting) requires significant work to reasonably project expected future claim reporting and payment
patterns. If, during the course of our regular monitoring of reserves, we determine that coverages previously written are incurring higher than expected losses, we will take action that may include, among other things, increasing the related reserves. Any adjustments we make to reserves are reflected in operating results in the year in which we make those adjustments. We engage an independent actuary, Regnier Consulting Group, Inc., to render an opinion as to the reasonableness of our statutory reserves annually. The actuarial opinion is filed in those states where we are licensed.
On a quarterly basis, UFG's internal actuary performs a detailed actuarial review of IBNR reserves. This review includes a comparison of results from the most recent analysis of reserves completed by both our internal and external actuaries. Senior management meets with our internal actuary to review, on a regular and quarterly basis, the adequacy of carried reserves based on results from this actuarial analysis. There are two fundamental types or sources of IBNR reserves. We record IBNR reserves for "normal" types of claims and also specific IBNR reserves related to unique circumstances or events. A major hurricane is an example of an event that might necessitate establishing specific IBNR reserves because an analysis of existing historical data would not provide an appropriate estimate.
We do not discount loss reserves based on the time value of money.
The following table provides an analysis of changes in our property and casualty losses and loss settlement expense reserves at
June 30, 2019
and
December 31, 2018
(net of reinsurance amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
Gross liability for losses and loss settlement expenses
at beginning of year
|
$
|
1,312,483
|
|
|
$
|
1,224,183
|
|
Ceded losses and loss settlement expenses
|
(57,094
|
)
|
|
(59,871
|
)
|
Net liability for losses and loss settlement expenses
at beginning of year
|
$
|
1,255,389
|
|
|
$
|
1,164,312
|
|
Losses and loss settlement expenses incurred
for claims occurring during
|
|
|
|
Current year
|
$
|
379,507
|
|
|
$
|
785,778
|
|
Prior years
|
4,742
|
|
|
(54,167
|
)
|
Total incurred
|
$
|
384,249
|
|
|
$
|
731,611
|
|
Losses and loss settlement expense payments
for claims occurring during
|
|
|
|
Current year
|
$
|
125,106
|
|
|
$
|
306,032
|
|
Prior years
|
222,102
|
|
|
334,502
|
|
Total paid
|
$
|
347,208
|
|
|
$
|
640,534
|
|
Net liability for losses and loss settlement expenses
at end of year
|
$
|
1,292,430
|
|
|
$
|
1,255,389
|
|
Ceded loss and loss settlement expenses
|
49,236
|
|
|
57,094
|
|
Gross liability for losses and loss settlement expenses
at end of period
|
$
|
1,341,666
|
|
|
$
|
1,312,483
|
|
There are a multitude of factors that can impact loss reserve development. Those factors include, but are not limited to: historical data, the potential impact of various loss reserve development factors and trends including historical loss experience, legislative enactments, judicial decisions, legal developments in imposition of damages, experience with alternative dispute resolution, results of our medical bill review process, the potential impact of salvage and subrogation and changes and trends in general economic conditions, including the effects of inflation. All of these factors influence our estimates of required reserves and for long tail lines these factors can change over the course of the settlement of the claim. However, there is no precise method for evaluating the specific monetary impact of any individual factor on the development of reserves.
For the three-month period ended June 30, 2019, the majority of unfavorable development came from commercial liability with a partial offset coming primarily from favorable development in workers compensation and commercial fire and allied lines. All other lines combined contributed a relatively minimal amount of overall unfavorable development during this three-month period. For the six-month period ended June 30, 2019, the
majority of unfavorable development came from commercial liability with a partial offset coming primarily from favorable development in workers compensation, and fidelity and surety. All other lines combined contributed a relatively minimal amount of overall unfavorable development during this six-month period. The unfavorable development in both periods in commercial liability was primarily from prior year reserve strengthening on auto liability and other liability claims.
For the three-month period ended June 30, 2018, the majority of favorable development came from two lines, workers compensation and reinsurance assumed with a partial offset coming from unfavorable development for commercial fire and allied lines and commercial other liability. All other lines combined also contributed some overall favorable development during this three-month period. For the six-month period ended June 30, 2018, the majority of favorable development came from three lines: commercial automobile, workers compensation, and commercial other liability. All other lines combined also contributed overall favorable development and only one line, reinsurance assumed, provided any unfavorable development during this six-month period. The favorable development is attributable to our continued litigation management efforts as well as favorable runoff of reserves for general loss adjustment expenses.
Generally, we base reserves for each claim on the estimated ultimate exposure for that claim. We believe that it is appropriate and reasonable to establish a best estimate for reserves within a range of reasonable estimates, especially when we are reserving for claims for bodily injury, disabilities and similar claims, for which settlements and verdicts can vary widely. Our reserving philosophy may result in favorable reserve development in future years that will decrease losses and loss settlement expenses for prior year claims in the year of adjustment. We realize that this philosophy, coupled with what we believe to be aggressive and successful claims management and loss settlement practices, has resulted in year-to-year redundancies in reserves. We believe our approach produces recorded reserves that are reasonably consistent as to their relative position within a range of reasonable reserves from year-to-year. However, conditions and trends that have affected the reserve development for a given year do change. Therefore, such development cannot be used to project future reserve redundancies or deficiencies.
We are not aware of any significant contingent liabilities related to environmental issues. Because of the type of property coverage we write, we have potential exposure to environmental pollution, mold and asbestos claims. Our underwriters are aware of these exposures and use riders or endorsements to limit exposure.
NOTE 5. EMPLOYEE BENEFITS
Net Periodic Benefit Cost
The components of the net periodic benefit cost for our pension and postretirement benefit plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
Postretirement Benefit Plan
|
Three Months Ended June 30,
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
|
|
|
|
|
|
Service cost
|
$
|
1,997
|
|
|
$
|
2,175
|
|
|
$
|
456
|
|
|
$
|
750
|
|
Interest cost
|
2,080
|
|
|
1,875
|
|
|
318
|
|
|
502
|
|
Expected return on plan assets
|
(2,696
|
)
|
|
(2,626
|
)
|
|
—
|
|
|
—
|
|
Amortization of prior service credit
|
—
|
|
|
—
|
|
|
(2,221
|
)
|
|
(1,352
|
)
|
Amortization of net loss
|
901
|
|
|
1,072
|
|
|
224
|
|
|
589
|
|
Net periodic benefit cost
|
$
|
2,282
|
|
|
$
|
2,496
|
|
|
$
|
(1,223
|
)
|
|
$
|
489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
Postretirement Benefit Plan
|
Six Months Ended June 30,
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
|
|
|
|
|
|
Service cost
|
$
|
3,994
|
|
|
$
|
4,350
|
|
|
$
|
912
|
|
|
$
|
1,499
|
|
Interest cost
|
4,160
|
|
|
3,750
|
|
|
637
|
|
|
1,004
|
|
Expected return on plan assets
|
(5,392
|
)
|
|
(5,251
|
)
|
|
—
|
|
|
—
|
|
Amortization of prior service credit
|
—
|
|
|
—
|
|
|
(4,242
|
)
|
|
(2,704
|
)
|
Amortization of net loss
|
1,802
|
|
|
2,143
|
|
|
447
|
|
|
1,178
|
|
Net periodic benefit cost
|
$
|
4,564
|
|
|
$
|
4,992
|
|
|
$
|
(2,246
|
)
|
|
$
|
977
|
|
A portion of the service cost component of net periodic pension and postretirement benefit costs is capitalized and amortized as part of deferred acquisition costs and is included in the income statement line titled "amortization of deferred policy acquisition costs." The portion not related to the compensation and the other components of net periodic pension and postretirement benefit costs is included in the income statement line titled "other underwriting expenses."
Employer Contributions
We previously disclosed in our Annual Report on Form 10-K for the year ended
December 31, 2018
that we expected to contribute
$4,000
to the pension plan in
2019
. For the
six-month period ended June 30, 2019
, we contributed
$2,000
to the pension plan.
NOTE 6. STOCK-BASED COMPENSATION
Non-Qualified Employee Stock Award Plan
The United Fire Group, Inc. 2008 Stock Plan (the "2008 Stock Plan") authorized the issuance of restricted and unrestricted stock awards, restricted stock units, stock appreciation rights, incentive stock options, and non-qualified stock options for up to
1,900,000
shares of UFG common stock to employees. In May 2014, the Registrant's shareholders approved an additional
1,500,000
shares of UFG common stock issuable at any time and from time to time pursuant to the 2008 Stock Plan, among other amendments, and renamed such plan as the United Fire Group, Inc. Stock Plan (as amended, the "Stock Plan"). At
June 30, 2019
, there were
809,310
authorized shares remaining available for future issuance. The Stock Plan is administered by the Board of Directors, which determines those employees who will receive awards, when awards will be granted, and the terms and conditions of the awards. The Board of Directors may also take any action it deems necessary and appropriate for the administration of the Stock Plan. Pursuant to the Stock Plan, the Board of Directors may, at its sole discretion, grant awards to our employees who are in positions of substantial responsibility with UFG.
Options granted pursuant to the Stock Plan are granted to buy shares of United Fire's common stock at the market value of the stock on the date of grant. Options granted prior to March 2017 vest and are exercisable in installments of
20.0 percent
of the number of shares covered by the option award each year from the grant date, unless the Board of Directors authorizes the acceleration of vesting. Options granted after March 2017 vest and are exercisable in installments of
33.3 percent
of the number of shares covered by the option award each year from the grant date, unless the Board of Directors authorizes the acceleration of vesting. To the extent not exercised, vested option awards accumulate and are exercisable by the awardee, in whole or in part, in any subsequent year included in the option period, but not later than
10 years
from the grant date. Restricted and unrestricted stock awards granted pursuant to the Stock Plan are granted at the market value of UFG's common stock on the date of the grant. Restricted stock units fully vest after
3 years
or
5 years
from the date of grant, unless accelerated upon the approval of the Board of Directors, at which time UFG common stock will be issued to the awardee.
The activity in the Stock Plan is displayed in the following table:
|
|
|
|
|
|
|
Authorized Shares Available for Future Award Grants
|
Six Months Ended June 30, 2019
|
|
From Inception to June 30, 2019
|
Beginning balance
|
890,857
|
|
|
1,900,000
|
|
Additional shares authorized
|
—
|
|
|
1,500,000
|
|
Number of awards granted
|
(117,553
|
)
|
|
(3,140,620
|
)
|
Number of awards forfeited or expired
|
36,006
|
|
|
549,930
|
|
Ending balance
|
809,310
|
|
|
809,310
|
|
Number of option awards exercised
|
90,723
|
|
|
1,415,337
|
|
Number of unrestricted stock awards granted
|
—
|
|
|
9,370
|
|
Number of restricted stock awards vested
|
42,425
|
|
|
100,618
|
|
Non-Qualified Non-Employee Director Stock Option and Restricted Stock Plan
The United Fire Group, Inc. 2005 Non-Qualified Non-Employee Director Stock Option and Restricted Stock Plan (the "Director Plan") authorizes the issuance of restricted stock awards and non-qualified stock options to purchase shares of UFG's common stock to non-employee directors. At
June 30, 2019
, we had
34,863
authorized shares available for future issuance.
The Board of Directors has the authority to determine which non-employee directors receive awards, when options and restricted stock shall be granted, the option price, the option expiration date, the date of grant, the vesting schedule of options or whether the options shall be immediately vested, the terms and conditions of options and restricted stock (other than those terms and conditions set forth in the plan) and the number of shares of common stock to be issued pursuant to an option agreement or restricted stock agreement (subject to limits set forth in the plan). The Board of Directors may also take any action it deems necessary and appropriate for the administration of the Director Plan.
The activity in the Director Plan is displayed in the following table:
|
|
|
|
|
|
|
Authorized Shares Available for Future Award Grants
|
Six Months Ended June 30, 2019
|
|
From Inception to June 30, 2019
|
Beginning balance
|
49,163
|
|
|
300,000
|
|
Number of awards granted
|
(14,300
|
)
|
|
(289,140
|
)
|
Number of awards forfeited or expired
|
—
|
|
|
24,003
|
|
Ending balance
|
34,863
|
|
|
34,863
|
|
Number of option awards exercised
|
1,131
|
|
|
119,092
|
|
Number of restricted stock awards vested
|
—
|
|
|
71,541
|
|
Stock-Based Compensation Expense
For the
three-month periods ended June 30, 2019 and 2018
, we recognized stock-based compensation expense of
$1,357
and
$1,437
, respectively. For the
six-month periods ended June 30, 2019 and 2018
, we recognized stock-based compensation expense of
$4,045
and
$2,718
, respectively. Stock-based compensation expense is recognized over the vesting period of the stock options.
As of
June 30, 2019
, we had
$8,114
in stock-based compensation expense that has yet to be recognized through our results of operations. We expect this compensation to be recognized over the remainder of
2019
and subsequent years according to the table below, except with respect to awards that are accelerated by the Board of Directors, in which case we will recognize any remaining compensation expense in the period in which the awards are accelerated.
|
|
|
|
|
|
2019
|
|
$
|
2,650
|
|
2020
|
|
3,614
|
|
2021
|
|
1,672
|
|
2022
|
|
178
|
|
2023
|
|
—
|
|
Total
|
|
$
|
8,114
|
|
NOTE 7. SEGMENT INFORMATION
On September 19, 2017, the Company announced that it had agreed to sell its subsidiary, United Life, to Kuvare. The sale closed on March 30, 2018. As a result, the life insurance business has been reported as discontinued operations in the Consolidated Financial Statements and all comparable prior periods have been presented to conform to the current period presentation. For more information, refer to Note 11. Discontinued Operations.
Prior to the announcement to sell United Life, we had
two
reportable business segments in our operations: property and casualty insurance and life insurance. The property and casualty insurance business has
six
domestic locations
from which it conducts its business. The life insurance segment operated from our home office in Cedar Rapids, Iowa. Because all of our insurance is sold domestically, we have no revenues from foreign operations.
After the announcement of the United Life transaction, our continuing operations, the property and casualty insurance business, was reported as
one
reportable segment. The property and casualty insurance business profit or loss is consistent with consolidated reporting as disclosed on the Consolidated Statements of Income and Comprehensive Income. We analyze the property and casualty insurance business results based on profitability (i.e., loss ratios), expenses and return on equity. The Company's property and casualty insurance business was determined using a management approach to make decisions on operating matters, including allocating resources, assessing performance, determining which products to market and sell, determining distribution networks with insurance agents and monitoring the regulatory environment. The property and casualty insurance business products have similar economic characteristics and use a similar marketing and distribution strategy with our independent agents. The property and casualty insurance business geographic concentration did not change after the announcement of the sale of the life insurance business. We will continue to evaluate our continuing operations on the basis of both statutory accounting principles prescribed or permitted by our states of domicile and GAAP.
NOTE 8. EARNINGS PER COMMON SHARE
Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share gives effect to all dilutive common shares outstanding during the reporting period. The dilutive shares we consider in our diluted earnings per share calculation relate to our outstanding stock options, restricted stock awards and restricted stock unit awards.
We determine the dilutive effect of our outstanding stock options using the "treasury stock" method. Under this method, we assume the exercise of all of the outstanding stock options whose exercise price is less than the weighted-average market value of our common stock during the reporting period. This method also assumes that the proceeds from the hypothetical stock option exercises are used to repurchase shares of our common stock at the weighted-average market value of the stock during the reporting period. The net of the assumed stock options exercised and assumed common shares repurchased represents the number of dilutive common shares, which we add to the denominator of the earnings per share calculation.
The components of basic and diluted earnings per share were as follows for the
three-month periods ended June 30, 2019 and 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
(In Thousands, Except Share Data)
|
2019
|
|
2018
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
Net income (loss) from continuing operations
|
$
|
(4,196
|
)
|
|
$
|
(4,196
|
)
|
|
$
|
157
|
|
|
$
|
157
|
|
Weighted-average common shares outstanding
|
25,210,354
|
|
|
25,210,354
|
|
|
24,976,563
|
|
|
24,976,563
|
|
Add dilutive effect of restricted stock unit awards
|
—
|
|
|
—
|
|
|
—
|
|
|
281,654
|
|
Add dilutive effect of stock options
|
—
|
|
|
—
|
|
|
—
|
|
|
353,556
|
|
Weighted-average common shares outstanding
|
25,210,354
|
|
|
25,210,354
|
|
|
24,976,563
|
|
|
25,611,773
|
|
Earnings (loss) per common share from continuing operations
|
$
|
(0.17
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
Earnings (loss) per common share
|
$
|
(0.17
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
Awards excluded from diluted earnings per share calculation
(1)
|
—
|
|
|
63,897
|
|
|
—
|
|
|
2,681
|
|
|
|
(1)
|
Outstanding awards that are not "in-the-money" are excluded from the diluted earnings per share calculation because the effect of including them would have been anti-dilutive.
|
The components of basic and diluted earnings per share were as follows for the
six-month periods ended June 30, 2019 and 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
(In Thousands, Except Share Data)
|
2019
|
|
2018
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
Net income from continuing operations
|
$
|
40,325
|
|
|
$
|
40,325
|
|
|
$
|
20,521
|
|
|
$
|
20,521
|
|
Weighted-average common shares outstanding
|
25,170,877
|
|
|
25,170,877
|
|
|
24,946,335
|
|
|
24,946,335
|
|
Add dilutive effect of restricted stock unit awards
|
—
|
|
|
257,810
|
|
|
—
|
|
|
281,654
|
|
Add dilutive effect of stock options
|
—
|
|
|
231,116
|
|
|
—
|
|
|
354,719
|
|
Weighted-average common shares outstanding
|
25,170,877
|
|
|
25,659,803
|
|
|
24,946,335
|
|
|
25,582,708
|
|
Earnings per common share from continuing operations
|
$
|
1.60
|
|
|
$
|
1.57
|
|
|
$
|
0.82
|
|
|
$
|
0.80
|
|
Earnings (loss) per common share from discontinued operations
|
—
|
|
|
—
|
|
|
(0.08
|
)
|
|
(0.07
|
)
|
Gain on sale of discontinued operations, net of taxes
|
—
|
|
|
—
|
|
|
1.10
|
|
|
1.07
|
|
Earnings per common share
|
$
|
1.60
|
|
|
$
|
1.57
|
|
|
$
|
1.84
|
|
|
$
|
1.80
|
|
Awards excluded from diluted earnings per share calculation
(1)
|
—
|
|
|
63,897
|
|
|
—
|
|
|
2,681
|
|
|
|
(1)
|
Outstanding awards that are not "in-the-money" are excluded from the diluted earnings per share calculation because the effect of including them would have been anti-dilutive.
|
NOTE 9. CREDIT FACILITY
On February 2, 2016, the Company, as borrower, entered into a Credit Agreement (the "Credit Agreement") by and among the Company, with the lenders from time to time party thereto and KeyBank National Association ("Key Bank"), as administrative agent, swingline lender and letter of credit issuer. The Credit Agreement provides for a
$50,000
four
-year unsecured revolving credit facility that includes a
$20,000
letter of credit subfacility and a swingline subfacility in the amount up to
$5,000
. The Credit Agreement allows the Company to increase the aggregate amount of the commitments thereunder by up to
$100,000
, provided that no event of default has occurred and is continuing and certain other conditions are satisfied.
The Credit Agreement is available for the Company's general corporate purposes, including liquidity, acquisitions and working capital. All unpaid principal and accrued interest under the Credit Agreement is due and payable in full at maturity on February 2, 2020. Based on the type of loan, advances under the Credit Agreement would bear interest on either the London interbank offered rate ("LIBOR") or a base rate plus, in each case, a calculated margin amount.
The unused commitments under the Credit Agreement will be subject to a commitment fee that will be calculated at a per annum rate. The applicable margins for borrowings under the Credit Agreement and the commitment fee thereunder will be determined by reference to a pricing grid based on the Company’s issuer credit rating by A.M. Best Company, Inc.
The Credit Agreement contains customary representations, conditions to borrowing, covenants and events of default, including certain covenants that limit or restrict, subject to certain exceptions, the ability of the Company and its subsidiaries to sell or transfer assets, enter into a merger or consolidate with another company, create liens, impose restrictions on subsidiary dividends, enter into sale-leaseback transactions, make investments or acquisitions, enter into certain reinsurance agreements, pay dividends during any period of default, enter into transactions with affiliates, change the nature of its business, or incur indebtedness. The Credit Agreement also includes financial covenants that require the Company to (i) maintain a minimum consolidated net worth, (ii) maintain a minimum consolidated statutory surplus and (iii) not exceed a
0.35
to
1.0
debt to total capitalization ratio.
There was
no
outstanding balance on the Credit Agreement at
June 30, 2019
and
2018
, respectively. For the
six-month periods ended June 30, 2019 and 2018
, we did
no
t incur any interest expense related to either credit facility. We were in compliance with all covenants of the Credit Agreement at
June 30, 2019
.
NOTE 10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table shows the changes in the components of our accumulated other comprehensive income (loss), net of tax, for the
three-month period ended June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability for
|
|
|
|
Net unrealized
|
|
underfunded
|
|
|
|
appreciation
|
|
employee
|
|
|
|
on investments
|
|
benefit costs
(1)
|
|
Total
|
Balance as of March 31, 2019
|
16,956
|
|
|
(20,261
|
)
|
|
$
|
(3,305
|
)
|
Change in accumulated other comprehensive income before reclassifications
|
22,592
|
|
|
—
|
|
|
22,592
|
|
Reclassification adjustments from accumulated other comprehensive income (loss)
|
(30
|
)
|
|
888
|
|
|
858
|
|
Balance as of June 30, 2019
|
$
|
39,518
|
|
|
$
|
(19,373
|
)
|
|
$
|
20,145
|
|
(1) The preparation of financial statements in conformity with GAAP requires us to make various estimates and assumptions that affect the reporting of net periodic benefit cost, plan assets and plan obligations for each plan at the date of the financial statements. Actual results could differ from these estimates. One significant estimate relates to the calculation of the benefit obligation for each plan. We annually establish the discount rate, which is an estimate of the interest rate at which these benefits could be effectively settled, that is used to determine the present value of the respective plan's benefit obligations as of December 31.
The following table shows the changes in the components of our accumulated other comprehensive income (loss), net of tax, for the
six-month period ended June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability for
|
|
|
|
Net unrealized
|
|
underfunded
|
|
|
|
appreciation
|
|
employee
|
|
|
|
on investments
|
|
benefit costs
(1)
|
|
Total
|
Balance as of January 1, 2019
|
(9,323
|
)
|
|
(21,149
|
)
|
|
$
|
(30,472
|
)
|
Change in accumulated other comprehensive income before reclassifications
|
48,941
|
|
|
—
|
|
|
48,941
|
|
Reclassification adjustments from accumulated other comprehensive income (loss)
|
(100
|
)
|
|
1,776
|
|
|
1,676
|
|
Balance as of June 30, 2019
|
$
|
39,518
|
|
|
$
|
(19,373
|
)
|
|
$
|
20,145
|
|
(1) The preparation of financial statements in conformity with GAAP requires us to make various estimates and assumptions that affect the reporting of net periodic benefit cost, plan assets and plan obligations for each plan at the date of the financial statements. Actual results could differ from these estimates. One significant estimate relates to the calculation of the benefit obligation for each plan. We annually establish the discount rate, which is an estimate of the interest rate at which these benefits could be effectively settled, that is used to determine the present value of the respective plan's benefit obligations as of December 31.
NOTE 11. DISCONTINUED OPERATIONS
On September 18, 2017, we signed a definitive agreement to sell our subsidiary, United Life, to Kuvare for
$280,000
in cash, less a
$21
adjustment as set forth in the definitive agreement, for a net amount of
$279,979
. The sale closed on March 30, 2018 and we reported an after-tax gain on the sale of discontinued operations of
$27,307
. The life insurance business (previously reported as a separate segment) was considered held for sale and reported as discontinued operations and its financial position, results of operations and cash flows were reported separately for all periods presented, as applicable, unless otherwise noted.
UFG has agreed to provide services to Kuvare through a transition services agreement ("TSA"). The TSA ensures a
seamless transfer of the business between UFG and Kuvare. The TSA includes, among other considerations, accounting management, human resources, legal and information technology services, from the closing date for up to
24 months
. Since the close date, the Company has received
$717
as part of the TSA agreement.
Summary operating results of discontinued operations were as follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations
|
Statements of Income (Unaudited)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
(In Thousands, Except Share Data)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
Net premiums earned
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13,003
|
|
Investment income, net of investment expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
12,663
|
|
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,057
|
)
|
Other income
|
—
|
|
|
—
|
|
|
—
|
|
|
146
|
|
Total revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
24,755
|
|
|
|
|
|
|
|
|
|
Benefits, Losses and Expenses
|
|
|
|
|
|
|
|
Losses and loss settlement expenses
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,823
|
|
Increase in liability for future policy benefits
|
—
|
|
|
—
|
|
|
—
|
|
|
5,023
|
|
Amortization of deferred policy acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
1,895
|
|
Other underwriting expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
3,864
|
|
Interest on policyholders’ accounts
|
—
|
|
|
—
|
|
|
—
|
|
|
4,499
|
|
Total benefits, losses and expenses
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,104
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations before income taxes
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,349
|
)
|
Federal income tax expense
|
—
|
|
|
—
|
|
|
—
|
|
|
563
|
|
Net income (loss) from discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,912
|
)
|
Earnings (loss) per common share from discontinued operations:
|
|
|
|
|
|
|
|
Basic
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(0.08
|
)
|
Diluted
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.07
|
)
|
Note: The sale of the life insurance business was completed on March 30, 2018.
The Company's Consolidated Statement of Cash Flows presents operating, investing and financing cash flows of the discontinued operations separately. The Company's cash management and financial management of both continued and discontinued operations is consolidated as a centralized corporate function in our Finance Department.
NOTE 12. LEASES
The Company has operating leases consisting of office space, vehicle leases, computer equipment, and office equipment. Lease terms and options vary in the Company's operating leases dependent upon the underlying leased asset. We exclude options to extend or terminate a lease from our recognition as part of our right-of-use assets and lease liabilities until those options are known and/or executed, as we typically do not exercise options to purchase the underlying leased asset. As of
June 30, 2019
, we have leases with remaining terms of
1 year
to
7 years
, some of which may include no options for renewal and others with options to extend the lease terms from
6 months
to
5 years
.
The components of our operating leases were as follows:
|
|
|
|
|
|
|
|
As of June 30, 2019
|
|
|
|
Components of lease expense:
|
|
|
Operating lease expense
|
|
$
|
3,820
|
|
Less sublease income
|
|
252
|
|
Net lease expense
|
|
3,568
|
|
Cash flows information related to leases:
|
|
|
Operating cash outflow from operating leases
|
|
3,608
|
|
|
|
|
|
|
|
Balance sheet information for operating leases:
|
|
As of June 30, 2019
|
|
|
|
Operating lease right-of-use assets (Other assets on Consolidated Balance Sheets)
|
|
$
|
18,398
|
|
Operating lease liabilities (Accrued expenses and other liabilities on Consolidated Balance Sheets)
|
|
18,884
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
|
467
|
|
Weighted average remaining lease term
|
|
3.50
|
|
Weighted average discount rate
|
|
4.80
|
%
|
|
|
|
|
|
|
Maturities of lease liabilities:
|
|
As of June 30, 2019
|
2019
|
|
$
|
3,800
|
|
2020
|
|
7,258
|
|
2021
|
|
5,256
|
|
2022
|
|
2,374
|
|
2023
|
|
1,293
|
|
Thereafter
|
|
298
|
|
Total lease payments
|
|
20,279
|
|
Less imputed interest
|
|
(1,395
|
)
|
Lease liability
|
|
$
|
18,884
|
|