Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Feb. 12, 2014 | Jun. 30, 2013 | |
Document and Entity Information | ' | ' | ' |
Entity Registrant Name | 'RLI CORP | ' | ' |
Entity Central Index Key | '0000084246 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Amendment Flag | 'false | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Entity Well-known Seasoned Issuer | 'Yes | ' | ' |
Entity Voluntary Filers | 'No | ' | ' |
Entity Current Reporting Status | 'Yes | ' | ' |
Entity Filer Category | 'Large Accelerated Filer | ' | ' |
Entity Public Float | ' | ' | $1,437,954,365 |
Entity Common Stock, Shares Outstanding | ' | 42,984,424 | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Fixed income: | ' | ' |
Available-for-sale, at fair value (amortized cost - $1,431,049 in 2013 and $1,294,350 in 2012) | $1,440,052 | $1,378,582 |
Held-to-maturity, at amortized cost (fair value - $687 in 2013 and $11,868 in 2012) | 651 | 11,728 |
Trading, at fair value (amortized cost - $0 in 2013 and $6 in 2012) | ' | 7 |
Equity securities available-for-sale, at fair value (cost - $218,848 in 2013 and $240,287 in 2012) | 418,654 | 375,788 |
Short-term investments, at cost which approximates fair value | 23,232 | 30,462 |
Cash | 39,469 | 44,314 |
Total investments and cash | 1,922,058 | 1,840,881 |
Accrued investment income | 15,710 | 14,403 |
Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $13,328 in 2013 and $13,470 in 2012 | 152,509 | 139,355 |
Ceded unearned premiums | 60,407 | 73,192 |
Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $14,239 in 2013 and $14,834 in 2012 | 354,924 | 359,884 |
Deferred policy acquisition costs, net | 61,508 | 52,344 |
Property and equipment, at cost, net of accumulated depreciation of $41,491 in 2013 and $45,603 in 2012 | 40,261 | 27,987 |
Investment in unconsolidated investee | 49,793 | 52,128 |
Goodwill and intangibles | 74,876 | 76,113 |
Other assets | 8,264 | 8,345 |
Total assets | 2,740,310 | 2,644,632 |
Liabilities: | ' | ' |
Unpaid losses and settlement expenses | 1,129,433 | 1,158,483 |
Unearned premiums | 392,081 | 369,346 |
Reinsurance balances payable | 47,334 | 43,959 |
Funds held | 61,656 | 56,633 |
Income taxes - deferred | 57,801 | 55,566 |
Accrued expenses | 59,596 | 49,933 |
Other liabilities | 13,861 | 14,349 |
Total liabilities | 1,911,344 | 1,848,269 |
Shareholders' equity: | ' | ' |
Common stock ($1 par value, authorized 100,000,000 shares, issued 65,912,638 shares in 2013 and 65,455,462 shares in 2012, and outstanding 42,982,424 shares in 2013 and 42,525,248 shares in 2012) | 65,913 | 65,455 |
Paid in capital | 208,705 | 202,535 |
Accumulated other comprehensive earnings, net of tax | 136,027 | 143,170 |
Retained earnings | 811,320 | 778,202 |
Deferred compensation | 11,562 | 11,106 |
Treasury stock, at cost (22,930,214 shares in 2013 and 2012) | -404,561 | -404,105 |
Total shareholders' equity | 828,966 | 796,363 |
Total liabilities and shareholders' equity | 2,740,310 | 2,644,632 |
Debt, notes payable due 2023 | ' | ' |
Liabilities: | ' | ' |
Notes payable | 149,582 | ' |
Debt, notes payable due 2014 | ' | ' |
Liabilities: | ' | ' |
Notes payable | ' | $100,000 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, except Share data, unless otherwise specified | ||
Consolidated Balance Sheets | ' | ' |
Available-for-sale, amortized cost | $1,431,049 | $1,294,350 |
Held-to-maturity, fair value | 687 | 11,868 |
Trading, amortized cost | 0 | 6 |
Equity securities available-for-sale, cost | 218,848 | 240,287 |
Premiums and reinsurance balances receivable, allowances for uncollectible amounts | 13,328 | 13,470 |
Reinsurance balances recoverable on unpaid losses and settlement expenses, allowances for uncollectible amounts | 14,239 | 14,834 |
Property and equipment, accumulated depreciation | $41,491 | $45,603 |
Common stock, par value (in dollars per share) | $1 | $1 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 65,912,638 | 65,455,462 |
Common stock, shares outstanding (in shares) | 42,982,424 | 42,525,248 |
Treasury stock, shares (in shares) | 22,930,214 | 22,930,214 |
Consolidated_Statements_of_Ear
Consolidated Statements of Earnings and Comprehensive Earnings (USD $) | 12 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Consolidated Statements of Earnings and Comprehensive Earnings | ' | ' | ' |
Net premiums earned | $630,802 | $576,571 | $538,452 |
Net investment income | 52,763 | 58,831 | 63,681 |
Net realized investment gains | 22,036 | 26,528 | 17,293 |
Other-than-temporary-impairment losses on investments | ' | -1,156 | -257 |
Consolidated revenue | 705,601 | 660,774 | 619,169 |
Losses and settlement expenses | 259,801 | 271,645 | 200,084 |
Policy acquisition costs | 210,651 | 196,362 | 183,868 |
Insurance operating expenses | 53,557 | 44,971 | 44,312 |
Interest expense on debt | 8,095 | 6,050 | 6,050 |
General corporate expenses | 8,746 | 7,867 | 7,766 |
Total expenses | 540,850 | 526,895 | 442,080 |
Equity in earnings of unconsolidated investee | 10,915 | 8,853 | 6,497 |
Earnings before income taxes | 175,666 | 142,732 | 183,586 |
Income tax expense: | ' | ' | ' |
Current | 43,346 | 35,605 | 49,524 |
Deferred | 6,065 | 3,781 | 7,464 |
Income tax expense: | 49,411 | 39,386 | 56,988 |
Net earnings | 126,255 | 103,346 | 126,598 |
Other comprehensive earnings (loss), net of tax | -7,143 | 25,845 | 21,333 |
Comprehensive earnings | $119,112 | $129,191 | $147,931 |
Basic: | ' | ' | ' |
Net earnings per share (in dollars per share) | $2.95 | $2.44 | $3 |
Comprehensive earnings per share (in dollars per share) | $2.79 | $3.04 | $3.51 |
Diluted: | ' | ' | ' |
Net earnings per share (in dollars per share) | $2.90 | $2.39 | $2.95 |
Comprehensive earnings per share (in dollars per share) | $2.74 | $2.99 | $3.45 |
Weighted average number of common shares outstanding | ' | ' | ' |
Basic (in shares) | 42,744 | 42,431 | 42,156 |
Diluted (in shares) | 43,514 | 43,160 | 42,869 |
Consolidated_Statements_of_Sha
Consolidated Statements of Shareholders' Equity (USD $) | Total | Common Stock | Paid-in Capital | Accumulated Other Comprehensive Earnings (Loss) | Retained Earnings | Deferred Compensation | Treasury Stock at Cost |
In Thousands, except Share data, unless otherwise specified | |||||||
Balance at Dec. 31, 2010 | $769,151 | $64,635 | $182,749 | $95,992 | $812,150 | $6,474 | ($392,849) |
Balance (in shares) at Dec. 31, 2010 | ' | 41,929,080 | ' | ' | ' | ' | ' |
Increase (Decrease) in Shareholders' Equity | ' | ' | ' | ' | ' | ' | ' |
Net earnings | 126,598 | ' | ' | ' | 126,598 | ' | ' |
Other comprehensive earnings, net of tax | 21,333 | ' | ' | 21,333 | ' | ' | ' |
Treasury shares purchased | -6,624 | ' | ' | ' | ' | ' | -6,624 |
Treasury shares purchased (in shares) | ' | -223,912 | ' | ' | ' | ' | ' |
Deferred compensation under Rabbi trust plans | ' | ' | ' | ' | ' | 3,971 | -3,971 |
Stock option excess tax benefit | 4,210 | ' | 4,210 | ' | ' | ' | ' |
Exercise of stock options | 8,821 | 619 | 8,202 | ' | ' | ' | ' |
Exercise of stock options (in shares) | ' | 619,106 | ' | ' | ' | ' | ' |
Dividends declared ($2.17, $3.13 and $3.10 per share during 2013, 2012 and 2011, respectively) | -130,855 | ' | ' | ' | -130,855 | ' | ' |
Balance at Dec. 31, 2011 | 792,634 | 65,254 | 195,161 | 117,325 | 807,893 | 10,445 | -403,444 |
Balance (in shares) at Dec. 31, 2011 | ' | 42,324,274 | ' | ' | ' | ' | ' |
Increase (Decrease) in Shareholders' Equity | ' | ' | ' | ' | ' | ' | ' |
Net earnings | 103,346 | ' | ' | ' | 103,346 | ' | ' |
Other comprehensive earnings, net of tax | 25,845 | ' | ' | 25,845 | ' | ' | ' |
Deferred compensation under Rabbi trust plans | ' | ' | ' | ' | ' | 661 | -661 |
Stock option excess tax benefit | 1,471 | ' | 1,471 | ' | ' | ' | ' |
Exercise of stock options | 6,104 | 201 | 5,903 | ' | ' | ' | ' |
Exercise of stock options (in shares) | ' | 200,974 | ' | ' | ' | ' | ' |
Dividends declared ($2.17, $3.13 and $3.10 per share during 2013, 2012 and 2011, respectively) | -133,037 | ' | ' | ' | -133,037 | ' | ' |
Balance at Dec. 31, 2012 | 796,363 | 65,455 | 202,535 | 143,170 | 778,202 | 11,106 | -404,105 |
Balance (in shares) at Dec. 31, 2012 | ' | 42,525,248 | ' | ' | ' | ' | ' |
Increase (Decrease) in Shareholders' Equity | ' | ' | ' | ' | ' | ' | ' |
Net earnings | 126,255 | ' | ' | ' | 126,255 | ' | ' |
Other comprehensive earnings, net of tax | -7,143 | ' | ' | -7,143 | ' | ' | ' |
Deferred compensation under Rabbi trust plans | ' | ' | ' | ' | ' | 456 | -456 |
Stock option excess tax benefit | 6,310 | ' | 6,310 | ' | ' | ' | ' |
Exercise of stock options | 318 | 458 | -140 | ' | ' | ' | ' |
Exercise of stock options (in shares) | ' | 457,176 | ' | ' | ' | ' | ' |
Dividends declared ($2.17, $3.13 and $3.10 per share during 2013, 2012 and 2011, respectively) | -93,137 | ' | ' | ' | -93,137 | ' | ' |
Balance at Dec. 31, 2013 | $828,966 | $65,913 | $208,705 | $136,027 | $811,320 | $11,562 | ($404,561) |
Balance (in shares) at Dec. 31, 2013 | ' | 42,982,424 | ' | ' | ' | ' | ' |
Consolidated_Statements_of_Sha1
Consolidated Statements of Shareholders' Equity (Parenthetical) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Consolidated Statements of Shareholders' Equity | ' | ' | ' |
Dividends declared (in dollars per share) | $2.17 | $3.13 | $3.10 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Cash flows from operating activities: | ' | ' | ' |
Net earnings | $126,255 | $103,346 | $126,598 |
Adjustments to reconcile net earnings to net cash provided by operating activities | ' | ' | ' |
Net realized investment gains | -22,036 | -25,372 | -17,036 |
Depreciation | 3,765 | 3,145 | 3,177 |
Other items, net | 13,104 | 7,732 | -9,144 |
Change in: | ' | ' | ' |
Accrued investment income | -1,307 | -538 | 2,577 |
Premiums and reinsurance balances receivable (net of direct write-offs and commutations) | -13,154 | -14,859 | 14,303 |
Reinsurance balances payable | 3,375 | -6,902 | 27,010 |
Funds held | 5,023 | -53,922 | 78,483 |
Ceded unearned premium | 12,785 | -11,563 | 2,025 |
Reinsurance balances recoverable on unpaid losses | 4,960 | -6,079 | 358 |
Deferred policy acquisition costs | -9,164 | -239 | -1,041 |
Accrued expenses | 9,663 | -8,950 | -17,619 |
Unpaid losses and settlement expenses | -29,050 | 7,769 | -95,616 |
Unearned premiums | 22,735 | 28,079 | 8,593 |
Income taxes | ' | ' | ' |
Current | 5,966 | 14,536 | -1,440 |
Deferred | 6,065 | 3,781 | 7,464 |
Stock option excess tax benefit | -6,310 | -1,471 | -4,210 |
Changes in investment in unconsolidated investees: | ' | ' | ' |
Undistributed earnings | -10,915 | -8,853 | -6,497 |
Dividends received | 13,200 | 6,600 | ' |
Net proceeds from trading portfolio activity | 6 | ' | 6 |
Net cash provided by operating activities | 134,966 | 36,240 | 117,991 |
Purchase of: | ' | ' | ' |
Fixed income, held-to-maturity | ' | -25,078 | -209,300 |
Fixed income, available-for-sale | -545,899 | -632,955 | -450,813 |
Equity securities, available-for-sale | -31,010 | -34,113 | -87,346 |
Short-term investments, net | ' | -6,597 | ' |
Property and equipment | -25,407 | -18,521 | -5,382 |
Acquisition of CBIC, net of cash acquired | ' | ' | -120,767 |
Acquisition of Rockbridge Underwriting Agency | ' | -15,500 | ' |
Other | ' | -400 | ' |
Proceeds from sale of: | ' | ' | ' |
Fixed income, available-for-sale | 173,694 | 181,338 | 383,664 |
Equity securities, available-for-sale | 73,982 | 78,315 | 40,092 |
Short-term investments, net | 7,230 | ' | 15,922 |
Property and equipment | 9,368 | 3,913 | 1,424 |
Other | 400 | ' | ' |
Proceeds from call or maturity of: | ' | ' | ' |
Fixed income, held-to-maturity | 11,090 | 273,816 | 258,493 |
Fixed income, available-for-sale | 224,620 | 248,134 | 261,654 |
Net cash provided by (used in) investing activities | -101,932 | 52,352 | 87,641 |
Cash flows from financing activities: | ' | ' | ' |
Stock option excess tax benefit | 6,310 | 1,471 | 4,210 |
Proceeds from stock option exercises | 318 | 6,104 | 8,821 |
Proceeds from issuance of senior notes | 149,571 | ' | ' |
Payment on senior notes | -99,504 | ' | ' |
Debt issue costs paid | -1,437 | ' | ' |
Treasury shares purchased | ' | ' | -6,624 |
Cash dividends paid | -93,137 | -133,037 | -130,855 |
Net cash used in financing activities | -37,879 | -125,462 | -124,448 |
Net increase (decrease) in cash | -4,845 | -36,870 | 81,184 |
Cash at beginning of year | 44,314 | 81,184 | ' |
Cash at end of year | $39,469 | $44,314 | $81,184 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||||
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||||
A. DESCRIPTION OF BUSINESS: We underwrite selected property and casualty insurance coverages. We conduct operations principally through four insurance companies. These companies are organized in a vertical structure beneath RLI Corp. with RLI Insurance Company (RLI Ins.) as the first-level, or principal, insurance subsidiary. RLI Ins. writes multiple lines of insurance on an admitted basis in all 50 states, the District of Columbia and Puerto Rico. Mt. Hawley Insurance Company, a subsidiary of RLI Ins., writes surplus lines insurance in all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands and Guam. RLI Indemnity Company (RIC), a subsidiary of Mt. Hawley Insurance Company, has authority to write multiple lines of insurance on an admitted basis in 48 states and the District of Columbia. Contractors Bonding and Insurance Company (CBIC), a subsidiary of RLI Ins., has authority to write multiple lines of insurance on an admitted basis in all 50 states and the District of Columbia. | |||||||||||
B. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION: The accompanying consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States of America (GAAP), which differ in some respects from those followed in reports to insurance regulatory authorities. The consolidated financial statements include the accounts of our holding company and our subsidiaries. All significant intercompany balances and transactions have been eliminated. On January 15, 2014, RLI Corp. executed a two-for-one split of its common stock. All share and per share data throughout this report reflect the stock split and certain related reclassifications were made to prior years’ financial statements to conform to classifications used in the current year. | |||||||||||
C. ADOPTED ACCOUNTING STANDARDS | |||||||||||
ASU 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment | |||||||||||
This ASU permits an entity the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. The results of the qualitative assessment are used as a basis in determining whether it is necessary to perform the two-step quantitative impairment test. If the qualitative assessment supports the conclusion that it is more likely than not that the fair value of the asset exceeds its carrying amount, the entity would not need to perform the two-step quantitative impairment test. The focus of the guidance is to reduce the cost and complexity of performing impairment tests for indefinite-lived intangible assets other than goodwill and to improve consistency in impairment testing among long-lived asset categories. | |||||||||||
We adopted ASU 2012-02 on January 1, 2013. The adoption did not have a material effect on our financial statements. There have been no triggering events that would suggest possible impairment or that it is more likely than not that the fair values of indefinite-lived intangible assets are less than their carrying amounts. | |||||||||||
ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income | |||||||||||
This ASU was issued to improve the reporting of reclassifications out of accumulated other comprehensive income. The guidance requires an entity to present, either on the face of the statement where net earnings is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items in the statement of earnings. The intent of the guidance is to provide financial statement users with a single location to determine the effect of reclassification adjustments on the financial statements. | |||||||||||
We adopted ASU 2013-02 on January 1, 2013. The required disclosures have been included in note 1.P. to these consolidated financial statements. | |||||||||||
D. PROSPECTIVE ACCOUNTING STANDARDS | |||||||||||
There are no prospective accounting standards which would have a material impact on our financial statements as of December 31, 2013. | |||||||||||
E. INVESTMENTS: We classify our investments in all debt and equity securities into one of three categories: available-for-sale, held-to-maturity or trading. | |||||||||||
AVAILABLE-FOR-SALE SECURITIES | |||||||||||
Debt and equity securities not included as held-to-maturity are classified as available-for-sale and reported at fair value. Unrealized gains and losses on these securities are excluded from net earnings but are recorded as a separate component of comprehensive earnings and shareholders’ equity, net of deferred income taxes. All of our equity securities and approximately 99 percent of debt securities are classified as available-for-sale. | |||||||||||
HELD-TO-MATURITY SECURITIES | |||||||||||
Debt securities that we have the positive intent and ability to hold to maturity are classified as held-to-maturity and carried at amortized cost. Except for declines that are other-than-temporary, changes in the fair value of these securities are not reflected in the financial statements. We have classified less than 1 percent of our debt securities portfolio as held-to-maturity. | |||||||||||
TRADING SECURITIES | |||||||||||
Debt and equity securities purchased for short-term resale are classified as trading securities. These securities are reported at fair value with unrealized gains and losses included in earnings. During 2013, we sold our remaining debt securities classified as trading. | |||||||||||
For the years ended December 31, 2013, 2012 and 2011, no securities were transferred from held-to-maturity to available-for-sale or trading. | |||||||||||
OTHER THAN TEMPORARY IMPAIRMENT | |||||||||||
We regularly evaluate our fixed income and equity securities using both quantitative and qualitative criteria to determine impairment losses for other-than-temporary declines in the fair value of the investments. The following are the key factors for determining if a security is other-than-temporarily impaired: | |||||||||||
· The length of time and the extent to which the fair value has been less than cost, | |||||||||||
· The probability of significant adverse changes to the cash flows on a fixed income investment, | |||||||||||
· The occurrence of a discrete credit event resulting in the issuer defaulting on a material obligation, the issuer seeking protection from creditors under the bankruptcy laws, the issuer proposing a voluntary reorganization under which creditors are asked to exchange their claims for cash or securities having a fair value substantially lower than par value, | |||||||||||
· The probability that we will recover the entire amortized cost basis of our fixed income securities prior to maturity or | |||||||||||
· For our equity securities, our expectation of recovery to cost within a reasonable period of time. | |||||||||||
Quantitative criteria considered during this process include, but are not limited to: the degree and duration of current fair value as compared to the cost (amortized, in certain cases) of the security, degree and duration of the security’s fair value being below cost and, for fixed maturities, whether the issuer is in compliance with terms and covenants of the security. Qualitative criteria include the credit quality, current economic conditions, the anticipated speed of cost recovery, the financial health of and specific prospects for the issuer, as well as our absence of intent to sell or requirement to sell fixed income securities prior to maturity. In addition, we consider price declines of securities in our other-than-temporary impairment (OTTI) analysis, where such price declines provide evidence of declining credit quality, and we distinguish between price changes caused by credit deterioration, as opposed to rising interest rates. See note 2 for further discussion of OTTI. | |||||||||||
Interest on fixed maturities and short-term investments is credited to earnings on an accrual basis. Premiums and discounts are amortized or accreted over the lives of the related fixed maturities. Dividends on equity securities are credited to earnings on the ex-dividend date. Realized gains and losses on disposition of investments are based on specific identification of the investments sold on the settlement date. | |||||||||||
F. CASH AND SHORT-TERM INVESTMENTS: Cash consists of uninvested balances in bank accounts. Short-term investments consist of investments with original maturities of 90 days or less, primarily AAA-rated prime and government money market funds. Short-term investments are carried at cost, which approximates fair value. We have not experienced losses on these instruments. | |||||||||||
G. REINSURANCE: Ceded unearned premiums and reinsurance balances recoverable on paid and unpaid losses and settlement expenses are reported separately as assets, instead of being netted with the related liabilities, since reinsurance does not relieve us of our legal liability to our policyholders. | |||||||||||
We continuously monitor the financial condition of our reinsurers. As part of our monitoring efforts, we review their annual financial statements, quarterly disclosures and Securities and Exchange Commission (SEC) filings for those reinsurers that are publicly traded. We also review insurance industry developments that may impact the financial condition of our reinsurers. We analyze the credit risk associated with our reinsurance balances recoverable by monitoring the A.M. Best and Standard & Poor’s (S&P) ratings of our reinsurers. In addition, we subject our reinsurance recoverables to detailed recoverable tests, including one based on average default by S&P rating. Based upon our review and testing, our policy is to charge to earnings, in the form of an allowance, an estimate of unrecoverable amounts from reinsurers. This allowance is reviewed on an ongoing basis to ensure that the amount makes a reasonable provision for reinsurance balances that we may be unable to recover. | |||||||||||
H. POLICY ACQUISITION COSTS: We defer commissions, premium taxes and certain other costs that are incrementally or directly related to the successful acquisition of new or renewal insurance contracts. Acquisition-related costs may be deemed ineligible for deferral when they are based on contingent or performance criteria beyond the basic acquisition of the insurance contract or when efforts to obtain or renew the insurance contract are unsuccessful. All eligible costs are capitalized and charged to expense in proportion to premium revenue recognized. The method followed in computing deferred policy acquisition costs limits the amount of such deferred costs to their estimated realizable value. This would also give effect to the premiums to be earned and anticipated losses and settlement expenses, as well as certain other costs expected to be incurred as the premiums are earned. Judgments as to the ultimate recoverability of such deferred costs are reviewed on a segment basis and are highly dependent upon estimated future loss costs associated with the premiums written. This deferral methodology applies to both gross and ceded premiums and acquisition costs. | |||||||||||
I. PROPERTY AND EQUIPMENT: Property and equipment are presented at cost less accumulated depreciation and are depreciated on a straight-line basis for financial statement purposes over periods ranging from 3 to 10 years for equipment and up to 30 years for buildings and improvements. | |||||||||||
J. INVESTMENT IN UNCONSOLIDATED INVESTEE: We maintain a 40 percent interest in the earnings of Maui Jim, Inc. (Maui Jim), a manufacturer of high-quality polarized sunglasses, which is accounted for by the equity method. We also maintain a similar minority representation on their board of directors. Maui Jim’s chief executive officer owns a controlling majority of the outstanding shares of Maui Jim. We carry this investment at the holding company, RLI Corp., level as it is not core to our insurance operations. Our investment in Maui Jim was $49.8 million in 2013 and $52.1 million in 2012. In 2013, we recorded $10.9 million in investee earnings, compared to $8.9 million in 2012 and $6.5 million in 2011. Maui Jim recorded net income of $26.1 million in 2013, $22.6 million in 2012 and $16.1 million in 2011. Additional summarized financial information for Maui Jim for 2013 and 2012 is outlined in the following table: | |||||||||||
(in millions) | 2013 | 2012 | |||||||||
Total assets | $ | 193.5 | $ | 175.4 | |||||||
Total liabilities | 92.7 | 68 | |||||||||
Total equity | 100.8 | 107.4 | |||||||||
Approximately $36.7 million of undistributed earnings from Maui Jim are included in our retained earnings as of December 31, 2013. In 2013 and 2012, we received dividends of $13.2 million and $6.6 million, respectively, from Maui Jim. | |||||||||||
We perform an annual impairment review of our investment in our unconsolidated investee, which considers current valuation and operating results. Based upon the most recent review, this asset was not impaired. | |||||||||||
K. INTANGIBLE ASSETS: In accordance with GAAP guidelines, the amortization of goodwill and indefinite-lived intangible assets is not permitted. Goodwill and indefinite-lived intangible assets remain on the balance sheet and are tested for impairment on an annual basis, or earlier if there is reason to suspect that their values may have been diminished or impaired. Goodwill and intangibles totaled $74.9 million at December 31, 2013. These assets relate to acquisition activity including our recent acquisitions of CBIC and Rockbridge. | |||||||||||
Goodwill resulting from acquisitions completed prior to 2011 totaled $26.2 million and is attributable to our surety segment. Goodwill and intangible assets resulting from the CBIC acquisition in April 2011 totaled $32.5 million. The CBIC-related assets include goodwill attributable to our casualty and surety segments of $5.3 million and $15.1 million, respectively, and an indefinite-lived intangible asset in the amount of $8.8 million. Annual impairment testing was performed on each of these goodwill and indefinite-lived intangible assets in the second quarter of 2013. Based upon these reviews, none of the assets were impaired. In addition, as of December 31, 2013, there were no triggering events that occurred that would suggest an updated review was necessary. Definite-lived intangible assets related to the CBIC acquisition totaled $3.3 million, net of amortization, as of December 31, 2013. | |||||||||||
The remaining $16.2 million of goodwill and intangibles relates to our purchase of Rockbridge in November 2012. Of this amount, $12.4 million is recorded as goodwill attributable to our casualty segment. The remaining $3.8 million relates to definite-lived intangible assets, net of amortization, as of December 31, 2013. We completed our evaluation of the acquisition under ASC Topic 805, Business Combinations in January 2013, which resulted in no adjustments from amounts recorded at December 31, 2012. Annual impairment testing was performed on this goodwill in the fourth quarter of 2013. Based upon this review, the asset was not impaired. In addition, as of December 31, 2013, there were no triggering events that occurred that would suggest an updated review was necessary. | |||||||||||
The aforementioned definite-lived intangible assets are amortized against future operating results based on their estimated useful lives. Amortization of intangible assets resulting from the acquisitions of CBIC and Rockbridge was $1.2 million for 2013. | |||||||||||
L. UNPAID LOSSES AND SETTLEMENT EXPENSES: The liability for unpaid losses and settlement expenses represents estimates of amounts needed to pay reported and unreported claims and related expenses. The estimates are based on certain actuarial and other assumptions related to the ultimate cost to settle such claims. Such assumptions are subject to occasional changes due to evolving economic, social and political conditions. All estimates are periodically reviewed and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments are reflected in the results of operations in the period in which they are determined. Due to the inherent uncertainty in estimating reserves for losses and settlement expenses, there can be no assurance that the ultimate liability will not exceed recorded amounts. If actual liabilities do exceed recorded amounts, there will be an adverse effect. Furthermore, we may determine that recorded reserves are more than adequate to cover expected losses, as happened during 2010 through 2013, when favorable experience primarily on casualty business led us to reduce our reserves. Based on the current assumptions used in estimating reserves, we believe that our overall reserve levels at December 31, 2013, make a reasonable provision to meet our future obligations. See note 6 for a further discussion of unpaid losses and settlement expenses. | |||||||||||
M. INSURANCE REVENUE RECOGNITION: Insurance premiums are recognized ratably over the term of the contracts, net of ceded reinsurance. Unearned premiums are calculated on a monthly pro rata basis. | |||||||||||
N. INCOME TAXES: We file a consolidated federal income tax return. Federal income taxes are accounted for using the asset and liability method under which deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities, operating losses and tax credit carry forwards. The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance if it is more likely than not all or some of the deferred tax assets will not be realized. | |||||||||||
We consider uncertainties in income taxes and recognize those in our financial statements as required. As it relates to uncertainties in income taxes, our unrecognized tax benefits, including interest and penalty accruals, are not considered material to the consolidated financial statements. Also, no tax uncertainties are expected to result in significant increases or decreases to unrecognized tax benefits within the next 12-month period. Penalties and interest related to income tax uncertainties, should they occur, would be included in income tax expense in the period in which they are incurred. | |||||||||||
During 2013, the Internal Revenue Service (IRS) completed an examination of the income tax returns for the years 2010 and 2011, which produced no material change to net earnings. Although 2010 and 2011 have been examined by the IRS, tax years 2010 through 2013 remain open and are subject to examination or re-examination. | |||||||||||
As an insurance company, we are subject to minimal state income tax liabilities. On a state basis, since the majority of our income is from insurance operations, we pay premium tax in lieu of state income tax. Premium taxes are a component of policy acquisition costs and calculated as a percentage of gross premiums written. | |||||||||||
O. EARNINGS PER SHARE: Basic earnings per share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock or common stock equivalents were exercised or converted into common stock. When inclusion of common stock equivalents increases the earnings per share or reduces the loss per share, the effect on earnings is anti-dilutive. Under these circumstances, the diluted net earnings or net loss per share is computed excluding the common stock equivalents. | |||||||||||
The following represents a reconciliation of the numerator and denominator of the basic and diluted EPS computations contained in the consolidated financial statements. As discussed in note 1.B. above, all share and per share data reflect the two-for-one stock split executed on January 15, 2014. | |||||||||||
(in thousands, except per share data) | Income | Weighted Average | Per Share | ||||||||
(Numerator) | Shares | Amount | |||||||||
(Denominator) | |||||||||||
For the year ended December 31, 2013 | |||||||||||
Basic EPS | |||||||||||
Income available to common shareholders | $ | 126,255 | 42,744 | $ | 2.95 | ||||||
Stock options | — | 770 | |||||||||
Diluted EPS | |||||||||||
Income available to common shareholders and assumed conversions | $ | 126,255 | 43,514 | $ | 2.9 | ||||||
For the year ended December 31, 2012 | |||||||||||
Basic EPS | |||||||||||
Income available to common shareholders | $ | 103,346 | 42,431 | $ | 2.44 | ||||||
Stock options | — | 729 | |||||||||
Diluted EPS | |||||||||||
Income available to common shareholders and assumed conversions | $ | 103,346 | 43,160 | $ | 2.39 | ||||||
For the year ended December 31, 2011 | |||||||||||
Basic EPS | |||||||||||
Income available to common shareholders | $ | 126,598 | 42,156 | $ | 3 | ||||||
Stock options | — | 713 | |||||||||
Diluted EPS | |||||||||||
Income available to common shareholders and assumed conversions | $ | 126,598 | 42,869 | $ | 2.95 | ||||||
P. COMPREHENSIVE EARNINGS: Our comprehensive earnings include net earnings plus unrealized gains/losses on our available-for-sale investment securities, net of tax. In reporting the components of comprehensive earnings on a net basis in the statement of earnings, we used a 35 percent tax rate. Other comprehensive income (loss), as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax expense (benefit) of $(3.8) million, $13.9 million and $11.5 million for 2013, 2012 and 2011, respectively. | |||||||||||
The following table illustrates the changes in the balance of each component of accumulated other comprehensive earnings for each period presented in the consolidated financial statements. | |||||||||||
(in thousands) | For the Year Ended December 31, | ||||||||||
Unrealized Gains/Losses on Available-for-Sale Securities | 2013 | 2012 | 2011 | ||||||||
Beginning balance | $ | 143,170 | 117,325 | 95,992 | |||||||
Other comprehensive earnings before reclassifications | 7,723 | 44,079 | 32,230 | ||||||||
Amounts reclassified from accumulated other comprehensive earnings | (14,866 | ) | (18,234 | ) | (10,897 | ) | |||||
Net current-period other comprehensive earnings (loss) | $ | (7,143 | ) | 25,845 | 21,333 | ||||||
Ending balance | $ | 136,027 | 143,170 | 117,325 | |||||||
The sale or other-than-temporary impairment of an available-for-sale security results in amounts being reclassified from accumulated other comprehensive earnings to current period net earnings. The effects of reclassifications out of accumulated other comprehensive earnings by the respective line items of net earnings are presented in the following table. | |||||||||||
(in thousands) | Amount Reclassified from | ||||||||||
Accumulated Other Comprehensive Earnings | |||||||||||
Component of Accumulated | For the Year Ended December 31, | Affected line item in the | |||||||||
Other Comprehensive Earnings | 2013 | 2012 | 2011 | Statement of Earnings | |||||||
Unrealized gains and losses on available-for-sale securities | $ | 22,871 | 29,209 | 17,021 | Net realized investment gains | ||||||
Other-than-temporary impairment | |||||||||||
— | (1,156 | ) | (257 | ) | (OTTI) losses on investments | ||||||
22,871 | 28,053 | 16,764 | Earnings before income taxes | ||||||||
(8,005 | ) | (9,819 | ) | (5,867 | ) | Income tax expense | |||||
$ | 14,866 | 18,234 | 10,897 | Net earnings | |||||||
Q. FAIR VALUE DISCLOSURES: Fair value is defined as the price in the principal market that would be received for an asset to facilitate an orderly transaction between market participants on the measurement date. We determined the fair value of certain financial instruments based on their underlying characteristics and relevant transactions in the marketplace. GAAP guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance also describes three levels of inputs that may be used to measure fair value. | |||||||||||
The following are the levels of the fair value hierarchy and a brief description of the type of valuation inputs that are used to establish each level: | |||||||||||
· Pricing Level 1 is applied to valuations based on readily available, unadjusted quoted prices in active markets for identical assets. These valuations are based on quoted prices that are readily and regularly available in an active market. | |||||||||||
· Pricing Level 2 is applied to valuations based upon quoted prices for similar assets in active markets, quoted prices for identical or similar assets in inactive markets; or valuations based on models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities) or can be corroborated by observable market data. | |||||||||||
· Pricing Level 3 is applied to valuations that are derived from techniques in which one or more of the significant inputs are unobservable. Financial assets are classified based upon the lowest level of significant input that is used to determine fair value. | |||||||||||
As a part of management’s process to determine fair value, we utilize a widely recognized, third-party pricing source to determine our fair values. We have obtained an understanding of the third-party pricing source’s valuation methodologies and inputs. The following is a description of the valuation techniques used for financial assets that are measured at fair value, including the general classification of such assets pursuant to the fair value hierarchy. | |||||||||||
Corporate, Agencies, Government and Municipal Bonds: The pricing vendor employs a multi-dimensional model which uses standard inputs including (listed in order of priority for use) benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, market bids/offers and other reference data. The pricing vendor also monitors market indicators, as well as industry and economic events. All bonds valued using these techniques are classified as Level 2. All Corporate, Agencies, Government and Municipal securities are deemed Level 2. | |||||||||||
Mortgage-backed Securities (MBS)/Collateralized Mortgage Obligations (CMO) and Asset-backed Securities (ABS): The pricing vendor evaluation methodology includes principally interest rate movements and new issue data. Evaluation of the tranches (non-volatile, volatile or credit sensitivity) is based on the pricing vendors’ interpretation of accepted modeling and pricing conventions. This information is then used to determine the cash flows for each tranche, benchmark yields, prepayment assumptions and to incorporate collateral performance. To evaluate CMO volatility, an option adjusted spread model is used in combination with models that simulate interest rate paths to determine market price information. This process allows the pricing vendor to obtain evaluations of a broad universe of securities in a way that reflects changes in yield curve, index rates, implied volatility, mortgage rates and recent trade activity. MBS/CMO and ABS with corroborated, observable inputs are classified as Level 2. All of our MBS/CMO and ABS are deemed Level 2. | |||||||||||
Common Stock: Exchange traded equities have readily observable price levels and are classified as Level 1 (fair value based on quoted market prices). All of our common stock holdings are deemed Level 1. | |||||||||||
For the Level 2 securities, as described above, we periodically conduct a review to assess the reasonableness of the fair values provided by our pricing service. Our review consists of a two-pronged approach. First, we compare prices provided by our pricing service to those provided by an additional source. Second, we obtain prices from securities brokers and compare them to the prices provided by our pricing service. In both comparisons, when discrepancies are found, we compare our prices to actual reported trade data for like securities. Based on this assessment, we determined that the fair values of our Level 2 securities provided by our pricing service are reasonable. | |||||||||||
For common stock, we receive prices from the same nationally recognized pricing service. Prices are based on observable inputs in an active market and are therefore disclosed as Level 1. Based on this assessment, we determined that the fair values of our Level 1 securities provided by our pricing service are reasonable. | |||||||||||
Due to the relatively short-term nature of cash, short-term investments, accounts receivable and accounts payable, their carrying amounts are reasonable estimates of fair value. The fair value of our long-term debt is discussed further in note 4. See note 13 for fair value of assets and liabilities acquired with CBIC and Rockbridge. | |||||||||||
R. STOCK-BASED COMPENSATION: We expense the estimated fair value of employee stock options and similar awards. Guidance requires entities to measure compensation cost for awards of equity instruments to employees based on the grant-date fair value of those awards and recognize compensation expense over the service period that the awards are expected to vest. | |||||||||||
We calculate the tax effects of share-based compensation under the alternative transition method as permitted by GAAP guidance. The alternative transition method includes simplified methods to determine the impact on the additional paid-in capital pool and consolidated statements of cash flows of the tax effects of employee share-based compensation awards. | |||||||||||
See note 8 for further discussion and related disclosures regarding stock options. | |||||||||||
S. RISKS AND UNCERTAINTIES: Certain risks and uncertainties are inherent to our day-to-day operations and to the process of preparing our consolidated financial statements. The more significant risks and uncertainties, as well as our attempt to mitigate, quantify and minimize such risks, are presented below and throughout the notes to the consolidated financial statements. | |||||||||||
Catastrophe Exposures | |||||||||||
Our insurance coverages include exposure to catastrophic events. We monitor all catastrophe exposures by quantifying our exposed policy limits in each region and by using computer-assisted modeling techniques. Additionally, we limit our risk to such catastrophes through restraining the total policy limits written in each region and by purchasing reinsurance. Our major catastrophe exposure is to losses caused by earthquakes, primarily on the West Coast. In 2013, for this coverage, we had protection of $300 million in excess of $25 million first-dollar retention for earthquakes in California and $330 million in excess of a $20 million first-dollar retention for earthquakes outside of California. These amounts are subject to certain co-participations by us on losses in excess of the $25 million or $20 million retentions. Our second largest catastrophe exposure is to losses caused by hurricanes to commercial properties throughout the Gulf and East Coasts, as well as to homes we insure in Hawaii. In 2013, these coverages were supported by $230 million in excess of a $20 million first-dollar retention in traditional catastrophe reinsurance protection, subject to certain retentions by us in the excess layers. In addition, we have incidental exposure to international catastrophic events. | |||||||||||
Our catastrophe reinsurance treaty renewed on January 1, 2014. We purchased the same limits over the same retention amounts outlined above for earthquakes in California. For earthquakes outside of California, we purchased $325 million excess of a $25 million first-dollar retention, subject to certain retentions by us in the excess layers. For other CAT events such as hurricanes, we purchased $225 million excess of a $25 million first-dollar retention, subject to certain retentions by us in the excess layers. We actively manage our catastrophe program to keep our net retention in line with risk tolerances and to optimize the risk/return trade off. | |||||||||||
Environmental Exposures | |||||||||||
We are subject to environmental claims and exposures primarily through our commercial umbrella, general liability and discontinued assumed casualty reinsurance lines of business. Although exposure to environmental claims exists in these lines of business, we sought to mitigate or control the extent of this exposure on the vast majority of this business through the following methods: (1) our policies include pollution exclusions that have been continually updated to further strengthen them, (2) our policies primarily cover moderate hazard risks and (3) we began writing this business after the insurance industry became aware of the potential pollution liability exposure and implemented changes to limit its exposure to this hazard. | |||||||||||
In 2009, as an extension of our excess and surplus lines general liability product, we expanded our offerings into low to moderate environmental liability exposures for small contractors and asbestos and mold remediation specialists. The business unit also provides limited coverage for individually underwritten underground storage tanks. We attempted to mitigate the overall exposure by focusing on smaller risks with low to moderate exposures. A large portion of this business is also offered on a claims-made basis with relatively low limits. We avoid risks that have large-scale exposures including petrochemical, chemical, mining, manufacturers and other risks that might be exposed to superfund sites. This business is covered under our casualty ceded reinsurance treaties. Since 2009, we have written $9.3 million of premium from this new product extension with $3.0 million written in 2013. | |||||||||||
We made loss and settlement expense payments on environmental liability claims and have loss and settlement expense reserves for others. We include this historical environmental loss experience with the remaining loss experience in the applicable line of business to project ultimate incurred losses and settlement expenses as well as related incurred but not reported (IBNR) loss and settlement expense reserves. | |||||||||||
Although historical experience on environmental claims may not accurately reflect future environmental exposures, we used this experience to record loss and settlement expense reserves in the exposed lines of business. See further discussion of environmental exposures in note 6. | |||||||||||
Reinsurance | |||||||||||
Reinsurance does not discharge us from our primary liability to policyholders, and to the extent that a reinsurer is unable to meet its obligations, we would be liable. We continuously monitor the financial condition of prospective and existing reinsurers. As a result, we purchase reinsurance from a number of financially strong reinsurers. We provide an allowance for reinsurance balances deemed uncollectible. See further discussion of reinsurance exposures in note 5. | |||||||||||
Investment Risk | |||||||||||
Our investment portfolio is subject to market, credit and interest rate risks. The equity portfolio will fluctuate with movements in the overall stock market. While the equity portfolio has been constructed to have lower downside risk than the market, the portfolio is sensitive to movements in the market. The bond portfolio is affected by interest rate changes and movement in credit spreads. We attempt to mitigate our interest rate and credit risks by constructing a well-diversified portfolio with high-quality securities with varied maturities. Downturns in the financial markets could have a negative effect on our portfolio. However, we attempt to manage this risk through asset allocation and security selection. | |||||||||||
Liquidity Risk | |||||||||||
Liquidity is essential to our business and a key component of our concept of asset-liability matching. Our liquidity may be impaired by an inability to collect premium receivable or reinsurance recoverable balances in a timely manner, an inability to sell assets or redeem our investments, an inability to access funds from our insurance subsidiaries, unforeseen outflows of cash or large claim payments or an inability to access debt or equity capital markets. This situation may arise due to circumstances that we may be unable to control, such as a general market disruption, an operational problem that affects third parties or us, or even by the perception among market participants that we, or other market participants, are experiencing greater liquidity risk. | |||||||||||
Our credit ratings are important to our liquidity. A reduction in our credit ratings could adversely affect our liquidity and competitive position, by increasing our borrowing costs or limiting our access to the capital markets. | |||||||||||
Financial Statements | |||||||||||
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses. The most significant of these amounts is the liability for unpaid losses and settlement expenses. Other estimates include investment valuation and OTTIs, the collectability of reinsurance balances, recoverability of deferred tax assets and deferred policy acquisition costs. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. Although recorded estimates are supported by actuarial computations and other supportive data, the estimates are ultimately based on our expectations of future events. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods. | |||||||||||
External Factors | |||||||||||
Our insurance subsidiaries are highly regulated by the states in which they are incorporated and by the states in which they do business. Such regulations, among other things, limit the amount of dividends, impose restrictions on the amount and types of investments and regulate rates insurers may charge for various coverages. We are also subject to insolvency and guarantee fund assessments for various programs designed to ensure policyholder indemnification. We generally accrue an assessment during the period in which it becomes probable that a liability has been incurred from an insolvency and the amount of the related assessment can be reasonably estimated. | |||||||||||
The National Association of Insurance Commissioners (NAIC) has developed Property/Casualty Risk-Based Capital (RBC) standards that relate an insurer’s reported statutory surplus to the risks inherent in its overall operations. The RBC formula uses the statutory annual statement to calculate the minimum indicated capital level to support asset (investment and credit) risk and underwriting (loss reserves, premiums written and unearned premium) risk. The NAIC model law calls for various levels of regulatory action based on the magnitude of an indicated RBC capital deficiency, if any. We regularly monitor our subsidiaries’ internal capital requirements and the NAIC’s RBC developments. As of December 31, 2013, we determined that our capital levels are well in excess of the minimum capital requirements for all RBC action levels and that our capital levels are sufficient to support the level of risk inherent in our operations. See note 9 for further discussion of statutory information and related insurance regulatory restrictions. | |||||||||||
In addition, ratings are a critical factor in establishing the competitive position of insurance companies. Our insurance companies are rated by A.M. Best, S&P and Moody’s. Their ratings reflect their opinions of an insurance company’s and an insurance holding company’s, financial strength, operating performance, strategic position and ability to meet its obligations to policyholders. |
INVESTMENTS
INVESTMENTS | 12 Months Ended | |||||||||||||||||||
Dec. 31, 2013 | ||||||||||||||||||||
INVESTMENTS | ' | |||||||||||||||||||
INVESTMENTS | ' | |||||||||||||||||||
2. INVESTMENTS | ||||||||||||||||||||
A summary of net investment income is as follows: | ||||||||||||||||||||
NET INVESTMENT INCOME | ||||||||||||||||||||
(in thousands) | 2013 | 2012 | 2011 | |||||||||||||||||
Interest on fixed income securities | $ | 45,870 | $ | 50,646 | $ | 58,294 | ||||||||||||||
Dividends on equity securities | 11,865 | 12,848 | 9,957 | |||||||||||||||||
Interest on cash and short-term investments | 23 | 15 | 47 | |||||||||||||||||
Gross investment income | 57,758 | 63,509 | 68,298 | |||||||||||||||||
Less investment expenses | (4,995 | ) | (4,678 | ) | (4,617 | ) | ||||||||||||||
Net investment income | $ | 52,763 | $ | 58,831 | $ | 63,681 | ||||||||||||||
Pretax net realized investment gains (losses) and net changes in unrealized gains (losses) on investments for the years ended December 31 are summarized as follows: | ||||||||||||||||||||
REALIZED/UNREALIZED GAINS | ||||||||||||||||||||
(in thousands) | 2013 | 2012 | 2011 | |||||||||||||||||
Net realized investment gains (losses) | ||||||||||||||||||||
Fixed income | ||||||||||||||||||||
Available-for-sale | $ | 1,338 | $ | 12,965 | $ | 10,892 | ||||||||||||||
Available-for-sale OTTI | — | — | — | |||||||||||||||||
Held-to-maturity | 9 | 247 | 201 | |||||||||||||||||
Trading | — | — | — | |||||||||||||||||
Equity securities | 21,533 | 16,245 | 6,129 | |||||||||||||||||
Equity securities OTTI | — | (1,156 | ) | (257 | ) | |||||||||||||||
Other | (844 | ) | (2,929 | ) | 71 | |||||||||||||||
Total | $ | 22,036 | $ | 25,372 | $ | 17,036 | ||||||||||||||
Net changes in unrealized gains | ||||||||||||||||||||
(losses) on investments | ||||||||||||||||||||
Fixed income | ||||||||||||||||||||
Available-for-sale | $ | (75,228 | ) | $ | 23,643 | $ | 22,393 | |||||||||||||
Equity securities | 64,305 | 16,212 | 10,462 | |||||||||||||||||
Total | $ | (10,923 | ) | $ | 39,855 | $ | 32,855 | |||||||||||||
Net realized investment gains (losses) and changes in unrealized gains (losses) on investments | $ | 11,113 | $ | 65,227 | $ | 49,891 | ||||||||||||||
During 2013, we recorded $22.0 million in net realized gains along with a change in unrealized losses of $10.9 million. The majority of our net realized gains were due to sales of equity securities while the change in unrealized losses was due to decreases in the fixed income portfolio. For 2013, the net realized investment gains and changes in unrealized gains (losses) on investments totaled $11.1 million. | ||||||||||||||||||||
The following is a summary of the disposition of fixed maturities and equities for the years ended December 31, with separate presentations for sales and calls/maturities. | ||||||||||||||||||||
Net | ||||||||||||||||||||
SALES | Proceeds | Gross Realized | Realized | |||||||||||||||||
(in thousands) | From Sales | Gains | Losses | Gain (Loss) | ||||||||||||||||
2013 | ||||||||||||||||||||
Available-for-sale | $ | 173,694 | $ | 3,561 | $ | (2,597 | ) | $ | 964 | |||||||||||
Held-to-maturity | — | — | — | — | ||||||||||||||||
Trading | 5 | — | — | — | ||||||||||||||||
Equities | 73,982 | 21,542 | (9 | ) | 21,533 | |||||||||||||||
2012 | ||||||||||||||||||||
Available-for-sale | $ | 181,338 | $ | 11,208 | $ | (43 | ) | $ | 11,165 | |||||||||||
Held-to-maturity | — | — | — | — | ||||||||||||||||
Trading | — | — | — | — | ||||||||||||||||
Equities | 78,315 | 19,755 | (3,510 | ) | 16,245 | |||||||||||||||
2011 | ||||||||||||||||||||
Available-for-sale | $ | 383,664 | $ | 11,333 | $ | (487 | ) | $ | 10,846 | |||||||||||
Held-to-maturity | — | — | — | — | ||||||||||||||||
Trading | — | — | — | — | ||||||||||||||||
Equities | 40,092 | 8,483 | (2,354 | ) | 6,129 | |||||||||||||||
Net | ||||||||||||||||||||
CALLS/MATURITIES | Gross Realized | Realized | ||||||||||||||||||
(in thousands) | Proceeds | Gains | Losses | Gain (Loss) | ||||||||||||||||
2013 | ||||||||||||||||||||
Available-for-sale | $ | 224,620 | $ | 379 | $ | (5 | ) | $ | 374 | |||||||||||
Held-to-maturity | 11,090 | 9 | — | 9 | ||||||||||||||||
Trading | 1 | — | — | — | ||||||||||||||||
2012 | ||||||||||||||||||||
Available-for-sale | $ | 248,134 | $ | 1,806 | $ | (6 | ) | $ | 1,800 | |||||||||||
Held-to-maturity | 273,816 | 247 | — | 247 | ||||||||||||||||
Trading | — | — | — | — | ||||||||||||||||
2011 | ||||||||||||||||||||
Available-for-sale | $ | 261,654 | $ | 63 | $ | (17 | ) | $ | 46 | |||||||||||
Held-to-maturity | 258,493 | 201 | — | 201 | ||||||||||||||||
Trading | 6 | — | — | — | ||||||||||||||||
FAIR VALUE MEASUREMENTS | ||||||||||||||||||||
Assets measured at fair value on a recurring basis as of December 31, 2013, are summarized below: | ||||||||||||||||||||
Significant | ||||||||||||||||||||
Quoted in Active | Other | Significant | ||||||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||||||
(in thousands) | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||||
Trading securities | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Available-for-sale securities: | ||||||||||||||||||||
U.S. agency | $ | — | $ | 10,298 | $ | — | $ | 10,298 | ||||||||||||
Corporate | — | 526,038 | — | 526,038 | ||||||||||||||||
Mortgage-backed | — | 244,416 | — | 244,416 | ||||||||||||||||
ABS/CMBS* | — | 106,309 | — | 106,309 | ||||||||||||||||
Non-U.S. govt. & agency | — | 13,678 | — | 13,678 | ||||||||||||||||
U.S. government | — | 17,303 | — | 17,303 | ||||||||||||||||
Municipal | — | 522,010 | — | 522,010 | ||||||||||||||||
Equity | 418,654 | — | — | 418,654 | ||||||||||||||||
Total available-for-sale securities | $ | 418,654 | $ | 1,440,052 | $ | — | $ | 1,858,706 | ||||||||||||
Total | $ | 418,654 | $ | 1,440,052 | $ | — | $ | 1,858,706 | ||||||||||||
*Asset-backed & commercial mortgage-backed | ||||||||||||||||||||
Assets measured at fair value on a recurring basis as of December 31, 2012, are summarized below: | ||||||||||||||||||||
Significant | ||||||||||||||||||||
Quoted in Active | Other | Significant | ||||||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||||||
(in thousands) | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||||
Trading securities | $ | — | $ | 7 | $ | — | $ | 7 | ||||||||||||
Available-for-sale securities: | ||||||||||||||||||||
U.S. agency | $ | — | $ | 11,759 | $ | — | $ | 11,759 | ||||||||||||
Corporate | — | 580,708 | — | 580,708 | ||||||||||||||||
Mortgage-backed | — | 250,387 | — | 250,387 | ||||||||||||||||
ABS/CMBS* | — | 77,329 | — | 77,329 | ||||||||||||||||
Non-U.S. govt. & agency | — | 9,367 | — | 9,367 | ||||||||||||||||
U.S. government | — | 16,713 | — | 16,713 | ||||||||||||||||
Municipal | — | 432,319 | — | 432,319 | ||||||||||||||||
Equity | 375,788 | — | — | 375,788 | ||||||||||||||||
Total available-for-sale securities | $ | 375,788 | $ | 1,378,582 | $ | — | $ | 1,754,370 | ||||||||||||
Total | $ | 375,788 | $ | 1,378,589 | $ | — | $ | 1,754,377 | ||||||||||||
*Asset-backed & commercial mortgage-backed | ||||||||||||||||||||
As noted in the previous tables, we did not have any assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of December 31, 2013 and 2012. Additionally, there were no securities transferred in or out of levels 1 or 2 during 2013 or 2012. | ||||||||||||||||||||
The amortized cost and estimated fair value of fixed income securities at December 31, 2013, by contractual maturity, are shown as follows: | ||||||||||||||||||||
(in thousands) | Amortized Cost | Fair Value | ||||||||||||||||||
Available-for-sale | ||||||||||||||||||||
Due in one year or less | $ | 12,048 | $ | 12,102 | ||||||||||||||||
Due after one year through five years | 150,049 | 158,587 | ||||||||||||||||||
Due after five years through 10 years | 668,637 | 675,290 | ||||||||||||||||||
Due after 10 years | 250,127 | 243,348 | ||||||||||||||||||
Mtge/ABS/CMBS* | 350,188 | 350,725 | ||||||||||||||||||
Total available-for-sale | $ | 1,431,049 | $ | 1,440,052 | ||||||||||||||||
Held-to-maturity: | ||||||||||||||||||||
Due in one year or less | $ | — | $ | — | ||||||||||||||||
Due after one year through five years | 651 | 687 | ||||||||||||||||||
Due after five years through 10 years | — | — | ||||||||||||||||||
Due after 10 years | — | — | ||||||||||||||||||
Total held-to-maturity | $ | 651 | $ | 687 | ||||||||||||||||
Trading | $ | — | $ | — | ||||||||||||||||
Total fixed income | ||||||||||||||||||||
Due in one year or less | $ | 12,048 | $ | 12,102 | ||||||||||||||||
Due after one year through five years | 150,700 | 159,274 | ||||||||||||||||||
Due after five years through 10 years | 668,637 | 675,290 | ||||||||||||||||||
Due after 10 years | 250,127 | 243,348 | ||||||||||||||||||
Mtge/ABS/CMBS* | 350,188 | 350,725 | ||||||||||||||||||
Total fixed income | $ | 1,431,700 | $ | 1,440,739 | ||||||||||||||||
*Mortgage-backed, asset-backed & commercial mortgage-backed | ||||||||||||||||||||
Expected maturities may differ from contractual maturities due to call provisions on some existing securities. At December 31, 2013, the net unrealized appreciation of available-for-sale fixed maturities and equity securities totaled $208.8 million pretax. At December 31, 2012, the net unrealized appreciation of available-for-sale fixed maturities and equity securities totaled $219.7 million pretax. | ||||||||||||||||||||
In addition, the following table is a schedule of amortized costs and estimated fair values of investments in fixed income and equity securities as of December 31, 2013 and 2012: | ||||||||||||||||||||
2013 | Amortized | Gross Unrealized | ||||||||||||||||||
(in thousands) | Cost | Fair Value | Gains | Losses | ||||||||||||||||
Available-for-sale: | ||||||||||||||||||||
U.S. government | $ | 17,086 | $ | 17,303 | $ | 217 | $ | — | ||||||||||||
U.S. agency | 10,513 | 10,298 | 22 | (237 | ) | |||||||||||||||
Non-U.S. govt. & agency | 13,306 | 13,678 | 437 | (65 | ) | |||||||||||||||
Mtge/ABS/CMBS* | 350,187 | 350,725 | 8,188 | (7,650 | ) | |||||||||||||||
Corporate | 511,748 | 526,038 | 22,302 | (8,012 | ) | |||||||||||||||
Municipal | 528,209 | 522,010 | 6,495 | (12,694 | ) | |||||||||||||||
Total fixed income | $ | 1,431,049 | $ | 1,440,052 | $ | 37,661 | $ | (28,658 | ) | |||||||||||
Equity securities | 218,848 | 418,654 | 200,081 | (275 | ) | |||||||||||||||
Total available-for-sale | $ | 1,649,897 | $ | 1,858,706 | $ | 237,742 | $ | (28,933 | ) | |||||||||||
Held-to-maturity: | ||||||||||||||||||||
U.S. agency | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Corporate | — | — | — | — | ||||||||||||||||
Municipal | 651 | 687 | 36 | — | ||||||||||||||||
Total held-to-maturity | $ | 651 | $ | 687 | $ | 36 | $ | — | ||||||||||||
Trading** | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Total | $ | 1,650,548 | $ | 1,859,393 | $ | 237,778 | $ | (28,933 | ) | |||||||||||
*Mortgage-backed, asset-backed & commercial mortgage-backed | ||||||||||||||||||||
**Trading securities are carried at fair value with unrealized gains (losses) included in earnings | ||||||||||||||||||||
2012 | Amortized | Gross Unrealized | ||||||||||||||||||
(in thousands) | Cost | Fair Value | Gains | Losses | ||||||||||||||||
Available-for-sale: | ||||||||||||||||||||
U.S. government | $ | 16,358 | $ | 16,713 | $ | 355 | $ | — | ||||||||||||
U.S. agency | 11,609 | 11,759 | 150 | — | ||||||||||||||||
Non-U.S. govt. & agency | 8,410 | 9,367 | 957 | — | ||||||||||||||||
Mtge/ABS/CMBS* | 307,310 | 327,716 | 20,406 | — | ||||||||||||||||
Corporate | 535,437 | 580,708 | 45,497 | (226 | ) | |||||||||||||||
Municipal | 415,226 | 432,319 | 17,250 | (157 | ) | |||||||||||||||
Total fixed income | $ | 1,294,350 | $ | 1,378,582 | $ | 84,615 | $ | (383 | ) | |||||||||||
Equity securities | 240,287 | 375,788 | 136,376 | (875 | ) | |||||||||||||||
Total available-for-sale | $ | 1,534,637 | $ | 1,754,370 | $ | 220,991 | $ | (1,258 | ) | |||||||||||
Held-to-maturity: | ||||||||||||||||||||
U.S. agency | $ | 10,076 | $ | 10,150 | $ | 74 | $ | — | ||||||||||||
Corporate | — | — | — | — | ||||||||||||||||
Municipal | 1,652 | 1,718 | 66 | — | ||||||||||||||||
Total held-to-maturity | $ | 11,728 | $ | 11,868 | $ | 140 | $ | — | ||||||||||||
Trading** | $ | 6 | $ | 7 | $ | — | $ | — | ||||||||||||
Total | $ | 1,546,371 | $ | 1,766,245 | $ | 221,131 | $ | (1,258 | ) | |||||||||||
*Mortgage-backed, asset-backed & commercial mortgage-backed | ||||||||||||||||||||
**Trading securities are carried at fair value with unrealized gains (losses) included in earnings | ||||||||||||||||||||
Corporate Bonds | ||||||||||||||||||||
Unrealized losses in the corporate bond portfolio increased to $8.0 million in 2013 from $0.2 million at the end of 2012 as interest rates increased during the year. These unrealized losses are not due to credit-specific issues. The corporate bond portfolio has an overall rating of A. | ||||||||||||||||||||
Municipal Bonds | ||||||||||||||||||||
Unrealized losses in the municipal bond portfolio increased $12.5 million to $12.7 million in 2013 as interest rates increased during the year. Municipals continue to be a focus area of portfolio strategy and were a large component of net purchases during the year. Ninety-one percent of our municipal securities are rated AA or better while 99 percent are rated A or better. | ||||||||||||||||||||
Mortgage-Backed, Commercial Mortgage-Backed and Asset-Backed Securities | ||||||||||||||||||||
Unrealized losses in the collateralized securities bond portfolio increased to $7.7 million in 2013 due to the increase in interest rates during the year. Ninety-nine percent of our collateralized securities carry the highest credit rating by one or more major rating agency and continue to pay according to contractual terms. | ||||||||||||||||||||
For all fixed income securities at a loss at December 31, 2013, we believe it is probable that we will receive all contractual payments in the form of principal and interest. In addition, we are not required to, nor do we intend to sell these investments prior to recovering the entire amortized cost basis of each security, which may be maturity. We do not consider these investments to be other-than-temporarily impaired at December 31, 2013. | ||||||||||||||||||||
Equity Securities | ||||||||||||||||||||
Our equity portfolio consists of common stocks and exchange traded funds (ETF). Unrealized losses in the equity portfolio decreased $0.6 million in 2013. Given our intent to hold and expectation of recovery to cost within a reasonable period of time, we do not consider any of our equities to be other-than-temporarily impaired. | ||||||||||||||||||||
Under current accounting standards, an OTTI write-down of debt securities, where fair value is below amortized cost, is triggered by circumstances where (1) an entity has the intent to sell a security, (2) it is more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis or (3) the entity does not expect to recover the entire amortized cost basis of the security. If an entity intends to sell a security or if it is more likely than not the entity will be required to sell the security before recovery, an OTTI write-down is recognized in earnings equal to the difference between the security’s amortized cost and its fair value. If an entity does not intend to sell the security or it is not more likely than not that it will be required to sell the security before recovery, the OTTI write-down is separated into an amount representing the credit loss, which is recognized in earnings, and the amount related to all other factors, which is recognized in other comprehensive income. | ||||||||||||||||||||
Part of our evaluation of whether particular securities are other-than-temporarily impaired involves assessing whether we have both the intent and ability to continue to hold equity securities in an unrealized loss position. For fixed income securities, we consider our intent to sell a security (which is determined on a security-by-security basis) and whether it is more likely than not we will be required to sell the security before the recovery of our amortized cost basis. Significant changes in these factors could result in a charge to net earnings for impairment losses. Impairment losses result in a reduction of the underlying investment’s cost basis. | ||||||||||||||||||||
The following table is also used as part of our impairment analysis and displays the total value of securities that were in an unrealized loss position as of December 31, 2013, and December 31, 2012. The table segregates the securities based on type, noting the fair value, cost (or amortized cost) and unrealized loss on each category of investment as well as in total. The table further classifies the securities based on the length of time they have been in an unrealized loss position. | ||||||||||||||||||||
December 31, 2013 | December 31, 2012 | |||||||||||||||||||
(in thousands) | < 12 Mos. | 12 Mos. | Total | < 12 Mos. | 12 Mos. & | Total | ||||||||||||||
& Greater | Greater | |||||||||||||||||||
U.S. Government | ||||||||||||||||||||
Fair value | $ | — | $ | — | $ | — | $ | 749 | $ | — | $ | 749 | ||||||||
Cost or amortized cost | — | — | — | 749 | — | 749 | ||||||||||||||
Unrealized Loss | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
U.S. Agency | ||||||||||||||||||||
Fair value | $ | 5,760 | $ | — | $ | 5,760 | $ | — | $ | — | $ | — | ||||||||
Cost or amortized cost | 5,997 | — | 5,997 | — | — | — | ||||||||||||||
Unrealized Loss | $ | (237 | ) | $ | — | $ | (237 | ) | $ | — | $ | — | $ | — | ||||||
Non-U.S. Government | ||||||||||||||||||||
Fair value | $ | 1,825 | $ | — | $ | 1,825 | $ | — | $ | — | $ | — | ||||||||
Cost or amortized cost | 1,890 | — | 1,890 | — | — | — | ||||||||||||||
Unrealized Loss | $ | (65 | ) | $ | — | $ | (65 | ) | $ | — | $ | — | $ | — | ||||||
Mortgage-backed | ||||||||||||||||||||
Fair value | $ | 118,283 | $ | — | $ | 118,283 | $ | — | $ | — | $ | — | ||||||||
Cost or amortized cost | 124,034 | — | 124,034 | — | — | — | ||||||||||||||
Unrealized Loss | $ | (5,751 | ) | $ | — | $ | (5,751 | ) | $ | — | $ | — | $ | — | ||||||
ABS/CMBS* | ||||||||||||||||||||
Fair value | $ | 54,115 | $ | — | $ | 54,115 | $ | 18 | $ | — | $ | 18 | ||||||||
Cost or amortized cost | 56,014 | — | 56,014 | 18 | — | 18 | ||||||||||||||
Unrealized Loss | $ | (1,899 | ) | $ | — | $ | (1,899 | ) | $ | — | $ | — | $ | — | ||||||
Corporate | ||||||||||||||||||||
Fair value | $ | 190,470 | $ | 2,245 | $ | 192,715 | $ | 35,969 | $ | 960 | $ | 36,929 | ||||||||
Cost or amortized cost | 198,250 | 2,477 | 200,727 | 36,162 | 993 | 37,155 | ||||||||||||||
Unrealized Loss | $ | (7,780 | ) | $ | (232 | ) | $ | (8,012 | ) | $ | (193 | ) | $ | (33 | ) | $ | (226 | ) | ||
Municipal | ||||||||||||||||||||
Fair value | $ | 309,407 | $ | 943 | $ | 310,350 | $ | 35,064 | $ | — | $ | 35,064 | ||||||||
Cost or amortized cost | 322,095 | 949 | 323,044 | 35,221 | — | 35,221 | ||||||||||||||
Unrealized Loss | $ | (12,688 | ) | $ | (6 | ) | $ | (12,694 | ) | $ | (157 | ) | $ | — | $ | (157 | ) | |||
Subtotal, fixed income | ||||||||||||||||||||
Fair value | $ | 679,860 | $ | 3,188 | $ | 683,048 | $ | 71,800 | $ | 960 | $ | 72,760 | ||||||||
Cost or amortized cost | 708,280 | 3,426 | 711,706 | 72,150 | 993 | 73,143 | ||||||||||||||
Unrealized Loss | $ | (28,420 | ) | $ | (238 | ) | $ | (28,658 | ) | $ | (350 | ) | $ | (33 | ) | $ | (383 | ) | ||
Equity securities | ||||||||||||||||||||
Fair value | $ | 2,394 | $ | — | $ | 2,394 | $ | 16,207 | $ | — | $ | 16,207 | ||||||||
Cost or amortized cost | 2,669 | — | 2,669 | 17,082 | — | 17,082 | ||||||||||||||
Unrealized Loss | $ | (275 | ) | $ | — | $ | (275 | ) | $ | (875 | ) | $ | — | $ | (875 | ) | ||||
Total | ||||||||||||||||||||
Fair value | $ | 682,254 | $ | 3,188 | $ | 685,442 | $ | 88,007 | $ | 960 | $ | 88,967 | ||||||||
Cost or amortized cost | 710,949 | 3,426 | 714,375 | 89,232 | 993 | 90,225 | ||||||||||||||
Unrealized Loss | $ | (28,695 | ) | $ | (238 | ) | $ | (28,933 | ) | $ | (1,225 | ) | $ | (33 | ) | $ | (1,258 | ) | ||
*Asset-backed & commercial mortgage-backed | ||||||||||||||||||||
As of December 31, 2013, we held one equity security that was in an unrealized loss position. The total unrealized loss on this security was $0.3 million. In considering both the significance and duration of the unrealized loss position, we have no equity securities in an unrealized loss position of greater than 20 percent for more than six consecutive months. | ||||||||||||||||||||
The fixed income portfolio contained 337 securities at an unrealized loss as of December 31, 2013. Of these 337 securities, two have been in an unrealized loss position for 12 consecutive months or longer and represent $0.2 million in unrealized losses. The majority of fixed income unrealized losses can be attributed to the increases in interest rates during the final three quarters of the year and are not credit related. All fixed income securities in the investment portfolio continue to pay the expected coupon payments under the contractual terms of the securities. Any credit-related impairment related to fixed income securities we do not plan to sell and for which we are not more likely than not to be required to sell is recognized in net earnings, with the non-credit related impairment recognized in comprehensive earnings. Based on our analysis, our fixed income portfolio is of a high credit quality and we believe we will recover the amortized cost basis of our fixed income securities. We continually monitor the credit quality of our fixed income investments to assess if it is probable that we will receive our contractual or estimated cash flows in the form of principal and interest. There were no OTTI losses recognized in other comprehensive earnings in the periods presented. Key factors that we consider in the evaluation of credit quality include: | ||||||||||||||||||||
· Changes in technology that may impair the earnings potential of the investment, | ||||||||||||||||||||
· The discontinuance of a segment of business that may affect future earnings potential, | ||||||||||||||||||||
· Reduction or elimination of dividends, | ||||||||||||||||||||
· Specific concerns related to the issuer’s industry or geographic area of operation, | ||||||||||||||||||||
· Significant or recurring operating losses, poor cash flows and/or deteriorating liquidity ratios and | ||||||||||||||||||||
· Downgrades in credit quality by a major rating agency. | ||||||||||||||||||||
Based on our analysis, we concluded that the securities in an unrealized loss position were not other-than-temporarily impaired at December 31, 2013, and 2012. | ||||||||||||||||||||
During 2013, we did not recognize any impairment losses. There were $1.2 million in losses associated with OTTI of securities in 2012 and $0.3 million in losses associated with OTTI of securities in 2011. | ||||||||||||||||||||
As required by law, certain fixed maturity investments amounting to $23.7 million at December 31, 2013, were on deposit with either regulatory authorities or banks. |
POLICY_ACQUISITION_COSTS
POLICY ACQUISITION COSTS | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
POLICY ACQUISITION COSTS | ' | ||||||||||
POLICY ACQUISITION COSTS | ' | ||||||||||
3. POLICY ACQUISITION COSTS | |||||||||||
Policy acquisition costs deferred and amortized to income for the years ended December 31 are summarized as follows: | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Deferred policy acquisition costs (DAC), beginning of year | $ | 52,344 | $ | 52,105 | $ | 40,242 | |||||
VOBA*, CBIC - Acquisition date | — | — | 10,822 | ||||||||
Deferred: | |||||||||||
Direct commissions | $ | 134,770 | $ | 129,765 | $ | 116,206 | |||||
Premium taxes | 10,442 | 9,528 | 8,725 | ||||||||
Ceding commissions | (20,186 | ) | (29,010 | ) | (24,721 | ) | |||||
Net deferred | $ | 125,026 | $ | 110,283 | $ | 100,210 | |||||
Amortized | 115,862 | 110,044 | 99,169 | ||||||||
DAC/VOBA*, end of year | $ | 61,508 | $ | 52,344 | $ | 52,105 | |||||
Policy acquisition costs: | |||||||||||
Amortized to expense - DAC | $ | 115,442 | $ | 107,482 | $ | 91,499 | |||||
Amortized to expense - VOBA | 420 | 2,562 | 7,670 | ||||||||
Period costs: | |||||||||||
Ceding commission - contingent | (2,126 | ) | (1,940 | ) | (2,207 | ) | |||||
Other underwriting expenses | 96,915 | 88,258 | 86,906 | ||||||||
Total policy acquisition costs | $ | 210,651 | $ | 196,362 | $ | 183,868 | |||||
*Includes asset for value of business acquired (VOBA) in CBIC acquisition. |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2013 | |
DEBT | ' |
DEBT | ' |
4. DEBT | |
As of December 31, 2013, outstanding debt balances totaled $149.6 million, net of unamortized discount, all of which were our long-term senior notes. | |
On October 2, 2013, we completed a public debt offering, issuing $150.0 million in senior notes maturing September 15, 2023, and paying interest semi-annually at the rate of 4.875 percent. The notes were issued at a discount resulting in proceeds, net of discount and commission, of $148.6 million. The amount of the discount is being charged to income over the life of the debt on an effective-yield basis. On December 12, 2013, a portion of the proceeds were used to redeem the $100.0 million in senior notes that were to mature on January 15, 2014, and the remaining proceeds were made available for general corporate purposes. The estimated fair value for the senior note is $150.8 million. The fair value of our long-term debt is estimated based on the limited observable prices that reflect thinly traded securities. | |
In 2013, 2012 and 2011, we incurred interest expense on our senior notes in the amounts of $8.1 million, $6.0 million and $6.0 million, respectively. The average rate on debt in 2013, 2012 and 2011 was 5.71 percent, 6.02 percent and 6.02 percent, respectively. | |
We maintain a revolving line of credit with JP Morgan Chase, which permits us to borrow up to an aggregate principal amount of $25.0 million. Under certain conditions, the line may be increased up to an aggregate principal amount of $50.0 million. This facility was renewed under similar terms for a three-year term that expires on May 31, 2014. As of and during the years ended December 31, 2013, 2012 and 2011, no amounts were outstanding on this facility. |
REINSURANCE
REINSURANCE | 12 Months Ended | |||||||||||||||
Dec. 31, 2013 | ||||||||||||||||
REINSURANCE | ' | |||||||||||||||
REINSURANCE | ' | |||||||||||||||
5. REINSURANCE | ||||||||||||||||
In the ordinary course of business, the insurance subsidiaries assume and cede premiums and selected insured risks with other insurance companies, known as reinsurance. A large portion of the reinsurance is put into effect under contracts known as treaties and, in some instances, by negotiation on each individual risk (known as facultative reinsurance). In addition, there are several types of treaties including quota share, excess of loss and catastrophe reinsurance contracts that protect against losses over stipulated amounts arising from any one occurrence or event. The arrangements allow us to pursue greater diversification of business and serve to limit the maximum net loss to a single event, such as a catastrophe. Through the quantification of exposed policy limits in each region and the extensive use of computer-assisted modeling techniques, we monitor the concentration of risks exposed to catastrophic events. | ||||||||||||||||
Through the purchase of reinsurance, we also generally limit our net loss on any individual risk to a maximum of $3.0 million, although retentions can range from $0.7 million to $8.8 million. | ||||||||||||||||
Premiums written and earned along with losses and settlement expenses incurred for the years ended December 31 are summarized as follows: | ||||||||||||||||
(in thousands) | 2013 | 2012 | 2011 | |||||||||||||
WRITTEN | ||||||||||||||||
Direct | 770,142 | 709,107 | 629,727 | |||||||||||||
Reinsurance assumed | 73,053 | 75,692 | 72,380 | |||||||||||||
Reinsurance ceded | (176,873 | ) | (191,713 | ) | (152,469 | ) | ||||||||||
Net | $ | 666,322 | $ | 593,086 | $ | 549,638 | ||||||||||
EARNED | ||||||||||||||||
Direct | 741,569 | 679,124 | 625,963 | |||||||||||||
Reinsurance assumed | 78,891 | 77,597 | 66,984 | |||||||||||||
Reinsurance ceded | (189,658 | ) | (180,150 | ) | (154,495 | ) | ||||||||||
Net | $ | 630,802 | $ | 576,571 | $ | 538,452 | ||||||||||
LOSSES AND SETTLEMENT EXPENSES INCURRED | ||||||||||||||||
Direct | 279,358 | 282,859 | 180,768 | |||||||||||||
Reinsurance assumed | 72,508 | 69,830 | 60,076 | |||||||||||||
Reinsurance ceded | (92,065 | ) | (81,044 | ) | (40,760 | ) | ||||||||||
Net | $ | 259,801 | $ | 271,645 | $ | 200,084 | ||||||||||
The assumed business is made up of short-tail property, catastrophe and multi-peril crop and hail reinsurance. The majority of this assumed reinsurance is proportional and a large portion of the assumed incurred losses can be attributed to crop-related reinsurance, which we began offering in 2010, and a specialty property treaty that experienced unusually high weather-related loss activity in 2011. Losses for each crop season are ultimately determined and paid subsequent to December 31 of the crop year reinsured. | ||||||||||||||||
At December 31, 2013, we had prepaid reinsurance premiums and recoverables on paid and unpaid losses and settlement expenses totaling $362.1 million. Nearly 95 percent of our reinsurance recoverables are due from companies with financial strength ratings of “A” or better by A.M. Best and S&P rating services. | ||||||||||||||||
The following table displays net reinsurance balances recoverable, after consideration of collateral, from our top 10 reinsurers as of December 31, 2013. These reinsurers all have financial strength ratings of “A” or better by A.M. Best and Standard and Poor’s ratings services. Also shown are the amounts of written premium ceded to these reinsurers during the calendar year 2013. | ||||||||||||||||
Net Reinsurer | Ceded | |||||||||||||||
A.M. Best | S & P | Exposure as of | Percent of | Premiums | Percent of | |||||||||||
(dollars in thousands) | Rating | Rating | 12/31/13 | Total | Written | Total | ||||||||||
Munich Re America / HSB | A+, Superior | AA-, Very Strong | $ | 60,256 | 16.6 | % | $ | 23,544 | 13.3 | % | ||||||
Endurance Re | A, Excellent | A, Strong | 60,235 | 16.6 | % | 16,039 | 9.1 | % | ||||||||
Aspen UK Ltd. | A, Excellent | A, Strong | 35,152 | 9.7 | % | 10,585 | 6 | % | ||||||||
Transatlantic Re | A, Excellent | A+, Strong | 25,803 | 7.1 | % | 11,549 | 6.5 | % | ||||||||
Berkley Insurance Co. | A+, Superior | A+, Strong | 24,060 | 6.6 | % | 7,658 | 4.3 | % | ||||||||
Axis Re | A+, Superior | A+, Strong | 22,494 | 6.2 | % | 5,834 | 3.3 | % | ||||||||
Swiss Re / Westport Ins. Corp. | A+, Superior | AA-, Very Strong | 21,268 | 5.9 | % | 5,958 | 3.4 | % | ||||||||
Allied World Re - US | A, Excellent | A, Strong | 16,148 | 4.5 | % | 6,340 | 3.6 | % | ||||||||
Toa-Re | A+, Superior | A+, Strong | 14,106 | 3.9 | % | 3,021 | 1.7 | % | ||||||||
Alterra Re USA | A, Excellent | A, Strong | 10,680 | 2.9 | % | 1,479 | 0.8 | % | ||||||||
All other reinsurers* | 71,884 | 20 | % | 84,866 | 48 | % | ||||||||||
Total ceded exposure | $ | 362,086 | 100 | % | $ | 176,873 | 100 | % | ||||||||
*All other reinsurance balances recoverable, when considered by individual reinsurer, are less than 2 percent of shareholders’ equity. | ||||||||||||||||
Ceded unearned premiums and reinsurance balances recoverable on paid losses and settlement expenses are reported separately as an asset, rather than being netted with the related liability, since reinsurance does not relieve us of our liability to policyholders. Such balances are subject to the credit risk associated with the individual reinsurer. We continually monitor the financial condition of our reinsurers and actively follow up on any past due or disputed amounts. As part of our monitoring efforts, we review their annual financial statements and SEC filings for those reinsurers that are publicly traded. We also review insurance industry developments that may impact the financial condition of our reinsurers. We analyze the credit risk associated with our reinsurance balances recoverable by monitoring the A.M. Best and S&P ratings of our reinsurers. In addition, we subject our reinsurance recoverables to detailed recoverability tests, including a segment based analysis using the average default rating percentage by S&P rating, which assists us in assessing the sufficiency of the existing allowance. Additionally, we perform an in-depth reinsurer financial condition analysis prior to the renewal of our reinsurance placements. | ||||||||||||||||
Our policy is to charge to earnings, in the form of an allowance, an estimate of unrecoverable amounts from reinsurers. This allowance is reviewed on an ongoing basis to ensure that the amount makes a reasonable provision for reinsurance balances that we may be unable to recover. Once regulatory action (such as receivership, finding of insolvency, order of conservation, or order of liquidation) is taken against a reinsurer, the paid and unpaid recoverable for the reinsurer are specifically identified and written off through the use of our allowance for estimated unrecoverable amounts from reinsurers. When we write-off such a balance, it is done in full. We then re-evaluate the remaining allowance and determine whether the balance is sufficient as detailed above and if needed, an additional allowance is recognized and income charged. The amounts of allowances for uncollectible amounts on paid and unpaid recoverables were $13.3 million and $14.2 million, respectively, at December 31, 2013. At December 31, 2012, the amounts were $13.5 million and $14.8 million, respectively. We have no receivables with a due date that extends beyond one year that are not included in our allowance for uncollectible amounts, other than the receivable related to our crop reinsurance program. The amount receivable under our crop reinsurance business, which represents $29.4 million of our total premiums and reinsurance balances receivable at December 31, 2013, is not contractually due until the final settlement of the 2013 crop year, which is scheduled to occur during the fourth quarter of 2014. |
HISTORICAL_LOSS_AND_LAE_DEVELO
HISTORICAL LOSS AND LAE DEVELOPMENT | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
HISTORICAL LOSS AND LAE DEVELOPMENT | ' | ||||||||||
HISTORICAL LOSS AND LAE DEVELOPMENT | ' | ||||||||||
6. HISTORICAL LOSS AND LAE DEVELOPMENT | |||||||||||
The following table is a reconciliation of our unpaid losses and settlement expenses (LAE) for the years 2013, 2012 and 2011. | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Unpaid losses and LAE at beginning of year: | |||||||||||
Gross | $ | 1,158,483 | $ | 1,150,714 | $ | 1,173,943 | |||||
Ceded | (359,884 | ) | (353,805 | ) | (354,163 | ) | |||||
Net | $ | 798,599 | $ | 796,909 | $ | 819,780 | |||||
Unpaid losses and LAE - CBIC - Acquisition date: | |||||||||||
April 28, 2011 | |||||||||||
Gross | $ | — | $ | — | $ | 72,387 | |||||
Ceded | — | — | (18,881 | ) | |||||||
Net | $ | — | $ | — | $ | 53,506 | |||||
Increase (decrease) in incurred losses and LAE: | |||||||||||
Current accident year | $ | 332,282 | $ | 336,228 | $ | 310,145 | |||||
Prior accident years | (72,481 | ) | (64,583 | ) | (110,061 | ) | |||||
Total incurred | $ | 259,801 | $ | 271,645 | $ | 200,084 | |||||
Loss and LAE payments for claims incurred: | |||||||||||
Current accident year | $ | (57,537 | ) | $ | (69,785 | ) | $ | (89,924 | ) | ||
Prior accident year | (226,354 | ) | (200,170 | ) | (186,537 | ) | |||||
Total paid | $ | (283,891 | ) | $ | (269,955 | ) | $ | (276,461 | ) | ||
Net unpaid losses and LAE at end of year | $ | 774,509 | $ | 798,599 | $ | 796,909 | |||||
Unpaid losses and LAE at end of year: | |||||||||||
Gross | $ | 1,129,433 | $ | 1,158,483 | $ | 1,150,714 | |||||
Ceded | (354,924 | ) | (359,884 | ) | (353,805 | ) | |||||
Net | $ | 774,509 | $ | 798,599 | $ | 796,909 | |||||
The differences from our initial reserve estimates emerged as changes in our ultimate loss estimates as we updated those estimates through our reserve analysis process. The recognition of the changes in initial reserve estimates occurred over time as claims were reported, initial case reserves were established, initial reserves were reviewed in light of additional information and ultimate payments were made on the collective set of claims incurred as of that evaluation date. The new information on the ultimate settlement value of claims is continually updated until all claims in a defined set are settled. As a small specialty insurer with a diversified product portfolio, our experience will ordinarily exhibit fluctuations from period to period. While we attempt to identify and react to systematic changes in the loss environment, we also must consider the volume of experience directly available to us and interpret any particular period’s indications with a realistic technical understanding of the reliability of those observations. | |||||||||||
The following table summarizes our prior accident years’ loss reserve development by segment for 2013, 2012 and 2011: | |||||||||||
(FAVORABLE)/UNFAVORABLE RESERVE DEVELOPMENT BY SEGMENT | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Casualty | $ | (61,805 | ) | $ | (40,449 | ) | $ | (83,892 | ) | ||
Property | (7,273 | ) | (16,800 | ) | (18,453 | ) | |||||
Surety | (3,403 | ) | (7,334 | ) | (7,716 | ) | |||||
Total | $ | (72,481 | ) | $ | (64,583 | ) | $ | (110,061 | ) | ||
A discussion of significant components of reserve development for the three most recent calendar years follows: | |||||||||||
2013. We experienced favorable emergence relative to prior years’ reserve estimate in all our segments during 2013. The casualty segment contributed $61.8 million in favorable development. Accident year 2012 contributed significantly to the favorable development, with accident years 2008 to 2011 also continuing to develop favorably. The favorable development in 2013 is larger than 2012 and reflects the continuing favorable frequency and severity trends. In addition, the risk selection by our underwriters continued to provide results better than estimated in our reserving process. The general liability product contributed $28.5 million to our favorable development with all coverages, including habitational contributing to the favorable development in 2013. Executive products were the second largest contributor with $8.9 million in favorable development mostly from accident year 2011. Personal and commercial umbrella were favorable by $7.5 million and $6.0 million respectively. P&C package products were favorable by $8.1 million. Our run-off program business was favorable by $2.0 million mostly from the discontinued restaurant-bar-tavern business. Transportation and miscellaneous professional liability were the only products unfavorable at $3.5 million and $0.5 million, respectively. | |||||||||||
The marine product was the primary driver of the favorable development in the property segment. Marine contributed $5.9 million of the $7.3 million total favorable property development. Accident year 2009 to 2012 contributed to the marine products’ favorable development. The marine protection & indemnity and liability coverages accounted for the majority of the favorable development. Other direct property products contributed $3.5 million favorable development offsetting the unfavorable development of $1.4 million in the assumed property. | |||||||||||
The surety segment experienced favorable development of $3.4 million. The majority of the favorable development was from accident year 2012, which offset the unfavorable development from accident years 2009 to 2011. The adverse development coincided with the economic environment in those years. The majority of the adverse development was from the contract and miscellaneous surety products. Though accident year 2012 was favorable for all of surety combined, oil and gas surety was unfavorable in accident year 2012. | |||||||||||
2012. We experienced favorable emergence relative to prior years’ reserve estimates in all of our segments during 2012. Development from the casualty segment totaled $40.4 million with the largest amounts coming from accident years 2007 through 2010. We continue to experience emergence that is generally better than previously estimated, but to a lesser degree in 2012 than in the previous two years. Frequency and severity trends have been favorable relative to initial estimates and we believe this is largely due to risk selection by our underwriters, which has been effective in offsetting loss cost trends and a competitive pricing environment. Our general liability product was the largest single contributor to this favorable development at $14.2 million. Although the habitational classes within this product produced adverse development, it was more than offset by favorable development from the construction classes. The second largest contributor was our personal umbrella product at $11.5 million and we also had a favorable contribution of $4.9 million from our commercial umbrella products. In addition, our active program business combined for $9.2 million of favorable development, coming mostly from the CBIC products that were added in 2011. Our run-off program business contributed $4.6 million of favorable development coming mostly from the discontinued restaurant-bar-tavern class. Two business units experienced adverse development in 2012. Transportation and executive products were unfavorable by $3.2 million and $2.2 million, respectively. | |||||||||||
For the second year in a row, our marine product was the predominant driver of the favorable development in the property segment, accounting for $12.1 million of the $16.8 million total favorable development for the segment. The accident years making the largest contributions were 2008 through 2010. The marine protection & indemnity and liability coverages were responsible for the majority of the favorable loss experience. Our other direct property products contributed $3.5 million of favorable development with the majority of that coming from loss reductions on previous hurricanes and storms. Development on assumed reinsurance business was also favorable overall. | |||||||||||
The surety segment experienced $7.3 million of favorable development with nearly all of it coming from accident years 2010 and 2011. The development from the commercial, miscellaneous and energy products more than offset $2.6 million of unfavorable development from the contract surety product. Last year we started seeing evidence that the cumulative effect of the economic environment was having an adverse impact on our customers and our experience, in particular for contract surety. This continued during 2012 causing us to increase our estimates for contract surety for prior accident years, in particular accident year 2011. | |||||||||||
2011. During 2011, all of our segments experienced favorable emergence from prior years’ reserve estimates. From the casualty segment there was $83.9 million of favorable development coming mostly from accident years 2006 through 2009. Again this year, the expected loss ratios initially used to establish carried reserves for these accident years proved to be higher than required. This resulted in loss emergence significantly lower than expected. This was predominantly caused by favorable frequency and severity trends that continued to be considerably less than our long-term expectations. In addition, we believe this to be the result of our underwriters’ risk selection, which has mostly offset price declines and loss cost inflation. Nearly all of our casualty products contributed to the favorable development, but this was particularly true for our general liability product. It was by far the largest contributor at $37.3 million and was driven primarily by the construction classes. Other significant favorable development came from our commercial umbrella, personal umbrella and transportation products in amounts of $15.1 million, $7.7 million and $6.9 million, respectively. In addition, our program business, much of which is in runoff, was responsible for $6.2 million of the total. Unfavorable development came from the asbestos and environmental exposures associated with business assumed in the 1970’s and 1980’s, which totaled $1.5 million. | |||||||||||
The property segment experienced $18.5 million of favorable development in 2011. Of this amount, $8.5 million came from the marine product in accident years 2008 through 2010. The longer-tailed hull, protection & indemnity and liability coverages were responsible for most of the total. The difference in conditions product was also a contributor in 2011 with $7.0 million of favorable development that was primarily the result of the favorable final resolution of a claim arising from the 1994 Northridge earthquake. Other products having favorable development were assumed crop, assumed facultative reinsurance and homeowners. | |||||||||||
The surety segment contributed $7.7 million of favorable emergence in 2011. Accident years 2010 and 2009 were responsible for the majority of that development. The biggest contributors by product were contract, energy and commercial with favorable development of $3.9 million, $2.2 million and $2.0 million, respectively. We have been monitoring these products for the last few years for signs of adverse experience caused by the economic environment. In prior years we had not seen much evidence of stress on our customers. However, this began to change somewhat in 2011, particularly with respect to contract surety. This did not significantly affect development on prior accident years, but did affect loss estimates for the current accident year. | |||||||||||
ENVIRONMENTAL, ASBESTOS AND MASS TORT EXPOSURES | |||||||||||
We are subject to environmental site cleanup, asbestos removal and mass tort claims and exposures through our commercial umbrella, general liability and discontinued assumed casualty reinsurance lines of business. The majority of the exposure is in the excess layers of our commercial umbrella and assumed reinsurance books of business. | |||||||||||
The following table represents paid and unpaid environmental, asbestos and mass tort claims data (including incurred but not reported losses) as of December 31, 2013, 2012 and 2011: | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
LOSS AND LAE PAYMENTS (CUMULATIVE) | |||||||||||
Gross | $ | 105,559 | $ | 102,222 | $ | 91,079 | |||||
Ceded | (57,976 | ) | (57,345 | ) | (48,039 | ) | |||||
Net | $ | 47,583 | $ | 44,877 | $ | 43,040 | |||||
UNPAID LOSSES AND LAE AT END OF YEAR | |||||||||||
Gross | $ | 48,507 | $ | 50,353 | $ | 66,429 | |||||
Ceded | (15,043 | ) | (16,733 | ) | (31,633 | ) | |||||
Net | $ | 33,464 | $ | 33,620 | $ | 34,796 | |||||
Our environmental, asbestos and mass tort exposure is limited, relative to other insurers, as a result of entering the affected liability lines after the insurance industry had already recognized environmental and asbestos exposure as a problem and adopted appropriate coverage exclusions. The majority of our reserves are associated with products that went into runoff at least two decades ago. Some are for assumed reinsurance, some are for excess liability business and some followed from the acquisition of Underwriters Indemnity Company in 1999. | |||||||||||
Calendar year 2013 included an increase in inception-to-date incurred losses on a net and gross basis. The most significant change was an increase in the case reserve for a 1982 claim. The claim is reserved at the policy limit, with a gross increase of $2.2 million and the net increase of $1.8 million. Case reserves were increased for the claim while the amount of gross and net IBNR decreased. | |||||||||||
While our environmental exposure is limited, the ultimate liability for this exposure is difficult to assess because of the extensive and complicated litigation involved in the settlement of claims and evolving legislation on issues such as joint and several liability, retroactive liability and standards of cleanup. Additionally, we participate primarily in the excess layers of coverage, where accurate estimates of ultimate loss are more difficult to derive than for primary coverage. |
INCOME_TAXES
INCOME TAXES | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
INCOME TAXES | ' | ||||||||||
INCOME TAXES | ' | ||||||||||
7. INCOME TAXES | |||||||||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are summarized as follows: | |||||||||||
(in thousands) | 2013 | 2012 | |||||||||
Deferred tax assets: | |||||||||||
Tax discounting of claim reserves | $ | 22,200 | $ | 25,462 | |||||||
Unearned premium offset | 23,163 | 20,731 | |||||||||
Deferred compensation | 6,193 | 5,614 | |||||||||
Stock option expense | 4,160 | 4,678 | |||||||||
NOL carryforward | 1,059 | 3,223 | |||||||||
Other | 604 | 433 | |||||||||
Deferred tax assets before allowance | 57,379 | 60,141 | |||||||||
Less valuation allowance | — | — | |||||||||
Total deferred tax assets | $ | 57,379 | $ | 60,141 | |||||||
Deferred tax liabilities: | |||||||||||
Net unrealized appreciation of securities | $ | 73,198 | $ | 77,036 | |||||||
Deferred policy acquisition costs | 21,528 | 18,320 | |||||||||
Book/tax depreciation | 2,632 | 1,060 | |||||||||
Intangible assets from CBIC acquisition | 4,235 | 4,541 | |||||||||
Undistributed earnings of unconsolidated investee | 12,995 | 13,812 | |||||||||
Other | 592 | 938 | |||||||||
Total deferred tax liabilities | 115,180 | 115,707 | |||||||||
Net deferred tax liability | $ | (57,801 | ) | $ | (55,566 | ) | |||||
Income tax expense attributable to income from operations for the years ended December 31, 2013, 2012 and 2011, differed from the amounts computed by applying the U.S. federal tax rate of 35 percent to pretax income from continuing operations as demonstrated in the following table: | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Provision for income taxes at the statutory federal tax rates | $ | 61,483 | $ | 49,956 | $ | 64,255 | |||||
Increase (reduction) in taxes resulting from: | |||||||||||
Dividends received deduction | (2,490 | ) | (2,630 | ) | (1,980 | ) | |||||
ESOP dividends paid deduction | (2,532 | ) | (3,596 | ) | (3,367 | ) | |||||
Tax-exempt interest income | (3,758 | ) | (2,995 | ) | (2,412 | ) | |||||
Unconsolidated investee dividends | (3,696 | ) | (1,848 | ) | — | ||||||
Other items, net | 404 | 499 | 492 | ||||||||
Total | $ | 49,411 | $ | 39,386 | $ | 56,988 | |||||
Our effective tax rates were 28.1 percent, 27.6 percent and 31.0 percent for 2013, 2012 and 2011, respectively. Effective rates are dependent upon components of pretax earnings and the related tax effects. The effective rate for 2013 was higher than 2012 due to an increase in underwriting income notwithstanding an increase in tax-exempt income and dividends qualifying for preferential tax treatment, specifically as noted below from Maui Jim. | |||||||||||
Dividends paid to our Employee Stock Ownership Plan (ESOP) result in a tax deduction. Special dividends paid to the ESOP in 2013, 2012 and 2011 resulted in tax benefits of $1.7 million, $2.9 million and $2.7 million, respectively. These tax benefits reduced the effective tax rate for 2013, 2012 and 2011 by 1.0 percent, 2.0 percent and 1.5 percent, respectively. | |||||||||||
Our net earnings include equity in earnings of unconsolidated investee, Maui Jim. This investee does not have a policy or pattern of paying dividends. As a result, we record a deferred tax liability on the earnings at the corporate capital gains rate of 35 percent. In the fourth quarters of 2013 and 2012, we received a $13.2 and $6.6 million dividend, respectively. In accordance with GAAP guidelines on income taxes, we recognized a $3.7 million tax benefit for 2013 and a $1.8 million tax benefit for 2012 from applying the lower tax rate applicable to affiliated dividends (7 percent), as compared to the corporate capital gains rate on which the deferred tax liabilities were based. Standing alone the dividend resulted in a 2.1 and 1.3 percent reduction to the 2013 and 2012 effective tax rate, respectively. In determining the appropriate tax rate to apply, we anticipate recovering our investment through means other than the receipt of dividends, such as a sale. | |||||||||||
We have recorded our deferred tax assets and liabilities using the statutory federal tax rate of 35 percent. We believe it is more likely than not that all deferred tax assets will be recovered given the carry back availability as well as the results of future operations, which will generate sufficient taxable income to realize the deferred tax asset. In addition, we believe when these deferred items reverse in future years, our taxable income will be taxed at an effective rate of 35 percent. | |||||||||||
In 2011, a deferred tax asset was recorded at $5.5 million for the net operating loss (NOL) carryforward stemming from the CBIC acquisition. This NOL was primarily the result of certain transaction-related items, including employee bonuses that were incurred by CBIC in conjunction with the sale. A portion of the NOL was carried back to recover taxes paid in prior periods. The remaining NOL is being carried forward to future tax years. Due to our consistent history of taxable income, we expect to recover the remaining NOL by the end of 2014. | |||||||||||
Federal and state income taxes paid in 2013, 2012 and 2011, amounted to $36.8 million, $25.9 million and $50.5 million, respectively. |
EMPLOYEE_BENEFITS
EMPLOYEE BENEFITS | 12 Months Ended | |||||||||||
Dec. 31, 2013 | ||||||||||||
EMPLOYEE BENEFITS | ' | |||||||||||
EMPLOYEE BENEFITS | ' | |||||||||||
8. EMPLOYEE BENEFITS | ||||||||||||
As discussed in note 1.B. all share and per share data throughout this report reflect the two-for-one stock split executed on January 15, 2014. | ||||||||||||
EMPLOYEE STOCK OWNERSHIP, 401(K) AND BONUS AND INCENTIVE PLANS | ||||||||||||
We maintain ESOP, 401(k) and bonus and incentive plans covering executives, managers and associates. At the board of directors’ discretion, funding of these plans is primarily dependent upon reaching predetermined levels of operating return on equity, combined ratio and Market Value Potential (MVP). MVP is a compensation model that measures components of comprehensive earnings against a minimum required return on our capital. Bonuses are earned as we generate earnings in excess of this required return. While some management incentive plans may be affected somewhat by other performance factors, the larger influence of corporate performance ensures that the interests of our executives, managers and associates correspond with those of our shareholders. | ||||||||||||
Our 401(k) plan allows voluntary contributions by employees and permits ESOP diversification transfers for employees meeting certain age or service requirements. We provide a basic 401(k) contribution of 3 percent of eligible compensation. Participants are 100 percent vested in both voluntary and basic contributions. Additionally, an annual discretionary profit-sharing contribution may be made to the ESOP and 401(k), subject to the achievement of certain overall financial goals and board approval. Profit-sharing contributions vest after three years of plan service. | ||||||||||||
Our ESOP and 401(k) cover all employees meeting eligibility requirements. ESOP and 401(k) profit-sharing contributions are determined annually by our board of directors and are expensed in the year earned. ESOP and 401(k)-related expenses (basic and profit-sharing) were $12.4 million, $7.8 million and $10.6 million, for 2013, 2012 and 2011, respectively. | ||||||||||||
During 2013, the ESOP purchased 140,484 shares of RLI stock on the open market at an average price of $35.03 ($4.9 million) relating to the contribution for plan year 2012. Shares held by the ESOP as of December 31, 2013, totaled 3,382,944 and are treated as outstanding in computing our earnings per share. During 2012, the ESOP purchased 189,282 shares of RLI stock on the open market at an average price of $35.01 ($6.6 million) relating to the contribution for plan year 2011. During 2011, the ESOP purchased 179,566 shares of RLI stock on the open market at an average price of $28.82 ($5.2 million) relating to the contribution for plan year 2010. The above mentioned ESOP purchases relate only to our annual contributions to the plan and do not include amounts or shares resulting from the reinvestment of dividends. | ||||||||||||
Annual bonuses are awarded to executives, managers and associates through our incentive plans, provided certain financial and operational goals are met. Annual expenses for these incentive plans totaled $23.2 million, $16.7 million and $17.4 million for 2013, 2012 and 2011, respectively. | ||||||||||||
DEFERRED COMPENSATION | ||||||||||||
We maintain “rabbi trusts” for deferred compensation plans for directors, key employees and executive officers through which our shares are purchased. GAAP guidelines prescribe an accounting treatment whereby the employer stock in the plan is classified and accounted for as equity, in a manner consistent with the accounting for treasury stock. | ||||||||||||
In 2013, the trusts purchased 13,922 shares of our common stock on the open market at an average price of $38.33 ($0.5 million). In 2012, the trusts purchased 14,968 shares of our common stock on the open market at an average price of $34.24 ($0.5 million). In 2011, the trusts purchased 19,562 shares of our common stock on the open market at an average price of $29.75 ($0.6 million). At December 31, 2013, the trusts’ assets were valued at $32.5 million. | ||||||||||||
STOCK OPTIONS AND STOCK PLANS | ||||||||||||
Our RLI Corp. Omnibus Stock Plan (omnibus plan) was in place from 2005 to 2010. The omnibus plan provided for grants of up to 3,000,000 shares (subject to adjustment for changes in our capitalization). Since 2005, we have granted 2,457,644 stock options under this plan, including incentive stock options (ISOs), which were adjusted as part of the special dividends paid in 2013 and prior years. | ||||||||||||
During the second quarter of 2010, our shareholders approved the RLI Corp. Long-Term Incentive Plan (LTIP), which replaced the omnibus plan. In conjunction with the adoption of the LTIP, effective May 6, 2010, options will no longer be granted under the omnibus plan. Awards under the LTIP may be in the form of restricted stock, stock options (nonqualified only), stock appreciation rights, performance units, as well as other stock-based awards. Eligibility under the LTIP is limited to employees or directors of the company or any affiliate. The granting of awards under the LTIP is solely at the discretion of the executive resources committee of the board of directors. The total number of shares of common stock available for distribution under the LTIP may not exceed 4,000,000 shares (subject to adjustment for changes in our capitalization). Since 2010, we have granted 2,312,500 stock options under the LTIP, including 632,700 in 2013. | ||||||||||||
Under the LTIP, as under the omnibus plan, we grant stock options for shares with an exercise price equal to the fair market value of the shares at the date of grant. Options generally vest and become exercisable ratably over a five-year period. | ||||||||||||
In most instances, the requisite service period and vesting period will be the same. For participants who are retirement eligible, defined by the plan as those individuals whose age and years of service equals 75, the requisite service period is deemed to be met and options are immediately expensed on the date of grant. For participants who will become retirement eligible during the vesting period, the requisite service period over which expense is recognized is the period between the grant date and the attainment of retirement eligibility. Shares issued upon option exercise are newly issued shares. | ||||||||||||
Shares issued may be less than the number of shares actually exercised, as our plan allows net settlement to cover the option exercise price and taxes due upon option exercise. Shares netted are valued at the closing stock price on the date of option exercise. In these instances, the actual number of shares issued will be less than the options exercised and can result in a decrease to shareholders’ equity. Specifically, when options are exercised with significant intrinsic value (i.e. market value in excess of exercise price) and the exercise is facilitated via net settlement, amounts withheld for taxes result in a decrease in shareholders’ equity. During 2013, the aggregate intrinsic value of options exercised was $22.4 million. A majority of these options were exercised via net settlement with taxes withheld at the statutory minimum rate. As shown in the consolidated statements of shareholders’ equity, the exercise of options in 2013 resulted in a decrease to paid-in-capital, as the taxes withheld pursuant to net settlement exceeded amounts paid in for options that were exercised using cash. This was not the case in 2012 or 2011 as the intrinsic value of the options exercised was not as significant ($4.7 million and $12.8 million, respectively). Therefore, the exercise of options in 2012 and 2011 resulted in increases to paid-in-capital. | ||||||||||||
On November 14, 2013, the board of directors declared a $1.50 per share special cash dividend to be paid on December 20, 2013, to shareholders of record at the close of business on November 29, 2013. To preserve the intrinsic value for option holders, the board also approved, pursuant to the terms of our various stock option plans, a proportional adjustment to both the exercise price and the number of shares covered by each award for all outstanding ISOs and an adjustment to the exercise price (equivalent to the special dividend) for all outstanding non-qualified options. Most (99 percent of) outstanding options at the time of the adjustment were non-qualified. These adjustments did not result in any incremental compensation expense as the aggregate fair value, aggregate intrinsic value and the ratio of the exercise price to the market price are approximately equal immediately before and after the adjustment. Similarly, on November 14, 2012, the board of directors declared a $2.50 per share special cash dividend to be paid on December 20, 2012, to shareholders of record at the close of business on November 30, 2012. On November 17, 2011, the board of directors declared a $2.50 per share special cash dividend to be paid on December 20, 2011, to shareholders of record at the close of business on November 30, 2011. The adjustments made for the 2013 special dividend were also made for the 2012 and 2011 special dividends and did not result in any incremental compensation expense. | ||||||||||||
The following tables summarize option activity in 2013, 2012 and 2011: | ||||||||||||
Weighted | ||||||||||||
Weighted | Average | Aggregate | ||||||||||
Number of | Average | Remaining | Intrinsic | |||||||||
Options | Exercise | Contractual | Value | |||||||||
Outstanding | Price | Life | (in 000’s) | |||||||||
Outstanding options at January 1, 2013 | 2,945,204 | $ | 22.22 | |||||||||
Options granted | 632,700 | $ | 35.67 | |||||||||
Special dividend* | 272 | $ | 16.38 | |||||||||
Options exercised | (935,692 | ) | $ | 17.4 | $ | 22,422 | ||||||
Options canceled/forfeited | (47,400 | ) | $ | 24.86 | ||||||||
Outstanding options at December 31, 2013 | 2,595,084 | $ | 26.04 | 5.56 | $ | 58,790 | ||||||
Exercisable options at December 31, 2013 | 934,544 | $ | 20.36 | 4.28 | $ | 26,474 | ||||||
Weighted | ||||||||||||
Weighted | Average | Aggregate | ||||||||||
Number of | Average | Remaining | Intrinsic | |||||||||
Options | Exercise | Contractual | Value | |||||||||
Outstanding | Price | Life | (in 000’s) | |||||||||
Outstanding options at January 1, 2012 | 2,561,732 | $ | 21.62 | |||||||||
Options granted | 669,800 | $ | 31.71 | |||||||||
Special dividend* | 2,172 | $ | 15.39 | |||||||||
Options exercised | (282,260 | ) | $ | 19.03 | $ | 4,712 | ||||||
Options canceled/forfeited | (6,240 | ) | $ | 20.42 | ||||||||
Outstanding options at December 31, 2012 | 2,945,204 | $ | 22.22 | 5.43 | $ | 29,865 | ||||||
Exercisable options at December 31, 2012 | 1,362,184 | $ | 18.29 | 4.27 | $ | 19,135 | ||||||
Weighted | ||||||||||||
Weighted | Average | Aggregate | ||||||||||
Number of | Average | Remaining | Intrinsic | |||||||||
Options | Exercise | Contractual | Value | |||||||||
Outstanding | Price | Life | (in 000’s) | |||||||||
Outstanding options at January 1, 2011 | 3,049,964 | $ | 20.66 | |||||||||
Options granted | 595,900 | $ | 27.51 | |||||||||
Special dividend* | 3,082 | $ | 16.08 | |||||||||
Options exercised | (1,030,634 | ) | $ | 17.31 | $ | 12,764 | ||||||
Options canceled/forfeited | (56,580 | ) | $ | 20.82 | ||||||||
Outstanding options at December 31, 2011 | 2,561,732 | $ | 21.62 | 5.62 | $ | 37,949 | ||||||
Exercisable options at December 31, 2011 | 1,207,872 | $ | 19.9 | 4.54 | $ | 19,965 | ||||||
*An adjustment was made to the exercise price and number of ISO options outstanding for the special cash dividends paid during December 2013, 2012, and 2011. “Special dividend” represents the incremental options issued as a result of the this adjustment. | ||||||||||||
The majority of our options are granted annually at our regular board meeting in May. In addition, options are approved at the May meeting for quarterly grants to certain retirement eligible employees. Since grants to retirement eligible employees are fully expensed when issued, the approach allows for a more even expense distribution throughout the year. | ||||||||||||
In 2013, 632,700 options were granted with an average exercise price of $35.67 and an average fair value of $6.88. Of these grants, 472,700 were granted at the board meeting in May with a calculated fair value of $6.47. We recognized $3.8 million of expense during 2013 related to options vesting. Since options granted under our plan are non-qualified, we recorded a tax benefit of $1.3 million related to this compensation expense. Total unrecognized compensation expense relating to outstanding and unvested options was $4.5 million, which will be recognized over the remainder of the vesting period. | ||||||||||||
In 2012, 669,800 options were granted with an average exercise price of $31.71 and an average fair value of $6.55. Of these grants, 437,800 were granted at the board meeting in May with a calculated fair value of $6.54. We recognized $3.6 million of expense during 2012 related to options vesting. Since options granted under our plan are non-qualified, we recorded a tax benefit of $1.3 million related to this compensation expense. Total unrecognized compensation expense relating to outstanding and unvested options was $4.3 million, which will be recognized over the remainder of the vesting period. | ||||||||||||
In 2011, 595,900 options were granted with an average exercise price of $27.51 and an average fair value of $6.45. Of these grants, 402,000 were granted at the board meeting in May with a calculated fair value of $6.46. We recognized $3.5 million of expense during 2011 related to options vesting. Since options granted under our plan are non-qualified, we recorded a tax benefit of $1.2 million related to this compensation expense. Total unrecognized compensation expense relating to outstanding and unvested options was $3.6 million, which will be recognized over the remainder of the vesting period. | ||||||||||||
The fair value of options were estimated using a Black-Scholes based option pricing model with the following weighted-average grant-date assumptions and weighted average fair values as of December 31: | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Weighted-average fair value of grants | $ | 6.88 | $ | 6.55 | $ | 6.45 | ||||||
Risk-free interest rates | 0.87 | % | 0.9 | % | 2.06 | % | ||||||
Dividend yield | 2 | % | 1.93 | % | 1.89 | % | ||||||
Expected volatility | 25.4 | % | 25.62 | % | 25.68 | % | ||||||
Expected option life | 5.26 years | 5.43 years | 5.54 years | |||||||||
The risk-free rate is determined based on U.S. treasury yields that most closely approximate the option’s expected life. The dividend yield is calculated based on the average annualized dividends paid during the most recent five-year period. It excludes the special dividends paid in 2013, 2012, 2011 and 2010. The expected volatility is calculated based on the mean reversion of RLI’s stock. The expected option life is determined based on historical exercise behavior and the assumption that all outstanding options will be exercised at the midpoint of the current date and remaining contractual term, adjusted for the demographics of the current year’s grant. | ||||||||||||
Prior to 2011, directors participated in the Non-Employee Directors’ Stock Plan under which directors could receive awards of company stock. The final award to outside directors under this plan occurred in the 2011 calendar year and totaled 3,082 shares. Shares were awarded at an average share price of $27.48 and we recognized $0.1 million of expense related to these awards. No shares were issued to outside directors in 2012. | ||||||||||||
In 2013, we began providing restricted common stock to outside directors. Shares are issued to outside directors from the LTIP as part of annual director compensation and are directly owned by each director on the date of issuance. Currently, each director receives restricted shares worth $10,000 at the time of issuance. The shares are issued annually in the first quarter and include a one-year restriction on the sale or transfer of such shares. In the first quarter of 2013, we issued a total of 2,320 restricted shares and recognized $0.1 million of compensation expense. |
STATUTORY_INFORMATION_AND_DIVI
STATUTORY INFORMATION AND DIVIDEND RESTRICTIONS | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
STATUTORY INFORMATION AND DIVIDEND RESTRICTIONS | ' | ||||||||||
STATUTORY INFORMATION AND DIVIDEND RESTRICTIONS | ' | ||||||||||
9. STATUTORY INFORMATION AND DIVIDEND RESTRICTIONS | |||||||||||
The statutory financial statements of our four insurance companies are presented on the basis of accounting practices prescribed or permitted by the insurance regulatory authority of their respective states of domicile, which are the Illinois Department of Insurance and the Washington State Office of the Insurance Commissioner. Each of those domiciliary states has adopted the NAIC statutory accounting practices as the basis of its statutory accounting practices. We do not use any permitted statutory accounting practices that differ from NAIC prescribed statutory accounting practices. In converting from statutory to GAAP, typical adjustments include deferral of policy acquisition costs, the inclusion of statutory non-admitted assets and the inclusion of net unrealized holding gains or losses in shareholders’ equity relating to fixed maturities. | |||||||||||
The NAIC has RBC requirements that require insurance companies to calculate and report information under a risk-based formula, which measures statutory capital and surplus needs based upon a regulatory definition of risk relative to the company’s balance sheet and mix of products. As of December 31, 2013, each of our insurance subsidiaries had an RBC amount in excess of the authorized control level RBC, as defined by the NAIC. RLI Insurance Company (RLI Ins.), our principal insurance company subsidiary, had an authorized control level RBC of $90.6 million, $90.4 million and $89.3 million as of December 31, 2013, 2012 and 2011, respectively, compared to actual statutory capital and surplus of $859.2 million, $684.1 million and $710.2 million, respectively, for these same periods. | |||||||||||
Year-end statutory surplus for 2013 presented in the table below includes $64.0 million of RLI stock (cost basis of $64.6 million) held by Mt. Hawley Insurance Company, compared to $9.1 million and $14.7 million in 2012 and 2011, respectively. The Securities Valuation Office provides specific guidance for valuing this investment, which is eliminated in our GAAP consolidated financial statements. | |||||||||||
The following table includes selected information for our insurance subsidiaries for the year ending and as of December 31: | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Consolidated net income, statutory basis | $ | 122,550 | $ | 125,672 | $ | 118,922 | |||||
Consolidated surplus, statutory basis | $ | 859,221 | $ | 684,072 | $ | 710,186 | |||||
As discussed in note 1.A., our insurance subsidiaries are organized in a vertical structure with RLI Ins. as the first-level, or principal, insurance subsidiary of RLI Corp. At the holding company (RLI Corp.) level, we rely largely on dividends from our insurance company subsidiaries to meet our obligations for paying principal and interest on outstanding debt, corporate expenses and dividends to RLI Corp. shareholders. As discussed further below, dividend payments to RLI Corp. from our principal insurance subsidiary are restricted by state insurance laws as to the amount that may be paid without prior approval of the insurance regulatory authorities of Illinois. As a result, we may not be able to receive dividends from such subsidiary at times and in amounts necessary to pay desired dividends to RLI Corp. shareholders. On a GAAP basis, as of December 31, 2013, our holding company had $829.0 million in equity. This includes amounts related to the equity of our insurance subsidiaries, which is subject to regulatory restrictions under state insurance laws. The unrestricted portion of holding company net assets is comprised primarily of investments and cash, including $32.0 million in liquid assets, which approximate annual holding company expenditures. Unrestricted funds at the holding company are available to fund debt interest, general corporate obligations and dividend payments to our shareholders. If necessary, the holding company also has other potential sources of liquidity that could provide for additional funding to meet corporate obligations or pay shareholder dividends, which include a revolving line of credit, as well as issuances of common stock and debt. | |||||||||||
Ordinary dividends, which may be paid by our principal insurance subsidiary without prior regulatory approval, are subject to certain limitations based upon statutory income, surplus and earned surplus. The maximum ordinary dividend distribution from our principal insurance subsidiary in a rolling 12-month period is limited by Illinois law to the greater of 10 percent of RLI Ins. policyholder surplus, as of December 31 of the preceding year, or the net income of RLI Ins. for the 12-month period ending December 31 of the preceding year. Ordinary dividends are further restricted by the requirement that they be paid from earned surplus. In 2013 and 2012, our principal insurance subsidiary paid ordinary dividends totaling $40.0 million and $13.0 million, respectively, to RLI Corp. No ordinary dividends were paid in 2011. Any dividend distribution in excess of the ordinary dividend limits is deemed extraordinary and requires prior approval from the Illinois Department of Insurance. While no extraordinary dividends were paid in 2013, our principal insurance subsidiary sought and received regulatory approval in 2012 and 2011, prior to the payment of extraordinary dividends totaling $125.0 million and $150.0 million, respectively. As of December 31, 2013, $92.7 million of the net assets of our principal insurance subsidiary are not restricted and could be distributed to RLI Corp. as ordinary dividends. As of December 31, 2012 and 2011, as a result of extraordinary dividends distributed, the net assets of our principal insurance subsidiary were restricted and prior approval from the Illinois Department of Insurance was required for all dividends to RLI Corp. Because the limitations are based upon a rolling 12-month period, the presence, amount and impact of these restrictions vary over time. |
COMMITMENTS_AND_CONTINGENT_LIA
COMMITMENTS AND CONTINGENT LIABILITIES | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
COMMITMENTS AND CONTINGENT LIABILITIES | ' | ||||
COMMITMENTS AND CONTINGENT LIABILITIES | ' | ||||
10. COMMITMENTS AND CONTINGENT LIABILITIES | |||||
We are party to numerous claims, losses and litigation matters that arise in the normal course of our business. Many of such claims, losses or litigation matters involve claims under policies that we underwrite as an insurer. We believe that the resolution of these claims and losses will not have a material adverse effect on our financial condition, results of operations or cash flows. We are also involved in various other legal proceedings and litigation unrelated to our insurance business that arise in the ordinary course of business operations. Management believes that any liabilities that may arise as a result of these legal matters will not have a material adverse effect on our financial condition or results of operations. | |||||
We have operating lease obligations for regional office facilities. These leases expire in various years through 2023. Expenses associated with these leases totaled $5.7 million in 2013, $5.4 million in 2012 and $5.0 million in 2011. Minimum future rental payments under non-cancellable leases are as follows: | |||||
(in thousands) | |||||
2014 | $ | 4,791 | |||
2015 | 4,401 | ||||
2016 | 3,380 | ||||
2017 | 2,667 | ||||
2018 | 1,876 | ||||
2019-2023 | 3,866 | ||||
Total minimum future rental payments | $ | 20,981 |
OPERATING_SEGMENT_INFORMATION
OPERATING SEGMENT INFORMATION | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
OPERATING SEGMENT INFORMATION | ' | ||||||||||
OPERATING SEGMENT INFORMATION | ' | ||||||||||
11. OPERATING SEGMENT INFORMATION | |||||||||||
The segments of our insurance operations include casualty, property and surety. The casualty portion of our business consists largely of general liability, personal umbrella, transportation, executive products, commercial umbrella, package business and other specialty coverages, such as our professional liability for design professionals. We also offer fidelity and crime coverage for commercial insureds and select financial institutions and recently expanded our casualty offerings to include medical professional liability coverage in the excess and surplus market. The casualty business is subject to the risk of estimating losses and related loss reserves because the ultimate settlement of a casualty claim may take several years to fully develop. The casualty segment is also subject to inflation risk and may be affected by evolving legislation and court decisions that define the extent of coverage and the amount of compensation due for injuries or losses. | |||||||||||
Our property segment is comprised primarily of commercial fire, earthquake, difference in conditions, marine, facultative and treaty reinsurance, including crop and select personal lines policies, including recreational vehicle insurance and Hawaii homeowners coverages. Property insurance and reinsurance results are subject to the variability introduced by perils such as earthquakes, fires and hurricanes. Our major catastrophe exposure is to losses caused by earthquakes, primarily on the West Coast. Our second largest catastrophe exposure is to losses caused by hurricanes to commercial properties throughout the Gulf and East Coast, as well as to homes we insure in Hawaii. We limit our net aggregate exposure to a catastrophic event by minimizing the total policy limits written in a particular region, purchasing reinsurance and through extensive use of computer-assisted modeling techniques. These techniques provide estimates that help us carefully manage the concentration of risks exposed to catastrophic events. Our assumed multi-peril crop and hail treaty reinsurance business covers revenue shortfalls or production losses due to natural causes such as drought, excessive moisture, hail, wind, frost, insects and disease. Significant aggregation of these losses is mitigated by the Federal Government reinsurance program that provides stop loss protection inuring to our benefit. | |||||||||||
The surety segment specializes in writing small-to-large commercial and contract surety coverages, as well as those for the energy, petrochemical and refining industries. We offer miscellaneous bonds including license and permit, notary and court bonds. Often, our surety coverages involve a statutory requirement for bonds. While these bonds typically maintain a relatively low loss ratio, losses may fluctuate due to adverse economic conditions affecting the financial viability of our insureds. The contract surety product guarantees the construction work of a commercial contractor for a specific project. Generally, losses occur due to the deterioration of a contractor’s financial condition. This line has historically produced marginally higher loss ratios than other surety lines during economic downturns. | |||||||||||
Net investment income is the by-product of the interest and dividend income streams from our investments in fixed income and equity securities. Interest and general corporate expenses include the cost of debt and other director and shareholder relations costs incurred for the benefit of the corporation, but not attributable to the operations of our insurance segments. Investee earnings represent our share in Maui Jim earnings. We own 40 percent of Maui Jim, a privately held company which operates in the sunglass and optical goods industries. Our investment in Maui Jim, which is carried at the holding company, is unrelated to our core insurance operations. | |||||||||||
The following table summarizes our segment data based on the internal structure and reporting of information as it is used by management. The net earnings of each segment are before taxes and include revenues (if applicable), direct product or segment costs (such as commissions and claims costs), as well as allocated support costs from various support departments. While depreciation and amortization charges have been included in these measures via our expense allocation system, the related assets are not allocated for management use and, therefore, are not included in this schedule. | |||||||||||
REVENUES | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Casualty | $ | 324,022 | $ | 267,697 | $ | 236,198 | |||||
Property | 200,141 | 202,402 | 203,660 | ||||||||
Surety | 106,639 | 106,472 | 98,594 | ||||||||
Segment totals before income taxes | 630,802 | 576,571 | 538,452 | ||||||||
Net investment income | 52,763 | 58,831 | 63,681 | ||||||||
Net realized gains | 22,036 | 25,372 | 17,036 | ||||||||
Total | $ | 705,601 | $ | 660,774 | $ | 619,169 | |||||
INSURANCE EXPENSES | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Loss and settlement expenses: | |||||||||||
Casualty | $ | 148,860 | $ | 144,106 | $ | 85,091 | |||||
Property | 96,271 | 115,707 | 101,969 | ||||||||
Surety | 14,670 | 11,832 | 13,024 | ||||||||
Segment totals before income taxes | $ | 259,801 | $ | 271,645 | $ | 200,084 | |||||
Policy acquisition costs: | |||||||||||
Casualty | $ | 93,463 | $ | 76,765 | $ | 67,495 | |||||
Property | 58,650 | 60,070 | 57,878 | ||||||||
Surety | 58,538 | 59,527 | 58,495 | ||||||||
Segment totals before income taxes | $ | 210,651 | $ | 196,362 | $ | 183,868 | |||||
Other insurance expenses: | |||||||||||
Casualty | $ | 26,107 | $ | 21,387 | $ | 22,215 | |||||
Property | 17,616 | 14,933 | 13,481 | ||||||||
Surety | 9,834 | 8,651 | 8,616 | ||||||||
Segment totals before income taxes | $ | 53,557 | $ | 44,971 | $ | 44,312 | |||||
Total | $ | 524,009 | $ | 512,978 | $ | 428,264 | |||||
NET EARNINGS (LOSSES) | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Casualty | $ | 55,592 | $ | 25,439 | $ | 61,397 | |||||
Property | 27,604 | 11,692 | 30,332 | ||||||||
Surety | 23,597 | 26,462 | 18,459 | ||||||||
Net underwriting income | $ | 106,793 | $ | 63,593 | $ | 110,188 | |||||
Net investment income | 52,763 | 58,831 | 63,681 | ||||||||
Net realized gains | 22,036 | 25,372 | 17,036 | ||||||||
General corporate expense and interest on debt | (16,841 | ) | (13,917 | ) | (13,816 | ) | |||||
Equity in earnings of unconsolidated investees | 10,915 | 8,853 | 6,497 | ||||||||
Total earnings before incomes taxes | $ | 175,666 | $ | 142,732 | $ | 183,586 | |||||
Income taxes | $ | 49,411 | $ | 39,386 | $ | 56,988 | |||||
Total | $ | 126,255 | $ | 103,346 | $ | 126,598 | |||||
The following table further summarizes net premiums earned by major product type within each segment: | |||||||||||
Year ended December 31, | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
CASUALTY | |||||||||||
Commercial and personal umbrella | $ | 85,532 | $ | 68,287 | $ | 63,020 | |||||
General liability | 81,427 | 84,985 | 85,020 | ||||||||
Commercial transportation | 50,287 | 34,701 | 34,106 | ||||||||
Professional services | 42,063 | 28,018 | 13,151 | ||||||||
P&C package business | 30,603 | 28,497 | 16,379 | ||||||||
Executive products | 19,123 | 17,198 | 15,472 | ||||||||
Medical professional liability | 8,626 | 25 | — | ||||||||
Other casualty | 6,361 | 5,986 | 9,050 | ||||||||
Total | $ | 324,022 | $ | 267,697 | $ | 236,198 | |||||
PROPERTY | |||||||||||
Commercial property | $ | 76,939 | $ | 74,197 | $ | 80,743 | |||||
Marine | 57,122 | 56,367 | 51,654 | ||||||||
Crop reinsurance | 31,421 | 24,506 | 34,935 | ||||||||
Property reinsurance | 15,770 | 27,021 | 19,925 | ||||||||
Other property | 18,889 | 20,311 | 16,403 | ||||||||
Total | $ | 200,141 | $ | 202,402 | $ | 203,660 | |||||
SURETY | |||||||||||
Miscellaneous | $ | 38,131 | $ | 39,299 | $ | 34,837 | |||||
Contract | 27,176 | 26,329 | 24,354 | ||||||||
Commercial | 23,133 | 22,107 | 21,317 | ||||||||
Oil and gas | 18,199 | 18,737 | 18,086 | ||||||||
Total | $ | 106,639 | $ | 106,472 | $ | 98,594 | |||||
Grand total | $ | 630,802 | $ | 576,571 | $ | 538,452 |
UNAUDITED_INTERIM_FINANCIAL_IN
UNAUDITED INTERIM FINANCIAL INFORMATION | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
UNAUDITED INTERIM FINANCIAL INFORMATION | ' | ||||||||||||||||
UNAUDITED INTERIM FINANCIAL INFORMATION | ' | ||||||||||||||||
12. UNAUDITED INTERIM FINANCIAL INFORMATION | |||||||||||||||||
As discussed in note 1.B., all share and per share data reflect the two-for-one stock split executed on January 15, 2014. Selected quarterly information is as follows: | |||||||||||||||||
(in thousands, except per share data) | First | Second | Third | Fourth | Year | ||||||||||||
2013 | |||||||||||||||||
Net premiums earned | $ | 144,151 | $ | 154,553 | $ | 163,702 | $ | 168,396 | $ | 630,802 | |||||||
Net investment income | 12,886 | 12,847 | 13,598 | 13,432 | 52,763 | ||||||||||||
Net realized investment gains | 3,684 | 3,742 | 10,999 | 3,611 | 22,036 | ||||||||||||
Earnings before income taxes | 35,969 | 43,576 | 55,309 | 40,812 | 175,666 | ||||||||||||
Net earnings | 24,847 | 29,902 | 37,647 | 33,859 | 126,255 | ||||||||||||
Basic earnings per share(1) | $ | 0.58 | $ | 0.7 | $ | 0.88 | $ | 0.79 | $ | 2.95 | |||||||
Diluted earnings per share(1) | $ | 0.57 | $ | 0.69 | $ | 0.86 | $ | 0.77 | $ | 2.9 | |||||||
2012 | |||||||||||||||||
Net premiums earned | $ | 137,280 | $ | 141,584 | $ | 149,943 | $ | 147,764 | $ | 576,571 | |||||||
Net investment income | 15,293 | 14,826 | 14,221 | 14,491 | 58,831 | ||||||||||||
Net realized investment gains (losses) | 11,416 | (664 | ) | 5,481 | 9,139 | 25,372 | |||||||||||
Earnings before income taxes | 41,109 | 36,568 | 36,480 | 28,575 | 142,732 | ||||||||||||
Net earnings | 28,038 | 24,748 | 25,463 | 25,097 | 103,346 | ||||||||||||
Basic earnings per share(1) | $ | 0.66 | $ | 0.58 | $ | 0.6 | $ | 0.59 | $ | 2.44 | |||||||
Diluted earnings per share(1) | $ | 0.65 | $ | 0.58 | $ | 0.59 | $ | 0.58 | $ | 2.39 | |||||||
(1) Since the weighted-average shares for the quarters are calculated independently of the weighted-average shares for the year, quarterly earnings per share may not total to annual earnings per share. |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2013 | |
ACQUISITIONS | ' |
ACQUISITIONS | ' |
13. ACQUISITIONS | |
On November 2, 2012, we acquired Rockbridge, a Houston-based managing general agency. Rockbridge specializes in medical professional liability insurance in the excess and surplus markets. Coverage is offered to individual physicians and physician groups in all 50 states through a network of retail and wholesale brokers. Total consideration for the acquisition was $16.7 million, which included $15.5 million of cash paid at acquisition, and $1.2 million associated with the present value of a contingent earn-out agreement. The earn-out is subject to the achievement of certain loss ratio targets and may be adjusted, either upward or downward, in future periods based on actual performance achieved. As of December 31, 2013, the recorded value of the contingent earn-out agreement was $1.3 million. For 2013, Rockbridge contributed gross premiums written of $16.7 million and net premiums earned of $8.6 million. | |
On April 28, 2011, we acquired CBIC through an acquisition of its holding company, Data and Staff Service Co., for $135.9 million in cash. CBIC is a Seattle-based insurance company specializing in surety bonds and related niche property and casualty insurance products. CBIC posted $55.4 million of gross premiums written in 2013, which included $37.0 million attributable to the casualty segment and $18.4 million attributable to surety. CBIC contributed pretax earnings of $12.5 million. While these figures reflect results posted by CBIC, the full financial impact of the acquisition extends beyond CBIC and also impacts RLI Insurance Company results. Integration efforts and synergies experienced after the acquisition have transitioned certain policies which were formerly written in CBIC to RLI Insurance Company. For 2012, CBIC contributed $54.9 million of gross premiums written and pretax earnings of $14.1 million. For 2011, CBIC contributed $36.0 million of gross premiums written and pretax earnings of $2.7 million. |
SCHEDULE_ISUMMARY_OF_INVESTMEN
SCHEDULE I-SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
SCHEDULE I-SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' | ||||||||||
SCHEDULE I-SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' | ||||||||||
SCHEDULE I—SUMMARY OF INVESTMENTS—OTHER THAN INVESTMENTS | |||||||||||
IN RELATED PARTIES | |||||||||||
December 31, 2013 | |||||||||||
Column A | Column B | Column C | Column D | ||||||||
Amount at | |||||||||||
(in thousands) | which shown in | ||||||||||
Type of Investment | Cost (1) | Fair Value | the balance sheet | ||||||||
Fixed maturities: | |||||||||||
Bonds: | |||||||||||
Available-for-sale | |||||||||||
U.S. Government | $ | 17,086 | $ | 17,303 | $ | 17,303 | |||||
U.S. Agency | 10,513 | 10,298 | 10,298 | ||||||||
Non-U.S. Government & Agency | 13,306 | 13,678 | 13,678 | ||||||||
Mtge/ABS/CMBS* | 350,187 | 350,725 | 350,725 | ||||||||
Corporate | 511,748 | 526,038 | 526,038 | ||||||||
Municipal | 528,209 | 522,010 | 522,010 | ||||||||
Total available-for-sale | $ | 1,431,049 | $ | 1,440,052 | $ | 1,440,052 | |||||
Held-to-maturity | |||||||||||
U.S. Government | $ | — | $ | — | $ | — | |||||
U.S. Agency | — | — | — | ||||||||
Corporate | — | — | — | ||||||||
Municipal | 651 | 687 | 651 | ||||||||
Total held-to-maturity | $ | 651 | $ | 687 | $ | 651 | |||||
Trading | $ | — | $ | — | $ | — | |||||
Total fixed maturities | $ | 1,431,700 | $ | 1,440,739 | $ | 1,440,703 | |||||
Equity securities, available-for-sale | |||||||||||
Common stock | |||||||||||
Ind Misc & all other | $ | 171,211 | $ | 340,107 | $ | 340,107 | |||||
ETFs (Ind/misc) | 47,637 | 78,547 | 78,547 | ||||||||
Reits (Ind/misc) | — | — | — | ||||||||
Total equity securities | $ | 218,848 | $ | 418,654 | $ | 418,654 | |||||
Cash & short-term investments | $ | 62,701 | $ | 62,701 | $ | 62,701 | |||||
Total investments and cash | $ | 1,713,249 | $ | 1,922,094 | $ | 1,922,058 | |||||
*Mortgage-backed, asset-backed & commercial mortgage-backed | |||||||||||
Note: See notes 1E and 2 of Notes to Consolidated Financial Statements. See also the accompanying report of independent registered public accounting firm on page 102 of this report. | |||||||||||
(1) Original cost of equity securities and, as to fixed maturities, original cost reduced by repayments and adjusted for amortization of premiums or accrual of discounts. |
SCHEDULE_IICONDENSED_FINANCIAL
SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) | ' | ||||||||||
SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) | ' | ||||||||||
SCHEDULE II—CONDENSED FINANCIAL INFORMATION OF REGISTRANT | |||||||||||
(PARENT COMPANY) | |||||||||||
CONDENSED BALANCE SHEETS | |||||||||||
December 31, | |||||||||||
(in thousands, except share data) | 2013 | 2012 | |||||||||
ASSETS | |||||||||||
Cash | $ | 181 | $ | 14,023 | |||||||
Short-term investments, at cost which approximates fair value | 13,394 | 431 | |||||||||
Accounts receivable, affiliates | 2,350 | 3,699 | |||||||||
Investments in subsidiaries, at equity value | 905,620 | 822,856 | |||||||||
Investments in unconsolidated investee, at equity value | 49,793 | 52,128 | |||||||||
Fixed income: | |||||||||||
Available-for-sale, at fair value (amortized cost - $18,839 in 2013 and $19,967 in 2012) | 18,447 | 20,599 | |||||||||
Property and equipment, at cost, net of accumulated depreciation of $312 in 2013 and $240 in 2012 | 3,446 | 709 | |||||||||
Income taxes receivable - current | 493 | — | |||||||||
Deferred debt costs | 1,398 | 112 | |||||||||
Other assets | 190 | 397 | |||||||||
Total assets | $ | 995,312 | $ | 914,954 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Liabilities: | |||||||||||
Income taxes payable—current | $ | — | $ | 207 | |||||||
Income taxes payable—deferred | 14,485 | 15,183 | |||||||||
Debt, notes payable due 2014 | — | 100,000 | |||||||||
Debt, notes payable due 2023 | 149,582 | — | |||||||||
Interest payable, long-term debt | 1,808 | 2,727 | |||||||||
Other liabilities | 471 | 474 | |||||||||
Total liabilities | $ | 166,346 | $ | 118,591 | |||||||
Shareholders’ equity: | |||||||||||
Common stock ($1 par value, authorized 100,000,000 shares, issued 65,912,638 shares in 2013 and 65,455,462 shares in 2012, and outstanding 42,982,424 shares in 2013 and 42,525,248 shares in 2012) | $ | 65,913 | $ | 65,455 | |||||||
Paid in capital | 208,705 | 202,535 | |||||||||
Accumulated other comprehensive earnings, net of tax | 136,027 | 143,170 | |||||||||
Retained earnings | 811,320 | 778,202 | |||||||||
Deferred compensation | 11,562 | 11,106 | |||||||||
Treasury shares at cost (22,930,214 shares in 2013 and 2012) | (404,561 | ) | (404,105 | ) | |||||||
Total shareholders’ equity | $ | 828,966 | $ | 796,363 | |||||||
Total liabilities and shareholders’ equity | $ | 995,312 | $ | 914,954 | |||||||
See Notes to Consolidated Financial Statements. See also the accompanying report of independent registered public accounting firm on page 102 of this report. | |||||||||||
SCHEDULE II—CONDENSED FINANCIAL INFORMATION OF REGISTRANT | |||||||||||
(PARENT COMPANY)—(continued) | |||||||||||
CONDENSED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS | |||||||||||
Years ended December 31, | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Net investment income | $ | 652 | $ | 837 | $ | 1,179 | |||||
Net realized investment gains (losses) | (850 | ) | (2,834 | ) | 42 | ||||||
Equity in earnings of unconsolidated investees | 10,915 | 8,853 | 6,497 | ||||||||
Selling, general and administrative expenses | (8,746 | ) | (7,867 | ) | (7,766 | ) | |||||
Interest expense on debt | (8,095 | ) | (6,050 | ) | (6,050 | ) | |||||
Loss before income taxes | (6,124 | ) | (7,061 | ) | (6,098 | ) | |||||
Income tax benefit | (11,946 | ) | (8,071 | ) | (4,949 | ) | |||||
Net earnings (loss) before equity in net earnings of subsidiaries | 5,822 | 1,010 | (1,149 | ) | |||||||
Equity in net earnings of subsidiaries | 120,433 | 102,336 | 127,747 | ||||||||
Net earnings | $ | 126,255 | $ | 103,346 | $ | 126,598 | |||||
Other comprehensive income (loss), net of tax | |||||||||||
Unrealized gains (losses) on securities: | |||||||||||
Unrealized holding gains (losses) arising during the period | $ | (665 | ) | $ | 807 | $ | 277 | ||||
Less: reclassification adjustment for losses (gains) included in net earnings | — | (70 | ) | (27 | ) | ||||||
Other comprehensive income (loss) - parent only | (665 | ) | 737 | 250 | |||||||
Equity in other comprehensive earnings (loss) of subsidiaries/investees | (6,478 | ) | 25,108 | 21,083 | |||||||
Other comprehensive earnings (loss) | (7,143 | ) | 25,845 | 21,333 | |||||||
Comprehensive earnings | $ | 119,112 | $ | 129,191 | $ | 147,931 | |||||
See Notes to Consolidated Financial Statements. See also the accompanying report of independent registered public accounting firm on page 102 of this report. | |||||||||||
SCHEDULE II—CONDENSED FINANCIAL INFORMATION OF REGISTRANT | |||||||||||
(PARENT COMPANY)—(continued) | |||||||||||
CONDENSED STATEMENTS OF CASH FLOWS | |||||||||||
Years ended December 31, | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Cash flows from operating activities | |||||||||||
Earnings (loss) before equity in net earnings of subsidiaries | $ | 5,822 | $ | 1,010 | $ | (1,149 | ) | ||||
Adjustments to reconcile net losses to net cash provided by (used in) operating activities: | |||||||||||
Net realized investment (gains) losses | 850 | 2,834 | (42 | ) | |||||||
Depreciation | 90 | 30 | 235 | ||||||||
Other items, net | (1,789 | ) | 852 | (104 | ) | ||||||
Change in: | |||||||||||
Affiliate balances receivable/payable | 1,349 | (10,383 | ) | 3,026 | |||||||
Federal income taxes | 5,288 | 3,964 | 3,330 | ||||||||
Stock option excess tax benefit | (6,310 | ) | (1,471 | ) | (4,210 | ) | |||||
Changes in investment in unconsolidated investees: | |||||||||||
Undistributed earnings | (10,915 | ) | (8,853 | ) | (6,497 | ) | |||||
Dividends received | 13,200 | 6,600 | — | ||||||||
Net cash provided by (used in) operating activities | $ | 7,585 | $ | (5,417 | ) | $ | (5,411 | ) | |||
Cash flows from investing activities | |||||||||||
Purchase of: | |||||||||||
Fixed income, available-for-sale | $ | (99,982 | ) | $ | (20,147 | ) | $ | (29,621 | ) | ||
Short-term investments, net | (12,963 | ) | — | (10,198 | ) | ||||||
Property and equipment | (2,845 | ) | (2,656 | ) | (11 | ) | |||||
Sale of: | |||||||||||
Fixed income, available-for-sale | — | 7,938 | 8,125 | ||||||||
Short-term investments, net | — | 10,786 | — | ||||||||
Property and equipment | 18 | 3,108 | — | ||||||||
Call or maturity of: | |||||||||||
Fixed income, available-for-sale | 101,000 | 20,185 | 24,400 | ||||||||
Cash dividends received-subsidiaries | 40,000 | 138,000 | 150,000 | ||||||||
Net cash provided by investing activities | $ | 25,228 | $ | 157,214 | $ | 142,695 | |||||
Cash flows from financing activities | |||||||||||
Stock option excess tax benefit | $ | 6,310 | $ | 1,471 | $ | 4,210 | |||||
Proceeds from stock option exercises | 318 | 6,104 | 8,821 | ||||||||
Proceeds from issuance of senior notes | 149,571 | — | — | ||||||||
Payment on senior notes | (99,504 | ) | — | — | |||||||
Debt issue costs paid | (1,437 | ) | — | — | |||||||
Treasury shares purchased | — | — | (6,624 | ) | |||||||
Cash dividends paid | (101,913 | ) | (145,695 | ) | (143,371 | ) | |||||
Net cash used in financing activities | $ | (46,655 | ) | $ | (138,120 | ) | $ | (136,964 | ) | ||
Net (decrease) increase in cash | (13,842 | ) | 13,677 | 320 | |||||||
Cash at beginning of year | 14,023 | 346 | 26 | ||||||||
Cash at end of year | $ | 181 | $ | 14,023 | $ | 346 | |||||
Interest paid on outstanding debt for 2013, 2012 and 2011 amounted to $8.4 million, $6.0 million and $6.0 million. See Notes to Consolidated Financial Statements. See also the accompanying report of independent registered public accounting firm on page 102 of this report. |
SCHEDULE_IIISUPPLEMENTARY_INSU
SCHEDULE III-SUPPLEMENTARY INSURANCE INFORMATION | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
SCHEDULE III-SUPPLEMENTARY INSURANCE INFORMATION | ' | ||||||||||||||||
SCHEDULE III-SUPPLEMENTARY INSURANCE INFORMATION | ' | ||||||||||||||||
SCHEDULE III—SUPPLEMENTARY INSURANCE INFORMATION | |||||||||||||||||
As of and for the years ended December 31, 2013, 2012 and 2011 | |||||||||||||||||
Incurred losses | |||||||||||||||||
Deferred policy | Unpaid losses | Unearned | Net | and settlement | |||||||||||||
(in thousands) | acquisition | and settlement | premiums, | premiums | expenses | ||||||||||||
Segment | costs | expenses, gross | gross | earned | current year | ||||||||||||
Year ended December 31, 2013 | |||||||||||||||||
Casualty segment | $ | 28,553 | $ | 947,677 | $ | 228,907 | $ | 324,022 | $ | 210,665 | |||||||
Property segment | 14,275 | 146,122 | 97,116 | 200,141 | 103,544 | ||||||||||||
Surety segment | 18,680 | 35,634 | 66,058 | 106,639 | 18,073 | ||||||||||||
RLI Insurance Group | $ | 61,508 | $ | 1,129,433 | $ | 392,081 | $ | 630,802 | $ | 332,282 | |||||||
Year ended December 31, 2012 | |||||||||||||||||
Casualty segment | $ | 19,673 | $ | 955,730 | $ | 199,672 | $ | 267,697 | $ | 184,555 | |||||||
Property segment | 14,523 | 169,250 | 103,854 | 202,402 | 132,507 | ||||||||||||
Surety segment | 18,148 | 33,503 | 65,820 | 106,472 | 19,166 | ||||||||||||
RLI Insurance Group | $ | 52,344 | $ | 1,158,483 | $ | 369,346 | $ | 576,571 | $ | 336,228 | |||||||
Year ended December 31, 2011 | |||||||||||||||||
Casualty segment | $ | 18,507 | $ | 973,077 | $ | 171,768 | $ | 236,198 | $ | 168,983 | |||||||
Property segment | 14,474 | 133,861 | 103,346 | 203,660 | 120,422 | ||||||||||||
Surety segment | 19,124 | 43,776 | 66,153 | 98,594 | 20,740 | ||||||||||||
RLI Insurance Group | $ | 52,105 | $ | 1,150,714 | $ | 341,267 | $ | 538,452 | $ | 310,145 | |||||||
NOTE 1: Investment income is not allocated to the segments, therefore net investment income has not been provided. | |||||||||||||||||
See the accompanying report of independent registered public accounting firm on page 102 of this report. | |||||||||||||||||
Incurred | |||||||||||||||||
losses and | |||||||||||||||||
settlement | Policy | Other | Net | ||||||||||||||
(in thousands) | expenses | acquisition | operating | premiums | |||||||||||||
Segment | prior year | costs | expenses | written | |||||||||||||
Year ended December 31, 2013 | |||||||||||||||||
Casualty segment | $ | (61,805 | ) | $ | 93,463 | $ | 26,107 | $ | 362,459 | ||||||||
Property segment | (7,273 | ) | 58,650 | 17,616 | 196,467 | ||||||||||||
Surety segment | (3,403 | ) | 58,538 | 9,834 | 107,396 | ||||||||||||
RLI Insurance Group | $ | (72,481 | ) | $ | 210,651 | $ | 53,557 | $ | 666,322 | ||||||||
Year ended December 31, 2012 | |||||||||||||||||
Casualty segment | $ | (40,449 | ) | $ | 76,765 | $ | 21,387 | $ | 284,058 | ||||||||
Property segment | (16,800 | ) | 60,070 | 14,933 | 202,971 | ||||||||||||
Surety segment | (7,334 | ) | 59,527 | 8,651 | 106,057 | ||||||||||||
RLI Insurance Group | $ | (64,583 | ) | $ | 196,362 | $ | 44,971 | $ | 593,086 | ||||||||
Year ended December 31, 2011 | |||||||||||||||||
Casualty segment | $ | (83,892 | ) | $ | 67,495 | $ | 22,215 | $ | 238,611 | ||||||||
Property segment | (18,453 | ) | 57,878 | 13,481 | 210,904 | ||||||||||||
Surety segment | (7,716 | ) | 58,495 | 8,616 | 100,123 | ||||||||||||
RLI Insurance Group | $ | (110,061 | ) | $ | 183,868 | $ | 44,312 | $ | 549,638 | ||||||||
See the accompanying report of independent registered public accounting firm on page 102 of this report. |
SCHEDULE_IVREINSURANCE
SCHEDULE IV-REINSURANCE | 12 Months Ended | |||||||||||||||
Dec. 31, 2013 | ||||||||||||||||
SCHEDULE IV-REINSURANCE | ' | |||||||||||||||
SCHEDULE IV-REINSURANCE | ' | |||||||||||||||
SCHEDULE IV—REINSURANCE | ||||||||||||||||
Years ended December 31, 2013, 2012 and 2011 | ||||||||||||||||
Percentage | ||||||||||||||||
Ceded to | Assumed | of amount | ||||||||||||||
(in thousands) | Direct | other | from other | Net | assumed | |||||||||||
Segment | amount | companies | companies | amount | to net | |||||||||||
2013 | ||||||||||||||||
Casualty | $ | 425,105 | $ | 103,696 | $ | 2,613 | $ | 324,022 | 0.8 | % | ||||||
Property | 203,424 | 79,320 | 76,037 | 200,141 | 38 | % | ||||||||||
Surety | 113,040 | 6,642 | 241 | 106,639 | 0.2 | % | ||||||||||
RLI Insurance Group Premiums earned | $ | 741,569 | $ | 189,658 | $ | 78,891 | $ | 630,802 | 12.5 | % | ||||||
2012 | ||||||||||||||||
Casualty | $ | 362,724 | $ | 96,039 | $ | 1,012 | $ | 267,697 | 0.4 | % | ||||||
Property | 203,072 | 76,817 | 76,147 | 202,402 | 37.6 | % | ||||||||||
Surety | 113,328 | 7,294 | 438 | 106,472 | 0.4 | % | ||||||||||
RLI Insurance Group Premiums earned | $ | 679,124 | $ | 180,150 | $ | 77,597 | $ | 576,571 | 13.5 | % | ||||||
2011 | ||||||||||||||||
Casualty | $ | 327,411 | $ | 91,991 | $ | 778 | $ | 236,198 | 0.3 | % | ||||||
Property | 194,946 | 56,356 | 65,070 | 203,660 | 32 | % | ||||||||||
Surety | 103,606 | 6,148 | 1,136 | 98,594 | 1.2 | % | ||||||||||
RLI Insurance Group Premiums earned | $ | 625,963 | $ | 154,495 | $ | 66,984 | $ | 538,452 | 12.4 | % | ||||||
See the accompanying report of independent registered public accounting firm on page 102 of this report. |
SCHEDULE_VVALUATION_AND_QUALIF
SCHEDULE V-VALUATION AND QUALIFYING ACCOUNTS | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
SCHEDULE V-VALUATION AND QUALIFYING ACCOUNTS | ' | |||||||||||||
SCHEDULE V-VALUATION AND QUALIFYING ACCOUNTS | ' | |||||||||||||
SCHEDULE V—VALUATION AND QUALIFYING ACCOUNTS | ||||||||||||||
Years ended December 31, 2013, 2012 and 2011 | ||||||||||||||
Balance | Amounts | Amounts | Balance | |||||||||||
at beginning | charged | recovered | at end of | |||||||||||
(in thousands) | of period | to expense | (written off) | period | ||||||||||
2013 Allowance for uncollectible reinsurance | $ | 26,404 | $ | — | $ | — | $ | 26,404 | ||||||
2012 Allowance for uncollectible reinsurance | $ | 26,404 | $ | — | $ | — | $ | 26,404 | ||||||
2011 Allowance for uncollectible reinsurance | $ | 26,900 | $ | — | $ | (496 | ) | $ | 26,404 | |||||
See the accompanying report of independent registered public accounting firm on page 102 of this report. |
SCHEDULE_VISUPPLEMENTARY_INFOR
SCHEDULE VI-SUPPLEMENTARY INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
SCHEDULE VI-SUPPLEMENTARY INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS | ' | ||||||||||||||||
SCHEDULE VI-SUPPLEMENTARY INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS | ' | ||||||||||||||||
SCHEDULE VI—SUPPLEMENTARY INFORMATION CONCERNING | |||||||||||||||||
PROPERTY-CASUALTY INSURANCE OPERATIONS | |||||||||||||||||
Years ended December 31, 2013, 2012 and 2011 | |||||||||||||||||
(in thousands) | Deferred policy | Claims and | Unearned | Net | Net | ||||||||||||
Affiliation with | acquisition | claim adjustment | premiums, | premiums | investment | ||||||||||||
Registrant (1) | costs | expense reserves | gross | earned | income | ||||||||||||
2013 | $ | 61,508 | $ | 1,129,433 | $ | 392,081 | $ | 630,802 | $ | 52,763 | |||||||
2012 | $ | 52,344 | $ | 1,158,483 | $ | 369,346 | $ | 576,571 | $ | 58,831 | |||||||
2011 | $ | 52,105 | $ | 1,150,714 | $ | 341,267 | $ | 538,452 | $ | 63,681 | |||||||
Claims and claim adjustment | |||||||||||||||||
expenses incurred related to: | Amortization | Paid claims and | Net | ||||||||||||||
Current | Prior | of deferred | claim adjustment | premiums | |||||||||||||
year | year | acquisition costs | expenses | written | |||||||||||||
2013 | $ | 332,282 | $ | (72,481 | ) | $ | 210,651 | $ | 283,891 | $ | 666,322 | ||||||
2012 | $ | 336,228 | $ | (64,583 | ) | $ | 196,362 | $ | 269,955 | $ | 593,086 | ||||||
2011 | $ | 310,145 | $ | (110,061 | ) | $ | 183,868 | $ | 276,461 | $ | 549,638 | ||||||
(1) Consolidated property-casualty insurance operations. | |||||||||||||||||
See the accompanying report of independent registered public accounting firm on page 102 of this report. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||||
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION | ' | ||||||||||
B. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION: The accompanying consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States of America (GAAP), which differ in some respects from those followed in reports to insurance regulatory authorities. The consolidated financial statements include the accounts of our holding company and our subsidiaries. All significant intercompany balances and transactions have been eliminated. On January 15, 2014, RLI Corp. executed a two-for-one split of its common stock. All share and per share data throughout this report reflect the stock split and certain related reclassifications were made to prior years’ financial statements to conform to classifications used in the current year. | |||||||||||
INVESTMENTS | ' | ||||||||||
E. INVESTMENTS: We classify our investments in all debt and equity securities into one of three categories: available-for-sale, held-to-maturity or trading. | |||||||||||
AVAILABLE-FOR-SALE SECURITIES | |||||||||||
Debt and equity securities not included as held-to-maturity are classified as available-for-sale and reported at fair value. Unrealized gains and losses on these securities are excluded from net earnings but are recorded as a separate component of comprehensive earnings and shareholders’ equity, net of deferred income taxes. All of our equity securities and approximately 99 percent of debt securities are classified as available-for-sale. | |||||||||||
HELD-TO-MATURITY SECURITIES | |||||||||||
Debt securities that we have the positive intent and ability to hold to maturity are classified as held-to-maturity and carried at amortized cost. Except for declines that are other-than-temporary, changes in the fair value of these securities are not reflected in the financial statements. We have classified less than 1 percent of our debt securities portfolio as held-to-maturity. | |||||||||||
TRADING SECURITIES | |||||||||||
Debt and equity securities purchased for short-term resale are classified as trading securities. These securities are reported at fair value with unrealized gains and losses included in earnings. During 2013, we sold our remaining debt securities classified as trading. | |||||||||||
For the years ended December 31, 2013, 2012 and 2011, no securities were transferred from held-to-maturity to available-for-sale or trading. | |||||||||||
OTHER THAN TEMPORARY IMPAIRMENT | |||||||||||
We regularly evaluate our fixed income and equity securities using both quantitative and qualitative criteria to determine impairment losses for other-than-temporary declines in the fair value of the investments. The following are the key factors for determining if a security is other-than-temporarily impaired: | |||||||||||
· The length of time and the extent to which the fair value has been less than cost, | |||||||||||
· The probability of significant adverse changes to the cash flows on a fixed income investment, | |||||||||||
· The occurrence of a discrete credit event resulting in the issuer defaulting on a material obligation, the issuer seeking protection from creditors under the bankruptcy laws, the issuer proposing a voluntary reorganization under which creditors are asked to exchange their claims for cash or securities having a fair value substantially lower than par value, | |||||||||||
· The probability that we will recover the entire amortized cost basis of our fixed income securities prior to maturity or | |||||||||||
· For our equity securities, our expectation of recovery to cost within a reasonable period of time. | |||||||||||
Quantitative criteria considered during this process include, but are not limited to: the degree and duration of current fair value as compared to the cost (amortized, in certain cases) of the security, degree and duration of the security’s fair value being below cost and, for fixed maturities, whether the issuer is in compliance with terms and covenants of the security. Qualitative criteria include the credit quality, current economic conditions, the anticipated speed of cost recovery, the financial health of and specific prospects for the issuer, as well as our absence of intent to sell or requirement to sell fixed income securities prior to maturity. In addition, we consider price declines of securities in our other-than-temporary impairment (OTTI) analysis, where such price declines provide evidence of declining credit quality, and we distinguish between price changes caused by credit deterioration, as opposed to rising interest rates. See note 2 for further discussion of OTTI. | |||||||||||
Interest on fixed maturities and short-term investments is credited to earnings on an accrual basis. Premiums and discounts are amortized or accreted over the lives of the related fixed maturities. Dividends on equity securities are credited to earnings on the ex-dividend date. Realized gains and losses on disposition of investments are based on specific identification of the investments sold on the settlement date. | |||||||||||
CASH AND SHORT-TERM INVESTMENTS | ' | ||||||||||
F. CASH AND SHORT-TERM INVESTMENTS: Cash consists of uninvested balances in bank accounts. Short-term investments consist of investments with original maturities of 90 days or less, primarily AAA-rated prime and government money market funds. Short-term investments are carried at cost, which approximates fair value. We have not experienced losses on these instruments. | |||||||||||
REINSURANCE | ' | ||||||||||
G. REINSURANCE: Ceded unearned premiums and reinsurance balances recoverable on paid and unpaid losses and settlement expenses are reported separately as assets, instead of being netted with the related liabilities, since reinsurance does not relieve us of our legal liability to our policyholders. | |||||||||||
We continuously monitor the financial condition of our reinsurers. As part of our monitoring efforts, we review their annual financial statements, quarterly disclosures and Securities and Exchange Commission (SEC) filings for those reinsurers that are publicly traded. We also review insurance industry developments that may impact the financial condition of our reinsurers. We analyze the credit risk associated with our reinsurance balances recoverable by monitoring the A.M. Best and Standard & Poor’s (S&P) ratings of our reinsurers. In addition, we subject our reinsurance recoverables to detailed recoverable tests, including one based on average default by S&P rating. Based upon our review and testing, our policy is to charge to earnings, in the form of an allowance, an estimate of unrecoverable amounts from reinsurers. This allowance is reviewed on an ongoing basis to ensure that the amount makes a reasonable provision for reinsurance balances that we may be unable to recover. | |||||||||||
POLICY ACQUISITION COSTS | ' | ||||||||||
H. POLICY ACQUISITION COSTS: We defer commissions, premium taxes and certain other costs that are incrementally or directly related to the successful acquisition of new or renewal insurance contracts. Acquisition-related costs may be deemed ineligible for deferral when they are based on contingent or performance criteria beyond the basic acquisition of the insurance contract or when efforts to obtain or renew the insurance contract are unsuccessful. All eligible costs are capitalized and charged to expense in proportion to premium revenue recognized. The method followed in computing deferred policy acquisition costs limits the amount of such deferred costs to their estimated realizable value. This would also give effect to the premiums to be earned and anticipated losses and settlement expenses, as well as certain other costs expected to be incurred as the premiums are earned. Judgments as to the ultimate recoverability of such deferred costs are reviewed on a segment basis and are highly dependent upon estimated future loss costs associated with the premiums written. This deferral methodology applies to both gross and ceded premiums and acquisition costs. | |||||||||||
PROPERTY AND EQUIPMENT | ' | ||||||||||
I. PROPERTY AND EQUIPMENT: Property and equipment are presented at cost less accumulated depreciation and are depreciated on a straight-line basis for financial statement purposes over periods ranging from 3 to 10 years for equipment and up to 30 years for buildings and improvements. | |||||||||||
INVESTMENT IN UNCONSOLIDATED INVESTEE | ' | ||||||||||
J. INVESTMENT IN UNCONSOLIDATED INVESTEE: We maintain a 40 percent interest in the earnings of Maui Jim, Inc. (Maui Jim), a manufacturer of high-quality polarized sunglasses, which is accounted for by the equity method. We also maintain a similar minority representation on their board of directors. Maui Jim’s chief executive officer owns a controlling majority of the outstanding shares of Maui Jim. We carry this investment at the holding company, RLI Corp., level as it is not core to our insurance operations. Our investment in Maui Jim was $49.8 million in 2013 and $52.1 million in 2012. In 2013, we recorded $10.9 million in investee earnings, compared to $8.9 million in 2012 and $6.5 million in 2011. Maui Jim recorded net income of $26.1 million in 2013, $22.6 million in 2012 and $16.1 million in 2011. Additional summarized financial information for Maui Jim for 2013 and 2012 is outlined in the following table: | |||||||||||
(in millions) | 2013 | 2012 | |||||||||
Total assets | $ | 193.5 | $ | 175.4 | |||||||
Total liabilities | 92.7 | 68 | |||||||||
Total equity | 100.8 | 107.4 | |||||||||
Approximately $36.7 million of undistributed earnings from Maui Jim are included in our retained earnings as of December 31, 2013. In 2013 and 2012, we received dividends of $13.2 million and $6.6 million, respectively, from Maui Jim. | |||||||||||
We perform an annual impairment review of our investment in our unconsolidated investee, which considers current valuation and operating results. Based upon the most recent review, this asset was not impaired. | |||||||||||
INTANGIBLE ASSETS | ' | ||||||||||
K. INTANGIBLE ASSETS: In accordance with GAAP guidelines, the amortization of goodwill and indefinite-lived intangible assets is not permitted. Goodwill and indefinite-lived intangible assets remain on the balance sheet and are tested for impairment on an annual basis, or earlier if there is reason to suspect that their values may have been diminished or impaired. Goodwill and intangibles totaled $74.9 million at December 31, 2013. These assets relate to acquisition activity including our recent acquisitions of CBIC and Rockbridge. | |||||||||||
Goodwill resulting from acquisitions completed prior to 2011 totaled $26.2 million and is attributable to our surety segment. Goodwill and intangible assets resulting from the CBIC acquisition in April 2011 totaled $32.5 million. The CBIC-related assets include goodwill attributable to our casualty and surety segments of $5.3 million and $15.1 million, respectively, and an indefinite-lived intangible asset in the amount of $8.8 million. Annual impairment testing was performed on each of these goodwill and indefinite-lived intangible assets in the second quarter of 2013. Based upon these reviews, none of the assets were impaired. In addition, as of December 31, 2013, there were no triggering events that occurred that would suggest an updated review was necessary. Definite-lived intangible assets related to the CBIC acquisition totaled $3.3 million, net of amortization, as of December 31, 2013. | |||||||||||
The remaining $16.2 million of goodwill and intangibles relates to our purchase of Rockbridge in November 2012. Of this amount, $12.4 million is recorded as goodwill attributable to our casualty segment. The remaining $3.8 million relates to definite-lived intangible assets, net of amortization, as of December 31, 2013. We completed our evaluation of the acquisition under ASC Topic 805, Business Combinations in January 2013, which resulted in no adjustments from amounts recorded at December 31, 2012. Annual impairment testing was performed on this goodwill in the fourth quarter of 2013. Based upon this review, the asset was not impaired. In addition, as of December 31, 2013, there were no triggering events that occurred that would suggest an updated review was necessary. | |||||||||||
The aforementioned definite-lived intangible assets are amortized against future operating results based on their estimated useful lives. Amortization of intangible assets resulting from the acquisitions of CBIC and Rockbridge was $1.2 million for 2013. | |||||||||||
UNPAID LOSSES AND SETTLEMENT EXPENSES | ' | ||||||||||
L. UNPAID LOSSES AND SETTLEMENT EXPENSES: The liability for unpaid losses and settlement expenses represents estimates of amounts needed to pay reported and unreported claims and related expenses. The estimates are based on certain actuarial and other assumptions related to the ultimate cost to settle such claims. Such assumptions are subject to occasional changes due to evolving economic, social and political conditions. All estimates are periodically reviewed and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments are reflected in the results of operations in the period in which they are determined. Due to the inherent uncertainty in estimating reserves for losses and settlement expenses, there can be no assurance that the ultimate liability will not exceed recorded amounts. If actual liabilities do exceed recorded amounts, there will be an adverse effect. Furthermore, we may determine that recorded reserves are more than adequate to cover expected losses, as happened during 2010 through 2013, when favorable experience primarily on casualty business led us to reduce our reserves. Based on the current assumptions used in estimating reserves, we believe that our overall reserve levels at December 31, 2013, make a reasonable provision to meet our future obligations. See note 6 for a further discussion of unpaid losses and settlement expenses. | |||||||||||
INSURANCE REVENUE RECOGNITION | ' | ||||||||||
M. INSURANCE REVENUE RECOGNITION: Insurance premiums are recognized ratably over the term of the contracts, net of ceded reinsurance. Unearned premiums are calculated on a monthly pro rata basis. | |||||||||||
INCOME TAXES | ' | ||||||||||
N. INCOME TAXES: We file a consolidated federal income tax return. Federal income taxes are accounted for using the asset and liability method under which deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities, operating losses and tax credit carry forwards. The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance if it is more likely than not all or some of the deferred tax assets will not be realized. | |||||||||||
We consider uncertainties in income taxes and recognize those in our financial statements as required. As it relates to uncertainties in income taxes, our unrecognized tax benefits, including interest and penalty accruals, are not considered material to the consolidated financial statements. Also, no tax uncertainties are expected to result in significant increases or decreases to unrecognized tax benefits within the next 12-month period. Penalties and interest related to income tax uncertainties, should they occur, would be included in income tax expense in the period in which they are incurred. | |||||||||||
During 2013, the Internal Revenue Service (IRS) completed an examination of the income tax returns for the years 2010 and 2011, which produced no material change to net earnings. Although 2010 and 2011 have been examined by the IRS, tax years 2010 through 2013 remain open and are subject to examination or re-examination. | |||||||||||
As an insurance company, we are subject to minimal state income tax liabilities. On a state basis, since the majority of our income is from insurance operations, we pay premium tax in lieu of state income tax. Premium taxes are a component of policy acquisition costs and calculated as a percentage of gross premiums written. | |||||||||||
EARNINGS PER SHARE | ' | ||||||||||
O. EARNINGS PER SHARE: Basic earnings per share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock or common stock equivalents were exercised or converted into common stock. When inclusion of common stock equivalents increases the earnings per share or reduces the loss per share, the effect on earnings is anti-dilutive. Under these circumstances, the diluted net earnings or net loss per share is computed excluding the common stock equivalents. | |||||||||||
The following represents a reconciliation of the numerator and denominator of the basic and diluted EPS computations contained in the consolidated financial statements. As discussed in note 1.B. above, all share and per share data reflect the two-for-one stock split executed on January 15, 2014. | |||||||||||
(in thousands, except per share data) | Income | Weighted Average | Per Share | ||||||||
(Numerator) | Shares | Amount | |||||||||
(Denominator) | |||||||||||
For the year ended December 31, 2013 | |||||||||||
Basic EPS | |||||||||||
Income available to common shareholders | $ | 126,255 | 42,744 | $ | 2.95 | ||||||
Stock options | — | 770 | |||||||||
Diluted EPS | |||||||||||
Income available to common shareholders and assumed conversions | $ | 126,255 | 43,514 | $ | 2.9 | ||||||
For the year ended December 31, 2012 | |||||||||||
Basic EPS | |||||||||||
Income available to common shareholders | $ | 103,346 | 42,431 | $ | 2.44 | ||||||
Stock options | — | 729 | |||||||||
Diluted EPS | |||||||||||
Income available to common shareholders and assumed conversions | $ | 103,346 | 43,160 | $ | 2.39 | ||||||
For the year ended December 31, 2011 | |||||||||||
Basic EPS | |||||||||||
Income available to common shareholders | $ | 126,598 | 42,156 | $ | 3 | ||||||
Stock options | — | 713 | |||||||||
Diluted EPS | |||||||||||
Income available to common shareholders and assumed conversions | $ | 126,598 | 42,869 | $ | 2.95 | ||||||
COMPREHENSIVE EARNINGS | ' | ||||||||||
P. COMPREHENSIVE EARNINGS: Our comprehensive earnings include net earnings plus unrealized gains/losses on our available-for-sale investment securities, net of tax. In reporting the components of comprehensive earnings on a net basis in the statement of earnings, we used a 35 percent tax rate. Other comprehensive income (loss), as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax expense (benefit) of $(3.8) million, $13.9 million and $11.5 million for 2013, 2012 and 2011, respectively. | |||||||||||
The following table illustrates the changes in the balance of each component of accumulated other comprehensive earnings for each period presented in the consolidated financial statements. | |||||||||||
(in thousands) | For the Year Ended December 31, | ||||||||||
Unrealized Gains/Losses on Available-for-Sale Securities | 2013 | 2012 | 2011 | ||||||||
Beginning balance | $ | 143,170 | 117,325 | 95,992 | |||||||
Other comprehensive earnings before reclassifications | 7,723 | 44,079 | 32,230 | ||||||||
Amounts reclassified from accumulated other comprehensive earnings | (14,866 | ) | (18,234 | ) | (10,897 | ) | |||||
Net current-period other comprehensive earnings (loss) | $ | (7,143 | ) | 25,845 | 21,333 | ||||||
Ending balance | $ | 136,027 | 143,170 | 117,325 | |||||||
The sale or other-than-temporary impairment of an available-for-sale security results in amounts being reclassified from accumulated other comprehensive earnings to current period net earnings. The effects of reclassifications out of accumulated other comprehensive earnings by the respective line items of net earnings are presented in the following table. | |||||||||||
(in thousands) | Amount Reclassified from | ||||||||||
Accumulated Other Comprehensive Earnings | |||||||||||
Component of Accumulated | For the Year Ended December 31, | Affected line item in the | |||||||||
Other Comprehensive Earnings | 2013 | 2012 | 2011 | Statement of Earnings | |||||||
Unrealized gains and losses on available-for-sale securities | $ | 22,871 | 29,209 | 17,021 | Net realized investment gains | ||||||
Other-than-temporary impairment | |||||||||||
— | (1,156 | ) | (257 | ) | (OTTI) losses on investments | ||||||
22,871 | 28,053 | 16,764 | Earnings before income taxes | ||||||||
(8,005 | ) | (9,819 | ) | (5,867 | ) | Income tax expense | |||||
$ | 14,866 | 18,234 | 10,897 | Net earnings | |||||||
FAIR VALUE DISCLOSURES | ' | ||||||||||
Q. FAIR VALUE DISCLOSURES: Fair value is defined as the price in the principal market that would be received for an asset to facilitate an orderly transaction between market participants on the measurement date. We determined the fair value of certain financial instruments based on their underlying characteristics and relevant transactions in the marketplace. GAAP guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance also describes three levels of inputs that may be used to measure fair value. | |||||||||||
The following are the levels of the fair value hierarchy and a brief description of the type of valuation inputs that are used to establish each level: | |||||||||||
· Pricing Level 1 is applied to valuations based on readily available, unadjusted quoted prices in active markets for identical assets. These valuations are based on quoted prices that are readily and regularly available in an active market. | |||||||||||
· Pricing Level 2 is applied to valuations based upon quoted prices for similar assets in active markets, quoted prices for identical or similar assets in inactive markets; or valuations based on models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities) or can be corroborated by observable market data. | |||||||||||
· Pricing Level 3 is applied to valuations that are derived from techniques in which one or more of the significant inputs are unobservable. Financial assets are classified based upon the lowest level of significant input that is used to determine fair value. | |||||||||||
As a part of management’s process to determine fair value, we utilize a widely recognized, third-party pricing source to determine our fair values. We have obtained an understanding of the third-party pricing source’s valuation methodologies and inputs. The following is a description of the valuation techniques used for financial assets that are measured at fair value, including the general classification of such assets pursuant to the fair value hierarchy. | |||||||||||
Corporate, Agencies, Government and Municipal Bonds: The pricing vendor employs a multi-dimensional model which uses standard inputs including (listed in order of priority for use) benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, market bids/offers and other reference data. The pricing vendor also monitors market indicators, as well as industry and economic events. All bonds valued using these techniques are classified as Level 2. All Corporate, Agencies, Government and Municipal securities are deemed Level 2. | |||||||||||
Mortgage-backed Securities (MBS)/Collateralized Mortgage Obligations (CMO) and Asset-backed Securities (ABS): The pricing vendor evaluation methodology includes principally interest rate movements and new issue data. Evaluation of the tranches (non-volatile, volatile or credit sensitivity) is based on the pricing vendors’ interpretation of accepted modeling and pricing conventions. This information is then used to determine the cash flows for each tranche, benchmark yields, prepayment assumptions and to incorporate collateral performance. To evaluate CMO volatility, an option adjusted spread model is used in combination with models that simulate interest rate paths to determine market price information. This process allows the pricing vendor to obtain evaluations of a broad universe of securities in a way that reflects changes in yield curve, index rates, implied volatility, mortgage rates and recent trade activity. MBS/CMO and ABS with corroborated, observable inputs are classified as Level 2. All of our MBS/CMO and ABS are deemed Level 2. | |||||||||||
Common Stock: Exchange traded equities have readily observable price levels and are classified as Level 1 (fair value based on quoted market prices). All of our common stock holdings are deemed Level 1. | |||||||||||
For the Level 2 securities, as described above, we periodically conduct a review to assess the reasonableness of the fair values provided by our pricing service. Our review consists of a two-pronged approach. First, we compare prices provided by our pricing service to those provided by an additional source. Second, we obtain prices from securities brokers and compare them to the prices provided by our pricing service. In both comparisons, when discrepancies are found, we compare our prices to actual reported trade data for like securities. Based on this assessment, we determined that the fair values of our Level 2 securities provided by our pricing service are reasonable. | |||||||||||
For common stock, we receive prices from the same nationally recognized pricing service. Prices are based on observable inputs in an active market and are therefore disclosed as Level 1. Based on this assessment, we determined that the fair values of our Level 1 securities provided by our pricing service are reasonable. | |||||||||||
Due to the relatively short-term nature of cash, short-term investments, accounts receivable and accounts payable, their carrying amounts are reasonable estimates of fair value. The fair value of our long-term debt is discussed further in note 4. See note 13 for fair value of assets and liabilities acquired with CBIC and Rockbridge. | |||||||||||
STOCK-BASED COMPENSATION | ' | ||||||||||
R. STOCK-BASED COMPENSATION: We expense the estimated fair value of employee stock options and similar awards. Guidance requires entities to measure compensation cost for awards of equity instruments to employees based on the grant-date fair value of those awards and recognize compensation expense over the service period that the awards are expected to vest. | |||||||||||
We calculate the tax effects of share-based compensation under the alternative transition method as permitted by GAAP guidance. The alternative transition method includes simplified methods to determine the impact on the additional paid-in capital pool and consolidated statements of cash flows of the tax effects of employee share-based compensation awards. | |||||||||||
See note 8 for further discussion and related disclosures regarding stock options. | |||||||||||
RISKS AND UNCERTAINTIES | ' | ||||||||||
S. RISKS AND UNCERTAINTIES: Certain risks and uncertainties are inherent to our day-to-day operations and to the process of preparing our consolidated financial statements. The more significant risks and uncertainties, as well as our attempt to mitigate, quantify and minimize such risks, are presented below and throughout the notes to the consolidated financial statements. | |||||||||||
Catastrophe Exposures | |||||||||||
Our insurance coverages include exposure to catastrophic events. We monitor all catastrophe exposures by quantifying our exposed policy limits in each region and by using computer-assisted modeling techniques. Additionally, we limit our risk to such catastrophes through restraining the total policy limits written in each region and by purchasing reinsurance. Our major catastrophe exposure is to losses caused by earthquakes, primarily on the West Coast. In 2013, for this coverage, we had protection of $300 million in excess of $25 million first-dollar retention for earthquakes in California and $330 million in excess of a $20 million first-dollar retention for earthquakes outside of California. These amounts are subject to certain co-participations by us on losses in excess of the $25 million or $20 million retentions. Our second largest catastrophe exposure is to losses caused by hurricanes to commercial properties throughout the Gulf and East Coasts, as well as to homes we insure in Hawaii. In 2013, these coverages were supported by $230 million in excess of a $20 million first-dollar retention in traditional catastrophe reinsurance protection, subject to certain retentions by us in the excess layers. In addition, we have incidental exposure to international catastrophic events. | |||||||||||
Our catastrophe reinsurance treaty renewed on January 1, 2014. We purchased the same limits over the same retention amounts outlined above for earthquakes in California. For earthquakes outside of California, we purchased $325 million excess of a $25 million first-dollar retention, subject to certain retentions by us in the excess layers. For other CAT events such as hurricanes, we purchased $225 million excess of a $25 million first-dollar retention, subject to certain retentions by us in the excess layers. We actively manage our catastrophe program to keep our net retention in line with risk tolerances and to optimize the risk/return trade off. | |||||||||||
Environmental Exposures | |||||||||||
We are subject to environmental claims and exposures primarily through our commercial umbrella, general liability and discontinued assumed casualty reinsurance lines of business. Although exposure to environmental claims exists in these lines of business, we sought to mitigate or control the extent of this exposure on the vast majority of this business through the following methods: (1) our policies include pollution exclusions that have been continually updated to further strengthen them, (2) our policies primarily cover moderate hazard risks and (3) we began writing this business after the insurance industry became aware of the potential pollution liability exposure and implemented changes to limit its exposure to this hazard. | |||||||||||
In 2009, as an extension of our excess and surplus lines general liability product, we expanded our offerings into low to moderate environmental liability exposures for small contractors and asbestos and mold remediation specialists. The business unit also provides limited coverage for individually underwritten underground storage tanks. We attempted to mitigate the overall exposure by focusing on smaller risks with low to moderate exposures. A large portion of this business is also offered on a claims-made basis with relatively low limits. We avoid risks that have large-scale exposures including petrochemical, chemical, mining, manufacturers and other risks that might be exposed to superfund sites. This business is covered under our casualty ceded reinsurance treaties. Since 2009, we have written $9.3 million of premium from this new product extension with $3.0 million written in 2013. | |||||||||||
We made loss and settlement expense payments on environmental liability claims and have loss and settlement expense reserves for others. We include this historical environmental loss experience with the remaining loss experience in the applicable line of business to project ultimate incurred losses and settlement expenses as well as related incurred but not reported (IBNR) loss and settlement expense reserves. | |||||||||||
Although historical experience on environmental claims may not accurately reflect future environmental exposures, we used this experience to record loss and settlement expense reserves in the exposed lines of business. See further discussion of environmental exposures in note 6. | |||||||||||
Reinsurance | |||||||||||
Reinsurance does not discharge us from our primary liability to policyholders, and to the extent that a reinsurer is unable to meet its obligations, we would be liable. We continuously monitor the financial condition of prospective and existing reinsurers. As a result, we purchase reinsurance from a number of financially strong reinsurers. We provide an allowance for reinsurance balances deemed uncollectible. See further discussion of reinsurance exposures in note 5. | |||||||||||
Investment Risk | |||||||||||
Our investment portfolio is subject to market, credit and interest rate risks. The equity portfolio will fluctuate with movements in the overall stock market. While the equity portfolio has been constructed to have lower downside risk than the market, the portfolio is sensitive to movements in the market. The bond portfolio is affected by interest rate changes and movement in credit spreads. We attempt to mitigate our interest rate and credit risks by constructing a well-diversified portfolio with high-quality securities with varied maturities. Downturns in the financial markets could have a negative effect on our portfolio. However, we attempt to manage this risk through asset allocation and security selection. | |||||||||||
Liquidity Risk | |||||||||||
Liquidity is essential to our business and a key component of our concept of asset-liability matching. Our liquidity may be impaired by an inability to collect premium receivable or reinsurance recoverable balances in a timely manner, an inability to sell assets or redeem our investments, an inability to access funds from our insurance subsidiaries, unforeseen outflows of cash or large claim payments or an inability to access debt or equity capital markets. This situation may arise due to circumstances that we may be unable to control, such as a general market disruption, an operational problem that affects third parties or us, or even by the perception among market participants that we, or other market participants, are experiencing greater liquidity risk. | |||||||||||
Our credit ratings are important to our liquidity. A reduction in our credit ratings could adversely affect our liquidity and competitive position, by increasing our borrowing costs or limiting our access to the capital markets. | |||||||||||
Financial Statements | |||||||||||
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses. The most significant of these amounts is the liability for unpaid losses and settlement expenses. Other estimates include investment valuation and OTTIs, the collectability of reinsurance balances, recoverability of deferred tax assets and deferred policy acquisition costs. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. Although recorded estimates are supported by actuarial computations and other supportive data, the estimates are ultimately based on our expectations of future events. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods. | |||||||||||
External Factors | |||||||||||
Our insurance subsidiaries are highly regulated by the states in which they are incorporated and by the states in which they do business. Such regulations, among other things, limit the amount of dividends, impose restrictions on the amount and types of investments and regulate rates insurers may charge for various coverages. We are also subject to insolvency and guarantee fund assessments for various programs designed to ensure policyholder indemnification. We generally accrue an assessment during the period in which it becomes probable that a liability has been incurred from an insolvency and the amount of the related assessment can be reasonably estimated. | |||||||||||
The National Association of Insurance Commissioners (NAIC) has developed Property/Casualty Risk-Based Capital (RBC) standards that relate an insurer’s reported statutory surplus to the risks inherent in its overall operations. The RBC formula uses the statutory annual statement to calculate the minimum indicated capital level to support asset (investment and credit) risk and underwriting (loss reserves, premiums written and unearned premium) risk. The NAIC model law calls for various levels of regulatory action based on the magnitude of an indicated RBC capital deficiency, if any. We regularly monitor our subsidiaries’ internal capital requirements and the NAIC’s RBC developments. As of December 31, 2013, we determined that our capital levels are well in excess of the minimum capital requirements for all RBC action levels and that our capital levels are sufficient to support the level of risk inherent in our operations. See note 9 for further discussion of statutory information and related insurance regulatory restrictions. | |||||||||||
In addition, ratings are a critical factor in establishing the competitive position of insurance companies. Our insurance companies are rated by A.M. Best, S&P and Moody’s. Their ratings reflect their opinions of an insurance company’s and an insurance holding company’s, financial strength, operating performance, strategic position and ability to meet its obligations to policyholders. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||||
Schedule of summarized financial information of Maui Jim | ' | ||||||||||
(in millions) | 2013 | 2012 | |||||||||
Total assets | $ | 193.5 | $ | 175.4 | |||||||
Total liabilities | 92.7 | 68 | |||||||||
Total equity | 100.8 | 107.4 | |||||||||
Schedule of reconciliation of numerator and denominator of the basic and diluted earnings per share computations | ' | ||||||||||
(in thousands, except per share data) | Income | Weighted Average | Per Share | ||||||||
(Numerator) | Shares | Amount | |||||||||
(Denominator) | |||||||||||
For the year ended December 31, 2013 | |||||||||||
Basic EPS | |||||||||||
Income available to common shareholders | $ | 126,255 | 42,744 | $ | 2.95 | ||||||
Stock options | — | 770 | |||||||||
Diluted EPS | |||||||||||
Income available to common shareholders and assumed conversions | $ | 126,255 | 43,514 | $ | 2.9 | ||||||
For the year ended December 31, 2012 | |||||||||||
Basic EPS | |||||||||||
Income available to common shareholders | $ | 103,346 | 42,431 | $ | 2.44 | ||||||
Stock options | — | 729 | |||||||||
Diluted EPS | |||||||||||
Income available to common shareholders and assumed conversions | $ | 103,346 | 43,160 | $ | 2.39 | ||||||
For the year ended December 31, 2011 | |||||||||||
Basic EPS | |||||||||||
Income available to common shareholders | $ | 126,598 | 42,156 | $ | 3 | ||||||
Stock options | — | 713 | |||||||||
Diluted EPS | |||||||||||
Income available to common shareholders and assumed conversions | $ | 126,598 | 42,869 | $ | 2.95 | ||||||
Schedule of changes in the balance of each component of accumulated other comprehensive earnings | ' | ||||||||||
(in thousands) | For the Year Ended December 31, | ||||||||||
Unrealized Gains/Losses on Available-for-Sale Securities | 2013 | 2012 | 2011 | ||||||||
Beginning balance | $ | 143,170 | 117,325 | 95,992 | |||||||
Other comprehensive earnings before reclassifications | 7,723 | 44,079 | 32,230 | ||||||||
Amounts reclassified from accumulated other comprehensive earnings | (14,866 | ) | (18,234 | ) | (10,897 | ) | |||||
Net current-period other comprehensive earnings (loss) | $ | (7,143 | ) | 25,845 | 21,333 | ||||||
Ending balance | $ | 136,027 | 143,170 | 117,325 | |||||||
Schedule of effects of reclassifications out of accumulated other comprehensive earnings | ' | ||||||||||
(in thousands) | Amount Reclassified from | ||||||||||
Accumulated Other Comprehensive Earnings | |||||||||||
Component of Accumulated | For the Year Ended December 31, | Affected line item in the | |||||||||
Other Comprehensive Earnings | 2013 | 2012 | 2011 | Statement of Earnings | |||||||
Unrealized gains and losses on available-for-sale securities | $ | 22,871 | 29,209 | 17,021 | Net realized investment gains | ||||||
Other-than-temporary impairment | |||||||||||
— | (1,156 | ) | (257 | ) | (OTTI) losses on investments | ||||||
22,871 | 28,053 | 16,764 | Earnings before income taxes | ||||||||
(8,005 | ) | (9,819 | ) | (5,867 | ) | Income tax expense | |||||
$ | 14,866 | 18,234 | 10,897 | Net earnings |
INVESTMENTS_Tables
INVESTMENTS (Tables) | 12 Months Ended | |||||||||||||||||||
Dec. 31, 2013 | ||||||||||||||||||||
INVESTMENTS | ' | |||||||||||||||||||
Schedule of net investment income | ' | |||||||||||||||||||
NET INVESTMENT INCOME | ||||||||||||||||||||
(in thousands) | 2013 | 2012 | 2011 | |||||||||||||||||
Interest on fixed income securities | $ | 45,870 | $ | 50,646 | $ | 58,294 | ||||||||||||||
Dividends on equity securities | 11,865 | 12,848 | 9,957 | |||||||||||||||||
Interest on cash and short-term investments | 23 | 15 | 47 | |||||||||||||||||
Gross investment income | 57,758 | 63,509 | 68,298 | |||||||||||||||||
Less investment expenses | (4,995 | ) | (4,678 | ) | (4,617 | ) | ||||||||||||||
Net investment income | $ | 52,763 | $ | 58,831 | $ | 63,681 | ||||||||||||||
Schedule of pretax net realized investment gains (losses) and net changes in unrealized gains (losses) on investments | ' | |||||||||||||||||||
REALIZED/UNREALIZED GAINS | ||||||||||||||||||||
(in thousands) | 2013 | 2012 | 2011 | |||||||||||||||||
Net realized investment gains (losses) | ||||||||||||||||||||
Fixed income | ||||||||||||||||||||
Available-for-sale | $ | 1,338 | $ | 12,965 | $ | 10,892 | ||||||||||||||
Available-for-sale OTTI | — | — | — | |||||||||||||||||
Held-to-maturity | 9 | 247 | 201 | |||||||||||||||||
Trading | — | — | — | |||||||||||||||||
Equity securities | 21,533 | 16,245 | 6,129 | |||||||||||||||||
Equity securities OTTI | — | (1,156 | ) | (257 | ) | |||||||||||||||
Other | (844 | ) | (2,929 | ) | 71 | |||||||||||||||
Total | $ | 22,036 | $ | 25,372 | $ | 17,036 | ||||||||||||||
Net changes in unrealized gains | ||||||||||||||||||||
(losses) on investments | ||||||||||||||||||||
Fixed income | ||||||||||||||||||||
Available-for-sale | $ | (75,228 | ) | $ | 23,643 | $ | 22,393 | |||||||||||||
Equity securities | 64,305 | 16,212 | 10,462 | |||||||||||||||||
Total | $ | (10,923 | ) | $ | 39,855 | $ | 32,855 | |||||||||||||
Net realized investment gains (losses) and changes in unrealized gains (losses) on investments | $ | 11,113 | $ | 65,227 | $ | 49,891 | ||||||||||||||
Schedule of disposition of fixed maturities and equities | ' | |||||||||||||||||||
Net | ||||||||||||||||||||
SALES | Proceeds | Gross Realized | Realized | |||||||||||||||||
(in thousands) | From Sales | Gains | Losses | Gain (Loss) | ||||||||||||||||
2013 | ||||||||||||||||||||
Available-for-sale | $ | 173,694 | $ | 3,561 | $ | (2,597 | ) | $ | 964 | |||||||||||
Held-to-maturity | — | — | — | — | ||||||||||||||||
Trading | 5 | — | — | — | ||||||||||||||||
Equities | 73,982 | 21,542 | (9 | ) | 21,533 | |||||||||||||||
2012 | ||||||||||||||||||||
Available-for-sale | $ | 181,338 | $ | 11,208 | $ | (43 | ) | $ | 11,165 | |||||||||||
Held-to-maturity | — | — | — | — | ||||||||||||||||
Trading | — | — | — | — | ||||||||||||||||
Equities | 78,315 | 19,755 | (3,510 | ) | 16,245 | |||||||||||||||
2011 | ||||||||||||||||||||
Available-for-sale | $ | 383,664 | $ | 11,333 | $ | (487 | ) | $ | 10,846 | |||||||||||
Held-to-maturity | — | — | — | — | ||||||||||||||||
Trading | — | — | — | — | ||||||||||||||||
Equities | 40,092 | 8,483 | (2,354 | ) | 6,129 | |||||||||||||||
Net | ||||||||||||||||||||
CALLS/MATURITIES | Gross Realized | Realized | ||||||||||||||||||
(in thousands) | Proceeds | Gains | Losses | Gain (Loss) | ||||||||||||||||
2013 | ||||||||||||||||||||
Available-for-sale | $ | 224,620 | $ | 379 | $ | (5 | ) | $ | 374 | |||||||||||
Held-to-maturity | 11,090 | 9 | — | 9 | ||||||||||||||||
Trading | 1 | — | — | — | ||||||||||||||||
2012 | ||||||||||||||||||||
Available-for-sale | $ | 248,134 | $ | 1,806 | $ | (6 | ) | $ | 1,800 | |||||||||||
Held-to-maturity | 273,816 | 247 | — | 247 | ||||||||||||||||
Trading | — | — | — | — | ||||||||||||||||
2011 | ||||||||||||||||||||
Available-for-sale | $ | 261,654 | $ | 63 | $ | (17 | ) | $ | 46 | |||||||||||
Held-to-maturity | 258,493 | 201 | — | 201 | ||||||||||||||||
Trading | 6 | — | — | — | ||||||||||||||||
Schedule of assets measured at fair value on recurring basis | ' | |||||||||||||||||||
Assets measured at fair value on a recurring basis as of December 31, 2013, are summarized below: | ||||||||||||||||||||
Significant | ||||||||||||||||||||
Quoted in Active | Other | Significant | ||||||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||||||
(in thousands) | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||||
Trading securities | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Available-for-sale securities: | ||||||||||||||||||||
U.S. agency | $ | — | $ | 10,298 | $ | — | $ | 10,298 | ||||||||||||
Corporate | — | 526,038 | — | 526,038 | ||||||||||||||||
Mortgage-backed | — | 244,416 | — | 244,416 | ||||||||||||||||
ABS/CMBS* | — | 106,309 | — | 106,309 | ||||||||||||||||
Non-U.S. govt. & agency | — | 13,678 | — | 13,678 | ||||||||||||||||
U.S. government | — | 17,303 | — | 17,303 | ||||||||||||||||
Municipal | — | 522,010 | — | 522,010 | ||||||||||||||||
Equity | 418,654 | — | — | 418,654 | ||||||||||||||||
Total available-for-sale securities | $ | 418,654 | $ | 1,440,052 | $ | — | $ | 1,858,706 | ||||||||||||
Total | $ | 418,654 | $ | 1,440,052 | $ | — | $ | 1,858,706 | ||||||||||||
*Asset-backed & commercial mortgage-backed | ||||||||||||||||||||
Assets measured at fair value on a recurring basis as of December 31, 2012, are summarized below: | ||||||||||||||||||||
Significant | ||||||||||||||||||||
Quoted in Active | Other | Significant | ||||||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||||||
(in thousands) | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||||||
Trading securities | $ | — | $ | 7 | $ | — | $ | 7 | ||||||||||||
Available-for-sale securities: | ||||||||||||||||||||
U.S. agency | $ | — | $ | 11,759 | $ | — | $ | 11,759 | ||||||||||||
Corporate | — | 580,708 | — | 580,708 | ||||||||||||||||
Mortgage-backed | — | 250,387 | — | 250,387 | ||||||||||||||||
ABS/CMBS* | — | 77,329 | — | 77,329 | ||||||||||||||||
Non-U.S. govt. & agency | — | 9,367 | — | 9,367 | ||||||||||||||||
U.S. government | — | 16,713 | — | 16,713 | ||||||||||||||||
Municipal | — | 432,319 | — | 432,319 | ||||||||||||||||
Equity | 375,788 | — | — | 375,788 | ||||||||||||||||
Total available-for-sale securities | $ | 375,788 | $ | 1,378,582 | $ | — | $ | 1,754,370 | ||||||||||||
Total | $ | 375,788 | $ | 1,378,589 | $ | — | $ | 1,754,377 | ||||||||||||
*Asset-backed & commercial mortgage-backed | ||||||||||||||||||||
Schedule of contractual maturity of securities | ' | |||||||||||||||||||
(in thousands) | Amortized Cost | Fair Value | ||||||||||||||||||
Available-for-sale | ||||||||||||||||||||
Due in one year or less | $ | 12,048 | $ | 12,102 | ||||||||||||||||
Due after one year through five years | 150,049 | 158,587 | ||||||||||||||||||
Due after five years through 10 years | 668,637 | 675,290 | ||||||||||||||||||
Due after 10 years | 250,127 | 243,348 | ||||||||||||||||||
Mtge/ABS/CMBS* | 350,188 | 350,725 | ||||||||||||||||||
Total available-for-sale | $ | 1,431,049 | $ | 1,440,052 | ||||||||||||||||
Held-to-maturity: | ||||||||||||||||||||
Due in one year or less | $ | — | $ | — | ||||||||||||||||
Due after one year through five years | 651 | 687 | ||||||||||||||||||
Due after five years through 10 years | — | — | ||||||||||||||||||
Due after 10 years | — | — | ||||||||||||||||||
Total held-to-maturity | $ | 651 | $ | 687 | ||||||||||||||||
Trading | $ | — | $ | — | ||||||||||||||||
Total fixed income | ||||||||||||||||||||
Due in one year or less | $ | 12,048 | $ | 12,102 | ||||||||||||||||
Due after one year through five years | 150,700 | 159,274 | ||||||||||||||||||
Due after five years through 10 years | 668,637 | 675,290 | ||||||||||||||||||
Due after 10 years | 250,127 | 243,348 | ||||||||||||||||||
Mtge/ABS/CMBS* | 350,188 | 350,725 | ||||||||||||||||||
Total fixed income | $ | 1,431,700 | $ | 1,440,739 | ||||||||||||||||
*Mortgage-backed, asset-backed & commercial mortgage-backed | ||||||||||||||||||||
Schedule of amortized costs and estimated fair values of investments in fixed income and equity securities | ' | |||||||||||||||||||
2013 | Amortized | Gross Unrealized | ||||||||||||||||||
(in thousands) | Cost | Fair Value | Gains | Losses | ||||||||||||||||
Available-for-sale: | ||||||||||||||||||||
U.S. government | $ | 17,086 | $ | 17,303 | $ | 217 | $ | — | ||||||||||||
U.S. agency | 10,513 | 10,298 | 22 | (237 | ) | |||||||||||||||
Non-U.S. govt. & agency | 13,306 | 13,678 | 437 | (65 | ) | |||||||||||||||
Mtge/ABS/CMBS* | 350,187 | 350,725 | 8,188 | (7,650 | ) | |||||||||||||||
Corporate | 511,748 | 526,038 | 22,302 | (8,012 | ) | |||||||||||||||
Municipal | 528,209 | 522,010 | 6,495 | (12,694 | ) | |||||||||||||||
Total fixed income | $ | 1,431,049 | $ | 1,440,052 | $ | 37,661 | $ | (28,658 | ) | |||||||||||
Equity securities | 218,848 | 418,654 | 200,081 | (275 | ) | |||||||||||||||
Total available-for-sale | $ | 1,649,897 | $ | 1,858,706 | $ | 237,742 | $ | (28,933 | ) | |||||||||||
Held-to-maturity: | ||||||||||||||||||||
U.S. agency | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Corporate | — | — | — | — | ||||||||||||||||
Municipal | 651 | 687 | 36 | — | ||||||||||||||||
Total held-to-maturity | $ | 651 | $ | 687 | $ | 36 | $ | — | ||||||||||||
Trading** | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Total | $ | 1,650,548 | $ | 1,859,393 | $ | 237,778 | $ | (28,933 | ) | |||||||||||
*Mortgage-backed, asset-backed & commercial mortgage-backed | ||||||||||||||||||||
**Trading securities are carried at fair value with unrealized gains (losses) included in earnings | ||||||||||||||||||||
2012 | Amortized | Gross Unrealized | ||||||||||||||||||
(in thousands) | Cost | Fair Value | Gains | Losses | ||||||||||||||||
Available-for-sale: | ||||||||||||||||||||
U.S. government | $ | 16,358 | $ | 16,713 | $ | 355 | $ | — | ||||||||||||
U.S. agency | 11,609 | 11,759 | 150 | — | ||||||||||||||||
Non-U.S. govt. & agency | 8,410 | 9,367 | 957 | — | ||||||||||||||||
Mtge/ABS/CMBS* | 307,310 | 327,716 | 20,406 | — | ||||||||||||||||
Corporate | 535,437 | 580,708 | 45,497 | (226 | ) | |||||||||||||||
Municipal | 415,226 | 432,319 | 17,250 | (157 | ) | |||||||||||||||
Total fixed income | $ | 1,294,350 | $ | 1,378,582 | $ | 84,615 | $ | (383 | ) | |||||||||||
Equity securities | 240,287 | 375,788 | 136,376 | (875 | ) | |||||||||||||||
Total available-for-sale | $ | 1,534,637 | $ | 1,754,370 | $ | 220,991 | $ | (1,258 | ) | |||||||||||
Held-to-maturity: | ||||||||||||||||||||
U.S. agency | $ | 10,076 | $ | 10,150 | $ | 74 | $ | — | ||||||||||||
Corporate | — | — | — | — | ||||||||||||||||
Municipal | 1,652 | 1,718 | 66 | — | ||||||||||||||||
Total held-to-maturity | $ | 11,728 | $ | 11,868 | $ | 140 | $ | — | ||||||||||||
Trading** | $ | 6 | $ | 7 | $ | — | $ | — | ||||||||||||
Total | $ | 1,546,371 | $ | 1,766,245 | $ | 221,131 | $ | (1,258 | ) | |||||||||||
*Mortgage-backed, asset-backed & commercial mortgage-backed | ||||||||||||||||||||
**Trading securities are carried at fair value with unrealized gains (losses) included in earnings | ||||||||||||||||||||
Schedule of securities in an unrealized loss position segregated by type and length of time in an unrealized loss position | ' | |||||||||||||||||||
December 31, 2013 | December 31, 2012 | |||||||||||||||||||
(in thousands) | < 12 Mos. | 12 Mos. | Total | < 12 Mos. | 12 Mos. & | Total | ||||||||||||||
& Greater | Greater | |||||||||||||||||||
U.S. Government | ||||||||||||||||||||
Fair value | $ | — | $ | — | $ | — | $ | 749 | $ | — | $ | 749 | ||||||||
Cost or amortized cost | — | — | — | 749 | — | 749 | ||||||||||||||
Unrealized Loss | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
U.S. Agency | ||||||||||||||||||||
Fair value | $ | 5,760 | $ | — | $ | 5,760 | $ | — | $ | — | $ | — | ||||||||
Cost or amortized cost | 5,997 | — | 5,997 | — | — | — | ||||||||||||||
Unrealized Loss | $ | (237 | ) | $ | — | $ | (237 | ) | $ | — | $ | — | $ | — | ||||||
Non-U.S. Government | ||||||||||||||||||||
Fair value | $ | 1,825 | $ | — | $ | 1,825 | $ | — | $ | — | $ | — | ||||||||
Cost or amortized cost | 1,890 | — | 1,890 | — | — | — | ||||||||||||||
Unrealized Loss | $ | (65 | ) | $ | — | $ | (65 | ) | $ | — | $ | — | $ | — | ||||||
Mortgage-backed | ||||||||||||||||||||
Fair value | $ | 118,283 | $ | — | $ | 118,283 | $ | — | $ | — | $ | — | ||||||||
Cost or amortized cost | 124,034 | — | 124,034 | — | — | — | ||||||||||||||
Unrealized Loss | $ | (5,751 | ) | $ | — | $ | (5,751 | ) | $ | — | $ | — | $ | — | ||||||
ABS/CMBS* | ||||||||||||||||||||
Fair value | $ | 54,115 | $ | — | $ | 54,115 | $ | 18 | $ | — | $ | 18 | ||||||||
Cost or amortized cost | 56,014 | — | 56,014 | 18 | — | 18 | ||||||||||||||
Unrealized Loss | $ | (1,899 | ) | $ | — | $ | (1,899 | ) | $ | — | $ | — | $ | — | ||||||
Corporate | ||||||||||||||||||||
Fair value | $ | 190,470 | $ | 2,245 | $ | 192,715 | $ | 35,969 | $ | 960 | $ | 36,929 | ||||||||
Cost or amortized cost | 198,250 | 2,477 | 200,727 | 36,162 | 993 | 37,155 | ||||||||||||||
Unrealized Loss | $ | (7,780 | ) | $ | (232 | ) | $ | (8,012 | ) | $ | (193 | ) | $ | (33 | ) | $ | (226 | ) | ||
Municipal | ||||||||||||||||||||
Fair value | $ | 309,407 | $ | 943 | $ | 310,350 | $ | 35,064 | $ | — | $ | 35,064 | ||||||||
Cost or amortized cost | 322,095 | 949 | 323,044 | 35,221 | — | 35,221 | ||||||||||||||
Unrealized Loss | $ | (12,688 | ) | $ | (6 | ) | $ | (12,694 | ) | $ | (157 | ) | $ | — | $ | (157 | ) | |||
Subtotal, fixed income | ||||||||||||||||||||
Fair value | $ | 679,860 | $ | 3,188 | $ | 683,048 | $ | 71,800 | $ | 960 | $ | 72,760 | ||||||||
Cost or amortized cost | 708,280 | 3,426 | 711,706 | 72,150 | 993 | 73,143 | ||||||||||||||
Unrealized Loss | $ | (28,420 | ) | $ | (238 | ) | $ | (28,658 | ) | $ | (350 | ) | $ | (33 | ) | $ | (383 | ) | ||
Equity securities | ||||||||||||||||||||
Fair value | $ | 2,394 | $ | — | $ | 2,394 | $ | 16,207 | $ | — | $ | 16,207 | ||||||||
Cost or amortized cost | 2,669 | — | 2,669 | 17,082 | — | 17,082 | ||||||||||||||
Unrealized Loss | $ | (275 | ) | $ | — | $ | (275 | ) | $ | (875 | ) | $ | — | $ | (875 | ) | ||||
Total | ||||||||||||||||||||
Fair value | $ | 682,254 | $ | 3,188 | $ | 685,442 | $ | 88,007 | $ | 960 | $ | 88,967 | ||||||||
Cost or amortized cost | 710,949 | 3,426 | 714,375 | 89,232 | 993 | 90,225 | ||||||||||||||
Unrealized Loss | $ | (28,695 | ) | $ | (238 | ) | $ | (28,933 | ) | $ | (1,225 | ) | $ | (33 | ) | $ | (1,258 | ) | ||
*Asset-backed & commercial mortgage-backed |
POLICY_ACQUISITION_COSTS_Table
POLICY ACQUISITION COSTS (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
POLICY ACQUISITION COSTS | ' | ||||||||||
Schedule of policy acquisition costs deferred and amortized to income | ' | ||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Deferred policy acquisition costs (DAC), beginning of year | $ | 52,344 | $ | 52,105 | $ | 40,242 | |||||
VOBA*, CBIC - Acquisition date | — | — | 10,822 | ||||||||
Deferred: | |||||||||||
Direct commissions | $ | 134,770 | $ | 129,765 | $ | 116,206 | |||||
Premium taxes | 10,442 | 9,528 | 8,725 | ||||||||
Ceding commissions | (20,186 | ) | (29,010 | ) | (24,721 | ) | |||||
Net deferred | $ | 125,026 | $ | 110,283 | $ | 100,210 | |||||
Amortized | 115,862 | 110,044 | 99,169 | ||||||||
DAC/VOBA*, end of year | $ | 61,508 | $ | 52,344 | $ | 52,105 | |||||
Policy acquisition costs: | |||||||||||
Amortized to expense - DAC | $ | 115,442 | $ | 107,482 | $ | 91,499 | |||||
Amortized to expense - VOBA | 420 | 2,562 | 7,670 | ||||||||
Period costs: | |||||||||||
Ceding commission - contingent | (2,126 | ) | (1,940 | ) | (2,207 | ) | |||||
Other underwriting expenses | 96,915 | 88,258 | 86,906 | ||||||||
Total policy acquisition costs | $ | 210,651 | $ | 196,362 | $ | 183,868 | |||||
*Includes asset for value of business acquired (VOBA) in CBIC acquisition. |
REINSURANCE_Tables
REINSURANCE (Tables) | 12 Months Ended | |||||||||||||||
Dec. 31, 2013 | ||||||||||||||||
REINSURANCE | ' | |||||||||||||||
Schedule of premiums written and earned along with losses and settlement expenses incurred | ' | |||||||||||||||
(in thousands) | 2013 | 2012 | 2011 | |||||||||||||
WRITTEN | ||||||||||||||||
Direct | 770,142 | 709,107 | 629,727 | |||||||||||||
Reinsurance assumed | 73,053 | 75,692 | 72,380 | |||||||||||||
Reinsurance ceded | (176,873 | ) | (191,713 | ) | (152,469 | ) | ||||||||||
Net | $ | 666,322 | $ | 593,086 | $ | 549,638 | ||||||||||
EARNED | ||||||||||||||||
Direct | 741,569 | 679,124 | 625,963 | |||||||||||||
Reinsurance assumed | 78,891 | 77,597 | 66,984 | |||||||||||||
Reinsurance ceded | (189,658 | ) | (180,150 | ) | (154,495 | ) | ||||||||||
Net | $ | 630,802 | $ | 576,571 | $ | 538,452 | ||||||||||
LOSSES AND SETTLEMENT EXPENSES INCURRED | ||||||||||||||||
Direct | 279,358 | 282,859 | 180,768 | |||||||||||||
Reinsurance assumed | 72,508 | 69,830 | 60,076 | |||||||||||||
Reinsurance ceded | (92,065 | ) | (81,044 | ) | (40,760 | ) | ||||||||||
Net | $ | 259,801 | $ | 271,645 | $ | 200,084 | ||||||||||
Schedule of net reinsurance balances recoverable, after consideration of collateral, from top 10 reinsurers | ' | |||||||||||||||
Net Reinsurer | Ceded | |||||||||||||||
A.M. Best | S & P | Exposure as of | Percent of | Premiums | Percent of | |||||||||||
(dollars in thousands) | Rating | Rating | 12/31/13 | Total | Written | Total | ||||||||||
Munich Re America / HSB | A+, Superior | AA-, Very Strong | $ | 60,256 | 16.6 | % | $ | 23,544 | 13.3 | % | ||||||
Endurance Re | A, Excellent | A, Strong | 60,235 | 16.6 | % | 16,039 | 9.1 | % | ||||||||
Aspen UK Ltd. | A, Excellent | A, Strong | 35,152 | 9.7 | % | 10,585 | 6 | % | ||||||||
Transatlantic Re | A, Excellent | A+, Strong | 25,803 | 7.1 | % | 11,549 | 6.5 | % | ||||||||
Berkley Insurance Co. | A+, Superior | A+, Strong | 24,060 | 6.6 | % | 7,658 | 4.3 | % | ||||||||
Axis Re | A+, Superior | A+, Strong | 22,494 | 6.2 | % | 5,834 | 3.3 | % | ||||||||
Swiss Re / Westport Ins. Corp. | A+, Superior | AA-, Very Strong | 21,268 | 5.9 | % | 5,958 | 3.4 | % | ||||||||
Allied World Re - US | A, Excellent | A, Strong | 16,148 | 4.5 | % | 6,340 | 3.6 | % | ||||||||
Toa-Re | A+, Superior | A+, Strong | 14,106 | 3.9 | % | 3,021 | 1.7 | % | ||||||||
Alterra Re USA | A, Excellent | A, Strong | 10,680 | 2.9 | % | 1,479 | 0.8 | % | ||||||||
All other reinsurers* | 71,884 | 20 | % | 84,866 | 48 | % | ||||||||||
Total ceded exposure | $ | 362,086 | 100 | % | $ | 176,873 | 100 | % | ||||||||
*All other reinsurance balances recoverable, when considered by individual reinsurer, are less than 2 percent of shareholders’ equity. |
HISTORICAL_LOSS_AND_LAE_DEVELO1
HISTORICAL LOSS AND LAE DEVELOPMENT (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
HISTORICAL LOSS AND LAE DEVELOPMENT | ' | ||||||||||
Schedule of reconciliation of unpaid losses and settlement expenses (LAE) | ' | ||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Unpaid losses and LAE at beginning of year: | |||||||||||
Gross | $ | 1,158,483 | $ | 1,150,714 | $ | 1,173,943 | |||||
Ceded | (359,884 | ) | (353,805 | ) | (354,163 | ) | |||||
Net | $ | 798,599 | $ | 796,909 | $ | 819,780 | |||||
Unpaid losses and LAE - CBIC - Acquisition date: | |||||||||||
April 28, 2011 | |||||||||||
Gross | $ | — | $ | — | $ | 72,387 | |||||
Ceded | — | — | (18,881 | ) | |||||||
Net | $ | — | $ | — | $ | 53,506 | |||||
Increase (decrease) in incurred losses and LAE: | |||||||||||
Current accident year | $ | 332,282 | $ | 336,228 | $ | 310,145 | |||||
Prior accident years | (72,481 | ) | (64,583 | ) | (110,061 | ) | |||||
Total incurred | $ | 259,801 | $ | 271,645 | $ | 200,084 | |||||
Loss and LAE payments for claims incurred: | |||||||||||
Current accident year | $ | (57,537 | ) | $ | (69,785 | ) | $ | (89,924 | ) | ||
Prior accident year | (226,354 | ) | (200,170 | ) | (186,537 | ) | |||||
Total paid | $ | (283,891 | ) | $ | (269,955 | ) | $ | (276,461 | ) | ||
Net unpaid losses and LAE at end of year | $ | 774,509 | $ | 798,599 | $ | 796,909 | |||||
Unpaid losses and LAE at end of year: | |||||||||||
Gross | $ | 1,129,433 | $ | 1,158,483 | $ | 1,150,714 | |||||
Ceded | (354,924 | ) | (359,884 | ) | (353,805 | ) | |||||
Net | $ | 774,509 | $ | 798,599 | $ | 796,909 | |||||
Schedule of prior accident years' loss reserve development by segment | ' | ||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Casualty | $ | (61,805 | ) | $ | (40,449 | ) | $ | (83,892 | ) | ||
Property | (7,273 | ) | (16,800 | ) | (18,453 | ) | |||||
Surety | (3,403 | ) | (7,334 | ) | (7,716 | ) | |||||
Total | $ | (72,481 | ) | $ | (64,583 | ) | $ | (110,061 | ) | ||
Schedule of paid and unpaid environmental, asbestos and mass tort claims data (including incurred but not reported losses) | ' | ||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
LOSS AND LAE PAYMENTS (CUMULATIVE) | |||||||||||
Gross | $ | 105,559 | $ | 102,222 | $ | 91,079 | |||||
Ceded | (57,976 | ) | (57,345 | ) | (48,039 | ) | |||||
Net | $ | 47,583 | $ | 44,877 | $ | 43,040 | |||||
UNPAID LOSSES AND LAE AT END OF YEAR | |||||||||||
Gross | $ | 48,507 | $ | 50,353 | $ | 66,429 | |||||
Ceded | (15,043 | ) | (16,733 | ) | (31,633 | ) | |||||
Net | $ | 33,464 | $ | 33,620 | $ | 34,796 |
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
INCOME TAXES | ' | ||||||||||
Schedule of deferred tax assets and deferred tax liabilities | ' | ||||||||||
(in thousands) | 2013 | 2012 | |||||||||
Deferred tax assets: | |||||||||||
Tax discounting of claim reserves | $ | 22,200 | $ | 25,462 | |||||||
Unearned premium offset | 23,163 | 20,731 | |||||||||
Deferred compensation | 6,193 | 5,614 | |||||||||
Stock option expense | 4,160 | 4,678 | |||||||||
NOL carryforward | 1,059 | 3,223 | |||||||||
Other | 604 | 433 | |||||||||
Deferred tax assets before allowance | 57,379 | 60,141 | |||||||||
Less valuation allowance | — | — | |||||||||
Total deferred tax assets | $ | 57,379 | $ | 60,141 | |||||||
Deferred tax liabilities: | |||||||||||
Net unrealized appreciation of securities | $ | 73,198 | $ | 77,036 | |||||||
Deferred policy acquisition costs | 21,528 | 18,320 | |||||||||
Book/tax depreciation | 2,632 | 1,060 | |||||||||
Intangible assets from CBIC acquisition | 4,235 | 4,541 | |||||||||
Undistributed earnings of unconsolidated investee | 12,995 | 13,812 | |||||||||
Other | 592 | 938 | |||||||||
Total deferred tax liabilities | 115,180 | 115,707 | |||||||||
Net deferred tax liability | $ | (57,801 | ) | $ | (55,566 | ) | |||||
Schedule of reconciliation of income tax expense attributable to income from operations with amounts computed by applying the U.S. federal tax rate to pretax income from continuing operations | ' | ||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Provision for income taxes at the statutory federal tax rates | $ | 61,483 | $ | 49,956 | $ | 64,255 | |||||
Increase (reduction) in taxes resulting from: | |||||||||||
Dividends received deduction | (2,490 | ) | (2,630 | ) | (1,980 | ) | |||||
ESOP dividends paid deduction | (2,532 | ) | (3,596 | ) | (3,367 | ) | |||||
Tax-exempt interest income | (3,758 | ) | (2,995 | ) | (2,412 | ) | |||||
Unconsolidated investee dividends | (3,696 | ) | (1,848 | ) | — | ||||||
Other items, net | 404 | 499 | 492 | ||||||||
Total | $ | 49,411 | $ | 39,386 | $ | 56,988 |
EMPLOYEE_BENEFITS_Tables
EMPLOYEE BENEFITS (Tables) | 12 Months Ended | |||||||||||
Dec. 31, 2013 | ||||||||||||
EMPLOYEE BENEFITS | ' | |||||||||||
Schedule of stock option activity | ' | |||||||||||
Weighted | ||||||||||||
Weighted | Average | Aggregate | ||||||||||
Number of | Average | Remaining | Intrinsic | |||||||||
Options | Exercise | Contractual | Value | |||||||||
Outstanding | Price | Life | (in 000’s) | |||||||||
Outstanding options at January 1, 2013 | 2,945,204 | $ | 22.22 | |||||||||
Options granted | 632,700 | $ | 35.67 | |||||||||
Special dividend* | 272 | $ | 16.38 | |||||||||
Options exercised | (935,692 | ) | $ | 17.4 | $ | 22,422 | ||||||
Options canceled/forfeited | (47,400 | ) | $ | 24.86 | ||||||||
Outstanding options at December 31, 2013 | 2,595,084 | $ | 26.04 | 5.56 | $ | 58,790 | ||||||
Exercisable options at December 31, 2013 | 934,544 | $ | 20.36 | 4.28 | $ | 26,474 | ||||||
Weighted | ||||||||||||
Weighted | Average | Aggregate | ||||||||||
Number of | Average | Remaining | Intrinsic | |||||||||
Options | Exercise | Contractual | Value | |||||||||
Outstanding | Price | Life | (in 000’s) | |||||||||
Outstanding options at January 1, 2012 | 2,561,732 | $ | 21.62 | |||||||||
Options granted | 669,800 | $ | 31.71 | |||||||||
Special dividend* | 2,172 | $ | 15.39 | |||||||||
Options exercised | (282,260 | ) | $ | 19.03 | $ | 4,712 | ||||||
Options canceled/forfeited | (6,240 | ) | $ | 20.42 | ||||||||
Outstanding options at December 31, 2012 | 2,945,204 | $ | 22.22 | 5.43 | $ | 29,865 | ||||||
Exercisable options at December 31, 2012 | 1,362,184 | $ | 18.29 | 4.27 | $ | 19,135 | ||||||
Weighted | ||||||||||||
Weighted | Average | Aggregate | ||||||||||
Number of | Average | Remaining | Intrinsic | |||||||||
Options | Exercise | Contractual | Value | |||||||||
Outstanding | Price | Life | (in 000’s) | |||||||||
Outstanding options at January 1, 2011 | 3,049,964 | $ | 20.66 | |||||||||
Options granted | 595,900 | $ | 27.51 | |||||||||
Special dividend* | 3,082 | $ | 16.08 | |||||||||
Options exercised | (1,030,634 | ) | $ | 17.31 | $ | 12,764 | ||||||
Options canceled/forfeited | (56,580 | ) | $ | 20.82 | ||||||||
Outstanding options at December 31, 2011 | 2,561,732 | $ | 21.62 | 5.62 | $ | 37,949 | ||||||
Exercisable options at December 31, 2011 | 1,207,872 | $ | 19.9 | 4.54 | $ | 19,965 | ||||||
*An adjustment was made to the exercise price and number of ISO options outstanding for the special cash dividends paid during December 2013, 2012, and 2011. “Special dividend” represents the incremental options issued as a result of the this adjustment. | ||||||||||||
Schedule of weighted-average grant-date assumptions and weighted average fair values | ' | |||||||||||
2013 | 2012 | 2011 | ||||||||||
Weighted-average fair value of grants | $ | 6.88 | $ | 6.55 | $ | 6.45 | ||||||
Risk-free interest rates | 0.87 | % | 0.9 | % | 2.06 | % | ||||||
Dividend yield | 2 | % | 1.93 | % | 1.89 | % | ||||||
Expected volatility | 25.4 | % | 25.62 | % | 25.68 | % | ||||||
Expected option life | 5.26 years | 5.43 years | 5.54 years | |||||||||
STATUTORY_INFORMATION_AND_DIVI1
STATUTORY INFORMATION AND DIVIDEND RESTRICTIONS (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
STATUTORY INFORMATION AND DIVIDEND RESTRICTIONS | ' | ||||||||||
Schedule of selected information for insurance subsidiaries | ' | ||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Consolidated net income, statutory basis | $ | 122,550 | $ | 125,672 | $ | 118,922 | |||||
Consolidated surplus, statutory basis | $ | 859,221 | $ | 684,072 | $ | 710,186 |
COMMITMENTS_AND_CONTINGENT_LIA1
COMMITMENTS AND CONTINGENT LIABILITIES (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
COMMITMENTS AND CONTINGENT LIABILITIES | ' | ||||
Schedule of minimum future rental payments under noncancellable leases | ' | ||||
(in thousands) | |||||
2014 | $ | 4,791 | |||
2015 | 4,401 | ||||
2016 | 3,380 | ||||
2017 | 2,667 | ||||
2018 | 1,876 | ||||
2019-2023 | 3,866 | ||||
Total minimum future rental payments | $ | 20,981 |
OPERATING_SEGMENT_INFORMATION_
OPERATING SEGMENT INFORMATION (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
OPERATING SEGMENT INFORMATION | ' | ||||||||||
Schedule of revenues and net earnings by segment | ' | ||||||||||
REVENUES | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Casualty | $ | 324,022 | $ | 267,697 | $ | 236,198 | |||||
Property | 200,141 | 202,402 | 203,660 | ||||||||
Surety | 106,639 | 106,472 | 98,594 | ||||||||
Segment totals before income taxes | 630,802 | 576,571 | 538,452 | ||||||||
Net investment income | 52,763 | 58,831 | 63,681 | ||||||||
Net realized gains | 22,036 | 25,372 | 17,036 | ||||||||
Total | $ | 705,601 | $ | 660,774 | $ | 619,169 | |||||
INSURANCE EXPENSES | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Loss and settlement expenses: | |||||||||||
Casualty | $ | 148,860 | $ | 144,106 | $ | 85,091 | |||||
Property | 96,271 | 115,707 | 101,969 | ||||||||
Surety | 14,670 | 11,832 | 13,024 | ||||||||
Segment totals before income taxes | $ | 259,801 | $ | 271,645 | $ | 200,084 | |||||
Policy acquisition costs: | |||||||||||
Casualty | $ | 93,463 | $ | 76,765 | $ | 67,495 | |||||
Property | 58,650 | 60,070 | 57,878 | ||||||||
Surety | 58,538 | 59,527 | 58,495 | ||||||||
Segment totals before income taxes | $ | 210,651 | $ | 196,362 | $ | 183,868 | |||||
Other insurance expenses: | |||||||||||
Casualty | $ | 26,107 | $ | 21,387 | $ | 22,215 | |||||
Property | 17,616 | 14,933 | 13,481 | ||||||||
Surety | 9,834 | 8,651 | 8,616 | ||||||||
Segment totals before income taxes | $ | 53,557 | $ | 44,971 | $ | 44,312 | |||||
Total | $ | 524,009 | $ | 512,978 | $ | 428,264 | |||||
NET EARNINGS (LOSSES) | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
Casualty | $ | 55,592 | $ | 25,439 | $ | 61,397 | |||||
Property | 27,604 | 11,692 | 30,332 | ||||||||
Surety | 23,597 | 26,462 | 18,459 | ||||||||
Net underwriting income | $ | 106,793 | $ | 63,593 | $ | 110,188 | |||||
Net investment income | 52,763 | 58,831 | 63,681 | ||||||||
Net realized gains | 22,036 | 25,372 | 17,036 | ||||||||
General corporate expense and interest on debt | (16,841 | ) | (13,917 | ) | (13,816 | ) | |||||
Equity in earnings of unconsolidated investees | 10,915 | 8,853 | 6,497 | ||||||||
Total earnings before incomes taxes | $ | 175,666 | $ | 142,732 | $ | 183,586 | |||||
Income taxes | $ | 49,411 | $ | 39,386 | $ | 56,988 | |||||
Total | $ | 126,255 | $ | 103,346 | $ | 126,598 | |||||
Schedule of net premiums earned by major product type | ' | ||||||||||
Year ended December 31, | |||||||||||
(in thousands) | 2013 | 2012 | 2011 | ||||||||
CASUALTY | |||||||||||
Commercial and personal umbrella | $ | 85,532 | $ | 68,287 | $ | 63,020 | |||||
General liability | 81,427 | 84,985 | 85,020 | ||||||||
Commercial transportation | 50,287 | 34,701 | 34,106 | ||||||||
Professional services | 42,063 | 28,018 | 13,151 | ||||||||
P&C package business | 30,603 | 28,497 | 16,379 | ||||||||
Executive products | 19,123 | 17,198 | 15,472 | ||||||||
Medical professional liability | 8,626 | 25 | — | ||||||||
Other casualty | 6,361 | 5,986 | 9,050 | ||||||||
Total | $ | 324,022 | $ | 267,697 | $ | 236,198 | |||||
PROPERTY | |||||||||||
Commercial property | $ | 76,939 | $ | 74,197 | $ | 80,743 | |||||
Marine | 57,122 | 56,367 | 51,654 | ||||||||
Crop reinsurance | 31,421 | 24,506 | 34,935 | ||||||||
Property reinsurance | 15,770 | 27,021 | 19,925 | ||||||||
Other property | 18,889 | 20,311 | 16,403 | ||||||||
Total | $ | 200,141 | $ | 202,402 | $ | 203,660 | |||||
SURETY | |||||||||||
Miscellaneous | $ | 38,131 | $ | 39,299 | $ | 34,837 | |||||
Contract | 27,176 | 26,329 | 24,354 | ||||||||
Commercial | 23,133 | 22,107 | 21,317 | ||||||||
Oil and gas | 18,199 | 18,737 | 18,086 | ||||||||
Total | $ | 106,639 | $ | 106,472 | $ | 98,594 | |||||
Grand total | $ | 630,802 | $ | 576,571 | $ | 538,452 |
UNAUDITED_INTERIM_FINANCIAL_IN1
UNAUDITED INTERIM FINANCIAL INFORMATION (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
UNAUDITED INTERIM FINANCIAL INFORMATION | ' | ||||||||||||||||
Schedule of selected quarterly information | ' | ||||||||||||||||
(in thousands, except per share data) | First | Second | Third | Fourth | Year | ||||||||||||
2013 | |||||||||||||||||
Net premiums earned | $ | 144,151 | $ | 154,553 | $ | 163,702 | $ | 168,396 | $ | 630,802 | |||||||
Net investment income | 12,886 | 12,847 | 13,598 | 13,432 | 52,763 | ||||||||||||
Net realized investment gains | 3,684 | 3,742 | 10,999 | 3,611 | 22,036 | ||||||||||||
Earnings before income taxes | 35,969 | 43,576 | 55,309 | 40,812 | 175,666 | ||||||||||||
Net earnings | 24,847 | 29,902 | 37,647 | 33,859 | 126,255 | ||||||||||||
Basic earnings per share(1) | $ | 0.58 | $ | 0.7 | $ | 0.88 | $ | 0.79 | $ | 2.95 | |||||||
Diluted earnings per share(1) | $ | 0.57 | $ | 0.69 | $ | 0.86 | $ | 0.77 | $ | 2.9 | |||||||
2012 | |||||||||||||||||
Net premiums earned | $ | 137,280 | $ | 141,584 | $ | 149,943 | $ | 147,764 | $ | 576,571 | |||||||
Net investment income | 15,293 | 14,826 | 14,221 | 14,491 | 58,831 | ||||||||||||
Net realized investment gains (losses) | 11,416 | (664 | ) | 5,481 | 9,139 | 25,372 | |||||||||||
Earnings before income taxes | 41,109 | 36,568 | 36,480 | 28,575 | 142,732 | ||||||||||||
Net earnings | 28,038 | 24,748 | 25,463 | 25,097 | 103,346 | ||||||||||||
Basic earnings per share(1) | $ | 0.66 | $ | 0.58 | $ | 0.6 | $ | 0.59 | $ | 2.44 | |||||||
Diluted earnings per share(1) | $ | 0.65 | $ | 0.58 | $ | 0.59 | $ | 0.58 | $ | 2.39 | |||||||
(1) Since the weighted-average shares for the quarters are calculated independently of the weighted-average shares for the year, quarterly earnings per share may not total to annual earnings per share. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 0 Months Ended | 12 Months Ended |
Jan. 15, 2014 | Dec. 31, 2013 | |
item | ||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ' |
Number of insurance companies through which the entity conducts operations | ' | 4 |
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION | ' | ' |
Common stock split conversion ratio | 2 | ' |
RLI Ins. | ' | ' |
DESCRIPTION OF BUSINESS | ' | ' |
Number of states in which entity writes insurance | ' | 50 |
Mt. Hawley Insurance Company | ' | ' |
DESCRIPTION OF BUSINESS | ' | ' |
Number of states in which entity writes insurance | ' | 50 |
RIC | ' | ' |
DESCRIPTION OF BUSINESS | ' | ' |
Number of states in which entity writes insurance | ' | 48 |
Contractors Bonding and Insurance Company | ' | ' |
DESCRIPTION OF BUSINESS | ' | ' |
Number of states in which entity writes insurance | ' | 50 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $) | 12 Months Ended | ||
In Millions, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ' | ' |
Number of categories for debt and equity securities | 3 | ' | ' |
Available-For-Sale Securities | ' | ' | ' |
INVESTMENTS | ' | ' | ' |
Classification of debt securities portfolio (as a percent) | 99.00% | ' | ' |
Amount of securities transferred from held-to-maturity | $0 | $0 | $0 |
Held-to-Maturity Securities | Maximum | ' | ' | ' |
INVESTMENTS | ' | ' | ' |
Classification of debt securities portfolio (as a percent) | 1.00% | ' | ' |
SUMMARY_OF_SIGNIFICANT_ACCOUNT5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) | 12 Months Ended |
Dec. 31, 2013 | |
Equipment | Minimum | ' |
PROPERTY AND EQUIPMENT | ' |
Useful life | '3 years |
Equipment | Maximum | ' |
PROPERTY AND EQUIPMENT | ' |
Useful life | '10 years |
Buildings and improvements | Maximum | ' |
PROPERTY AND EQUIPMENT | ' |
Useful life | '30 years |
SUMMARY_OF_SIGNIFICANT_ACCOUNT6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) (USD $) | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
INVESTMENT IN UNCONSOLIDATED INVESTEES: | ' | ' | ' | ' | ' |
Interest in investee (as a percent) | 40.00% | ' | 40.00% | ' | ' |
Investment amount | $49,793,000 | $52,128,000 | $49,793,000 | $52,128,000 | ' |
Investee earnings recorded in income | ' | ' | 10,915,000 | 8,853,000 | 6,497,000 |
Additional summarized financial information for investee | ' | ' | ' | ' | ' |
Dividends received | 13,200,000 | 6,600,000 | 13,200,000 | 6,600,000 | ' |
Maui Jim Inc. | ' | ' | ' | ' | ' |
INVESTMENT IN UNCONSOLIDATED INVESTEES: | ' | ' | ' | ' | ' |
Interest in investee (as a percent) | 40.00% | ' | 40.00% | ' | ' |
Investment amount | 49,800,000 | 52,100,000 | 49,800,000 | 52,100,000 | ' |
Investee earnings recorded in income | ' | ' | 10,900,000 | 8,900,000 | 6,500,000 |
Total investee net income | ' | ' | 26,100,000 | 22,600,000 | 16,100,000 |
Additional summarized financial information for investee | ' | ' | ' | ' | ' |
Total assets | 193,500,000 | 175,400,000 | 193,500,000 | 175,400,000 | ' |
Total liabilities | 92,700,000 | 68,000,000 | 92,700,000 | 68,000,000 | ' |
Total equity | 100,800,000 | 107,400,000 | 100,800,000 | 107,400,000 | ' |
Undistributed earnings included in retained earnings | 36,700,000 | ' | 36,700,000 | ' | ' |
Dividends received | ' | ' | $13,200,000 | $6,600,000 | ' |
SUMMARY_OF_SIGNIFICANT_ACCOUNT7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 5) (USD $) | 0 Months Ended | 3 Months Ended | 12 Months Ended | 1 Months Ended | 1 Months Ended | 1 Months Ended | 0 Months Ended | ||||||||||||||||
Share data in Thousands, except Per Share data, unless otherwise specified | Jan. 15, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2013 | Apr. 30, 2011 | Dec. 31, 2013 | Apr. 30, 2011 | Dec. 31, 2013 | Apr. 30, 2011 | Dec. 31, 2013 | Nov. 02, 2012 | Dec. 31, 2013 | Nov. 30, 2012 |
CBIC and Rockbridge | Surety segment | Surety segment | Surety segment | Casualty and Surety segment | Casualty and Surety segment | Casualty | Casualty | Casualty | Casualty | Casualty | |||||||||||||
Acquisitions prior to 2011 | Contractors Bonding and Insurance Company | Contractors Bonding and Insurance Company | Contractors Bonding and Insurance Company | Contractors Bonding and Insurance Company | Contractors Bonding and Insurance Company | Contractors Bonding and Insurance Company | Rockbridge | Rockbridge | Rockbridge | ||||||||||||||
INTANGIBLE ASSETS | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Goodwill and intangibles | ' | $74,876,000 | ' | ' | ' | $76,113,000 | ' | ' | ' | $74,876,000 | $76,113,000 | ' | ' | ' | ' | ' | $32,500,000 | ' | ' | ' | ' | ' | $16,200,000 |
Goodwill | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 26,200,000 | ' | 15,100,000 | ' | ' | ' | 5,300,000 | ' | 12,400,000 | ' |
Goodwill acquired | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 15,100,000 | ' | ' | ' | 5,300,000 | ' | 12,400,000 | ' | ' |
Indefinite Lived Intangible Assets Acquired | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 8,800,000 | ' | ' | ' | ' | ' | ' |
Definite-lived intangible assets, net of amortization | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,300,000 | ' | ' | ' | 3,800,000 | ' |
Amortization of intangible assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Earnings per share: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock split conversion ratio | 2 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Basic EPS, Income (Numerator) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Income available to common shareholders | ' | 33,859,000 | 37,647,000 | 29,902,000 | 24,847,000 | 25,097,000 | 25,463,000 | 24,748,000 | 28,038,000 | 126,255,000 | 103,346,000 | 126,598,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Diluted EPS, Income (Numerator) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Income available to common shareholders | ' | ' | ' | ' | ' | ' | ' | ' | ' | 126,255,000 | 103,346,000 | 126,598,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Basic EPS, Weighted Average Shares (Denominator) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of shares outstanding | ' | ' | ' | ' | ' | ' | ' | ' | ' | 42,744 | 42,431 | 42,156 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Effect of Dilutive Securities, Shares (Denominator) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock options (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | ' | 770 | 729 | 713 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Diluted EPS, Weighted Average Shares (Denominator) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of shares outstanding | ' | ' | ' | ' | ' | ' | ' | ' | ' | 43,514 | 43,160 | 42,869 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Basic EPS, Per Share Amount | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Basic net earnings per share (in dollars per share) | ' | $0.79 | $0.88 | $0.70 | $0.58 | $0.59 | $0.60 | $0.58 | $0.66 | $2.95 | $2.44 | $3 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Diluted EPS, Per Share Amount | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Diluted earnings per share (in dollars per share) | ' | $0.77 | $0.86 | $0.69 | $0.57 | $0.58 | $0.59 | $0.58 | $0.65 | $2.90 | $2.39 | $2.95 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
COMPREHENSIVE EARNINGS | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Tax rate used (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | 35.00% | 35.00% | 35.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Other comprehensive income (loss), tax | ' | ' | ' | ' | ' | ' | ' | ' | ' | ($3,800,000) | $13,900,000 | $11,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
SUMMARY_OF_SIGNIFICANT_ACCOUNT8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 6) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Changes in the balance of each component of accumulated other comprehensive earnings | ' | ' | ' |
Beginning balance | $143,170 | ' | ' |
Net current-period other comprehensive earnings (loss) | -7,143 | 25,845 | 21,333 |
Ending balance | 136,027 | 143,170 | ' |
Unrealized Gains and Losses on Available-for-Sale Securities | ' | ' | ' |
Changes in the balance of each component of accumulated other comprehensive earnings | ' | ' | ' |
Beginning balance | 143,170 | 117,325 | 95,992 |
Other comprehensive earnings before reclassifications | 7,723 | 44,079 | 32,230 |
Amounts reclassified from accumulated other comprehensive earnings | -14,866 | -18,234 | -10,897 |
Net current-period other comprehensive earnings (loss) | -7,143 | 25,845 | 21,333 |
Ending balance | $136,027 | $143,170 | $117,325 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 7) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Amount Reclassified from Accumulated Other Comprehensive Earnings | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net realized investment gains | ' | ' | ' | ' | ' | ' | ' | ' | $22,036 | $26,528 | $17,293 |
Other-than-temporary-impairment losses on investments | ' | ' | ' | ' | ' | ' | ' | ' | ' | -1,156 | -257 |
Earnings before income taxes | 40,812 | 55,309 | 43,576 | 35,969 | 28,575 | 36,480 | 36,568 | 41,109 | 175,666 | 142,732 | 183,586 |
Income tax expense | ' | ' | ' | ' | ' | ' | ' | ' | -49,411 | -39,386 | -56,988 |
Net earnings | 33,859 | 37,647 | 29,902 | 24,847 | 25,097 | 25,463 | 24,748 | 28,038 | 126,255 | 103,346 | 126,598 |
Reclassifications out of accumulated other comprehensive earnings | Unrealized gains and losses on available-for-sale securities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amount Reclassified from Accumulated Other Comprehensive Earnings | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net realized investment gains | ' | ' | ' | ' | ' | ' | ' | ' | 22,871 | 29,209 | 17,021 |
Other-than-temporary-impairment losses on investments | ' | ' | ' | ' | ' | ' | ' | ' | ' | -1,156 | -257 |
Earnings before income taxes | ' | ' | ' | ' | ' | ' | ' | ' | 22,871 | 28,053 | 16,764 |
Income tax expense | ' | ' | ' | ' | ' | ' | ' | ' | -8,005 | -9,819 | -5,867 |
Net earnings | ' | ' | ' | ' | ' | ' | ' | ' | $14,866 | $18,234 | $10,897 |
Recovered_Sheet1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 8) (USD $) | 0 Months Ended | 12 Months Ended |
In Millions, unless otherwise specified | Jan. 02, 2014 | Dec. 31, 2013 |
California earthquake | ' | ' |
Catastrophe Exposures | ' | ' |
Catastrophe reinsurance | ' | $300 |
First-dollar retention | ' | 25 |
Non-California earthquake | ' | ' |
Catastrophe Exposures | ' | ' |
Catastrophe reinsurance | 325 | 330 |
First-dollar retention | 25 | 20 |
Other perils | ' | ' |
Catastrophe Exposures | ' | ' |
Catastrophe reinsurance | 225 | 230 |
First-dollar retention | $25 | $20 |
Recovered_Sheet2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 9) (Casualty segment, Environmental liability exposures, USD $) | 12 Months Ended | 60 Months Ended |
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2013 |
Casualty segment | Environmental liability exposures | ' | ' |
Environmental Exposures | ' | ' |
Premiums written | $3,000 | $9,300 |
INVESTMENTS_Details
INVESTMENTS (Details) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Net investment income | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gross investment income | ' | ' | ' | ' | ' | ' | ' | ' | $57,758 | $63,509 | $68,298 |
Less investment expenses | ' | ' | ' | ' | ' | ' | ' | ' | -4,995 | -4,678 | -4,617 |
Net investment income | 13,432 | 13,598 | 12,847 | 12,886 | 14,491 | 14,221 | 14,826 | 15,293 | 52,763 | 58,831 | 63,681 |
Fixed income securities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net investment income | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gross investment income | ' | ' | ' | ' | ' | ' | ' | ' | 45,870 | 50,646 | 58,294 |
Equity securities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net investment income | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gross investment income | ' | ' | ' | ' | ' | ' | ' | ' | 11,865 | 12,848 | 9,957 |
Cash and Short-term Investments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net investment income | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gross investment income | ' | ' | ' | ' | ' | ' | ' | ' | $23 | $15 | $47 |
INVESTMENTS_Details_2
INVESTMENTS (Details 2) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
INVESTMENTS | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net realized investment gains (losses), excluding OTTI | ' | ' | ' | ' | ' | ' | ' | ' | $22,036 | $26,528 | $17,293 |
OTTI | ' | ' | ' | ' | ' | ' | ' | ' | ' | -1,156 | -257 |
Net realized investment gains (losses) | 3,611 | 10,999 | 3,742 | 3,684 | 9,139 | 5,481 | -664 | 11,416 | 22,036 | 25,372 | 17,036 |
Net changes in unrealized gains (losses) on investments: | ' | ' | ' | ' | ' | ' | ' | ' | -10,923 | 39,855 | 32,855 |
Net realized investment gains (losses) and changes in unrealized gains (losses) on investments | ' | ' | ' | ' | ' | ' | ' | ' | 11,113 | 65,227 | 49,891 |
Fixed income securities | Available-For-Sale Securities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
INVESTMENTS | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net realized investment gains (losses), excluding OTTI | ' | ' | ' | ' | ' | ' | ' | ' | 1,338 | 12,965 | 10,892 |
Net changes in unrealized gains (losses) on investments: | ' | ' | ' | ' | ' | ' | ' | ' | -75,228 | 23,643 | 22,393 |
Fixed income securities | Held-to-Maturity Securities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
INVESTMENTS | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net realized investment gains (losses), excluding OTTI | ' | ' | ' | ' | ' | ' | ' | ' | 9 | 247 | 201 |
Equity securities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
INVESTMENTS | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net realized investment gains (losses), excluding OTTI | ' | ' | ' | ' | ' | ' | ' | ' | 21,533 | 16,245 | 6,129 |
OTTI | ' | ' | ' | ' | ' | ' | ' | ' | ' | -1,156 | -257 |
Net changes in unrealized gains (losses) on investments: | ' | ' | ' | ' | ' | ' | ' | ' | 64,305 | 16,212 | 10,462 |
Other | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
INVESTMENTS | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net realized investment gains (losses), excluding OTTI | ' | ' | ' | ' | ' | ' | ' | ' | ($844) | ($2,929) | $71 |
INVESTMENTS_Details_3
INVESTMENTS (Details 3) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Fixed maturities | Available-For-Sale Securities | SALES | ' | ' | ' |
Summary of the disposition of fixed maturities and equities | ' | ' | ' |
Proceeds From Sales | $173,694 | $181,338 | $383,664 |
Gross Realized Gains | 3,561 | 11,208 | 11,333 |
Gross Realized Losses | -2,597 | -43 | -487 |
Net Realized Gain (Loss) | 964 | 11,165 | 10,846 |
Fixed maturities | Available-For-Sale Securities | CALLS/MATURITIES | ' | ' | ' |
Summary of the disposition of fixed maturities and equities | ' | ' | ' |
Proceeds From Sales | 224,620 | 248,134 | 261,654 |
Gross Realized Gains | 379 | 1,806 | 63 |
Gross Realized Losses | -5 | -6 | -17 |
Net Realized Gain (Loss) | 374 | 1,800 | 46 |
Fixed maturities | Held-to-Maturity Securities | CALLS/MATURITIES | ' | ' | ' |
Summary of the disposition of fixed maturities and equities | ' | ' | ' |
Proceeds From Sales | 11,090 | 273,816 | 258,493 |
Gross Realized Gains | 9 | 247 | 201 |
Net Realized Gain (Loss) | 9 | 247 | 201 |
Fixed maturities | Trading Securities | SALES | ' | ' | ' |
Summary of the disposition of fixed maturities and equities | ' | ' | ' |
Proceeds From Sales | 5 | ' | ' |
Fixed maturities | Trading Securities | CALLS/MATURITIES | ' | ' | ' |
Summary of the disposition of fixed maturities and equities | ' | ' | ' |
Proceeds From Sales | 1 | ' | 6 |
Equities | SALES | ' | ' | ' |
Summary of the disposition of fixed maturities and equities | ' | ' | ' |
Proceeds From Sales | 73,982 | 78,315 | 40,092 |
Gross Realized Gains | 21,542 | 19,755 | 8,483 |
Gross Realized Losses | -9 | -3,510 | -2,354 |
Net Realized Gain (Loss) | $21,533 | $16,245 | $6,129 |
INVESTMENTS_Details_4
INVESTMENTS (Details 4) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Assets measured at Fair Value | ' | ' |
Trading securities | ' | $7 |
Available-for-sale securities | 1,858,706 | 1,754,370 |
Transfers in (out of) level 1 | 0 | 0 |
Transfers in (out of) level 2 | 0 | 0 |
U.S. Agency | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 10,298 | 11,759 |
Non-U.S. govt. & agency | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 13,678 | 9,367 |
U.S. government | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 17,303 | 16,713 |
Equity | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 418,654 | 375,788 |
Fair value measured on recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 418,654 | 375,788 |
Total assets at fair value | 418,654 | 375,788 |
Fair value measured on recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 418,654 | 375,788 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | ' | ' |
Assets measured at Fair Value | ' | ' |
Trading securities | ' | 7 |
Available-for-sale securities | 1,440,052 | 1,378,582 |
Total assets at fair value | 1,440,052 | 1,378,589 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | U.S. Agency | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 10,298 | 11,759 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | Corporate | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 526,038 | 580,708 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | Mortgage-backed | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 244,416 | 250,387 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | ABS/CMBS | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 106,309 | 77,329 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | Non-U.S. govt. & agency | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 13,678 | 9,367 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | U.S. government | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 17,303 | 16,713 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | Municipal | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 522,010 | 432,319 |
Fair value measured on recurring basis | Total | ' | ' |
Assets measured at Fair Value | ' | ' |
Trading securities | ' | 7 |
Available-for-sale securities | 1,858,706 | 1,754,370 |
Total assets at fair value | 1,858,706 | 1,754,377 |
Fair value measured on recurring basis | Total | U.S. Agency | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 10,298 | 11,759 |
Fair value measured on recurring basis | Total | Corporate | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 526,038 | 580,708 |
Fair value measured on recurring basis | Total | Mortgage-backed | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 244,416 | 250,387 |
Fair value measured on recurring basis | Total | ABS/CMBS | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 106,309 | 77,329 |
Fair value measured on recurring basis | Total | Non-U.S. govt. & agency | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 13,678 | 9,367 |
Fair value measured on recurring basis | Total | U.S. government | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 17,303 | 16,713 |
Fair value measured on recurring basis | Total | Municipal | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | 522,010 | 432,319 |
Fair value measured on recurring basis | Total | Equity | ' | ' |
Assets measured at Fair Value | ' | ' |
Available-for-sale securities | $418,654 | $375,788 |
INVESTMENTS_Details_5
INVESTMENTS (Details 5) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Amortized cost of available-for-sale debt securities by contractual maturity | ' | ' |
Due in one year or less | $12,048,000 | ' |
Due after one year through five years | 150,049,000 | ' |
Due after five years through 10 years | 668,637,000 | ' |
Due after 10 years | 250,127,000 | ' |
Total amortized cost | 1,431,049,000 | 1,294,350,000 |
Fair value of available-for-sale debt securities by contractual maturity | ' | ' |
Due in one year or less | 12,102,000 | ' |
Due after one year through five years | 158,587,000 | ' |
Due after five years through 10 years | 675,290,000 | ' |
Due after 10 years | 243,348,000 | ' |
Total fair value | 1,440,052,000 | 1,378,582,000 |
Amortized cost of debt securities held-to-maturity by contractual maturity | ' | ' |
Due after one year through five years | 651,000 | ' |
Total amortized cost | 651,000 | 11,728,000 |
Fair value of debt securities held-to-maturity by contractual maturity | ' | ' |
Due after one year through five years | 687,000 | ' |
Total fair value | 687,000 | 11,868,000 |
Amortized cost of fixed income securities by contractual maturity | ' | ' |
Due in one year or less | 12,048,000 | ' |
Due after one year through five years | 150,700,000 | ' |
Due after five years through 10 years | 668,637,000 | ' |
Due after 10 years | 250,127,000 | ' |
Total amortized cost | 1,431,700,000 | ' |
Fair value of fixed income securities by contractual maturity | ' | ' |
Due in one year or less | 12,102,000 | ' |
Due after one year through five years | 159,274,000 | ' |
Due after five years through 10 years | 675,290,000 | ' |
Due after 10 years | 243,348,000 | ' |
Total fair value | 1,440,739,000 | ' |
Net unrealized appreciation of available-for-sale fixed maturities and equity securities | 208,800,000 | 219,700,000 |
Mtge/ABS/CMBS | ' | ' |
Amortized cost of available-for-sale debt securities by contractual maturity | ' | ' |
Total amortized cost | 350,188,000 | ' |
Fair value of available-for-sale debt securities by contractual maturity | ' | ' |
Total fair value | 350,725,000 | ' |
Amortized cost of fixed income securities by contractual maturity | ' | ' |
Total amortized cost | 350,188,000 | ' |
Fair value of fixed income securities by contractual maturity | ' | ' |
Total fair value | $350,725,000 | ' |
INVESTMENTS_Details_6
INVESTMENTS (Details 6) (USD $) | 12 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Available-for-sale | ' | ' |
Amortized Cost | $1,649,897 | $1,534,637 |
Fair Value | 1,858,706 | 1,754,370 |
Gross Unrealized Gains | 237,742 | 220,991 |
Gross Unrealized Losses | -28,933 | -1,258 |
Held-to-maturity | ' | ' |
Amortized Cost | 651 | 11,728 |
Fair Value | 687 | 11,868 |
Gross Unrecognized Gains | 36 | 140 |
Trading securities | ' | ' |
Amortized Cost | ' | 6 |
Fair Value | ' | 7 |
Total fixed income and equity securities | ' | ' |
Amortized Cost | 1,650,548 | 1,546,371 |
Fair Value | 1,859,393 | 1,766,245 |
Gross Unrealized Gains | 237,778 | 221,131 |
Gross Unrealized Losses | -28,933 | -1,258 |
U.S. government | ' | ' |
Available-for-sale | ' | ' |
Amortized Cost | 17,086 | 16,358 |
Fair Value | 17,303 | 16,713 |
Gross Unrealized Gains | 217 | 355 |
U.S. Agency | ' | ' |
Available-for-sale | ' | ' |
Amortized Cost | 10,513 | 11,609 |
Fair Value | 10,298 | 11,759 |
Gross Unrealized Gains | 22 | 150 |
Gross Unrealized Losses | -237 | ' |
Held-to-maturity | ' | ' |
Amortized Cost | ' | 10,076 |
Fair Value | ' | 10,150 |
Gross Unrecognized Gains | ' | 74 |
Non-U.S. govt. & agency | ' | ' |
Available-for-sale | ' | ' |
Amortized Cost | 13,306 | 8,410 |
Fair Value | 13,678 | 9,367 |
Gross Unrealized Gains | 437 | 957 |
Gross Unrealized Losses | -65 | ' |
Mtge/ABS/CMBS | ' | ' |
Available-for-sale | ' | ' |
Amortized Cost | 350,187 | 307,310 |
Fair Value | 350,725 | 327,716 |
Gross Unrealized Gains | 8,188 | 20,406 |
Gross Unrealized Losses | -7,650 | ' |
Percentage of securities of portfolio rated with highest credit rating by by one or more major rating agency | 99.00% | ' |
Corporate | ' | ' |
Available-for-sale | ' | ' |
Amortized Cost | 511,748 | 535,437 |
Fair Value | 526,038 | 580,708 |
Gross Unrealized Gains | 22,302 | 45,497 |
Gross Unrealized Losses | -8,012 | -226 |
Municipal | ' | ' |
Available-for-sale | ' | ' |
Amortized Cost | 528,209 | 415,226 |
Fair Value | 522,010 | 432,319 |
Gross Unrealized Gains | 6,495 | 17,250 |
Gross Unrealized Losses | -12,694 | -157 |
Percentage of securities of portfolio rated as AA or better | 91.00% | ' |
Percentage of securities of portfolio rated as A or better | 99.00% | ' |
Held-to-maturity | ' | ' |
Amortized Cost | 651 | 1,652 |
Fair Value | 687 | 1,718 |
Gross Unrecognized Gains | 36 | 66 |
Total fixed income | ' | ' |
Available-for-sale | ' | ' |
Amortized Cost | 1,431,049 | 1,294,350 |
Fair Value | 1,440,052 | 1,378,582 |
Gross Unrealized Gains | 37,661 | 84,615 |
Gross Unrealized Losses | -28,658 | -383 |
Equity securities | ' | ' |
Available-for-sale | ' | ' |
Amortized Cost | 21,848 | 240,287 |
Fair Value | 418,654 | 375,788 |
Gross Unrealized Gains | 200,081 | 136,376 |
Gross Unrealized Losses | ($275) | ($875) |
INVESTMENTS_Details_7
INVESTMENTS (Details 7) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Fair value | ' | ' |
Less than 12 months | $682,254 | $88,007 |
12 Months and Greater | 3,188 | 960 |
Total Fair value | 685,442 | 88,967 |
Cost or amortized Cost | ' | ' |
Less than 12 months | 710,949 | 89,232 |
12 months and greater | 3,426 | 993 |
Total Cost or Amortized Cost | 714,375 | 90,225 |
Unrealized Loss | ' | ' |
Less than 12 months | -28,695 | -1,225 |
12 Months and Greater | -238 | -33 |
Total Unrealized Loss | -28,933 | -1,258 |
Fixed income | ' | ' |
Fair value | ' | ' |
Less than 12 months | 679,860 | 71,800 |
12 Months and Greater | 3,188 | 960 |
Total Fair value | 683,048 | 72,760 |
Cost or amortized Cost | ' | ' |
Less than 12 months | 708,280 | 72,150 |
12 months and greater | 3,426 | 993 |
Total Cost or Amortized Cost | 711,706 | 73,143 |
Unrealized Loss | ' | ' |
Less than 12 months | -28,420 | -350 |
12 Months and Greater | -238 | -33 |
Total Unrealized Loss | -28,658 | -383 |
U.S. government | ' | ' |
Fair value | ' | ' |
Less than 12 months | ' | 749 |
Total Fair value | ' | 749 |
Cost or amortized Cost | ' | ' |
Less than 12 months | ' | 749 |
Total Cost or Amortized Cost | ' | 749 |
U.S. Agency | ' | ' |
Fair value | ' | ' |
Less than 12 months | 5,760 | ' |
Total Fair value | 5,760 | ' |
Cost or amortized Cost | ' | ' |
Less than 12 months | 5,997 | ' |
Total Cost or Amortized Cost | 5,997 | ' |
Unrealized Loss | ' | ' |
Less than 12 months | -237 | ' |
Total Unrealized Loss | -237 | ' |
Non-U.S. Government | ' | ' |
Fair value | ' | ' |
Less than 12 months | 1,825 | ' |
Total Fair value | 1,825 | ' |
Cost or amortized Cost | ' | ' |
Less than 12 months | 1,890 | ' |
Total Cost or Amortized Cost | 1,890 | ' |
Unrealized Loss | ' | ' |
Less than 12 months | -65 | ' |
Total Unrealized Loss | -65 | ' |
Mortgage-backed | ' | ' |
Fair value | ' | ' |
Less than 12 months | 118,283 | ' |
Total Fair value | 118,283 | ' |
Cost or amortized Cost | ' | ' |
Less than 12 months | 124,034 | ' |
Total Cost or Amortized Cost | 124,034 | ' |
Unrealized Loss | ' | ' |
Less than 12 months | -5,751 | ' |
Total Unrealized Loss | -5,751 | ' |
ABS/CMBS | ' | ' |
Fair value | ' | ' |
Less than 12 months | 54,115 | 18 |
Total Fair value | 54,115 | 18 |
Cost or amortized Cost | ' | ' |
Less than 12 months | 56,014 | 18 |
Total Cost or Amortized Cost | 56,014 | 18 |
Unrealized Loss | ' | ' |
Less than 12 months | -1,899 | ' |
Total Unrealized Loss | -1,899 | ' |
Corporate | ' | ' |
Fair value | ' | ' |
Less than 12 months | 190,470 | 35,969 |
12 Months and Greater | 2,245 | 960 |
Total Fair value | 192,715 | 36,929 |
Cost or amortized Cost | ' | ' |
Less than 12 months | 198,250 | 36,162 |
12 months and greater | 2,477 | 993 |
Total Cost or Amortized Cost | 200,727 | 37,155 |
Unrealized Loss | ' | ' |
Less than 12 months | -7,780 | -193 |
12 Months and Greater | -232 | -33 |
Total Unrealized Loss | -8,012 | -226 |
Municipal | ' | ' |
Fair value | ' | ' |
Less than 12 months | 309,407 | 35,064 |
12 Months and Greater | 943 | ' |
Total Fair value | 310,350 | 35,064 |
Cost or amortized Cost | ' | ' |
Less than 12 months | 322,095 | 35,221 |
12 months and greater | 949 | ' |
Total Cost or Amortized Cost | 323,044 | 35,221 |
Unrealized Loss | ' | ' |
Less than 12 months | -12,688 | -157 |
12 Months and Greater | -6 | ' |
Total Unrealized Loss | -12,694 | -157 |
Equity securities | ' | ' |
Fair value | ' | ' |
Less than 12 months | 2,394 | 16,207 |
Total Fair value | 2,394 | 16,207 |
Cost or amortized Cost | ' | ' |
Less than 12 months | 2,669 | 17,082 |
Total Cost or Amortized Cost | 2,669 | 17,082 |
Unrealized Loss | ' | ' |
Less than 12 months | -275 | -875 |
Total Unrealized Loss | ($275) | ($875) |
INVESTMENTS_Details_8
INVESTMENTS (Details 8) (USD $) | 12 Months Ended | 12 Months Ended | 12 Months Ended | ||||||
Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
item | Debt securities | Debt securities | Common stock security | Common stock security | Equity securities | Equity securities | |||
item | item | Maximum | |||||||
Fixed income securities in unrealized loss positions | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of unrealized loss positions | ' | ' | ' | 337 | ' | 1 | ' | ' | ' |
Total unrealized loss | $1,258,000 | ' | $28,933,000 | ' | $383,000 | $300,000 | ' | ' | ' |
Number of securities in unrealized loss positions of greater than 20 percent | ' | ' | 0 | ' | ' | 0 | ' | ' | ' |
Maximum percentage of unrealized loss to portfolio for more than six consecutive months | ' | ' | ' | ' | ' | ' | 20.00% | ' | ' |
Maximum period for securities with unrealized losses greater than 20 percent | ' | ' | ' | '12 months | ' | '6 months | ' | ' | ' |
Number of securities in unrealized loss positions for 12 months or longer | ' | ' | ' | 2 | ' | ' | ' | ' | ' |
Other-than-temporary impairment (OTTI) losses recognized in other comprehensive earnings | 1,156,000 | 257,000 | ' | ' | ' | ' | ' | 1,156,000 | 257,000 |
Unrealized losses for 12 consecutive months or longer | 33,000 | ' | 238,000 | 200,000 | 33,000 | ' | ' | ' | ' |
Fixed maturities and short-term investments on deposit with either regulatory authorities or banks | ' | ' | $23,700,000 | ' | ' | ' | ' | ' | ' |
POLICY_ACQUISITION_COSTS_Detai
POLICY ACQUISITION COSTS (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Policy acquisition costs deferred and amortized to income | ' | ' | ' |
Deferred policy acquisition costs (DAC), beginning of year | $52,344 | $52,105 | $40,242 |
VOBA*, CBIC - Acquisition date | ' | ' | 10,822 |
Deferred: | ' | ' | ' |
Direct commissions | 134,770 | 129,765 | 116,206 |
Premium taxes | 10,442 | 9,528 | 8,725 |
Ceding commissions | -20,186 | -29,010 | -24,721 |
Net deferred | 125,026 | 110,283 | 100,210 |
Amortized | 115,862 | 110,044 | 99,169 |
DAC/VOBA*, end of year | 61,508 | 52,344 | 52,105 |
Policy acquisition costs: | ' | ' | ' |
Amortized to expense - DAC | 115,442 | 107,482 | 91,499 |
Amortized to expense - VOBA | 420 | 2,562 | 7,670 |
Period costs: | ' | ' | ' |
Ceding commission - contingent | -2,126 | -1,940 | -2,207 |
Other underwriting expenses | 96,915 | 88,258 | 86,906 |
Total policy acquisition costs | $210,651 | $196,362 | $183,868 |
DEBT_Details
DEBT (Details) (USD $) | 12 Months Ended | 0 Months Ended | 0 Months Ended | 12 Months Ended | ||||||||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Oct. 02, 2013 | Dec. 31, 2013 | Dec. 12, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Senior Notes | Senior Notes | Senior Notes | Senior notes maturing September 15, 2023 | Senior notes maturing September 15, 2023 | Senior notes maturing January 15, 2014 | Revolving line of credit | Revolving line of credit | Revolving line of credit | ||||
Debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding long-term senior notes | ' | ' | ' | $149,600,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Issue of senior notes by public debt offering | ' | ' | ' | ' | ' | ' | 150,000,000 | ' | ' | ' | ' | ' |
Stated interest rate, payable semi-annually (as a percent) | ' | ' | ' | ' | ' | ' | 4.88% | ' | ' | ' | ' | ' |
Proceeds from issuance of debt, net of discount and commission | ' | ' | ' | ' | ' | ' | 148,600,000 | ' | ' | ' | ' | ' |
Amount of principle redeemed | ' | ' | ' | ' | ' | ' | ' | ' | 100,000,000 | ' | ' | ' |
Estimated fair value of senior notes | ' | ' | ' | ' | ' | ' | ' | 150,800,000 | ' | ' | ' | ' |
Borrowing capacity under revolving line of credit facility | ' | ' | ' | ' | ' | ' | ' | ' | ' | 25,000,000 | ' | ' |
Maximum borrowing capacity conditional expansion | ' | ' | ' | ' | ' | ' | ' | ' | ' | 50,000,000 | ' | ' |
Term of facility | ' | ' | ' | ' | ' | ' | ' | ' | ' | '3 years | ' | ' |
Amount outstanding on this facility | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0 | 0 | 0 |
Average interest rate on debt (as a percent) | ' | ' | ' | 5.71% | 6.02% | 6.02% | ' | ' | ' | ' | ' | ' |
Interest paid on outstanding debt | $8,095,000 | $6,050,000 | $6,050,000 | $8,100,000 | $6,000,000 | $6,000,000 | ' | ' | ' | ' | ' | ' |
REINSURANCE_Details
REINSURANCE (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Reinsurance | ' | ' | ' |
Maximum amount beyond which net loss on any individual risk is limited through the purchase of reinsurance | $3,000,000 | ' | ' |
WRITTEN | ' | ' | ' |
Reinsurance ceded | -176,873,000 | ' | ' |
EARNED | ' | ' | ' |
Direct | 741,569,000 | 679,124,000 | 625,963,000 |
Reinsurance assumed | 78,891,000 | 77,597,000 | 66,984,000 |
Reinsurance ceded | -189,658,000 | -180,150,000 | -154,495,000 |
Net amount | 630,802,000 | 576,571,000 | 538,452,000 |
Maximum | ' | ' | ' |
Reinsurance | ' | ' | ' |
Reinsurance retentions | 8,800,000 | ' | ' |
Minimum | ' | ' | ' |
Reinsurance | ' | ' | ' |
Reinsurance retentions | 700,000 | ' | ' |
Property and Casualty | ' | ' | ' |
WRITTEN | ' | ' | ' |
Direct | 770,142,000 | 709,107,000 | 629,727,000 |
Reinsurance assumed | 73,053,000 | 75,692,000 | 72,380,000 |
Reinsurance ceded | -176,873,000 | -191,713,000 | -152,469,000 |
Net | 666,322,000 | 593,086,000 | 549,638,000 |
EARNED | ' | ' | ' |
Direct | 741,569,000 | 679,124,000 | 625,963,000 |
Reinsurance assumed | 78,891,000 | 77,597,000 | 66,984,000 |
Reinsurance ceded | -189,658,000 | -180,150,000 | -154,495,000 |
Net amount | 630,802,000 | 576,571,000 | 538,452,000 |
LOSSES AND SETTLEMENT EXPENSES INCURRED | ' | ' | ' |
Direct | 279,358,000 | 282,859,000 | 180,768,000 |
Reinsurance assumed | 72,508,000 | 69,830,000 | 60,076,000 |
Reinsurance ceded | -92,065,000 | -81,044,000 | -40,760,000 |
Net | $259,801,000 | $271,645,000 | $200,084,000 |
REINSURANCE_Details_2
REINSURANCE (Details 2) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
item | ||
REINSURANCE | ' | ' |
Prepaid reinsurance premiums and recoverables on paid and unpaid losses and settlement expenses | $362,100,000 | ' |
Percentage of reinsurance recoverables due from companies with financial strength ratings of "A" or better by A.M. Best and S&P rating services | 95.00% | ' |
Number of top reinsurers | 10 | ' |
Net reinsurance balances recoverable | ' | ' |
Reinsurer Exposure | 362,086,000 | ' |
Percent of Total Net Reinsurer Exposure | 100.00% | ' |
Ceded Premium Written | 176,873,000 | ' |
Percent of Total Ceded Premium Written | 100.00% | ' |
Reinsurance balances recoverable as a percentage of shareholder's equity, threshold for disclosure | 2.00% | ' |
Amount of allowance for uncollectible amounts on paid recoverables | 13,300,000 | 13,500,000 |
Reinsurance balances recoverable on unpaid losses and settlement expenses, allowances for uncollectible amounts | 14,200,000 | 14,800,000 |
Threshold period for including reinsurance receivables in the allowance for uncollectible amounts | '1 year | ' |
Crop reinsurance business | ' | ' |
Net reinsurance balances recoverable | ' | ' |
Premiums and reinsurance balances receivable beyond one year | 29,400,000 | ' |
Munich Re America / HSB | A.M. Best Rating, A+, Superior | S&P Rating, AA-, Very Strong | ' | ' |
Net reinsurance balances recoverable | ' | ' |
Reinsurer Exposure | 60,256,000 | ' |
Percent of Total Net Reinsurer Exposure | 16.60% | ' |
Ceded Premium Written | 23,544,000 | ' |
Percent of Total Ceded Premium Written | 13.30% | ' |
Endurance Re | A.M. Best Rating, A, Excellent | S&P Rating, A, Strong | ' | ' |
Net reinsurance balances recoverable | ' | ' |
Reinsurer Exposure | 60,235,000 | ' |
Percent of Total Net Reinsurer Exposure | 16.60% | ' |
Ceded Premium Written | 16,039,000 | ' |
Percent of Total Ceded Premium Written | 9.10% | ' |
Aspen UK Ltd. | A.M. Best Rating, A, Excellent | S&P Rating, A, Strong | ' | ' |
Net reinsurance balances recoverable | ' | ' |
Reinsurer Exposure | 35,152,000 | ' |
Percent of Total Net Reinsurer Exposure | 9.70% | ' |
Ceded Premium Written | 10,585,000 | ' |
Percent of Total Ceded Premium Written | 6.00% | ' |
Transatlantic Re | A.M. Best Rating, A, Excellent | S&P Rating, A+, Strong | ' | ' |
Net reinsurance balances recoverable | ' | ' |
Reinsurer Exposure | 25,803,000 | ' |
Percent of Total Net Reinsurer Exposure | 7.10% | ' |
Ceded Premium Written | 11,549,000 | ' |
Percent of Total Ceded Premium Written | 6.50% | ' |
Berkley Insurance Co. | A.M. Best Rating, A+, Superior | S&P Rating, A+, Strong | ' | ' |
Net reinsurance balances recoverable | ' | ' |
Reinsurer Exposure | 24,060,000 | ' |
Percent of Total Net Reinsurer Exposure | 6.60% | ' |
Ceded Premium Written | 7,658,000 | ' |
Percent of Total Ceded Premium Written | 4.30% | ' |
Axis Re | A.M. Best Rating, A+, Superior | S&P Rating, A+, Strong | ' | ' |
Net reinsurance balances recoverable | ' | ' |
Reinsurer Exposure | 22,494,000 | ' |
Percent of Total Net Reinsurer Exposure | 6.20% | ' |
Ceded Premium Written | 5,834,000 | ' |
Percent of Total Ceded Premium Written | 3.30% | ' |
Swiss Re /Westport Ins. Corp. | A.M. Best Rating, A+, Superior | S&P Rating, AA-, Very Strong | ' | ' |
Net reinsurance balances recoverable | ' | ' |
Reinsurer Exposure | 21,268,000 | ' |
Percent of Total Net Reinsurer Exposure | 5.90% | ' |
Ceded Premium Written | 5,958,000 | ' |
Percent of Total Ceded Premium Written | 3.40% | ' |
Allied World Re - US | A.M. Best Rating, A, Excellent | S&P Rating, A, Strong | ' | ' |
Net reinsurance balances recoverable | ' | ' |
Reinsurer Exposure | 16,148,000 | ' |
Percent of Total Net Reinsurer Exposure | 4.50% | ' |
Ceded Premium Written | 6,340,000 | ' |
Percent of Total Ceded Premium Written | 3.60% | ' |
Toa-Re | A.M. Best Rating, A+, Superior | S&P Rating, A+, Strong | ' | ' |
Net reinsurance balances recoverable | ' | ' |
Reinsurer Exposure | 14,106,000 | ' |
Percent of Total Net Reinsurer Exposure | 3.90% | ' |
Ceded Premium Written | 3,021,000 | ' |
Percent of Total Ceded Premium Written | 1.70% | ' |
Alterra Re - USA | A.M. Best Rating, A, Excellent | S&P Rating, A, Strong | ' | ' |
Net reinsurance balances recoverable | ' | ' |
Reinsurer Exposure | 10,680,000 | ' |
Percent of Total Net Reinsurer Exposure | 2.90% | ' |
Ceded Premium Written | 1,479,000 | ' |
Percent of Total Ceded Premium Written | 0.80% | ' |
All other reinsurers | ' | ' |
Net reinsurance balances recoverable | ' | ' |
Reinsurer Exposure | 71,884,000 | ' |
Percent of Total Net Reinsurer Exposure | 20.00% | ' |
Ceded Premium Written | $84,866,000 | ' |
Percent of Total Ceded Premium Written | 48.00% | ' |
HISTORICAL_LOSS_AND_LAE_DEVELO2
HISTORICAL LOSS AND LAE DEVELOPMENT (Details) (USD $) | 12 Months Ended | |||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Apr. 28, 2011 |
Unpaid losses and LAE at beginning of year: | ' | ' | ' | ' |
Gross | $1,158,483 | $1,150,714 | $1,173,943 | $72,387 |
Ceded | -359,884 | -353,805 | -354,163 | -18,881 |
Net | 798,599 | 796,909 | 819,780 | 53,506 |
Increase (decrease) in incurred losses and LAE: | ' | ' | ' | ' |
Current accident year | 332,282 | 336,228 | 310,145 | ' |
Prior accident years | -72,481 | -64,583 | -110,061 | ' |
Total incurred | 259,801 | 271,645 | 200,084 | ' |
Loss and LAE payments for claims incurred: | ' | ' | ' | ' |
Current accident year | -57,537 | -69,785 | -89,924 | ' |
Prior accident year | -226,354 | -200,170 | -186,537 | ' |
Total paid | -283,891 | -269,955 | -276,461 | ' |
Net unpaid losses and LAE at end of year | 774,509 | 798,599 | 796,909 | 53,506 |
Unpaid losses and LAE at end of year: | ' | ' | ' | ' |
Gross | 1,129,433 | 1,158,483 | 1,150,714 | 72,387 |
Ceded | -354,924 | -359,884 | -353,805 | -18,881 |
Net | $774,509 | $798,599 | $796,909 | $53,506 |
HISTORICAL_LOSS_AND_LAE_DEVELO3
HISTORICAL LOSS AND LAE DEVELOPMENT (Details 2) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | ($72,481) | ($64,583) | ($110,061) |
Casualty | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | -61,805 | -40,449 | -83,892 |
Casualty | Asbestos and environmental exposures | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | 1,500 |
Casualty | Personal umbrella | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | -7,500 | -11,500 | -7,700 |
Casualty | Transportation | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | 3,500 | 3,200 | -6,900 |
Casualty | Executive products | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | -8,900 | 2,200 | ' |
Casualty | General liability | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | -28,500 | -14,200 | -37,300 |
Casualty | Program business | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | -9,200 | -6,200 |
Casualty | Runoff casualty business | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | -2,000 | -4,600 | ' |
Casualty | Commercial umbrella products | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | -6,000 | -4,900 | -15,100 |
Casualty | Miscellaneous professional liability | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | 500 | ' | ' |
Casualty | P&C Package | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | -8,100 | ' | ' |
Property | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | -7,273 | -16,800 | -18,453 |
Property | Difference in conditions | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | -7,000 |
Property | Marine business | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | -5,900 | -12,100 | -8,500 |
Property | Other direct property products | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | -3,500 | -3,500 | ' |
Property | Assumed property | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | 1,400 | ' | ' |
Surety | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | -3,403 | -7,334 | -7,716 |
Surety | Contract surety product | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | 2,600 | -3,900 |
Surety | Energy surety product | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | -2,200 |
Surety | Commercial surety product | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ' |
(Favorable)/unfavorable reserve development | ' | ' | ($2,000) |
HISTORICAL_LOSS_AND_LAE_DEVELO4
HISTORICAL LOSS AND LAE DEVELOPMENT (Details 3) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Apr. 28, 2011 | Dec. 31, 2010 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Environmental, Asbestos and Mass Tort Claims | Environmental, Asbestos and Mass Tort Claims | Environmental, Asbestos and Mass Tort Claims | ||||||
Loss and LAE payments (cumulative) | ' | ' | ' | ' | ' | ' | ' | ' |
Gross | ' | ' | ' | ' | ' | $105,559,000 | $102,222,000 | $91,079,000 |
Ceded | ' | ' | ' | ' | ' | -57,976,000 | -57,345,000 | -48,039,000 |
Net | ' | ' | ' | ' | ' | 47,583,000 | 44,877,000 | 43,040,000 |
Unpaid losses and LAE at end of year: | ' | ' | ' | ' | ' | ' | ' | ' |
Gross | 1,129,433,000 | 1,158,483,000 | 1,150,714,000 | 72,387,000 | 1,173,943,000 | 48,507,000 | 50,353,000 | 66,429,000 |
Ceded | -354,924,000 | -359,884,000 | -353,805,000 | -18,881,000 | -354,163,000 | -15,043,000 | -16,733,000 | -31,633,000 |
Net | 774,509,000 | 798,599,000 | 796,909,000 | 53,506,000 | 819,780,000 | 33,464,000 | 33,620,000 | 34,796,000 |
Minimum period for which product lines related to majority of reserves have been in runoff | ' | ' | ' | ' | ' | '20 years | ' | ' |
Gross increase in loss | ' | ' | ' | ' | ' | 2,200,000 | ' | ' |
Net increase in loss | ' | ' | ' | ' | ' | $1,800,000 | ' | ' |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Deferred tax assets: | ' | ' | ' | ' | ' |
Tax discounting of claim reserves | $22,200,000 | $25,462,000 | $22,200,000 | $25,462,000 | ' |
Unearned premium offset | 23,163,000 | 20,731,000 | 23,163,000 | 20,731,000 | ' |
Deferred compensation | 6,193,000 | 5,614,000 | 6,193,000 | 5,614,000 | ' |
Stock option expense | 4,160,000 | 4,678,000 | 4,160,000 | 4,678,000 | ' |
NOL carryforward | 1,059,000 | 3,223,000 | 1,059,000 | 3,223,000 | 5,500,000 |
Other | 604,000 | 433,000 | 604,000 | 433,000 | ' |
Deferred tax assets before allowance | 57,379,000 | 60,141,000 | 57,379,000 | 60,141,000 | ' |
Total deferred tax assets | 57,379,000 | 60,141,000 | 57,379,000 | 60,141,000 | ' |
Deferred tax liabilities: | ' | ' | ' | ' | ' |
Net unrealized appreciation of securities | 73,198,000 | 77,036,000 | 73,198,000 | 77,036,000 | ' |
Deferred policy acquisition costs | 21,528,000 | 18,320,000 | 21,528,000 | 18,320,000 | ' |
Book/tax depreciation | 2,632,000 | 1,060,000 | 2,632,000 | 1,060,000 | ' |
Intangible assets from CBIC acquisition | 4,235,000 | 4,541,000 | 4,235,000 | 4,541,000 | ' |
Undistributed earnings of unconsolidated investee | 12,995,000 | 13,812,000 | 12,995,000 | 13,812,000 | ' |
Other | 592,000 | 938,000 | 592,000 | 938,000 | ' |
Total deferred tax liabilities | 115,180,000 | 115,707,000 | 115,180,000 | 115,707,000 | ' |
Net deferred tax liability | -57,801,000 | -55,566,000 | -57,801,000 | -55,566,000 | ' |
U.S. federal tax rate (as a percent) | ' | ' | 35.00% | 35.00% | 35.00% |
Reconciliation of income tax expense attributable to income from operations with amounts computed by applying the U.S. federal tax rate to pretax income from continuing operations | ' | ' | ' | ' | ' |
Provision for income taxes at the statutory federal tax rates | ' | ' | 61,483,000 | 49,956,000 | 64,255,000 |
Increase (reduction) in taxes resulting from: | ' | ' | ' | ' | ' |
Dividends received deduction | ' | ' | -2,490,000 | -2,630,000 | -1,980,000 |
ESOP dividends paid deduction | ' | ' | -2,532,000 | -3,596,000 | -3,367,000 |
Tax-exempt interest income | ' | ' | -3,758,000 | -2,995,000 | -2,412,000 |
Unconsolidated investee dividends | ' | ' | 3,696,000 | 1,848,000 | ' |
Other items, net | ' | ' | 404,000 | 499,000 | 492,000 |
Income tax expense: | ' | ' | 49,411,000 | 39,386,000 | 56,988,000 |
Effective tax rates (as a percent) | ' | ' | 28.10% | 27.60% | 31.00% |
Tax benefit recognized from special dividend paid to ESOP | ' | ' | 1,700,000 | 2,900,000 | 2,700,000 |
Effective rate reduction due to special dividend paid to ESOP (as a percent) | ' | ' | 1.00% | 2.00% | 1.50% |
Capital gains rate (as a percent) | ' | ' | 35.00% | ' | ' |
Dividend received | 13,200,000 | 6,600,000 | 13,200,000 | 6,600,000 | ' |
Lower tax rate (as a percent) | ' | ' | 7.00% | ' | ' |
Effective rate reduction due to dividend received (as a percent) | ' | ' | 2.10% | 1.30% | ' |
Expected effective tax rate when deferred items reverse in future years (as a percent) | ' | ' | 35.00% | ' | ' |
Federal and state income taxes paid | ' | ' | $36,800,000 | $25,900,000 | $50,500,000 |
EMPLOYEE_BENEFITS_Details
EMPLOYEE BENEFITS (Details) (USD $) | 0 Months Ended | 12 Months Ended | ||
In Millions, except Share data, unless otherwise specified | Jan. 15, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
EMPLOYEE BENEFITS | ' | ' | ' | ' |
Common stock split conversion ratio | 2 | ' | ' | ' |
Annual expenses for incentive plans | ' | $23.20 | $16.70 | $17.40 |
ESOP and 401(k) Plans | ' | ' | ' | ' |
Employee Stock Ownership, 401(K) And Deferred Compensation Plan | ' | ' | ' | ' |
Vesting period of profit sharing contributions | ' | '3 years | ' | ' |
Expenses recognized | ' | 12.4 | 7.8 | 10.6 |
Employee Stock Ownership Plan (ESOP) | ' | ' | ' | ' |
Employee Stock Ownership, 401(K) And Deferred Compensation Plan | ' | ' | ' | ' |
Shares purchased under defined contribution plan | ' | 140,484 | 189,282 | 179,566 |
Average price of shares purchased (in dollars per share) | ' | $35.03 | $35.01 | $28.82 |
Aggregate price of shares purchased | ' | 4.9 | 6.6 | 5.2 |
Shares held by the ESOP | ' | 3,382,944 | ' | ' |
Employee 401(k) Plans | ' | ' | ' | ' |
Employee Stock Ownership, 401(K) And Deferred Compensation Plan | ' | ' | ' | ' |
Employer contribution as a percent of eligible compensation | ' | 3.00% | ' | ' |
Vesting percentage in basic and voluntary contributions | ' | 100.00% | ' | ' |
Deferred compensation plan | ' | ' | ' | ' |
Employee Stock Ownership, 401(K) And Deferred Compensation Plan | ' | ' | ' | ' |
Shares purchased under defined contribution plan | ' | 13,922 | 14,968 | 19,562 |
Average price of shares purchased (in dollars per share) | ' | $38.33 | $34.24 | $29.75 |
Aggregate price of shares purchased | ' | 0.5 | 0.5 | 0.6 |
Assets held under trust | ' | $32.50 | ' | ' |
EMPLOYEE_BENEFITS_Details_2
EMPLOYEE BENEFITS (Details 2) (USD $) | 0 Months Ended | 1 Months Ended | 12 Months Ended | 12 Months Ended | 44 Months Ended | 12 Months Ended | 3 Months Ended | |||||||||||||
Nov. 14, 2013 | Dec. 20, 2012 | Nov. 14, 2012 | Dec. 20, 2011 | Nov. 17, 2011 | 31-May-13 | 31-May-12 | 31-May-11 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2005 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2011 | Dec. 31, 2012 | Mar. 31, 2013 | |
RLI Corp. Long-Term Incentive Plan (LTIP) and Omnibus Stock Plan | Omnibus Stock Plan | Omnibus Stock Plan | RLI Corp. Long-Term Incentive Plan (LTIP) | RLI Corp. Long-Term Incentive Plan (LTIP) | RLI Corp. Long-Term Incentive Plan (LTIP) | Non-Employee Director's Stock Plan (stock plan) | Non-Employee Director's Stock Plan (stock plan) | Outside Directors' Stock Option Plan (the director's plan) | ||||||||||||
Outside director | Outside director | |||||||||||||||||||
Stock options and stock plans | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Shares authorized for grant | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,000,000 | 4,000,000 | 4,000,000 | ' | ' | ' | ' |
Stock options granted to date (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,457,644 | ' | ' | 2,312,500 | ' | 3,082 | 0 | ' |
Award vesting period | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '5 years | ' | ' | ' | ' | ' | ' | ' | ' |
Age and period of service of the participant to be eligible for retirement | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '75 years | ' | ' | ' | ' | ' |
Special dividend declared (in dollars per share) | $1.50 | ' | $2.50 | ' | $2.50 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Special dividend paid (in dollars per share) | ' | $2.50 | ' | $2.50 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Nonqualified options as percentage of options outstanding | ' | ' | ' | ' | ' | ' | ' | ' | 99.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted Number of Options Outstanding | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding options at the beginning of the period (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | 2,945,204 | 2,561,732 | 3,049,964 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options granted (in shares) | ' | ' | ' | ' | ' | 472,700 | 437,800 | 402,000 | 632,700 | 669,800 | 595,900 | ' | ' | ' | 632,700 | ' | ' | ' | ' | ' |
Special dividend (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | 272 | 2,172 | 3,082 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options exercised (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | -935,692 | -282,260 | -1,030,634 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options canceled/forfeited (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | -47,400 | -6,240 | -56,580 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding options at the end of the period (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | 2,595,084 | 2,945,204 | 2,561,732 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Exercisable options at the end of the period (in shares) | ' | ' | ' | ' | ' | ' | ' | ' | 934,544 | 1,362,184 | 1,207,872 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted Average Exercise Price | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding options at the beginning of the period (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | $22.22 | $21.62 | $20.66 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options granted (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | $35.67 | $31.71 | $27.51 | ' | ' | ' | ' | ' | ' | $27.48 | ' | ' |
Special dividend (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | $16.38 | $15.39 | $16.08 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options exercised (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | $17.40 | $19.03 | $17.31 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options canceled/forfeited (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | $24.86 | $20.42 | $20.82 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding options at the end of the period (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | $26.04 | $22.22 | $21.62 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Exercisable options at the end of the period (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | $20.36 | $18.29 | $19.90 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted Average Remaining Contractual Life | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted-average remaining contractual term of options outstanding | ' | ' | ' | ' | ' | ' | ' | ' | '5 years 6 months 22 days | '5 years 5 months 5 days | '5 years 7 months 13 days | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted-average remaining contractual term of exercisable options | ' | ' | ' | ' | ' | ' | ' | ' | '4 years 3 months 11 days | '4 years 3 months 7 days | '4 years 6 months 14 days | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Aggregate Intrinsic Value | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options exercised (in dollars) | ' | ' | ' | ' | ' | ' | ' | ' | $22,422,000 | $4,712,000 | $12,764,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Outstanding options at the end of the period (in dollars) | ' | ' | ' | ' | ' | ' | ' | ' | 58,790,000 | 29,865,000 | 37,949,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Exercisable options at the end of the period (in dollars) | ' | ' | ' | ' | ' | ' | ' | ' | 26,474,000 | 19,135,000 | 19,965,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Average fair value of options granted (in dollars per share) | ' | ' | ' | ' | ' | $6.47 | $6.54 | $6.46 | $6.88 | $6.55 | $6.45 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock-based compensation expenses (in dollars) | ' | ' | ' | ' | ' | ' | ' | ' | 3,800,000 | 3,600,000 | 3,500,000 | ' | ' | ' | ' | ' | ' | 100,000 | ' | 100,000 |
Income tax benefit from stock-based compensation (in dollars) | ' | ' | ' | ' | ' | ' | ' | ' | 1,300,000 | 1,300,000 | 1,200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unrecognized stock-based compensation expense (in dollars) | ' | ' | ' | ' | ' | ' | ' | ' | 4,500,000 | 4,300,000 | 3,600,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average grant date assumptions and weighted average fair value | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted-average fair value of grants (in dollars per share) | ' | ' | ' | ' | ' | $6.47 | $6.54 | $6.46 | $6.88 | $6.55 | $6.45 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Risk-free interest rates (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | 0.87% | 0.90% | 2.06% | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Dividend yield (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | 2.00% | 1.93% | 1.89% | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Expected volatility (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | 25.40% | 25.62% | 25.68% | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Expected option life | ' | ' | ' | ' | ' | ' | ' | ' | '5 years 3 months 4 days | '5 years 5 months 5 days | '5 years 6 months 14 days | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Period for which annualized dividends is considered to calculate dividend yield | ' | ' | ' | ' | ' | ' | ' | ' | '5 years | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Restricted shares issued per recipient (in dollars) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $10,000 | ' | ' | ' |
Restricted shares issued | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,320 |
Restriction period | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '1 year |
STATUTORY_INFORMATION_AND_DIVI2
STATUTORY INFORMATION AND DIVIDEND RESTRICTIONS (Details) (USD $) | 12 Months Ended | 12 Months Ended | 12 Months Ended | |||||||||||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
item | RLI Ins. | RLI Ins. | RLI Ins. | Mt. Hawley Insurance Company | Insurance subsidiaries | Insurance subsidiaries | Insurance subsidiaries | Common stock security | Common stock security | Common stock security | ||||
Mt. Hawley Insurance Company | Mt. Hawley Insurance Company | Mt. Hawley Insurance Company | ||||||||||||
STATUTORY INFORMATION AND DIVIDEND RESTRICTIONS | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of insurance companies | 4 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Equity | $828,966,000 | $796,363,000 | $792,634,000 | $769,151,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Remaining unrestricted equity, liquid assets | 32,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Statutory information and dividend restrictions | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Authorized control level RBC | ' | ' | ' | ' | 90,600,000 | 90,400,000 | 89,300,000 | ' | ' | ' | ' | ' | ' | ' |
Cost basis of RLI stock held by the subsidiary | ' | ' | ' | ' | ' | ' | ' | 64,600,000 | ' | ' | ' | ' | ' | ' |
Selected information for insurance subsidiaries | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consolidated net income, statutory basis | ' | ' | ' | ' | ' | ' | ' | ' | 122,550,000 | 125,672,000 | 118,922,000 | ' | ' | ' |
Consolidated surplus, statutory basis | ' | ' | ' | ' | 859,200,000 | 684,100,000 | 710,200,000 | ' | 859,221,000 | 684,072,000 | 710,186,000 | 64,000,000 | 9,100,000 | 14,700,000 |
Dividend restriction as percentage of policyholder surplus | 10.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Ordinary dividends paid | ' | ' | ' | ' | 40,000,000 | 13,000,000 | 0 | ' | ' | ' | ' | ' | ' | ' |
Extraordinary dividend paid after seeking and receiving approval from the Illinois regulatory authorities | ' | ' | ' | ' | 0 | 125,000,000 | 150,000,000 | ' | ' | ' | ' | ' | ' | ' |
Non restricted net assets | ' | ' | ' | ' | ' | ' | ' | ' | $92,700,000 | ' | ' | ' | ' | ' |
COMMITMENTS_AND_CONTINGENT_LIA2
COMMITMENTS AND CONTINGENT LIABILITIES (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
COMMITMENTS AND CONTINGENT LIABILITIES | ' | ' | ' |
Expense associated with operating leases | $5,700,000 | $5,400,000 | $5,000,000 |
Minimum future rental payments under noncancellable leases | ' | ' | ' |
2014 | 4,791,000 | ' | ' |
2015 | 4,401,000 | ' | ' |
2016 | 3,380,000 | ' | ' |
2017 | 2,667,000 | ' | ' |
2018 | 1,876,000 | ' | ' |
2019-2023 | 3,866,000 | ' | ' |
Total minimum future rental payments | $20,981,000 | ' | ' |
OPERATING_SEGMENT_INFORMATION_1
OPERATING SEGMENT INFORMATION (Details) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
OPERATING SEGMENT INFORMATION | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Ownership percentage in Maui Jim Inc. | 40.00% | ' | ' | ' | ' | ' | ' | ' | 40.00% | ' | ' |
REVENUES | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Segment totals before income taxes | $168,396 | $163,702 | $154,553 | $144,151 | $147,764 | $149,943 | $141,584 | $137,280 | $630,802 | $576,571 | $538,452 |
Net investment income | 13,432 | 13,598 | 12,847 | 12,886 | 14,491 | 14,221 | 14,826 | 15,293 | 52,763 | 58,831 | 63,681 |
Realized gains | 3,611 | 10,999 | 3,742 | 3,684 | 9,139 | 5,481 | -664 | 11,416 | 22,036 | 25,372 | 17,036 |
Consolidated revenue | ' | ' | ' | ' | ' | ' | ' | ' | 705,601 | 660,774 | 619,169 |
INSURANCE EXPENSES | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Loss and settlement expenses | ' | ' | ' | ' | ' | ' | ' | ' | 259,801 | 271,645 | 200,084 |
Policy acquisition costs | ' | ' | ' | ' | ' | ' | ' | ' | 210,651 | 196,362 | 183,868 |
Other insurance expenses | ' | ' | ' | ' | ' | ' | ' | ' | 53,557 | 44,971 | 44,312 |
Insurance expenses | ' | ' | ' | ' | ' | ' | ' | ' | 524,009 | 512,978 | 428,264 |
NET EARNINGS (LOSSES) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net underwriting income | ' | ' | ' | ' | ' | ' | ' | ' | 106,793 | 63,593 | 110,188 |
Net investment income | 13,432 | 13,598 | 12,847 | 12,886 | 14,491 | 14,221 | 14,826 | 15,293 | 52,763 | 58,831 | 63,681 |
Realized gains | 3,611 | 10,999 | 3,742 | 3,684 | 9,139 | 5,481 | -664 | 11,416 | 22,036 | 25,372 | 17,036 |
General corporate expense and interest on debt | ' | ' | ' | ' | ' | ' | ' | ' | -16,841 | -13,917 | -13,816 |
Equity in earnings of unconsolidated investee | ' | ' | ' | ' | ' | ' | ' | ' | 10,915 | 8,853 | 6,497 |
Earnings before income taxes | 40,812 | 55,309 | 43,576 | 35,969 | 28,575 | 36,480 | 36,568 | 41,109 | 175,666 | 142,732 | 183,586 |
Income tax expense | ' | ' | ' | ' | ' | ' | ' | ' | 49,411 | 39,386 | 56,988 |
Net earnings | 33,859 | 37,647 | 29,902 | 24,847 | 25,097 | 25,463 | 24,748 | 28,038 | 126,255 | 103,346 | 126,598 |
Casualty | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
REVENUES | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Segment totals before income taxes | ' | ' | ' | ' | ' | ' | ' | ' | 324,022 | 267,697 | 236,198 |
INSURANCE EXPENSES | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Loss and settlement expenses | ' | ' | ' | ' | ' | ' | ' | ' | 148,860 | 144,106 | 85,091 |
Policy acquisition costs | ' | ' | ' | ' | ' | ' | ' | ' | 93,463 | 76,765 | 67,495 |
Other insurance expenses | ' | ' | ' | ' | ' | ' | ' | ' | 26,107 | 21,387 | 22,215 |
NET EARNINGS (LOSSES) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net underwriting income | ' | ' | ' | ' | ' | ' | ' | ' | 55,592 | 25,439 | 61,397 |
Property | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
REVENUES | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Segment totals before income taxes | ' | ' | ' | ' | ' | ' | ' | ' | 200,141 | 202,402 | 203,660 |
INSURANCE EXPENSES | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Loss and settlement expenses | ' | ' | ' | ' | ' | ' | ' | ' | 96,271 | 115,707 | 101,969 |
Policy acquisition costs | ' | ' | ' | ' | ' | ' | ' | ' | 58,650 | 60,070 | 57,878 |
Other insurance expenses | ' | ' | ' | ' | ' | ' | ' | ' | 17,616 | 14,933 | 13,481 |
NET EARNINGS (LOSSES) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net underwriting income | ' | ' | ' | ' | ' | ' | ' | ' | 27,604 | 11,692 | 30,332 |
Surety | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
REVENUES | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Segment totals before income taxes | ' | ' | ' | ' | ' | ' | ' | ' | 106,639 | 106,472 | 98,594 |
INSURANCE EXPENSES | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Loss and settlement expenses | ' | ' | ' | ' | ' | ' | ' | ' | 14,670 | 11,832 | 13,024 |
Policy acquisition costs | ' | ' | ' | ' | ' | ' | ' | ' | 58,538 | 59,527 | 58,495 |
Other insurance expenses | ' | ' | ' | ' | ' | ' | ' | ' | 9,834 | 8,651 | 8,616 |
NET EARNINGS (LOSSES) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net underwriting income | ' | ' | ' | ' | ' | ' | ' | ' | $23,597 | $26,462 | $18,459 |
OPERATING_SEGMENT_INFORMATION_2
OPERATING SEGMENT INFORMATION (Details 2) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | $168,396 | $163,702 | $154,553 | $144,151 | $147,764 | $149,943 | $141,584 | $137,280 | $630,802 | $576,571 | $538,452 |
Casualty | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 324,022 | 267,697 | 236,198 |
Casualty | Commercial and personal umbrella | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 85,532 | 68,287 | 63,020 |
Casualty | General liability | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 81,427 | 84,985 | 85,020 |
Casualty | Commercial transportation | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 50,287 | 34,701 | 34,106 |
Casualty | Professional services | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 42,063 | 28,018 | 13,151 |
Casualty | P&C package business | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 30,603 | 28,497 | 16,379 |
Casualty | Executive products | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 19,123 | 17,198 | 15,472 |
Casualty | Medical professional liability | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 8,626 | 25 | ' |
Casualty | Other casualty | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 6,361 | 5,986 | 9,050 |
Property | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 200,141 | 202,402 | 203,660 |
Property | Commercial property | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 76,939 | 74,197 | 80,743 |
Property | Marine | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 57,122 | 56,367 | 51,654 |
Property | Crop reinsurance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 31,421 | 24,506 | 34,935 |
Property | Property reinsurance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 15,770 | 27,021 | 19,925 |
Property | Other property | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 18,889 | 20,311 | 16,403 |
Surety | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 106,639 | 106,472 | 98,594 |
Surety | Miscellaneous | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 38,131 | 39,299 | 34,837 |
Surety | Contract | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 27,176 | 26,329 | 24,354 |
Surety | Commercial | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | 23,133 | 22,107 | 21,317 |
Surety | Oil and Gas | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenue by major product | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | ' | ' | ' | ' | ' | ' | ' | $18,199 | $18,737 | $18,086 |
UNAUDITED_INTERIM_FINANCIAL_IN2
UNAUDITED INTERIM FINANCIAL INFORMATION (Details) (USD $) | 0 Months Ended | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, except Per Share data, unless otherwise specified | Jan. 15, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
UNAUDITED INTERIM FINANCIAL INFORMATION | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock split conversion ratio | 2 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net premiums earned | ' | $168,396 | $163,702 | $154,553 | $144,151 | $147,764 | $149,943 | $141,584 | $137,280 | $630,802 | $576,571 | $538,452 |
Net investment income | ' | 13,432 | 13,598 | 12,847 | 12,886 | 14,491 | 14,221 | 14,826 | 15,293 | 52,763 | 58,831 | 63,681 |
Net realized investment gains (losses) | ' | 3,611 | 10,999 | 3,742 | 3,684 | 9,139 | 5,481 | -664 | 11,416 | 22,036 | 25,372 | 17,036 |
Earnings before income taxes | ' | 40,812 | 55,309 | 43,576 | 35,969 | 28,575 | 36,480 | 36,568 | 41,109 | 175,666 | 142,732 | 183,586 |
Net earnings | ' | $33,859 | $37,647 | $29,902 | $24,847 | $25,097 | $25,463 | $24,748 | $28,038 | $126,255 | $103,346 | $126,598 |
Basic earnings per share (in dollars per share) | ' | $0.79 | $0.88 | $0.70 | $0.58 | $0.59 | $0.60 | $0.58 | $0.66 | $2.95 | $2.44 | $3 |
Diluted earnings per share (in dollars per share) | ' | $0.77 | $0.86 | $0.69 | $0.57 | $0.58 | $0.59 | $0.58 | $0.65 | $2.90 | $2.39 | $2.95 |
ACQUISITIONS_Details
ACQUISITIONS (Details) (USD $) | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 0 Months Ended | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2012 | Dec. 31, 2013 | Nov. 02, 2012 | Apr. 28, 2011 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2013 | |
Casualty | Casualty | Casualty | Surety | Surety | Surety | Rockbridge | Rockbridge | Rockbridge | Contractors Bonding and Insurance Company | Contractors Bonding and Insurance Company | Contractors Bonding and Insurance Company | Contractors Bonding and Insurance Company | Contractors Bonding and Insurance Company | Contractors Bonding and Insurance Company | ||||||||||||
state | Casualty | Surety | ||||||||||||||||||||||||
Business acquisition | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of states in which coverage is offered to individual physicians and physician groups | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 50 | ' | ' | ' | ' | ' | ' |
Total business acquisition consideration | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $16,700,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Business acquisition consideration paid in cash | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 15,500,000 | ' | ' | 135,900,000 | ' | ' | ' | ' | ' |
Present value of an earn-out agreement to be paid in future years | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,200,000 | 1,300,000 | ' | ' | ' | ' | ' | ' | ' |
Gross premiums written | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 16,700,000 | ' | ' | 55,400,000 | 54,900,000 | 36,000,000 | 37,000,000 | 18,400,000 |
Net premiums earned | 168,396,000 | 163,702,000 | 154,553,000 | 144,151,000 | 147,764,000 | 149,943,000 | 141,584,000 | 137,280,000 | 630,802,000 | 576,571,000 | 538,452,000 | 324,022,000 | 267,697,000 | 236,198,000 | 106,639,000 | 106,472,000 | 98,594,000 | ' | 8,600,000 | ' | ' | ' | ' | ' | ' | ' |
Pretax earnings contributed | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $12,500,000 | $14,100,000 | $2,700,000 | ' | ' |
SCHEDULE_ISUMMARY_OF_INVESTMEN1
SCHEDULE I-SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES (Details) (USD $) | Dec. 31, 2013 |
In Thousands, unless otherwise specified | |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | $1,713,249 |
Fair Value | 1,922,094 |
Amount at which shown in the balance sheet | 1,922,058 |
Fixed maturities | ' |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | 1,431,700 |
Fair Value | 1,440,739 |
Amount at which shown in the balance sheet | 1,440,703 |
Fixed maturities | Available-for-sale Securities | ' |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | 1,431,049 |
Fair Value | 1,440,052 |
Amount at which shown in the balance sheet | 1,440,052 |
Fixed maturities | Held-to-maturity Securities | ' |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | 651 |
Fair Value | 687 |
Amount at which shown in the balance sheet | 651 |
U.S. government | Available-for-sale Securities | ' |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | 17,086 |
Fair Value | 17,303 |
Amount at which shown in the balance sheet | 17,303 |
U.S. Agency | Available-for-sale Securities | ' |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | 10,513 |
Fair Value | 10,298 |
Amount at which shown in the balance sheet | 10,298 |
Non U.S. Government & Agency | Available-for-sale Securities | ' |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | 13,306 |
Fair Value | 13,678 |
Amount at which shown in the balance sheet | 13,678 |
Mtge/ABS/CMBS | Available-for-sale Securities | ' |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | 350,187 |
Fair Value | 350,725 |
Amount at which shown in the balance sheet | 350,725 |
Corporate | Available-for-sale Securities | ' |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | 511,748 |
Fair Value | 526,038 |
Amount at which shown in the balance sheet | 526,038 |
Municipal | Available-for-sale Securities | ' |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | 528,209 |
Fair Value | 522,010 |
Amount at which shown in the balance sheet | 522,010 |
Municipal | Held-to-maturity Securities | ' |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | 651 |
Fair Value | 687 |
Amount at which shown in the balance sheet | 651 |
Equity securities | ' |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | 218,848 |
Fair Value | 418,654 |
Amount at which shown in the balance sheet | 418,654 |
Ind Misc & all other | ' |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | 171,211 |
Fair Value | 340,107 |
Amount at which shown in the balance sheet | 340,107 |
ETFs (Ind/misc) | ' |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | 47,637 |
Fair Value | 78,547 |
Amount at which shown in the balance sheet | 78,547 |
Cash and Short-term Investments | ' |
SCHEDULE I - SUMMARY OF INVESTMENTS-OTHER THAN INVESTMENTS IN RELATED PARTIES | ' |
Cost | 62,701 |
Fair Value | 62,701 |
Amount at which shown in the balance sheet | $62,701 |
SCHEDULE_IICONDENSED_FINANCIAL1
SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 |
In Thousands, unless otherwise specified | ||||
ASSETS | ' | ' | ' | ' |
Cash | $39,469 | $44,314 | $81,184 | ' |
Short-term investments, at cost which approximates fair value | 23,232 | 30,462 | ' | ' |
Investments in unconsolidated investee, at equity value | 49,793 | 52,128 | ' | ' |
Fixed income: | ' | ' | ' | ' |
Available-for-sale, at fair value (amortized cost - $18,839 in 2013 and $19,967 in 2012 ) | 1,440,052 | 1,378,582 | ' | ' |
Property and equipment, at cost, net of accumulated depreciation of $312 in 2013 and $240 in 2012 | 40,261 | 27,987 | ' | ' |
Total assets | 2,740,310 | 2,644,632 | ' | ' |
Liabilities: | ' | ' | ' | ' |
Total liabilities | 1,911,344 | 1,848,269 | ' | ' |
Shareholders' equity: | ' | ' | ' | ' |
Common stock ($1 par value, authorized 100,000,000 shares, issued 65,912,638 shares in 2013 and 65,455,462 shares in 2012, and outstanding 42,982,424 shares in 2013 and 42,525,248 shares in 2012) | 65,913 | 65,455 | ' | ' |
Paid in capital | 208,705 | 202,535 | ' | ' |
Accumulated other comprehensive earnings, net of tax | 136,027 | 143,170 | ' | ' |
Retained earnings | 811,320 | 778,202 | ' | ' |
Deferred compensation | 11,562 | 11,106 | ' | ' |
Treasury shares at cost (22,930,214 shares in 2013 and 2012) | -404,561 | -404,105 | ' | ' |
Total shareholders' equity | 828,966 | 796,363 | 792,634 | 769,151 |
Total liabilities and shareholders' equity | 2,740,310 | 2,644,632 | ' | ' |
Debt, notes payable due 2023 | ' | ' | ' | ' |
Liabilities: | ' | ' | ' | ' |
Notes payable | 149,582 | ' | ' | ' |
Debt, notes payable due 2014 | ' | ' | ' | ' |
Liabilities: | ' | ' | ' | ' |
Notes payable | ' | 100,000 | ' | ' |
PARENT COMPANY | ' | ' | ' | ' |
ASSETS | ' | ' | ' | ' |
Cash | 181 | 14,023 | 346 | 26 |
Short-term investments, at cost which approximates fair value | 13,394 | 431 | ' | ' |
Accounts receivable, affiliates | 2,350 | 3,699 | ' | ' |
Investments in subsidiaries, at equity value | 905,620 | 822,856 | ' | ' |
Investments in unconsolidated investee, at equity value | 49,793 | 52,128 | ' | ' |
Fixed income: | ' | ' | ' | ' |
Available-for-sale, at fair value (amortized cost - $18,839 in 2013 and $19,967 in 2012 ) | 18,447 | 20,599 | ' | ' |
Property and equipment, at cost, net of accumulated depreciation of $312 in 2013 and $240 in 2012 | 3,446 | 709 | ' | ' |
Income taxes receivable - current | 493 | ' | ' | ' |
Deferred debt costs | 1,398 | 112 | ' | ' |
Other assets | 190 | 397 | ' | ' |
Total assets | 995,312 | 914,954 | ' | ' |
Liabilities: | ' | ' | ' | ' |
Income taxes payable--current | ' | 207 | ' | ' |
Income taxes payable--deferred | 14,485 | 15,183 | ' | ' |
Interest payable, long-term debt | 1,808 | 2,727 | ' | ' |
Other liabilities | 471 | 474 | ' | ' |
Total liabilities | 166,346 | 118,591 | ' | ' |
Shareholders' equity: | ' | ' | ' | ' |
Common stock ($1 par value, authorized 100,000,000 shares, issued 65,912,638 shares in 2013 and 65,455,462 shares in 2012, and outstanding 42,982,424 shares in 2013 and 42,525,248 shares in 2012) | 65,913 | 65,455 | ' | ' |
Paid in capital | 208,705 | 202,535 | ' | ' |
Accumulated other comprehensive earnings, net of tax | 136,027 | 143,170 | ' | ' |
Retained earnings | 811,320 | 778,202 | ' | ' |
Deferred compensation | 11,562 | 11,106 | ' | ' |
Treasury shares at cost (22,930,214 shares in 2013 and 2012) | -404,561 | -404,105 | ' | ' |
Total shareholders' equity | 828,966 | 796,363 | ' | ' |
Total liabilities and shareholders' equity | 995,312 | 914,954 | ' | ' |
PARENT COMPANY | Debt, notes payable due 2023 | ' | ' | ' | ' |
Liabilities: | ' | ' | ' | ' |
Notes payable | 149,582 | ' | ' | ' |
PARENT COMPANY | Debt, notes payable due 2014 | ' | ' | ' | ' |
Liabilities: | ' | ' | ' | ' |
Notes payable | ' | $100,000 | ' | ' |
SCHEDULE_IICONDENSED_FINANCIAL2
SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) (Details 2) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, except Share data, unless otherwise specified | ||
CONDENSED BALANCE SHEETS (Parenthetical) | ' | ' |
Available-for-sale, amortized cost | $1,431,049 | $1,294,350 |
Property and equipment, accumulated depreciation | 41,491 | 45,603 |
Common stock, par value (in dollars per share) | $1 | $1 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 65,912,638 | 65,455,462 |
Common stock, shares outstanding (in shares) | 42,982,424 | 42,525,248 |
Treasury stock, shares (in shares) | 22,930,214 | 22,930,214 |
PARENT COMPANY | ' | ' |
CONDENSED BALANCE SHEETS (Parenthetical) | ' | ' |
Available-for-sale, amortized cost | 18,839 | 19,967 |
Property and equipment, accumulated depreciation | $312 | $240 |
Common stock, par value (in dollars per share) | $1 | $1 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 65,912,638 | 65,455,462 |
Common stock, shares outstanding (in shares) | 42,982,424 | 42,525,248 |
Treasury stock, shares (in shares) | 22,930,214 | 22,930,214 |
SCHEDULE_IICONDENSED_FINANCIAL3
SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) (Details 3) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
CONDENSED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net investment income | $13,432 | $13,598 | $12,847 | $12,886 | $14,491 | $14,221 | $14,826 | $15,293 | $52,763 | $58,831 | $63,681 |
Net realized investment gains (losses) | 3,611 | 10,999 | 3,742 | 3,684 | 9,139 | 5,481 | -664 | 11,416 | 22,036 | 25,372 | 17,036 |
Equity in earnings of unconsolidated investee | ' | ' | ' | ' | ' | ' | ' | ' | 10,915 | 8,853 | 6,497 |
Interest expense on debt | ' | ' | ' | ' | ' | ' | ' | ' | -8,095 | -6,050 | -6,050 |
Loss before income taxes | 40,812 | 55,309 | 43,576 | 35,969 | 28,575 | 36,480 | 36,568 | 41,109 | 175,666 | 142,732 | 183,586 |
Income tax benefit | ' | ' | ' | ' | ' | ' | ' | ' | 49,411 | 39,386 | 56,988 |
Net earnings | 33,859 | 37,647 | 29,902 | 24,847 | 25,097 | 25,463 | 24,748 | 28,038 | 126,255 | 103,346 | 126,598 |
Unrealized gains (losses) on securities: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Other comprehensive earnings (loss) | ' | ' | ' | ' | ' | ' | ' | ' | -7,143 | 25,845 | 21,333 |
Comprehensive earnings | ' | ' | ' | ' | ' | ' | ' | ' | 119,112 | 129,191 | 147,931 |
PARENT COMPANY | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
CONDENSED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net investment income | ' | ' | ' | ' | ' | ' | ' | ' | 652 | 837 | 1,179 |
Net realized investment gains (losses) | ' | ' | ' | ' | ' | ' | ' | ' | -850 | -2,834 | 42 |
Equity in earnings of unconsolidated investee | ' | ' | ' | ' | ' | ' | ' | ' | 10,915 | 8,853 | 6,497 |
Selling, general and administrative expenses | ' | ' | ' | ' | ' | ' | ' | ' | -8,746 | -7,867 | -7,766 |
Interest expense on debt | ' | ' | ' | ' | ' | ' | ' | ' | -8,095 | -6,050 | -6,050 |
Loss before income taxes | ' | ' | ' | ' | ' | ' | ' | ' | -6,124 | -7,061 | -6,098 |
Income tax benefit | ' | ' | ' | ' | ' | ' | ' | ' | -11,946 | -8,071 | -4,949 |
Net earnings (loss) before equity in net earnings of subsidiaries | ' | ' | ' | ' | ' | ' | ' | ' | 5,822 | 1,010 | -1,149 |
Equity in net earnings of subsidiaries | ' | ' | ' | ' | ' | ' | ' | ' | 120,433 | 102,336 | 127,747 |
Net earnings | ' | ' | ' | ' | ' | ' | ' | ' | 126,255 | 103,346 | 126,598 |
Unrealized gains (losses) on securities: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unrealized holding gains (losses) arising during the period | ' | ' | ' | ' | ' | ' | ' | ' | -665 | 807 | 277 |
Less: reclassification adjustment for losses (gains) included in net earnings | ' | ' | ' | ' | ' | ' | ' | ' | ' | -70 | -27 |
Other comprehensive income (loss) - parent only | ' | ' | ' | ' | ' | ' | ' | ' | -665 | 737 | 250 |
Equity in other comprehensive earnings (loss) of subsidiaries/investees | ' | ' | ' | ' | ' | ' | ' | ' | -6,478 | 25,108 | 21,083 |
Other comprehensive earnings (loss) | ' | ' | ' | ' | ' | ' | ' | ' | -7,143 | 25,845 | 21,333 |
Comprehensive earnings | ' | ' | ' | ' | ' | ' | ' | ' | $119,112 | $129,191 | $147,931 |
SCHEDULE_IICONDENSED_FINANCIAL4
SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) (Details 4) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Adjustments to reconcile net losses to net cash provided by (used in) operating activities: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net realized investment (gains) losses | ($3,611,000) | ($10,999,000) | ($3,742,000) | ($3,684,000) | ($9,139,000) | ($5,481,000) | $664,000 | ($11,416,000) | ($22,036,000) | ($25,372,000) | ($17,036,000) |
Depreciation | ' | ' | ' | ' | ' | ' | ' | ' | 3,765,000 | 3,145,000 | 3,177,000 |
Other items, net | ' | ' | ' | ' | ' | ' | ' | ' | 13,104,000 | 7,732,000 | -9,144,000 |
Change in: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock option excess tax benefit | ' | ' | ' | ' | ' | ' | ' | ' | -6,310,000 | -1,471,000 | -4,210,000 |
Changes in investment in unconsolidated investees: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Undistributed earnings | ' | ' | ' | ' | ' | ' | ' | ' | -10,915,000 | -8,853,000 | -6,497,000 |
Dividends received | 13,200,000 | ' | ' | ' | 6,600,000 | ' | ' | ' | 13,200,000 | 6,600,000 | ' |
Net cash provided by operating activities | ' | ' | ' | ' | ' | ' | ' | ' | 134,966,000 | 36,240,000 | 117,991,000 |
Purchase of: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fixed income, available-for-sale | ' | ' | ' | ' | ' | ' | ' | ' | -545,899,000 | -632,955,000 | -450,813,000 |
Short-term investments, net | ' | ' | ' | ' | ' | ' | ' | ' | ' | -6,597,000 | ' |
Property and equipment | ' | ' | ' | ' | ' | ' | ' | ' | -25,407,000 | -18,521,000 | -5,382,000 |
Sale of: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fixed income, available-for-sale | ' | ' | ' | ' | ' | ' | ' | ' | 173,694,000 | 181,338,000 | 383,664,000 |
Short-term investments, net | ' | ' | ' | ' | ' | ' | ' | ' | 7,230,000 | ' | 15,922,000 |
Property and equipment | ' | ' | ' | ' | ' | ' | ' | ' | 9,368,000 | 3,913,000 | 1,424,000 |
Call or maturity of: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fixed income, available-for-sale | ' | ' | ' | ' | ' | ' | ' | ' | 224,620,000 | 248,134,000 | 261,654,000 |
Net cash provided by (used in) investing activities | ' | ' | ' | ' | ' | ' | ' | ' | -101,932,000 | 52,352,000 | 87,641,000 |
Cash flows from financing activities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock option excess tax benefit | ' | ' | ' | ' | ' | ' | ' | ' | 6,310,000 | 1,471,000 | 4,210,000 |
Proceeds from stock option exercises | ' | ' | ' | ' | ' | ' | ' | ' | 318,000 | 6,104,000 | 8,821,000 |
Proceeds from issuance of senior notes | ' | ' | ' | ' | ' | ' | ' | ' | 149,571,000 | ' | ' |
Payment on senior notes | ' | ' | ' | ' | ' | ' | ' | ' | -99,504,000 | ' | ' |
Debt issue costs paid | ' | ' | ' | ' | ' | ' | ' | ' | -1,437,000 | ' | ' |
Treasury shares purchased | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -6,624,000 |
Net cash used in financing activities | ' | ' | ' | ' | ' | ' | ' | ' | -37,879,000 | -125,462,000 | -124,448,000 |
Net (decrease) increase in cash | ' | ' | ' | ' | ' | ' | ' | ' | -4,845,000 | -36,870,000 | 81,184,000 |
Cash at beginning of year | ' | ' | ' | 44,314,000 | ' | ' | ' | 81,184,000 | 44,314,000 | 81,184,000 | ' |
Cash at end of year | 39,469,000 | ' | ' | ' | 44,314,000 | ' | ' | ' | 39,469,000 | 44,314,000 | 81,184,000 |
PARENT COMPANY | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash flows from operating activities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Earnings (loss) before equity in net earnings of subsidiaries | ' | ' | ' | ' | ' | ' | ' | ' | 5,822,000 | 1,010,000 | -1,149,000 |
Adjustments to reconcile net losses to net cash provided by (used in) operating activities: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net realized investment (gains) losses | ' | ' | ' | ' | ' | ' | ' | ' | 850,000 | 2,834,000 | -42,000 |
Depreciation | ' | ' | ' | ' | ' | ' | ' | ' | 90,000 | 30,000 | 235,000 |
Other items, net | ' | ' | ' | ' | ' | ' | ' | ' | -1,789,000 | 852,000 | -104,000 |
Change in: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Affiliate balances receivable/payable | ' | ' | ' | ' | ' | ' | ' | ' | 1,349,000 | -10,383,000 | 3,026,000 |
Federal income taxes | ' | ' | ' | ' | ' | ' | ' | ' | 5,288,000 | 3,964,000 | 3,330,000 |
Stock option excess tax benefit | ' | ' | ' | ' | ' | ' | ' | ' | -6,310,000 | -1,471,000 | -4,210,000 |
Changes in investment in unconsolidated investees: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Undistributed earnings | ' | ' | ' | ' | ' | ' | ' | ' | -10,915,000 | -8,853,000 | -6,497,000 |
Dividends received | ' | ' | ' | ' | ' | ' | ' | ' | 13,200,000 | 6,600,000 | ' |
Net cash provided by operating activities | ' | ' | ' | ' | ' | ' | ' | ' | 7,585,000 | -5,417,000 | -5,411,000 |
Purchase of: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fixed income, available-for-sale | ' | ' | ' | ' | ' | ' | ' | ' | -99,982,000 | -20,147,000 | -29,621,000 |
Short-term investments, net | ' | ' | ' | ' | ' | ' | ' | ' | -12,963,000 | ' | -10,198,000 |
Property and equipment | ' | ' | ' | ' | ' | ' | ' | ' | -2,845,000 | -2,656,000 | -11,000 |
Sale of: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fixed income, available-for-sale | ' | ' | ' | ' | ' | ' | ' | ' | ' | 7,938,000 | 8,125,000 |
Short-term investments, net | ' | ' | ' | ' | ' | ' | ' | ' | ' | 10,786,000 | ' |
Property and equipment | ' | ' | ' | ' | ' | ' | ' | ' | 18,000 | 3,108,000 | ' |
Call or maturity of: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fixed income, available-for-sale | ' | ' | ' | ' | ' | ' | ' | ' | 101,000,000 | 20,185,000 | 24,400,000 |
Cash dividends received-subsidiaries | ' | ' | ' | ' | ' | ' | ' | ' | 40,000,000 | 138,000,000 | 150,000,000 |
Net cash provided by (used in) investing activities | ' | ' | ' | ' | ' | ' | ' | ' | 25,228,000 | 157,214,000 | 142,695,000 |
Cash flows from financing activities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock option excess tax benefit | ' | ' | ' | ' | ' | ' | ' | ' | 6,310,000 | 1,471,000 | 4,210,000 |
Proceeds from stock option exercises | ' | ' | ' | ' | ' | ' | ' | ' | 318,000 | 6,104,000 | 8,821,000 |
Proceeds from issuance of senior notes | ' | ' | ' | ' | ' | ' | ' | ' | 149,571,000 | ' | ' |
Payment on senior notes | ' | ' | ' | ' | ' | ' | ' | ' | -99,504,000 | ' | ' |
Debt issue costs paid | ' | ' | ' | ' | ' | ' | ' | ' | -1,437,000 | ' | ' |
Treasury shares purchased | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -6,624,000 |
Cash dividends paid | ' | ' | ' | ' | ' | ' | ' | ' | -101,913,000 | -145,695,000 | -143,371,000 |
Net cash used in financing activities | ' | ' | ' | ' | ' | ' | ' | ' | -46,655,000 | -138,120,000 | -136,964,000 |
Net (decrease) increase in cash | ' | ' | ' | ' | ' | ' | ' | ' | -13,842,000 | 13,677,000 | 320,000 |
Cash at beginning of year | ' | ' | ' | 14,023,000 | ' | ' | ' | 346,000 | 14,023,000 | 346,000 | 26,000 |
Cash at end of year | 181,000 | ' | ' | ' | 14,023,000 | ' | ' | ' | 181,000 | 14,023,000 | 346,000 |
Interest paid on outstanding debt | ' | ' | ' | ' | ' | ' | ' | ' | $8,400,000 | $6,000,000 | $6,000,000 |
SCHEDULE_IIISUPPLEMENTARY_INSU1
SCHEDULE III-SUPPLEMENTARY INSURANCE INFORMATION (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Supplementary insurance information | ' | ' | ' |
Deferred policy acquisition costs | $61,508 | $52,344 | $52,105 |
Unpaid losses and settlement expenses, gross | 1,129,433 | 1,158,483 | 1,150,714 |
Unearned premiums, gross | 392,081 | 369,346 | 341,267 |
Net premiums earned | 630,802 | 576,571 | 538,452 |
Incurred losses and settlement expenses | ' | ' | ' |
Current accident year | 332,282 | 336,228 | 310,145 |
Prior accident years | -72,481 | -64,583 | -110,061 |
Policy acquisition costs | 210,651 | 196,362 | 183,868 |
Other operating expenses | 53,557 | 44,971 | 44,312 |
Net premiums written | 666,322 | 593,086 | 549,638 |
Casualty segment | ' | ' | ' |
Supplementary insurance information | ' | ' | ' |
Deferred policy acquisition costs | 28,553 | 19,673 | 18,507 |
Unpaid losses and settlement expenses, gross | 947,677 | 955,730 | 973,077 |
Unearned premiums, gross | 228,907 | 199,672 | 171,768 |
Net premiums earned | 324,022 | 267,697 | 236,198 |
Incurred losses and settlement expenses | ' | ' | ' |
Current accident year | 210,665 | 184,555 | 168,983 |
Prior accident years | -61,805 | -40,449 | -83,892 |
Policy acquisition costs | 93,463 | 76,765 | 67,495 |
Other operating expenses | 26,107 | 21,387 | 22,215 |
Net premiums written | 362,459 | 284,058 | 238,611 |
Property segment | ' | ' | ' |
Supplementary insurance information | ' | ' | ' |
Deferred policy acquisition costs | 14,275 | 14,523 | 14,474 |
Unpaid losses and settlement expenses, gross | 146,122 | 169,250 | 133,861 |
Unearned premiums, gross | 97,116 | 103,854 | 103,346 |
Net premiums earned | 200,141 | 202,402 | 203,660 |
Incurred losses and settlement expenses | ' | ' | ' |
Current accident year | 103,544 | 132,507 | 120,422 |
Prior accident years | -7,273 | -16,800 | -18,453 |
Policy acquisition costs | 58,650 | 60,070 | 57,878 |
Other operating expenses | 17,616 | 14,933 | 13,481 |
Net premiums written | 196,467 | 202,971 | 210,904 |
Surety segment | ' | ' | ' |
Supplementary insurance information | ' | ' | ' |
Deferred policy acquisition costs | 18,680 | 18,148 | 19,124 |
Unpaid losses and settlement expenses, gross | 35,634 | 33,503 | 43,776 |
Unearned premiums, gross | 66,058 | 65,820 | 66,153 |
Net premiums earned | 106,639 | 106,472 | 98,594 |
Incurred losses and settlement expenses | ' | ' | ' |
Current accident year | 18,073 | 19,166 | 20,740 |
Prior accident years | -3,403 | -7,334 | -7,716 |
Policy acquisition costs | 58,538 | 59,527 | 58,495 |
Other operating expenses | 9,834 | 8,651 | 8,616 |
Net premiums written | $107,396 | $106,057 | $100,123 |
SCHEDULE_IVREINSURANCE_Details
SCHEDULE IV-REINSURANCE (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
RLI Insurance Group Premiums earned | ' | ' | ' |
Direct amount | $741,569 | $679,124 | $625,963 |
Ceded to other companies | 189,658 | 180,150 | 154,495 |
Assumed from other companies | 78,891 | 77,597 | 66,984 |
Net amount | 630,802 | 576,571 | 538,452 |
Percentage of amount assumed to net | 12.50% | 13.50% | 12.40% |
Casualty | ' | ' | ' |
RLI Insurance Group Premiums earned | ' | ' | ' |
Direct amount | 425,105 | 362,724 | 327,411 |
Ceded to other companies | 103,696 | 96,039 | 91,991 |
Assumed from other companies | 2,613 | 1,012 | 778 |
Net amount | 324,022 | 267,697 | 236,198 |
Percentage of amount assumed to net | 0.80% | 0.40% | 0.30% |
Property | ' | ' | ' |
RLI Insurance Group Premiums earned | ' | ' | ' |
Direct amount | 203,424 | 203,072 | 194,946 |
Ceded to other companies | 79,320 | 76,817 | 56,356 |
Assumed from other companies | 76,037 | 76,147 | 65,070 |
Net amount | 200,141 | 202,402 | 203,660 |
Percentage of amount assumed to net | 38.00% | 37.60% | 32.00% |
Surety | ' | ' | ' |
RLI Insurance Group Premiums earned | ' | ' | ' |
Direct amount | 113,040 | 113,328 | 103,606 |
Ceded to other companies | 6,642 | 7,294 | 6,148 |
Assumed from other companies | 241 | 438 | 1,136 |
Net amount | $106,639 | $106,472 | $98,594 |
Percentage of amount assumed to net | 0.20% | 0.40% | 1.20% |
SCHEDULE_VVALUATION_AND_QUALIF1
SCHEDULE V-VALUATION AND QUALIFYING ACCOUNTS (Details) (Allowance for uncollectible reinsurance, USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2011 | Dec. 31, 2013 | Dec. 31, 2012 |
Allowance for uncollectible reinsurance | ' | ' | ' |
Allowance for uncollectible reinsurance | ' | ' | ' |
Balance at beginning of period | $26,900 | $26,404 | $26,404 |
Amounts recovered (written off) | -496 | ' | ' |
Balance at end of period | $26,404 | $26,404 | $26,404 |
SCHEDULE_VISUPPLEMENTARY_INFOR1
SCHEDULE VI-SUPPLEMENTARY INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Claims and claim adjustment expenses incurred related to: | ' | ' | ' |
Current accident year | $332,282 | $336,228 | $310,145 |
Prior accident years | -72,481 | -64,583 | -110,061 |
Amortization of deferred acquisition costs | 210,651 | 196,362 | 183,868 |
Consolidated property-casualty insurance operations | ' | ' | ' |
SUPPLEMENTARY INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS | ' | ' | ' |
Deferred policy acquisition costs | 61,508 | 52,344 | 52,105 |
Claims and claim adjustment expense reserves | 1,129,433 | 1,158,483 | 1,150,714 |
Unearned premiums, gross | 392,081 | 369,346 | 341,267 |
Net premiums earned | 630,802 | 576,571 | 538,452 |
Net investment income | 52,763 | 58,831 | 63,681 |
Claims and claim adjustment expenses incurred related to: | ' | ' | ' |
Current accident year | 332,282 | 336,228 | 310,145 |
Prior accident years | -72,481 | -64,583 | -110,061 |
Amortization of deferred acquisition costs | 210,651 | 196,362 | 183,868 |
Paid claims and claims adjustment expenses | 283,891 | 269,955 | 276,461 |
Net premiums written | $666,322 | $593,086 | $549,638 |