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EX-32.2 - EXHIBIT 32.2 - SELECTIVE INSURANCE GROUP INCsigi-ex322_9302017xq3.htm
EX-32.1 - EXHIBIT 32.1 - SELECTIVE INSURANCE GROUP INCsigi-ex321_9302017xq3.htm
EX-31.2 - EXHIBIT 31.2 - SELECTIVE INSURANCE GROUP INCsigi-ex312_9302017xq3.htm
EX-31.1 - EXHIBIT 31.1 - SELECTIVE INSURANCE GROUP INCsigi-ex311_9302017xq3.htm
EX-11 - EXHIBIT 11 - SELECTIVE INSURANCE GROUP INCsigi-ex11_9302017xq3.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 10-Q
(Mark One)
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended: September 30, 2017
or
 
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from_____________________________to_____________________________
 
Commission File Number: 001-33067
SELECTIVE INSURANCE GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
New Jersey
 
22-2168890
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
 
 
40 Wantage Avenue
 
 
Branchville, New Jersey
 
07890
(Address of Principal Executive Offices)
 
(Zip Code)
(973) 948-3000
(Registrant’s Telephone Number, Including Area Code)
 
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yesx           No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yesx           No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer o
Non-accelerated filer o
 
Smaller reporting company o
Emerging growth company o
 
 
(Do not check if a smaller reporting company)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Yeso           No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                                                              Yeso          Nox
As of October 13, 2017, there were 58,391,399 shares of common stock, par value $2.00 per share, outstanding. 



 
SELECTIVE INSURANCE GROUP, INC.
 
 
Table of Contents
 
 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS.
 
SELECTIVE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
 
Unaudited
 
 
($ in thousands, except share amounts)
 
September 30,
2017
 
December 31,
2016
ASSETS
 
 

 
 

Investments:
 
 

 
 

Fixed income securities, held-to-maturity – at carrying value (fair value:  $67,716 – 2017; $105,211 – 2016)
 
$
64,989

 
101,556

Fixed income securities, available-for-sale – at fair value (amortized cost: $5,026,735 – 2017; $4,753,759 – 2016)
 
5,133,432

 
4,792,540

Equity securities, available-for-sale – at fair value (cost:  $145,984 – 2017; $120,889 – 2016)
 
175,272

 
146,753

Short-term investments (at cost which approximates fair value)
 
216,336

 
221,701

Other investments
 
120,806

 
102,397

Total investments (Note 4 and 6)
 
5,710,835


5,364,947

Cash
 
694

 
458

Interest and dividends due or accrued
 
40,754

 
40,164

Premiums receivable, net of allowance for uncollectible accounts of:  $7,218 – 2017; $5,980 – 2016
 
769,786

 
681,611

Reinsurance recoverable, net of allowance for uncollectible accounts of: $4,700 – 2017; $5,500 – 2016
 
661,189

 
621,537

Prepaid reinsurance premiums
 
161,429

 
146,282

Current federal income tax
 

 
2,486

Deferred federal income tax
 
52,932

 
84,840

Property and equipment – at cost, net of accumulated depreciation and amortization of:
$211,444 – 2017; $198,729 – 2016
 
66,339

 
69,576

Deferred policy acquisition costs
 
242,156

 
222,564

Goodwill
 
7,849

 
7,849

Other assets
 
98,167

 
113,534

Total assets
 
$
7,812,130

 
7,355,848

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 

 
 

Liabilities:
 
 

 
 

Reserve for losses and loss expenses (Note 8)
 
$
3,835,800

 
3,691,719

Unearned premiums
 
1,393,821

 
1,262,819

Long-term debt
 
439,006

 
438,667

Current federal income tax
 
6,730

 

Accrued salaries and benefits
 
113,076

 
132,880

Other liabilities
 
324,345

 
298,393

Total liabilities
 
$
6,112,778

 
5,824,478

 
 
 
 
 
Stockholders’ Equity:
 
 

 
 

Preferred stock of $0 par value per share:
 
$

 

Authorized shares 5,000,000; no shares issued or outstanding
 
 
 
 
Common stock of $2 par value per share:
 
 
 
 
Authorized shares 360,000,000
 
 
 
 
Issued: 102,180,302 – 2017; 101,620,436 – 2016
 
204,361

 
203,241

Additional paid-in capital
 
362,737

 
347,295

Retained earnings
 
1,679,041

 
1,568,881

Accumulated other comprehensive income (loss) (Note 11)
 
31,315

 
(15,950
)
Treasury stock – at cost
(shares:  43,789,249 – 2017; 43,653,237 – 2016)
 
(578,102
)
 
(572,097
)
Total stockholders’ equity
 
$
1,699,352

 
1,531,370

Commitments and contingencies
 


 


Total liabilities and stockholders’ equity
 
$
7,812,130

 
7,355,848


The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

1


SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
 
Quarter ended September 30,
 
Nine Months ended September 30,
($ in thousands, except per share amounts)
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 

 
 

 
 
 
 
Net premiums earned
 
$
572,055

 
542,429

 
1,700,939

 
1,596,819

Net investment income earned
 
40,446

 
33,375

 
119,295

 
95,326

Net realized gains:
 
 

 
 

 
 
 
 
Net realized investment gains
 
6,871

 
4,030

 
12,252

 
7,233

Other-than-temporary impairments
 
(43
)
 
(342
)
 
(4,729
)
 
(4,494
)
Other-than-temporary impairments on fixed income securities recognized in other comprehensive income
 
(30
)
 

 
(36
)
 
10

Total net realized gains
 
6,798

 
3,688

 
7,487

 
2,749

Other income
 
1,994

 
2,199

 
8,526

 
7,018

Total revenues
 
621,293

 
581,691

 
1,836,247

 
1,701,912

 
 
 
 
 
 
 
 
 
Expenses:
 
 

 
 

 
 
 
 
Losses and loss expenses incurred
 
344,587

 
316,258

 
1,003,618

 
911,881

Policy acquisition costs
 
194,635

 
193,835

 
587,687

 
567,793

Interest expense
 
6,085

 
5,714

 
18,272

 
16,940

Other expenses
 
8,671

 
10,441

 
32,852

 
35,669

Total expenses
 
553,978

 
526,248

 
1,642,429

 
1,532,283

 
 
 
 
 
 
 
 
 
Income before federal income tax
 
67,315

 
55,443

 
193,818

 
169,629

 
 
 
 
 
 
 
 
 
Federal income tax expense:
 
 

 
 

 
 
 
 
Current
 
16,859

 
5,625

 
48,917

 
38,027

Deferred
 
3,738

 
11,316

 
6,317

 
12,467

Total federal income tax expense
 
20,597

 
16,941

 
55,234

 
50,494

 
 
 
 
 
 
 
 
 
Net income
 
$
46,718

 
38,502

 
138,584

 
119,135

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 

 
 

 
 
 
 
Basic net income
 
$
0.80

 
0.66

 
2.37

 
2.06

 
 
 
 
 
 
 
 
 
Diluted net income
 
$
0.79

 
0.66

 
2.34

 
2.03

 
 
 
 
 
 
 
 
 
Dividends to stockholders
 
$
0.16

 
0.15

 
0.48

 
0.45

 
The accompanying notes are an integral part of these unaudited interim consolidated financial statements. 
 


2


SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
Quarter ended September 30,
 
Nine Months ended September 30,
($ in thousands)
 
2017
 
2016
 
2017
 
2016
Net income
 
$
46,718

 
38,502

 
138,584

 
119,135

 
 
 
 
 
 
 
 
 
Other comprehensive income, net of tax:
 
 

 
 

 
 
 
 
Unrealized gains (losses) on investment securities:
 
 

 
 

 
 
 
 
Unrealized holding gains (losses) arising during period
 
10,874

 
(8,444
)
 
50,961

 
70,473

Non-credit portion of other-than-temporary impairments recognized in other comprehensive income
 
19

 

 
23

 
(6
)
  Amounts reclassified into net income:
 
 
 
 
 
 
 
 
Held-to-maturity securities
 
(35
)
 
(9
)
 
(95
)
 
(68
)
Non-credit other-than-temporary impairments
 
25

 

 
25

 

Realized gains on available-for-sale securities
 
(4,394
)
 
(2,395
)
 
(4,638
)
 
(1,786
)
Total unrealized gains (losses) on investment securities
 
6,489

 
(10,848
)
 
46,276

 
68,613

 
 
 
 
 
 
 
 
 
Defined benefit pension and post-retirement plans:
 
 

 
 

 
 
 
 
Amounts reclassified into net income:
 
 
 
 
 
 
 
 
Net actuarial loss
 
329

 
1,050

 
989

 
3,021

  Total defined benefit pension and post-retirement plans
 
329

 
1,050

 
989

 
3,021

Other comprehensive income (loss)
 
6,818

 
(9,798
)
 
47,265

 
71,634

Comprehensive income
 
$
53,536

 
28,704

 
185,849

 
190,769

 
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
 


3


SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
 
Nine Months ended September 30,
($ in thousands, except per share amounts)
 
2017
 
2016
Common stock:
 
 

 
 

Beginning of year
 
$
203,241

 
201,723

Dividend reinvestment plan (shares:  22,278 – 2017; 29,865 – 2016)
 
45

 
60

Stock purchase and compensation plans (shares:  537,588 – 2017; 613,964 – 2016)
 
1,075

 
1,228

End of period
 
204,361

 
203,011

 
 
 
 
 
Additional paid-in capital:
 
 

 
 

Beginning of year
 
347,295

 
326,656

Dividend reinvestment plan
 
1,025

 
1,035

Stock purchase and compensation plans
 
14,417

 
15,155

End of period
 
362,737

 
342,846

 
 
 
 
 
Retained earnings:
 
 

 
 

Beginning of year
 
1,568,881

 
1,446,192

Net income
 
138,584

 
119,135

Dividends to stockholders ($0.48 per share – 2017; $0.45 per share – 2016)
 
(28,424
)
 
(26,399
)
End of period
 
1,679,041

 
1,538,928

 
 
 
 
 
Accumulated other comprehensive income:
 
 

 
 

Beginning of year
 
(15,950
)
 
(9,425
)
Other comprehensive income
 
47,265

 
71,634

End of period
 
31,315

 
62,209

 
 
 
 
 
Treasury stock:
 
 

 
 

Beginning of year
 
(572,097
)
 
(567,105
)
Acquisition of treasury stock (shares: 136,012 – 2017; 152,392 – 2016)
 
(6,005
)
 
(4,985
)
End of period
 
(578,102
)
 
(572,090
)
Total stockholders’ equity
 
$
1,699,352

 
1,574,904

 
Selective Insurance Group, Inc. also has authorized, but not issued, 5,000,000 shares of preferred stock, without par value, of which 300,000 shares have been
designated Series A junior preferred stock, without par value.
  
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
 


4


SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Nine Months ended September 30,
($ in thousands)
 
2017
 
2016
Operating Activities
 
 

 
 

Net income
 
$
138,584

 
119,135

 
 
 
 
 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Depreciation and amortization
 
38,163

 
45,563

Stock-based compensation expense
 
10,139

 
8,950

Undistributed (gains) losses of equity method investments
 
(5,157
)
 
49

Loss on disposal of fixed assets
 
998

 

Net realized gains
 
(7,487
)
 
(2,749
)
 
 
 
 
 
Changes in assets and liabilities:
 
 

 
 

Increase in reserve for losses and loss expenses, net of reinsurance recoverable
 
104,429

 
90,814

Increase in unearned premiums, net of prepaid reinsurance
 
115,855

 
125,453

Decrease in net federal income taxes
 
15,674

 
11,534

Increase in premiums receivable
 
(88,175
)
 
(96,425
)
Increase in deferred policy acquisition costs
 
(19,592
)
 
(22,775
)
Increase in interest and dividends due or accrued
 
(1,088
)
 
(1,356
)
Decrease in accrued salaries and benefits
 
(19,804
)
 
(63,753
)
Decrease (increase) in other assets
 
12,678

 
(16,280
)
Increase (decrease) in other liabilities
 
12,621

 
(20,686
)
Net cash provided by operating activities
 
307,838

 
177,474

 
 
 
 
 
Investing Activities
 
 

 
 

Purchase of fixed income securities, held-to-maturity
 

 
(4,235
)
Purchase of fixed income securities, available-for-sale
 
(1,517,474
)
 
(842,253
)
Purchase of equity securities, available-for-sale
 
(44,480
)
 
(24,747
)
Purchase of other investments
 
(34,586
)
 
(34,994
)
Purchase of short-term investments
 
(3,025,824
)
 
(1,307,024
)
Sale of fixed income securities, available-for-sale
 
811,991

 
33,448

Sale of short-term investments
 
3,032,802

 
1,332,239

Redemption and maturities of fixed income securities, held-to-maturity
 
36,092

 
74,186

Redemption and maturities of fixed income securities, available-for-sale
 
439,616

 
483,877

Sale of equity securities, available-for-sale
 
19,007

 
99,420

Distributions from other investments
 
18,503

 
18,512

Purchase of property and equipment
 
(11,806
)
 
(13,421
)
Net cash used in investing activities
 
(276,159
)
 
(184,992
)
 
 
 
 
 
Financing Activities
 
 

 
 

Dividends to stockholders
 
(26,915
)
 
(24,885
)
Acquisition of treasury stock
 
(6,005
)
 
(4,985
)
Net proceeds from stock purchase and compensation plans
 
4,744

 
4,906

Proceeds from borrowings
 
64,000

 
105,000

Repayments of borrowings
 
(64,000
)
 
(70,000
)
Excess tax benefits from share-based payment arrangements
 

 
1,917

Repayments of capital lease obligations
 
(3,267
)
 
(3,840
)
Net cash (used in) provided by financing activities
 
(31,443
)
 
8,113

Net increase in cash
 
236

 
595

Cash, beginning of year
 
458

 
898

Cash, end of period
 
$
694

 
1,493

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

5


NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Basis of Presentation
As used herein, the "Company,” “we,” “us,” or “our” refers to Selective Insurance Group, Inc. (the "Parent"), and its subsidiaries, except as expressly indicated or unless the context otherwise requires. Our interim unaudited consolidated financial statements (“Financial Statements”) have been prepared by us in conformity with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The preparation of the Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported financial statement balances, as well as the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. All significant intercompany accounts and transactions between the Parent and its subsidiaries are eliminated in consolidation.

Our Financial Statements reflect all adjustments that, in our opinion, are normal, recurring, and necessary for a fair presentation of our results of operations and financial condition. Our Financial Statements cover the third quarters ended September 30, 2017 (“Third Quarter 2017”) and September 30, 2016 (“Third Quarter 2016”) and the nine-month periods ended September 30, 2017 ("Nine Months 2017") and September 30, 2016 ("Nine Months 2016"). The Financial Statements do not include all of the information and disclosures required by GAAP and the SEC for audited annual financial statements. Results of operations for any interim period are not necessarily indicative of results for a full year. Consequently, our Financial Statements should be read in conjunction with the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2016 (“2016 Annual Report”) filed with the SEC.

NOTE 2. Adoption of Accounting Pronouncements 
In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions. We adopted this guidance on January 1, 2017, which resulted in the following impacts on our consolidated financial statements:
Consolidated Statements of Income
The new standard requires that the tax effects of share-based compensation be recognized in the income tax provision as discrete items outside of the annual estimated expected tax rate. In addition, all excess tax benefits and tax deficiencies should be recognized as income tax benefit or expense in the income statement. Previously, these amounts were recorded in additional paid-in capital. In addition, in calculating potential common shares used to determine diluted earnings per share, GAAP requires us to use the treasury stock method. The new standard requires that assumed proceeds under the treasury stock method be modified to exclude the amount of excess tax benefits that would have been recognized in additional paid-in capital. These changes were adopted on a prospective basis. As a result of adoption, we recognized an income tax benefit in the Consolidated Statements of Income of $0.1 million in Third Quarter 2017 and $3.4 million in Nine Months 2017 related to stock grants that have vested this year.

In recording share-based compensation expense, the standard allows companies to make a policy election as to whether they will include an estimate of awards expected to be forfeited or whether they will account for forfeitures as they occur. We have elected to include an estimate of forfeitures in the computation of our share-based compensation expense. As this treatment is consistent with previous guidance, this election had no impact on our consolidated financial statements.
Consolidated Statements of Cash Flows
ASU 2016-09 requires that excess tax benefits from share-based awards be reported as operating activities in the consolidated statement of cash flows. Previously, these cash flows were included in financing activities. We elected to apply this change on a prospective basis; therefore, no changes have been made to the prior periods disclosed in this report.

ASU 2016-09 also requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as financing activities in the consolidated statement of cash flows. This requirement has no impact to us as we have historically reported these cash flows as part of financing activities.
In October 2016, the FASB issued ASU 2016-17, Consolidation: Interests Held through Related Parties That Are under Common Control ("ASU 2016-17"). ASU 2016-17 changes how a decision maker considers indirect interests in a variable interest entity ("VIE") held under common control in making the primary beneficiary determination. ASU 2016-17 was effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. The adoption of ASU 2016-17 did not impact us, as we are not the decision maker in any of the VIEs in which we are invested.

6



Pronouncements to be effective in the future
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 provides guidance to improve certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Specifically the guidance: (i) requires equity investments to be measured at fair value with changes in fair value recognized in earnings; (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost; (iv) requires the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and (v) clarifies that the need for a valuation allowance on a deferred tax asset related to an available-for-sale ("AFS") security should be evaluated with other deferred tax assets.

ASU 2016-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Our adoption of this guidance will require a cumulative-effect adjustment to the balance sheet as of January 1, 2018 in an amount equal to the after-tax net unrealized gain or loss on our equity portfolio as of year-end 2017. If this guidance had been adopted as of the beginning of 2017, the cumulative-effect adjustment would have been approximately $17 million after tax and we would have recognized additional after-tax net income of approximately $2 million or $0.04 per diluted share, reflecting the change in fair value during Nine Months 2017.

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires all lessees to recognize a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that fiscal year, with early adoption permitted. ASU 2016-02 requires the application of a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. While we are currently evaluating ASU 2016-02, we do not expect a material impact on our financial condition or results of operations from the adoption of this guidance.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“ASU 2016-13”).  ASU 2016-13 will change the way entities recognize impairment of financial assets by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, including, among others, held-to-maturity debt securities, trade receivables, and reinsurance recoverables. ASU 2016-13 requires a valuation allowance to be calculated on these financial assets and that they be presented on the financial statements net of the valuation allowance. The valuation allowance is a measurement of expected losses that is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.  This methodology is referred to as the current expected credit loss model. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2018. We are currently evaluating the impact of this guidance on our financial condition and results of operations.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (“ASU 2016-15”). ASU 2016-15 adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows, including, but not limited to: (i) debt prepayment or debt extinguishment costs; (ii) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (iii) distributions received from equity method investees; and (iv) separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this guidance on our statement of cash flows.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash ("ASU 2016-18"). ASU 2016-18, requires that restricted cash and restricted cash equivalents be included with cash and cash equivalents in the reconciliation of beginning and ending cash on the statements of cash flows. This update also requires a reconciliation of the statement of the cash flows to the balance sheet if the balance sheet includes more than one line item of cash, cash equivalents, and restricted cash. ASU 2016-18 is effective, with retrospective adoption, for annual periods beginning after December 15, 2017, and interim periods within those annual periods. We currently have restricted cash associated with the National Flood Insurance Program ("NFIP") in "Other assets." This literature will impact the presentation of this item in both the Consolidated Balance Sheets and the Statements of Cash Flows.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 eliminates the second step of the two part goodwill impairment test, which

7


required entities to determine the fair value of individual assets and liabilities of a reporting unit to measure the goodwill impairment. Under the new guidance, a goodwill impairment is calculated as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendments in this update should be applied on a prospective basis for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect a material impact on our financial condition or results of operations from the adoption of this guidance.
In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ("ASU 2017-07"). ASU 2017-07 requires that an employer report a pension plan's service cost in the same line item or line items as other compensation costs arising from services rendered by pertinent employees during the period. ASU 2017-07 also requires that other components of net benefit cost be presented in the income statement separately from the service cost component. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. ASU 2017-07 is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted at the beginning of an annual period. As our pension plan was frozen as of March 2016, we have ceased accruing additional service fee costs since that time. Therefore, the application of this guidance is not anticipated to impact our financial condition, results of operations, or disclosures.
In March 2017, the FASB issued ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs: Premium Amortization on Purchased Callable Debt Securities ("ASU 2017-08"). ASU 2017-08 revises the amortization period for certain callable debt securities held at a premium, requiring the premium to be amortized to the earliest call date. Under current GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. ASU 2017-08 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 with early adoption permitted. This ASU does not impact us as we amortize premium on these callable debt securities to the earliest call date.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting ("ASU 2017-09"). ASU 2017-09 provides clarification about which changes to the terms or conditions of a share-based payment award would require the application of modification accounting. ASU 2017-09 is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The adoption of this guidance is not anticipated to impact us, as we currently record modifications in accordance with this ASU.

NOTE 3. Statements of Cash Flows
Supplemental cash flow information was as follows:
 
 
Nine Months ended September 30,
($ in thousands)
 
2017
 
2016
Cash paid during the period for:
 
 

 
 

Interest
 
$
15,356

 
13,874

Federal income tax
 
39,000

 
36,405

 
 
 
 
 
Non-cash items:
 
 
 
 
Exchange of fixed income securities, AFS
 
6,192

 
21,775

Corporate actions related to equity securities, AFS1
 
4,725

 
3,032

Assets acquired under capital lease arrangements
 
278

 
3,108

Non-cash purchase of property and equipment
 

 
648

1Examples of such corporate actions include non-cash acquisitions and stock splits.

Included in "Other assets" on the Consolidated Balance Sheets was $18.0 million at September 30, 2017 and $20.9 million at September 30, 2016 of cash received from the NFIP, which is restricted to pay flood claims under the Write Your Own ("WYO") program. 

8



NOTE 4. Investments
(a) Information regarding our held-to-maturity ("HTM") fixed income securities as of September 30, 2017 and December 31, 2016 was as follows:
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
($ in thousands)
 
Amortized
Cost
 
Net
 Unrealized Gains
 (Losses)
 
Carrying
Value
 
Unrecognized
 Holding
Gains
 
Unrecognized Holding
 Losses
 
Fair
Value
Obligations of states and political subdivisions
 
$
46,551

 
130

 
46,681

 
1,442

 

 
48,123

Corporate securities
 
18,426

 
(118
)
 
18,308

 
1,285

 

 
19,593

Total HTM fixed income securities
 
$
64,977

 
12

 
64,989

 
2,727

 

 
67,716

December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
($ in thousands)
 
Amortized
Cost
 
Net
 Unrealized Gains
 (Losses)
 
Carrying
Value
 
Unrecognized
 Holding
Gains
 
Unrecognized Holding
 Losses
 
Fair
Value
Obligations of states and political subdivisions
 
$
77,466

 
317

 
77,783

 
2,133

 

 
79,916

Corporate securities
 
22,711

 
(143
)
 
22,568

 
1,665

 
(158
)
 
24,075

Commercial mortgage-backed securities ("CMBS")
 
1,220

 
(15
)
 
1,205

 
15

 

 
1,220

Total HTM fixed income securities
 
$
101,397

 
159

 
101,556

 
3,813

 
(158
)
 
105,211

 
Unrecognized holding gains and losses of HTM securities are not reflected in the Financial Statements, as they represent fair value fluctuations from the later of: (i) the date a security is designated as HTM; or (ii) the date that an other-than-temporary impairment (“OTTI”) charge is recognized on an HTM security, through the date of the balance sheet.

(b) Information regarding our AFS securities as of September 30, 2017 and December 31, 2016 was as follows:
September 30, 2017
 
 
 
 
 
 
 
 
($ in thousands)
 
Cost/
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
AFS fixed income securities:
 
 
 
 
 
 
 
 
U.S. government and government agencies
 
$
58,820

 
906

 
(137
)
 
59,589

Foreign government
 
18,149

 
650

 

 
18,799

Obligations of states and political subdivisions
 
1,431,282

 
49,088

 
(432
)
 
1,479,938

Corporate securities
 
1,753,584

 
41,095

 
(845
)
 
1,793,834

Collateralized loan obligations and other asset-backed securities ("CLO and other ABS")
 
747,793

 
6,305

 
(143
)
 
753,955

CMBS
 
306,173

 
2,249

 
(318
)
 
308,104

Residential mortgage-backed
securities (“RMBS”)
 
710,934

 
8,842

 
(563
)
 
719,213

Total AFS fixed income securities
 
5,026,735

 
109,135

 
(2,438
)
 
5,133,432

AFS equity securities:
 
 
 
 
 
 
 
 
Common stock
 
131,869

 
29,900

 
(1,342
)
 
160,427

Preferred stock
 
14,115

 
748

 
(18
)
 
14,845

Total AFS equity securities
 
145,984

 
30,648

 
(1,360
)
 
175,272

Total AFS securities
 
$
5,172,719

 
139,783

 
(3,798
)
 
5,308,704


9


December 31, 2016
 
 
 
 
 
 
 
 
($ in thousands)
 
Cost/
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
AFS fixed income securities:
 
 
 
 
 
 
 
 
U.S. government and government agencies
 
$
75,139

 
2,230

 
(36
)
 
77,333

Foreign government
 
26,559

 
322

 
(16
)
 
26,865

Obligations of states and political subdivisions
 
1,366,287

 
18,610

 
(5,304
)
 
1,379,593

Corporate securities
 
1,976,556

 
27,057

 
(5,860
)
 
1,997,753

CLO and other ABS
 
527,876

 
1,439

 
(355
)
 
528,960

CMBS
 
256,356

 
1,514

 
(1,028
)
 
256,842

RMBS
 
524,986

 
3,006

 
(2,798
)
 
525,194

Total AFS fixed income securities
 
4,753,759

 
54,178

 
(15,397
)
 
4,792,540

AFS equity securities:
 
 
 
 
 
 
 
 
Common stock
 
104,663

 
26,250

 
(305
)
 
130,608

Preferred stock
 
16,226

 
274

 
(355
)
 
16,145

Total AFS equity securities
 
120,889

 
26,524

 
(660
)
 
146,753

Total AFS securities
 
$
4,874,648

 
80,702

 
(16,057
)
 
4,939,293


Unrealized gains and losses of AFS securities represent fair value fluctuations from the later of: (i) the date a security is designated as AFS; or (ii) the date that an OTTI charge is recognized on an AFS security, through the date of the balance sheet. These unrealized gains and losses are recorded in "Accumulated other comprehensive income (loss)" ("AOCI") on the Consolidated Balance Sheets.
  
(c) The severity of impairment on securities in an unrealized/unrecognized loss position averaged 1% of amortized cost at September 30, 2017 and December 31, 2016. Quantitative information regarding unrealized losses on our AFS portfolio is provided below.
September 30, 2017
 
Less than 12 months
 
12 months or longer
 
Total
($ in thousands)
 
Fair Value
 
Unrealized
Losses1
 
Fair Value
 
Unrealized
Losses1
 
Fair Value
 
Unrealized
Losses
1
AFS fixed income securities:
 
 

 
 

 
 

 
 

 
 
 
 
U.S. government and government agencies
 
$
19,058

 
(136
)
 
250

 
(1
)
 
19,308

 
(137
)
Obligations of states and political subdivisions
 
67,538

 
(432
)
 

 

 
67,538

 
(432
)
Corporate securities
 
108,011

 
(827
)
 
1,475

 
(18
)
 
109,486

 
(845
)
CLO and other ABS
 
88,636

 
(143
)
 

 

 
88,636

 
(143
)
CMBS
 
65,016

 
(245
)
 
5,216

 
(73
)
 
70,232

 
(318
)
RMBS
 
96,981

 
(558
)
 
592

 
(5
)
 
97,573

 
(563
)
Total AFS fixed income securities
 
445,240

 
(2,341
)
 
7,533

 
(97
)
 
452,773

 
(2,438
)
AFS equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
Common stock
 
18,032

 
(1,342
)
 

 

 
18,032

 
(1,342
)
Preferred stock
 
3,886

 
(18
)
 

 

 
3,886

 
(18
)
Total AFS equity securities
 
21,918

 
(1,360
)
 

 

 
21,918

 
(1,360
)
Total AFS
 
$
467,158

 
(3,701
)
 
7,533

 
(97
)
 
474,691

 
(3,798
)


10


December 31, 2016
 
Less than 12 months
 
12 months or longer
 
Total
($ in thousands)
 
Fair
Value
 
Unrealized
Losses1
 
Fair Value
 
Unrealized
Losses1
 
Fair Value
 
Unrealized
Losses
1
AFS fixed income securities:
 
 

 
 

 
 

 
 

 
 
 
 
U.S. government and government agencies
 
$
6,419

 
(36
)
 

 

 
6,419

 
(36
)
Foreign government
 
13,075

 
(16
)
 

 

 
13,075

 
(16
)
Obligations of states and political subdivisions
 
306,509

 
(5,304
)
 

 

 
306,509

 
(5,304
)
Corporate securities
 
462,902

 
(5,771
)
 
4,913

 
(89
)
 
467,815

 
(5,860
)
CLO and other ABS
 
189,795

 
(354
)
 
319

 
(1
)
 
190,114

 
(355
)
CMBS
 
82,492

 
(1,021
)
 
1,645

 
(7
)
 
84,137

 
(1,028
)
RMBS
 
279,480

 
(2,489
)
 
8,749

 
(309
)
 
288,229

 
(2,798
)
Total AFS fixed income securities
 
1,340,672

 
(14,991
)
 
15,626

 
(406
)
 
1,356,298

 
(15,397
)
AFS equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
Common stock
 
11,271

 
(305
)
 

 

 
11,271

 
(305
)
Preferred stock
 
6,168

 
(355
)
 

 

 
6,168

 
(355
)
Total AFS equity securities
 
17,439

 
(660
)
 

 

 
17,439

 
(660
)
Total AFS
 
$
1,358,111

 
(15,651
)
 
15,626

 
(406
)
 
1,373,737

 
(16,057
)
  1 Gross unrealized losses include non-OTTI unrealized amounts and OTTI losses recognized in AOCI. 

We do not intend to sell any of the securities in the tables above, nor do we believe we will be required to sell any of these securities. We have also reviewed these securities under our OTTI policy, as described in Note 2. “Summary of Significant Accounting Policies” within Item 8. “Financial Statements and Supplementary Data.” of our 2016 Annual Report, and have concluded that they are temporarily impaired. This conclusion reflects our current judgment as to the financial position and future prospects of the entity that issued the investment security and underlying collateral.
 
(d) Fixed income securities at September 30, 2017, by contractual maturity, are shown below. Mortgage-backed securities ("MBS") are included in the maturity tables using the estimated average life of each security. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations, with or without call or prepayment penalties.
 
Listed below are the contractual maturities of fixed income securities at September 30, 2017:
 
 
AFS
 
HTM
($ in thousands)
 
Fair Value
 
Carrying Value
 
Fair Value
Due in one year or less
 
$
337,546

 
27,335

 
27,531

Due after one year through five years
 
2,148,949

 
29,341

 
31,037

Due after five years through 10 years
 
2,377,658

 
8,313

 
9,148

Due after 10 years
 
269,279

 

 

Total fixed income securities
 
$
5,133,432

 
64,989

 
67,716

  
(e) We evaluate the alternative investments and tax credit investments included in our other investments portfolio to determine whether those investments are VIEs and if so, whether consolidation is required. A VIE is an entity that either has equity investors that lack certain essential characteristics of a controlling financial interest or lacks sufficient funds to finance its own activities without financial support provided by other entities. We consider several significant factors in determining if our investments are VIEs and if we are the primary beneficiary, including whether we have: (i) the power to direct activities of the VIE; (ii) the ability to remove the decision maker of the VIE; (iii) the ability to participate in making decisions that are significant to the VIE; and (iv) the obligation to absorb losses and the right to receive benefits that could potentially be significant to the VIE. We have determined that the investments in our other investment portfolio are VIEs, but that we are not the primary beneficiary and therefore, consolidation is not required.


11


The following table summarizes our other investment portfolio by strategy:
Other Investments
 
September 30, 2017
 
December 31, 2016
($ in thousands)
 
Carrying Value
 
Remaining Commitment
 
Maximum Exposure to Loss1
 
Carrying Value
 
Remaining Commitment
 
Maximum Exposure to Loss1
Alternative Investments
 
 

 
 

 
 
 
 
 
 
 
 
   Private equity
 
$
47,654

 
81,478

 
129,132

 
41,135

 
76,774

 
117,909

   Private credit
 
33,318

 
53,635

 
86,953

 
28,193

 
40,613

 
68,806

   Real assets
 
21,649

 
31,466

 
53,115

 
14,486

 
22,899

 
37,385

Total alternative investments
 
102,621

 
166,579

 
269,200

 
83,814

 
140,286

 
224,100

Other securities
 
18,185

 

 
18,185

 
18,583

 
3,400

 
21,983

Total other investments
 
$
120,806

 
166,579

 
287,385

 
102,397

 
143,686

 
246,083

1The maximum exposure to loss includes both the carry value of these investments and the related unfunded commitments. In addition, tax credits that have been previously recognized in Other securities are subject to the risk of recapture, which we do not consider significant. 

We do not have a future obligation to fund losses or debts on behalf of the investments above; however, we are contractually committed to make additional investments up to the remaining commitment outlined above. We have not provided any non-contractual financial support at any time during 2017 or 2016.

For a description of our alternative investment strategies, as well as information regarding redemption, restrictions, and fund liquidations, refer to Note 5. “Investments” in Item 8. “Financial Statements and Supplementary Data.” of our 2016 Annual Report.
 
The following table sets forth gross summarized financial information for our other investments portfolio, including the portion not owned by us. The majority of these investments are carried under the equity method of accounting. The last line of the table below reflects our share of the aggregate income or loss, which is the portion included in our Financial Statements. As the majority of these investments report results to us on a one quarter lag, the summarized financial statement information for the three and nine-month periods ended June 30 is included in our Third Quarter and Nine Months results. This information is as follows:
Income Statement Information
 
Quarter ended September 30,
 
Nine Months ended September 30,
($ in millions)
 
2017
 
2016
 
2017
 
2016
Net investment (loss) income
 
$
(10.3
)

(55.4
)
 
(61.8
)
 
26.1

Realized gains (losses)
 
43.3


245.6

 
(261.0
)
 
1,186.8

Net change in unrealized appreciation (depreciation)
 
1,072.0


117.8

 
3,186.3

 
(1,132.8
)
Net gain
 
$
1,105.0


308.0

 
2,863.5

 
80.1

Selective’s insurance subsidiaries’ other investments gain
 
$
2.7

 
1.6

 
9.5

 

 
(f) We have pledged certain AFS fixed income securities as collateral related to our relationships with the Federal Home Loan Bank of Indianapolis ("FHLBI") and the Federal Home Loan Bank of New York ("FHLBNY"). In addition, certain securities were on deposit with various state and regulatory agencies at September 30, 2017 to comply with insurance laws. We retain all rights regarding all securities pledged as collateral.

The following table summarizes the market value of these securities at September 30, 2017:
($ in millions)
 
FHLBI Collateral
 
FHLBNY Collateral
 
State and Regulatory Deposits
 
Total
U.S. government and government agencies
 
$
3.0

 

 
22.8

 
25.8

Obligations of states and political subdivisions
 

 

 
3.2

 
3.2

CMBS
 
3.5

 
4.8

 

 
8.3

RMBS
 
58.7

 
49.6

 

 
108.3

Total pledged as collateral
 
$
65.2

 
54.4

 
26.0


145.6

 

12


(g) We did not have exposure to any credit concentration risk of a single issuer greater than 10% of our stockholders' equity, other than certain U.S. government-backed investments, as of September 30, 2017 or December 31, 2016.

(h) The components of pre-tax net investment income earned were as follows:
 
 
Quarter ended September 30,
 
Nine Months ended September 30,
($ in thousands)
 
2017
 
2016
 
2017
 
2016
Fixed income securities
 
$
38,865


32,453

 
$
113,424

 
95,850

Equity securities
 
1,605


1,506

 
4,492

 
5,940

Short-term investments
 
396


192

 
1,023

 
493

Other investments
 
2,659


1,628

 
9,493

 
(49
)
Investment expenses
 
(3,079
)

(2,404
)
 
(9,137
)
 
(6,908
)
Net investment income earned
 
$
40,446

 
33,375

 
$
119,295

 
95,326


(i) The following tables summarize OTTI by asset type for the periods indicated:
Third Quarter 2017
 
Gross 
 
Included in Other Comprehensive Income ("OCI")
 
Recognized in
Earnings
($ in thousands) 
 
 
 
AFS fixed income securities:
 
 
 
 
 
 
Corporate securities
 
$
12

 

 
12

CLO and other ABS
 
11

 

 
11

RMBS
 
20

 
(30
)
 
50

Total OTTI losses
 
$
43

 
(30
)
 
73

 
 
 
 
 
 
 
Third Quarter 2016
 
Gross 
 
Included in OCI
 
Recognized in
Earnings
($ in thousands) 
 
 
 
AFS equity securities:
 
 
 
 
 
 
Common stock
 
$
342

 

 
342

Total AFS equity securities
 
342

 

 
342

Total OTTI losses
 
$
342

 

 
342

 
 
 
 
 
 
 
Nine Months 2017
 
Gross 
 
Included in OCI
 
Recognized in
Earnings
($ in thousands) 
 
 
 
AFS fixed income securities:
 
 
 
 
 
 
U.S. government and government agencies
 
$
31

 

 
31

Obligations of states and political subdivisions
 
612

 

 
612

Corporate securities
 
587

 

 
587

CLO and other ABS
 
96

 

 
96

CMBS
 
670

 

 
670

RMBS
 
1,183

 
(36
)
 
1,219

Total AFS fixed income securities
 
3,179

 
(36
)
 
3,215

AFS equity securities:
 
 
 
 
 
 
Common stock
 
1,360

 

 
1,360

Total AFS equity securities
 
1,360

 

 
1,360

Other Investments
 
190

 

 
190

Total OTTI losses
 
$
4,729

 
(36
)
 
4,765

 
 
 
 
 
 
 
Nine Months 2016
 
Gross 
 
Included in OCI
 
Recognized in
Earnings
($ in thousands) 
 
 
 
AFS fixed income securities:
 
 
 
 
 
 
Corporate securities
 
$
1,077

 

 
1,077

RMBS
 
98

 
10

 
88

Total AFS fixed income securities
 
1,175

 
10

 
1,165

AFS equity securities:
 
 
 
 
 
 
Common stock
 
3,316

 

 
3,316

Preferred stock
 
3

 

 
3

Total AFS equity securities
 
3,319

 

 
3,319

Total OTTI losses
 
$
4,494

 
10

 
4,484



13


For a discussion of our evaluation for OTTI refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2016 Annual Report.

(j) The components of net realized gains, excluding OTTI charges, for the periods indicated were as follows:
 
 
Quarter ended September 30,
 
Nine Months ended September 30,
($ in thousands)
 
2017
 
2016
 
2017
 
2016
HTM fixed income securities
 
 
 
 
 
 
 
 
Gains
 
$

 

 
44

 
3

Losses
 

 

 
(1
)
 
(1
)
AFS fixed income securities
 
 

 
 

 
 
 
 
Gains
 
2,070

 
2,204

 
8,337

 
3,189

Losses
 
(74
)
 
(40
)
 
(1,814
)
 
(81
)
AFS equity securities
 
 

 
 

 
 
 
 
Gains
 
4,875

 
1,863

 
5,225

 
4,364

Losses
 

 

 

 
(240
)
Other investments
 
 
 
 
 
 
 
 
Gains
 

 
3

 
480

 
3

      Losses
 



 
(19
)
 
(4
)
Total net realized gains (excluding OTTI charges)
 
$
6,871


4,030

 
12,252

 
7,233

 
Realized gains and losses on the sale of investments are determined on the basis of the cost of the specific investments sold. Proceeds from the sale of AFS securities were $107.6 million and $27.0 million in Third Quarter 2017 and Third Quarter 2016, respectively and $831.0 million and $132.9 million in Nine Months 2017 and Nine Months 2016, respectively. This increase was primarily driven by opportunistic sales in our equity portfolio and higher trading volume in our fixed income securities portfolio related to the recent hiring of new external investment managers.

NOTE 5. Indebtedness
Our long-term debt balance has not changed since December 31, 2016. However, on February 28, 2017, Selective Insurance Company of America ("SICA") borrowed $64 million in short-term funds from the FHLBNY at an interest rate of 0.75%. This borrowing was repaid on March 21, 2017.

For detailed information on our indebtedness, see Note 10. "Indebtedness" in Item 8. "Financial Statements and Supplementary Data." of our 2016 Annual Report.

NOTE 6. Fair Value Measurements
Our financial assets are measured at fair value as disclosed on the Consolidated Balance Sheets. The fair values of our long-term debt have improved since December 31, 2016, but none by more than 5% in the aggregate. For a discussion of the fair value and hierarchy of the techniques used to value our financial assets and liabilities, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2016 Annual Report.


14


The following tables provide quantitative disclosures of our financial assets that were measured at fair value at September 30, 2017 and December 31, 2016:
September 30, 2017
 
 
 
Fair Value Measurements Using
($ in thousands)
 
Assets
Measured at
Fair Value
 
Quoted Prices in
Active Markets for
Identical Assets/
Liabilities (Level 1)1
 
Significant Other
 Observable
Inputs
 (Level 2)1
 
Significant Unobservable
 Inputs
 (Level 3)
Description
 
 

 
 

&