Disclosures about Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2012

Disclosures about Fair Value of Financial Instruments

14. Disclosures about Fair Value of Financial Instruments

Cash. The carrying amount approximates fair value.

Investment securities and short-term investments. See Note 3, “Investments,” for additional information.

Premiums receivable and reinsurance recoverables on paid losses. The carrying value of current receivables approximates fair value. At September 30, 2012 and December 31, 2011, the carrying values of premiums receivable over 90 days were $28.6 million and $19.3 million, respectively. Included in “Reinsurance recoverables” in the Consolidated Balance Sheets at September 30, 2012 and December 31, 2011, are amounts that are due from third party trade capital providers associated with the operations of Argo Underwriting Agency Limited (“Argo International”). Upon settlement, the receivable is offset against the liability also reflected in the accompanying Consolidated Balance Sheets. At September 30, 2012 and December 31, 2011, the payable was in excess of the receivable. Of our paid losses on reinsurance recoverable balances, excluding amounts attributable to Argo International’s third party trade capital providers, at September 30, 2012 and December 31, 2011, the carrying values over 90 days were $14.4 million and $12.0 million, respectively. Our methodology for establishing our allowances for doubtful accounts includes specifically identifying all potential uncollectible balances regardless of aging. Any of the over 90 day balances, where collectibility was deemed questionable, have been included in the allowances. The allowance for doubtful accounts for premiums receivable was $2.5 million and $2.8 million at September 30, 2012 and December 31, 2011, respectively. The allowance for doubtful accounts for reinsurance recoverables on paid losses was $2.3 million and $3.2 million at September 30, 2012 and December 31, 2011, respectively. Premiums receivable over 90 days were secured by collateral in the amount of $0.5 million and $0.3 million at September 30, 2012 and December 31, 2011, respectively. Reinsurance recoverables on paid losses over 90 days were secured by collateral in the amount of $0.2 million and $0.3 million at September 30, 2012 and December 31, 2011, respectively.

Long-term debt. At September 30, 2012 and December 31, 2011, the fair value of our Junior Subordinated Debentures was estimated using quoted prices from external sources based on current market conditions.

Senior unsecured fixed rate notes. At September 30, 2012, the fair value of our Senior Unsecured Fixed Rate Notes was estimated using quoted prices from external sources based on current market conditions.

Other indebtedness. At September 30, 2012 and December 31, 2011, the fair value of our Other Indebtedness was estimated using quoted prices from external sources based on current market conditions.

A summary of our financial instruments whose carrying value did not equal fair value at September 30, 2012 and December 31, 2011 is shown below:

	September 30, 2012				December 31, 2011
(in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Junior subordinated debentures	$	311.5	$	252.2	$	311.5	$	250.8
Senior unsecured fixed rate notes		143.8		143.8		0.0		0.0
Other indebtedness:
Floating rate loan stock		63.7		46.5		64.7		46.8
Note payable		0.8		0.6		0.8		0.6
	$	519.8	$	443.1	$	377.0	$	298.2