Fair value is the estimated price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company attempts to establish fair value as an exit price consistent with transactions taking place under normal market conventions. The Company utilizes market observable information to the extent possible and seeks to obtain quoted market prices for all securities. If quoted market prices in active markets are not available, the Company uses a number of methodologies to establish fair value estimates including discounted cash flow models, prices from recently executed transactions of similar securities, or broker/dealer quotes.

Fair values for the Company’s fixed maturity and equity securities are determined by management, utilizing prices obtained from third-party pricing services. Management reviews on an ongoing basis the reasonableness of the methodologies used by the pricing services to ensure prices received represent a reasonable estimate of fair value and to confirm representations regarding whether inputs are observable or unobservable. The main procedure the Company employs in fulfillment of this objective includes back-testing transactions, where past fair value estimates are compared to actual transactions executed in the market on similar dates.

The Company’s assets and liabilities have been classified into a three-level hierarchy based on the priority of the inputs to the respective valuation technique. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). An asset’s or a liability’s classification is based on the lowest level input that is significant to its measurement. For example, a Level 3 fair value measurement may include inputs that are both observable (Level 1 and Level 2) and unobservable (Level 3). The levels of the fair value hierarchy are as follows:

Level 1 – Unadjusted quoted prices for identical assets in active markets the Company can access. Level 1 assets include securities that are traded in an active exchange market.

Level 2 – This level includes fixed maturities priced principally by independent pricing services using observable inputs other than Level 1 prices, such as quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments on inactive markets; and model-derived valuations for which all significant inputs are observable market data. Level 2 instruments include most corporate debt securities and U.S. government and agency mortgage-backed securities that are valued by models using inputs that are derived principally from or corroborated by observable market data.

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs are unobservable. Level 3 instruments include less liquid assets for which significant inputs are unobservable in the market, such as structured securities with complex features that require significant management assumptions or estimation in the fair value measurement.

Certain assets and liabilities are not carried at fair value on a recurring basis, including investments such as mortgage loans, intangible assets, future policy benefits excluding term life reserves and policyholder account balances. Accordingly, such items are only included in the fair value hierarchy disclosure when the items are subject to re-measurement at fair value after initial recognition (for example, when there is evidence of impairment) and the resulting re-measurement is reflected in the consolidated financial statements at the reporting date.

The Company’s assets that are carried at fair value on a recurring and non-recurring basis, by fair value hierarchy level, are as follows:


June 30, 2022	Level 1		Level 2		Level 3		Total Fair Value
Recurring fair value measurements
Financial instruments recorded as assets:
Fixed maturities
U.S. government and agencies	$	—	$	9,823	$	—	$	9,823
U.S. agency mortgage-backed		—		8,071		—		8,071
State and political subdivisions		—		49,248		457		49,705
Corporate and miscellaneous		2,637		130,772		27,926		161,335
Foreign government		—		136		—		136
Residential mortgage-backed		—		5,519		—		5,519
Commercial mortgage-backed		—		19,174		—		19,174
Asset-backed		—		41,737		2,878		44,615
Total fixed maturities		2,637		264,480		31,261		298,378
Total recurring assets	$	2,637	$	264,480	$	31,261	$	298,378


December 31, 2021	Level 1		Level 2		Level 3		Total Fair Value
Recurring fair value measurements
Financial instruments recorded as assets:
Fixed maturities
U.S. government and agencies	$	—	$	11,901	$	—	$	11,901
U.S. agency mortgage-backed		—		13,679		—		13,679
State and political subdivisions		—		59,972		498		60,470
Corporate and miscellaneous		2,821		156,937		24,740		184,498
Foreign government		—		414		—		414
Residential mortgage-backed		—		6,069		—		6,069
Commercial mortgage-backed		—		20,815		—		20,815
Asset-backed		—		51,699		2,838		54,537
Total fixed maturities		2,821		321,486		28,076		352,383
Total recurring assets	$	2,821	$	321,486	$	28,076	$	352,383

Level 1 securities include principally exchange‑traded funds that are valued based on quoted market prices for identical assets.

Level 2 securities are based on prices obtained from independent pricing services. All of the Company’s prices for each security are generally sourced from multiple pricing vendors, and a vendor hierarchy is maintained by asset type and region of the world, based on historical pricing experience and vendor expertise. The Company ultimately uses the price from the pricing service highest in the vendor hierarchy based on the respective asset type and region. For fixed maturities that do not trade on a daily basis, the pricing services prepare estimates of fair value measurements using their pricing applications which incorporate a variety of inputs including, but not limited to, benchmark yields, reported trades, broker/dealer quotes, issuer spreads, and U.S. Treasury curves. Specifically, for asset-backed securities, key inputs include prepayment and default projections based on past performance of the underlying collateral and current market data. Securities with validated quotes from pricing services are reflected within Level 2 of the fair value hierarchy, as they generally are based on observable pricing for similar assets or other market significant observable inputs.

Level 3 fair value classification consists of investments in structured securities where the fair value of the security is determined by a pricing service using internal pricing models where one or more of the significant inputs is unobservable in the marketplace, or there is a single broker/dealer quote. The fair value of a broker-quoted asset is based solely on the receipt of an updated quote from a single market maker or a broker-dealer recognized as a market participant. The fair value of Level 3 liabilities is estimated on the discounted cash flows of contractual payments.

If the Company believes the pricing information received from third-party pricing services is not reflective of market activity or other inputs observable in the market, the Company may challenge the price through a formal process with the pricing service. Historically, the Company has not challenged or updated the prices provided by third-party pricing services. However, any such updates by a pricing service to be more consistent with the presented market observations, or any adjustments made by the Company to prices provided by third-party pricing services would be reflected in the balance sheet for the current period.

When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. Thus, a Level 3 fair value measurement may include inputs that are observable (Level 1 or Level 2) and unobservable (Level 3). Net transfers into and/or out of Level 3 are reported as having occurred at the beginning of the period and are based on observable inputs received from pricing sources; therefore, all net realized and unrealized gains and losses on these securities for the period are reflected in the table that follows. A summary of changes in fair value of Level 3 assets held at fair value on a recurring basis is as follows:


			Total gains (losses) included in:
	Balance at January 1, 2022		Net Income (loss)		OCI			Purchases		Sales			Settlements			Net Transfers		Balance at June 30, 2022
Financial Assets
Fixed maturities
State and political subdivision	$	498	$	—	$	(41	)	$	—	$	—		$	—		$	—	$	457
Corporate and miscellaneous		24,740		554		(306	)		1,086		(27	)		(1,005	)		2,884		27,926
Asset-backed		2,838		10		(170	)		129		(655	)		(228	)		954		2,878
Total assets	$	28,076	$	564	$	(517	)	$	1,215	$	(682	)	$	(1,233	)	$	3,838	$	31,261


			Total gains (losses) included in:
	Balance at January 1, 2021		Net Income			OCI			Purchases		Sales		Settlements			Net Transfers			Balance at December 31, 2021
Financial Assets
Fixed maturities
State and political subdivisions	$	521	$	—		$	(23	)	$	—	$	—	$	—		$	—		$	498
Corporate and miscellaneous		8,433		(39	)		—			18,873		—		(14	)		(2,513	)		24,740
Asset-backed		1,301		—			(2	)		1,290		—		(251	)		500			2,838
Total assets	$	10,255	$	(39	)	$	(25	)	$	20,163	$	—	$	(265	)	$	(2,013	)	$	28,076

In 2022, there were 19 transfers from Level 2 to Level 3 and 3 transfers from level 3 to level 2. In 2021, there were 3 transfers from Level 3 to Level 2 and 1 transfer from level 2 to level 3. The transfers between levels is primarily due to number of broker quotes and trading activity.

The following tables provide fair value information for financial instruments that are carried on the balance sheet at amounts other than fair value. These tables exclude cash and cash equivalents and accrued investment income, that are not securities and therefore are not included in the three-level hierarchy table disclosed in the “Recurring and Non-Recurring Fair Value Measurements” section. The carrying amount and estimated fair values of the Company’s financial instruments that are not measured at fair value on the Interim Condensed Consolidated Balance Sheets are as follows:


			Estimated Fair Value
June 30, 2022	Carrying Value		Level 1		Level 2		Level 3		Total
Financial instruments recorded as assets:
Mortgage loans	$	47,547	$	—	$	—	$	43,987	$	43,987
Policyholder loans		6,600		—		—		8,579		8,579
Financial instruments recorded as liabilities:
Future policy benefits, excluding term life reserves	$	18,117	$	—	$	—	$	16,286	$	16,286
Long/short-term debt		32,997		—		—		34,093		34,093
Policyholder account balances		79,286		—		—		74,396		74,396


			Estimated Fair Value
December 31, 2021	Carrying Value		Level 1		Level 2		Level 3		Total
Financial instruments recorded as assets:
Mortgage loans	$	47,487	$	—	$	—	$	43,047	$	43,047
Policyholder loans		6,371		—		—		8,280		8,280
Financial instruments recorded as liabilities:
Future policy benefits, excluding term life reserves	$	22,680	$	—	$	—	$	19,733	$	19,733
Long/short-term debt		26,378		—		—		31,940		31,940
Policyholder account balances		80,494		—		—		86,198		86,198

The following methods and assumptions were used to estimate the fair value of these financial assets and liabilities.

Mortgage Loans — Fair value was based on the discounted value of future cash flows for all first mortgage loans adjusted for specific loan risk. The discount rate was based on the rate that would be offered for similar loans at the reporting date. Fair value excludes $1,952 and $2,398 of second and mezzanine mortgages carried at cost for which fair value is not measurable at June 30, 2022 and December 31, 2021, respectively.

Policyholder Loans — Fair value of policyholder loans was estimated using discounted cash flows using risk-free interest rates with no adjustment for borrower credit risk as these loans are fully collateralized by the cash value of the underlying insurance policy.

Future Policy Benefits and Policyholder Account Balances — For deposit liabilities with interest rate guarantees greater than one year or with defined maturities, the fair value was estimated by calculating an average present value of expected cash flows over a broad range of interest rate scenarios using the current market risk‑free interest rates adjusted for spreads required for publicly traded bonds issued by comparably rated insurers. For deposit liabilities with interest rate guarantees of less than one year, the fair value was based on the amount payable on demand at the reporting date.

Long and Short-Term Debt — Fair value was calculated using the discounted value of future cash flows method. The discount rate was based on the rate that is commensurable to the level of risk. The carrying amounts reported on the Interim Condensed Consolidated Balance Sheets have been divided in to short and long-term based upon expected maturity dates.