Fair Value Measurements

9 Months Ended

Sep. 30, 2017

The fair value hierarchy established by the accounting standards on fair value measurements includes three levels which are based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities that are recorded in the Combined Balance Sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we have the ability to access.

Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.

Level 3. Financial assets and liabilities whose values are based on model inputs that are unobservable.

Recurring Fair Value Measurements

The following table presents our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016, respectively:



	September 30, 2017
	Level 1		Level 2		Level 3		Total
	(In millions)
Assets:
Fixed-maturity securities available for sale:
Corporate debt securities	$	—	$	22.5	$	—	$	22.5
Equity securities available for sale	16.9		—		—		16.9
Deferred compensation	4.2		—		—		4.2
Total assets	$	21.1	$	22.5	$	—	$	43.6
Liabilities:
Deferred compensation	$	4.2	$	—	$	—	$	4.2
Total liabilities	$	4.2	$	—	$	—	$	4.2



	December 31, 2016
	Level 1		Level 2		Level 3		Total
	(In millions)
Assets:
Fixed-maturity securities available for sale:
Corporate debt securities	$	—	$	25.0	$	—	$	25.0
Equity securities available for sale	51.8		—		—		51.8
Deferred compensation	3.5		—		—		3.5
Total assets	$	55.3	$	25.0	$	—	$	80.3
Liabilities:
Deferred compensation	$	3.5	$	—	$	—	$	3.5
Total liabilities	$	3.5	$	—	$	—	$	3.5

Our recurring Level 2 fair value measure for our fixed-maturity securities available for sale are provided by a third-party provider. We rely on one price for the instruments to determine the carrying amount of the assets on our balance sheet. Quarterly, a blended comparable public company and discounted cash flow analysis are utilized to determine the fair value. The inputs utilized in the analysis include observable measures such as benchmark yields, benchmark securities, and reference data including public company operating results and market research publications. Other factors considered include the bond's yield, its terms and conditions, or any other feature which may influence its risk and thus marketability, as well as relative credit information and relevant sector news. We review the pricing methodologies for our Level 2 securities by obtaining an understanding of the valuation models and assumptions used by the third-party as well as independently comparing the resulting prices to other publicly available measures of fair value.

Additional information regarding the fair value of our investment portfolio is included in Note D Investments.

Deferred compensation plan assets are comprised of various investment funds which are valued based upon their quoted market prices.

As of September 30, 2017 and December 31, 2016 we held no material assets or liabilities measured at fair value using Level 3 inputs.

The carrying amounts of trade receivables and notes receivable approximate fair value due to their short-term nature. The fair value of our notes payable is included in Note F Notes Payable.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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