Fair value measurements

The Company measures its investments in certain fixed-income and equity securities at fair value with changes in fair value recognized in income. The Company anticipates using these investments, which consist of an insurance contract, to satisfy its obligations under its unfunded, nonqualified benefit plans for executive officers and certain key management employees, and invests in these fixed-income and equity securities for the purpose of earning investment returns and capital appreciation. These investments, which totaled $73.1 million, $71.4 million and $70.9 million, at June 30, 2017 and 2016, and December 31, 2016, respectively, are classified as investments on the Consolidated Balance Sheets. The net unrealized gains on these investments were $2.1 million and $5.0 million for the three and six months ended June 30, 2017. The net unrealized gains on these investments were $2.3 million and $3.9 million for the three and six months ended June 30, 2016. The change in fair value, which is considered part of the cost of the plan, is classified in operation and maintenance expense on the Consolidated Statements of Income.

The Company did not elect the fair value option, which records gains and losses in income, for its available-for-sale securities, which include mortgage-backed securities and U.S. Treasury securities. These available-for-sale securities are recorded at fair value and are classified as investments on the Consolidated Balance Sheets. Unrealized gains or losses are recorded in accumulated other comprehensive income (loss). Details of available-for-sale securities were as follows:



June 30, 2017	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Mortgage-backed securities	$	9,743	$	13	$	(86	)	$	9,670
U.S. Treasury securities	613		—		—			613
Total	$	10,356	$	13	$	(86	)	$	10,283



June 30, 2016	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Mortgage-backed securities	$	10,420	$	52	$	(12	)	$	10,460
Total	$	10,420	$	52	$	(12	)	$	10,460



December 31, 2016	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Mortgage-backed securities	$	10,546	$	8	$	(105	)	$	10,449
Total	$	10,546	$	8	$	(105	)	$	10,449

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The ASC establishes a hierarchy for grouping assets and liabilities, based on the significance of inputs.

The estimated fair values of the Company's assets and liabilities measured on a recurring basis are determined using the market approach.

The Company's Level 2 money market funds are valued at the net asset value of shares held at the end of the quarter, based on published market quotations on active markets, or using other known sources including pricing from outside sources.

The estimated fair value of the Company's Level 2 mortgage-backed securities and U.S. Treasury securities are based on comparable market transactions, other observable inputs or other sources, including pricing from outside sources.

The estimated fair value of the Company's Level 2 insurance contract is based on contractual cash surrender values that are determined primarily by investments in managed separate accounts of the insurer. These amounts approximate fair value. The managed separate accounts are valued based on other observable inputs or corroborated market data.

Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in a different estimate of fair value. For the six months ended June 30, 2017 and 2016, there were no transfers between Levels 1 and 2.

The Company's assets and liabilities measured at fair value on a recurring basis were as follows:



	Fair Value Measurements at June 30, 2017, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at June 30, 2017
	(In thousands)
Assets:
Money market funds	$	—	$	5,882	$	—	$	5,882
Insurance contract*	—		73,126		—		73,126
Available-for-sale securities:
Mortgage-backed securities	—		9,670		—		9,670
U.S. Treasury securities	—		613		—		613
Total assets measured at fair value	$	—	$	89,291	$	—	$	89,291


*	The insurance contract invests approximately 50 percent in fixed-income investments, 23 percent in common stock of large-cap companies, 13 percent in common stock of mid-cap companies, 11 percent in common stock of small-cap companies, 2 percent in target date investments and 1 percent in cash equivalents.



	Fair Value Measurements at June 30, 2016, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at June 30, 2016
	(In thousands)
Assets:
Money market funds	$	—	$	1,525	$	—	$	1,525
Insurance contract*	—		71,355		—		71,355
Available-for-sale securities:
Mortgage-backed securities	—		10,460		—		10,460
Total assets measured at fair value	$	—	$	83,340	$	—	$	83,340


*	The insurance contract invests approximately 66 percent in fixed-income investments, 17 percent in common stock of large-cap companies, 9 percent in common stock of mid-cap companies, 6 percent in common stock of small-cap companies, 1 percent in target date investments and 1 percent in cash equivalents.



	Fair Value Measurements at December 31, 2016, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at December 31, 2016
	(In thousands)
Assets:
Money market funds	$	—	$	1,602	$	—	$	1,602
Insurance contract*	—		70,921		—		70,921
Available-for-sale securities:
Mortgage-backed securities	—		10,449		—		10,449
Total assets measured at fair value	$	—	$	82,972	$	—	$	82,972


*	The insurance contract invests approximately 52 percent in fixed-income investments, 22 percent in common stock of large-cap companies, 13 percent in common stock of mid-cap companies, 10 percent in common stock of small-cap companies, 1 percent in target date investments and 2 percent in cash equivalents.

For information about fair value assessments of assets and liabilities classified as held for sale, see Note 8.

The Company's long-term debt is not measured at fair value on the Consolidated Balance Sheets and the fair value is being provided for disclosure purposes only. The fair value was based on discounted future cash flows using current market interest rates. The estimated fair value of the Company's Level 2 long-term debt was as follows:



	Carrying Amount		Fair Value
	(In thousands)
Long-term debt at June 30, 2017	$	1,761,476	$	1,864,884
Long-term debt at June 30, 2016	$	1,987,307	$	2,134,708
Long-term debt at December 31, 2016	$	1,790,159	$	1,841,885

The carrying amounts of the Company's remaining financial instruments included in current assets and current liabilities approximate their fair values.