Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2013

Summary of Company's fair value hierarchy measured at recurring basis

The following table presents the Company’s fair value hierarchy for those assets and liabilities measured and carried at fair value on a recurring basis as of September 30, 2013 and December 31, 2012. At September 30, 2013, Level 3 invested assets below comprised approximately 2.1% of the Company’s total investment portfolio fair value.

					Fair Value Measurements at
	Carrying		Fair		Reporting Date Using
	Amount		Value		Level 1		Level 2		Level 3
September 30, 2013
Financial Assets
Investments
Fixed maturities
U.S. government and federally
sponsored agency obligations:
Mortgage-backed securities	$	587,361	$	587,361	$	-	$	587,361	$	-
Other, including
U.S. Treasury securities		455,101		455,101		18,063		437,038		-
Municipal bonds		1,459,611		1,459,611		-		1,451,296		8,315
Foreign government bonds		54,321		54,321		-		54,321		-
Corporate bonds		2,553,424		2,553,424		10,090		2,479,043		64,291
Other mortgage-backed securities		830,704		830,704		-		767,694		63,010
Total fixed maturities		5,940,522		5,940,522		28,153		5,776,753		135,616
Equity securities		86,631		86,631		70,381		16,244		6
Short-term investments		94,245		94,245		78,956		15,289		-
Totals		6,121,398		6,121,398		177,490		5,808,286		135,622
Separate Account
(variable annuity) assets (1)		1,627,685		1,627,685		1,627,685		-		-
Financial Liabilities		-		-		-		-		-

December 31, 2012
Financial Assets
Investments
Fixed maturities
U.S. government and federally
sponsored agency obligations:
Mortgage-backed securities	$	619,559	$	619,559	$	-	$	619,559	$	-
Other, including
U.S. Treasury securities		409,428		409,428		18,594		390,834		-
Municipal bonds		1,586,037		1,586,037		-		1,573,762		12,275
Foreign government bonds		57,869		57,869		-		57,869		-
Corporate bonds		2,567,034		2,567,034		11,934		2,469,378		85,722
Other mortgage-backed securities		722,305		722,305		-		689,133		33,172
Total fixed maturities		5,962,232		5,962,232		30,528		5,800,535		131,169
Equity securities		53,503		53,503		43,704		9,459		340
Short-term investments		87,561		87,561		87,561		-		-
Totals		6,103,296		6,103,296		161,793		5,809,994		131,509
Separate Account
(variable annuity) assets (1)		1,398,281		1,398,281		1,398,281		-		-
Financial Liabilities		-		-		-		-		-

(1)

Separate Account (variable annuity) liabilities are set equal to Separate Account (variable annuity) assets.

Table for reconciliations for all Level 3 assets measured at fair value on a recurring basis

The following tables present reconciliations for the three and nine months ended September 30, 2013 and 2012 for all Level 3 assets measured at fair value on a recurring basis.

	Municipal Bonds		Corporate Bonds		Other Mortgage- Backed Securities		Total Fixed Maturities		Equity Securities		Total
Financial Assets
Beginning balance July 1, 2013	$	3,764	$	56,590	$	49,343	$	109,697	$	6	$	109,703
Transfers into Level 3 (1)		5,546		9,315		23,828		38,689		-		38,689
Transfers out of Level 3 (1)		(800)		-		(1,881)		(2,681)		-		(2,681)
Total gains or losses
Net realized gains (losses)
included in net income		-		-		-		-		-		-
Net unrealized gains (losses)
included in other
comprehensive income		(123)		104		(20)		(39)		-		(39)
Purchases		-		-		-		-		-		-
Issuances		-		-		-		-		-		-
Sales		-		-		-		-		-		-
Settlements		-		-		-		-		-		-
Paydowns, maturities
and distributions		(72)		(1,718)		(8,260)		(10,050)		-		(10,050)
Ending balance, September 30, 2013	$	8,315	$	64,291	$	63,010	$	135,616	$	6	$	135,622

Beginning balance, January 1, 2013	$	12,275	$	85,722	$	33,172	$	131,169	$	340	$	131,509
Transfers into Level 3 (1)		9,453		32,754		67,827		110,034		-		110,034
Transfers out of Level 3 (1)		(800)		(50,341)		(20,284)		(71,425)		-		(71,425)
Total gains or losses
Net realized gains (losses)
included in net income		-		-		-		-		-		-
Net unrealized gains (losses)
included in other
comprehensive income		(474)		(1,605)		(438)		(2,517)		-		(2,517)
Purchases		-		-		-		-		-		-
Issuances		-		-		-		-		-		-
Sales		-		-		-		-		(334)		(334)
Settlements		-		-		-		-		-		-
Paydowns, maturities
and distributions		(12,139)		(2,239)		(17,267)		(31,645)		-		(31,645)
Ending balance, September 30, 2013	$	8,315	$	64,291	$	63,010	$	135,616	$	6	$	135,622

(1)

Transfers into and out of Level 3 during the periods ended September 30, 2013 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company’s policy is to recognize transfers into and transfers out of the levels as of the ending date of the reporting period.

	Municipal Bonds		Corporate Bonds		Other Mortgage- Backed Securities		Total Fixed Maturities		Equity Securities		Total
Financial Assets
Beginning balance July 1, 2012	$	-	$	56,459	$	12,911	$	69,370	$	385	$	69,755
Transfers into Level 3 (1)		12,297		29,558		21,044		62,899		-		62,899
Transfers out of Level 3 (1)		-		-		-		-		-		-
Total gains or losses
Net realized gains (losses)
included in net income		-		-		(2)		(2)		-		(2)
Net unrealized gains (losses)
included in other
comprehensive income		-		(31)		95		64		(45)		19
Purchases		-		-		-		-		-		-
Issuances		-		-		-		-		-		-
Sales		-		-		-		-		-		-
Settlements		-		-		-		-		-		-
Paydowns, maturities
and distributions		-		(169)		(160)		(329)		-		(329)
Ending balance, September 30, 2012	$	12,297	$	85,817	$	33,888	$	132,002	$	340	$	132,342

Beginning balance, January 1, 2012	$	-	$	88,256	$	4,532	$	92,788	$	385	$	93,173
Transfers into Level 3 (1)		12,297		47,798		29,548		89,643		-		89,643
Transfers out of Level 3 (1)		-		(50,707)		-		(50,707)		-		(50,707)
Total gains or losses
Net realized gains (losses)
included in net income		-		-		(2)		(2)		-		(2)
Net unrealized gains (losses)
included in other
comprehensive income		-		915		260		1,175		(45)		1,130
Purchases		-		-		-		-		-		-
Issuances		-		-		-		-		-		-
Sales		-		-		-		-		-		-
Settlements		-		-		-		-		-		-
Paydowns, maturities
and distributions		-		(445)		(450)		(895)		-		(895)
Ending balance, September 30, 2012	$	12,297	$	85,817	$	33,888	$	132,002	$	340	$	132,342

(1)

Transfers into and out of Level 3 during the periods ended September 30, 2012 were attributable to changes in the availability of observable market information for individual fixed maturity securities. The Company’s policy is to recognize transfers into and transfers out of the levels as of the ending date of the reporting period.

Carrying value, fair value and fair value hierarchy of financial assets and financial liabilities

The following table presents the carrying value, fair value and fair value hierarchy of these financial assets and financial liabilities at September 30, 2013 and December 31, 2012.

					Fair Value Measurements at
	Carrying		Fair		Reporting Date Using
	Amount		Value		Level 1		Level 2		Level 3
September 30, 2013
Financial Assets
Investments
Other investments	$	139,010	$	144,054	$	-	$	-	$	144,054
Financial Liabilities
Fixed annuity contract liabilities		3,454,356		3,254,859		-		-		3,254,859
Policyholder account balances on
interest-sensitive life contracts		78,843		78,345		-		-		78,345
Other policyholder funds		97,823		97,823		-		-		97,823
Short-term debt		38,000		38,000		-		38,000		-
Long-term debt		199,858		215,918		215,918		-		-
Other liabilities, repurchase
agreement obligations		121,308		121,308		-		121,308		-

December 31, 2012
Financial Assets
Investments
Other investments	$	134,985	$	135,121	$	-	$	-	$	135,121
Financial Liabilities
Fixed annuity contract liabilities		3,257,758		3,070,111		-		-		3,070,111
Policyholder account balances on
interest-sensitive life contracts		79,017		78,519		-		-		78,519
Other policyholder funds		103,227		103,227		-		-		103,227
Short-term debt		38,000		38,000		-		38,000		-
Long-term debt		199,809		219,319		219,319		-		-

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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