Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

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. At September 30, 2019, Level 3 invested assets comprised 4.3% of the Company’s total investment portfolio at fair value.



($ in thousands)					Fair Value Measurements at
	Carrying		Fair		Reporting Date Using
	Amount		Value		Level 1		Level 2		Level 3
September 30, 2019
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	754,355	$	754,355	$	—	$	749,551	$	4,804
Other, including U.S. Treasury securities	458,175		458,175		17,779		440,396		—
Municipal bonds	1,676,422		1,676,422		—		1,628,717		47,705
Foreign government bonds	47,915		47,915		—		47,915		—
Corporate bonds	1,585,108		1,585,108		14,506		1,473,929		96,673
Other mortgage-backed securities	1,317,585		1,317,585		—		1,175,684		141,901
Total fixed maturity securities	5,839,560		5,839,560		32,285		5,516,192		291,083
Equity securities	105,483		105,483		57,876		47,491		116
Short-term investments	237,819		237,819		237,819		—		—
Other investments	23,935		23,935		—		23,935		—
Totals	$	6,206,797	$	6,206,797	$	327,980	$	5,587,618	$	291,199
Separate Account (variable annuity) assets ⁽¹⁾	$	2,308,134	$	2,308,134	$	2,308,134	$	—	$	—
Financial Liabilities
Investment contract and policy reserves, embedded derivatives	$	1,145	$	1,145	$	—	$	1,145	$	—
Other policyholder funds, embedded derivatives	$	89,098	$	89,098	$	—	$	—	$	89,098

December 31, 2018
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	787,441	$	787,441	$	—	$	784,224	$	3,217
Other, including U.S. Treasury securities	833,542		833,542		13,291		820,251		—
Municipal bonds	2,003,969		2,003,969		—		1,956,438		47,531
Foreign government bonds	84,904		84,904		—		84,904		—
Corporate bonds	2,079,510		2,079,510		12,281		1,986,487		80,742
Other mortgage-backed securities	1,725,952		1,725,952		—		1,608,958		116,994
Total fixed maturity securities	7,515,318		7,515,318		25,572		7,241,262		248,484
Equity securities	111,750		111,750		64,330		47,415		5
Short-term investments	122,222		122,222		117,296		4,926		—
Other investments	16,147		16,147		—		16,147		—
Totals	$	7,765,437	$	7,765,437	$	207,198	$	7,309,750	$	248,489
Separate Account (variable annuity) assets ⁽¹⁾	$	2,001,128	$	2,001,128	$	2,001,128	$	—	$	—
Financial Liabilities
Investment contract and policy reserves, embedded derivatives	$	248	$	248	$	—	$	248	$	—
Other policyholder funds, embedded derivatives	$	78,700	$	78,700	$	—	$	—	$	78,700

________________

⁽¹⁾ Separate Account (variable annuity) liabilities are equal to the estimated fair value of the Separate Account (variable annuity) assets.

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

The following table presents reconciliations for the periods indicated for all Level 3 assets and liabilities measured at fair value on a recurring basis.



($ in thousands)	Financial Assets																	Financial Liabilities⁽¹⁾
	Municipal Bonds			Corporate Bonds			Other Mortgage- Backed Securities ⁽²⁾			Total Fixed Maturity Securities			Equity Securities		Total
Beginning balance, July 1, 2019	$	46,984		$	79,222		$	128,438		$	254,644		$	69	$	254,713		$	85,961
Transfers into Level 3⁽³⁾	—			18,916			21,004			39,920			1		39,921			—
Transfers out of Level 3 ⁽³⁾	—			(2,822		)	(449		)	(3,271		)	—		(3,271		)	—
Total gains or losses
Net investment gains (losses) included in net income related to financial assets	—			—			—			—			46		46			—
Net realized (gains) losses included in net income related to financial liabilities	—			—			—			—			—		—			3,661
Net unrealized investment gains (losses) included in OCI	842			1,744			397			2,983			—		2,983			—
Purchases	—			—			—			—			—		—			—
Issuances	—			—			—			—			—		—			2,033
Sales	—			—			—			—			—		—			—
Settlements	—			—			—			—			—		—			—
Paydowns, maturities and distributions	(121		)	(387		)	(2,685		)	(3,193		)	—		(3,193		)	(2,557		)
Ending balance, September 30, 2019	$	47,705		$	96,673		$	146,705		$	291,083		$	116	$	291,199		$	89,098

Beginning balance, January 1, 2019	$	47,531		$	80,742		$	120,211		$	248,484		$	5	$	248,489		$	78,700
Transfers into Level 3 ⁽³⁾	—			24,798			42,938			67,736			65		67,801			—
Transfers out of Level 3 ⁽³⁾	—			(7,698		)	(449		)	(8,147		)	—		(8,147		)	—
Total gains or losses
Net investment gains (losses) included in net income related to financial assets	—			—			—			—			46		46			—
Net realized (gains) losses included in net income related to financial liabilities	—			—			—			—			—		—			8,366
Net unrealized investment gains (losses) included in OCI	649			6,254			3,052			9,955			—		9,955			—
Purchases	—			1,566			—			1,566			—		1,566			—
Issuances	—			—			—			—			—		—			7,482
Sales	—			—			(607		)	(607		)	—		(607		)	—
Settlements	—			—			—			—			—		—			—
Paydowns, maturities and distributions	(475		)	(8,989		)	(18,440		)	(27,904		)	—		(27,904		)	(5,450		)
Ending balance, September 30, 2019	$	47,705		$	96,673		$	146,705		$	291,083		$	116	$	291,199		$	89,098

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⁽¹⁾	Represents embedded derivatives, all related to the Company's fixed indexed annuity products, reported in Other policyholder funds in the Company's Consolidated Balance Sheets.


⁽²⁾	Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other mortgage-backed securities.

⁽³⁾

Transfers into and out of Level 3 during the three and nine month periods ended September 30, 2019 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 having occurred at the end of the reporting period in which the transfers were determined.

Summary of fair value assets and liabilities measured on nonrecurring basis

The Company has various other financial assets and financial liabilities used in the normal course of business that are not carried at fair value, but for which fair value disclosure is required. The following table presents the carrying value, fair value and fair value hierarchy of these financial assets and financial liabilities.



($ in thousands)					Fair Value Measurements at
	Carrying		Fair		Reporting Date Using
	Amount		Value		Level 1		Level 2		Level 3
September 30, 2019
Financial Assets
Investments
Other investments	$	171,579	$	175,478	$	—	$	—	$	175,478
Deposit asset on reinsurance	2,342,305		2,619,640		—		—		2,619,640
Financial Liabilities
Investment contract and policy reserves, fixed annuity contracts	4,658,148		4,581,321		—		—		4,581,321
Investment contract and policy reserves, account values on life contracts	91,788		94,899		—		—		94,899
Other policyholder funds	583,747		583,747		—		526,113		57,634
Short-term debt	135,000		135,000		—		—		135,000
Long-term debt	297,953		318,271		—		318,271		—

December 31, 2018
Financial Assets
Investments
Other investments	$	156,725	$	161,449	$	—	$	—	$	161,449
Financial Liabilities
Investment contract and policy reserves, fixed annuity contracts	4,555,849		4,478,338		—		—		4,478,338
Investment contract and policy reserves, account values on life contracts	87,229		90,402		—		—		90,402
Other policyholder funds	689,287		689,287		—		626,325		62,962
Short-term debt	—		—		—		—		—
Long-term debt	297,740		291,938		—		291,938		—