Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 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 December 31, 2019, Level 3 investments comprised approximately 4.8% of the Company's total investment portfolio at fair value.



($ in thousands)	Carrying		Fair		Fair Value Measurements at Reporting Date Using
	Amount		Value		Level 1		Level 2		Level 3
December 31, 2019
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	724,319	$	724,319	$	—	$	711,004	$	13,315
Other, including U.S. Treasury securities	458,868		458,868		17,699		441,169		—
Municipal bonds	1,686,203		1,686,203		—		1,641,912		44,291
Foreign government bonds	45,370		45,370		—		45,370		—
Corporate bonds	1,581,424		1,581,424		14,470		1,463,002		103,952
Other mortgage-backed securities	1,295,492		1,295,492		—		1,161,979		133,513
Total fixed maturity securities	5,791,676		5,791,676		32,169		5,464,436		295,071
Equity securities	101,864		101,864		49,834		51,923		107
Short-term investments	172,667		172,667		172,667		—		—
Other investments	25,997		25,997		—		25,997		—
Totals	$	6,092,204	$	6,092,204	$	254,670	$	5,542,356	$	295,178
Separate Account (variable annuity) assets ⁽¹⁾	$	2,490,469	$	2,490,469	$	2,490,469	$	—	$	—
Financial Liabilities
Investment contract and life policy reserves, embedded derivatives	$	1,314	$	1,314	$	—	$	1,314	$	—
Other policyholder funds, embedded derivatives	$	93,733	$	93,733	$	—	$	—	$	93,733

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 life policy reserves, embedded derivatives	$	248	$	248	$	—	$	248	$	—
Other policyholder funds, embedded derivatives	$	78,700	$	78,700	$	—	$	—	$	78,700


⁽¹⁾	Separate Account (variable annuity) assets represent contractholder funds invested in various actively traded mutual funds that have daily quoted net asset values that are readily determinable for identical assets that the Company can access. Separate Account (variable annuity) liabilities are equal to the estimated fair value of 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 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, January 1, 2019	$	47,531		$	80,742		$	120,211		$	248,484		$	5		$	248,489		$	78,700
Transfers into Level 3 ⁽³⁾	—			33,475			56,766			90,241			65			90,306			—
Transfers out of Level 3 ⁽³⁾	—			(7,698		)	(2,568		)	(10,266		)	—			(10,266		)	—
Total gains or losses
Net investment gains (losses) included in net income related to financial assets	—			—			(1,105		)	(1,105		)	38			(1,067		)	—
Net realized (gains) losses included in net income related to financial liabilities	—			—			—			—			—			—			12,636
Net unrealized investment gains (losses) included in OCI	474			4,461			6,100			11,035			—			11,035			—
Purchases	—			2,483			—			2,483			—			2,483			—
Issuances	—			—			—			—			—			—			10,039
Sales	—			—			(607		)	(607		)	(1		)	(608		)	—
Settlements	—			—			—			—			—			—			—
Paydowns, maturities and distributions	(3,714		)	(9,511		)	(31,969		)	(45,194		)	—			(45,194		)	(7,642		)
Ending balance, December 31, 2019	$	44,291		$	103,952		$	146,828		$	295,071		$	107		$	295,178		$	93,733

Beginning balance, January 1, 2018	$	49,328		$	72,979		$	107,944		$	230,251		$	6		$	230,257		$	80,733
Transfers into Level 3 ⁽³⁾	—			40,488			50,771			91,259			—			91,259			—
Transfers out of Level 3 ⁽³⁾	—			(11,279		)	(5,200		)	(16,479		)	—			(16,479		)	—
Total gains or losses
Net investment gains (losses) included in net income related to financial assets	—			(487		)	—			(487		)	3			(484		)	—
Net realized (gains) losses included in net income related to financial liabilities	—			—			—			—			—			—			(7,518		)
Net unrealized investment gains (losses) included in OCI	(1,195		)	(2,840		)	(5,570		)	(9,605		)	—			(9,605		)	—
Purchases	—			—			—			—			—			—			—
Issuances	—			—			—			—			—			—			11,183
Sales	—			(6,135		)	(187		)	(6,322		)	(4		)	(6,326		)	—
Settlements	—			—			—			—			—			—			—
Paydowns, maturities and distributions	(602		)	(11,984		)	(27,547		)	(40,133		)	—			(40,133		)	(5,698		)
Ending balance, December 31, 2018	$	47,531		$	80,742		$	120,211		$	248,484		$	5		$	248,489		$	78,700


⁽¹⁾	Represents embedded derivatives, all related to the Company's FIA 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 years ended December 31, 2019 and 2018 were attributable to changes in the availability of observable market information for individual fixed maturity securities and short-term investments. 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 following table presents the carrying value, fair value and fair value hierarchy of these financial assets and financial liabilities.



($ in thousands)	Carrying		Fair		Fair Value Measurements at Reporting Date Using
	Amount		Value		Level 1		Level 2		Level 3
December 31, 2019
Financial Assets
Investments
Other investments	$	163,312	$	167,185	$	—	$	—	$	167,185
Deposit asset on reinsurance	2,346,166		2,634,012		—		—		2,634,012
Financial Liabilities
Investment contract and policy reserves, fixed annuity contracts	4,675,774		4,609,880		—		—		4,609,880
Investment contract and life policy reserves, account values on life contracts	93,465		98,332		—		—		98,332
Other policyholder funds	553,550		553,550		—		495,812		57,738
Short-term debt	135,000		135,000		—		—		135,000
Long-term debt	298,025		322,678		—		322,678		—

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 life policy reserves, account values on life contracts	87,229		90,402		—		—		90,402
Other policyholder funds	689,287		689,287		—		626,325		62,962
Long-term debt	297,740		291,938		—		291,938		—