Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2018

Fair value measurements for items measured at fair value

Assets measured at fair value, by hierarchy level, as of September 30, 2018 and December 31, 2017 are shown in tables 8.1a and 8.1b below. The fair value of the assets is estimated using the process described above, and more fully in Note 3 - “Significant Accounting Policies” of the notes to the consolidated financial statements in our 2017 Annual Report on Form 10-K.



	Table	8.1a
Fair value hierarchy - current year			September 30, 2018
Fair value hierarchy - current year	(In thousands)		Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	U.S. Treasury securities and obligations of U.S. government corporations and agencies		$	176,216	$	29,584	$	146,632	$	—
	Obligations of U.S. states and political subdivisions		1,734,606		—		1,734,529		77
	Corporate debt securities		2,255,065		—		2,255,065		—
	ABS		70,935		—		70,935		—
	RMBS		154,963		—		154,963		—
	CMBS		270,220		—		270,220		—
	CLOs		307,607		—		307,607		—
	Total fixed income securities		4,969,612		29,584		4,939,951		77
	Equity securities		7,720		2,889		—		4,831
	Total investments at fair value		$	4,977,332	$	32,473	$	4,939,951	$	4,908
	Real estate acquired ⁽¹⁾		$	12,339	$	—	$	—	$	12,339



	Table	8.1b
Fair value hierarchy - prior year-end			December 31, 2017
Fair value hierarchy - prior year-end	(In thousands)		Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	U.S. Treasury securities and obligations of U.S. government corporations and agencies		$	178,846	$	81,598	$	97,248	$	—
	Obligations of U.S. states and political subdivisions		2,152,524		—		2,152,253		271
	Corporate debt securities		2,066,838		—		2,066,838		—
	ABS		4,923		—		4,923		—
	RMBS		181,849		—		181,849		—
	CMBS		297,312		—		297,312		—
	CLOs		101,023		—		101,023		—
	Total fixed income securities		4,983,315		81,598		4,901,446		271
	Equity securities ⁽²⁾		7,246		2,978		—		4,268
	Total investments at fair value		$	4,990,561	$	84,576	$	4,901,446	$	4,539
	Real estate acquired ⁽¹⁾		$	12,713	$	—	$	—	$	12,713


⁽¹⁾	Real estate acquired through claim settlement, which is held for sale, is reported in Other assets on the consolidated balance sheets.


⁽²⁾	Equity securities in Level 3 are carried at cost, which approximates fair value. See “Reconciliations of Level 3 assets” below for information regarding a change in presentation of amounts previously included in Level 3 Equity securities.

Reconciliation of beginning and ending balance for assets and liabilities measured at fair value with significant unobservable inputs (level 3)

For assets measured at fair value using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances for the three and nine months ended September 30, 2018 and 2017 is shown in tables 8.2a and 8.2b and 8.3a and 8.3b below. As described in Note 2 - “New Accounting Pronouncements,” under updated guidance regarding the Recognition and Measurement of Financial Assets and Financial Liabilities which became effective on January 1, 2018, our investment in FHLB stock is no longer presented with equity securities. Prior to the updated guidance, our FHLB stock was included in our Level 3 equity securities. As shown in table 8.3a below, for the nine months ended September 30, 2018, we have transferred our FHLB stock out of Level 3 assets, and it is carried at cost, which approximates fair value, on our consolidated balance sheet in “Other invested assets” as of September 30, 2018. There were no losses included in earnings for those periods attributable to the change in unrealized losses on assets still held at the end of the applicable period.



	Table	8.2a
Development of assets and liabilities classified within level 3 - current year quarter			Three Months Ended September 30, 2018
	(In thousands)		Debt Securities			Equity Securities		Total Investments			Real Estate Acquired
	Balance at June 30, 2018		$	192		$	1,168	$	1,360		$	13,321
	Total realized gains (losses):
	Included in earnings and reported as net realized investment gains		—			3,663		3,663			—
	Included in earnings and reported as losses incurred, net		—			—		—			(450		)
	Purchases		—			—		—			7,979
	Sales		(115		)	—		(115		)	(8,511		)
	Balance at September 30, 2018		$	77		$	4,831	$	4,908		$	12,339



	Table	8.2b
Development of assets and liabilities classified within level 3 - prior year quarter			Three Months Ended September 30, 2017
	(In thousands)		Debt Securities			Equity Securities		Total Investments			Real Estate Acquired
	Balance at June 30, 2017		$	577		$	4,268	$	4,845		$	10,271
	Total realized gains (losses):
	Included in earnings and reported as losses incurred, net		—			—		—			(592		)
	Purchases		—			—		—			8,881
	Sales		(197		)	—		(197		)	(6,832		)
	Balance at September 30, 2017		$	380		$	4,268	$	4,648		$	11,728



	Table	8.3a
Development of assets and liabilities classified within level 3 - current year to date			Nine Months Ended September 30, 2018
	(In thousands)		Debt Securities			Equity Securities			Total Investments			Real Estate Acquired
	Balance at December 31, 2017		$	271		$	4,268		$	4,539		$	12,713
	Transfers out of Level 3		—			(3,100		)	(3,100		)	—
	Total realized gains (losses):
	Included in earnings and reported as net realized investment gains		—			3,663			3,663			—
	Included in earnings and reported as losses incurred, net		—			—			—			(1,104		)
	Purchases		—			—			—			24,742
	Sales		(194		)	—			(194		)	(24,012		)
	Balance at September 30, 2018		$	77		$	4,831		$	4,908		$	12,339



	Table	8.3b
Development of assets and liabilities classified within level 3 - prior year to date			Nine Months Ended September 30, 2017
	(In thousands)		Debt Securities			Equity Securities		Total Investments			Real Estate Acquired
	Balance at December 31, 2016		$	691		$	4,268	$	4,959		$	11,748
	Total realized gains (losses):
	Included in earnings and reported as losses incurred, net		—			—		—			(818		)
	Purchases		—			—		—			26,985
	Sales		(311		)	—		(311		)	(26,187		)
	Balance at September 30, 2017		$	380		$	4,268	$	4,648		$	11,728

Carrying value and fair value of debt

Table 8.4 presents the carrying value and fair value of our financial liabilities disclosed, but not carried, at fair value at September 30, 2018 and December 31, 2017. The fair values of our 5.75% Senior Notes and 9% Convertible Junior Subordinated Debentures were based on observable market prices. The fair value of the FHLB Advance was estimated using cash flows discounted at current incremental borrowing rates for similar borrowing arrangements. In all cases the fair values of the financial liabilities below are categorized as Level 2.



	Table	8.4
Fair value measurements - liabilities			September 30, 2018				December 31, 2017
	(In thousands)		Carrying Value		Fair Value		Carrying Value		Fair Value
	FHLB Advance		$	155,000	$	148,288	$	155,000	$	152,124
	5.75% Senior Notes		419,425		445,430		418,560		465,473
	9% Convertible Junior Subordinated Debentures		256,872		347,458		256,872		353,507
	Total financial liabilities		$	831,297	$	941,176	$	830,432	$	971,104