Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2019

Fair value measurements for items measured at fair value

Assets measured at fair value, by hierarchy level, as of September 30, 2019 and December 31, 2018 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 2018 Annual Report on Form 10-K.



Assets carried at fair value by hierarchy level as of September 30, 2019
Table	8.1a
(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		$	199,129	$	40,545	$	158,584	$	—
Obligations of U.S. states and political subdivisions		1,660,552		—		1,660,552		—
Corporate debt securities		2,724,603		—		2,724,603		—
ABS		215,546		—		215,546		—
RMBS		246,457		—		246,457		—
CMBS		286,812		—		286,812		—
CLOs		327,893		—		327,893		—
Total fixed income securities		5,660,992		40,545		5,620,447		—
Equity securities		17,360		17,360		—		—
Other ⁽¹⁾		161,518		161,518		—		—
Real estate acquired ⁽²⁾		7,779		—		—		7,779
Total		$	5,847,649	$	219,423	$	5,620,447	$	7,779



Assets carried at fair value by hierarchy level as of December 31, 2018
Table	8.1b
(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		$	167,176	$	42,264	$	124,912	$	—
Obligations of U.S. states and political subdivisions		1,720,100		—		1,720,087		13
Corporate debt securities		2,400,762		—		2,400,762		—
ABS		112,033		—		112,033		—
RMBS		178,961		—		178,961		—
CMBS		267,660		—		267,660		—
CLOs		305,295		—		305,295		—
Total fixed income securities		5,151,987		42,264		5,109,710		13
Equity securities		3,932		3,932		—		—
Other ⁽¹⁾		96,403		96,403		—		—
Real estate acquired ⁽²⁾		14,535		—		—		14,535
Total		$	5,266,857	$	142,599	$	5,109,710	$	14,548


⁽¹⁾	Consists of money market funds included in “Cash and Cash Equivalents” and “Restricted Cash and Cash Equivalents” on the consolidated balance sheets.


⁽²⁾	Real estate acquired through claim settlement, which is held for sale, is reported in “Other assets” on the consolidated balance sheets.

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, 2019 and 2018 is shown in tables 8.2a through 8.2d below. As shown in table 8.2d below, we 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.” 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.



Fair value roll-forward for financial instruments classified as Level 3 for the three months ended September 30, 2019
Table	8.2a
(In thousands)		Fixed income		Equity Securities		Total Investments		Real Estate Acquired
Balance at June 30, 2019		$	—	$	—	$	—	$	10,250
Purchases		—		—		—		4,681
Sales		—		—		—		(7,173		)
Included in earnings and reported as losses incurred, net		—		—		—		21
Balance at September 30, 2019		$	—	$	—	$	—	$	7,779



Fair value roll-forward for financial instruments classified as Level 3 for the nine months ended September 30, 2019
Table	8.2b
(In thousands)		Fixed income			Equity Securities		Total Investments			Real Estate Acquired
Balance at December 31, 2018		$	13		$	—	$	13		$	14,535
Purchases		—			—		—			19,872
Sales		(13		)	—		(13		)	(26,197		)
Included in earnings and reported as losses incurred, net		—			—		—			(431		)
Balance at September 30, 2019		$	—		$	—	$	—		$	7,779



Fair value roll-forward for financial instruments classified as Level 3 for the three months ended September 30, 2018
Table	8.2c
(In thousands)		Fixed income			Equity Securities		Total Investments			Real Estate Acquired
Balance at June 30, 2018		192			1,168		1,360			13,321
Purchases		—			—		—			7,979
Sales		(115		)	—		(115		)	(8,511		)
Included in earnings and reported as net realized investment gains		—			3,663		3,663			—
Included in earnings and reported as losses incurred, net		—			—		—			(450		)
Balance at September 30, 2018		$	77		$	4,831	$	4,908		$	12,339



Fair value roll-forward for financial instruments classified as Level 3 for the nine months ended September 30, 2018
Table	8.2d
(In thousands)		Fixed income			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		)	—
Purchases		—			—			—			24,742
Sales		(194		)	—			(194		)	(24,012		)
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		)
Balance at September 30, 2018		$	77		$	4,831		$	4,908		$	12,339

Carrying value and fair value of financial assets and liabilities

Table 8.3 presents the carrying value and fair value of our financial assets and liabilities disclosed, but not carried, at fair value at September 30, 2019 and December 31, 2018.



Financial assets and liabilities not measured at fair value
Table	8.3
		September 30, 2019				December 31, 2018
(In thousands)		Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets
Other invested assets		$	3,100	$	3,100	$	3,100	$	3,100

Financial liabilities
FHLB Advance		$	155,000	$	156,637	$	155,000	$	150,551
5.75% Senior Notes		420,578		467,317		419,713		425,791
9% Convertible Junior Subordinated Debentures		256,872		351,699		256,872		338,069
Total financial liabilities		$	832,450	$	975,653	$	831,585	$	914,411