Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

(2) Fair Value Measurements

We carry financial assets and financial liabilities at fair value. In determining fair value, we generally apply the market approach, which uses prices and other relevant data based on market transactions involving identical or comparable assets and liabilities. We classify our financial instruments into the following three-level hierarchy:

•Level 1 – Inputs are based on quoted prices in active markets for identical instruments.

•Level 2 – Inputs are based on observable market data (other than quoted prices), or are derived from or corroborated by observable market data.

•Level 3 – Inputs are unobservable and not corroborated by market data.

Our Level 1 investments consist ofU.S. Treasuries and equity securities traded in an active exchange market. We use unadjusted quoted prices for identical instruments to measure fair value.

Our Level 2 investments include most of our fixed income securities, which consist of U.S. government agency securities, municipal bonds, certain corporate debt securities, and certain mortgage-backed and asset-backed securities. We measure fair value for the majority of our Level 2 investments using quoted prices of securities with similar characteristics. The remaining investments are valued using pricing models or matrix pricing. The fair value measurements consider observable assumptions, including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, default rates, loss severity and other economic measures.

We use independent pricing services to assist us in determining fair value for approximately99% of our Level 2 investments. The pricing services provide a single price or quote per security. We use data provided by our third party investment manager to value the remaining Level 2 investments.To validate that these quoted and modeled prices are reasonable estimates of fair value, we perform various quantitative and qualitative procedures, including: 1) evaluation of the underlying methodologies, 2) analysis of recent sales activity, 3) analytical review of our fair values against current market prices and 4) comparison of the pricing services' fair value to other pricing services' fair value for the same investment. No markets for our investments were judged to be inactive at period end. Based on these procedures, we did not adjust the prices or quotes provided by our independent pricing services or third party investment manager as of September 30,2011 or December 31,2010.

Our Level 3 securities include certain fixed income securities and an insurance contract,classified in other assets, that we account for as a derivative. In the first quarter of 2010, we terminated our interest in a similar insurance contract and recognized an $8.0 million gain. We determine fair value of our Level 3 securities based on internally developed models that use assumptions or other data that are not readily observable from objective sources.

We exclude from our fair value disclosures our held to maturity investment portfolio measured at amortized cost.

The following tables present our assets that were measured at fair value at September 30,2011 andDecember 31,2010. No liabilities were measured at fair value at either balance sheet date.

		Level 1		Level 2		Level 3		Total
September 30, 2011
Fixed income securities - available for sale
	U.S. government and government agency securities	$	185,530	$	107,814	$	0	$	293,344
	Fixed income securities of states, municipalities and
	political subdivisions		0		1,079,859		0		1,079,859
	Special purpose revenue bonds of states, municipalities
	and political subdivisions		0		1,815,959		0		1,815,959
	Corporate fixed income securities		0		813,450		156		813,606
	Residential mortgage-backed securities		0		1,111,321		0		1,111,321
	Commercial mortgage-backed securities		0		249,051		0		249,051
	Asset-backed securities		0		33,555		1,062		34,617
	Foreign government securities		0		253,432		0		253,432
	Total fixed income securities - available for sale		185,530		5,464,441		1,218		5,651,189
Other investments			34,088		0		0		34,088
Other assets			0		0		1,373		1,373
	Total assets measured at fair value	$	219,618	$	5,464,441	$	2,591	$	5,686,650

December 31, 2010
Fixed income securities - available for sale
	U.S. government and government agency securities	$	148,217	$	176,050	$	0	$	324,267
	Fixed income securities of states, municipalities and
	political subdivisions		0		1,082,057		0		1,082,057
	Special purpose revenue bonds of states, municipalities
	and political subdivisions		0		1,628,059		0		1,628,059
	Corporate fixed income securities		0		570,152		242		570,394
	Residential mortgage-backed securities		0		995,108		0		995,108
	Commercial mortgage-backed securities		0		145,228		0		145,228
	Asset-backed securities		0		11,370		1,196		12,566
	Foreign government securities		0		241,761		0		241,761
	Total fixed income securities - available for sale		148,217		4,849,785		1,438		4,999,440
Other investments			5,575		0		0		5,575
Other assets			0		0		857		857
	Total assets measured at fair value	$	153,792	$	4,849,785	$	2,295	$	5,005,872

The following tables present the changes in fair value of our Level 3 assets.

	2011						2010
	Fixed						Fixed
	income		Other				income		Other
	securities		assets		Total		securities		assets		Total
Balance at beginning of year	$	1,438	$	857	$	2,295	$	4,262	$	432	$	4,694
Settlements		0		0		0		0		(8,342)		(8,342)
Sales		(144)		0		(144)		(100)		0		(100)
Gains and (losses) – unrealized		(11)		263		252		62		(141)		(79)
Gains and (losses) – realized		(2)		0		(2)		0		8,342		8,342
Balance at March 31		1,281		1,120		2,401		4,224		291		4,515
Sales		(55)		0		(55)		(395)		0		(395)
Gains and (losses) – unrealized		18		122		140		144		179		323
Balance at June 30		1,244		1,242		2,486		3,973		470		4,443
Sales		(43)		0		(43)		(77)		0		(77)
Gains and (losses) – unrealized		17		131		148		70		216		286
Transfers out of Level 3		0		0		0		(2,543)		0		(2,543)
Balance at September 30	$	1,218	$	1,373	$	2,591	$	1,423	$	686	$	2,109

Unrealized gains and losses on our Level 3 fixed income securities are reported in other comprehensive income within shareholders' equity, and unrealized gains and losses on our Level 3 other assets are reported in other operating income. There were no transfers between Level 1, Level 2 or Level 3 in the first nine months of 2011. We transferred investments from Level 3 to Level 2 in 2010 because we were able to determine their fair value using inputs based on observable market data in the period transferred.